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Thread: WEhat Triggered this Whole Economic Mess?

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    Default WEhat Triggered this Whole Economic Mess?

    It was oil prices that caused much of the home mortgage squeeze. That in turn caused banks and finance institutions (since Reagan, somewhat indistinguishable from each other), which were playing Vegas-style gambling games, to run short of money. Those institutions thought they were safe since they bought insurance contracts, but they bought those contracts from companies that were themselves subject to mortgage repayment failures. And now the bailout is not even going to be used for its governmentally requested purpose. Well, pretty simplified. But it summarizes my investigations which I've posted here in several parts.

    Now I want to re-iterate an initial cause of thie whole chain of events, one that has not been widely recognized yet. It was NOT oil demand, but rather oil speculators. Demand didn't shoot up in just a few short months. The world just cannot consume that much oil in such a short period. Even the dramatically increased consumption by China and India could not have caused it.
    Speculation is not actual use, storage, or transport for a product, just the money that represents it; it is not real product demand. It is merely a paper transaction based on contracts saying, essentially, that we'll deliver it to you as of a contracted date, unless the entity that is supposed to deliver it to me doesn't come thru because his supplier might not come thru either, etc.; in any case, as none of us are in physical possession of it, we'll do the best we can.
    Speculators NEVER want the product delivered, as that would cost them money for transport/storage too and they would have to actually DO something productive to earn that money. Heaven forbid!!!

    Here's an editorial that includes actual sources that the delineate the speculation mechanism: http://www.counterpunch.org/ahmed06182008.html. There are others. My US Senator Charles Schumer (D-NY) in his letter to me shows that this is pretty well recognized. I guess my question is why the news channels do not bring out this information. Since all the world now is hurting by this chain of events caused by oil speculators, this would seem to be the root CAUSE and would then seem to need to be addressed.

    Capitalism is not all a bed of roses; some thorns are in there too if you don't know where you are going.

    AGAIN IT WAS NOT DEMAND.
    Last edited by threlayer; 10-31-2008 at 07:03 AM.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Here is that editorial...

    Oil Prices, Market Regulation and the 2008 Elections
    By PARVEZ AHMED

    On June 6, 2008 crude oil futures surged to an all-time high of $139.12 per barrel, a doubling of price in the past 12 months. U.S. Treasury Secretary Henry Paulson rightly suggested that the increasing price of oil is "a real burden on American consumers." The surge in oil prices is also threatening millions of poor people forcing them further into poverty, according to a report by the UN Development Programme.

    Secretary Paulson has blamed the increase in oil prices on rising demand. However, there has not been any dramatic rise in demand even as economies in China and India continued to soar over the past year. It stands to reason that growth in energy demand is somewhat correlated with growth in gross domestic product (GDP). As an economy grows so will its need for energy. The projected annual growth rate for worldwide GDP is about 4.1 percent annually over the next quarter century. China and India is expected to lead that growth at about 6 percent per year.

    Further, the demand for oil is tied to consumption of fossil fuels. According to Energy Information Administration (EIA), the official source of energy statistics from the U.S. government, worldwide consumption of energy from liquid sources, “is projected to increase from 83 million barrels per day (bpd) in 2004 to 97 million barrels per day in 2015 and 118 million bpd in 2030.” This represents a less than 2 percent annual growth in projected oil consumption. Thus, global growth or the Chinese red-scare alone cannot account for a doubling of gas prices at the pump.

    On the supply side, the latest EIA estimates show that oil output from non-OPEC countries remain weak but that weakness is somewhat offset by increases in supply from OPEC countries lead by Saudi Arabia, which increased output in May by 300,000 bpd and will increase supply even more once its Khursaniyah oilfield is online. EIA projects that OPEC crude oil production is expected to increase during the third quarter of 2008, contingent on security situations in Iraq and Nigeria.

    If neither demand nor supply explains the doubling of prices (and it is certainly not the falling US dollar), it leaves us with one other possibility - market speculation. Reminiscent of the Worldcom saga when telecom analysts like Jack Grubman working in concert with Worldcom CEO Bernie Ebbers put out false information about the “explosive demand for networking infrastructure” once again a group of market insiders are peddling rumors about dramatic demand increases. On May 6, Goldman Sachs speculated that oil could reach $200 per barrel fueled by the surging economies of China and India. “Goldman Sachs was one of the founding partners of online commodities and futures marketplace Intercontinental Exchange (ICE). And ICE has been a primary focus of recent congressional investigations; ….. Those investigations looked into the unregulated trading in energy futures, and both concluded that energy prices' climb to stratospheric heights has been driven by the billions of dollars' worth of oil and natural gas futures contracts being placed on the ICE—which is not regulated by the Commodities Futures Trading Commission,” wrote Ed Wallace in Business Week. Speculation coupled with lax regulation is causing untold misery to millions, while the shrewd insiders continue to game the system.

    Heck even to play Monopoly you need rules! So how can complex markets trading sophisticated financial products be left without public oversight? In calling for more stringent regulation, the idea is to strike the right balance between fairness and efficiency. William Greider in his book the Soul of Capitalism writes, “With a few important exceptions, the agents of capital operate with dedicated blindness to capital's collateral consequences, an indifference to the future of society even as they search for the future's returns. The capital system does not authorize financial agents to think about such things and may well penalize them if they do.”

    Undoubtedly futures markets serve an important societal function by allowing appropriate management of risk for both farmers and factories. The markets in and of itself are thus not the problem. It is the unmitigated greed of speculators and the herd mentality of the rest that creates the perfect storm for the development of price bubbles. While regulation may not be a panacea it can certainly help by injecting more transparency into markets like ICE. It appears that lessons from another unregulated energy market, Enron, have been forgotten all too soon.

    Thus far both Presidential candidates have parroted the Bush administration’s line that increased demand from China is the reason for runaway gas prices. It is time they take another hard look at the data. Will any candidate favor more stringent regulation to prevent the next speculative bubble? Will they commit to using the Presidential bully pulpit to promote a culture of social responsibility such that doing well cannot come at the expense of doing good? After all the free market envisioned by Adam Smith requires human society to be “bound together by the agreeable bonds of love, affection and are, as it were, drawn to one common center of mutual good offices.”

    Parvez Ahmed is associate professor of finance at the University of North Florida. He also serves as chairman of the board for the Council on American-Islamic Relations. He can be reached at [email protected]
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Similar articles by the same author have appeared in recent months in several other publications.
    Last edited by threlayer; 10-31-2008 at 07:05 AM.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    It's not one thing that caused all this. It was a collection of things.

    If it is one thing, it would be called greed.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Yes, greed, as I have previously posted. Also govt. de-regulation and other bad policies, govt. officials not doing their jobs, banks making stupid loans to stupid people not recognizing their risks, people trying to skirt around the system, high-stakes gambling mentality, people buying gas-guzzlers, etc, etc, etc.

    It was set up by a number of things, but the oil speculation source has not yet been widely publicized.

    This whole mess makes me angry because I have had no part in any of this, and have been trying to be smart etc. But what could I expect from a stupid administration I never voted for?
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Speculation played a part in a short term run up of prices but it was NOT a root cause. Those who went long on oil in the Commodities Market were betting the price would continue to rise. On what did they base such an assumption ?

    1. Oil is a finite resource.
    2. It is concentrated in unstable parts of the world. Every time Ahmadinejad threatened Israel; every time terrorists blew up a pipeline in Iraq; every time Chavez postured in a hostile way; every time rebels in Nigeria attacked an oil platform; the price went up. Actual; threatened or just anticipated threats to supply and delivery of oil cause the price to go up.
    3. We consume 25% of the world's oil and pay for it in dollars. As the dollar went down in value, the price went up.
    4. We won't drill in Anwar; offshore and in certain other areas. When "Drill Baby Drill" took off as a popular battle cry, the price went down.

    Those evil, greedy speculators acted on these and other events anticipating continued high demand and uncertain supplies. As some geo- political concerns stabilized; as folks drove less; as more drilling became possible; as Boone pushed the Pickens Plan; as the economy slowed; as the dollar went UP; the price of oil dropped like a rock from a high of $147 a barrel down to its current $65.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by Eric Stoner View Post
    Speculation played a part in a short term run up of prices but it was NOT a root cause. Those who went long on oil in the Commodities Market were betting the price would continue to rise. On what did they base such an assumption ?
    What did the Hunt brothers base their run-up on silver in the late 70s? Profit. Speculation is gambling; they bet they can get in, make fast profits, and get out before the house of cards crumbles, as it always does. The FACT that oil is now down so much is only further proof that it went up so high on speculation, not demand, as the posters in this forum have written. Those geo-political uncertainties make for pretty big blips in the price, as well as the formation of OPEC in the 70s, the Gulf War and to an extent the Iraq war; those can be predicted. But greed feeds the speculation devil, but it has no logical birth. It just happens when a bunch of people convince each other that they all can make a lot of money foisting the rest of us. Similar to those rush hour road crowd-ups that seem to appear and disappear for no logical reason at all--some sort of random wave theory.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by threlayer View Post
    What did the Hunt brothers base their run-up on silver in the late 70s? Profit. Speculation is gambling; they bet they can get in, make fast profits, and get out before the house of cards crumbles, as it always does. The FACT that oil is now down so much is only further proof that it went up so high on speculation, not demand, as the posters in this forum have written. Those geo-political uncertainties make for pretty big blips in the price, as well as the formation of OPEC in the 70s, the Gulf War and to an extent the Iraq war; those can be predicted. But greed feeds the speculation devil, but it has no logical birth. It just happens when a bunch of people convince each other that they all can make a lot of money foisting the rest of us. Similar to those rush hour road crowd-ups that seem to appear and disappear for no logical reason at all--some sort of random wave theory.
    The Hunt brothers came a cropper when their attempt to corner the world silver market fell apart and silver dropped from $40 an ounce to less than $10. They lost over a billion dollars and deservedly so. It wasn't your money so what do you care ?

    Whether you like it or not, oil, silver, gold and many other commodities are bought and sold on WORLD markets. Did speculation play a part in running up the price ? Of course. It's worked that way since ancient times. What would you replace the current markets with ? How would you control "speculation" ? Be careful because EVERY attempt to do anything of the kind has failed miserably.

    You say that geo-political events can be PREDICTED ? How ? By whom ? Who predicted the Arab Oil Embargo of 1973 ? The fall of the Shah ?
    The Iraq - Iran War ? Saddam's invasion of Kuwait ? ALL resulted in UNEXPECTED increases in the price of oil. As did problems in Nigeria and hurricanes in the Gulf of Mexico.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    I'm with Stoner here. Previously I've put a lot of blame on Oil Speculation, I thought it was an important root cause. Now... Speculation accounted for a low % of the market, the % they were playing with was not that much higher than the normal %. Their effect on the market, while important, was not the single greatest factor in the pricing.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by Eric Stoner View Post
    The Hunt brothers...lost over a billion dollars and deservedly so. It wasn't your money so what do you care ?
    Not much now.

    ...It's worked that way since ancient times. What would you replace the current markets with ? How would you control "speculation" ? Be careful because EVERY attempt to do anything of the kind has failed miserably.
    I just pointed out the problem. I don't think we can fix it beforehand, maybe just detect it and try to control it incooperation with other countries, maybe. Not sure. We've also had criminals since, well, forever.

    You say that geo-political events can be PREDICTED ? How ? By whom ? Who predicted the Arab Oil Embargo of 1973 ? The fall of the Shah ?
    The Iraq - Iran War ? Saddam's invasion of Kuwait ? ALL resulted in UNEXPECTED increases in the price of oil. As did problems in Nigeria and hurricanes in the Gulf of Mexico.
    Not predict the events (obviously), just the oil and gold price increase because of speculation on supply/demand and general instability.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by jester214 View Post
    I'm with Stoner here. Previously I've put a lot of blame on Oil Speculation, I thought it was an important root cause. Now... Speculation accounted for a low % of the market, the % they were playing with was not that much higher than the normal %. Their effect on the market, while important, was not the single greatest factor in the pricing.
    The price went up from the 40s to the 140s and now its coming back down past the 70s probably eventually to the 50s unless a severe world-wide depression occurs or another speculative opportunity. What else could even cause half of this movement? Certainly not the 'demand' fable. So how you come to that conclusion?
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    The major spike in commodities was a self reinforcing rush to hedge. That is why it didn't show up as speculators. If I had to pick one thing that caused it, it would be fear that the Chinese were going to buy everything.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by threlayer View Post
    The price went up from the 40s to the 140s and now its coming back down past the 70s probably eventually to the 50s unless a severe world-wide depression occurs or another speculative opportunity. What else could even cause half of this movement? Certainly not the 'demand' fable. So how you come to that conclusion?
    It's a FUTURES market !!!!!!! Do you have the vaguest idea how the commodities markets work ? A big part of the process is estimating; guesstimating and/or gambling on what the supply and demand will be in the F U T U R E. If you go long on something like oil; you do it on
    M A R G I N hoping, praying and yes BETTNG the price will go up. For every person betting oil would go up there was somebody on the other end agreeing to buy it at that price.

    The ONLY reason speculation played the role it did was all the money that entered the market trying to cash in on the run-up in commodity prices. The more bidders, the higher the price for FUTURES contracts.

    Are there people who have been selling short on commodities ? Yes, and they are hoping there is NOT a sudden rise in price because if there is, they are SCREWED.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    It's a FUTURES market !!!!!!!
    That's what I said, speculation. It's pretty obvious that if they didn't think they'd make money on the deal, in spite of the heavy risk, they wouldn't do it. My question is what social good does that do?

    In the future you might consider not getting so worked up, if you just feel you have to educate someone, probably affects your blood pressure.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by Eric Stoner View Post
    4. We won't drill in Anwar; offshore and in certain other areas. When "Drill Baby Drill" took off as a popular battle cry, the price went down.
    The price of oil went down because people began to significantly use less of it. It's pretty common knowledge that there isn't anywhere near enough oil in the US to have any impact on the world supply, no matter how much we drill. The United States Energy Information Administration estimates that drilling in ANWR will have a price effect of a few cents a gallon approximately ten years from now.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    ^^^ and I trust that official gov't statistic about as much as other gov't statistics like unemployment rate , inflation rate etc.

    In the grand scheme of things, like every other commodity the price of oil is set 'at the margin' i.e. every additional barrel of oil that comes onto the market over and above current consumption has some downward effect on price. Thus while reduced demand for oil is a driving factor, increased production (even if only a couple of percent) is a driving factor as well.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by threlayer View Post
    That's what I said, speculation. It's pretty obvious that if they didn't think they'd make money on the deal, in spite of the heavy risk, they wouldn't do it. My question is what social good does that do?
    Speculators in the commodity futures market provide important liquidity in a system which is set up to provide producers with a method to hedge future risk.

    Price spikes or bubbles come and go...they are important for about a minute in the larger picture. It's a zero sum game, for every loser there is an equal winner. For every speculator gambling on the long side, there's someone gambling on the short side. The only difference between the two is one buys low and sells high, and the other sells high and buys low.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    ^^ Yes, I know, they share the risk for profit. But they are notoriously asocial in their dealings, having the effects of artificially inflating and then deflating prices. To my way of thinking, that is not sharing the risks and profits, that is exploiting the market and the consumer.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by threlayer View Post
    ^^ Yes, I know, they share the risk for profit. But they are notoriously asocial in their dealings, having the effects of artificially inflating and then deflating prices. To my way of thinking, that is not sharing the risks and profits, that is exploiting the market and the consumer.
    You seem to be saying here and in this thread generally that the only virtuous demand is the demand expressed by the final consumer; all other participants who are motivated by profit are somehow corrupted by greed and a scourge on society. Why not think of them all as traders, neither good, nor bad? Wouldn't we all like to buy something that will increase in value, or sell something at it's highest value, believing we can buy it back cheaper later?

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Why not think of them all as traders, neither good, nor bad? Wouldn't we all like to buy something that will increase in value, or sell something at it's highest value, believing we can buy it back cheaper later?
    Because they are NOT simply traders. For example, sales of additional gold futures contracts drives down both the futures price and the current price. But the selling of additional gold futures contracts does NOT actually require that the gold being sold for delivery in december (example) really exists. It is the ability of speculators to sell commodities and stocks which the do not own - commodities and stock shares that may not actually exist anywhere in the real world ... i.e. 'naked' short selling ... that breaks from your illusion of traders / merchants and borders on the fraudulent.

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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by Melonie View Post
    Because they are NOT simply traders. For example, sales of additional gold futures contracts drives down both the futures price and the current price. But the selling of additional gold futures contracts does NOT actually require that the gold being sold for delivery in december (example) really exists. It is the ability of speculators to sell commodities and stocks which the do not own - commodities and stock shares that may not actually exist anywhere in the real world ... i.e. 'naked' short selling ... that breaks from your illusion of traders / merchants and borders on the fraudulent.
    I don't understand the concept of futures contracts that are for imaginary commodities. Someone please explain. A futures contract is for delivery of a quantity of a commodity at an agreed price; at least that's what I thought...

    In the commodity futures market, I wasn't aware of any other kind of short selling other than the "naked" kind. And if a naked short seller is such a demon, what is the guy on the other side of the trade who is buying?

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    Default Re: WEhat Triggered this Whole Economic Mess?

    For every buy there must be a sale (though it may be temporarily to a broker). So there is always a balance between sales and bought quantities. You can't tell the motivations of the buyer or seller or how much above/below that price would they be willing to go. I believe the best way of gauging that is by the actual price deal struck between them.

    For example if the quantity, the driving force, goes up and the price goes up, then that security is on the upswing. Conversely if that price comes down when a lot of securities are transferred, then that security is on the downswing. I believe that says a lot more than what the pundits say because it is the market's judgement.

    Now, all that occurs because securities (the actual thing representing that value) actually change ownership. I'm not a speculator, so I certainly don't know the situation about how contracts are bought/redeemed etc. But I believe no speculator ever wants to take possession of the goods; they just deal in contracts. They never actually own anything but a contract.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

  23. #23
    Banned Melonie's Avatar
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    Default Re: WEhat Triggered this Whole Economic Mess?

    For every buy there must be a sale
    ahhh, if only this were actually true.

    (snip)"Naked Short Selling 101
    If you read a finance textbook, it will tell you that in order to sell a stock short, you borrow shares and sell them on, with the understanding that you must replace the loaned shares by purchase in the open market at a later date (hopefully, at a lower price).

    That's the theory.

    In practice, things are a little more fluid. Investors are not required to borrow the shares first before selling them, but they must have a reasonable expectation that they will able to locate shares they can borrow in order to be able to deliver on them to the buyer on settlement. Investment banks (remember those institutions?) have stock loan desks that specialize in going out into the market and locating shares for investors that want to go short. In fact, lending shares to hedge funds is a very big, very lucrative activity for the banks.

    Selling shares that you haven't borrowed is known as a "naked short selling." You might have heard the term being bandied about in the press, since the practice has elicited much controversy and disinformation during the current crisis.

    Myth No. 2: All naked short selling is illegal
    This myth is unfortunately widespread, but it's simply false.

    Nonetheless, critics argue the tactic allows hedge funds to launch speculative "attacks" on a stock, unfairly manipulating prices downward to profit from their drop. According to this line of thought, short sellers were instrumental in bringing down Bear Stearns (acquired by JPMorgan Chase (NYSE: JPM) in March) and Lehman Brothers (NYSE: LEH) (filing forbankruptcy).

    What the critics are actually referring to is what the SEC describes as "abusive naked short selling," in which (a) short sellers sell shares they have not borrowed, and (b) are unable to deliver those shares on the settlement date of their sale. The SEC wants to eliminate abusive naked short selling through a series of measures that took effect on Thursday, which penalize failures to deliver borrowed shares at settlement. In addition, on Friday, the SEC banned all short sales of 799 financial stocks until Oct. 2, and increased the reporting burden for short sellers."(snip)

    from

    while I wasn't able to find a similar link for naked shorting of commodities, the theory works the same way. In theory, the 'seller' must first borrow or lease enough of the commodity to write the new contract (i.e. the central banks have established a lease market for their gold). In practice, speculators can simply pretend that they have (temporary) possession of enough gold to write the new contract. While there isn't any definitive 'proof' of abusive naked shorting of gold, there is AMPLE proof of this practice in regard to Nickel. In fact, the LME was forced to change its trading rules when speculative Nickel short contract sellers were all called upon to deliver their contracted Nickel at contract expiration ... and there wasn't enough Nickel in all of the world's commodity warehouses to make good on the contracts !!!!!

    (snip)"LME acts on suspected nickel collusionThe London Metal Exchange has intervened in the nickel market amid suspected collusion at a time of soaring prices and critically low stock levels. The nickel market is small and relatively illiquid and traders describe the metal’s physical supplies as “very stressed”. Nickel prices have soared this year with the benchmark three-month price rising 55 per cent to a record $51,650 a tonne in May. Market speculation suggested that two or more participants were acting together to squeeze nickel prices higher but circumventing the LME’s rules by maintaining their individual holdings of nickel below the level which would require them to lend back into the market."(snip)

  24. #24
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    Default Re: WEhat Triggered this Whole Economic Mess?

    OK. I was trying to describe real trading, not 'naked' short selling. I was under the impression that your stock dealer would buy the securities for you while you pay interest on your margin account with them. Wrong huh?

    Somehow I think this phrase is appropriate for SW, though I have never tried to sell my shorts.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

  25. #25
    Banned Eric Stoner's Avatar
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    Default Re: WEhat Triggered this Whole Economic Mess?

    Quote Originally Posted by eagle2 View Post
    The price of oil went down because people began to significantly use less of it. It's pretty common knowledge that there isn't anywhere near enough oil in the US to have any impact on the world supply, no matter how much we drill. The United States Energy Information Administration estimates that drilling in ANWR will have a price effect of a few cents a gallon approximately ten years from now.
    WRONG ! The price went down because of decreased demand and INCREASED supply- Chinese drilling off Cuba; Brazil drillinga HUGE off-shore oil field and Congress approving increased off-shore drilling.

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