Posted on 07/13/2009 1:31:38 PM PDT by FromLori
As hog prices collapsed (cash got down to NINE cents/lb at one point), the open interest kept going straight up in Dec, then shifted to Feb and April.
I have the hard figures in hand, and you can get them too, at cftc.gov. Moreover, this is not the only such example of specs hitting the downside of a mkt viciously; examples are to be had in the crude and products mkts, also. Your generalisation is just silly, and your ''correlation'' ... well, 'laughable' comes to mind.
Well.... probably. The hedge fund positions in energy were/are motivated by the same sorts of considerations that drove the mortgage derivative market.
Speculation isn't bad per se, until it becomes divorced from the realities of the market in which the commodity being traded. Once that happens, the price of the commodity can do very strange things for reasons that have nothing to do with the actual supply/demand balance for the commodity itself.
There's some evidence that the price of oil was "artificially" high the last couple of years due to hedge funds trying to use an energy position to cover their losses in the mortgage market and elsewhere.
Market was design for users of oil to lock in prices, not non users to use it as a casino to distort the swings to the point that they cause recessions and booms.
Of course you’re not going to have stability, but if we’re going to have instability, I say let it be because of real shifts in demand, NOT PERCEIVED SHIFTS. Speculators create artificial shifts in the demand curve (you got me back on theory, hope you’re happy) in an attempt to anticipate a real shift. This is a recipe for a mess - they will either make an error (anticipating a rightward shift when there is a leftward shift) or cause a rightward shift larger than real demand merits, all in the name of lining their pockets. They produce nothing via all this activity, they only flip bits in a bank account’s electronic register. You, I, and everyone else in America pay for this activity, to our detriment. Let the market work by responding to real demand.
It is a reflection of the mistrust people with money have of Hussein. What will he do next? Despite the clear language of our Constitution, ex-post facto laws are common. There is legitimate concern that what an investor does today will be ruled illegal or will be heavily taxed long after the capital was invested.
FDR made the same mistake in 1937. He caused a depression within The Great Depression.
Without oil speculators buying contracts, there will be a shortage of oil. The price may drop, but it may not be available. At prices too low, there is no incentive to produce or distribute.
The open interest in futures has little to do with the stockpiles of the commodity.
“I say let it be because of real shifts in demand, NOT PERCEIVED SHIFTS”
But a shift in perceived demand IS a shift in real demand. Real speculative demand. Hardly matters to me that they’re moving pieces of digital information from place to place, or however it is people characterize it. The same rules apply as in all other markets.
Can’t imagine an economy in which all prices were based on the demand for people to use whatever it is they’re buying immediately. There has to be some place for people who buy in order to turn a profit. There’s a self-regulating mechanism to the process. When speculators make an error, they lose money. That’s the best motivator there is not to make errors.
As for not being productive, there are efficiency concerns. Hedging producers’ risks. Stimulating future production. And probably a hundred other things.
Pure 1000% bullshit!!!
ROFLOL
If you are economics experts you should know that speculators can make just as much money in a falling market as a rising market. Why would speculation drive it only up?
Free markets are instituted to FIND a price. You need speculators to do that efficiently.
Thank you. So few understand markets.
How does Southwest Airlines make you and "everyone else in America pay" when they try to hedge their future fuel costs?
Of course there is not a completely free market in oil. Corrupt governments and a suppliers cartel really is messing thing up. Don’t blame the “speculators”, blame these evil governments.
Do you mean Fort Island Beach on Crystal Bay on 44 off of Suncoast Blvd, or somewhere along Powerline Road, OR across from Chambers Key (which isn't really on the Gulf)?
I would agree with that statement. Instead of blaming the corrupt govts, what we have instead is the corrupt govts displacing the blame on the “speculators”.
I’m sure there have been distortions due to speculation but I tend to think that any cure is likely worse than the original disease.
Based on what?
Your ignorance of commodity markets?
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