Posted on 06/09/2008 1:23:15 PM PDT by PeaceBeWithYou
I really think the main reason no action has been taken so far to halt the rampant speculation by the likes of GS and MS is to allow them to recouple some of their subprime losses. Think about it. The feds allow them to be considered commercial buyers, so they don't have position limits. The Fed opens the discount window to them. They take that cheap, freshly printed money and then leverage it into futures contracts at eight percent margin. The money pours into their coffers like a torrent while they line up the suckers (such as pension funds) for when the regulations get put back into place.
So Fed policy is screwing us both coming and going. Our paychecks are getting devaluated by the cheap money the Fed is loaning to investment banks ... that they can use to drive up the price of oil and take a bite out of what is left of our paychecks.
Global consumers are bailing out the subprime mess a few dollars per head.
Oh, and wait until the margin calls hit the long-term index funds all those pension funds are holding. Can you say “poof?” Sure you can.
No reason, that is, except native stubbornness, tradition (the CBT trading hours go back for decades, perhaps even a century), and the attitude of ''not invented here''.
Believe me, you are hardly the first to have been a bit confused by the current situation on openings/closings/names of sessions/etc., for which the only proper adjective is ''goofy''. You ought to see the confusion among brand-new broker trainees -- now THIS is the definition of ''Chinese fire drill' !
“By your own admission, the price of oil probably should be $70/bbl. I’ll spot you $80.”
Banks lend on some internal percentage of what they deem the “real” price to be. So 80 is probably more the market price.
But yes, there is ample speculation in the market.
That said, where were you in 1999? Oil was $8.50 -— and it cost $28 to get out of the ground.
What was going on was OPEC was trying to break its competitors — living lean while USA domestic production disappeared -— AND stupid “no drill” laws got passed -— because they didn’t seem so expensive at the time.
In that time, you got an EXTRA $2,500 bucks that you should have been saving up for today.
Just manipulation — on the other side.
Of course, the North East was the beneficiary of THAT manipulation, so the MSM didn’t bitch about it.
“Most of the oil is used in the manufacturing sector.”
Yeah, plastic crap made in China.
This is not the 1970’s. Our economy is not NEARLY as energy dependent.
China, however, is getting screwed. It’s COGS is up, and the dollars it holds in T-Bills totally devalued.
Sucks to be a ChiComm.
Am I am sure we can trust the Keating 5 Senator with the job of fixing this current problem. We know Obama and the Progressos will just use the manufactured calamity to manufacture consent of the governed to hand over more freedoms. How in the world can anyone logically think that a government almost 10 Trillion in debt can afford to give out free health care ? The next 8 years looks to be rough ones. Hopefully the sane ones will be able to pickup the pieces.
Hey, I used to live in Texas and Oklahoma. I know what cheap oil does to the economies down there. The main reason I didn't become a petroleum geologist was the oil bust of the early eighties.
But this speculation is extending to more than just oil. It is filling every commodity. So the impact is far more than being offset by cheap oil in the late 1990s.
When trading for their own respective accounts, which they do -- heavily! -- GS, Merrill, Chase, MS, et al. are merely ''large specs'', a la any hedge fund or large individual trader.
Above from www.eia.doe.gov. So we have cut our reliance on oil in the stationary sector, but it still supplies 95 % of our transportation energy. Just wait till the truckers go on strike and you local store shelves empty. Truckers can be very volatile also. There was one a few years ago who tried to drive his rig into the California capital building. Got stuck in the entranceway if memory serves me right.
"The entire commodities market has always been underregulated, while the the stock market has rigorous regulations. Think Hillary Clinton and cattle futures."
Bad example. The alleged cattle trade could not have happened under the rules. The most plausible explanation is a bribe funded by the commodity broker simultaneously going short and long and "allocating" the winner to the Ms. Clinton as the "bag man" [so to speak] for her hubby ... and the loser to an intermediary for the person passing the bribe to the Clintons.
The same sort of nonsense could be done with stocks although it would take a little longer. OTOH maybe she is the world's smartest woman who never went back for more because of the tremendous stress of making all that money.
EXACTLY!
I was in silver at the time and the Hunt Brothers had the rules changed on them in mid-stream. By the commodity futures regulators back then. 1980
“It is a monopoly good with no real competitor.”
Baloney. There are plenty of real competitors, at the right price point (silly environmental laws permitting).
Liquified coal comes to mind -— roughly at the price point now.
And who is sitting on something like 2/3 of the world’s coal? The USA and Canada.
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