Posted on 06/26/2008 8:17:27 PM PDT by Fractal Trader
Speculators take positions on both sides of the market — they are both long and short on oil futures. Also, speculators are (by definition) traders — they don’t buy and hold futures contracts to the bitter end. If the contract price turns the wrong way, they will bail. A speculator may open and close positions several times a day — on alternate sides of the market, even.
Why? With the Republican National Convention in Minneapolis and Saint Paul, Minnesota this time and with Governor Pawlenty as a popular moderate Republican, having a McCain/Pawlenty ticket is very possible. I prefer either Sarah Palin, Mark Sanford, or Mike Pence as the final VP choice, but I still see McCain picking either a Democrat or a RINO Republican as his final choice for VP, which will also upset a majority of conservatives. I’m still guessing that McCain picks Charlie Crist for VP.
There will be two certain results from this action:
1. Serious speculators will take their custom to exchanges outside the U.S. & the U.K. (the U.K. is cooperating on this).
2. The futures markets in the U.S. and U.K. will have much less liquidity. Wide gaps will open between the bid and the ask — to the detriment of hedgers, who rely on the futures market to insure themselves against wild price movements. (Both producers, and large consumers are hedgers — if they’re not hedging, their Boards of Directors should fire their CFO.)
Pawlenty has always promised to finish his goobernatorial term. OK...he’s been known to stray from the ranch. But, even though he’s a global warming, pro-ethanol, Will Steger polar bear lovin’, cigarette taxin’, no smokin’ in public conservative republican-ish rino.....
He has always promised to finish his term and not be a VP candidate.
Rock solid.
/sarc
A speculator who buys low and sells high will increase the prices of goods when they are below average and decrease them when they are above average, thus reducing market swings. This is a good thing, and the speculator will profit by it.
A speculator who buys high and sells low will increase market swings, which is bad, but he'll pay dearly for the privilege.
While there may be some swindlers who are good at convincing other speculators to throw away huge amounts of money, I can't see any way that speculators as a whole would be destabilizing the market absent a major source of outside funding. Soros et al. may be playing games, but if anything anti-speculation rules would allow worse market manipulation to be done more cheaply.
Yes, but if the speculator is buying at lower prices than he's selling, his actions will reduce the market swings. If he's buying at higher prices than he's selling, his actions will increase market swings, but only until he loses all his money.
Econ 101 should be required of all school children. Of course, the Dems would never allow it since it would expose their mendacity.
Ah, Congress is re-arranging the Deck Chairs again while they steam full speed at the Iceberg. The Chinese have a better handle on Capitalism than DC.
Pray for W and Our Troops
“Oil prices are not driven by speculation in the futures market.”
Well, ok.
But I guess home prices weren’t driven by speculation in the housing market, either, right?
- John
Speculators provide liquidity to the market by participating in it. The more liquidity, the smaller the gap between bid and ask — and the less likely that the market will lurch suddenly. Some speculators win, others lose — in the case of the futures market, they are simply betting of future prices of the commodity, they are not affecting the actual price of the commodity.
The Democrats are using speculators to deflect blame from themselves — do not fall for their tricks.
(BTW, FWIW, I’ve taken Economics 101 to 590 & I agree that it should be taught in high schools.)
Can’t disagree with that. When you have your own money invested in a particular outcome, you’d better be right. Congress thinks it has an infinite reservoir of other people’s money to play with, and that’s why I trust them far less than I do the private speculators.
Speculators in futures markets are simply betting on the future price of the commodity. They never take possession of the commodity. Hedgers use the market to — well, hedge against wild swings in prices. It's a form of insurance used by both producers and large consumers. Hedgers, who buy futures contracts, generally take delivery of the commodity & also buy on the spot market, where actual prices are set.
The Democrats are playing tricks — they want you to blame speculators and not their own actions (locking up supplies, over-regulating refineries, blocking alternatives such as nuclear power, etc.). Don't let them fool you.
To amplify your point: If consumers of a commodity only bought it to satisfy their own immediate need, and producers always sought to immediately liquidate any production, producers would often get very low prices for their goods (since almost nobody would want to buy them at the exact moment they were produced) while sellers would often have to pay very high prices (since almost nobody would be trying to sell at the exact moment goods were required).
Both buyers and sellers benefit when speculators appear in the market to purchase goods as they become available and sell them as they are needed. Zero-sum liberal economists may not view such a thing as possible, but the introduction of speculators into the market benefits everyone.
Trust me, you also better be right when you bet with “borrowed money”. You not only have to make a profit, but you have to pay back the loan with interest.
The speculator has it easy these days because there is no place for prices to go but up. Until we start to drill, and even then there will be a 6 month period where the future market will not start taking new product into consideration. But this is sooner then the democrats plan, which is the year 2030 or thereabouts.
Very well said.
Ending speculation altogether would be a disaster. Fortunately, there are alternative markets to those in the U.S. and the U.K. Unfortunately, the main ones are in places like Dubai and Hong Kong.
402 to 19 ... Only 19 out of 421 Brain-dead selfish congress critters have any understanding of how a free market works, and that speculators are not and do not cause price rises. Market conditions do.
If prices have no where to go but up, then the speculator has no other choice but to keep up so that his profits keep up with inflation. Lord knows what people with plain old savings accounts can do as the currency steadily drops in value.
Of course you can invest in big oil, and make a profit as they do, and if you have an ira or pension fund (or 401 K) chances are you are invested in this way. I personally am out of the market in bonds while this thing rolls on. And in this regard I am only keeping up with inflation, not wildly pulling ahead.
If the drilling option comes about, invest with the oil supply companies. Alternate energy investments will eventually pay off, but they are years away at best. (Obama uses 2030 as his target point.)
“Speculators in housing took possession of actual houses.”
Wrong... Speculators in housing do not generally take possession of actual houses. The attempt was to roll them in a few months at a higher price. Never to live in them.
“The U.S. House of Representatives on Thursday overwhelmingly approved legislation that directs the Commodity Futures Trading Commission to use all its authority, including the agency’s emergency powers, to “curb immediately” the role of excessive speculation in energy futures markets.”
~~~
Mite be a good thing,,,
Raghead Farts,,,Oil prices go UP!!!
Thunder Horse Field starts delivery?,,,(crickets)!!!
Oil Prices Go Up!!!
Haynesville Shale Production starts,,,(crickets)!!!
Natural Gas Prices Go Up!!!
OH NOES MY MUNNNY!!! IT’LL blah,blah,blah,blah!!!(whine)!!!
DRIVE THE PRICES DOWN OR BLOW IT UP!!! BULLSH!T SEZ ME...
Well put.
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