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View Diary: Goldman uses Artificial Aluminum Bottleneck to Squeeze Coca-Cola (108 comments)

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  •  Coke needs to have a guarantee of delivery (0+ / 0-)

    at a guaranteed price. The aluminum can come from Alcoa or Reynolds and rolled by any of 4 mills in the US. If something happened to Reynold's smelter or rolling mill, Coke would have to buy on the spot market and may not be able to get any at all because there would be a shortage.

    Can you imagine what would happen to Coke's image and sales if they couldn't supply, even for a few weeks. Pepsi would gain millions of new customers who may not go back.

    The futures markets spread risk and are a good thing. The problem is when the traders, who neither produce nor take delivery, such as investment banks and hedge funds get involved on a massive scale. The markets then tend to follow their moves (games) and not actual supply and demand.

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