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You can open a commodities position with as little as $2,800 margin per contract, but skimping is not a good idea because you might be out of town when you get a margin call.
To make the case for gold and grains we turned to Renee Haugerud, operator of a smallish hedge fund in New York with a big commodities position, Galtere International Fund , Ltd
Also, a commodities position in which the market has a limit up or limit down day and investors are unable to move in to or out of the market.
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Despite strong overall gains (profits for the fourth quarter rose 62%, the company said Wednesday), trading revenues were down 64% from the third quarter and 24% from 2004′s fourth quarter, mostly because of poor results in interest rate and commodities positions.
As of June 30 , 2008 CalPERS' holdings in stocks, private equity, real estate and commodities positions were worth $239.2 billion.
On Wednesday, the Wall Street Journal had reported the Soros Fund was selling commodities including silver, and four sources from other hedge funds told Reuters they believed Soros was busy selling commodities positions again on Thursday.
General Mills said gross margin rose to 41.2percentt in the quarter from 37.1percentt a year earlier, excluding changes in the market value of commodity positions.
There was also talk that hedge funds had been selling mining stocks because of rumours that Refco has been liquidating its commodity positions.
If institutional investors, like Calpers, are forced to divest its commodity positions, the market could go into a tailspin, crushing the positions of many of the banks that hold long positions.
Officials at the exchanges where those trades occur had to monitor Bear Stearns's financial situation carefully throughout last week to ensure that its cash shortage did not affect its commodity positions or those of its clients.
Hedge funds may well have been selling their commodity positions to meet demands for cash from other parts of their portfolios.In a complete meltdown, for example during world wars and revolutions, it is hard to find anything that keeps its value.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com