Posted on 06/09/2008 8:58:55 PM PDT by DeaconBenjamin
For once, many speculators were caught on the wrong side of the oil market.
After being accused by US lawmakers of profiting from rising prices and driving energy costs higher, some speculators lost serious money last Thursday and Friday when prices jumped by a staggering $16.24 a barrel to a record $139.12 in less than 36 hours.
Traders say many speculators bet early last week on falling oil prices through short sales – in which they sell the commodity in the hope of buying it back later at a lower level.
They were gambling that prices could drop below the critical $120 a barrel level on further signs of demand erosion in the US and the partial removal of fuel subsidies in some Asian countries.
More ambitious speculators not only bet that spot prices would decline, they also gambled that long-term prices, such as futures for delivery in 2016, would move higher. Complex and vanilla bets shared a common theme: they depended on a stable US dollar, particularly against the euro, the sterling and the yen.
Data from the US Commodity Futures Trading Commission shows that for the week to June 3, speculators were getting out of the crude oil market. If you include futures and options, then speculators sold a net 4,500 contracts through the liquidation of some previous long positions – bets on higher oil prices – and the establishment of fresh short positions.
The overall net long position fell to 94,752 contracts, the lowest level in a year and well below the 150,000 contracts seen in early March.
Giovanni Serio, an oil analyst at Goldman Sachs, says the bets on falling oil prices reflected concerns over a sharp deterioration in oil demand raised by the rapid rally in long-dated prices against a backdrop of weak economic data in the US.
He said: “These concerns had translated into significant short selling and a liquidation of net speculative length”.
By Wednesday last week, it had started to become clear that the bet might not work. US oil inventories, instead of moving higher because of lower demand, fell sharply. Some traders started to unwind their bearish positions.
Oil prices then failed to fall below $120 a barrel – a critical support. If that had been broken, it could have triggered further sales. On Thursday, spot prices begin to climb, while long-term prices lagged, triggering more nervousness among speculators.
But it was a non-oil event – the press conference by Jean-Claude Trichet at the European Central Bank, which sent the bears into a tailspin. His warning that the bank could raise interest rates in July sent the dollar plunging.
As the US dollar weakened 2.4 per cent in two days, some investors panicked and tried to buy back their short oil positions. Mr Serio says that the rapidity and strength of the rebound suggested it was largely due to “a large short covering of the short positions”.
A trader with a US hedge fund adds: “It was a massive short-covering.”
By the end of Thursday’s trading, the oil price had climbed $5.49 to $127.79 a barrel, the largest ever increase until then.
But the situation got even worse for the speculators on Friday: as trading started in London, the market reacted to comments by the Israeli transport minister – and a former chief of the Israeli military – who said an attack on Iran was “unavoidable”. Then, as New York opened, Morgan Stanley, the investment bank, warned that prices could jump to $150 a barrel in two weeks.
The Israeli threat plus the Morgan Stanley forecast triggered fresh buying of spot contracts – rather than long-term ones – in turn further undermining the short-sellers. By mid-afternoon in New York, traders say, they were forced to throw in the towel and cover their positions, sending oil prices rocketing more than $11 at one point.
Ed Meir, at MF Global in New York, says: “Friday’s move was driven by a combination of abrupt short-covering – after a failure to break $120 a barrel – and buying hysteria.”
The fact that short-term prices appear to have been influenced so much by speculators – both on the way down and the way up – is likely to intensify calls for regulation.
Somehow this will hurt innocents; for now, I’m not feeling any pain for those who knew what they were doing.
INOW, the people who bet on rising oil prices, and profited all the way up to 120+, then reversed field, and bet on falling Oil prices?
Riiiight..
At this rate, it will soon be time to sell short on toilet paper and kindling, as we'll have plenty in green.
Wouldn't it have been great to have had a nice fiscally conservative Republican in the presidency for 8 years, along with Republican Congress? Instead, we've been stuck with that free-spending Democrat "W" or whatever his name is.
Betting against rising oil prices right now is like betting against the sunrise.
it’s crazy to have such a neccessity as gas be controlled by so few companies without much competition by alternatives. That will be changing, thank God.
Today's oil prices are driven by speculation and market manipulation by Wall Street and energy traders. A Senate investigation revealed this in 2006, finding that prices above $50/barrel could not be accounted for by market forces. Download the full report (and prepare to get mad). The Role Of Market Speculation In Rising Oil And Gas Prices: A Need To Put The Cop Back On The Beat
The Enron loophole (yes, the same crooks who pushed Clinton and Gore on Kyoto and discussed how much money could be made trading "carbon credits") made it possible for market manipulation. The CFTC is supposed to regulate commodities trading, but exempted OTC trades. Recently, the CFTC announced they were going to apply greater scrutiny to ICE, but the CFTC seems largely clueless (see below). At best the CFTC is undermanned and overwhelmed.
Following are exerpts from the report...
The traditional forces of supply and demand cannot fully account for these increases. While global demand for oil has been increasing – led by the rapid industrialization of China, growth in India, and a continued increase in appetite for refined petroleum products, particularly gasoline, in the United States – global oil supplies have increased by an even greater amount. As a result, global inventories have increased as well. Today, U.S. oil inventories are at an eight year high, and OECD oil inventories are at a 20-year high. Accordingly, factors other than basic supply and demand must be examined…
Over the past few years, large financial institutions, hedge funds, pension funds, and other investment funds have been pouring billions of dollars into the energy commodities markets – perhaps as much as $60 billion in the regulated U.S. oil futures market alone – to try to take advantage of price changes or to hedge against them. Because much of this additional investment has come from financial institutions and investment funds that do not use the commodity as part of their business, it is defined as “speculation” by the Commodity Futures Trading Commission (CFTC).
According to the CFTC, a speculator “does not produce or use the commodity, but risks his or her own capital trading futures in that commodity in hopes of making a profit on price changes.” Reports indicate that, in the past couple of years, some speculators have made tens and perhaps hundreds of millions of dollars in profits trading in energy commodities. This speculative trading has occurred both on the regulated New York Mercantile Exchange (NYMEX) and on the over-the-counter (OTC) markets.
The large purchases of crude oil futures contracts by speculators have, in effect, created an additional demand for oil, driving up the price of oil to be delivered in the future in the same manner that additional demand for the immediate delivery of a physical barrel of oil drives up the price on the spot market. As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum.
Although it is difficult to quantify the effect of speculation on prices, there is substantial evidence that the large amount of speculation in the current market has significantly increased prices. Several analysts have estimated that speculative purchases of oil futures have added as much as $20-$25 per barrel to the current price of crude oil, thereby pushing up the price of oil from $50 to approximately $70 per barrel. Additionally, by purchasing large numbers of futures contracts, and thereby pushing up futures prices to even higher levels than current prices, speculators have provided a financial incentive for oil companies to buy even more oil and place it in storage. A refiner will purchase extra oil today, even if it costs $70 per barrel, if the futures price is even higher.
As a result, over the past two years crude oil inventories have been steadily growing, resulting in U.S. crude oil inventories that are now higher than at any time in the previous eight years. The last time crude oil inventories were this high, in May 1998 – at about 347 million barrels – the price of crude oil was about $15 per barrel. By contrast, the price of crude oil is now about $70 per barrel. The large influx of speculative investment into oil futures has led to a situation where we have high crude oil prices despite high levels of oil in inventory.
[snip]
At the same time that there has been a huge influx of speculative dollars in energy commodities, the CFTC’s ability to monitor the nature, extent, and effect of this speculation has been diminishing. Most significantly, there has been an explosion of trading of U.S. energy commodities on exchanges that are not regulated by the CFTC. Available data on the nature and extent of this speculation is limited, so it is not possible for anyone, including the CFTC, to make a final determination about the current level of speculation.
[snip]
Until recently, U.S. energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC, including ongoing monitoring to detect and prevent price manipulation or fraud.
In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called “futures lookalikes.” The only practical difference between futures look-alike contracts and futures contracts is that the look-alikes are traded in unregulated markets whereas futures are traded on regulated exchanges. The trading of energy commodities by large firms on OTC electronic exchanges was exempted from CFTC oversight by a provision inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 in the waning hours of the 106th Congress.
The impact on market oversight has been substantial. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC. These Large Trader Reports, together with daily trading data providing price and volume information, are the CFTC’s primary tools to gauge the extent of speculation in the markets and to detect, prevent, and prosecute price manipulation. CFTC Chairman Reuben Jeffrey recently stated: “The Commission’s Large Trader information system is one of the cornerstones of our surveillance program and enables detection of concentrated and coordinated positions that might be used by one or more traders to attempt manipulation.”
In contrast to trades conducted on the NYMEX, traders on unregulated OTC electronic exchanges are not required to keep records or file Large Trader Reports with the CFTC, and these trades are exempt from routine CFTC oversight. In contrast to trades conducted on regulated futures exchanges, there is no limit on the number of contracts a speculator may hold on an unregulated OTC electronic exchange, no monitoring of trading by the exchange itself, and no reporting of the amount of outstanding contracts (“open interest”) at the end of each day.
The CFTC’s ability to monitor the U.S. energy commodity markets was further eroded when, in January of this year, the CFTC permitted the Intercontinental Exchange (ICE), the leading operator of electronic energy exchanges, to use its trading terminals in the United States for the trading of U.S. crude oil futures on the ICE futures exchange in London – called “ICE Futures.” Previously, the ICE Futures exchange in London had traded only in European energy commodities – Brent crude oil and United Kingdom natural gas. As a United Kingdom futures market, the ICE Futures exchange is regulated solely by the United Kingdom Financial Services Authority. In 1999, the London exchange obtained the CFTC’s permission to install computer terminals in the United States to permit traders here to trade European energy commodities through that exchange.
Then, in January of this year, ICE Futures in London began trading a futures contract for West Texas Intermediate (WTI) crude oil, a type of crude oil that is produced and delivered in the United States. ICE Futures also notified the CFTC that it would be permitting traders in the United States to use ICE terminals in the United States to trade its new WTI contract on the ICE Futures London exchange. Beginning in April, ICE Futures similarly allowed traders in the United States to trade U.S. gasoline and heating oil futures on the ICE Futures exchange in London.
Despite the use by U.S. traders of trading terminals within the United States to trade U.S. oil, gasoline, and heating oil futures contracts, the CFTC has not asserted any jurisdiction over the trading of these contracts. Persons within the United States seeking to trade key U.S. energy commodities – U.S. crude oil, gasoline, and heating oil futures – now can avoid all U.S. market oversight or reporting requirements by routing their trades through the ICE Futures exchange in London instead of the NYMEX in New York.
As an increasing number of U.S. energy trades occurs on unregulated, OTC electronic exchanges or through foreign exchanges, the CFTC’s large trading reporting system becomes less and less accurate, the trading data becomes less and less useful, and its market oversight program becomes less comprehensive. The absence of large trader information from the electronic exchanges makes it more difficult for the CFTC to monitor speculative activity and to detect and prevent price manipulation. The absence of this information not only obscures the CFTC’s view of that portion of the energy commodity markets, but it also degrades the quality of information that is reported. A trader may take a position on an unregulated electronic exchange or on a foreign exchange that is either in addition to or opposite from the positions the trader has taken on the NYMEX, and thereby avoid and distort the large trader reporting system.
Not only can the CFTC be misled by these trading practices, but these trading practices could render the CFTC weekly publication of energy market trading data, intended to be used by the public, as incomplete and misleading.
[snip]
Because the over-the-counter energy markets are unregulated, there are no precise or reliable figures as to the total dollar value of recent spending on investments in energy commodities, but the estimates are consistently in the range of tens of billions of dollars. Last fall, the International Monetary Fund reported, “Industry estimates suggest that approximately $100-$120 billion of new investment in the past three years has been in active and passive energy investment vehicles.” The New York Times cited an estimate that there were “at least 450 hedge funds with an estimated $60 billion in assets focused on energy and the environment, including 200 devoted exclusively to various energy strategies.”
The increased speculative interest in commodities is also seen in the increasing popularity of commodity index funds, which are funds whose price is tied to the price of a basket of various commodity futures. Goldman Sachs estimates that pension funds and mutual funds have invested a total of approximately $85 billion in commodity index funds, and that investments in its own index, the Goldman Sachs Commodity Index (GSCI), has tripled over the past few years to $55 billion. In March of this year, petroleum economist Philip Verleger calculated that the amount of money invested in commodity index funds “jumped from $15 billion in 2003 to $56 billion in 2004 and on to $80 billion today.”
[snip]
A number of energy industry participants and analysts have noted the divergence between the ample supplies of crude oil and natural gas, and record-high prices for those commodities, and have attributed some of this disconnect to the presence of speculators in the market. “Gold prices don’t go up just because jewelers need more gold, they go up because gold is an investment,” one consultant said. “The same has happened to oil.”
“The answer to the puzzle posed by rising prices and inventories, industry analysts say, lies not only in supply constraints such as the war in Iraq and civil unrest in Nigeria and the broad upswing in demand caused by industrialization of China and India. Increasingly, they say, prices also are being guided by a continuing rush of investor funds in commodities investments.”
Another gas trader said: “It’s all about futures speculators shooting for irrational price objectives, as well as trying to out-think other players – sort of like a twisted game of chess.”
“[T]he basic facts are clear,” he added, “this market is purely and simply being controlled by over-speculation.” Tim Evans, senior analyst at IFR Energy Services, stated, “What you have on the financial side is a bunch of money being thrown at the energy futures market. It’s just pulling in more and more cash. That’s the side of the market where we have runaway demand, not on the physical side.”
Some traders charge that certain hedge fund managers have purposefully contributed to a misperception that there is a shortage of supply. “There’s a few hedge fund managers out there who are masters at knowing how to exploit the peak theories [that the world is running out of oil] and hot buttons of supply and demand, (and) by making bold predictions of shocking price advancements to come (they) only add more fuel to the bullish fire in a sort of self-fulfilling prophecy.”
[snip]
Several analysts have estimated that the influx of speculative money has tacked on anywhere from about $7 to about $30 per barrel to the price of crude oil. Even OPEC officials are concerned that a shift in the market from high futures prices relative to current prices, to lower futures prices relative to current prices (i.e. from contango to backwardation) could precipitate a “quick drop of $20 a barrel or more.” Noting that “fundamentals are in balance and stock levels are comfortable,” the president of the OPEC cartel, Edmund Daukoru, recently attributed the current price levels to “refinery tightness, geopolitical developments and speculative activity.” Other traders have pointed out the possibility of a sharp drop in price.
“At some point, this oversupplied market has to begin to break down this house of cards which is\ dominated by speculative entities,” one futures trader noted, “and when those entities decide to start liquidating their futures positions in crude and gas, look out below.”
Generally, economists struggle to quantify the effect of speculators on market prices. Part of the difficulty is due to the absence of specific data about the strategies of particular traders or classes of traders. The CFTC’s weekly Commitment of Trader reports are not specific or precise enough to provide the basis for rigorous quantitative analysis, and commodity traders are, as a rule, reluctant to distribute their data for such purposes.
Another difficulty is separating cause from effect: are high prices caused by an increase in speculation, or do more speculators enter the market when prices become more volatile because that is when the profit opportunities arise?
[snip]
CFTC staff study. In contrast to the studies that have found a relationship between speculative activity and price, a CFTC staff study released in April 2005 found, in general, “no evidence of a link between price changes and MMT [managed money trader] positions” in the natural gas markets and “a significantly negative relationship between MMT positions and price changes (conditional on other participants trading) in the crude oil market.” The CFTC staff found, generally, that these managed money funds tended to follow what the commercial participants in the market were doing, and tended to trade less frequently than commercial traders.
NYMEX study. A second study that found no relationship between hedge fund activity and volatility was conducted by the NYMEX. Overall, the NYMEX found that during 2004, “hedge fund trading activity comprised a modest share of trading volume in both crude oil and natural gas futures markets,” and comprised “a relatively modest share of open interest.” It also found that hedge fund participation during this period tended to decrease volatility. “In short,” the NYMEX stated, “it appears that Hedge Funds have been unfairly maligned by certain quarters who are seeking simple answers to the problem of substantial price volatility in energy markets, simple answers that are not supported by the available evidence.”
[snip]
“[D]espite those [NYMEX and CFTC] reports,” one trade publication reported, “a majority of industry professionals still contend that there are too many large speculative entities actively engaged in the market – with fund accounts taking on massive equity positions in the commodities.” Another article reported that many traders have “scoffed” at these two studies, “saying that they focused only on certain months, missing price run-ups.”
[snip]
For example, it has been reported that in 2004, Goldman Sachs and Morgan Stanley, the two leading energy trading firms in the United States, earned a total of about $2.6 billion in net revenues from commodities trading, mostly from energy commodities. For 2005, Goldman Sachs and Morgan Stanley each reportedly earned about $1.5 billion in net revenue from energy transactions.
A recent article in Trader Monthly magazine included short profiles of the “100 Highest Earning Traders” for 2005, as ranked by the magazine. Overall, Trader Monthly reported, “On Wall Street, some of the scores were gargantuan, as bulge-bracket banks enjoyed one of the most profitable years in the history of the markets, from asset-backed to credit and crude to crack spreads.” Although the rankings are based on estimates and anecdotal information, and the article does not explain how the profiled traders generated their income, it nonetheless provides some information regarding the magnitude of some of the earnings of leading energy commodity traders in 2005. The Trader Monthly rankings group these traders into several categories: hedge fund managers, Wall Street Traders, and “the rest,” which includes traders working for brokerage firms that own seats on the NYMEX.
At the top of the Trader Monthly list, T. Boone Pickens was reported to have earned between one and one-and-a-half billion dollars in energy trading in 2005. The magazine reports that Mr. Pickens’s main commodities fund earned a return of approximately 700 percent in 2005, which it “believes is the largest one-year sum ever earned.” Another hedge fund magazine, Alpha, estimated that Mr. Pickens’s trading strategies earned $1.4 billion in 2005, largely due to his bets on crude oil.
Following an interview with Mr. Pickens, the Associated Press reported, “Oil tycoon Boone Pickens’ bet that energy prices would rise made him more money in the past five years than he earned in the preceding half century hunting for riches in petroleum deposits and companies.” During this interview, which occurred in mid-2005, when the price of oil was approaching a then-record $60 per barrel, Mr. Pickens stated, “I can’t tell for sure where [prices are] going, other than up.” Mr. Pickens’s success in predicting price increases may have even created its own momentum for further price increases – according to Natural Gas Week, “[Mr. Pickens] regularly talks up crude oil and natural gas prices on financial market cable TV. Traders and futures brokers report that each time this happens, more speculative interest is drawn to energy futures markets.”
Also at the top of the list of energy traders is John Arnold, a former Enron trader who left Enron in 2002 to start his own hedge fund, Centaurus Energy, with three employees and $8 million of his own money. As of January of this year, Centaurus employed 36 people and had about $1.5 billion in assets. At a recent energy conference, Mr. Arnold said he “looks to place bets on a market that he determines is ‘biased,’” meaning that the market is not reflecting the fair value for a product. “We ask ourselves can we identify what is forcing a market to price a product at an unfair value, and then, what will push it back to fair value.” Mr. Arnold also stated how a significant amount of speculative trading was taking place on the unregulated overthecounter Intercontinental exchange (ICE).
“‘Trading never went away,’ Arnold said, ‘What has changed is the non-commercial type of interest.’ Intercontinental Exchange, he said, has provided huge new opportunities, as has NYMEX’s Clearport trading. ‘Because of this, there has never been as much investor interest . . . as there is today.’”
[snip]
Until recently, the trading of U.S. energy futures was conducted exclusively on regulated exchanges within the United States, like the NYMEX, and subject to extensive oversight by the CFTC and the exchanges themselves in order to detect and prevent price manipulation. Under the Commodity Exchange Act, the purpose of CFTC regulation is to deter and prevent price manipulation, ensure the “financial integrity” of transactions, maintain market integrity, prevent fraud, and promote fair competition. This regulation and the resulting transparency has bolstered investor confidence in the integrity of the regulated U.S. commodity markets and helped propel U.S. exchanges into the leading marketplace for many commodities.
Pursuant to its statutory mandate to detect and prevent price manipulation, the CFTC has imposed a variety of reporting requirements and regulations on the trading of commodity futures and options. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC. The CFTC uses these Large Trader Reports, together with daily trading data providing price and volume information, to monitor exchange activity and detect unusual price movements or trading.
None of this oversight to prevent price manipulation, however, applies to any of the energy trading conducted on OTC electronic exchanges. As a result of a provision inserted by House and Senate negotiators during the waning hours of the 106th Congress into legislation that became the Commodity Futures Modernization Act of 2000 (CFMA), the Commodity Exchange Act exempts from CFTC oversight all trading of energy commodities by large firms on OTC electronic exchanges.
[snip]
In 2000, a half dozen investment banks and oil companies formed the Intercontinental Exchange (“ICE”) for OTC electronic trading in energy and metals commodities. The Atlanta based ICE is an electronic exchange open only to large commercial traders that meet the definition of an “eligible commercial entity” under the Commodity Exchange Act. According to ICE, its market participants “must satisfy certain asset-holding and other criteria and included entities that, in connection with their business, incur risks relating to a particular commodity or have a demonstrable ability to make or take delivery of that commodity, as well as financial institutions that provide risk-management or hedging services to those entities.”
Today, ICE operates the leading OTC electronic exchange for energy commodities. ICE describes its participants as “some of the world’s largest energy companies, financial institutions and other active contributors to trading volume in global commodity markets. They include oil and gas producers and refiners, power stations and utilities, chemical companies, transportation companies, banks, hedge funds and other energy industry participants.” According to ICE, its electronic markets now constitute “a significant global presence with over 9,300 active screens at over 1,000 OTC participant firms and over 440 futures participant firms as of December 31, 2005.”
Unlike NYMEX, ICE does not require its participants to become formal members of its exchange or to join a clearinghouse. Any large commercial company qualifying as an eligible commercial entity can trade through ICE’s OTC electronic exchange without having to employ a broker or pay a fee to a member of the Exchange.
[snip]
The history of commodity markets demonstrates it is unrealistic to rely on the self-interest of a few large traders as a substitute for dedicated, independent oversight to protect the public interest. Commodity traders have no responsibility or obligation to look out for public rather than private interests. In some cases, it could be a breach of fiduciary duty for officers of a private corporation to look out for interests other than those of the corporation’s shareholders.
Most recently, the Enron scandal, which involved misconduct by a number of traders at large energy and trading companies active in OTC trading, is clear evidence of how a few sophisticated, unscrupulous traders can harm not only other market participants, but also the public at large by artificially increasing prices. Consumers paying artificially high energy prices suffer the same harm regardless of whether the price was manipulated on an OTC electronic exchange or on a regulated futures market.
Yeppp and that’s how people *actually* make money. If everyone believes the same thing, ie, prices going up, there’s no more buyers left. Contrarian views of the market is what makes you money more often than not. It’s a good risk/reward proposition. Not a sure thing tho - you can still get blindsided by something unforeseen.
Lots of explanations are offered for the soaring prices of oil and commodities. You can choose from: (a) the terrorism premium, (b) speculators, (c) peak oil theory, (d) shrinking net exports from oil-producing nations, (e) rising demand from emerging market economies or (f) any combination of the above.
But another reason may be as important: the futility of holding dollar-based investments.
The most recent indication is the May interest rate reset on I Savings Bonds.
When they were first offered nearly 10 years ago, I Savings Bonds paid a premium of 3.40 percent over inflation. Since then, the premium has declined as the bonds have become more popular and an increasing number of savers have understood that the total return on these bonds was often higher than the return on conventional savings bonds. Those who bought the early bonds, for instance, are now enjoying returns over 8 percent (3.40 percent premium plus 4.84 percent inflation).
But that was then.
Savers were shocked on May 1, when the Treasury announced that I Savings Bonds issued during the next six months would carry a premium of zero. Yes, you read that right.
Zero.
Even so, the annualized “return” on the bonds for the next six months will be 4.84 percent, the annualized inflation rate.
The Treasury Department basically told savers it would condescend to take their money, use it for whatever it chooses, and return it adjusted for inflation.
http://www.businessjournals.com/ci_9415540?source=most_viewed
The Financial Times may be unaware of this, but ALL trades have a party on each side...
The specs kept bellowing for the last two weeks to everyone who would listen that these huge moves upwards were “not caused by speculation.”
Those of us who have been looking at the aftermath of Enron, Amaranth, etc in energy markets since the CFMA ‘00 were just so wrong. Why, the CFTC is always on the job! The markets are too big to be manipulated (pay no attention to how they did it successfully with Enron and Amaranth...).
Then the specs decide that they’re going to indict themselves by doing what they do so well: acting like manic depressives. Foot, revolver, blam!
The bigger problem here is that the GOP is on the wrong side of this issue. The GOP (in the form of Phil Gramm) put in the Enron Loophole, as it is affectionately known. The GOP had years to undo the Enron loophole that was enacted in December of 2000 with Phil Gramm’s CFMA after Amaranth proved that price manipulation of energy was possible. But no, the GOP decided to keep listening to the “free market” theorists and eggheads at various think tanks. Eggheads who have never actually been traders in markets, and who think that such nonsense as “free markets” actually exist.
As such, when this is finally cleaned up, the DNC is going to get the credit, the GOP will have yet another albatross around its neck, and they’re going to be yet further out into the wilderness.
The Financial Times may be unaware of this, but ALL trades have a party on each side...
And of course there is no profit or loss until it's sold. For shorts from just last Thursday or Friday I'd guess that very few have really lost anything yet.
Biggest waste of potential in our party’s history imo. Republican pres and congress, and those POS’s let us down.
If the Treasury can rent money for zero, good for them. I know people with a couple of hundred thousand in zero interest credit card offers. They just buy a 6 mo CD. and make 4K for going to the bank.
Wow! I could have copied every paragraph of your post!
I'm curious about all the names of the board members and share holders of these large firms on the OTC electronic exchanges. Nobody of course from the former administration. /s
Republican is just another word for tax-and-spend, just focusing on different means and ends.
BTTT!
I'm about as partisan as you can get (or I was until McCain secured the nomination). I wish I could lay all the blame for this mess on the Clintonistas, but there are fingerprints from both sides of the aisle.
Enron did this country a lot of damage before its demise. For example, if Enron didn't come up with the concept of a "carbon credit," they certainly pushed it. It was one of the topics discussed by Ken Lay in meetings with Clinton and Gore.
The Senate report lists major NYMEX traders as of 2006. That doesn't include trades on ICE, which was opaque until a week or so ago.
There's sort of a knee jerk tendency of Republicans to defend Wall Street investment houses because we defend markets. Yet, a lot of Wall Street types seem to back Democrats because they get a better chance to influence markets to their advantage. For example...
Although the rival Republican Party, which has controlled the White House since 2001, is traditionally considered to be the free-market party and more friendly to Wall Street, the financial community is pouring funds into Obama's campaign coffers.Securities and investment firms have donated around 57 percent of their contributions to Democrats in the current election cycle compared with 43 percent for the Republicans, according to the Center for Responsive Politics.
Obama bested Clinton, raking in 7.9 million dollars from the financial community as of May 21 compared with the 7.14 million dollars raised by Clinton, who promised this week to support Obama's more formidable campaign.
The presumptive Republican nominee, Senator John McCain, has garnered a mere 4.15 million dollars from the investment community.
"More money is flowing to the candidate that the financial sector believes is going to win," Busch said.
He said part of the money flow is aimed at buying financiers a seat at the fund-raising table so that they can approach the candidate's campaign and push their interests.
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