Originally posted by normbenign The presence of speculators in any free market doesn't drive prices in a single direction. If speculators are wrong, they lose.
Like any investor, they tend to be making an educated guess on market direction, supply and demand, and other factors. If they guess right they make money, and if they guess wrong they lose.
Like government oversight is ...[text shortened]... er in the banking business especially with quasi governmental agencies like Fanny and Freddie.
The presence of speculators does increase volatility, which is bad. Furthermore, the fact that speculators have invested X amount in oil futures does drive up prices.
Originally posted by KazetNagorra The presence of speculators does increase volatility, which is bad. Furthermore, the fact that speculators have invested X amount in oil futures does drive up prices.
and if you look at the actual AMOUNT of money that was spent on speculation during the last run up in oil prices, the amount is staggering.
Originally posted by uzless and if you look at the actual AMOUNT of money that was spent on speculation during the last run up in oil prices, the amount is staggering.
Okay, I watched the video. As usual, 60 Minutes does a good job producing their material.
But frankly, all I saw was a big blinding flash of the obvious. We all knew that speculation drove the oil bubble. How else could one explain a barrel going from $50 to $147 to $30 in a few months? Bubble. Bubble bursts. We saw that with tech stocks; we saw that with housing prices and now we saw that with oil.
What I still don't understand is what transparency has to do with any of this. The investment banks don't seem to have done anything illegal. They encouraged investors to speculate on the price of a commodity. So what? They encourage investors to speculate on the price of securities all the time.
I'd still like it if someone could explain to me how transparency would help. How would it discourage speculators?
It seems to me that the only thing that would "help" would be government regulation that would limit the ability of people to speculate on commodities.
Originally posted by sh76 Okay, I watched the video. As usual, 60 Minutes does a good job producing their material.
But frankly, all I saw was a big blinding flash of the obvious. We all knew that speculation drove the oil bubble. How else could one explain a barrel going from $50 to $147 to $30 in a few months? Bubble. Bubble bursts. We saw that with tech stocks; we saw that with ho ...[text shortened]... e government regulation that would limit the ability of people to speculate on commodities.
For starters, the gov can't track how much speculation is really going on. If they could track it, they would realize that re-regulating commodities is necessary. New rules would be put in place to limit speculation. But the gov won't do that until they have the hard data.
It comes down to whether or not you believe basic human essentials should be allowed to be speculated on. People who don't need oil are being allowed to own it for no purpose other than to make money from it. Is that acceptable? The same thing is happening to food. Rice anyone?
Originally posted by sh76 But frankly, all I saw was a big blinding flash of the obvious. We all knew that speculation drove the oil bubble. How else could one explain a barrel going from $50 to $147 to $30 in a few months?
Don't be so sure on how obvious it was.
A few months back I was one of the only one's here saying the speculation was driving the price of oil and most rhp posters were saying it was just supply/demand reasons. You listening palynka??
Originally posted by uzless Don't be so sure on how obvious it was.
A few months back I was one of the only one's here saying the speculation was driving the price of oil and most rhp posters were saying it was just supply/demand reasons. You listening palynka??
Go read what I wrote. I said it was both and I still stand by that.
Originally posted by uzless Would you state that the doubling of oil prices from 30 bux to 60 bux in the last few months is because of an increase in DEMAND?
Again you commit the mistake of thinking 30 bux was a "fair" price. Do you seriously believe there was no undershooting?
Originally posted by KazetNagorra The presence of speculators does increase volatility, which is bad. Furthermore, the fact that speculators have invested X amount in oil futures does drive up prices.
Sometimes speculation increases volitility, but it's place in the market is to reduce that volitility. Most of the time it acts as a buffer.
Originally posted by uzless and if you look at the actual AMOUNT of money that was spent on speculation during the last run up in oil prices, the amount is staggering.
WATCH THE VIDEO!!
The amount is staggering because the same contracts tend to be bought and sold many times over. A million barrels of oil doesn't turn into a billion or a trillion. It is bought and sold multiple times, with some winners and some losers.
I watched the video, and it gives no real explanation of futures markets, only its own speculations.
Originally posted by normbenign Sometimes speculation increases volitility, but it's place in the market is to reduce that volitility. Most of the time it acts as a buffer.
Have you been reading the Friedman Book of Fairytales again?
Originally posted by sh76 Okay, I watched the video. As usual, 60 Minutes does a good job producing their material.
But frankly, all I saw was a big blinding flash of the obvious. We all knew that speculation drove the oil bubble. How else could one explain a barrel going from $50 to $147 to $30 in a few months? Bubble. Bubble bursts. We saw that with tech stocks; we saw that with ho ...[text shortened]... e government regulation that would limit the ability of people to speculate on commodities.
If speculation truly drives a bubble, then in the end the speculators take a bath when actual market conditions set the end price of the commodity.
The only people who make money in this speculative process are those who time the market correctly and buy low and sell high. None of this really effects long term the price of the commodity.
The speculators are both reacting to, and anticipating conditions within a market. It is simply not within their power to control that market.
I would like to see a detailed analysis of who made and lost money during last year's cycle. There was a lot of really stupid news that the record profits of Exxon Mobil were related to that speculation. Perhaps the speculation of a year ago? We are talking future contracts, not present day actual sales of goods.
Originally posted by normbenign If speculation truly drives a bubble, then in the end the speculators take a bath when actual market conditions set the end price of the commodity.
The only people who make money in this speculative process are those who time the market correctly and buy low and sell high. None of this really effects long term the price of the commodity.
The specul ...[text shortened]... ulation of a year ago? We are talking future contracts, not present day actual sales of goods.
The problem is that large players in the market can influence pricing and use market dynamics to generate a cycle that they can profit from. Idiot traders following technical analysis will follow and take a bath, while the market maker pockets the money.
In the meantime, the real industry gets stuck with huge price swings in a commodity like oil.
The ugly Oil speculators Return??
02 Jun '09 20:45
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