CFTC prepares crackdown on speculators

Discussion in 'Commodity Futures' started by stock777, Jul 7, 2009.

  1. You do realize you're dealing with individuals who believe in Ayn Rands Utopian garbage.

    The fact that Greenspan was one of her disciples was a big red flag on his abilities ( and his sanity )

    #41     Jul 11, 2009
  2. New Federal Reserve Research gleaned from my weekend reading:

    Does Speculation Affect Spot Price Levels? The Case of Metals with and without Futures Markets

    "Abstract: This paper finds no evidence that speculative activity in futures markets for industrial metals caused higher spot prices in recent years. The empirical analysis focuses on industrial metals with and without futures contracts and is organized around two key themes. First, I show that the comovement between metals with and without futures contracts has not weakened in recent years as speculative activity has risen. Specifically, the annual and quarterly price growth rates of the two metal categories have been positively correlated with their growth rates experiencing a structural shift by the end of 2002. This comovement is driven by economic fundamentals because world GDP growth is strongly correlated with metal price growth, especially after 2002. The structural change in 2002 is also consistent with supply and demand information found in industry newsletters. In the second set of results, I focus more directly on financial speculation and spot price inflation. I use the S&P Goldman-Sachs Commodity Index returns to proxy for the volume of speculative activity and I show that these returns are unrelated to metal prices. The final test follows storage models, which suggest that speculation can affect spot markets only if it leads to physical hoarding. Focusing on metals with established futures markets, I find no evidence of physical hoarding because inventory growth is found to be negatively correlated with price growth rates."
    #42     Jul 12, 2009
  3. #43     Jul 12, 2009

  4. This is an accurate quote, but it also leaves out one key issue - the same one the the media, public and Gov. morons who cry for market limits miss . . .

    Futures contracts/options DO NOT EXIST unless there is an agreement between a buyer and a seller. There is no "float" like on stocks or physicals that can be hoarded or bought up. There can be a theoretically unlimited amount of them, they are not "issued". They are a true reflection of supply/demand.

    Therefore, for every speculator that is going long oil, there is either a hedger or a shorter selling it at that same moment. Or another spec or hedge long that thinks oil can't go higher closing out their position.

    For every speculative short-seller or hedger, there is a speculator or investor or even a reverse-hedger going long. Or a short that thinks it can't go lower, so they are buying back.

    So it is absurd to say that speculators falsely move the markets, they only help to make the markets by taking the other side of the trades - at the prices that the big companies hedging need to move a bunch of contracts one way or another. They provide needed liquidity. You can't just have all the big, non-spec hedging entities with no one to take their trades.

    Without speculators to reduce the volatility in the market, it would be constantly going limit up or limit down violently due to big hedgers all heading for the same side of the trade at the same time.

    Therefore, the idea that curbing speculators would create a more orderly market or act as price control is just plain ignorant of how these markets work.


    And what all this nonsense really is (in my opinion) is that the NoBam admin. wants to try and control oil & nat. gas prices by forcing downward pressure on the markets, so they can avoid criticism of all of their expensive, inefficient, porkulus, mandated green b.s. and not be blamed for driving up prices by restricting drilling, etc.

    They have done such a shitty job on all the other areas so far - housing, jobs, spending - that if oil prices rise too high, that could cost them much of their public support and will really piss off the American people.

    After all, supposedly if you use less oil due to being all solar and light rail and electric car, oil should go down, right? But if it is higher come the next election, they are screwed.

    After all, it was largely the pain from high gas prices and Bush being blamed for it by the Dems that got our little community organizer elected. And why the Repubs lost control.
    #45     Jul 12, 2009