Wow. I made the Cover story in Barrons. They agree with me 100%. The commodities boom is a construct of fools and greater fools. I'm never wrong.
yeah, perhaps margins of $200,000 per contract for WTI Crude perhaps $100,000 per contract heating oil spec margins only, hedgers would have to be certified or verified and under some form of legal oath... next suggestion.... just do it!
Look at what India's legislators were able to do with curbs on margin in rice futures trading: A nearly instant 40% drop in rice prices. Now, do not misunderstand - I am a free market proponent. However, when you have: 1) rampant speculation pushing 2) a good as vital to the national security and core economy of the U.S. (and world) as oil to 3) prices totally disconnected to basic supply and demand 4) and tangible proof that international, organized crime has worked itself actively into financial markets and commodity trading, and 4) Hank Paulson, President Bush and none other than Ben Bernanke could 5) justify 'curbing' trading of BSC just a short time ago (with BSC being a pimple on the ass of a circus full of elephants compared to oil and its impact on our economy/security.... I think intelligent people can draw a clear line here and stake a very rational case for governmental intervention. Bring oil close to its natural supply/demand price of $40 to $50 per barrel and watch inflationary pressures ease substantially, the consumer get a massive psychological boost, and equity markets soar (not to mention the massive shrinking of the U.S. trade imbalance, immediate relief for every major U.S. industry, and...well, I could go on and on, but you get the picture).
One thing I don't quite follow about this blame the speculators mantra is, if prices are overinflated due to specs, why doesn't price negatively react at expiration when the specs exit the current month? Since the specs are all rolling over their positions en masse, shouldn't the front month contract sell off precipitously as it heads into expiration? (assuming the spec-naysayers are correct that specs are adding x dollars to the price of crude) The June contract expired today, and it closed at a new all-time high. So whoever took delivery was more than willing to pay current market prices. Those weren't the specs buying the June contract into the close/expiration today..
TraderKGB - If you traded on ICE you would know that there is a cash settlement option. Consumption didn't just take off in January 2007.
I'm aware of the cash-settled contracts, NYMEX has them too, although they're illiquid. So you're saying, specs buy up the cash contract, hold til expiration/delivery (as it's only cash), thus forcing the physical buyers to pay as high as the cash market can take it? If that were the case, why aren't the refiners who are paying these artificially high prices complaining?
Phucking idiots on this site... speculators ahve nothign to do with the price of oil being so high....CFTC proved it by looking at all the trade data over teh last five years. They published it earlier this year. Hedgers are the ones who dictate price and speculators help grease the wheels so to speak... ALSO ALMOST ALL LARGE SPECULATORS ARE USING SPREADS NOT OUTRIGHT POSITIONS.. SO THEY ARE LONG AND SHORT ..WAKE UP PEOPLE.. SPECULATORS HAVE VERY LITTLE TO DO WITH OIL'S RISE! If you want to throw blame ... look at stock yes stock oil etf's and commodity funds ( funds being stock traded) these guys have to buy as price rallies to and MOST OF THEM ARE LONG ONLY! I guess you blame the rapid drop in Bear stearns due to speculative selling ? lol.. the company went bust. If everyone nt eh world stopped driving, shipping, and flying tomorrow and there was no demand then the chart on oil would look like bear stearns.. wake up people and stop the bullshit Lastly... the reference to INDIA..LMAO.. they still ride elephants int eh street and snake charming is a hobby! They still have a caste system in teh back country and servants or a (slaves) yes they do... like we should look to them for advice.. give me a break Laslty.. evan dooley of MF global did 22,000 contracts in wheat in a single night when teh market was very illiquid.. obvioulsy it moved the price... he lost 140 million ro MF global did.. but guess what wheat did not give a crap teh next day about his trades or the day after that and he was speculating wiht outrights.. 22,000 contracts i sabsolutely huge... liek doing 400,000 es contracts in one night..maybe more.. my point is the next day wheat went back in line and has continued to do so based on supply and demand. sure it gets over done or underdone sometimes.. but then it gets back inline.....
The problem in oil is we have a shortage of sellers If margins matter, we should lower margins on going short. If your theory is correct this should bring in more sellers.
The purpose of margin is EQUITY in the event that the party cannot cover their trade. It is WRONG to reduce margin on short selling...especially in this market. Increasing margin makes sense on multiple levels though.
i Seriuosly doubt there is a shortage of sellers.... if you were an oil producing company an dyou were very concernd about the government stepping in to "srew up" the free moving oil market or if you were concerened about lower demand due to high prices..wouldn't yuo "hedge " by selling the oil contracts.. oil companies are selling hundreds of thousands of barrels of oil short..... commercials end users .. are buying thousands long and thus the hedge happens.... if you sold 100,000 oil contracts today it would drop the market some..but Goldman would most likely step in and buy most of em or an airline or trucking company... this is how the market works... I think at these levels almost all of your producers are going to hedge by selling contracts to lock in this hihg price for years to come... but that doesn't mean the price drops... there is also a buyer fior every seller in the futures.. it si a price match.