Kingfish Posted January 12, 2009 Share Posted January 12, 2009 http://www.cbsnews.com/video/60minutes/ Link to comment Share on other sites More sharing options...
Steely Dan Posted January 12, 2009 Share Posted January 12, 2009 http://www.cbsnews.com/video/60minutes/ Yeah, I saw it. I knew it wasn't a supply and demand issue this whole time. All I kept hearing from a lot of people was China, China, China they need more and therefore the supply is low. Hopefully Obama's administration will put in regulations on that part of the industry. Link to comment Share on other sites More sharing options...
Acantha Posted January 12, 2009 Share Posted January 12, 2009 Hopefully Obama's administration will put in regulations on that part of the industry. Link to comment Share on other sites More sharing options...
HopsGuy Posted January 13, 2009 Share Posted January 13, 2009 Sure blame the speculators. I like Steve Kroft, but he completely missed the point here and failed to ask the question... "Why do they let speculators in to these markets?" Well, let's pretend you asked, Steve. You mentioned in your piece that the users of oil (airlines, gas stations, etc) use futures contracts to "get the best price" for the product. This is where the entire premise that speculators are to blame for the volatility in the oil market falls apart. The futures markets were created for price stability in commodities markets (pig bellies, cattle, corn, wheat, oil, frozen orange juice concentrate, etc). These markets shift the risk of supply disruptions (drought, foot and mouth disease, wars in the Middle East) or demand disruption (Atkins Diet fad, SUVs, etc) from the users and producers to speculators. Kroft also said that the speculators make money whether the price goes up or down. While true, he failed to mention that these folks also lose money. As Gordon Gekko said, "It's a zero sum game pal." (It's worth mentioning that commodities futures speculation actually is a zero sum game, while stock speculation is not due to wealth creation, but I digress.) The real problem not addressed in the piece is that the futures exchange where these contracts trade, the Chicago Mercantile Exchange (owner of the NYMEX where the trading actually occurs) lowered the margin requirements on the contracts with the blessing of the CFTC (the SEC of commodities). Also, miNY (get it? NY?) contracts were created to encourage smaller investors to get into the game. So now we have an unprecedented number of speculators at artificially low margin rates (high leverage) pushing the price of crude around. It went way too high in July and is probably way too low now (although it could still go lower). So what I am saying is that the volatility is a byproduct of higher leverage. higher leverage causes a price disconnect from the normal rules of supply/demand. Y'know, kinda like easy mortgages? GG and a few others here could probably state this more eloquently and fill in the gaps. Oh, by the way Obama's nominee for the head of the SEC is Mary Schapiro, former head of the CFTC. Link to comment Share on other sites More sharing options...
BuckyFillUps Posted January 13, 2009 Share Posted January 13, 2009 Hopefully Obama's administration will put in regulations on that part of the industry. yes, more regulation is just what we need!!!!! sheep like you ( ewe?) arent happy unless the governmet tells you how to wipe your asses. and in some cases, wipes the asses of those who are too lazy to wipe it themselves. Link to comment Share on other sites More sharing options...
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