TPS
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Posts posted by TPS
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Very slim at best. The point was and I know you can write lots of words and say a lot of BS, but basically you sit there on one hand , accuse GS of dumping gas futures to lower the price of gas to help the republicans and then when it turns out they are one of the most liberal democrats biggest contributors you try to spin it as business as normal.
Why is one okay (giving lots of cash to Hillary)? Yet somehow dumping futures is not (regardless of market conditions), because it supports the repubs, and that's EVIL?
Pretty damn hypocritical, if you ask me.
What a dope. First, you should be referring to me, not BlueFire. Second, I gave a possible scenario for how someone or an organization could have influenced gas prices; or, in fact, as the articles stated, did influence gas prices (not the only influence, but added "fuel" to the downward pressure). I stated it was either serendipity or consipiracy, and that I leaned toward the former (however, I said the latter wouldn't surprise me either).
Who said that one was ok and the other wasn't? It is politics as usual. Many corporations make "bets" on which party (person) they believe will win the White House. They give to both sides, but tend to give more to the side they think will win. I don't think they should be giving at all, and I've constantly ranted that "both sides are bought and paid for." I've stated time and again, that I DO NOT VOTE FOR EITHER MAJOR PARTY ANYMORE (10 years now). I have voted for independents, greens, and believe it or not libertarians.
The hypocrits around here are people who constantly defend (and believe) one party to no end. And from what I've read, you are one of them.
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It's bad, it's dumb, it's gross, it may be horrible, it's not rape and nothing close to it. Have you talked to 16 year olds lately? Especially ones that are smart enough to be congressional pages? These "kids" know what is going on in the world. Yes, they are not adults, yes they make stupid choices, yes they are easily led. But it's not like talking to a seven year old you can entice into a car. These guys know what they're doing.
Would you say the same thing about a 16 year old girl and she was an intern for someone? And then imagine if that girl were your daughter...
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cuz I want them to...
The Bills are defiant: They are showing the swagger and the bonding needed for a team to lay it all on the line for each other. Chicago is allowing 4 yards/carry on the ground McGahee will be ready to go.
will go to the wall for the guy standing next to them. Bust em up this week.
Excellent point! That fits right into the Bills' game plan. Keep runnin' willis, don't turn the ball over, and play great defense. The Bears can be had!
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My point is there seems to lots of articles saying that GW is getting worse and is the cause of hurricane frequency and stregth.
So now scientists seem to be backing off that since their bold predictions of a worse season then last year didn't occur.
http://www.time.com/time/nation/article/0,...1099102,00.html
Whether GW is true or not, I am not debating, I am debating the sensationalism that the tree hugging crowd, Goreits, etc... like to constantly orate about, and then when things are different, they have another excuse to dismiss their earlier findings.
I think people sensationalize it because it's not something you can reverse or slow in a short period: something has to be done now before we pass the tipping point.
Fortunately, businessmen/investors have to be pragmatic, and they know which side is spinning the issue.
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I'm not political, but...
On the one hand, you complain that the market has gone up 0% with the Republicans in charge. (Therefore, Republicans = Bad)
On the other other hand, you're not complaining when the market tanked in 2000 in the great tech crash with the Democrats in charge (Therefore, Democrats = Good)
You can't have it both ways. If numbers are the true indicator that you suggest, then Clinton is worse then Bush (for the NASDAQ falling the way it did). If numbers are not the true indicator, then why are you stating above that Clinton had a "record high" stock market in 2000?
Thank you for putting words in my mouth. I stated that the previous high was in 2000, and mentioned that Clinton was president then. I did not state the market went up 0% with republicans in charge. I said the market's gained 0% since the previous peak in 2000 (In fact, the market has gone up since Bush took office, because as we all know it started its fall before he took office).
Then, panties got twisted, and you guys all inferred I said "Bush bad." Now your telling me I'm saying "democrats good." Yes, there was a long bear market for much of Bush's first term, and many things happened to extend it--not the least of which was the accounting scandals. The bear ended in 2003, and the market's done pretty well since then. As KD said, only if you were foolish enough not to invest while it was down, did you experience the 0%.
By the way, how do you know I wasn't complaining when the market began its decline in 2000 (under Clinton)?
Oh, and I'm not political either....
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How are you defining the crash? The bear market that lasted for 2+ years (and, yes it began in Clinton's last year)? Or the initial drop in 2000? In percentage terms, one of the largest "crashes" over the past 40 years was in October 1987. But, hey, what do I know...
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Coming from the guy who thinks the administration controls monetary policy.
It's quite a stretch to go from my statement that "it took 6 years to break the previous high," to I must believe stock prices should always go up. I'm getting used to people stretching my statements though. The obvious inference from my statement is that the down turn in the Dow must have been pretty severe, and the resultant recovery a long, slow process. But maybe that's too complicated...
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The other quotes point to the immediate impact on the prices, and I did not dispute the fact that when components move in and out of an index, there is a pop up or down. However, once the one-time events are done, the underlying securities settle into their natural price.
Whew! That sure took a long time. I never said the prices were being affected by the index weight change after that. I agree prices will eventually settle to what the fundamentals dictate.
The price of gasoline has been going down, because the underying contracts have been going down, no matter what the GS did to its index. Of course, there's yet a reply from you on how valid the index would be if the market participants thought that GS was manipulating it for its own benefit.Oh, oh! In one paragraph you admit there can be a "pop", and the next there's no effect?
Who said they were manipulating it for their own benefit? You asked some flippant question earlier about who the GS traders work for, not about manipulation for their own benefit. Try to stay on topic.
The topic: Both articles STATE that the change in the weight had a significant impact on gasoline prices in August. Are both the NYT and FT articles incorrect? Who should we believe? Them, or you and the monkey?
Seems to me the only contentious issue is, what was the underlying reason for the change? As i said, I lean toward the serendipity explanation.
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By the way, I wouldn't get too cozy with the DOW at the moment; the put-call ratio on the index is about 2-1.
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Honestly, I can't believe it took 11 replies before we got the first mindless anti-Bush Hotpockets post.
Not that Bush or Clinton (or any President) really controls the economy but the country was heading into a recession during Clinton's final year and the economy was upset by some sort of terrorist thingy in 2001.
You're celebrating the fact that the DOW's at a new high. I pointed out that it took 6 years to do that. I am happy that it finally did, especially for my pension. I am unhappy though that it took so long to get back to this point. You inferred I blame Bush. However, I've never disagreed with the fact that presidents have very little control over the economy.
Sorry I pushed the Clinton button...
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It has everything to do with the market, because GS didn't want to have a large portion of its index represented by an illiquid contract. Obviously you missed that explanation by Vergeler, who also said that GS does not want to be a leader, but a follower. Now that's an awesome conspiracy tactic. Follow the market, yet have it act in the way that you intend. Simply brilliant. No wonder they're the smartest guys on Wall Street.
Never mind the fact that the index is composed of heavily traded contracts on major global exchanges, and here we are three months after the initial decisions to reduce the gasoline weighting, and the price keeps going down. Oh, those wily Goldman bankers.
I guess the other quotes are irrelevant? That article states how influential the index can be and was on unleaded prices. I quoted Vergler on the explanation. For one, he's not with GS. Yes, they don't want to be a leader in the new product--they don't want to influence its price. However, their action on "not wanting to influence the price" for the new product, caused price changes in the old unleaded product--and the FT article said it was a significant influence.
The gist of the article you link to (and the NYT article) supports the idea that GS's move DID influence the price of unleaded, and it was significant. Are you now disputing the gist of that article? Or since it's the position I've taken all along, is it that you have no choice but to continue to dance around and try to dispute that fact?
Conspiracy or serendipity for Bush? More likely serendipity, but the connection with his new T-sec allows for the possibility of the first. The link I initially found makes that contention. While I lean toward serendipity, the former wouldn't surprise me either. Because after all, no one has ever tried in the past to influence prices....
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This is fantastic news! The Dow has grown 0% since the previous high in 2000--under Clinton!!!!
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I wonder if there's a market based explanation for what Goldman Sachs did?
Thanks for finding that. It supports my point entirely. From the article:
1. But the weaker US gasoline futures and refiner margins are not just about the seasonal drop in gasoline demand from summer to autumn or the lack of big hurricanes. The decision by the Goldman Sachs Commodity Index to cut its exposure to the benchmark Nymex unleaded gasoline contract from a total of 4.8 per cent at present to zero by November also has been significant.2. Investors were surprised by the decision on the Goldman Sachs Commodity Index because the ethanol-friendly Nymex RBOB contract was already part of the GSCI, with a weighting of about 2.5 per cent. Goldman Sachs had previously indicated that the weight of the benchmark Nymex reformulated unleaded gasoline contract in the index would entirely switch over to the RBOB contract.
Instead, it plans to split the unleaded gasoline weighting into the Nymex heating oil, West Texas Intermediate and the Brent crude contract. The subsequent price fall in the Nymex unleaded gasoline contract underlines the influence the index funds have on commodity prices. Some traders estimate index funds to account for between 30 and 40 per cent of the daily trade in the gasoline contract.
The article quotes an independent energy economist to explain the move:
Philip Verleger, an independent energy economist, said Goldman Sachs' decision not to roll all its gasoline index weighting into the RBOB contract was due to the fact that it did not want its commodity index to account for the majority of trading in the contract.That has nothing to do with "market conditions," rather how influential the index can be on the futures price--which is the point I've made all along. So the decision by GS, according to this economist, was made to reduce their influence on the new RBOB futures contract, but it actually lead to influencing the old unleaded contract. Serendipity or conspiracy, who knows?
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And these were all August reactions. Even if you attribute the drop to the tag-along funds needing to liquidate their positions to be in line with the index, that would be a very temporary event. That unprecedented 82 cent drop over a 4-week period would have more than dissipated by now (4 weeks later) if the market conditions didn't warrant the price.
That's what I've been saying. The decision by GS added another kick to the factors putting downward pressure on gas prices. That would help explain the initial "unprecedented" drop. Prices are staying down because of the demand-supply conditions. My argument is not inconsistent with that.
Not according to GS's August press release. It looks pretty well distributed between the remaining energy-related products--crude wti, brent crude, heating oil (the largest shift), and gasoil.
Now that your jumping on monkey's bandwagon, my response to both of you is that, as I've said all along, there were multiple factors causing the drop in prices; supply and demand conditions were going to lead to a drop. Under most conditions, the drop would've been more gradual, not "unprecendented," yes?
With most factors indicating a drop in energy prices, the reallocation by GS to the other energy future's contracts would certainly not be followed by market speculators. When multiple factors are causing prices to fall, and you add another, that helps the momentum; when multiple factors are causing prices to fall, and only one factor adds upward pressure, certainly one would not expect prices to reverse.
AS for your last question, I trust you know that most participants in the futures markets are speculators--taking long positions when they believe prices will head higher, shorting when they believe prices will fall. They are not holding oil in their portfolios, they are speculating in a derivative security. When the market turns against their bet, they get out--as you mentioned before--by offsetting longs with shorts. I'm surprised (maybe I shouldn't be) that you can't see this possibility adding "fuel" to the drop in gas prices:
Market conditions were leading to a drop in gas prices--we all agree there. Under most circumstancess prices would fall at a steady or moderate clip. The argument being made is that Gold-Sachs' decision to re-weight the amount of unleaded gas in the GSCI meant downward pressure on future's contracts. when they addounced this move, that caused speculators in the futures market for unleaded to reverse their long positions--closing them out and then moving to short positions. The drop in unleaded futures prices helped create the "unprecendented" drop in spot gasoline prices in August.
A quote in the article, "at the start of the week (Aug. 9) everyone was talking about $4/gal gas." That means most speculators were still in long positions that week. When the market turned, for all reasons cited, including GS's announcment, that created "unprecedented" momentum for prices to fall.
Again, I don't know if it was a "conspiracy" or serendipity. The focus of this topic was on whether the Admin "manipulated" prices. I think I posted something early on that it was market conditions. I recently came across this interesting possibility.
People can draw their own conclusions.
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Yes, I read the article from the Times. And my complaint isn't that it's an article from the Times, my complaint is that it's an incomplete article. And misleading. It overstates the weighting reduction of gasoline by half (because, while they reduced unleaded gasoline, they added reformulated gasoline to the index, which is in part offsetting), and doesn't even begin to mention that the weighting of oil was increased by about 50%...
...yet, oil's dropped 20% over the same time that Goldman-Sachs has driven down the price of oil [sic]. One would expect, if GS reducing the relative importance of unleaded gasoline futures in the GSCI depressed gasoilne prices, that doing the opposite would have an opposite effect - namely, that increasing the relagive weight of oil futures would increase oil prices. Clearly, this is not the effect. Ergo, your argument is specious.
It would be helpful if you provided the source for your statement of a "50% increase in the oil weight." While they announced a transition to the reformulated gas in June, initially they were supposed to "roll" 1/3 of the unleaded into the reformulated over a 3 month period. Instead, they rolled 1/3 in August, then phased out the unleaded contracts over sept and oct. So the end result was that the weight (formerly for unleaded, now reformulated) was reduced over a 3 month period.
Again, I'm not saying the move by GS was the only factor. I'm saying it helped push the prices even lower. Couple of quotes from the NYT article:
“They (GS) started unwinding their positions, and those other longs also rushed to the door at the same time,” said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation.
“We saw gasoline fall 82 cents in the wholesale market over a four-week period, which is unprecedented,” he said. Mr. Goldstein said that the decline in gasoline prices helped send prices of the whole group of energy-related products down.
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So you throw out lengthy posts talking about potential conspiracy of Paulson getting into Treasury, but add a dismissive sentence that market factors may have played a role in the changing of the weights? Didn't we already talk market forces driving down the price of gas, resulting from a better weather forecast, end of peak driving season and downed capacity coming back online? All these things happened in August.
I never said market forces caused a change in the weights. See the explanation on how the weights are determined. I did agree that market forces were putting downward pressure on gasoline prices. The point I have made is that the decision to change the weight in the index helped create even greater downward pressure on gasoline prices (and not just by the influence of the reduced demand from GS's index, but also the announcement by GS of its decision to reduce the weight, which caused other traders to change their positions in the unleaded futures).
Was it a conspiracy to help the Bush admin? I certainly don't know. However the change in the weight seems inconsistent with what's stated on their web site. Here's their quote:
"The GSCI is world-production weighted; the quantity of each commodity in the index is determined by the average quantity of production in the last five years of available data. Such weighting provides the GSCI with significant advantages, both as an economic indicator and as a measure of investment performance.
For use as an economic indicator, the appropriate weight to assign each commodity is in proportion to the amount of that commodity flowing through the economy (i.e., the actual production or consumption of that commodity). For instance, the impact that doubling the price of corn has on inflation and on economic growth depends directly on how much corn is used (or produced) in the economy."
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No, we are talking about the factors that would cause gasoline prices to fall. Oil prices would face a bit of a counterbalance for the rising demand for heating oil.
More supply of gas & less demand for gas was the reason for the reallocation.
Here's a question. Who do you think GS traders are more loyal to, Paulson or their commission check?
Did you read the quote I posted from the GS site on the GSCI index and how the weights are determined? Your explanation makes no sense based on the gold sach explanation.
Your question on GS traders is irrelevant to the issue unerlying the change in the weight for unleaded gas in the GSCI index. This change is analogous to the DJIA making a change in the composition of the stocks contained in their index. They only do so when the structure of the economy has changed. so they need to add companies to the index that reflect the changed structure of the economy. Traders don't change the index, but you already knew that...
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So your knowledge of the reweighting of the GSCI is based on a single NYT article written six weeks after the reweighting? If you don't even know the components of the GSCI, but claim to know that the readjustment of a single component of the GSCI adversely affected a single commodity market, I'd have to consider your hypothesis specious, at best.
Boy you guys sure like to stretch my arguments...
I never said I didn't know the components of the GSCI. I actually went to the GS web site and found and posted the information on how they determine the weights--and their site has all of the components and weights listed. Maybe I wasn't clear enough. I did state that market forces were aligned to push prices lower, but this particular "adjustment" also helped speed the process, especially after other market players found out about the adjustment.
The article from the Times (did you read it?) is an objective business piece much like you'd find in the WSJ. There are no hints of conspiracy there (the blogger link, yes). The article, quoting industry traders and GS announcements, makes the case that this readjustment helped reduce unleaded gas prices. Based on the GS web site and their own words on how they determine the weights, the change they made in August is inconsistent with their explanation of how the weights are determined. Google GSCI and you can find the gold sach's link.
But of course, your usual counter-argument is that it's a NYT article. Gee, how can anyone argue against that point. It does serve you well though...
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12 years ago!!! I take it Goldman Sachs was ok when it produced Bob Rubin & John Corzine.
So you throw out lengthy posts talking about potential conspiracy of Paulson getting into Treasury, but add a dismissive sentence that market factors may have played a role in the changing of the weights? Didn't we already talk market forces driving down the price of gas, resulting from a better weather forecast, end of peak driving season and downed capacity coming back online? All these things happened in August.
And btw, closing out your long positions is tantamount to going short. But you knew that.
Having just described how the weights are determined in my previous posts, and after going to the GS web site on the index, it does raise the question of why they changed the weight, which is supposed to be based on the proportion of unleaded gasoline's consumption/production in the economy.
Yes, I agree the market forces were there to cause the price of oil to fall, which would then cause gas prices to fall. This index change is not the same thing. Their decision added another factor to the falling price of unleaded gas, and a factor that could immediately impact prices.
As my last posted stated, they closed out the positions by not "rolling over" the contracts--not buying new ones to maintain the composition of their index. That drained $6 billion out of the unleaded gas futures market on the NYME.
While you are correct that closing out a long position occurs when one offsets it with a short, that is not the same thing as taking a short position. One only takes a position when it is "open." but you already knew that....
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Yes, I was thinking about looking into that. Unfortunately, the article in the NYT doesn't state how they reallocated their weights. It did say "to other commodities," so they didn't pile it all into one area. And if market participants knew which areas, they would've been smart to jump on those futures too, creating the effect you mention.
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If the above is true, I wonder if GS just started something that would have happened anyway. Right now, long term supply-demand situation looks good and end product prices are likely to be off from their recent highs. Most likely, GS did an analysis and decided to start selling. Others hitched on to their analysis and actions and followed suit. Hence, I don't think GS tried to manipulate the market. If they were doing so, it would be at great financial risk which the market would punish accordingly. And GS is not that stupid.
Yes, that's what the second (and most likely) scenario implies--the market conditions were there to cause the price of oil to decline, which would then cause the prices of oil-related goods to start falling. It's a bit different in this case though. The GSCI is an index of commodity prices, but the "index" is created by purchasing underlying commodity contracts, the amount of which is based upon the weights that GS gives to each commodity. Every month, when contracts expire, GS will "roll over" the contracts to keep the underlying composition of its index intact. In August they announced they would reduce the weight of unleaded gasloline in their index (from about 8% to 2%) and redistribute the change to other energy commodities. In effect, they reduced their purchases of unleaded gas futures in August by $6 billion, and used the funds to purchase other (energy) commodity contracts, increasing the weights in those other categories.
Here's the rub: they created a product to sell. That product's value is determined by the weights of each product in the portfolio, which determines the quantity of contracts to purchase of each commodity, and the value of the contract itself. The GSCI is the sum of weight times the value of each contract. The GSCI is a derivative that GS sells to investors. The question is what determines the weights of each commodity? In this case, GS made a decision to change its product by changing the weight of an asset in the index. According to their web site, "appropriate weight to assign each commodity is in proportion to the amount of that commodity flowing through the economy (i.e., the actual production or consumption of that commodity). Did the amount of unleaded gasoline consumption/production change recently to make GS change its Weight?
Again, by doing this, it reduced the demand (I had this reversed in the other post) for unleaded futures by $6 billion, putting downward pressure on futures prices, then, when other players got wind of this move, they sold off futures based upon the expected impact. The more I think about this, the more it raises the question of why they changed the weight.
Lou Dobbs Actually Gets It
in Politics, Polls, and Pundits
Posted
You obviously don't know anything about Keynes' theory of inflation.
Phelps (and Friedman) attacked the notion underlying the Phillips' Curve that there's a trade-off between UP and inflation. Phillips looked at historical data for the UK to come to this conclusion. In the US, Paul Samuelson and Robert Solow (so-called American Keynesians) did a similar study, and they came up with the same results. Phelps and Friedman argued that this relationship would not be permanent once you considered expectations. In particular, they held to the view that expectations were formed by the recent past--"adaptive expectations." Keynes' theory of output, employment, and prices also assumes that current expectations are formed by the recent past. His "theory of prices" is based on how prices are determined at the level of the firm--prices are a function of the costs of production (wages, materials, etc.) and a profit margin.
The Phillips Curve relationship that Phelps "debunks" was based on an historical relationship and promoted by the American Keynesian school in 1960, not Keynes.
For the record, and I stated this years ago here, I am not a proponent of this simplified interpretation of Keynes. I adhere to a group known as post keynesians, and I am probably most influenced by Hyman Minsky.