What is in this article?:
- Money: the biggest price fundamental
- No-limit index funds
- Everyone is well aware of the skyrocketing prices in commodities over the last year and the enormous increase in price volatility. What many people are not aware of is that one of the biggest factors is speculative money that has flowed into the markets.
No-limit index funds
As I write this, without going in to a long dissertation on what has transpired since 2003, index funds for practical purposes have no limits on the size of their position. Traditional funds do have limits.
The CFTC has been having hearings and has stated that they will be issuing new regulations on index funds early this year. Whatever their new set of rules will be, it is likely that at least some limit will be set on how large of a position these funds can have in individual commodities.
Some view this as a potential negative for prices. That may not be the case since the change is widely anticipated.
What I believe will happen if the fund position sizes are limited, however, it will take out some of the volatility of price movements and allow some of us to start sleeping again at night.