All markets are political in one way or another. Major stockholders manipulate the stock of companies they control. Investment funds and banks manipulate stocks and commodities in which they are investing. And governments are certainly tempted to manipulate almost everything, from equities to commodities and certainly their own currencies. Some have even claimed that Alan Greenspan’s most lasting claim to fame will likely turn out to be his computerization of the gold and silver market manipulation game in the 1970s. In short, virtually all markets are manipulated by at least one person or entity. Given that manipulation offers preknowledge of coming events, anything else would be surprising. If you had a choice between playing in a market where you knew roughly what was going to happen and one where you didn’t, which would you choose?
Open discussions of manipulation are of course rare, for obvious reasons, though there are always exceptions. In my opinion, realizing this is the first step to successful investing, leaving behind those who have heard too many “Rational Expectations” lectures to pick up the pieces.
And yet, fundamentals do remain decisive in the long run. The question is always: when is the “long run” allowed to reassert itself? The short answer is that even the biggest manipulators find it in their interest to consider those fundamentals when planning their manipulations. It’s simply a lot cheaper that way. So from time to time, we can expect precisely this to happen, albeit likely timed to suit the manipulators. Second-guessing this timing becomes particularly tricky when the primary manipulator is also the party controlling the fundamentals, as is the case in today’s inflationary environment.
Since predicting manipulations unrelated to fundamentals tends to be a touch-and-go affair, it makes sense to make the best use of the rare occasions when fundamentals-based trends are allowed to reassert themselves. Today we live in just such a time, when printing press-fueled price pressure is coordinating price rises in commodity markets across the board. Carpe diem!