Oil at 57
such volatility in such an important commodity is astounding. How can the planet "plan" with such price variations. From 140 to 57 in 3 months? How can this be the result of offer and demand.
Thug vs Thug: Porsche 1, Hedge Funds: 0
The latest drama is fun. VW became the largest company in the world, in terms of market cap, ahead of EXXON on a little financial market coup d'etat orchestrated by Porsche. Apparently VW stocks was on the way down, I don't know the details but many Hedge Funds (HF) were short the position. Fine. The price goes down. Porsche starts buying the anonymous float (and probably some private too?), but the point is they build a 73% market share without many people noticing. In the US you would need disclosure after 10% or so. Point is, that many HF wake up and realize that their short position is about to lose a lot of money. So what do they do? those idiots? they short cover all together, which means they buy the stock to cover the short. The stock zooms up, by a full multiplier and overtakes EXXON. Porsche makes A KILLING in the process and has robbed the city robbers to the tune of "potentially $30B". Not bad for a days worth of work. PS: hey, psst Porsche! With t
Comments
No speculation involved, right?
Other great financial non-sense theories: decoupling. How's that working out now?
thank you for the post. Yes, I believe the commodities bubble was the result of hot-money movement.
Where is it going next. It can hide in Treasuries for a while? We are talking about a 5T thing? Bring it on...
I was surprised too but there was a debate. I have to read up on how price is set in oil markets. I think it does involve a part of expectations which makes it a futures market. Futures are speculative, by definition.
Over the last 18 years the oil gold ratio has been between 6.2 and 27.9 (1:4.5) while the price in dollar has been between 10.7 and 145.3 (1:13.6)
A big part of the volatility is volatility of the dollar, not the oil. True, gold supply depends on the price of oil, still.
Remember that famous tobacco hearing where all the tobacco CEOs pledged that tobacco was not addictive? They did that for these economists. The question was, "If we put in the proposed limits on oil speculation, how much will the price go down?" The most conservative estimate, even from the oil lackeys, was 40%.
"And if we enact this legislation, how long will it take that price to go down?" Answer: "About 30 days."
The congress passed legislation to let Exxon drill for oil on your kid's sand castle, but they never passed the speculation limits. However, the economists were right. As soon as the speculators were scared out of the market, oil dropped like a rock.