So a bond trader walks into a bar…
Actually, this isn’t really a joke, but it’s the beginning of a good story I heard Thursday from Kevin Ferry, president of Cronus Futures Management.
Ferry was in a Chicago pub a few days ago when he ordered a beer and a waitress brought it to him in a plastic cup with a big label on it indicating it was made with corn.
“And I thought that was the most ridiculous thing I ever heard,” the bond trader said.
What piqued Ferry was the notion that we’re using a food product to make plastic cups instead of, like, feeding people with it. The discussion took place during an interview for a story I filed yesterday on the coming explosion in global food prices and what investors can do to protect themselves.
Ferry was worked up plenty about the way Wall Street is developing a brand of dangerous securities to help benefit from the coming inflation storm, likely to manifest itself first in rising food prices in nations that can afford it least.
I had reported earlier in the week about a corn ETF that just started up back in June, and a slew of similar funds are likely to begin filtering into the pipeline once investors get the message that food costs are on their way up aggressively.
Using food for purposes other than for feeding people is a risky business and one bound to drive costs higher, a subject I had reported on at length for a competitor prior to coming to CNBC.
“You cannot stop the idea that foodstuffs are going to be made for beer cups if that’s what Americans want to buy,” Ferry said. “If the marginal dollar begins going into this stuff (i.e. if investor and speculator dollars start pouring into these markets), where these things go is anybody’s guess.”
Ferry also delved into the danger of leveraged ETFs playing against bond prices, but that’s a story for another time, and another bar.