With the recent Senate hearings and everybody debating the affects of speculation by index funds, we have been inundated with politically motivated noise demonizing everyone from hedge funds to oil companies and those who would both support or oppose offshore drilling. In an effort to go beyond the self-serving blather, here are three unique observations offered to me in the past several days on the subject.
“The typical line of reasoning is that commodity index funds exclusively buy and hold commodities, and this buying represents a permanent increase in demand, which naturally results in higher prices,” says John Joseph of commodity trading advisory SEMA4 Group. “Of course, this buying and holding activity is no different from the buying and holding activity performed by equity index funds. And yet commodity index activity has been branded as a threat to our economy, while equity index funds receive quite the opposite treatment. This is hypocritical at best and disingenuous at worst.”
