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Futures markets distorted by speculators


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In other news: reality distorted by viewing crappy YouTube videos.

 

Bah! I was going to go with the Francisco Franco thing...

 

...because the word "speculation" is involved. Speculation begets "distortion" sooner or later. I am just hoping that the new President takes the leash off oil drilling...unexpectedly, and massively...so that these oil speculators all have to take a kick in the nuts. Talk about Great Justice.

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youtube.com/watch?v=t3Xl0L21PjU&feature=feedu

A little over a week ago, Bernie Sanders released confidential CFTC data from the 2008 oil price run up, and that's the data that show investor/speculators controlled 80% of the oil futures contracts at the end of June that year. Of course, he's the bad guy for releasing the data...

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A little over a week ago, Bernie Sanders released confidential CFTC data from the 2008 oil price run up, and that's the data that show investor/speculators controlled 80% of the oil futures contracts at the end of June that year. Of course, he's the bad guy for releasing the data...

No offense, and I say this with all sincerity, but you truly don't understand what makes a market.

Edited by Magox
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A little over a week ago, Bernie Sanders released confidential CFTC data from the 2008 oil price run up, and that's the data that show investor/speculators controlled 80% of the oil futures contracts at the end of June that year. Of course, he's the bad guy for releasing the data...

TPS, Thanks for posting, with Tom OC and Magox posting I sometimes wonder if I'm in the Bizzaro Universe.

 

I always wonder if

1. They haven't seen the data

2. Have seen the data but don't believe the data

3. Believe the data but don't think it's a problem for the vast majority of people

4. Know it's a problem but don't give a !@#$ because it profits or at least doesn't adversely effect them.

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TPS, Thanks for posting, with Tom OC and Magox posting I sometimes wonder if I'm in the Bizzaro Universe.

 

I always wonder if

1. They haven't seen the data

2. Have seen the data but don't believe the data

3. Believe the data but don't think it's a problem for the vast majority of people

4. Know it's a problem but don't give a !@#$ because it profits or at least doesn't adversely effect them.

I see the data on a per minute basis, still doesn't change the fact that you don't understand markets.

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What's the data doing this minute?

In the gold markets, on the one minute chart its moving higher, stochastics and MACD have both crossed higher. Which doesn't necessarily mean it will be moving higher, but thats what the charts say. Hope that helped :thumbsup:

Edited by Magox
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I see the data on a per minute basis,(Maybe you can't see the forest for the trees) still doesn't change the fact that you don't understand markets. (Michael Greenberger gives a very coherent explanation of the markets and how excessive speculation distorts them- maybe instead of making a dismissive statement you could back up your opinion by critiquing the video and using your self professed knowledge rip his arguments up- I won't hold my breath)

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Simple... Speculators aren't evil, they make markets. They go long and they go short. Whatever the price you see, is determined by fundamental factors, and a price is set through those fundamental factors. Sometimes technical factors can add froth to the price and they get overdone, sometimes bearishness sets in and prices overshoot to the down side. But at the end of the day, those overreaches normalize and the average price throughout an extended time period is the price that the market deems to be reasonable. Same goes with housing, vehicles, appliances, commodities, stocks you name it.

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Simple... Speculators aren't evil, they make markets. They go long and they go short. Whatever the price you see, is determined by fundamental factors, and a price is set through those fundamental factors. Sometimes technical factors can add froth to the price and they get overdone, sometimes bearishness sets in and prices overshoot to the down side. But at the end of the day, those overreaches normalize and the average price throughout an extended time period is the price that the market deems to be reasonable. Same goes with housing, vehicles, appliances, commodities, stocks you name it.

What's the data doing this minute?

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What's the data doing this minute?

Ok, but last time :lol:

 

I'm now watching the 3 minute on a short-term basis and the MACD is basically flat lining, no direction at the moment. Bollinger bands are tightening which sometimes indicates a break out one direction or another. Stochastics are turning down (ticked back up again), but its right in the middle of the band , which indicates its semi neutral.

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Ok, but last time :lol:

 

I'm now watching the 3 minute on a short-term basis and the MACD is basically flat lining, no direction at the moment. Bollinger bands are tightening which sometimes indicates a break out one direction or another. Stochastics are turning down (ticked back up again), but its right in the middle of the band , which indicates its semi neutral.

Weird. I think Ennifer tightened some Bollinger bands on Sage once and it really freaked him out.

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In regards to your comment (Maybe you can't see the forest for the trees), I would agree with you if I was only looking at the short-term charts, but that's just one of the many tools I use for my clients. I have clients that are value buyers and wish for me to manage it in that form, where I would use a longer-term chart such as a daily. Yeah, I know, daily doesn't sound long-term, but they go back over a year. Then I have some investors that want to allocate a portion of it to a higher risk more speculative short-term basis, where we look to go in and out a few times a day, where we use 3m, 5m and 15m charts, but most of the clients I deal with wish to be managed with an allocation in both longer and shorter-term trading. To get a better idea (in my view), it's good to use a wide range of timetabled charts.

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TPS, Thanks for posting, with Tom OC and Magox posting I sometimes wonder if I'm in the Bizzaro Universe.

 

I always wonder if

1. They haven't seen the data

2. Have seen the data but don't believe the data

3. Believe the data but don't think it's a problem for the vast majority of people

4. Know it's a problem but don't give a !@#$ because it profits or at least doesn't adversely effect them.

Obviously we all have biases. I think Mag and I actually agree on many things, but we view them from very different perspectives. He has always said that speculators are not problematic because they can only have short term influence. My argument is that they now dominate futures markets (which were designed to hedge commercial interests' risk), so their ability to influence prices is greater. They influence prices for longer periods, AND (the key) they have increased price volatility (though he has argued previously the markets were more volatile several years back). That creates greater uncertainty for producers. Should I continue to develop sources that need $120/bl to generate a sufficient return, or not? All commoditiy prices are more volatile now because of the increased investment flows. I don't argue against speculation, I argue, like Greenberg the former CFTC member, that speculator/investor flows should not dominate markets designed for hedging.

 

But, hey, I don't understand how markets work...

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Obviously we all have biases. I think Mag and I actually agree on many things, but we view them from very different perspectives. He has always said that speculators are not problematic because they can only have short term influence. My argument is that they now dominate futures markets (which were designed to hedge commercial interests' risk), so their ability to influence prices is greater. They influence prices for longer periods, AND (the key) they have increased price volatility (though he has argued previously the markets were more volatile several years back). That creates greater uncertainty for producers. Should I continue to develop sources that need $120/bl to generate a sufficient return, or not? All commoditiy prices are more volatile now because of the increased investment flows. I don't argue against speculation, I argue, like Greenberg the former CFTC member, that speculator/investor flows should not dominate markets designed for hedging.

 

But, hey, I don't understand how markets work...

I can agree that volatility can play in the psyche of the average investor, but believe it or not, the more action in the market, the less volatility there is. I know sounds crazy right? but it's true.

Edited by Magox
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Obviously we all have biases. I think Mag and I actually agree on many things, but we view them from very different perspectives. He has always said that speculators are not problematic because they can only have short term influence. My argument is that they now dominate futures markets (which were designed to hedge commercial interests' risk), so their ability to influence prices is greater. They influence prices for longer periods, AND (the key) they have increased price volatility (though he has argued previously the markets were more volatile several years back). That creates greater uncertainty for producers. Should I continue to develop sources that need $120/bl to generate a sufficient return, or not? All commoditiy prices are more volatile now because of the increased investment flows. I don't argue against speculation, I argue, like Greenberg the former CFTC member, that speculator/investor flows should not dominate markets designed for hedging.

 

But, hey, I don't understand how markets work...

This is the real problem here, and therefore, this is why I want to see the speculators take a major beating. Not one that stops them from participating. Rather, one that merely gets their attention, and keeps them honest going forward. Like calling a reverse on an over-pursuing defense.

 

They will be much less likely to dominate the market, or, even if they do, less likely to have the current effect they do, if they know that the possibility of them getting a major whipping exists.

 

It's the same argument for why we don't need regulation...we need consequences. We need tailored consequences that are limited to hurting the speculator, or investment banker, that gets out of line. Screw jail time, hit them, and only them, in the wallet.

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