The Food Speculator

2012, Economics  -   18 Comments
Ratings: 8.50/10 from 32 users.

Assuming the role of a speculator, director Kees Brouwer tries to find out whether he is merely taking advantage of the opportunity offered to investors by the food scarcity, or that, through this abstract world of financial products, he is drastically interfering in poor people's lives.

Increasing food prices are increasingly causing unrest in the world. It was no coincidence that when the Arab Spring first began Tunisian protesters attacked the order police with baguettes.

Is there just not enough food for so many people, or are the price increases caused by speculators, looking for quick profits?

Backlight tries to find an answer by doing a little food speculation of its own. A quest that leads us to places including the streets of Tunisia and the Chicago Stock Exchange.

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18 Comments / User Reviews

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  1. DustUp

    I didn't watch enough to know what the reporter did but I've traded futures, options on futures, and a lot of other instruments at one point. Whether stocks, bonds, futures, options, etc. Assuming folks understand that when you have a bunch of buyers and sellers of an item, in theory, an appropriate price is found for the item. The BIG problem occurs when MARKET MANIPULATORS come in to a market. After the 2008-9 banking crisis and with interest rates down ... along with the likelihood that lending money would lead to losses due to high rates of loan defaults, so called investment banks who also have trading departments, took their bailout money, used it for trading to a larger degree. They jammed their undeserved bailout billions into every market they could find using their usual method of manipulation: Pump and dump. Both shorter and longer term, causing a sawtooth rise in markets they stuck their dirty fingers into, to make it look more or less normal market action. By the way market manipulation is illegal for you and me. The big boys like Goldman Sachs, Morgan Stanley, JP Morgan Chase, etc. are given a pass because they have their people in govt. The tell tale would be Futures(commodities and financial futures) trade volume. If volume across the various commodities had risen well beyond their norms.

    In order to make a Futures market worthwhile, over just the farmer selling his grain or commodity to a buyer on a straight up deal, many more futures instruments are traded on a Futures exchange like the CME, than the amount of a commodity has been hedged by using the same Futures instrument by the farmer or grain elevator or buyer or end user. Hence the speculators willing to risk capital which in normal times can actually smooth out the highs and lows of a market, making prices more stable. Speculators take on the risk. Most lose. Manipulators with lots of dough don't want to lose, they drive markets as far as they can in one direction and it they can get out and not left holding the bag as they did with crap mortgages, they will drive it down to an extreme as well. Yes, you and your grandchildren paid for inflated everything by allowing your govt to give the banksters billions and trillions in bailouts.

    Inflation numbers are obtained from rising prices but is it true inflation or pseudo inflation when those prices of most commodities were manipulated up beyond any reasonable measure of anything, well beyond prior all time highs? True inflation is when an economy is doing well enough to provide wage increases and more money chasing goods and services. What is it when some bankers buy and sell futures contracts to one another spiraling the market up, trying to find suckers at the top to sell it to? Usually a Futures instrument is for 3months, there are those further out but the majority are for 90 days. So the banksters invented commodity based ETFs which use swaps and/or auto roll forwarding so they could just buy and drive an individual market or a basket of items, making it just as easy for them and for the regular joe to buy and hold an ETF just like a stock and manipulated just like a stock.

    Anyone who has ever traded or thought of investing in the financial markets would do well to read the age old Reminiscences Of A Stock Operator, so you will have an idea of what you are up against. It is much worse than that nowadays but it clues you in, especially the latter section of the book.

    At any rate, in my opinion, it is not the regular speculators who caused an inordinate rise in food based commodities(or any other), it was the banksters who were desperate for cash income to save themselves(since a bailout doesn't produce sustainable income unless you do something with it to make money) and saw that as their opportunity for the quickest fix.

    Now we have a stock market where at least 70 percent of the daily activity is High Frequency Trading i.e. computerized manipulation to steal from the regular traders, causing them higher prices at entry and lower prices on exit, because Goldman Sachs computer located adjacent to the NYSE, seeing the orders coming in at the same time, but a faster computer, then places its opposing orders. They certainly are not the only one's trying to game the system.

    Trying to corner a market has gone on since the invention of such markets but no one typically had billions given to them in bailouts to do it with. It seems to me that some of these banksters knew they were selling crap mortgages that would backfire at some point, knew interest rates would dwindle and were looking for another way to make sizable dough when the fees for writing crap mortgages ended. So they did a test run on over manipulating commodities was done on crude oil from 2003-2008. Looking at those 5 years, when crude was actually plentiful, it rose past war premium, gold inflation, and any other measure of price rise you could find. What happened? Banker Barrels. They built new tank farms to hold oil off the market. They leased every tanker ship they could find to fill, anchor, and hold off the market. They had GW Bush filling the strategic reserve at ever higher prices, a real value for the taxpayer, eh? And when crude was still plentiful they just had their media report the opposite. Bush could have used futures contracts locking in the lower prices for future delivery knowing full well his oil and banker buddies were running the oil market up. However, that wouldn't have helped the banksters to the fullest extent. There was a point when it seemed the strategic reserve would have to be overflowing but that was still used as a reason oil supply was being taken off the market. The financial news never reported on the banker barrels. Did anyone go to jail over this manipulation? No one even investigated. When the rest of the commodities were run up during obama's admin., same situation with that govt also run by the banksters.

    If you want things to change you have to drain the swamp. When regulators don't regulate, govt is the problem. Cut govt down to the minimum so you can keep track of what they are doing. Why do we pay taxes twice for the same thing? Is there a federal road dept? No. Why are we paying vehicle fuel taxes to the feds? We don't need a federal dept of education when the states and locals are responsible for that. We don't need an agriculture dept or subsidy program, all they need is accurate data. How hard is that in this day and age of computers? Multiply simlar by the rest of govt. If you have ever heard of bloatware where a program used to control what you want to do such as make a brochure, is so feature rich and complex that you need to hire someone else to run it for you, then it is too bloated. That is govt. Despite what the socialist schools indoctrinate generations into believing, govt IS the problem, not the solution. They find cover in numbers.

    See to it decent, wise, incorruptible people are nominated from ALL parties in numbers squeezing out the scum. YOU need to see to it. Not someone else.

  2. cyberfrank

    ok, so I m back where I started, speculating sometimes inflates the prices, and you need to invest tons of money, and trade at the right time, big fishes make the market, under secrecy...

  3. Daniel Covington

    Uh, I don't trade futures, but I do trade stock options, and speculation on stock options prices has NO effect on underlying reference entity prices, so I don't trust this documentary. Also, there is VERY little mention of speculations of future commodity prices BEING LESS! You can make money both ways!

    1. InvisibleHandInMyPants

      Hmm. My market experience says that big moves in stocks are very often preceded by large option contract purchases.

  4. Luis Garcia da Silva

    One guy said he can predict human behaviour just like he predicts the movement of sound waves.. bulls*it man! and then the manager at a bank says that you dont own the assets if you buy a future contract.. bulls*it again! I stopped watching at 9:43min. Not good!

  5. Kubby Lemew

    I can't listen to German, such a harsh language...even with subtitles. Sorry.

    1. Kaaike

      The language spoken is Dutch, not German...

    2. lex lexich

      ppl who don't even recognize German... where is this world going???

    3. Kaaike

      It's DUTCH, dumbass.
      i.e. From The Netherlands, west of Germany.

    4. lex lexich

      shut up, please, i knew you would misunderstand, i am from europe and i lived in the netherlands for 2 yaar... like i said ppl not knowing how German sounds is not acceptable... ask your mother

    5. Kaaike

      You're right. I made a stupid comment. After posting I already had the feeling I had misunderstood what you wrote. Guess I'm the dumbass....sorry.

    6. lex lexich

      it's all right, no harm done

    7. McDolans

      Dutch isn't exactly a pretty language. I know because I'm Dutch!

  6. Luyang Han

    Unfortunately, I still don't get the point, how the system works.

    1. Paul Gloor

      I think you are basically betting against the prices.

    2. Luyang Han

      Not exactly. There are futures for wheat, and the reporter buys is a derivative of wheat future. I think the reporter still does not get through the understanding of how such multi-layered speculation works, and he just gather the opinion of people saying yes, speculation is bad, but lacks understanding of how exactly speculating a turbo will influence the price of wheat in Tunisia.

    3. Daniel Covington

      Yes, you are correct, the reported buys a derivative of the future, not the future itself.

    4. Daniel Covington

      What I am unsure of is whether or not the trading of the futures derivatives actually affects the underlying commodity price. I have to go to CBOE and take their educational lessons to be sure. However, I can say that purchasing options on stock options, if such instruments exist, does not affect the underlying stock price. There are single stock futures now though, so the trading of those instruments may or may not affect the underlying stock price.