03/15/2011 Oscar Carboni Shows the 65% Rule and Talks about Specs in Oil

[oldnbroke]

I could keep going but alas I have a life. I fear that if you had been alive in Pharaoh’s time you would have pushed to restrict Joseph’s ability to speculate in food during the 7 yrs of plenty of plenty because it was keeping the price of food high and wrecking the economy and then led the charge to put Pharaoh to the sword for not keeping adequate stockpiles during the seven years of famine.

[oldnbroke]

@dialoguequent Exactly on point.... Bravo!!

[oldnbroke]

Sixth, you are have my head spinning. Recently you claimed that a cutoff of Libyan crude would justify $115 oil, stated that a 50 billion dollar bet on crude pales in comparison to a 4 trillion bet on S&P, posited that our economy can handle this oil shock because we don’t have the concurrent housing/derivatives meltdown, and overnite you now maintain that a 50 B $ crude oil bet is wrecking the entire world economy.

[oldnbroke]

Fifth, it wouldn’t stop speculation anyway. The “big boys” would get around it… the USA isn’t the only crude market and while your pledge to stay out of the crude market is noble, if you think a herd of Omniacs day trading in crude could move the market in any appreciable amount over any significant period of time then you are suffering from a Napoleonic complex.

[oldnbroke]

@futuresanalysts ahh the ad hominem attack. I don's want to pick a fight with you on a personal level. You asked for our thoughts on the matter in the matter. I'll admit my fourth point was a little weak but please specify any any "unstudied wrongly(?) fact".

[oldnbroke]

Fourth; crude oil would be the most unfair market to limit access to. I buy about $100 worth of gasoline every week and about $1 worth of aluminum and yet you propose to restrict my ability to hedge my gasoline expenses and yet leave me free to hedge my aluminum expenses… big whoopee.

[oldnbroke]

Third; the combined mind of the market is truly the most accurate and useful predictor of the future and the more participants the market the better. As you so often say the fundamentals come out in the charts. Every study I have ever seen on commodity markets in general and crude in particular (there have been many, 2008 included) concludes that futures markets smooth price shocks rather than exacerbating them.

[oldnbroke]

Second; your solution will itself be disruptive to the market. Airlines sell tickets in the future and often use the futures market to lock in their fuel prices to hedge this commitment.  They don’t have any where to store oil (jet fuel). How are they going to take delivery on millions of dollars worth of fuel on the 3rd Friday in May? Fuel storage and transportation is the job of a different industry. They have to be able to unwind their trades without taking actual delivery

[oldnbroke]

Your oil rant is wrong on several levels. It surprises me coming from someone with the intimate knowledge of markets that you have. First; the world uses 80+ million barrels of crude per day, at $100 per barrel that is $8 billion per day. Hence; a 40 billion $ bet represents only 5 days of hoarding. If Saudi oil production is disrupted this will be a minor but useful cushion to help soften the shock. This is a normal, proper, and useful market function when risk is higher than the norm.

[ThePatternTrader]

Well, this is free market Capitalism, markets were designed to be invested in, speculators are being used as a scapegoat, if you do NOT take physical delivery of oil, you do NOT affect the price of crude oil. The powers to be are the ones to blame, the very ones YOU voted for! Your a man who came from the exchange, stocks are no different, same with ES contracts. Wheat, soybeans, etc. these are the very ones YOU trade! Hypocrite at best. You have put out signals for natural gas, sugar, etc

[tmacktrading22]

I want speculators and $300 barrel oil That is the ONLY way we will ever rid ourselves of the choke hold the ME has on the USA.

As long as we feed our addiction with $70 a barrel oil we will have no choice but to meddle in the affairs of these untrustworthy tribes which will cost many more American lives.

Unfortunately our lawmakers will not take action to eliminate our dependency on foreign oil without the extreme pain and suffering we will endure with $300 a barrel oil.

[jamaulbrown]

Every country uses food - should we do the same thing with food? It's a free market - people should be able to put their money where ever they want ..  If interest rates weren't artificially low, people wouldn't need to move their money into crude .. LESS government intervention is the key - not more !!

[JesusSatanAllah]

Many of these, so called, speculators are transport industries which hedge oil to smooth out prices of their goods & services.

[mastergpat]

Re: ESM11: Exactly 50% is closer to 50%, not 65%.

[robertplant634]

they'll never get rid of speculation in crude oil. how else are they going to create financial crises?

[MarkAllendotnet]

I enjoy your videos when you basically give economics lessons like this by talking about overview issues such as the crude in this episode. A way to look at economics beyond stocks / futures / technicals.

[78TIQ]

PPT should short the crude 40billion

[optionsupdate]

what is the 65% rule