What happened to all of the "excessive speculation" outrage?

If I'm not mistaken, when Obama came out and preached his baloney rhetoric to Congress, a bunch of oil traders holding large quantities became afraid of margin restrictions. Not eager to be caught selling into the midst of a liquidity crisis, they all jumped the gun and began unwinding their books preemptively. This started a downward trend in oil that was continued by the weakening macro data coming out Europe and China in the early summer.

So basically, speculation has decreased in the last 5 months. Where me and the president disagree, however, is that I don't see anything wrong with speculation. I believe that free markets are the most efficient markets, and that artificial price ceilings create inefficiency and dead-weight loss. But what do I know.

My interpretation of the term "speculation" is the act of buying futures contracts, not in an attempt to hedge uncertainty in the oil markets and stabilize a company's operating costs, but to make a directional bet on the future price of oil. As those who are simply trading the futures exit the market and a larger percentage of contract buyers intend to hold the contracts to delivery, I would say the market is less "speculative" than it was before those traders exited.

In other words, as the futures curve flattens, there is less and less speculation (people making the bet that prices will go up in the future).

But I see your point: If oil's futures curve became inverted, with people speculating that oil would be cheaper several months from now, it is unlikely that Obama would lambaste futures trading and harp on the evils of those greedy capitalists. It is much more likely that he would try and take credit for lower gasoline prices come November.

So, what is the story of Israeli attacked bus in Bulgaria by Iran. Do we attack, oil goes up or it is a fake story?

carparker said: Patches,

It's not a convenient evil right now. Just wait 2-3 months and they(liberals) will be pounding their fists again.

 CFTC position limits finally go into effect in September, which explains the weird timing of oil prices dropping at the time of year it usually rises , brace yourself for affordable gasoline....damned Liberals.

sky02316 said: The ....

 They are all corrupt, but all in bed with each other so they will always get away with manipulation, etc. Government = big money, big money = government. They work together to serve their own interests first then maybe throw a few scraps to the 99%. Republicans, Democrats, it just doesn't matter these days. I won't even be going out to vote because I don't live in a swing state. Couldn't care less at this point with the kind of morons in congress pointing fingers at each other nothing is going to get done.

 Thanks, now I need a Prozac.

@ $92, a far cry from the past two Sumner's highs.

CFTC position limits scheduled to be in place within a month, large prop desks have been deleveraging in advance.

The irony, the CFTC only limits buyers to a 10% share of any commodity, I don't think that's enough...but it does arouse the question, where 10% is the limit, why are the banks/prop desks so opposed to it?

The answer, while futures trading is allowed to be done in secret under the CFMA, some banks owned a substantially greater portion than 10%, that kind of ownership over any staple can easily yield immense influence and control over the market, economy and consumption.

I.E. - get short fraudulently rated Real Estate derivatives, pump oil prices to constrict consumer income, collect on the short positions as mortgage defaults ensue and the public will never know because there's no disclosure requirements under the CFMA.