TPS

I'm sure I haven't done a good job of making my point...1. Speculators have always been acceptable forces in markets, but their influence was capped by position limits to ensure that commercial interests mainly dominated prices. Speculators were kept to about 20% of the market. 2. The 2000 CFMA essentially ended position limits on non-commercials, so financial flows now dominate price discovery. Tradititional speculators are a small part of the new financial flows caused by swaps, etfs, etns, etc. Financial players now account for almost 80% of the market. 3. The important part, They create greater volatility in the short term, and their bullish bets tend to push prices significantly above what the fundamentals would determine. All it takes is a whiff of recovery or some supply disruptions for prices to make a 10% jump. Since food and oil are demand inelastic, you can maintain the higher prices (higher than what the fundamentals alone would determine) for a few months, but prices pushed up by financial bets are unsustainable, and the game ends. At least until the next bout of good news, and it begins again. It's not a radical or clueless position: if the price discovery function of the futures markets is dominated by financial bets, it distorts the fundamental prices that would be determined by consumers and producers of commodities. As i said about the current increase, HFs were betting on a recovery based on some improving news; however, by driving up prices, they kill that which they perceived.

I think he should be a good fit in, and benefit from, Pettine's system, vs Wanny's vanilla system.

Yes, yes, yes, it's all just technical analysis...related to money printing...

And another article today... http://www.reuters.com/article/2013/02/13/energy-speculators-idUSL1N0BCHJS20130213 A I suppose GS, MIT, and the Fed are clueless too...

This is the reason I predicted the markets (S&P) would rise 15% last year, there's no place to put all of the money INVESTORs have from the Fed buying bonds. The impact comes from what investors decide to do with the additional funds. Investors are desperate for yield, and they'll look anywhere and everywhere. Look at what's happened to junk yields. Or was your real point that someone else says the government lies about inflation? It's a pretty simple test M, so we'll see how clueless i am. I made a prediction based on how i view the markets. It shouldn't take more than a month or two for this to happen, or not...

Your article stated that gas prices are the highest they've ever been "for this time of year." The articles I posted stated that bets by investors are the highest ever for this time of year, do you think it's just a coincidence? I guarantee you that HFs and other investors will bail from these bets very soon because the combination of higher prices and payroll tax is causing the economy to slow, so oil and gas inventories will rise, and this "mini bubble" will pop, all while the Fed continues to pump more liquidity into the system.

I'm sure this is just a coincidence... http://www.latimes.com/business/autos/la-fi-hy-betting-on-higher-gasoline-prices-20130211,0,6691385.story And then there are the bets on oil... http://www.reuters.com/article/2013/02/12/us-oil-speculators-gasoline-idUSBRE91B1L520130212

I looked at data going back to the 1970s, and there isn't much of a relationship until after 2000. I wonder what happened that year...?

And I say look in the mirror. You want to start from a point when the Great Recession caused prices to collapse, so of course you'll get a big % jump from a depressed level--you are the intellectual fraud pal. My point is that QE was ratcheted up several times since commodity prices came back from the crisis-induced lows. Seriously, you don't get that? You don't get it because it doesn't fit your theory. The Fed has pumped in an additional trillion dollars going back to late 2010, but prices are lower today. All you can say is, "well they are higher than their depressed levels." Any good theory would explain why additional rounds of QE have not caused commodity prices to maintain the trajectory they were on from late 2008 to 2010. No, as I wrote, how does the currency devaluation lead to higher prices of commodities? What is the mechanism where the additional money injected into the economy gets translated into higher commodity prices? The Fed doesn't hand people money, so how does it happen?

I agree with much of what you wrote. What is the transmission mechansim in which currency devaluation changes the price of oil? Ronnie is now considered a liberal given the swing to the right by the right! Says the guy who can't explain why commodity prices are lower today than they were 2 years ago, even though QE is ongoing. Maybe you can point me to a wiki you wrote where you explain it?

To quote Ronald Reagan, "Well, there you go again..."You continue to try to attribute things to me that YOU make up. If you want to find posts that back up your creations, please do. I'll be happy to debate them. Otherwise, STFU.

Maybe my response was too difficult for you to understand. There is no smoothly differentiable curve, either supply or demand. There are plots of points that will never fit on a smooth curve, but you can esimate a line of best fit using regressions.

Curves only exist in text books. In real life, there are general forces of supply and demand, but no curves. I'm not sure how you come to that conclusion, as I've said over and over that prices, like that of oil, are determined by the real forces of supply and demand over the longer run. The difference is I argue that financial players have the biggest influence in the short run, but their bets are government by underlying S&D in the longer run. I'm not sure how you can be so dense as to not see that.

Thanks, I thought I did too.

Here's the thread: http://forums.twobillsdrive.com/topic/131205-spr-release-targeted-at-speculators/page__st__40 As I stated, I supported the idea of using the SPR as "threat" against speculative froth. Of course it would have no long run impact. By definition any release would be about trying to impact the very short run. The idea, as I said earlier, is that the threat is used when the Saudis/Administration believe financial flows are behind any short term run ups.

Here's what was said: You: My response:

Supply reacts to demand in the current environment. Since oil "inventories" are stored in the ground, the Saudis have reacted when those "external forces" push prices above their target, which is about $110 for Brent, and when prices fall they cut output. Regarding WTI, BO has threatened to release oil from the SPR when its price exceeds $100. They (Saudis and their muslim brother BO) have done this when they think the underlying driver is financial, not real. The better question to ask, regarding this current argument, is what has caused oil (both Brent and WTI) to increase $10 in the past couple months? Without that increase and the refinery issue, gas prices are below last year's at this time, and that article would not have been written. Again, QE policies have been ongoing since fall 2008, and ratcheted up several times (end of 2010 and end of last summer), yet oil prices have been essentially flat for the past 2 years. The facts don't fit your theory.

Oh gosh, you mean refinery issues and positive employment data are behind this? Who would've guessed?

You've just expressed why you are wrong. Gasoline has not continued to rise. It has see-sawed for the past 3 years. As I said, the price of oil hit a peak in April 2011, and prices have been below that peak price ever since, almost 2 years now. Look at any commodity index and it is the same. Please do explain why almost all commodity prices are lower today than they were 2 years ago, even though the Fed has pumped another trillion dollars into the economy over the same period. By the way Cinga, that nice little inflation indicator supports me as well, from 2008 to 2012, $100 is worth $106.64. An inflation rate of less than 2% per year. And that is the debate: it's not that there hasn't been inflation, rather there hasn't been significantly high inflation. Moderate inflation is the "price" we pay to prevent debt-deflations. Madox expresses the issue in the following quote. Magox: "monetary policy is the number one driver of commodity valuation" If so, please explain why almost all commodity prices are lower than they were in April 2011 (almost 2 years ago), even though the Fed has since pumped another trillion dollars into the economy.

Seems every year the Bills trot out an article about Troup and his battle back from his back. I like the guy, and wish he would recover and contribute, but I'm tired of the February articles that try to give hope he will eventually be a contributor.

Wow! You have changed your target again. Now you say that QE impacts asset prices. Of course! That is how monetary policy impacts the economy, via asset prices. My point all along is that the changes from the 2000 cfma have turned commodities into financial assets, so they now increase from Fed actions just like other financial assets, but commodity prices eventually have to reflect true demand. Which eventually brings those prices back down to earth. the big debate is, you and others have argued that the fed's policies will cause significant inflation of real goods prices, and that has not been the case. Inflation of real goods and services has been no different than the past 30 years, roughly 2-3%. The impact has been on the inflation of assets. That's the way monetary policy has always worked.

If you want to change the metric to people who are in the middle and lower class, of course higher prices for necessities hits them harder than is measured by the cpi because the cpi measures prices for a bundle of goods purchased by "the typical urban consumer." The reason I argue these mini speculative bubbles in oil always come back down to earth is because of that exact impact. However, I could argue that those higher prices barely impact the rich and upper classes, which changes the metric. So of course prices impact different classes differently, but if that's the focus you want to take, rather than on average inflation, then you better say so from the beginning, otherwise you are simply dancing around to make the data fit your point. Where we differ is 1) I argue (since the 2000 cfma) investors now have the greatest influence on short term commodity prices which does not reflect the true underlying demand, hence those mini bubbles pop; and 2) your analysis does not explain why WTI or brent hit peaks in April 2011 and we have not seen prices go above those since, yet QE policies continue... Was it only the first round of QE that was inflationary? You have to change the measuring stick to support your case; i don't. You are the one who is being dishonest to use a base price of 2009. What was the impact of QE2, QE3, and current QE(insert infinity sign here)? I only used the year over year because that's what the article used. I simply pointed out how stupid it was to say gas prices are higher than the equivalent time last year. You want to play games about "relative" demand, let's do it for every quarter for the past 2 years and see if your argument holds. In fact, since you are focusing on domestic demand, domestic consmption has been declining in the US since the crisis began, regardless of what growth has been. Yes, according to your friends the traders, the recent oil rally began with news that things are improving. That should be understandable to anyone who knows trading. It's the same reason the 10 year Tbond has been increasing, many people think the economy is finally recovering. Traders do bet on the future, yes? The recent impact on refineries and the many closings is not some common occurence; there has been a significant change in the industry in the past few years.

We weren't discussing oil, we were discussing what Magox seems to have in surplus...gas.Seriously, this was a really poor attempt to support a belief that we are experiencing high inflation, which we are not, and have not to date. The issue has been that those who hold to old fashion notions of money believe the Fed's actions have caused or will cause seriously high inflation. The best arguments on their side to date: 1. Fun with numbers: If you start at the trough of the crisis in 2009, then you can come up with a really big % change. This is the most dishonest way to support your case. Another problem with this type of number fudging (to support your contention that the FED has cause HUGE inflation) is that the additional rounds of QE should ALSO cause the burst in prices to continue onward and upward; however....the data doesn't support it. Since April 2011, oil and gas prices have declined, AND QE has proceeded non-stop. Shouldn't successive rounds of QE lead to successive rounds of inflationary burst? Not in their vocabulary. Given, that this doesn't support their belief system, they come up with the second argument... 2. It's a government conspiracy. With the exception of the Shadowstats estimates, two other outside non-partisan estimates suggest differences of at most 2%. So at best, average inflation could've hit 4-5% over the past couple years. Hardly hyper. Now my good friend Mag tries to use gas prices as the indicator of inflation, telling us they are the highest they've ever been. Again, compared to the same time last year, gas prices are NOT higher. Most people would laugh at someone who went batty over a one-year difference between $3.48 and $3.52 to make their case. As the article stated, gas prices rose 17 cents over the past week, so something has happened in the past week that has caused this article to be written and Magox to use it to defend his inflation contention. What? Two main things: oil prices having been increasing for the past few weeks (because of good economic news on the employment front); but, more important, refineries have closed, and this has been the more important issue wrt gasoline prices. This has NOTHING to do with Fed policy. BTW, there is also some crazy old law (Jones Act) that requires American oil to be transported domestically by American companies. This has created the perverse outcome of higher cost Brent being shipped to the east coast vs transporting cheaper WTI oil from Texas/Oklahoma. I've given my good friend Mag credit when deserved. This is a stretch buddy.

Let's see, you start by posting something on gas prices which have seen a two week run up of 17 cents, which makes them 4 cents higher than a year ago, which is barely over a 1% increase from last year Now you go back to the trough of gas prices to justify some idiotic remark about inflation related to the two-week run up in prices, and I'm the dingbat? Keep trying to justify your idiotic attempt to use a two week trend to support the idea that inflation is a threat. Btw, the recent run up fits the argument I've made for that past 4 years. You just can't admit you started this with something so stupid.

Uhhh..what part of "compared to a year ago" don't you understand? Currently averaging $3.52, up 4 cents from last year. I'll do the work for you 3rd....I mean magox, it's an increase of 1.15% over last year. Yup, better tell the Fed to put the brakes on....