Posted on 05/23/2008 9:32:18 PM PDT by gleeaikin
“For liquidation only.”
I did not really understand SAJ’s answer to Deacon Benjamin. After discussing this someone who did understand, this is what I understand. Hunt bought a whole lot of silver future contracts. [Actually ran the price up to about $50 an ounce. Dropped back to around $4/oz afterwards. Currently around $18/oz.] The rules were changed that people could only sell contracts in silver, they could not buy new ones. I guess everyone sold fast, no new money was coming in and the Hunts having so much could not sell fast enough and were toast. Kind of like being the last guys in a chain letter. Was this explained to me correctly?
New players might have been eager to buy more silver in Jan 1980, but it didn't matter. By rule, they simply could not.
Additionally, by that point, the IRS had tied up a number of Hunt brothers' account, not to mention another number of their associates' accounts. Net result: from a LOT of their accounts, Bunkie and the boys couldn't SELL off their stuff either.
The technical term you want is: hog-tied.
What do you think ?
Yes. Hence the "Soros-feel" to it.
We know what he did to the Asian currencies in the 1990s.
I'm just a Freeper trying to make sense of the world, and I'm appreciative of those like you who can educate us while keeping the dialogue civil.
Well, somebody is making out like a bandit,and that’s what they are.
I was exploring some other oil/commodity threads that have been posted here recently. It seems one problem is that there is a lot of oil just sitting in tankers waiting for someone to want delivery. Instead, hedge funds are just running up the futures for their non-end-users.
This is solely to do with A) Capital pools, principally pension funds and related types of funds, getting together with investment banks in order to avoid/evade position limits in futures mkts, and B) the incompetence of the Regress in recognising this, accompanied by their dildonic refusal to push for enforcement of **EXISTING** law.
Hey, you asked. 'Course, I've only been in the futures mkts for 36 years. What the hell do I know, eh?
FReegards to you!
I'm sure you're a nice chap, but, sorry, you simply don't get it. Condemn me all you like; I'll be making some sort of profit all this year, and the next, and the next...
Lesson 1 of Screwy Markets: Do not subscribe to a ''villain'' theory or a ''conspiracy'' theory. The villains may conspire, but that's only because goobermint allows them to do so.
Lesson 2 of Screwy Markets: Goobermint have NEVER taken any action whatever that has had the net effect of ''calming'' or ''smoothing'' screwy markets. Goobermint BENEFITS from screwy mkts; when mkts become sufficiently screwy, as they do from time to time, goobermint gets down on its knees and prays actively for the citizens to start hollering ''DO something!!'', at which point the members of goobermint start licking their overfed chops. They know, at that point, that they're about to gain more power, which is all the great majority of goobermint ''people'' are after.
Well, sometimes people really are OUT TO GET US. heh heh heh...
What the hell do I know, eh?
Once again, I've appreciated the postings and the education you've provided. I fully admit that I know nothing about futures markets, which is why I read these posts, trying to make sense of it all.
Freegards back at ya!
B) the incompetence of the Regress in recognising this, accompanied by their dildonic refusal to push for enforcement of **EXISTING** law.
Shouldn't the enforcement come from the Attorney General, federal or state, as an Executive function ? Or are you making this commentary in response to the idiotic hearings held by Congress, where they interrogated the oil company executives, instead of, as you have laid out, called for the enforcement of existing law which would have avoided the kind of speculation by institutional investors of which we are now reaping the whirlwind ?
It appears to me that Congress is as you describe it, and President Bush and his Executive function is a spent force.
Thanks and FReegards.
Any officer of the United States, which amazingly includes members of the Regress, can petition the DOJ to enforce existing statutes when enforcement appears lax or non-existent. The $64,000 question is: will someone in the Regress petition, and will the DOJ bureaudorks listen to the petition and act on it, you know, as guardians of the public trust and all that.
Answer: probably not, unless the petitioner has an awful lot of whoofle dust. I don't think Bush's DOJ gives a tiny rat's behind about this particular subject. Strange attitude, too, coming from a putative ''oil man''.
Nonetheless, the manipulation of energy mkts by investment banks is a very hot hot-button issue with a decent percentage of the population, and rates to become much more so, much faster, if energy prices keep rising. Sort of the old ''peasants with pitchforks'' deal.
The other side of the coin, removing the ''swaps exemption'' for investment banks regarding position limits in sundry mkts, is going to be tougher. One way or another, the big banks own enough Regresscritters to forestall any legislating in this area...or at least until their actions become so egregious as to be obvious to even American Idol watchers.
To be scrupulously fair about it, even Sen. Bunghole Bingaman (D-Fantasyland) has caught on to some degree. In a letter to CFTC published today, he specifically mentions the swap exemption (thus demonstrating he's no more than 4 months behind the denizens of Free Republic who follow energy-mkt threads...heh heh heh). Perhaps something will come of it.
After all, it is, as you pointed out, an election year.
There is more information available than just this article. A fairly interesting book by Hieronymus, 'Economics of Futures Trading', gives an historical background of the Chicago Grain market, which shows the necessity of regulation to a fair, free market.
Hope you got some good asbestos underwear on...
By even rising to the defense of those that keep markets moving, you have risked the ire of the conservatives around here that love markets until they they can no longer fill their F-150’s or get turned down on a HELoC.
I always appreciate the minority around here that actually know what a stock market, bond traders, commodities speculators and RE flippers do to keep this economy going.
“I’m sure you’re a nice chap, but, sorry, you simply don’t get it.” “Condemn me all you like...”
First of all I fail to see anywhere that I condemned you. You did have some heated exchanges with gipper81 and groanup, but also complemented gipper81 on one of his links.
Second, I am not a ‘nice chap’ I am a 69 year old, widowed, grandmother, who is just getting back into the world after 10 years of caring for dying mother, father, and husband. I am simply trying to learn and understand the world that I have not been able to pay much attention to in the past decade, also learning to use my first computer which I have had for only 2 years. No need to get nasty with either me or happygrl, as we just are trying to make sense of a very complicated set of situations.
Now maybe this is a man/women thing. Perhaps it is normal for men to claw and fight, and make accusations that people are highjacking the thread, and then find something nice to say to each other. This is not a typical woman style of interacting, and while I don’t care for it I will look past it to find the nuggets of useful information amidst the droppings.
I did not say you had condemned me; I stated that I held an unpopular opinion and invited you to condemn me if you wanted to. Please read that mssg again, because this distinction is important.
The single thing that most inhibits understanding of mkts, energy mkts particularly, is the habit/tactic of the so-called media of throwing out innumerable red herrings. This has the effect, among a significant portion of the public at large, of causing (many) people to run off in all directions casting about for ''causes'' of ''problems'', and for assorted villains busy with all sorts of malfeasance.
To understand mkts generally, focus only on sources of supply and/or possible supply, and on sources of demand and/or potential demand. The two questions to ask are always: 'How does Event X influence supply (demand) right now or in the very short term in Market Z?' and 'Will Event X influence supply (demand) in Market Z or a related market over the longer term.''
Naturally, no one gets the answers to such questions correct all the time, or even most of the time. The reason for this is not native stupidity or anything like it: the reasons are twofold. First is the quality of information about Market X, or the lack of information thereon, held by the individual who is trying to answer the question(s). Second is the utter lack of education about economics and the workings of markets, aided and abetted to an appalling degree by the education ''system'' in this nation.
Goobermint's role in this process, aside from sponsoring inferior economic education, is well-known and historically inarguable. The more goobermint interference that there is in a market, other than to protect mkt participants from fraud, the more unstable any mkt becomes.
The ''media'' are no better and in some ways worse. Just at the moment, I'm trying to recall an example of a mass-mkt media article or programme about mkts that A) had its ''facts'' straight, B) had its ''facts'' sufficiently complete enough to be able to address whatever topic the article purported to address, C) was even relatively free of non-market agenda-driven political bias -- to either side of the political spectrum, and D) showed competence in reasoning from A to B to C regarding events affecting Market X.
I can't think of a single instance, not one.
Examples of these flaws abound. Recently, we've had this ''syllogism'' (sic) from the LBM: (premise major)-- oil company executives earn enormous salaries and oil companies are earning enormous profits; (premise minor) -- gasoline prices are high; therefore, oil companies and their executives should be subject to a punitive tax, ''windfall-profits'' and all that.
Well, this is rubbish, of course. The LBM's reasoning is laughably faulty here, but that's not the worst of it by a long chalk. The LBM here deliberately conceal a half dozen vital facts. The most important of these, regarding a discussion about the gasoline market, is that goobermint profit enormously more than oil companies on the sale of a gallon of gasoline. Nowhere is this mentioned by the LBM, yet without doubt this is a very important point in the discussion.
The net of all this is:
1) Accept as contrarian evidence everything that the goobermint say about mkts, with the exception of ''hard'' data (the weekly reports on storage levels of petroleum products and natural gas, for example -- but even these can be and have been spectacularly wrong at times, so be very careful).
2) Ignore almost everything disseminated by the mass-mkt LBM. This includes, specifically, every opinion article on CBNC and FBN, and in WSJ, IBD, The Economist, FT, Barron's and ''business'' publications generally. In the case of print publications, the ''information'' presented is almost always out of date (and, thus, thoroughly useless) by the time you read it, the exception here being broad-based ''trend''-type pieces, which are still subject to objection C) above.
To learn what really happens in mkts, consult:
1) Cash-market brokers. Their very living depends upon their understanding of the markets in which they deal. Now, of course, they won't tell you everything you might want to know, because a lot of what they do know is time-sensitive, proprietary, or both...but they will give you a hell of a lot of very useful information.
2) UNsuccessful traders. There are way more of these than successful traders, and they love to talk...and they are outstandingly valuable contrarian indicators.
3) Industry statisticians. Again, their living depends on their ability to acquire, collate, and understand the pertinent data about markets. Side note: the more limited their scope, the more useful they are -- a person who follows stats and data on, say, corn, is more useful than someone else who follows stats and data on grain markets in broad.
4) Successful traders. The problem here is that most of them are very close-mouthed about their views and doings. Nonetheless, two of the five most instructive conversations I've ever had about markets were with world-class traders.
One last thing. Read. Read those who have proven, by the test of time, that they know and understand the workings of markets. Bastiat, Adam Smith, Ricardo, vonMises, Hayek, Bachelier (if you can find his papers in English or if you read French), Knight, Arrow, Merton (for the most part, but watch out, he's VERY mathematical and difficult for the non-mathematically inclined). For an easy and very enjoyable read, written by an utterly brilliant man, I'd recommend Thomas Sowell's Basic Economics.
Hope this little commentary is of some use to you in gaining a better understanding of mkts and the way they actually work, and FReegards!
Thank you for this very informative post. It will take a lot of digesting. I will want to show it to my new significant other who has made his money with the stock market, often as a contrarian. I have made what I have by following the real estate mantra—location, location, location. Most of what I own is within 5 blocks of a subway in a thriving urban area. I have a little in BP ;), and some in GE :(. Any ideas where I should go, or if I should go somewhere else with the GE. More comments later, got to go to work now.
Do you mean like BLS inflation data which shows "seasonally adjusted" gas prices dropping in April.
Also, have you ever noticed how frequently goobermint revises the stats it releases? Isn't that just another way of saying, ''Hey, folks, this is crapola in the first place!''?
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