SPR release

jmar
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jmar
Edited Date/Time 1/4/2012 7:31pm
I have an idea. Instead of participating in the silly games of futures trading today, why not work on changing the rules of the game? For those of you who are going to say, "you just can't go out and change the rules" . The traders have been manipulating and changing the rules in their favor for years now.

This is nothing more that a "feel good" let's show the people we are taking a stand against those crooks" short term measure.

It's politic's as usual.
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WhKnuckle
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WhKnuckle 6/24/2011 7:19am
6/24/2011 7:19am
This was exactly the right thing to do, at exactly the right time. The oil price run-up was not about supply and demand, it was a speculation bubble, so releasing oil from SPR wouldn't do anything to prices as long as the momentum was upward (market momentum can move opposite from fundamentals on pure speculation and emotion, but it can't go that way forever). The best thing to do is to wait until the market tops out and starts back down, and THEN release more oil onto the market. That will drive prices even lower, and basically punish those who went way long and drove the market originally. I've been waiting for the speculators to lose money, and now they are.

Make a note of the people who scream the loudest about this - they're the ones who screwed the pooch in the first place, and they're the ones who are going to lose money.
borg
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borg 6/24/2011 7:27am
6/24/2011 7:27am
I'll stop short saying it was a pure political ploy but so far the administration has not made a very good case for this based on their prior stated guidelines.
kcadrenalin
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kcadrenalin 6/24/2011 7:31am
6/24/2011 7:31am
Obama is grasping at straws now and it is becoming painfully obvious to ALMOST everyone.
jmar
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jmar 6/24/2011 7:47am
6/24/2011 7:47am
WhKnuckle wrote:
This was exactly the right thing to do, at exactly the right time. The oil price run-up was not about supply and demand, it was a...
This was exactly the right thing to do, at exactly the right time. The oil price run-up was not about supply and demand, it was a speculation bubble, so releasing oil from SPR wouldn't do anything to prices as long as the momentum was upward (market momentum can move opposite from fundamentals on pure speculation and emotion, but it can't go that way forever). The best thing to do is to wait until the market tops out and starts back down, and THEN release more oil onto the market. That will drive prices even lower, and basically punish those who went way long and drove the market originally. I've been waiting for the speculators to lose money, and now they are.

Make a note of the people who scream the loudest about this - they're the ones who screwed the pooch in the first place, and they're the ones who are going to lose money.
Why play the game?

These speculators you are speaking of are very large hedge funds, and they're just going to wait this out, and then start the game all over again. Why not work on rules and regulations that would cut them off at the knees and get the commodities market back to what it was designed to be.

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borg
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borg 6/24/2011 7:54am
6/24/2011 7:54am
Can you show me any evidence at all that "big oil" runs the price up? How many more hearings and investigations do you need? Maybe you were referring to the traders at the commodities desk at Goldman Sachs or elsewhere. I have no problem with seeing a few of them do a swan dive from the 60th floor but I would have a problem with the government making this kind of a rare decision for that purpose.
WhKnuckle
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WhKnuckle 6/24/2011 8:27am
6/24/2011 8:27am
WhKnuckle wrote:
This was exactly the right thing to do, at exactly the right time. The oil price run-up was not about supply and demand, it was a...
This was exactly the right thing to do, at exactly the right time. The oil price run-up was not about supply and demand, it was a speculation bubble, so releasing oil from SPR wouldn't do anything to prices as long as the momentum was upward (market momentum can move opposite from fundamentals on pure speculation and emotion, but it can't go that way forever). The best thing to do is to wait until the market tops out and starts back down, and THEN release more oil onto the market. That will drive prices even lower, and basically punish those who went way long and drove the market originally. I've been waiting for the speculators to lose money, and now they are.

Make a note of the people who scream the loudest about this - they're the ones who screwed the pooch in the first place, and they're the ones who are going to lose money.
jmar wrote:
Why play the game? These speculators you are speaking of are very large hedge funds, and they're just going to wait this out, and then start...
Why play the game?

These speculators you are speaking of are very large hedge funds, and they're just going to wait this out, and then start the game all over again. Why not work on rules and regulations that would cut them off at the knees and get the commodities market back to what it was designed to be.
I wish it wasn't this way, but hedging is a fundamental activity in American corporations today - in fact, I'd bet real money that the average corporate CEO knows more about his corporate hedging strategy than he does about their physical production activity. Hedging can't be unwound at this point - they own the country's economy. The decisions of hedge funds and independent corporate hedging are vastly more effective in moving our country's economy (for better or for worse) than anything the government and the Fed can do. Obviously, those forces are interdependent (hedging takes assumptions about Fed actions into account, the Fed takes hedging decisions into account), but you can see the effects of hedging and speculation in the last 3 months - the government did nothing different, but the US GDP dropped, hiring backed off, stock and bond markets were seriously impacted (impacting workers via their 401K plans), and it was all because of speculation about a Greece debt default and speculation about the possibility that revolution in Egypt could spread to Saudi Arabia, Kuwait and other Persian Gulf states. Nothing actually HAPPENED, but look what happened to the economy based on what a few people THOUGHT might happen.

I see this all the time in my job - I've actually been in operational meetings in multiple corporations when people have discussed hedging strategies as a functional part of the decision making process about whether or not to operate in certain ways. Operations was directly tied to hedging strategy. That's not to say that anyone did anything wrong in terms of energy supply or anything like that (not an Enron type thing), but hedging is an important part of corporate management. Unwinding it is simply impossible.

This is another part of the same thing that's been destroying our country - the movement of corporate America from a product/service maker to a financial engine for speculators. How do you turn that around? I have no idea.
borg
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borg 6/24/2011 8:35am
6/24/2011 8:35am
Just a point of clarity. Hedging and hedge fund speculation are two different things. It seems that WK understands that but the difference between the two are commonly confused.
WhKnuckle
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WhKnuckle 6/24/2011 8:48am
6/24/2011 8:48am
borg wrote:
Just a point of clarity. Hedging and hedge fund speculation are two different things. It seems that WK understands that but the difference between the two...
Just a point of clarity. Hedging and hedge fund speculation are two different things. It seems that WK understands that but the difference between the two are commonly confused.
Right - I was trying to differentiate by using "corporate hedging" and "hedge funds" as different things, but I kind of lumped them in together. Corporate hedging is also speculative, though, there's no way around that. Basically, it's a process of investing in ways that would tend to counteract losses in direct marketing if they bet wrong, as a way to smooth out volatility. But it IS speculative in nature, and in my experience (although I don't get directly involved in it), it tends to use similar assumptions as hedge funds do. It's uncanny how many corporate marketing heads wind up leaving corporations and going to hedge funds per se. I've seen hedging decisions creeping into operational decisions for a long time in the energy world, and I think it happens in other corporate areas, too. Originally, operations drove hedging - today, it sometimes goes the other way. That's not a good thing in my opinion.
jmar
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jmar 6/24/2011 10:58am
6/24/2011 10:58am
WhKnuckle wrote:
This was exactly the right thing to do, at exactly the right time. The oil price run-up was not about supply and demand, it was a...
This was exactly the right thing to do, at exactly the right time. The oil price run-up was not about supply and demand, it was a speculation bubble, so releasing oil from SPR wouldn't do anything to prices as long as the momentum was upward (market momentum can move opposite from fundamentals on pure speculation and emotion, but it can't go that way forever). The best thing to do is to wait until the market tops out and starts back down, and THEN release more oil onto the market. That will drive prices even lower, and basically punish those who went way long and drove the market originally. I've been waiting for the speculators to lose money, and now they are.

Make a note of the people who scream the loudest about this - they're the ones who screwed the pooch in the first place, and they're the ones who are going to lose money.
jmar wrote:
Why play the game? These speculators you are speaking of are very large hedge funds, and they're just going to wait this out, and then start...
Why play the game?

These speculators you are speaking of are very large hedge funds, and they're just going to wait this out, and then start the game all over again. Why not work on rules and regulations that would cut them off at the knees and get the commodities market back to what it was designed to be.
WhKnuckle wrote:
I wish it wasn't this way, but hedging is a fundamental activity in American corporations today - in fact, I'd bet real money that the average...
I wish it wasn't this way, but hedging is a fundamental activity in American corporations today - in fact, I'd bet real money that the average corporate CEO knows more about his corporate hedging strategy than he does about their physical production activity. Hedging can't be unwound at this point - they own the country's economy. The decisions of hedge funds and independent corporate hedging are vastly more effective in moving our country's economy (for better or for worse) than anything the government and the Fed can do. Obviously, those forces are interdependent (hedging takes assumptions about Fed actions into account, the Fed takes hedging decisions into account), but you can see the effects of hedging and speculation in the last 3 months - the government did nothing different, but the US GDP dropped, hiring backed off, stock and bond markets were seriously impacted (impacting workers via their 401K plans), and it was all because of speculation about a Greece debt default and speculation about the possibility that revolution in Egypt could spread to Saudi Arabia, Kuwait and other Persian Gulf states. Nothing actually HAPPENED, but look what happened to the economy based on what a few people THOUGHT might happen.

I see this all the time in my job - I've actually been in operational meetings in multiple corporations when people have discussed hedging strategies as a functional part of the decision making process about whether or not to operate in certain ways. Operations was directly tied to hedging strategy. That's not to say that anyone did anything wrong in terms of energy supply or anything like that (not an Enron type thing), but hedging is an important part of corporate management. Unwinding it is simply impossible.

This is another part of the same thing that's been destroying our country - the movement of corporate America from a product/service maker to a financial engine for speculators. How do you turn that around? I have no idea.
I wish it wasn't this way, but hedging is a fundamental activity in American corporations today - in fact, I'd bet real money that the average corporate CEO knows more about his corporate hedging strategy than he does about their physical production activity. Hedging can't be unwound at this point - they own the country's economy.

It's going to have to be unwound sooner or later. I understand that it's going to have a huge negative impact on our economy, but if we continue down the same path, it's just a matter of time before complete failure of our economy.
72kiteboarder
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72kiteboarder 6/25/2011 12:36am
6/25/2011 12:36am
The whole thing is stupid. Anything they release from the SPR will have to be replaced, the net gain is ZERO.
jmar
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jmar 6/25/2011 7:54am
6/25/2011 7:54am
72kiteboarder wrote:
The whole thing is stupid. Anything they release from the SPR will have to be replaced, the net gain is ZERO.
Storage levels are at an all time high anyway. Maybe it will allow all those tankers that have been sitting off shore for months now to finally unload and move on.

Nothing like fighting stupidly with stupidly.
fcr
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fcr 6/25/2011 8:38am
6/25/2011 8:38am

It's going to have to be unwound sooner or later. I understand that it's going to have a huge negative impact on our economy, but if we continue down the same path, it's just a matter of time before complete failure of our economy.
Seems that there was a call many to have the car industry bite the bullet and let them take it in the shorts a year or so ago. I guess it doesn't work that way in others backyard when it will effect them.
jmar
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jmar 6/25/2011 8:50am
6/25/2011 8:50am
fcr wrote:
[b] It's going to have to be unwound sooner or later. I understand that it's going to have a huge negative impact on our economy, but...

It's going to have to be unwound sooner or later. I understand that it's going to have a huge negative impact on our economy, but if we continue down the same path, it's just a matter of time before complete failure of our economy.
Seems that there was a call many to have the car industry bite the bullet and let them take it in the shorts a year or so ago. I guess it doesn't work that way in others backyard when it will effect them.
The delay of unwinding all of this is making a very few wealthier, while making the already deep hole, even deeper for the rest of us. The longer it goes on, the worse this whole thing is going to be.
WhKnuckle
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WhKnuckle 6/25/2011 8:56am
6/25/2011 8:56am
jmar wrote:
[i]I wish it wasn't this way, but hedging is a fundamental activity in American corporations today - in fact, I'd bet real money that the average...
I wish it wasn't this way, but hedging is a fundamental activity in American corporations today - in fact, I'd bet real money that the average corporate CEO knows more about his corporate hedging strategy than he does about their physical production activity. Hedging can't be unwound at this point - they own the country's economy.

It's going to have to be unwound sooner or later. I understand that it's going to have a huge negative impact on our economy, but if we continue down the same path, it's just a matter of time before complete failure of our economy.
You're probably right, but today's economy is a world-wide one; you collapse one, you collapse them all. Look at all the gloom-and-doom surrounding a possible collapse of the economy of Greece. GREECE? Are you kidding me? If Greece's economy is such a trigger for economic instability, think what would happen if it was the US, or China, or Japan, or Germany/France/UK. Or worse still, think what would happen if it was all of them.

A collapse of the US economy will inevitably start World War 3, and that's all she wrote. If the US economy collapses and takes everyone else with them, and depression sweeps around the world, every powerful country in the world will make a move on resource-rich countries, every other powerful country in the world will oppose them, and that's the end of the road. For everyone.
borg
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borg 6/25/2011 9:18am
6/25/2011 9:18am
The reason that Greece matters is because of the bond market. The amount of money that changes hands in the bond market dwarfs the stock market yet so few people understand it. I certainly don't. But this I do know, money market funds, which is where your unused stock trading money goes as well as other short term safe bets go, had unusually high withdrawals for the recent few weeks. These money market funds pick generally safe investments like foreign banks. Like the ones in the EU, that are heavily invested in the PIGS. Portugal, Ireland, Greece, Spain. People are afraid that these foreign banks might fail if Greece defaults. It's 2008 all over again if that happens.

The bond market is all about borrowing and lending. It's a fucking gigantic cloud right over our heads that we can neither see nor understand. It's the world where the financiers live.

If you want a glimpse of what that world is like, read The Big Short by Michael Lewis. It's not a typical green eye shades economics book. It's very well written. I couldn't put it down. It's a detailed true story of how 4 guys got rich from the real estate meltdown.
WhKnuckle
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WhKnuckle 6/25/2011 10:24am
6/25/2011 10:24am
borg wrote:
The reason that Greece matters is because of the bond market. The amount of money that changes hands in the bond market dwarfs the stock market...
The reason that Greece matters is because of the bond market. The amount of money that changes hands in the bond market dwarfs the stock market yet so few people understand it. I certainly don't. But this I do know, money market funds, which is where your unused stock trading money goes as well as other short term safe bets go, had unusually high withdrawals for the recent few weeks. These money market funds pick generally safe investments like foreign banks. Like the ones in the EU, that are heavily invested in the PIGS. Portugal, Ireland, Greece, Spain. People are afraid that these foreign banks might fail if Greece defaults. It's 2008 all over again if that happens.

The bond market is all about borrowing and lending. It's a fucking gigantic cloud right over our heads that we can neither see nor understand. It's the world where the financiers live.

If you want a glimpse of what that world is like, read The Big Short by Michael Lewis. It's not a typical green eye shades economics book. It's very well written. I couldn't put it down. It's a detailed true story of how 4 guys got rich from the real estate meltdown.
That's exactly right. In early April, I pulled all my 401K money and my mom's money out of stocks and bonds mutuals into money markets (I figured that "sell in May and go away" was coming early this year), and I don't really know what to do with it now. I'm waiting for a 16000 Dow or 1240 SP to get back into and ETF stock market tracker, but I don't know enough about bonds to be comfortable picking a ETF for those. I'll probably just keep half the money in a money market, but I hate it just sitting there.
KMC440
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KMC440 6/25/2011 10:42am
6/25/2011 10:42am Edited Date/Time 6/25/2011 10:43am
My "Hedge Fund" team .... though they call it a Shrubbery.... whatever.

https://youtu.be/QTQfGd3G6dg

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