So here it is: You plotted the spot price and claim it has been manipulated. Say I have a billion dollars at hand. What should I do (which instruments should I buy sell etc.) in order to drive the spot price higher?
PeakOil is You
Will Salty Oil Delay Peak?
Re: Will Salty Oil Delay Peak?
by smiley » Thu 19 Aug 2010, 16:34:04
OK according to the course "not to kill your employee because he doesn't get your point" which I followed recenty, I shouldn't try to smother you in arguments, but ask an open question instead.
So here it is: You plotted the spot price and claim it has been manipulated. Say I have a billion dollars at hand. What should I do (which instruments should I buy sell etc.) in order to drive the spot price higher?
So here it is: You plotted the spot price and claim it has been manipulated. Say I have a billion dollars at hand. What should I do (which instruments should I buy sell etc.) in order to drive the spot price higher?
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smiley - Intermediate Crude
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Re: Will Salty Oil Delay Peak?
by Pops » Thu 19 Aug 2010, 17:31:58
$this->bbcode_second_pass_quote('smiley', ' ')Say I have a billion dollars at hand. What should I do (which instruments should I buy sell etc.) in order to drive the spot price higher?
Oil.
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
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Pops - Elite
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Re: Will Salty Oil Delay Peak?
by Pops » Thu 19 Aug 2010, 17:49:29
hehe.
You and a bunch of your quant buddies are getting scared of the sliced and diced real estate derivatives and unwind a few billion. You can't just stick it under the mattress so you need a place to put it right?
Obviously food and oil aren't going out of style anytime soon so you plunk your money into commodities. When you do (with a sufficient amount) you create demand and so the price goes up. The market and other traders don't know you are just there to turn around and sell so they think demand is actually growing that much so they buy more at the higher price you just made - and the price goes up some more.
A great piece:
$this->bbcode_second_pass_quote('', 'F')or over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he'll lose some cash, but if there's a lousy summer or the global price collapses, he'll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.
Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into "derivatives" that could be bought and sold among traders who had nothing to do with agriculture. A market in "food speculation" was born.
So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutsche Bank, who sell it on for £30,000 to Merrill Lynch – and on and on until it seems to bear almost no relationship to Farmer Giles's crop at all.
You and a bunch of your quant buddies are getting scared of the sliced and diced real estate derivatives and unwind a few billion. You can't just stick it under the mattress so you need a place to put it right?
Obviously food and oil aren't going out of style anytime soon so you plunk your money into commodities. When you do (with a sufficient amount) you create demand and so the price goes up. The market and other traders don't know you are just there to turn around and sell so they think demand is actually growing that much so they buy more at the higher price you just made - and the price goes up some more.
A great piece:
$this->bbcode_second_pass_quote('', 'F')or over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he'll lose some cash, but if there's a lousy summer or the global price collapses, he'll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.
Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into "derivatives" that could be bought and sold among traders who had nothing to do with agriculture. A market in "food speculation" was born.
So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutsche Bank, who sell it on for £30,000 to Merrill Lynch – and on and on until it seems to bear almost no relationship to Farmer Giles's crop at all.
The Independent
And some screaming on the subject:
http://www.marketwatch.com/story/story/ ... A040E56B8E
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
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Pops - Elite
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Re: Will Salty Oil Delay Peak?
by smiley » Fri 20 Aug 2010, 17:08:49
$this->bbcode_second_pass_quote('', 'O')bviously food and oil aren't going out of style anytime soon so you plunk your money into commodities. When you do (with a sufficient amount) you create demand and so the price goes up. The market and other traders don't know you are just there to turn around and sell so they think demand is actually growing that much so they buy more at the higher price you just made - and the price goes up some more.
Say speculators buy up 75% of the nymex futures for august 2011. The price rises and the 25% of honest buyers who get fooled by the speculators lock in their oil at a premium. The speculators merrily sell and buy for the next year, making their profits losses and pretending to be very valuable members of society because they shove millions of dollars hence and forth.
But then somewhere august the 20th they get a little note from CME. It states: " where do you want your oil delivered?". Uh Oh.. Not to worry on notice day you can still terminate a contract. And that is what they do and they roll over their game to the next futures contract. Those 75% contracts suddenly come available for real traders, and the final price is set by real demand and supply.
Bottom line is: you cannot have a naked long position at expiration. At the final settlement you only have legitimate buyers and sellers. Nymex does allow speculation in its futures, but it demands a physical settlement.
http://www.cmegroup.com/trading/energy/ ... =undefined
There is only one way to affect the spot price and that is contango trading, commonly known as "hoarding". Here you do take delivery of the oil, store it, and sell it at a later date hopefully at a higher price. Because you remove physical oil from the current market it drives up the spot price. This is a real factor in base and precious metals because they are easy to store. But because of the volume of the market compared to the availability of crude storage I cannot envision this effect to be very large.
$this->bbcode_second_pass_quote('', '.').....and on and on until it seems to bear almost no relationship to Farmer Giles's crop at all.
Do you realise Giles is selling his crop even before he has even sown the seed. Which perhaps makes him the biggest speculator
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smiley - Intermediate Crude
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