Nat Rothschild Investing in Russian Alumninum Company Rusal

Rusal Aluminum

Nat Rothschild has made a deal to be a foundational investing in the Russian aluminum company Rusal, which will go public in January 2010. Rusal is controlled at this time by Russian billionaire Oleg Deripaska.

Also signing on to the deal is Paulson & Co, the American hedge fund giant headed by John Paulson; Robert Kuok, a wealthy Malaysian-Chinese; and Vnesheconombank, or VEB, the Russian state development bank.

How the deal is set up is the four investors, including Rothschild, will be guaranteed shares when the company goes public in exchange for an agreement to not sell them over a period of several months.

The major listing will be in Hong Kong, and secondarily in Paris on January 29. Rusal expects to raise about $2 billion from the offering, which represents a 10 percent stake in the company.

For the most part the reason for the float is to raise money to pay down the enormous $17 billion in debt Rusal has. Most of that came from acquiring a number of businesses not too long before commodity prices fell.

Because the deal is considered highly risky, retail investors won't be allowed to participate in the IPO. Once the deal goes forward, Rusal will be the first Russian company listed on the Hong Kong exchange.

Rusal Aluminum

Printing Money Benefits Commodities

With central banks and governments addicted to printing money as their preferred strategy to salvage the economy, that will have long term benefit to commodities investors, as prices are sure to rise in response the the inflation-producing activity.

So one indicator all of those interested in commodities as an investment can look for is how their particular country is managing their money supply.

If they're printing money at a huge rate, you can count on inflation kicking in, especially with many commodity prices, and so you can be sure that, along with growing demand for commodities in Asia will ensure there's a ripe commodity market for some time into the future.

This doesn't mean all commodities will go up in price, but in general there will be an upward price movement in the commodity sector.

Add to this the demand for food, energy and precious metals, and you have a good look at where commodity demand, and ultimately prices will head. Just watch the amount of money being printed along with supply and demand as the major factors driving long term commodity prices.

CME Offers Commodity Speculation Recommendation

In an effort to curb the influence of speculation in the commodity markets, CME Group offered up some of its own recommendations, among which is a stronger role for the Commodity Futures Trading Commission in reference to energy products in hard singel exchange positions, specifically those at exchanges that are regulated.

"We recognize that misperceptions can undermine confidence in well-functioning markets, which is why we support the CFTC's mission to provide regulatory certainty and to ensure that the energy markets can operate efficiently," said Terry Duffy, CME Group executive chairman. "Regulatory parity, however, must be given to all markets under the CFTC's jurisdiction."

But as CME's Donohue states, a number of studies have disproven the idea that commodity speculators have been the force behind driving commodity prices and energy prices up, and rather it's the supply and demand factors which drive prices, and not commodity speculators.

Donohue also, probably rightly, added, that if there are limits imposed on index funds, that will more than likely simply move the funds to invest in markets that are unregulated.

The government needs to simply stay out of attempting to be the central planner for the economy, it hasn't worked anywhere in the past, and it won't work now or in the future. Supply and demand drives commodity prices, not speculators.