Well a lot of things don't make sense, I agree. For example, you could force and subsidize a doubling of mileage requirements in all new cars to get us off foreign oil and reduce demand. This would cost less than we've spent in Iraq, and pay off entirely for sure within a few years. Do a $10k under-30mpg SUV tax thus forcing domestic automakers to get their act together, all to help bankroll the subsidy. And of course, giant rewards on terrorists don't help fund defense contractors who line politician's pockets. etc. etc. etc.
Don't need to cover the position just do what Japan does. Don't mark to market, only mark the loss or gain when the position is covered. Japan been carrying equity position for over a decade deep in the red under this methodology.
The problem is most people would not buy an under 10k car. They would rather have a 50k suv. Unless the price of gas keeps going up, then you hit 4-5 bucks a gallon and now an under 10k car with great mileage starts looking good. Your second comment is dead on. unless you get a powerful lobbyist group to fight for better gas mileage, it won't happen too quickly.
my wording wasn't clear. i meant tax suv buyers an extra $10k. so their $50k suv will now be $60k. for subsidy (hybrid or whatever), just get the cost down on 50mpg cars to mainstream levels, so consumers won't balk at a steep hybrid premium. we import 7million+ barrels/day. if we cut our transportation consumption in half by raising efficiency one half, we could almost entirely eliminate imports Even a more realistic relief of 3-4 million barrels/day of market demand would drop oil down to $15-$20. it would literally be a way out of this energy driven inflation trap we've set ourselves into. (housing is another story...)
This is what I wrote on my blog about this today. At the other extreme , I read with lot of interest the explanation for yesterdays gain as vast Fed conspiracy. Now it is on a blog which is extremely popular probably one of the most popular trading blog. So according to this market guru the Fed controls everything and it decides to take gold down, drive equities up and sells oil. It is one huge Matrix controlled by the Fed and the evil Bush administration.(Hey Ben Bernanke can you send the girl in the red here please) If you believe this kind of non sense , you should stop trading. What is the point of trying to go against the Matrix. How come this is still a secret. Why is it not on the front page of the liberal rag-The New York Times. Can you imagine a secret programme run by Bush to manipulate the market and Bill Keller is not even aware of it. Probably he is also part of this vast controversy. Denial ain't just a river in Egypt.
How about Long Term Capital Management, when they sunk in 1998, Warren Buffet offered to buy them out at $250 million. Clearly the fed went out of their way to save them. Maybe Nobel Prize winners should be spared the pain of trading poorly. Got to get me one of them prizes; maybe I could write a treatise on selective government interference. The book would be millions of pages long starting with the auto industry. Cato paper link: http://www.cato.org/pubs/briefs/bp-052es.html
Two questions. One, why does the government have to be short oil, would it not be better if they were long oil? Two, why not ride the wave with the so-called PPT? Seems like free money to me? What am I missing here?
My thought is oil too high is the single biggest non military threat to our economy (and the world economy). It is inflationary in a very real and unmanageable way. Expensive oil makes it harder for the fed to manage this ideal 'softer' landing of the housing market. High oil, although good for oil stocks and energy producers, is bad for just about everything and everyone else out there. Furthermore, super expensive oil could force an earlier and more permanent switch away it to alternatives. Its in the best interests of everyone who owns and runs oil to keep demand from waning and the price at the maximum threshold between threatening demand and maximum profit. $50-$75 is that number. An Iran confrontation, despite EU Russia and China disagreement with US, would definitely put us past the range. For how long and how high oil went would be the question - right now is actually perfect opportunity for the US to force their issue if they want - with the seasonal lull in demand, high inventories and no hurricanes. This lowers the impact of how high a price spike can go. Whats your thought on the benefit of going long, besides Bush/et al being oil money?