The Commodity Futures Trading Commission Thursday backed off its long-held and repeatedly reiterated conviction that market forces, rather than Evil! Speculators!, were responsible for the recently busted run-up in commodity prices. Now:
Or, from the original sort-of English, markets change. But regulators, not so much. Especially when “the lack of appropriate and predictable funding over the course of many years has had a negative impact on our staffing situation, rendering it unsustainable for the long run. Nothing has brought this point to bear more than our work on the swaps report, to which the CFTC has devoted more than 30 employees and 4000 staff hours.”This preliminary survey is not able to accurately answer and quantify the amount of speculative trading occurring in the futures markets. The current data received by the CFTC classifies positions by entity (commercial versus noncommercial) and not by trading activity (speculation versus hedging). These trader classifications have grown less precise over time, as both groups may be engaging in hedging and speculative activity.
But don’t think for a moment that acting (since Jun. 2007) CFTC chairman Walter Lukken doesn’t have his wits about him. Thursday, Lukkens was alone in the relatively friendly confines of the House Agriculture Committee; next Tuesday, when the topic will be taken up in the distinctly unfriendly free-fire zone of the Senate Energy Committee, where Self! Appointed! Scourge of the Evil! Speculators! Michael Masters will work off a few more of his 15 minutes, Lukken — in another display of the propensity for Republican hacks to be somewhere, anywhere, else when bullets are flying — will be safely offshore, attending a bunfight for international regulators.
Commodity Futures Trading Commission
Press release Sep. 11 2008
Commodity Futures Trading Commission Sep. 11 2008
See especially Commissioner Paul Atkins Bart Chilton in dissent
Pages 62-64 (.pdf numbering (Pp 60-62 in report))
House Committee on Agriculture Sep. 11 2008
The Evil! Speculators! File
File download (The two papers listed below are contained in a .zip archive; they are not directly accessible.)
How Institutional Investors Are Driving up Food and Energy Prices
Jul. 31 2008
Index Speculators Have Been a Major Cause of the Recent Drop in Oil Prices
Sep. 10 2008
1- The Commodity Futures Trading Commission lied in an official report to the government.
2- They still have jobs while a lot of the country population suffers without one.
In a seperate and rare dissident vote, Bart Chilton, one of the four CFTC commissioners, said the actions were insufficient. He said Quote "I do not believe the Commission's recommendations go far enough," End Quote.
I say, "How come no one is talking about compensation for the public? That’s right. We all got ripped off at the pumps and we want our money back. Vitol, Goldman Sachs, Morgan Stanley and the rest of the scoundrals have an obligation to make it right again and the CFTC should be disbanded and punishment administered to the ones that covered up this massive mistake". Remember the Vitol "Oil for food" scandal in 2007 and then there was the Vitol "Contaminated oil scandal" in 1993 which involve the selling of 280,000 barrels of dirty oil to Pakistan? I guess we can call this one the "Vitol Swaps Scandal" Why was a company like Vitol even allowed to speculate in the first place?
Markets around the world, no matter where they are or what assets are traded, are subject to periods of greed when everyone trips over one another to buy at any price temporarily driving prices into the stratosphere. Its called a bubble!
We have just come through a period in which we had the greatest number and scope of asset bubbles in history.
Then comes the realization that prices have risen too high. Everyone panics and dumps these assets at whatever price they can get. Its called a bear market or crash. Such periods have never had a happy ending as prices revert to below trend.
So the answer is to have the government try to stop both through even more regulation? Governments are inherently inefficient and can't even handle the basics without screwing things. Governments may be a necessary evil but it is an undeniable reality that the bigger governments are, the more evil they become. So we hear cries to give them more power to run markets and the economy too?
Bubbles are in part inflated by inaccurate government data that make the market or asset look more attractive than it really is. How do they do this? Manipulating economic statistics and keeping interest rates artificially low are two good examples. We saw a great example of this from 2001 -2004. It is a result of the current administration or governing party manipulating the data to make it look better than it really is. Both parties have been equally guilty.
Why? This practice in of making the economy look and feel better than it really is has one purpose and that is to get re-elected. Why do you think the election cycle is the most powerful cycle in markets? (See tradesystemguru.com/co... ) Like gravity, it is a reality that traders and investors had better appreciate or they will pay a heavy price.
Regulation is necessary but it is foolish to think that governments can regulate bubbles and busts away with more regulation. And it is those with the poorest understanding of markets and the economy that promote these ideas every time there is a bust.
If they truly understood the process, why are these same people silent when bubbles are in the process of forming? Wouldn't that be the best time to deal with the problem before the bubble burst?
Passing rafts of legislation after the bubble has burst not only shows a complete lack of understanding, it is too late to do anything about it.
www.businessword.com/i.../
My lede graphs:
The Commodity Futures Trading Commission today proved that it intends to protect pension funds, endowments, mutual funds and other commodity futures index speculators and their Wall Street brokers from advocates of strong limitations on their ability to distort the oil, corn, wheat, soybean and other futures markets.
In a long awaited 71-page report to Congress, the CFTC basically asked for more staff to study the problem of institutional speculation in the futures markets. The report is here.
The CFTC’s report shows how highly-politicized commissioners and staff work. They are captives of the futures exchanges like CME Group (CME), which owns the Chicago Board of Trade, Chicago Mercantile Exchange, International Money Market and New York Mercantile Eschange. Oil and other commodities and financial futures are traded on these exchanges.
Political gaming is reflected in the CFTC report, which says that the CFTC can’t determine whether instutional speculators drove up the prices of commodities to record levels earlier this year and then sent them reeling as Congress began to investigate their activities in the markets.
Yesterday, two guys who trade and analyze the markets for a living, issued a much more honest and instructive report commissioned by three members of the U.S. Senate.