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"People need to study their facts" before criticizing speculators, CME chairman Terry Duffy says...
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Wednesday, May 2, 2012, 2:28 PM ET"People need to study their facts" before criticizing speculators, CME chairman Terry Duffy says in response to Pres. Obama's blaming traders for driving fuel prices higher. Speculators provide vital liquidity to markets: "When the Dow goes above 13,000, Google goes above $600/share and everybody celebrates, who do you think did that? The U.S. equity market is 100% speculators."
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So true.
But let's not let that get in the way of Washington's bread-n-circus shall we?
When Rome burns, Obama will be caught holding the gas can.
Anyone with half a brain understands the liquidity argument (HFT's anyone) is pure rubbish. Commodity prices are unstable (up or down) because the traders profit from the volatility- by design that's what they do. Take out the speculation and you will still have a market because commodities are a "must have" for both industrials and consumers, unlike Iphones and Androids.
Got it..
There, verification one can literally screw one's self in the ass.
Speculators make markets more liquid, so shorting and leverage are generally ok given adequate transparency and capital requirements, but to a point. GDP, consumer spending and almost every facet of our economy including to the goods and services we export are dramatically correlated to oil prices. So it is actually in everyone's best interest to restrict rampant speculation in crude oil (except for the speculators, energy firms and oil producers, of course)
The real question isn't whether oil prices are higher due to speculation; they are. The question is, are artificial barriers in US commodity markets a viable way to fend off excessive speculation without suffering tremendous negative consequences? Negative consequences include: outside futures exchanges picking up the slack, pissing off energy/commodities firms world wide, threat of losing energy jobs in the US, etc.
If it were so easy speculating to wealth, why would speculators ever let the prices come down? This is more an issue of human folly than excessive speculation and the obvious truth is reflected in no outcry when prices fall.
There's some "facts" for you !
The energy markets have been messed up for a decade and the current price of a barrel of oil is completely obfuscated because supply-demand and price discovery aren't allowed to function normally.
A good essay on the subject appeared recently on FT:
http://on.ft.com/K4goHR
But there's tons of places to get info if one cared to, instead of shooting cute soundbite comments:
http://bit.ly/KwX4Ao
http://aol.it/K4gqQ0
http://onforb.es/KwX4Ar
It goes on and on...
"Investors" holding long-only positions in energy and permanently removing product from the market as a result are not 'providing liquidity.' Commodities are not like stocks: They are not capital creation tools. In the end, all commodities are a zero-sum game. Any money that traders make in the trading of commodities necessarily must come out of the pockets of someone else.
This is likely why you now have banks/speculators getting into the refinery business. They take all that crude they hold for their client-investors, sell it at today's price to the refinery, and make money on borrowed oil. The Delta deal makes a lot of sense in this context.
Might want to get used to it. This is a forward looking gambling casino, nothing more, nothing less.
If you don't have a FED PUT, now is the time.
Also, this commodities market is not the same one as 1928 and 1929s. Price discovery and hedging - the origin of the CFTC - has taken a back seat to speculation, long term investment, and rampant abuse.