Reply #13: Guessing [View All]

[Hawkowl]

I'm guessing that the Farm bill passing in June of 2008 which tightened the rules regarding speculation in several markets at the same time is responsible. This is the major reason oil is down. Entities were taking positions in say oil in the U.S. and then once the market closed, bidding up another position in the Asian market, then bidding it up in the U.S. etc. etc. Essentially these few speculators were bidding against themselves.

Looking at the graph of the price rise, it is a classical depiction of a price bubble. It does look like the bubble has deflated and now it's just a matter of picking the right time when the price will start to rise again. None too soon is my guess. It also looks like the precipitous drop began in July of 2008 which does correlate with the Farm Bill passage.

Contributing factors could be that the world market views deflation much, much more likely than inflation so there is no reason to hedge against inflation through precious metals, or commodities at large. People are just going to pull their money and wait on the sidelines until commodity prices stop falling.

Again this is just my guess. Reasons why markets do the things they do are arguable. What they actually are doing, i.e; dropping like a stone, are not.