01.10.2010 - Volatility makes commodity cos' valuation tough
From Indiatimes.com: Worldwide, trading companies have often found themselves embroiled in controversies — whether it is ‘Oil for Food’ (Masefield), government tenders (AWB) or violation of environment laws (Vedanta). Politics and commodity trading make a heady mix — names like Marc Rich (pardoned by Bill Clinton on the last day of presidency) and (Bofors) have not been able to keep distance from infamy. The reason: Pricing in commodities is inherently speculative. Commodities generate no direct income. Instead, one can only sell a barrel of oil or a shipload of wheat to produce cash flow. The problem is that it’s forever unclear how much cash the commodity is likely to generate until the day of transaction arrives..............................................Full Article: Source
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