evince
Truthmatters
http://www.marketwatch.com/news/sto...C102-68E0-41D9-9C9A-10EE2E723948}&dist=msr_13
End the speculation on futures.
End the speculation on futures.
Experts tell congress how to lower gas prices
- Thread starter evince
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Socrtease
Verified User
Well that is no good. You do realize that some people bought oil for this month at MUCH cheaper levels than they are selling for now? You really want people not to be able to make some educated guesses about future oil prices and then try to undercut those? IS there any part of the FREE MARKET you do like?
Socrtease
Verified User
Did you hear McCain yesterday saying opening up those fields would be "psychologically beneficial" for Americans? So I will now FEEL better about paying 4 dollars per gallon. In the same speech he said that opening them up would not help prices.
I heard that the speculation is responsible for about $30 of the cost of a barrel.
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The Almighty
Speculation on futures kept oil artifically below fair value throughout the 1990s.... why weren't you bitching about it then????
Speculation can once again drive oil below fair value today.... but as long as the idiots in the two parties continue to block legislation to increase domestic energy production (alt energy by the Reps and fossil fuels by the Dems) then future expectations of supply increases coupled with future expectations of the valuation of the dollar will keep oil artificially high.
Eliminating the ability of the US to speculate will not end speculation. It will simply handicap US companies and investors to the rest of the world.
Southwest Airlines remains profitable because it is one of the best speculators of future oil prices. Should the employees of that firm be forced to face to problems of other airlines because YOU want to limit or end something you clearly do not understand?
Yes, you will find "experts" who want to end the speculation now that it has driven prices above fair value. That is typically the case. People bitch when it works against them, but love it when it works for them. Imagine that.
You want to drop oil and other commodity prices.... bring on more supply.
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The Almighty
Right now it is closer to $40-45. Fair value is about $90.
Keep in mind though... Fair value was about $25 back in 1999 when oil prices were under $10.
very well written artical and the key points are:
There are two kinds of speculators in the futures markets, Masters said. Traditional speculators are those who need to hedge because they actually take physical possession of the commodities. Index speculators, on the other hand, are merely allocating a portion of their portfolio to commodity futures.
Also I dont agree with regulation because it will not work.. and only hinder the first kind of speculator above if we are regulated in US but speculation still goes on in other markets:
Neal Ryan, manager at Ryan Oil & Gas Partners, said that if Congress develops regulations to cut back speculative trading, speculation will just find a new home.
"Speculation is the root of capitalism," he said. "If the speculation is forced out of the U.S. exchanges, it'll simply show up on other exchanges that are OTC like the ICE, or new exchanges will pop up to allow for the spec trades to continue functioning."
There are two kinds of speculators in the futures markets, Masters said. Traditional speculators are those who need to hedge because they actually take physical possession of the commodities. Index speculators, on the other hand, are merely allocating a portion of their portfolio to commodity futures.
Also I dont agree with regulation because it will not work.. and only hinder the first kind of speculator above if we are regulated in US but speculation still goes on in other markets:
Neal Ryan, manager at Ryan Oil & Gas Partners, said that if Congress develops regulations to cut back speculative trading, speculation will just find a new home.
"Speculation is the root of capitalism," he said. "If the speculation is forced out of the U.S. exchanges, it'll simply show up on other exchanges that are OTC like the ICE, or new exchanges will pop up to allow for the spec trades to continue functioning."
That's fricking messed up. There is no way that betting on something should raise the actual value of something.
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The Almighty
Exactly... why should my clients not be able to offset inflationary pressures in commodities by investing in oil, grain etc....??? Managed futures are a way to protect investments and purchasing power of the dollar.
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The Almighty
You have that in every single stock and bond that is traded on the market. Every stock... like Apple for instance, has built in speculation based on where people think the price is going. That is why you end up with PE's that are either over or under their respective growth rates.
As I stated, it can also DECREASE the value below fair market value as it did in the 1990's.
Stock doesn't change the price of an iPod. Speculation here changes the actual value of a retail market.
It makes little sense.
You bet on a future price, if the price is lower than your bet you lose, your bet should not effect the price of the actual commodity.
Instead we somehow let it effect the price, thus making the bet a self-fulfilling prophecy..
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The Almighty
That is because you can essentially make an unlimited supply of Ipods. With commodities, supply is relatively fixed (unless you bring on new sources). Thus if expectations are that demand in the future is going to greatly outstrip supply, the spot price will also increase along with the futures contracts because the producers will be able to charge more for a limited commodity.
That is why we need to begin bringing on new supply... every one that we can. Whether it is fossil fuel or alt energy. That is the only way the speculation will reverse. Trying to limit it in the US will only send more money overseas. Because the speculation that has ALWAYS been there will not change.
People are just pissed right now because the speculation is working against them at this point. These faux solutions by Congress (both parties) are nothing more than political hackery. They will not solve anything.
I would love to see the positions of the "experts" that are trying to "end speculation". Ten to one they have large short positions.
T
TRGLDTE
Guest
The ICE says speculators are not the driving force behind of gas prices.
http://www.ajc.com/business/content/business/stories/2008/06/23/ice_oil_prices.html
T
TRGLDTE
Guest
The futures market is a zero sum game. For very winner, there is a loser. No one ever gives a concern when the speculators lose their butts.
They won't "end speculation" they'll regulate it to no end.
And I agree, we should bring online every available source until we are independent, then decrease fossil fuels as we bring other new sources online until we are free of emission too.
We should make it a national drive, like the moon shot.
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The Almighty
While the actual futures positions are indeed a zero sum game, they can indeed drive the price of a limited commodity's spot price above or below its fair market value.