Wall Street and oil prices.

Quote from Ivanovich:

I know I'll get flak for this, ...
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Well, with all due respect Mr. Ivanovich - here's your flak.


Nevermind all of the arbitrage issues and etc. Just a basic question or two.

According to the author, firms with long positions on the NYMEX want to see the prices higher. They are presumably maxed out at the 20,000 contract net futures limit. So they go to an alternate exchange that allows them to buy more - like the ICE.

So let's say Morgan and Goldman are long 20k contracts each on the NYMEX. They agree to each buy 5k contracts on ICE before NYMEX opens to run the price up.

Now ... they are doing this to run prices up so that they can sell their NYMEX positions, right? So after running the prices up, they possibly make a small profit on their ICE positions. But they also have to sell some of their NYMEX positions to benefit from their scheme. Let's say they each want to book a profit on 5k of their NYMEX positions.

So after running prices up overnight on ICE, they each sell the 5k ICE contracts that they used to run up the prices and then they each sell another 5k contracts on the NYMEX to book a profit on their scheme.

In summary, MS and GS combine to buy 10K of futures "over the counter" to run up the price overnight. After achieving this, they sell the 10k contracts of "over the counter" futures plus another combined 10k contracts of NYMEX positions.

According to the author:

Their combined buying of 10k contracts drives the price up.

And ... their combined SELLING of 20K contracts drives the price UP too !!!

Or at least, by his logic, the selling of 20k does not have the same impact as the buying of 10k ... 10k of buying drives the price up a buck, 20k of selling only takes it down 50 cents.

Why is this so, my friend?
 
Quote from robbie380:

really? lessening our dependence on oil isn't positive? innovation isn't positive?

and are you going to complain about the rising cost of fertilizer as well or just oil? maybe we should regulate that market too.
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I did not say that our dependence on oil is positive, nor did I say that innovation isn't positive. Nowhere did I mention that markets should be regulated.

The statement I made in the previous post is that the market will be affected in a negative way by the rapid rise in oil prices. The more money that goes to higher fuel costs, means less money for other expenditures. It will have a ripple effect through the economy. I don't think I have to go into detail here.
 
Quote from sttrader:

I did not say that our dependence on oil is positive, nor did I say that innovation isn't positive. Nowhere did I mention that markets should be regulated.

The statement I made in the previous post is that the market will be affected in a negative way by the rapid rise in oil prices. The more money that goes to higher fuel costs, means less money for other expenditures. It will have a ripple effect through the economy. I don't think I have to go into detail here.
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we are arguing semantics. you said there were no benefits to the rise in oil prices but you dismiss that positive changes are happening due to the high oil prices even though they may hurt.

you said the move in oil was manipulated which means it is not demand and supply based. since this thread is about how oil prices should be controlled i took that to mean you were implying this whole move in oil is bs and should be controlled. sorry for making that assumption.
 
Quote from robbie380:

a pipeline blew up in nigeria. you need to keep up with this stuff for your trend fighting paper trades.
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you must be long oil and worried about the correction....


:p
 
Quote from Daal:

everybody eats and drives. whoever makes a quick buck daytrading wheat will also be facing a higher food and gas bill and he has the right to make money on those markets to offset that
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Economies of scale. The people making money - real money - on this have the ability to put millions (though funds, banks, etc), if not more, into this market on speculative interest.

The every day Joe cannot. They just suffer.
 
Quote from Covert:

If these same speculators were jumping on a BEAR RUN in oil, driving prices down, harming the "big bad oil companies" and OPEC, nobody would say a word. You either believe that speculation is good and should be dealt with in a free market, or you believe that whenever we get into a bit of trouble, the govt. should jump in to the rescue. Nobody thought speculators were bad while they were driving up NASDAQ stocks to impossible multiples. No, people were thrilled that they were able to make $50/day on Arriba/ICGE/CMGI/YHOO/AMZN. It was only when the market collapsed that people said, "speculators did this to us."
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As I've said before, driving up Yahoo through speculation does not hurt billions of people world wide. Huge populations are not dependant on eating "Yahoos".
 
Toooo many people forecasting higher oil, reminds me of those few books that came out in the late 90's, DOW 36,000 and even DOW 100k. Everyone knows how bubbles end....


:eek: :eek: :eek: :eek: :eek:
 
Quote from Ivanovich:

As I've said before, driving up Yahoo through speculation does not hurt billions of people world wide. Huge populations are not dependant on eating "Yahoos".
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You've missed my point. I didn't say that anyone was hurt by the high price of Yahoo. Rather, I merely pointed out that the price action was conducted in an open market, and corrected itself, without any intervention. Prices simply corrected to a fairly priced level.
If you are saying that because billions of people need oil for transportation, heat, ect., then by all means, the solution you seek is the nationalization of THIS nation's oil industry.
It may be that we just disagree, and that's fine, but I just don't think that the greater good should cause a govt. to interfere with a free market
 
Quote from S2007S:

Toooo many people forecasting higher oil, reminds me of those few books that came out in the late 90's, DOW 36,000 and even DOW 100k. Everyone knows how bubbles end....


:eek: :eek: :eek: :eek: :eek:
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i don't disagree that this could be a short term top but to say that demand has slackened off and supply has ramped up enough to cause a major drop in oil is certainly naive.

either way you've already said you have no clue where the top will be so don't try to act like you have a clue now.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=126477&perpage=6&pagenumber=27
 
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