Not Just Goldman Sachs: Koch Industries Hoards Commodities as a Trading Strategy

Over the weekend, The New York Times published its investigation of how Goldman Sachs has made a tidy profit by buying up vast amounts of aluminum and slowing the delivery through the ownership of vast warehouses. Many investment banks purchase physical assets, like pipelines or storage facilities, to gain better market intelligence for speculative trading. The Goldman Sachs strategy, detailed first by Bloomberg News and by Reuters in 2011, has boosted the cost of aluminum, hitting both manufacturers and consumers with higher prices.

Wall Street's Commodities Profit Threatened As Federal Reserve Launches Review

The Federal Reserve said late Friday it is revisiting a landmark ruling that allowed big banks to enter the lucrative commodities business, raising the specter that banks may be banned from the highly profitable activity.

Goldman Sachs, Morgan Stanley, JPMorgan Chase and other large financial institutions have the most to lose, given their revenues from investing in and trading commodities, such as oil and aluminum. Representatives for the three banks declined to comment.

Commodity traders: the next Lehman Brothers?

Ever since the 2008 meltdown, financial market observers and regulators have been scouring the horizon for where the next bout of instability could come from. And increasingly, it seems, their watchful gaze is scrutinizing the commodities markets and commodities trading houses in particular, a group of players as opaque as they are colossal.

Now, there are a number of ways to sell, buy and bet on commodities. There are markets so-called spot markets, where buyers take immediate delivery of the goods purchased. Then there are futures and forward markets, where delivery can happen at a later date at set prices. Some markets operate through formal exchanges; others are “over the counter,” meaning that trading takes places between two parties.

Carney on commodities: ‘wrong conclusions … could do a lot of damage’

Mark Carney doesn’t think Canada has any control over the resource boom.

The 47-year-old governor of the Bank of Canada, sitting beneath the portraits of his predecessors in the bank’s stately Graham Towers boardroom, says that as China and other emerging economies have fuelled a sustained rush for resources, sometimes called a commodities supercycle, they have redrawn the fortunes of developed countries like Canada.

Conservative MPs push to hold more meetings behind closed doors

Much has been written -- rightly, I'd say -- about yesterday's landmark ruling by House of Commons Speaker Andrew Scheer, in which he dismissed the question of privilege raised by Liberal MP Irwin Cotler on "technical grounds," but made it clear that the conduct that had sparked the complaint was, in his words "reprehensible." 

 

If you're curious, you can read my thoughts on Scheer's conclusions here, with the caveat that I'm pretty sure I didn't really tread any new ground.  

But while much of yesterday afternoon's Hill chatter was -- again, rightly -- consumed by the Cotler ruling, something else was going on at committee that, depending on the ultimate outcome, could have a far more profound effect on the ability of Members of Parliament to do their job, not to mention the ability of the voters they represent to watch them do it.

Why oil isn’t behaving like other commodities

When the financial crisis torpedoed the global markets in 2008, commodities sunk like anchors, none more so than oil. In little more than half a year, prices went from about $144 (U.S.) a barrel to about $40 a barrel – a 70-per-cent fall.

Three years later, commodities have been getting the crunch treatment again as the euro zone debt crisis spun out of control and talk of another recession spewed from the lips of assorted economists and doomsayers. Since the spring, prices have fallen roughly in line with the equity markets. Mining shares have been slaughtered. Xstrata, to name but one biggie, has lost a third of its value in six months.

And oil? It, too, has fallen, but by less than you might have imagined. According to the BP Statistical Review, prices for Brent crude (the de facto global benchmark) climbed to about $124 by March, dipped ever so briefly below $100, and then recovered with alacrity. On Friday, the price was about $114. To be sure, oil shares are down, but by far less than those of the rock variety. In half a year, Exxon Mobil has lost a mere 8 per cent.