strangedays Wrote: ------------------------------------------------------- > at the end of the day is about money…“big” > people dont care if the market will go burst or if > customers will fell the pain…they just care to > fill they pocket as fast as they can. > Corporation power…this is how it is called. And they utilize people like above to justify the symptoms until they get burned (or others get burned), in which time they’ll beg for lower rates. The people then will bitch about them being bailed out, until they start justifying the “new problem” while trying to cling to narrow minded analysis. This whole oil issue is nothing more than global robbery. It’s sucking massive amounts of wealth, both from energy, food, services, and deterioration of wealth through inflation, and concentrating it into the hands of corporations, hedge funds (owned and run by rich people), banks, and other investors. All the while people like above justify it. It’s actually the one single thing that completely degrades our profession and charter.
Everything is a two side effect…one lose one win. So why they dont start to check who behind the scene is getting extremely rich? Everyone knows…but everyone blame the market condition…whatever…
I personally think that in order to use the word “manipulation” with a clean conscience, one has to prove one of two things: 1) collusion among distinct and large/influential market participants, whereby buyers would know with a high degree of certainty that others are not sellers, so as to protect their positions or 2) a fundamental value of the asset (having a large position is not manipulation, I don’t think, as one is allowed to buy an entire company if they want to, it will be proven in retrospect to be that much more smart or stupid depending on the outcome, as opposed to a small position). If the former were to be true, then hands down, we have fraud, and all participants should be punished under the law. That would imply market manipulation – I could buy something with better than average certainty that I would not be the subject of selling pressure, whereas that information may not be available to other investors. If the latter were violated, then yes, I would also agree. However, there is one large problem with this – we, as analysts, are trained to give an opinion on intrinsic value. But, there is no certain value. We all know it is as much an art as a science. So, how are we to say oil has deviated from intrinsic value? Value is really only known for certainty in hindsight, and even then one could make the case that it is still pretty hard to say for sure. An arms-length transaction may have been above or below intrinsic depending on through which looking glass one is observing. I think it’s pretty easy for the lynch-mob to call manipulation when oil is at $130 and filling up their cars is costly. But, by the same token we have plenty of fundamental analysis in the industry who are calling for anywhere from $50 to $200 oil. Who is right? If the $200 side is right, then is “manipulation” keeping price down? The fact of the matter is that a seller sold to a willing buyer, and speculation is what causes contracts to change hands. If I am an E&P and I make a decision to hedge or not to hedge, I am making a speculative position. Sure, it’s called hedging, and so it is viewed by joe public as angelic. But market participants, are, by nature speculators, assuming market participants are self-interested and profit seekers. Joey makes a very good point as well – hats off to him – if fundamentals determine prices, which they always ultimately will (though it is a matter of how long fundamentals are agreed upon), as soon as consumers start slowing their purchases then prices will follow. But, that is certainly not happening to any large degree. The use of foreign markets (ICE seems to be the target, these days, right? I am not sure to be honest) is pretty convenient. But, it would seem to me that a deeper market will allow for better price discovery, provided we do not have the above collusion. Maybe the tail (ICE) is wagging the dog (CME) a bit, and the big American swinging d*cks want their market to be the leader? I don’t really mean that, but one has to wonder a bit. It’s very easy to call a liability like energy costs “manipulated” because you have to pay for them. Heck, maybe we have been living in fantasy-land for the past number of years with $30 oil. Maybe that was kept low by speculators assuming that supply would increase every time we hit the upper band of OPECs price range, remember that trade? We will never know for certain. Just my 2 cents. Please be gentle.
grover33 Wrote: ------------------------------------------------------- > I personally think that in order to use the word > “manipulation” with a clean conscience, one has to > prove one of two things: 1) collusion among > distinct and large/influential market > participants, whereby buyers would know with a > high degree of certainty that others are not > sellers, so as to protect their positions or 2) a > fundamental value of the asset (having a large > position is not manipulation, I don’t think, as > one is allowed to buy an entire company if they > want to, it will be proven in retrospect to be > that much more smart or stupid depending on the > outcome, as opposed to a small position). If the > former were to be true, then hands down, we have > fraud, and all participants should be punished > under the law. That would imply market > manipulation – I could buy something with better > than average certainty that I would not be the > subject of selling pressure, whereas that > information may not be available to other > investors. If the latter were violated, then yes, > I would also agree. However, there is one large > problem with this – we, as analysts, are trained > to give an opinion on intrinsic value. But, there > is no certain value. We all know it is as much an > art as a science. So, how are we to say oil has > deviated from intrinsic value? Value is really > only known for certainty in hindsight, and even > then one could make the case that it is still > pretty hard to say for sure. An arms-length > transaction may have been above or below intrinsic > depending on through which looking glass one is > observing. > > I think it’s pretty easy for the lynch-mob to call > manipulation when oil is at $130 and filling up > their cars is costly. But, by the same token we > have plenty of fundamental analysis in the > industry who are calling for anywhere from $50 to > $200 oil. Who is right? If the $200 side is right, > then is “manipulation” keeping price down? The > fact of the matter is that a willing buyer sold to > a willing seller, and speculation is what causes > contracts to change hands. If I am an E&P and I > make a decision to hedge or not to hedge, I am > making a speculative position. Sure, it’s called > hedging, and so it is viewed by joe public as > angelic. But market participants, are, by nature > speculators, assuming market participants are > self-interested and profit seekers. Joey makes a > very good point as well – hats off to him – if > fundamentals determine prices, which they always > ultimately will (though it is a matter of how long > fundamentals are agreed upon), as soon as > consumers start slowing their purchases then > prices will follow. But, that is certainly not > happening to any large degree. > > The use of foreign markets (ICE seems to be the > target, these days, right? I am not sure to be > honest) is pretty convenient. But, it would seem > to me that a deeper market will allow for better > price discovery, provided we do not have the above > collusion. Maybe the tail (ICE) is wagging the dog > (CME) a bit, and the big American swinging d*cks > want their market to be the leader? I don’t really > mean that, but one has to wonder a bit. > > It’s very easy to call a liability like energy > costs “manipulated” because you have to pay for > them. Heck, maybe we have been living in > fantasy-land for the past number of years with $30 > oil. Maybe that was kept low by speculators > assuming that supply would increase every time we > hit the upper band of OPECs price range, remember > that trade? We will never know for certain. > > Just my 2 cents. Please be gentle. …but for example…it is very easy to produce car which use alternative energy…but “apparently” it is very difficult. Do you believe that? We can almost go to Mars and we dont have the technology to do this? Ask GM, Toyota and other company together with oil corporation to see if they are happy to change it
Strangedays - Perfectly valid point. The sausage made in government, along with industry lobbyists is pretty frightening. I like your use of interplanetary travel! I’m going to have to remember that one and pass it off as my own. So true. I was thinking more about the functioning of markets, now we can certainly debate the inputs into views on the fundamentals. If we’re talking about demand, then yes, I completely agree with you. I think it is silly that we aren’t able to figure something out, and headwinds of industry lobbyists are a major social problem. I would hope (really) that if consumers wanted energy efficiency badly enough, it would allow fuel efficient vehicles to be a meaningful part of auto co’s bottom lines, despite energy company backlash. These are all inputs into what we think fair value should be.
grover33 Wrote: ------------------------------------------------------- > Strangedays - Perfectly valid point. The sausage > made in government, along with industry lobbyists > is pretty frightening. I like your use of > interplanetary travel! I’m going to have to > remember that one and pass it off as my own. So > true. I was thinking more about the functioning of > markets, now we can certainly debate the inputs > into views on the fundamentals. If we’re talking > about demand, then yes, I completely agree with > you. I think it is silly that we aren’t able to > figure something out, and headwinds of industry > lobbyists are a major social problem. I would hope > (really) that if consumers wanted energy > efficiency badly enough, it would allow fuel > efficient vehicles to be a meaningful part of auto > co’s bottom lines, despite energy company > backlash. > > These are all inputs into what we think fair value > should be. So the conclusion is: who has power is also the manager of the market. So they search for good “apparent” fundamental in the market to increase price of goods or to not do a determinated thing until we reach the bottom. When this happen, they will watch each other like children and they will tell us “this was impossible to predict”…however they accounts in the bahamas will already be fully loaded. Last thing…everyone talks about credit cruch…do you know where all the money went? For sure somewhere.
I don’t understand. Market participants are trying to make money. Hedgers are hedging, speculators are providing the liquidity for hedgers (using the traditional sense of the roles). The side effect here is that it is on a good in which we all use. Are you making the argument that speculators determine the price alone? That’s a bit of a stretch, I personally think. Someone sold them that contract. We are going to get to a point where there is so much interest in selling future delivery to a speculator that when the marginal buyer goes away, all these guys are going to get hammered. Its a market. Its not price control by some overarching entity. Also, kind of recanting a bit of my prior post here. Unless we live in an EMH world, prices deviate from fundamentals all the time, right? So, maybe the thought about deviation from intrinsic doesn’t even matter? who knows. In re: credit crunch, anyone who bet the other way. I did. Im sure others on this board did. Is it a zero sum game? heck if i know.
If you think there’s going to be more inflation coming, there are plenty of ways to make money off it. It’s your fault for keeping your money in cash. Anyone who read those WSJ articles about Bear Stearns and still thinks the Fed did the wrong thing is completely delusional. On the subject of oil, I’ve yet to hear a single quasi-credible explanation as to how “manipulation” is actually occurring. Speculation is occurring, of course, as it does in every market, financial or otherwise. In the long run fundamentals drive markets. In the short run perceptions drive markets. Saying something must be wrong because a market has made a dramatic move in a short period of time with no change in the fundamentals is pretty ignorant of how markets work.