Financial market prices are moved by participants anticipating changes in supply or demand, the fundamental forces of economic activity. Prices move based on what is expected to happen at some point in the future.#-ad_banner-# This is why markets often seem to move in the opposite direction many investors expect. The anticipation of a sharp change in supply or demand is often much more powerful than the actual confirmation of the change. The old market saying “Buy the rumor, sell the fact” is a great way to think of this concept. Nowhere is this better demonstrated than in the… Read More
Financial market prices are moved by participants anticipating changes in supply or demand, the fundamental forces of economic activity. Prices move based on what is expected to happen at some point in the future.#-ad_banner-# This is why markets often seem to move in the opposite direction many investors expect. The anticipation of a sharp change in supply or demand is often much more powerful than the actual confirmation of the change. The old market saying “Buy the rumor, sell the fact” is a great way to think of this concept. Nowhere is this better demonstrated than in the commodity markets. Rumors and forecasts of supply disruptions due to weather, government action or a host of other factors can send short-term commodity prices skyrocketing. Next, after the disruptive event occurs (or doesn’t), prices fall back to the norm. (Regular readers of Dave Forrest’s Junior Resource Advisor are kept abreast of potential changes in investors’ perception of supply & demand in the commodity markets.) Recently, this is being witnessed in the natural gas market. Forecasts and the reality of an ultra-cold winter in the northeastern U.S. have pushed the spot price of natural gas prices from $3 per million… Read More