[3aidlillahi]

$this->bbcode_second_pass_quote('', '
')There is, admittedly, a growing category of inherently bullish investment funds that seek to track commodity-price indices, in which oil is usually the biggest component. Politicians have begun to denounce these “index funds”, since they make money for their investors only if prices rise. According to Mr Lieberman, they have grown in value from $13 billion to $260 billion over the past five years.

[Judgie]

$this->bbcode_second_pass_quote('OilFinder2', '
')............But that's not what the article said. The article is hidden behind a subscription wall, so I can't read the entire thing. Here is the teaser:...............

[bkwillia]

OPEC, China and Russia are likely playing a big part in this oil boom. They have too a surplus of petro dollars, and a falling US dollar, so their lowest risk investment is crude oil futures. This goes for the major independent produces like Shell, Exxon, BP etc.

Oil producers have insider information on production and reserves, while outsiders have to deal with OPEC's questionable numbers. They must have realized that it was more profitable to buy back all their futures contracts and resell them at a higher price, than to invest in more oil production. This strategy boosts both front month and long term prices. Investing in more production lowers near term prices and lowers reserve life.

At this point the flow of money into oil futures is like water flowing down hill. The stream of money is not going to change direction now that we are facing the other side of peak oil.

[AlterEgo]

I see this whole bidness as an initial reaction of people to the friction between a real economy and a paper economy.

Lifted from Russ Winter's website:
http://wallstreetexaminer.com/blogs/winter/?p=1722

$this->bbcode_second_pass_quote('', '"')“Should we have an economy that’s based on whether people make good or bad bets? Or should we have an economy where people build companies, create manufacturing, do inventions, advance the American society and make it more productive? We are rewarding people for sitting at their computers and punching in bets.” - Stanley Greenberger in “New American Economy”"

[kublikhan]

$this->bbcode_second_pass_quote('3aidlillahi', 'H')ow did that $2 billion cause a first quarter rise in the price of oil from $100 to $110/barrel? That's a rise of $10/barrel and we used 7.5 billion barrels during that time ... That's $75 billion dollars in the increase of the end price of oil and it was caused by $2 billion in speculation? That just doesn't seem right. School me if I'm wrong though.

[kublikhan]

$this->bbcode_second_pass_quote('3aidlillahi', 'H')ere's another figure given:
$this->bbcode_second_pass_quote('', 'P')aul Horsnell of Barclays Capital, an investment bank, puts the total value of index funds and other similar investments at $225 billion. That is less than half the market capitalisation of Exxon Mobil, he points out, and a tiny fraction of the $50 trillion-odd of transactions in the oil markets each year

[3aidlillahi]

$this->bbcode_second_pass_quote('', 'C')hart One shows Assets
allocated to commodity index trading strategies have risen from $13 billion at the end of
2003 to $260 billion as of March 2008

[joewp]

Somebody fix that link up there!


All you guys are assuming all these hedge fund dollars are going long on oil, whereas Dante and others have shown evidence that there's a large bearish sentiment in the traditional Wall Street speculator types that is shorting oil in all venues, from the futures to the ETFs. It doesn't matter the amount of money flowing into the markets, the important point is the direction of the trades, and a substantial amount of this money is shorting oil, actually keeping a lid on the price.

At this point it seems that without the speculators shorting the market, oil would be well over $150.

[threadbear]

$this->bbcode_second_pass_quote('frankthetank', 'G')ood to know its just a bubble. Hopefully $2 gasoline is right around the corner. Its all economics, oil production has nothing to do with the price of oil.

[kublikhan]

$this->bbcode_second_pass_quote('joewp', 'A')ll you guys are assuming all these hedge fund dollars are going long on oil, whereas Dante and others have shown evidence that there's a large bearish sentiment in the traditional Wall Street speculator types that is shorting oil in all venues, from the futures to the ETFs. It doesn't matter the amount of money flowing into the markets, the important point is the direction of the trades, and a substantial amount of this money is shorting oil, actually keeping a lid on the price.At this point it seems that without the speculators shorting the market, oil would be well over $150.

[kublikhan]

$this->bbcode_second_pass_quote('3aidlillahi', 'T')his guy apparently doesn't know what "annual" means. According to the DOE, Chinese demand has increased from 1.88 gigabarrels/year to 2.8 gigabarrels per year for a net increase of 920 mby. But Index Specs have increased demand by 848 million barrels TOTAL, not per year. So that's really less than 20% of China's growth.
Yeah, that's not exactly putting a dagger in your argument. I'm just saying that he's wrong (slightly) on this point about IS vs. China.

[joewp]

$this->bbcode_second_pass_quote('kublikhan', '
')Also, using the figures that Dante provided, the average short interest among U.S.-listed ETFs is 10%, according to Morgan Stanley. That would mean that the average long position is 90%.

[kublikhan]

$this->bbcode_second_pass_quote('joewp', 'I')t must be tough to take when the facts interrupt your fantasies that there's plenty of oil and the only reason the price is going up is those damn speculators. It must be really jarring to realize that without specs selling the market, the price would be even higher.
I don't know where you got that big quote about "Index Speculators", but it makes little sense. Especially that part about "explaining" the commodity markets prices increases, which completely ignores supply and demand.
You must be an economist or something, am I right kublikhan?

[3aidlillahi]

$this->bbcode_second_pass_quote('', 'N')ot sure I follow you. China's demand did not jump from 1.88 giga barrels/year to 2.8 giga barrels per year in a single year. That increase was spread out over 5 years. China's oil demand has been growing about 7% a year.

[roccman]

Well beyond moral hazard...
$this->bbcode_second_pass_quote('', 'T')he market will roar tomorrow. Now here's my advice - sell any and all financial stocks - anything that may have written CDS in the market - into the spike tomorrow. Do it at the opening bell, and do not look back. Here's why: By getting warrants that massively dilute existing shareholders what Paulson has done is paint a target on the back of every financial firm in America. All of them.

Let's say I'm a Hedge Fund. I want to make a billion dollars. I pick on, oh, Goldman Sachs. I know they wrote a bunch of CDS I, and a bunch of my hedge fund buddies, short the firm's stock into the ground. Eventually, this will force a ratings downgrade. As soon as it does, Goldman can't make the capital calls on the CDS, and is forced to ask for help. They get help and the common stockholders are wiped out. I, Mr. Hedgie, say "thank you very much" and cover my short at a huge profit. Then I repeat this with the next firm. I get rich and buy me a new yacht, while the common stockholders in the firms are destroyed.

This will happen to every firm in America as soon as this is figured out by the Hedge Fund community, which, incidentally, will take less time than it took me to write this and record the attached video. Sell your financial stocks into the spike tomorrow folks. No firm that is "seriously interconnected" in our financial system is safe from this, and this "risk" was wholly manufactured by the actions of our government this evening. You've been warned!

[Cashmere]

$this->bbcode_second_pass_quote('', 'I') pick on, oh, Goldman Sachs. I know they wrote a bunch of CDS. I, and a bunch of my hedge fund buddies, short the firm's stock into the ground.

[seldom_seen]

I wouldn't worry about Goldman Sachs. They've got their man Hank at the head of the Treasury Department. They were shorting the CDO market way back, and going long on the other side of the house. If things get tight they call Hank, and Hank looks after them.

[Ferretlover]

Hypothetical scenario: Bush activates the Executive Order (can't remember the number at the moment) where the government takes over the financials.
Would what is happening now be what would happen, or would things occur differently?

[cube]

$this->bbcode_second_pass_quote('Cashmere', '')$this->bbcode_second_pass_quote('', 'I') pick on, oh, Goldman Sachs. I know they wrote a bunch of CDS. I, and a bunch of my hedge fund buddies, short the firm's stock into the ground.

[Cashmere]

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('Cashmere', '')$this->bbcode_second_pass_quote('', 'I') pick on, oh, Goldman Sachs. I know they wrote a bunch of CDS. I, and a bunch of my hedge fund buddies, short the firm's stock into the ground.