Posted on 10/10/2008 2:32:15 PM PDT by vrwc1
It's one thing to buy gold that can be stored for long periods of time, but oil is extracted, refined, delivered and consumed over a pretty narrow window of time, no?"
They speculate on long term oil contracts as well. Also, this is paper oil. The speculators have no intention of buying or selling or taking delivery of physical product. But, the effect on price is all too real, as we've seen.
BTW, the Commodities Futures Trading Commission is supposedly there to stop this sort of thing. It's one of their mandates.
They've done just as good a job as has the Securities and Exchange Commission in stopping abuses in the credit derivatives markets. Totally asleep at the switch and no doubt in the pockets of the very people they're tasked with regulating.
Nothing of what I say should be a big revelation. When the price of oil doubles at a time when demand is down 2% then something is rotten. It's there for all to see.
Whenever there's a bubble in prices, in ANY market, it's caused by two things only in all cases: greed and fear, operating together. Goobermint has also contributed to price bubbles, accentuating the fear portion by their idiotic policies.
Specs are ALWAYS present, in EVERY tradable mkt. And specs have, collectively, enough money to move ANY mkt to outrageous levels from time to time. This occurs when, for whatever reason (and, just btw, occurs more frequently these days as goobermint mismanages mkts more frequently), specs decide that goobermint has its head further up its arse than usual, and as a result all trade in the same direction. Ordinarily, of course, the specs are typically 40-60 or 60-40 or 44-56 on either side of a mkt.
The recent huge run-up in energy prices is a sharp case in point. In addition to having prevented more production over the past 30 years, goobermint -- no one else -- also changed the rules so that one certain sub-class of speculators became classified as ''commercials'', that is, members of a group who legitimately use futures mkts to hedge their price risk.
This single misclassification, courtesy of the laughably misnamed ''Commodity Modernization Act of 2000'', was -- during the recent energy price bubble -- responsible for almost ALL of said bubble.
You needn't worry about ''insulting''. I wasn't. Believe me, mate, if I had wished to ''insult'' you, you would have known it straight off. You're, sadly, just another chap who either A) derives his views about mkts from non-mkt sources (such as Moody's -- who none of them actually TRADE anything), or B) has somehow, somewhere acquired factually wrong-headed views about how mkts operate, and won't admit as much, or C) both.
Good luck to you! You're going to need it, I'm sorry to say.
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