Posted on 06/26/2008 8:17:27 PM PDT by Fractal Trader
I agree, however there is no transparency w/ regards to who and how much.
You only need 12 or so large entities in collusion handling 50% or more of the contracts to manipulate the price.
To my knowledge, there is no futures market in houses. Only a cash market. Therefore, no analogy.
“You only need 12 or so large entities in collusion handling 50% or more of the contracts to manipulate the price.”
Do you have a link to some reference on that. I would like to see that the CFTC or some other knowledgeable group has done a study and concluded that. Especially in a market as huge as the energy market. A local or regional market of produce or meat could certainly be manipulated - short term, but a global energy market?
There are no futures contracts in houses. The closet thing would be buying pre-construction with the hope of selling it by the time it is built. However, the futures market is liquid compared with the housing market. There are plenty of real estate investors sitting with upside down mortgages right now, who own houses that they can't rent for the mortgage payment, and they can't sell for the purchase price.
I have watched Pelosi being interviewed, and I can't figure out if she is simply dumb as a rock (though articulate), or simply owned and operated by Anti-American interests (or both).
First, the Dems are lumping all futures traders together as “speculators”. This is not true. About 70% of futures trades are put on by hedgers. The longs are users who actually intend to take delivery and the shorts are sellers who actually intend to deliver.
Second, the actual speculators (the other 30% of futures traders), who add liquidity to the markets are almost evenly divided between longs and shorts. In other words, no big push in either direction.
Third, the cash market prices are not driven by the futures prices. If the futures prices were pushed out of whack by speculators, arbitrageurs would step in and profit by bringing prices back into line. Look at the cash prices of oil. They have followed the same pattern as the futures prices. Reason? Growing demand, stagnant supply.
Last, I doubt seriously if any of the lawyers in congress have even a remote understanding of how this works. Either that, or they are all owned and operated by America's enemies. Remember, US oil companies control a very small portion of world oil. The vast majority is owned by countries who hate America.
It only costs around $8 / brrl to get the oil out of the ground in the ME.
Once a group has in its possession enough contracts they can sell at the end of the cycle to those actually needing the oil.
The money is being made getting the oil out of the ground, not so much in the futures trades.
A neat way to rake in the cash.
Of course ARAMCO and others do not directly have transactions in these deals, but, they do have front companies all over Europe, 'investment groups' as you will.
Noticed lately every time oil slips 2.5% per barrel on the day, it isn't 2 days or more before some OPEC mouthpiece or oil minister from an OPEC country (or someone like Goldman Sachs going long on oil) comes out with a statement that immediately drives the price back up??
One thing is for sure the price per barrel versus actual barrel of oil demand increase is way the heck out of whack on a percentage base increase standpoint.
No this is not a tin foil hat statement neither....this is about money, power and control and the never ending attack on the West.
There is at least one big difference between housing speculators & speculators in the oil futures market: housing speculators were almost entirely on the long side of the market; while oil futures speculators are both long and short & many of them even change positions several times a day.
Also, the demand for housing exceeded the supply (and housing is price inelastic in the short term — just like oil). Once the housing bubble started to inflate; many ordinary people rushed to get into ownership — either hoping to make a speculative profit; or to hedge against future price increases (the notion that they'd be left out of home ownership forever, if they didn't “get in” right away). These people did take possession of houses & sent the prices up.
The increasing price signals enticed developers to build more housing stock. While the bubble continued to inflate; they found a ready market for their product.
The role of the speculator (flipper) in this was to provide liquidity.
When the supply of new housing finally caught up with the pent-up demand — the market started to cool. Meanwhile, developers had a lot of additional housing in the pipeline. An increasing glut of supply developed.
This all would not have been unusual, had it not been for the very loose credit (sub-prime mortgages) that many buyers used. When the market changed direction; they were suddenly underwater with their finances. That led to panic selling & the popping of the bubble.
Similarly, oil prices have inflated because of a shortfall of supply. They are also likely to tumble, when the market fundamentals change. (And they will change.)
Using speculators as whipping boys is nothing more than a devious, diversionary tactic by the Democrats & their fellow travelers. They want you to blame anyone but them. They want people to forget that they locked up oil supplies, choked off refining & stopped production of nuclear power plants. They've even prevented windmill farms in view of Senator Kennedy's mansion. Now, they're even threatening to shut down the largest single source of U.S. oil imports (Alberta oil sands). That's why you're paying nearly $5.00/gallon for gas.
You make a very good point about transparency. Markets generally work better with good information.
We part company on your next point.
Total volume for the board of all delivery months traded yesterday was 475,420,000 barrels of oil.
At an average price of $135 that is a dollar amount of 64.2 Billion dollars for one day's trading. Multiply that times the days in the month, times the number of months this price rise has been going on, then include the numerous other trading markets around the world.
Even with the margin advantage compared to price required for delivery, I don't think you are considering how large the market really is.
I tend to agree with what it pointed out in general in this article: (please read)
Oil Prices - Market,
Manipulative Forces At Work
By Joel Skousen
Editor - World Affairs Brief
6-13-8
http://www.rense.com/general82/manip.htm
If speculation is driving the price, I believe it is a symptom, not a cause, of a bigger problem.
The Hunt Brothers were not able to run Silver prices up until after they diminished the available supply by buying it up.
Note, you cannot also talk about a relatively small sector of a global market diminishing and ignore the much larger growth in other sectors to prove it is not following supply and demand.
Using the latest data available, the US petroleum consumption fell by 77.5 Million barrel over the last 12 months compared to the previous 12 months.
U.S. Total Crude Oil and Petroleum Products Product Supplied
http://tonto.eia.doe.gov/dnav/pet/hist/mttupus1m.htm
China alone has averaged an additional 166.7 Million barrel for five years in a row. The whole world has been averaging 527.3 Million barrel more required for 5 years.
International Petroleum Consumption Tables
http://www.eia.doe.gov/emeu/international/RecentPetroleumConsumptionBarrelsperDay.xls
A six/tenths of a percent point decline in US gasoline is less than 25 times smaller reduction than the rest of growth happening in the global market.
Political unrest in the ME (Iran) is the underlying culprit for the uncertainty in the oil futures market.
It is still relatively supply and demand, however, still we have around 70% of the futures traders never having the intention upon taking delivery by locking in at a set price of the commodity.
This type of manipulation is causing a highly artificial spike in the market and it will not cease until after the Nov. election.
Too many huge financial investment groups are exempted from large multi billion purchases in the futures markets though they have no other need other than to make money on the contracts, they don't need the oil.
Also, we have a do-nothing government restricting domestic exploration which aides in the upward push on the price.
Now with low margins on refining because of the high price, refiners aren't overly interested in developing excess gasoline supplies to help offset the prices at the pump.
It's not a one item cause, but a combination of entities pushing the price up just to make a buck. This is my main point when I refer to collusion of price manipulation on the barrel and the gallon of fuel.
Now, lets add in the federal subsidized BS ethanol from corn program.....Geeeseh we're screwed.
Eventually the price bubble will pop. The US is not the only country reeling from oil induced inflation in the cost of living.
I am reading daily about US companies bringing back outsourced manufacturing to US soil as shipping costs are outweighing the cheap labor margins.
Also, I understand that China's demand is being fed by a construction boom and I've also read that China is well on its way to bring several coal gasification plants on-line to supply some of its needs for diesel.
The ME OPEC nations are using more oil now too as they have a construction boom well under way fed by good margins on the barrel.
IT is very interesting and at the same time painful, to watch this play itself out.
these idiots can’t run a their own restaurant but they want to run the economy?
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