Posted on 06/24/2008 4:32:31 AM PDT by shrinkermd
Every dogma has its day, and so it is with the posturing that blames the run-up in oil prices on "speculators." The new political consensus is that further "common-sense regulation" of the energy futures market is necessary. Let's grant that the sentiment is common, but the sense – like the evidence – is nonexistent.
On Sunday, Barack Obama rolled out a proposal that will supposedly thwart market manipulation by "a few energy lobbyists and speculators." John McCain chimed in that Mr. Obama was merely following his lead;
The futures market may be a convenient scapegoat, but it's simply a price discovery mechanism. Major energy consumers – refiners, airlines – buy and sell these contracts to lock in goods at a future price, as a hedge against volatility. Essentially, they're guesses about coming oil supply and demand, as well as the rate of inflation. The political theory is that such futures trading is creating a bubble in the spot market (i.e., oil purchased for immediate delivery) beyond oil fundamentals. Thus, $4 gas.
But there's no inherent reason to "bet" that commodities will go up rather than down. Bet wrong – place all your chips on red, say – and you lose. If a company purchases the future right to buy oil at $140 a barrel and it instead sells for $130, the option is worthless. Besides, somebody has to take the other side of any futures contract: Some are trying to predict where the price will go in the future, while the other side is attempting to sell its future price risk. But no one knows how things will end up.
(Excerpt) Read more at online.wsj.com ...
Go to Wikipedia. Look up Hedge Fund. Note they are not required to report and receive special priveleges including the use of borrowed funds the small investor cannot do.
Don't jump in to regulate. Just jump in and demand reporting. Shoud be interesting.
But you have to read the Wikipedia entry first.
Falling exam passes blamed on Wikipedia ‘littered with inaccuracies’
http://news.scotsman.com/education/Falling-exam—passes-blamed.4209408.jp
After 143 days of work experience, Obama believed he was ready to be Commander In Chief, Leader of the Free World, and fill the shoes of Ronald Reagan. 143 days. I keep leftovers in my refrigerator longer than that.
Codswallop. You think that people couldn’t (or didn’t) plagiarise from books in the past?
Anyway, I’ve heard lots and lots of these comments about online internet innacuracies, but I’ve never heard what any of these “innacuracies” actually ARE.
I'm not sure about making political decisions based on wikipedia articles...
But my real point of contention with your post is, where is your evidence that the "McCain body" thinks?
To explain ‘speculation’ just ask friends to think about the example of Christmas and after-Christmas shopping.
Sellers ‘speculate’ that some buyers will shop at the pre-Dec 25 prices and some with shop at the post-Dec 25 discounted prices.
Many buyers pay the higher price to have the product before Dec 25. MANY other buyers ‘speculate’ that they will be able to get what they want later at the discounted price.
We all are speculators in our everyday lives.
Filling our gas tank sooner rather than later is a ‘speculation’ that the price later in the week will be higher.
BTW...I hope you have one of those FoodSaver gizmos, otherwise you have some very ugly stuff in your fridge...
Check out www.Snopes.com ...
Wikipedia is a good place to start.
We are in a campaign run by political, not policy, operatives.
Have you read the Wikipedia section on hedge funds? If so what errors did you find?
That's my idea. It gives a lot of good basic data with linked sources. Indeed, it's particularly good for technical matters, like the characteristics and design of astronomical telescopes. The trouble with Wiki comes when controversial political matters arise and people start editing the articles to achieve their own ends. Even then, however, it can be useful in obtaining basic biographical data.
1. We're both bald.
2. We've both spent over a third of a century in the investment advisory industry.
3. We agree that even those who create "derivative" investments often don't understand them.
While, semantically speaking, a "Hedge Fund" is not a derivative by the strict definition, it has all of the characteristics of a derivative, plus it may contain derivatives within it's portfolio.
Having said that, Bill Simon was the first person I heard say: "...those who know aren't saying and those who say don't know..."
Bottom line is those who really have comprehension of Hedge Funds aren't posting in Wikipedia.
So I haven't read the Wikipedia explanation of Hedge Funds but I am skeptical about there being useful information there.
But theres a difference in degree. If speculators buy up all the stocks of something in advance, betting that the price will rise, then by neccesity they are creating the very same conditions that ensure the prices WILL rise. Its like a self-fulfilling prophecy.
Now I personally dont mind if the price of, say, food rises, because I think the value of food has been underated for years, except...I very much doubt if much of this rise in price is going to make its way into the pockets of farmers. This is where I start to have problems.
Speculators dont actually make anything. They deal in the labor (specifically the future labor) of others. It irks me no end that the man who sells a product earns far more, for doing much less, than the man who actually makes the product. The natural consequence is that people are going to cotton on and stop making and do selling instead. But the problem with that is that we as a culture cannot survive selling each other insurance and hamburgers.
Ok. Theres nothing there.
I’m afraid I didn’t express myself clearly. I pointed to Snopes only because it is dedicated to analyzing internet inaccuracies...not specifically about hedge funds.
oh, I thought you were talking about wikipedia...I couldnt find much that was specifically about that, and none of it was specifically innaccurate either.
<<< It irks me no end that the man who sells a product earns far more, for doing much less, than the man who actually makes the product. >>>
For any product to reach a consumer there have to be a maker and a marketer. The knitter who made beautiful Irish sweaters by her peat fire got very little for her hours of labor, compared to the company who sold the sweater to a tourist. Without the marketer, however, said knitter would have had no income from her evenings of knitting.
Same thing with farmers. Some of my ancestors were in the wholesale food business, buying the produce off of the sailboats that brought the produce to Baltimore, and selling it to ‘hucksters’ - the people who had stalls in the local markets.
The farmer took a risk planting his crops. The sailboat captain took a risk bringing it to the market. My ancestors took a risk buying the food off the boat, etc. Risk which hopes to be compensated, at every level all the way to the consumer.
The people buying oil contracts are betting that they will earn money, not lose it. I have read that there are tankers full of crude that are floating off the coast of Iran, tankers which are leased to the govt of Iran, and are deliberately being kept off of the world market. If this is true, this is major manipulation of the market. When those ships are released into the market the price will fall, and every ‘speculator’ who ‘speculated’ on continuing rising prices will lose money. “Speculators” are not evil people.The prospect for increasing petroleum demand year after year seems to be a pretty sure bet for people who have to buy petroleum, until supply advances to meet the demand, or alternatives become practical.
Paulson is nothing more than a Bush yes man. He replaced O’Neil simply because O’Neil wouldn’t tow the “strong dollar” line.
I don’t understand people just like you. Its OK for food to go up but not gas? I spend on food three times each month what I spend on gas - so why should I care about gas price increases more than food price increases?
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