Go figure.  Matt Levine does a dizzy dance explaining that somewhere between 50 and 90 percent of the world’s copper is now in the London Metals Exchange warehouse.  No one knows who it belongs to.  Levine asks: Is the market being cornered.

He goes on to explain the heart of the commodities market.  There are people who really take possession of pork bellies, oil and copper.  And there are people who play with possession.  These are two different markets.

Hedge funds now take possession of oil and hold it on boats until the price goes up.  Pure manipulation.  Obviously when they sell, the market for the commodity is effected.

Whoever is holding the copper in London is holding a percentage of the supply.  In fact, forinstance, what is being held in the LME warefhouse is a tiny portion of the world’s copper.  What makes a difference is the time period when the copper actually needs to be use. Immediate delivery copper will have a higher price.  Long term delivery lower. And so on.

Algoirthms invented by those MIT grads who work in finance are surely being developed not to see who wants how much copper in the future, but how much money can be made right now.  A conundrum.

Pennies from Heaven?