TPS Posted February 13, 2013 Author Share Posted February 13, 2013 And another article today... http://www.reuters.com/article/2013/02/13/energy-speculators-idUSL1N0BCHJS20130213 A A large influx of cash into index funds that track the overall market caused oil to spike in the middle of 2008, leading to gasoline prices of $4.10 a gallon at the pump in the United States, Chilton said. He cited studies by Goldman Sachs, Rice University, the Massachusetts Institute of Technology and the Federal Reserve Bank of St. Louis, which all underscore the relationship between market speculation and high prices. The CFTC's staff had also found that speculators were dominating oil markets, establishing that only a tiny fraction of the trades that account for price changes were conducted by producers, processors and merchants. I suppose GS, MIT, and the Fed are clueless too... Link to comment Share on other sites More sharing options...
Magox Posted February 13, 2013 Share Posted February 13, 2013 (edited) Oh Geez! How many times have we talked about this? We've even spoken about these studies before. No one denies that speculation can add froth to the price or for that matter cause excessive selling leading to oversold markets. What you don't understand, is that the overall rising trend or the baselines that i was talking about the other day, has virtually nothing to do with the rising price. Why can't you get that through your head? Edited February 13, 2013 by Magox Link to comment Share on other sites More sharing options...
TPS Posted February 13, 2013 Author Share Posted February 13, 2013 Oh Geez! How many times have we talked about this? We've even spoken about these studies before. No one denies that speculation can add froth to the price or for that matter cause excessive selling leading to oversold markets. What you don't understand, is that the overall rising trend or the baselines that i was talking about the other day, has virtually nothing to do with the rising price. Why can't you get that through your head? Yes, yes, yes, it's all just technical analysis...related to money printing... Link to comment Share on other sites More sharing options...
Magox Posted February 13, 2013 Share Posted February 13, 2013 Yes, yes, yes, it's all just technical analysis...related to money printing... Link to comment Share on other sites More sharing options...
Alaska Darin Posted February 13, 2013 Share Posted February 13, 2013 You ought to know better by now. Link to comment Share on other sites More sharing options...
Magox Posted February 13, 2013 Share Posted February 13, 2013 I don't know why I bother. I think it's just that I like to talk about economics and sometimes when I make mention of certain hot button issues for him, he engages. But seriously, for someone who is as involved in economics as he is, I have a hard time understanding how he believes that speculation doesn't cut both ways. He seems to believe that "Speculation" is responsible for the high prices that we are seeing today. That is absurd. First off, speculators are involved in every single equity on this planet. Speculators buy when conditions indicate that prices seem primed to go higher. Speculators sell when conditions change and indicate worsening fundamentals. Sometimes speculators go wild and prices get too pricey, which of course ALWAYS leads to a sell off, in which many of those speculators get hammered. Same for the inverse, speculators sometimes get too scared and prices sell off and become extremely oversold. In his mind, he somehow has this notion that Speculators in the oil markets are a different breed. That they have been buying oil irrationally for almost 10 years now. He also believes that people buying oil or commodities because of currency devaluation are some odd group of cockamamie investors, that at some point are going to be proven wrong. Well that's utterly ridiculous. Conditions are ripe for higher tangible assets, currencies are weak and as long as monetary policy remains extremely loose, prices will remain high. And you can take that to the bank, unless of course the world falls into another recession, in which of course the response from monetary policy makers will be to only further erode their currencies, which will lead to future inflation. Link to comment Share on other sites More sharing options...
TPS Posted February 13, 2013 Author Share Posted February 13, 2013 I don't know why I bother. I think it's just that I like to talk about economics and sometimes when I make mention of certain hot button issues for him, he engages. But seriously, for someone who is as involved in economics as he is, I have a hard time understanding how he believes that speculation doesn't cut both ways. He seems to believe that "Speculation" is responsible for the high prices that we are seeing today. That is absurd. First off, speculators are involved in every single equity on this planet. Speculators buy when conditions indicate that prices seem primed to go higher. Speculators sell when conditions change and indicate worsening fundamentals. Sometimes speculators go wild and prices get too pricey, which of course ALWAYS leads to a sell off, in which many of those speculators get hammered. Same for the inverse, speculators sometimes get too scared and prices sell off and become extremely oversold. In his mind, he somehow has this notion that Speculators in the oil markets are a different breed. That they have been buying oil irrationally for almost 10 years now. He also believes that people buying oil or commodities because of currency devaluation are some odd group of cockamamie investors, that at some point are going to be proven wrong. Well that's utterly ridiculous. Conditions are ripe for higher tangible assets, currencies are weak and as long as monetary policy remains extremely loose, prices will remain high. And you can take that to the bank, unless of course the world falls into another recession, in which of course the response from monetary policy makers will be to only further erode their currencies, which will lead to future inflation. 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. Link to comment Share on other sites More sharing options...
Magox Posted February 13, 2013 Share Posted February 13, 2013 Again, you simply don't have a decent understanding of how the markets work. Who care's that position limits on non-commercials were ended? I'm going to make this very simple for you, if the prices get too high, people will not buy at those levels for a sustained period of time. If the prices are deemed reasonable, then they will. It's as simple as that. You just can't fathom the thought that the price of oil has continued it's upward trajectory for more than a decade now. Face it, prices will continue to go higher as long as monetary policy remains extremely loose. Link to comment Share on other sites More sharing options...
....lybob Posted February 13, 2013 Share Posted February 13, 2013 Again, you simply don't have a decent understanding of how the markets work. Who care's that position limits on non-commercials were ended? I'm going to make this very simple for you, if the prices get too high, people will not buy at those levels for a sustained period of time. If the prices are deemed reasonable, then they will. It's as simple as that. You just can't fathom the thought that the price of oil has continued it's upward trajectory for more than a decade now. Face it, prices will continue to go higher as long as monetary policy remains extremely loose. yeah if you are talking about TVs or the latest I-phone - if you are talking about gas for cars or oil for heating your home you're full of ****. Link to comment Share on other sites More sharing options...
Magox Posted February 13, 2013 Share Posted February 13, 2013 (edited) yeah if you are talking about TVs or the latest I-phone - if you are talking about gas for cars or oil for heating your home you're full of ****. In the markets, dipshit. Edited February 13, 2013 by Magox Link to comment Share on other sites More sharing options...
Jauronimo Posted February 13, 2013 Share Posted February 13, 2013 yeah if you are talking about TVs or the latest I-phone - if you are talking about gas for cars or oil for heating your home you're full of ****. Demand for TVs and iPhones may be more elastic than that for gasoline and heating oil but consumers will choose to consume less energy when prices are high. Whats your issue? Link to comment Share on other sites More sharing options...
meazza Posted February 13, 2013 Share Posted February 13, 2013 (edited) In the markets, dipshit. :lol: Edited February 13, 2013 by meazza Link to comment Share on other sites More sharing options...
....lybob Posted February 13, 2013 Share Posted February 13, 2013 Demand for TVs and iPhones may be more elastic than that for gasoline and heating oil but consumers will choose to consume less energy when prices are high. Whats your issue? actually people will cut spending from other areas unless they just drive around for fun or keep their house at 75 and open a window when they are too warm (which is nobody I know) most people I know are pretty thrifty energy users already and would have to outlay substantial money to upgrade the energy efficiency of their homes or vehicles. Link to comment Share on other sites More sharing options...
TPS Posted February 13, 2013 Author Share Posted February 13, 2013 (edited) Again, you simply don't have a decent understanding of how the markets work. Who care's that position limits on non-commercials were ended? I'm going to make this very simple for you, if the prices get too high, people will not buy at those levels for a sustained period of time. If the prices are deemed reasonable, then they will. It's as simple as that. You just can't fathom the thought that the price of oil has continued it's upward trajectory for more than a decade now. Face it, prices will continue to go higher as long as monetary policy remains extremely loose. The price of wti is exactly the same as it was 2 years ago, despite an additional $1 trillion of Fed buying. Explain it mr market. Edited February 13, 2013 by TPS Link to comment Share on other sites More sharing options...
Jauronimo Posted February 13, 2013 Share Posted February 13, 2013 actually people will cut spending from other areas unless they just drive around for fun or keep their house at 75 and open a window when they are too warm (which is nobody I know) most people I know are pretty thrifty energy users already and would have to outlay substantial money to upgrade the energy efficiency of their homes or vehicles. Incorrect. Link to comment Share on other sites More sharing options...
Magox Posted February 13, 2013 Share Posted February 13, 2013 (edited) The price of wti is exactly the same as it was 2 years ago, despite an additional $1 trillion of Fed buying. Explain it mr market. Seriously. Are you a dumbass or you do you pretend to be one on this message board? Did we not just have this discussion? Edited February 13, 2013 by Magox Link to comment Share on other sites More sharing options...
TPS Posted February 13, 2013 Author Share Posted February 13, 2013 Again, you simply don't have a decent understanding of how the markets work. Who care's that position limits on non-commercials were ended? I'm going to make this very simple for you, if the prices get too high, people will not buy at those levels for a sustained period of time. If the prices are deemed reasonable, then they will. It's as simple as that. You just can't fathom the thought that the price of oil has continued it's upward trajectory for more than a decade now. Face it, prices will continue to go higher as long as monetary policy remains extremely loose. Maybe we're just talking past each other. I'm not talking about long periods. Think of it this way, if there are 10 traders and 2 are speculators while the rest are producers and consumers, then the real users/consumers dominate prices, and speculation has a very small impact. When 8 traders are speculators, their actions influence prices, especially when they believe markets will move in a particular direction. However, they can't push prices up or down for too long as the fundamentals eventually take over. As to your other point, as long as expansionary M-policy isn't expanding the economy and real demand, then money printing can't sustain higher commodity prices, which is why the price of oil hasn't changed in 2 years despite all of the "money printing." Link to comment Share on other sites More sharing options...
jjamie12 Posted February 13, 2013 Share Posted February 13, 2013 Seriously. Are you a dumbass or you do you pretend to be one on this message board? Did we not just have this discussion? So -- Is your answer "The price should be lower and would be if we weren't 'printing money'" ? Link to comment Share on other sites More sharing options...
Magox Posted February 13, 2013 Share Posted February 13, 2013 So -- Is your answer "The price should be lower and would be if we weren't 'printing money'" ? I'm not going to comment on what "should be", but it certainly would be if we weren't printing money, yes. Link to comment Share on other sites More sharing options...
....lybob Posted February 13, 2013 Share Posted February 13, 2013 This topic is stupid we've had varying degrees of inflation as long as I remember ( which is from Nixon with his price freezes) - the difference now is wages are not moving with inflation and you can't get an interest rate on your savings while maintaining a reasonable level of risk that keeps up with inflation, This has nothing to do with QE and everything to do with neo-liberal economics and the constant drive to the lowest labor costs possible- and while I understand that the trickle down crowd applauds wealth and income moving from the working class to the managing class and the owning class I find it hilarious that people don't understand when you destroy consumption power from high wage countries and only replace a fraction of that power in low wage counties you of necessity have reduced overall growth. You don't even understand what real wealth is, every person who has gone from unemployed to unemployable is destruction of national wealth, every college graduate who has been delayed from finding a job in his field of study is destruction of national wealth. Link to comment Share on other sites More sharing options...
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