He said it several month ago he’s saying it again – the commodity rally is all speculators and has nothing to do with fundamentals. In an article today in the Telegraph Schultz, the Starbucks Founder, had some good quotes regarding the commodity rally:
“(the rally is) not based on supply and demand”
“Right now we are experiencing a very strange and almost inexplicable phenomenon in the commodities market. Without any real supply or demand issues we are witness to the fact that most agricultural food commodities are at record highs at once, and coffee is at a 34-year high,”
“Through financial speculation – hedge funds, index funds and other ways to manipulate the market – the commodities market is in a very unfortunate position. This has resulted in every coffee company having to pay extraordinarily high prices for coffee.”
“I don’t know the rules and regulations in the UK but unfortunately in the US you can’t identify who is buying the commodities. So there is no transparency. I just think it is [unfortunate that] at a time in the world where there is such concern over the economy, unemployment and the cost of food – not to mention the cost of oil – we could be in a position where we have inflationary prices on food not based on supply and demand. This is the first time in my 30-years of being in the coffee business where this exists…
“I don’t think, by the way, that this is sustainable, however it is not a good situation for the consumer and I am not convinced that the farmers benefit from this,”
Source: The Telegraph
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.