Posted: Thu Jul 24, 2008 12:11 am Post subject: Re: Speculators
Zardoz wrote:
JohnDenver wrote:
The report is a crock -- a bunch of mumbo-jumbo to throw people off the scent and protect the CFTC's Wall Street/hedge fund constituency.
Amazingly, the report clears everybody of responsibility. Manufacturers, commercial dealers, producers, other commercial traders, swap dealers, index funds, hedge funds, floor brokers/traders... None of these people had anything whatsoever to do with the price rise. What a complete crock.
Right on cue, as always, carrying his own personal "Peak Oil is a non-event" crock, as always.
We love you, JD.
I normally don't see JD around this neck of the woods.
Maybe he got tired of reading Graeme's "Technology News" in the current events section.
Posted: Thu Jul 24, 2008 12:21 am Post subject: Re: Speculators
Hate to shatter your perception of reality, but I kinda have to laugh at the witch hunt that congress, the general public, and much of the media (both main stream and conservative talk radio) are all looking for some easy to blame individual/group to blame for the increase of gas/oil prices.
The part I have to laugh at the most is an open letter by many in the airline industry against those evil "Speculators" who are causing all the problems...
The reason I had to laugh at the letter, is because one airline is actually a really big "Speculator" and the name of that airline is...... SOUTHWEST airlines.
If ya really want to find the honest cause of the recient price increases, look in the mirror because its the general american public and now many other consumers in places like china and india that are driving up demand, and as it stands global demand is far exceeding global supply (simple as that).
Getting back to the southwest airlines example, basically the reason that airline is doing so so much better than the majors like, northwest, american, continential, etc. is because southwest airlines is lean and mean (they only fly one type of aircraft the boing 737), the other airlines try and do it all by flying short haul communter aircraft to long haul aircraft used on international rountes. The other reason southwest is doing so well is because they hedged (in other bet that fuel in the future was going to be more expensive, so they bought lots of JP4 a few years ago). Think of it like going to price club to buy in bulk...
So I have to ask do you think since southwest spectulated that fuel was going to get more expensive a few years ago, that they should be punished?
Same thing is happening with the US auto industry, for years they produced lots of SUVs, because SUV's were actually more profitible to sell than basic sedans. Basically the american public bought into the BS marketing image put out by the Ford and GM. If you check you will see there is a direct cause between gasoline useage increases in the USA and the increase in popularity of SUVs....
As it stands the real reason there has been a global increase in gas prices is because there is an increase in global demand for gas and oil. Last time I checked, global oil production is something like 85 million barrels of oil a day, and global demand is something over 86 million barrels of oil a day. The difference of 1 million barrels of oil is being made up by converting stuff like coal into gas - which the nazi's did lots of during WW II
en.wikipedia.org/wiki/Fischer-Trop
and getting oil from tar sands in canada (which basically involves putting sand that contains some oil content, into a big pot adding water heated with lots of natural gas), if ya do the basic physics calculation you will see that more energy is being used to produce oil from sand than is possible to possible to extract from the oil itself.
To solve the problem of so called high oil prices, american consumers as well as consumers from europe, china, india, etc. are doing to have to decrease global demand and that will mean that consumers the world over are going to re-evaluate what they consider important.
Just as we are now seeing the results of poor judgement and un-realistic expectations by many who thought real-estate values in the USA were always going to go up, which is basically the fools on all sides in the subprime mess. So too are most people now waking up to the fact, that ever increasing oil consumption is a physical impossibility.
the average joe/jane in the USA does not really understand real hardship by that I mean to see reality try going to slums in latin america, asia, and africa, that is where life is really tough. In poor parts of the world (which is 5/6 of humanity) people spend something like 40% of their wages on food, In poor parts of the world most people don't have running water in their homes, or have a car.
The management mess in the USA with the subprime loans, the high gas prices, is mostly self inflicted, because in general we in the USA are living far beyond our means both financially and environmentally. And the example of american consumerism is being spread all around the world.
Until people look deep into their own souls and take responsibility for their own actions the mess the USA and the rest of the world of living beyond our means both financially and environmentally, problems will only get worst...
JohnDenver wrote:
The report is a crock -- a bunch of mumbo-jumbo to throw people off the scent and protect the CFTC's Wall Street/hedge fund constituency.
Amazingly, the report clears everybody of responsibility. Manufacturers, commercial dealers, producers, other commercial traders, swap dealers, index funds, hedge funds, floor brokers/traders... None of these people had anything whatsoever to do with the price rise. What a complete crock.
You can't blame the rise in futures prices on supply and demand for the simple reason that supply and demand are abstractions which don't buy/sell futures, and therefore can't have any effect on the market. Only people can affect the market, and since the CFTC has officially cleared all people of involvement, it seems the market just rose by magic. You know, pay no attention to that man behind the curtain. LOL.
There are only two facts you need to know to understand the speculator situation:
1) When the price of oil rises, there is a group of cynical profiteers on the futures exchanges who make obscene sums of money.
2) The average Joe gets his wallet cleaned out.
Now, the Wall Street/hedge fund people and their toadies will try to tell you that there is no connection whatsoever between 1) and 2). That's how stupid they think you are.
The best approach is probably to enact extremely invasive reporting requirements, and publicly disclose the names and windfall profit totals for all speculators profiting on oil.
_________________ "I'm 100% sure that unsustainable conspicuous consumption of natural basic resources will eventually lead to a proverbial hell on earth for those people who get stuck with the mismanagement mess of mankind not being stewards of the environment!"
Wall Street Journal says failed firm made a large number of speculative oil trades betting on prices to fall.
As I have said for many months, speculators were on the wrong side of the market. If any one could offer proof that speculators betting on rising prices had a larger position than the known speculative short sellers, please post it.
Otherwise, this debate is over.
Quote:
Wrong-Way Oil Bets Slam an Energy Firm
SemGroup's Downturn Roils Traders, Creditors;
Financiers Hold Stakes
By SERENA NG, PEG BRICKLEY and CAROLYN CUI
July 25, 2008
SemGroup had large "short" positions on crude-oil contracts, which were essentially bets that oil prices would fall. As part of its business, SemGroup uses these contracts -- which commit the company to sell oil at fixed prices at future dates -- to hedge its inventory and future oil purchases. But given the whopping size of SemGroup's losses, some analysts and creditors suspect the firm may also have been making speculative trades not directly tied to its core business.
Susheel Kirpalani, an attorney representing bondholders, said trading oil futures for profit was not supposed to be in the ordinary course of the company's business -- a distinction that he said could affect his clients' right to recover. "I don't think the company was supposed to be doing trades for financial profits...and just betting on where the market price was going to go."
WSJ _________________ It's already over, now it's just a matter of adjusting.
But one emerging story revolves around SemGroup, an oil marketing firm that filed for bankruptcy, disclosing heavy losses on short positions in crude oil that they were forced to reverse as the market’s gains went from steady to accelerated to explosive.
It wouldn’t be the first time that a long, ongoing bull-market rally in a commodity turned into a buying frenzy, fueled at first by speculators caught up in the mere expectation of higher prices, later by the same smelling someone on the wrong side of the trade trying to get out of their positions, such as what seems to have happened with SemGroup.
“If they sense there’s a wounded animal, a wounded fish, the sharks will circle,” says Phil Flynn, senior market analyst at Alaron Trading in Chicago.
SemGroup said in its bankruptcy filing that it had bet that crude prices would fall, and was shorting crude as a hedging strategy, but had to unwind those positions in order to minimize losses. Traders seeing unusual activity (such as June 5 and 6, when oil gained a ridiculous 13% in two days) may not have even known about a particular company struggling, but there is a tendency to pile on, creating a short squeeze.
Oil traders said SemGroup could have exacerbated the spike in oil prices this month, when the market experienced unprecedented swings of more than $10 a barrel, as the company was buying back some previous bets on lower prices.
A situation in which a lack of supply and an excess demand for a traded stock forces the price upward.
Investopedia Says... Short squeezes occur more often in smaller cap stocks with small floats.
If a stock starts to rise rapidly, the trend may continue to escalate because the short sellers will likely want out. For example, say a stock rises 15% in one day, those with short positions may be forced to liquidate and cover their position by purchasing the stock. If enough short sellers buy back the stock, the price is pushed even higher.
What's your point? I already said in an earlier post they had to close out short positions at a loss.
If they didn't go short in the first place the market price would have been higher earlier, and less volitle. _________________ It's already over, now it's just a matter of adjusting.
OK...This is rich. So now short sellers are getting blamed for driving up the price of crude? _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
OK...This is rich. So now short sellers are getting blamed for driving up the price of crude?
No, LONG sellers are getting blamed for the decreasing price of oil. Get it now? Heh. I don't either. _________________ Everything is Impermanent. Shakyamuni Buddha
No, LONG sellers are getting blamed for the decreasing price of oil. Get it now? Heh. I don't either.
Man. This futures market stuff must be harder than I imagined. Explain it again OF2? _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
What's your point? I already said in an earlier post they had to close out short positions at a loss.
Sorry, didn't see it.
DantesPeak wrote:
If they didn't go short in the first place the market price would have been higher earlier, and less volitle.
No, if there had been no or fewer short sellers, the market would have been dominated by long sellers, which (as you said), would have driven the price higher earlier. But if the price had been driven higher earlier, you'd have seen the current bout of demand destruction earlier, then the price would have corrected earlier. Plus, when the price of something goes so high so fast, you'd inevitably get short sellers anyway. So everything that has happened, would still have happened, it just would have happened earlier. _________________ Abundance - what a concept!
A situation in which a lack of supply and an excess demand for a traded stock forces the price upward.
Investopedia Says... Short squeezes occur more often in smaller cap stocks with small floats.
If a stock starts to rise rapidly, the trend may continue to escalate because the short sellers will likely want out. For example, say a stock rises 15% in one day, those with short positions may be forced to liquidate and cover their position by purchasing the stock. If enough short sellers buy back the stock, the price is pushed even higher.
What this is saying is, if the price of widgets is rising, you might bet that the price is going to fall. If it continues to rise, thus making you lose your bet, the best way to cover your losses is to buy the thing you were betting was going to fall. Short sellers are thus turned into de facto long sellers, in order to cover the losses on their shorts.
This, of course, leads to an even more dramatic rise in the price, as more and more short sellers are forced to buy the thing they were betting against to cover their losses. Unfortunately for all involved, this cannot go on forever, because at some point the fundamentals will take over, and the rapidly escalating price will kill demand for the product, thus (eventually) forcing the price to crash.
This is why I've said before, and I will say it again: Any time the price of anything rises very high, very fast, you can pretty much be sure it is a bubble waiting to burst. If it is a long, slow and steady price rise, you could make a case that fundamentals are driving the price higher. But if it rises too high, too fast, it is almost certainly a feeding frenzy by the financial markets. _________________ Abundance - what a concept!
That's my new response to the SEC shorting regulation.
"I'm not a short seller. I'm a defacto long seller." _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
Posted: Fri Jul 25, 2008 12:31 am Post subject: Re: Speculators
I can't read what OF2 is saying because he's on my ignore list.
however....
Judging by the response from some of the more respectable members of this board something tells me I'm not really missing out on much.
Posted: Fri Jul 25, 2008 1:52 am Post subject: Re: Speculators
DantesPeak wrote:
As I have said for many months, speculators were on the wrong side of the market. If any one could offer proof that speculators betting on rising prices had a larger position than the known speculative short sellers, please post it.
Dante, you've been expressing the opinion for a long time that speculators have been holding down the price of oil. However, during that time, oil prices consistently rose. So who was pushing it up? Some participants in the futures market must have been exerting upward pressure -- otherwise the futures price wouldn't have risen. Don't you agree? Now, according to your theory, the participants exerting upward pressure couldn't have been speculators, so who were they? _________________ A periscope up every ass!
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