Folks STOP BEING IN DENIAL! Finally SOMEBODY big says it as it is!
“Index speculators’ trading strategies amount to virtual hoarding via the commodities futures markets,” Michael Masters, a former hedge fund trader, told the committee in prepared testimony.
And he goes on…
“Institutional investors are buying up essential items that exist in limited quantities for the sole purpose of reaping speculative profits,” he said.
What have I been saying? I have been saying buying commodities is akin to flipping houses! Michael Masters even goes on to say that the speculator is creating as much demand as China! Think about it folks!
The market has been making excuses, excuses and more excuses! First we started with the main cause of the high price of oil? It’s the American market they consume so much.
WASHINGTON, May 20 (UPI) — Foreign oil imports fell in the United States in the first quarter of 2008, the U.S. Energy Information Administration said.
Foreign imports fell to 57.9 percent of the country’s consumption, down from 58.2 percent a year ago.
The trend is pushed by high oil prices, biofuel production mandates and improved fuel efficiency in cars, the Financial Times reported Tuesday.
What was the market response? Higher oil! Why? Next excuse, the dollar is weak and therefore oil must go higher to make up for the lost revenue.
Quote said on CNBC: For every percentage in weakness in the dollar there is a 4 percent increase in the price of oil.
What was the market response when the dollar strengthened? Higher oil! Next excuse, its not the dollar, nor the lower American demand, but its foreign demand!
Paraphrasing Ross Perrot Junior on CNBC: “The fair price of oil is in the 70’s. The problem is that the price of oil is not actual demand, but future demand as I was reminded by an Indian friend of mine.”
What was the market response? Higher oil! Why? Next excuse, its the fault of the backend where the price of crude is trading at very high levels indicating future demand. (Backend futures mean futures 5 years or so from now).
Quoting Boone Pickens: There is 87 million barrels of demand, but only 85 million barrels of supply per day. Its that simple, not even related to the US Dollar.
It is that simple, REALLY? Let me explain. Imagine you have 87 people that need shelter, but only 85 can find shelter, does that mean two people stand in the rain? And if so what happens in the next day? Are there still 87 people, and only 85 that can find shelter? Because if that is the case then there are really 89 people who need shelter. You get the math that this would lead to an exponential explosion.
Ok let’s roll this another way, the market is only 87 people and there is only 85 places of shelter. This means at any point in time 2 people will have no shelter. How does the market respond? They build more, and those that get shelter start hamster away and maybe take an extra place.
There is one excuse after another, but it all boils down the fact that these high prices are killing the economy. Yes I have harped quite a few times on this topic, but it is because I see the lack of understanding by most people on the economic ramifications. That is why I refuse to go long in commodities out of ethical reasons. Yes it is my ethics, but I see the economic ramifications.
Anybody who speculates in oil (via USO) or commodities might like the gains in your pocket book, but you don’t see how you are killing the economy.
AMR was the worst, dropping 14% on the Big Board after CEO Gerard Arpey said the industry “was not built to withstand oil prices at $125 a barrel.” Most airlines have hedging programs in place, but many hedge, at best, about one-third of their fuel cost, leaving them still exposed to the surge in costs. (AMR paid $2.74 per gallon for jet fuel in the first quarter, but prices have risen since.)
Those people who are without jobs are going to have to figure out how to eat tomorrow. Clap yourself on your back! Many argue hey this is capitalism! On CNBC they had a debate with a senator who was introducing legislation to tax the oil companies.
He replied, “When these high prices hurt people from going about their daily lives then it is the role of government to step in.”
I dislike government, but when you start hurting the average person you are going to get government involvement whether you like it or not! And when the government intervenes it is usually the capitalist that gets it first! That’s why I don’t agree on speculating with commodities since you are saying, “I want my money before somebody eats!”
For example look at what Senator Lieberman says:
But Lieberman said accessing the strategic petroleum reserves is not the solution to the nation’s energy problems but “it is a form of temporary relief.”
Instead, the Connecticut senator said index speculators are “partly responsible for hurting a lot of individuals and businesses.”
“I think it’s important to limit the options that people have to maximize their profits, because a lot of us end up paying through the nose,” he added
So take your profits today or you are going get your profits taken from you. EVEN the almighty Rick Santelli has conceded that MAYBE, JUST MAYBE there should be restrictions put on speculators! Tells you quite a bit no!
Though not all is bad, and I am starting to invest in companies that are going to be the future. Like Renault-Nissan that are in conjunction with the Israelis are a 100% electric vehicle. Or how about Tesla Motors?
All I can say is Go-Go Renault and Israel! And this is not future pie in the sky technology. They are talking about rolling this out in 2010, and 2011. This will finally break the backs of the oil conglomerates, and speculators!