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Steve Wisdom

Incentives in the Commodities Market

Chair has remarked many times on the role of incentives as they pertain to the effect of high commodity prices on economic decisions and choices, and on lacunae in certain analyses thereof.

Today's straw-in-the-wind: Mining enterprises are expanding so fast, in response to high prices, that there's now a shortage of tires for huge dump-trucks:



Tuesday, May 10, 2005 Mining boom creates shortage of giant tires

By BRIAN FARKAS, The Associated Press

CHARLESTON, W.Va. - Steve Walker was ready to sell four massive, 200-ton dump trucks, with price tags as high as $3 million, when the orders were canceled.

The buyer, a coal company planning to open a new mine site, was ready to buy. It just couldn't find the 12-foot-tall tires to get the trucks rolling.

The mammoth tires, which can cost up to $30,000 apiece, are in short supply worldwide, leaving earth-moving industries, including coal, in a lurch. The shortage is due to a rise in equipment orders, an increase in worldwide mining because of increased mineral prices and growth in China and other Asian counties. (.. )

Tennessee-based Bridgestone/Firestone has a large-tire plant in Illinois and is spending millions to expand capacity at its Japanese plant to address the shortage in Asian markets. But that plant won't be operational until the end of next year.

Michelin, which has a large-tire plant in South Carolina, announced earlier this month it is building one in Brazil. The plant is expected to come on line in mid-2007, serving North and South American markets. (.. )

Steve Wisdom, a Pennsylvania-born Harvard graduate, has been Victor Niederhoffer's chief for more than 15 years. He also has been associated with Trout Trading, Societ Generale and Deephaven Fund.