On Mar 23, 3:26*pm, Han wrote:
" wrote :
snip
Which doesn't address the core issue, which is evidence to
support the claim being made that it's speculators that are keeping up
the price of oil.
Let's define hedging as a legitimate way to cover your ass in case of
(whatever), and gambling as betting without any basis that the price will
go up or down. *That are 2 ways that (IMO) are fine, morally. *Then there
is speculating, which in my lexicon has the meaning of buying something
with inside information (Ahmadinejad told you he's closing the strait of
Hormuz tomorrow), or some kind of market manipulation to give you an
advantage that others don't have.
Unfortunately your definiton of speculating is not consistent with
any accepted definition. Neither the common usage nor the
usage as defined in the futures markets require that a speculator
have any inside information. Perhaps that's where you've gone wrong.
A speculator as pertinent to this discussion is simply someone who
takes a position in the futures market on the belief that the market
is going to move one way or the other so that they can profit. A
hedger is someone that enters the futures market to offset a
risk they have in their business or financial interest.
Examples:
George thinks the price of soybeans is headed higher and wants
to profit from it. He goes long 5 November futures contracts,
covering 25,000 bushels.
Stan, a farmer in Illinois, is happy with the current price of
soybeans and doesn't want to risk it going down before he
harvests and sells his crop. He sells 5 Novemeber futures
contracts.
Stan, the hedger has just transferred the risk to George,
the speculator. Nothing at all to do with inside information,
market manipulation or anything sinister.
Of course speculators, or hedging people can generate enough
"nervousness" in the market to affect prices. *In the case of oil, that
WILL AFFECT the price of gasoline. *Moreover, prices go up much easier
and quicker than they go down.
Sure there is nervousness. If it's nervousness that's a problem,
then we might as well just shut down all the worlds finanacial
markets.
The obvious problem with the nervousness makes oil go up
theory is there are speculators and hedgers on BOTH
sides of the market. There are speculators long and speculators
short. So, for this "nervousness" to translate into marching prices
up, somehow the ones on the long side would have to be doing
one hell of a lot better job than the ones on the short side. And
while the prices are being worked up through nervousness, the
hedgers, ie oil producers, would have to decide not to take
advantage of those prices going higher, ie they would have to
sit on their hands instead of profitting by selling into the increased
prices that they as producers should know are not real and
sustainable. Instead, if at least some of them behave rationally,
then as the prices try to move higher, they have difficulty doing
so because the oil producers sell into the rally. You;d have
speculators buying and the oil producers, the really smart money
giving them all they want until they choke.
You tell me how from any of that you can deduce that speculators
are what is driving the price of oil.
I'm sorry, but I can't figure out what this says.
That was the whole point. lol
Actually, wrapping screwed it all up. If you want, here's the CFTC
Committment of Traders Report that shows the positions in all
the futures markets held by anyone that has more than the
reporting limit in number of contracts.
http://www.cftc.gov/files/dea/cotarc...m_sf030612.htm
Light sweet crude is the oil contract of interest.