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Let's see if we have this straight. The big market manipulation bust by the CFTC today involved three guys who tried 19 times to manipulate the markets and maybe succeeded only five times. Also: three of those times they actually manipulated the price downward! And their total take from market manipulation came out to $1 million.
So much for all that blather about mysterious speculators and manipulators being responsible for the escalated price of oil.
Posted by guest, Jul 24, 2008 1:42PM
How can you try to manipulate the close of the market 19 times in only 11 trading days? Does the market close more than once or something?
Posted by Johnny, Jul 24, 2008 1:48PM
Are you implying that speculation has NOTHING to do with this runup in oil? Has some massive supply/demand dynamic changed in the last few days to warrant +/-15% selloff?? Shows what trillions of levered dollars chasing momentum can do....
Posted by guest, Jul 24, 2008 1:55PM
Would Optiver have been charged if they lost money on each of the trades in question? Speculation is the American way!
Posted by mktmkr, Jul 24, 2008 1:55PM
Johnny,
I never said speculation didn't cause the run up but last I checked "speculation" is not illegal and also not directionally biased. What would you call all the short sellers of financial stocks from the past few months? Speculators perhaps?
In case you missed it, a large energy company went belly up because they had to cover their short futures position helping cause this last run up in prices. Who do you think sold them their futures up at 145?
Posted by Anal_yst, Jul 24, 2008 1:56PM
I dunno if its supply/demand for the underlying asset, as much as supply/demand for the tradable securities based on that asset (or something like that)
Posted by guest, Jul 24, 2008 2:00PM
This entire debate is so fucking ludicrous...
It an essential definition that a futures trade has two parties: a hedger and a speculator
Why not blame the hedgers for selling at a high price?
Posted by guest, Jul 24, 2008 2:03PM
What about the firms that buy when they are hedging (airlines, etc....)
Posted by mktmkr, Jul 24, 2008 2:08PM
Semgroup
2.4 billion in losses and another $800 million in mark 2 market
Posted by guest, Jul 24, 2008 2:08PM
What's the difference between "manipulation" and gaming inefficient market structure. Really, I'd like to know.
Posted by guest, Jul 24, 2008 2:13PM
@8
Oh yeah because the airlines really came through with that winning play... (except SW)
Posted by Anal_yst, Jul 24, 2008 2:20PM
The problem is that, and this is not news, that to the "public" speculation IS directional, that is, moving markets in any direction that said "public" doesn't like.
Posted by guest, Jul 24, 2008 2:27PM
The SEC/Fed/CFTC have finally gotten around to "doing something" about the market: Operation Stocks Can Only Go Up (for bank stocks), and Operation Prices Can Only Go Down (for oil). We, stupid Americans broadly that is, are getting the government we deserve.
Posted by guest, Jul 24, 2008 2:38PM
@12
If the airlines had been fully hedging their fuel price risk all along, then the huge run-up would have started earlier and occurred over a longer period of time, with less volatility. Of course, if oil producers had been fully hedging the entire time...
Posted by mktmkr, Jul 24, 2008 2:38PM
"Finally those capitalist pigs will pay for their crimes, eh? Eh comrades? Eh?"
Posted by american bandersnatch, Jul 24, 2008 2:46PM
Speculation is my middle name.
Posted by guest, Jul 24, 2008 2:50PM
we aren't the only ones. see the karachi exchange riot. . .
Economics 101: If people willing to pay $150 a barrell for oil, that's what its worth.
Posted by guest, Jul 24, 2008 2:55PM
Well congress is focused on regulating "speculators" (who amusingly become investors when the buy financial stocks)with the goal of getting oil to $80/boe. Of course coming up with a long term energy plan, supply and demand issues, looking at conservation ect. doesn't really matter to them - it is all the speculators (well and the dudes at the airlines, druckdrivers, teamsters ect. told congress that the speculators were to blame and that group wouldn't talk their own book - would they?)
The law of unintended consequences dicates that based on the actions of this congress/senate/president oil hits $200 b/f it hits $80.
Posted by guest, Jul 24, 2008 3:11PM
"...said he would 'bully the market'..."
as distasteful as I find arrogance to be, I didn't know it was illegal.
Posted by Johnny, Jul 24, 2008 3:39PM
I never said there's anything wrong with speculation. Just that it clearly exists. Most of us wouldn't be getting paychecks if this behavior didn't exist. We all suck from the same tit of capitalism...
Posted by guest, Jul 24, 2008 3:48PM
If I am short and speculators are pushing the market lower, speculators are good religious people doing God's work for the betterment of all mankind.
If I am long and speculators are pushing the market lower, speculators are terrorist minions of Al Queda who wish the end of life and society as we know it for the promise of filthy lucre.
~Bad Leg Quezada
Posted by Anal_yst, Jul 24, 2008 4:14PM
@ Bad Leg
Yup, you pretty much summed up the Beltway definition of a speculator
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Posted by mktmkr, Jul 24, 2008 1:40PM
The problem with all this is people are confusing manipulators with speculators. What Optiver did probably wouldn't have been all that bad if they hadn't been squawking about it.
But as is typical with the gubment heads gotta roll. Funny that the best they can come up with is a small time shop making small dollars over a year ago when the price was $60.