Post by unlawflcombatnt on Jul 26, 2009 13:00:17 GMT -6
Jim Cramer makes the point that oil prices are manipulated by futures traders. According to Cramer, the 10% margin requirements for oil futures purchase is too low, and allows a relatively small number of players to control the entire market.
from CNBC
www.cnbc.com/id/31781232
July 7, 2009
by Tom Brennan
"Without further regulation, Cramer told viewers on Tuesday, manipulation of the energy futures market is virtually inevitable. Right now traders can use near-unlimited credit to swing prices in either direction, and that’s causing false valuations of oil and natural gas.
“The oil futures market? It’s a total farce,” Cramer said, adding that he was “stunned and outraged” by the speculation and Washington’s seeming inability so far to curb it.
The Mad Money host named margin requirements as the big issue. Right now energy traders need to put only 10% down on a position big enough to move markets. Just last week a rogue London trader pushed Brent crude higher with a mere $10 million. As a result, Cramer said, people wondered if gas prices would cross $3, airlines were given pause, and the idea of a consumer-led recovery came into question. Those requirements need to be increased, he continued, if the manipulation is to end.
Cramer also pushed back against anyone who says the energy markets are too “deep” to be manipulated....Cramer said that people denying the effects of speculation have a “vested financial interest in maintaining the status quo,” or they are academics with no real-world trading experience.
While the government finally seems to understand the severity of the problem, as the Commodity Futures Trading Commission on Tuesday announced it would consider limiting trader positions on commodities with finite supply, Cramer doubted the CFTC could fight off the industry’s powerful lobby.
“They’re just too big, and they’re more powerful than the government,” Cramer said, “and they have never yet been defeated.”"
Below is a link to the 5½ minute Cramer video:
www.cnbc.com/id/15840232?video=1174737140&play=1
from CNBC
www.cnbc.com/id/31781232
July 7, 2009
by Tom Brennan
"Without further regulation, Cramer told viewers on Tuesday, manipulation of the energy futures market is virtually inevitable. Right now traders can use near-unlimited credit to swing prices in either direction, and that’s causing false valuations of oil and natural gas.
“The oil futures market? It’s a total farce,” Cramer said, adding that he was “stunned and outraged” by the speculation and Washington’s seeming inability so far to curb it.
The Mad Money host named margin requirements as the big issue. Right now energy traders need to put only 10% down on a position big enough to move markets. Just last week a rogue London trader pushed Brent crude higher with a mere $10 million. As a result, Cramer said, people wondered if gas prices would cross $3, airlines were given pause, and the idea of a consumer-led recovery came into question. Those requirements need to be increased, he continued, if the manipulation is to end.
Cramer also pushed back against anyone who says the energy markets are too “deep” to be manipulated....Cramer said that people denying the effects of speculation have a “vested financial interest in maintaining the status quo,” or they are academics with no real-world trading experience.
While the government finally seems to understand the severity of the problem, as the Commodity Futures Trading Commission on Tuesday announced it would consider limiting trader positions on commodities with finite supply, Cramer doubted the CFTC could fight off the industry’s powerful lobby.
“They’re just too big, and they’re more powerful than the government,” Cramer said, “and they have never yet been defeated.”"
Below is a link to the 5½ minute Cramer video:
www.cnbc.com/id/15840232?video=1174737140&play=1