posted
Fellas, good, good stuff here; a trader's testimony before Congress, from May 20...just the other day.
Some excerpts:
quote:In the popular press the explanation given most often for rising oil prices is the increased demand for oil from China. According to the DOE, annual Chinese demand for petroleum has increased over the last five years from 1.88 billion barrels to 2.8 billion barrels, an increase of 920 million barrels.8 Over the same five-year period, Index Speculatorsʼ demand for petroleum futures has increased by 848 million barrels.9 The increase in demand from Index Speculators is almost equal to the increase in demand from China! (bold, my emphasis, throughout--tex)
quote:In fact, Index Speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years.10
Now, re food basics:
quote:What they overlook is the fact that Institutional Investors have purchased over 2 billion bushels of corn futures in the last five years. Right now, Index Speculators have stockpiled enough corn futures to potentially fuel the entire United States ethanol industry at full capacity for a year.12 That’s equivalent to producing 5.3 billion gallons of ethanol, which would make America the world’s largest ethanol producer.13 Turning to Wheat, in 2007 Americans consumed 2.22 bushels of Wheat per capita.14 At 1.3 billion bushels, the current Wheat futures stockpile of Index Speculators is enough to supply every American citizen with all the bread, pasta and baked goods they can eat for the next two years!
posted
Certainly odd that all this speculation that we can't produce enough, when we all know we are better at producing now than we have ever been in our history as a species. In any direction you look, you can easily see, from laborers to management.. we are better and more efficient than ever before. Why then is there concern... especially THIS level of concern that we can't produce enough?
Posts: 2965 | Registered: Aug 2005
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quote:Originally posted by Relentless.: Certainly odd that all this speculation that we can't produce enough, when we all know we are better at producing now than we have ever been in our history as a species. In any direction you look, you can easily see, from laborers to management.. we are better and more efficient than ever before. Why then is there concern... especially THIS level of concern that we can't produce enough?
maybe there is a bubble?
for a bubble to burst there has to be some "trigger" to burst it....
oil should be about 75-90$ is what i've heard by listening carefully to dozens of traders talk on MSNBC/CNBC at different times in the last few months...
it generally takes some sort of crisis, real or perceived, to "burst a bubble"... i can imagine no "crisis" that would burst this bubble...
the oil co's simply slow down the refineries to reduce gasoline supplies.. they say so plainly in so many words...
there's just not enough "free market competition" to burst this bubble IMO...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:Originally posted by Relentless.: Certainly odd that all this speculation that we can't produce enough, when we all know we are better at producing now than we have ever been in our history as a species. In any direction you look, you can easily see, from laborers to management.. we are better and more efficient than ever before. Why then is there concern... especially THIS level of concern that we can't produce enough?
not loophole, these guys are just making themselves middlemen BECAUSE THEY CAN.
One particularly troubling aspect of Index Speculator demand is that it actually increases the more prices increase.
they serve no use to the market... it's actually parasitic..
Index Speculator demand is distinctly different from Traditional Speculator demand; it arises purely from portfolio allocation decisions. When an Institutional Investor decides to allocate 2% to commodities futures, for example, they come to the market with a set amount of money. They are not concerned with the price per unit; they will buy as many futures contracts as they need, at whatever price is necessary, until all of their money has been “put to work.” Their insensitivity to price multiplies their impact on commodity markets. Furthermore, commodities futures markets are much smaller than the capital markets, so multi-billion-dollar allocations to commodities markets will have a far greater impact on prices. In 2004, the total value of futures contracts outstanding for all 25 index commodities amounted to only about $180 billion.16 Compare that with worldwide equity markets which totaled $44 trillion17, or over 240 times bigger. That year, Index Speculators poured $25 billion into these markets, an amount equivalent to 14% of the total market.18
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
There is a crucial distinction between Traditional Speculators and Index Speculators: Traditional Speculators provide liquidity by both buying and selling futures. Index Speculators buy futures and then roll their positions by buying calendar spreads. They never sell. Therefore, they consume liquidity and provide zero benefit to the futures markets.
there it is in black and white... they are basically able to just take our money because they can...
they don't have a contract to deliver, they are buying the INDEX.
they never HAVE TO WORRY ABOUT some dude with a tractor trailer backing up to their front yard and unloading whatever they traded on...
that's what keeps (or used to) the futures market honest... actual delivery..
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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