Senate hearing today puts commodity 'investing' in focus

Institutional investors that once stuck with stocks and bonds in their mega-portfolios have taken a shine to commodities in the last few years, seeking to cash in on the rocketing prices of raw materials.

But does that "investing" really just amount to more speculation that is stoking the inflated prices of oil and other commodities?

The issue, which has been fueling widespread debate on Wall Street, will be taken up this morning at a hearing of the U.S. Senate Committee on Homeland Security and Governmental Affairs chaired by Sen. Joe Lieberman (I-Conn.). The witness list is here.

Crude oil futures reached another record closing high Monday, rising 76 cents to $127.05 a barrel. As the price keeps climbing big investors including the California Public Employees' Retirement System are likely to face more questions about their commodity-market investment programs.

James Hamilton, an economics professor at UC San Diego, offers some perspective on his blog, here, on the possible role of speculation in the oil market’s surge. It’s not a simple read but you'll come away with some good insights.

Comments

[gman]

Interesting that speculative commodities investing gets such scrutiny when speculative house investing was cheered on. Guess which one was more damaging...