Futures markets for commodities are bogus and a joke

J.S. Kim, founder of the investment consulting firm SmartKnowledgeU, gives in a short exclusive interview his take on the rising oil price: “The current upward move has to do with OPEC manipulating fears to drive prices higher on futures market and the current destabilization occuring in the global monetary system.”

By Lars Schall

J.S. Kim graduated from the University of Pennsylvania in 1990 (in Neurobiology) and earned a double master degree from the University of Texas at Austin in 1997 (in Business Administration and Public Policy). Subsequently, he worked within the Private Wealth Management division of Wells Fargo and later on at Smith Barney.

After leaving the commercial investment industry, he launched in 2005 his own company SmartKnowledgeU, LLC (http://www.smartknowledgeu.com), an independent investment research and wealth consulting firm, where he serves as President and Chief Investment Strategist. His investment newsletter, the Crisis Investment Opportunities newsletter, has yielded positive return every year since its establishment in 2007, easily beating for example the US S&P500 in 2007, 08 and 09. He actively maintains a blog, The Underground Investor (http://www.theundergroundinvestor.com), and is the author of the book “Confessions of a Wall Street Insider.” He is also a regular contributor to the financial websites “Zero Hedge” and “Seeking Alpha.”

Mr. Kim’s investment strategies don’t rely on fundamental or technical analysis as primary screens to select stocks but instead utilize the strength of corporate-government-banking relationships to predict share prize appreciation. Away from the investment world, he is an avid martial artist and splits his time between the U.S. and Asia.

Mr. Kim, is the oil price driven by massive speculation in the futures market? And isn’t this really a scam?

True. Futures markets for commodities are bogus and a joke. It’s there so the criminals can make more money at the expense of social and public good. Gold and silver markets are the same. Shut down gold and silver futures markets in London and NY and within a month gold would be twice its current price and silver maybe five times its current price. Futures markets, including oil, have nothing to do with price discovery in a free market.

How much is the current upward move of the oil price connected to the turmoil in the Middle East?

A lot since the Middle East is an oil producing region. But more of the current upward move has to do with OPEC manipulating fears to drive prices higher on futures market and the current destabilization occuring in the global monetary system.

The oil price is now over $100 per barrel. Could the rising oil price turn out to be the Achilles heel of economic growth in China? (i)

Not necessarily. China has been wise in building up its oil reserves (we probably don’t know the true numbers as the Chinese gov’t probably never releases them). And I haven’t researched this, but how much oil does China produce internally that could offset the amount they have to import? Generally speaking, rising oil prices in dollars are bad for importers but those that have hedged against falling dollar purchasing power (that result in rising commodity prices) by hedging in gold and silver, like China has, may not be hurt as much as you believe.

How long do you think will the United States still benefit from the arrangement that oil is priced in US dollars?

As long as dumb nations continue to accept dollars for oil but at some point, the oil producing nations will probably demand an alternate payment than the dollar. Maybe even demand payment in gold or silver.

Thank you for taking your time, Mr. Kim!


(i) Compare James R. Norman: “The Oil Card. Global Economic Warfare in the 21st Century“, Trine Day, Walterville, 2008, 2009, pp. 35-52.

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