It's the speculators!!! (yup, oil again)

Two, By all means, put whatever you want in caps.

The housing market is a MARKET (how is that for caps?). It takes a buyer and a seller for a house to be sold. For everyone buying a house at what you have determined as a SPECULATIVE price (without any explanation of what that means), there was a seller out there willing to sell a home at that price. That is the market. Hanging the label "speculative" on it, doesn't change the fact that there is demand and supply and where the two intersect, you reach an equilibrium price at which houses will get sold.

You have obviously never traded a commodity. Please do this. Get yourself on a trading platform and start jumping in and out of a market and take that buck, or two or 30 that you think people are out there just grabbing at will. It shows no understanding of how markets work. Once again, in a MARKET, there are buyers and sellers. If I buy a contract (of anything) at $130, I am only selling it for $132 if there are buyers out there willing to pay $2 more than I paid for it. Subsequently, if I sell a contract at $130 and then want to buy one back at $128 to settle the trade and make a profit, I can only do it if there is seller willing to sell me a contract at the reduced price.

Guess what makes people willing to pay more, or willing to pay less? World events that impact supply and demand!

SPECULATORS (caps, just for you) don't just make up prices out of thin air. Markets determine prices -- and for the 40,000th time, there are way more factors that go into determining supply and demand in a market than I can get into it. But, I'm sorry, "SPECULATORS" is not a single word that sums up market economics and the oil futures market. Do you even realize that there are end users of crude oil in the world and their needs play the biggest role in determining the price of oil? Do you understand how a spot market works and how futures have to be priced rationally based on the spot price? Do you understand that the oil-producing nations can carefully manipulate how much available crude is on the market? And do you understand that the demand for any natural resource is impacted by world economic conditions, world events, geopolitics, nature, etc.?

Once again, it's right there under your nose in the newspaper TODAY. For the four weeks ending October 10 this year, Americans (and we are 25 percent of the crude oil market) demanded 9 percent less crude oil than we did during the same period last year. Statistically, for demand to drop off by a number that large, you have to have some major forces at work in the economy. It's unprecedented. SPECULATION doesn't explain anything about how that market has been operating. RECESSION does.

But since you've carefully explained that SPECULATION drives markets, the price of oil is trading around $70 a barrel today based on SPECULATION. I get it. Thanks.

 

Indeed. Common sense. Markets don't consist of buyers and sellers who put values on things.

It's all a matter of SPECULATION!

How specious.

 

Boom, I seriously don't know what "oil purchased to support the futures market" means, so I can't respond. I would if I could.

I am not sure how many ways I can do this, but I'll try again and then sort of beg out. If I hadn't responded, this thread might have died a merciful death....

Futures markets were created for those who use commodities in their businesses. Businesses which produce or use those commodities very often just buy and sell what they need in the cash, or spot, market.

But some commodities are very volatile -- prices can fluctuate a great deal and crush a business.

So businesses will enter the futures market to protect themselves against the risks of volatile prices. With agricultural commodities, those risks might be things like a drought or bad weather. With crude oil, it could be OPEC deciding to scale back production or some geopolitical concern that threatens to cut off supply from one of the unstable countries that have most of the world's oil fields.

There are two distinct classes of traders in a futures market (such as the crude oil market). The businesses who use commodities are hedgers. In crude oil, it might be a producer, such as an oil driller. And it might be a user, such as an oil distributor. Hedgers very often will decide to lock in today's contract price -- at the risk of giving up more profit later if the price goes down -- in order to avoid suffering a loss. They simply want to lock in a price and remove risk from their business. They want their profits to be predictable and based on their business, not on the whims of a commodity used in their business.

The other class of trader is a speculator, which despite what you posted earlier, has ALWAYS been an integral part of every futures market. Speculators make up the BULK of every futures market. Speculators are investors, who trade strictly for money. They can make fortunes (but they also very often lose their shirts, because of the amount of leverage a small trader can employ in the futures market; I can control a $100,000 contract with as little as a few thousand dollars, and without a stop-limit order, I can conceivably get a margin call putting me on the hook for the whole contract). Speculators are willing to risk losing money, but their goal is to make profits from commodity prices without actually being in the commodity business.

Speculators are gamblers--they walk a higher wire than anyone in the financial world. This doesn't make what they do immoral, wrong or dangerous. It makes them investors. They take a risk. If they make good trades, they can be very profitable. If they are on the wrong side of a trade, it can be disastrous for their financial fortunes.

You can't have a commodities market without speculation. They are crucial to the success of EVERY futures market because they complete a symbiotic relationship. They are willing to assume risk. So they perform a service for businesses that need to rely on those commodities and want to avoid risk. Businesses planning ahead, would rather transfer volatile market risks to others. That is what speculators are there for. Speculators accept that risk because they want the opportunity to profit.

Speculators also keep the market liquid and active. If only businesses traded futures contracts, there wouldn't be enough traders in the market, and the traders that existed would never complete trades, because no one would be willing to take risks.

As for these posts about the purposes of people in an active market, when I am simply talking about supply and demand (whether it is a crude oil futures market or the housing market), it doesn't matter why you are buying or selling a commodity! In a futures market, you have buyers and sellers. It's that simple. The buyer and seller can be two hedgers, two speculators or a speculator and a hedger. No one cares why they are making their trade. They only care that there are two people on opposite sides of the trade. The buyer makes a promise and the seller makes the opposite promise. And the price they set is based on supply and demand!

What is frustrating about some of the posts I have read is that I often don't understand what you are trying to ask, such as in the post above. In other posts, you act like what I just explained is some newfangled chicanary that is immoral or illegal. This is nothing new. There is nothing immoral, illegal or dangerous about it. In fact, it serves a vital economic purpose. Futures markets VERY similar to the ones that exist now, date back to at least Japan in the 1600s, when landlords who collected a share of the rice harvest as rent found that weather made their rent payments too unpredictable. They started shipping rice to warehouses in cities for storage and began selling warehouse receipts, which gave the holder the right to a quantity of rice at a date in the future (where the term "rice ticket" comes from). Rice tickets, which became a form of currency, gave landlords steady income. Merchants were able to use the system to have a steady supply of rice for their businesses at predictable prices, without being at the mercy of the weather. And anyone wanting to invest -- or *gasp* speculate -- had an opportunity to profit (but also took on the risk of a potential loss) by selling the tickets to others.

This is how futures markets have ALWAYS operated and it is no different today.

 

I'll get right on the "research," Boom.

If things are so "easily manipulated"--and have been--what do the CFTC and SEC do?

And if you aren't alleging that the regulatory agencies are corrupt or don't enforce their regulations (which are extensive, and yes, I have a good understanding of the regulations because I am not a fucking textbook, I am someone who has experience on the trading platforms), I suggest you do the patriotic thing and get some people thrown in jail.

You seem to be a major player in the fringe that knows of market manipulation-even if you can't really explain it or do anything but allege it without specifics. But maybe you can make the case and help bring about some much-needed prosecutions and jail time.

Or you can just post about market manipulation on a message board without anything coherent proving it.

I saw the stories this summer too, Boom, with the "Enron loophole," nonsense. It was perfect. "Gas is $4 a gallon. Um, it's um, Enron's fault!" There isn't a person alive -- including you -- who could understand SSFs and the over-the-counter market created when SSFs were allowed to trade in 2003. But fuck, "enron loophole" is great stuff when you are a politician in need of a scapegoat. It appeals to the sensibilities of people like you.

For the most part those blowhard politicians disappeared in August, because oil prices started to drop. So they stopped using something they know nothing about as a scapegoat to ward off the constituents with pitchforks at their doors who were frustrated about gas prices. For MOST people, its hard to allege a conspiracy when the high prices you are saying the conspiracy was causing drop off. Not for you.

You'd think you would have let it go, when it's obvious in hindsight that oil prices have been related to the world's economic conditions (credit markets collapse, inflation fears abate, economies come to a screeching halt and oil prices drop off a cliff!), not a bunch of Lex Luthers who can make up any price they want and somehow force everyone else to pay it. You have the world's financial markets boiled down to an extortion operation. If that was the case, a barrel of oil would cost $200 right now, not $70. Once again, why did they decide to stop manipulating the price? It's hysterical how YOU tell me to open my eyes. I will Oliver Stone. I promise.

 

Boom, I'll save you the time of googling, although I was glad I didn't have to read another 7,500 words from an alternative weekly. Here is a GREAT place for you to find some good stuff.

http://www.conspiracyarchive.com/