CFTC Helping Green America with $10 Gas

I'm starting to see the brilliant foresight of the master plan of our current Administration's social engineering program. Eroding liquidity in the energy markets that are easily accessible to hedgers (gas pump operators, airlines, utilities, etc.) who actively need big banks & other investors (speculators) to take the other side of their trades will certainly cause gas prices to spike at the pump, make air travel & shipping the luxury it once was, and ensure that the President is the only one who can keep his office tropically warm in the winter.
Since companies won't be able to put floors on the price of gasoline, natural gas and other commodities their costs will be at the mercy of a very volatile supply and demand and they will have to adjust their prices up to ensure they can still make a profit in any given quarter. That is, until they're nationalized because they can't sustain independent operations anymore and are too big to failll into the wrong hands (like those of a successful foreign company that might fire some US union workers).
This policy will at once force people into buying hybrids and increase the cost of imports (which makes Obama's protectionist allies happy). Of course it would be extremely unpopular to achieve these goals through gas taxes and import tariffs. Making this appear to be a crusade against evil market manipulators makes it far easier to achieve the same results with popular support.
Of course with taxes and tariffs at least the government would make some money to pay back the exponentially expanding debt load, but that's the problem of another generation. At least the Earth they'll inherit will be green, that's good since all their money will be going to interest payments they'll have to learn how to live off the land.

clipped from online.wsj.com CFTC Will Pin '08 Price Surge on Speculators, in a Reversal From Bush Findings. Under Chairman Gary Gensler, appointed by President Barack Obama, the CFTC is departing from the more hands-off approach it took under its previous head, a George W. Bush appointee. During his confirmation process earlier this year, Mr. Gensler said he believed speculation was partly behind the surge in commodity prices. In the U.S., the CFTC begins public hearings Tuesday to determine whether to limit speculative investments in commodities. Byron Dorgan, a North Dakota Democrat, has called on the CFTC to curb "oil speculators looking for a quick buck at the expense of American consumers." [CME Head] Craig Donohue, said: "We are deeply concerned that inappropriate regulation of these markets will cause market participants to move to dark pools and other unregulated markets, causing irrevocable harm to the entire U.S. economy." Last year, CFTC Chief Economist Jeffrey Harris told a House Agriculture subcommittee: "The economic data shows that overall commodity price levels, including agriculture commodity and energy futures prices, are being driven by powerful fundamental economic forces and the laws of supply and demand." Mr. Harris didn't return a call to comment. The acting CFTC chairman at the time, Bush-appointee Walter Lukken, told the House Agriculture committee that CFTC's economists "did not find direct evidence that speculation was driving up prices." Mr. Lukken, now an executive at the New York Stock Exchange, declined to comment. U.K.'s Financial Services Authority has found no evidence that speculators are behind big oil-price swings. The FSA doesn't believe that limiting the size of trading positions would be "beneficial" for the market.

Speculator Scapegoats

So both sides of the political fence are suddenly blaming “speculators” for the move in oil prices. Of course I know why (big oil, bigger lobby vs. a vague and easily vilified group).

But how does this make any sense to someone with half a brain (i.e. 3% of the electorate):

1. How do you define speculators?
1. If Big Oil wasn’t speculating Grandma Millie would have her lights on and high-earning big oil traders wouldn’t have a job. I can create a black box model that will look at real-time S&D and put in the equilibrium trades in real time. Yet all big oil companies pay the most to their traders …who are only there to hedge?
2. All the biggest energy funds & prop desks in the world couldn’t put enough volume through to drive the price up that much compared to the volume that the “hedgers” do. Furthermore, how many “speculative” funds do outright directional bets instead of spreads?
3. The only thing close to a “legit” hedger is an airline/trucker type business if all they do is buy a bunch of CL12s and chillax.
2. Isn’t this locking up the free market?
1. Speculators shouldn’t have any inside information (unlike the big oil “hedgers” who by definition do), so aren’t they just providing “efficiency” to the market? Even my nemesis, Fama, would agree with me here. In fact, without speculators providing liquidity the true hedgers would be fucked and the market would be at the mercy of the faux hedgers.
2. Furthermore, arbitrary regulation of speculators goes against the very principles of capitalism. To stop someone from buying a good at the current price in the market just because you think they’re paying too much is so pinko it could be a gay groom’s dress in California. Hey, if they’re all wrong then the commodity bubble will burst (which I think it will, but not until >$150 oil at least) and magically gas will be $2/gallon again.

Now everything I've outlined above is very basic, so there's a good chance I'm missing something. If so, by all means make me a fool and point it out. Otherwise it looks like we're in for Big Government (just not for those who need the regulating) no matter who wins in November.

Stealing money from your friends for political advancement

John Edwards clearly learned something (besides poverty) at Fortress - life, like trading, is a zero sum game and someone always has to take a loss. In this case - his former colleagues.
Johnny was overheard saying from behind his modest ivory and platinum desk while lighting a handrolled Cuban with a $1000 bill - "Hey, it was either that or no more $400 clips, and I gotta look good for the campaign. The wifey aint gonna last past the primaries."

clipped from online.wsj.com Democratic presidential candidate John Edwards proposed increasing taxes on private-equity and hedge-fund managers in three ways [through extortion, pogroms and inquisitions] saying it would make the tax code more fair without damaging U.S. capital markets [it's not like those hedgies could just go public on the LSE and move themselves to London or Dubai]. Taken together, the former North Carolina senator asserted, these steps would raise [steal] $4 billion to $6 billion a year [that will fund a program to rid the world of sex slaves by buying the market and putting them into a safe compound adjacent to the White House]. Mr. Edwards, himself a former adviser to the hedge fund Fortress Investment Group, thus became the first major Democratic candidate to wade deeply into the controversy sparked by the explosive growth and profitability of hedge-fund and private-equity firms [because making money by improving failing companies is un-American - if you want to be a capitalist bastard go to China!]. While making amelioration of poverty a centerpiece of his campaign, the one-time trial lawyer earlier this year reported that he had received $1.7 million in salary and investment income from Fortress, where his holdings total $16 million [but not for long! Unexpected drawdowns are a bitch.] Mr. Edwards's stance could help shore up his populist credentials after criticism of his personal wealth and lifestyle have eroded his poll standings [surely you jest!].

Whitewashed Blackstone IPO

The Bigot Jesse Jackson is at it again, and now he's after the nappy headed baller Stephen Schwarzman and his "racist" IPO of Blackstone. Apparently Blackstone didn't go out of their way to put any "minority owned" firms at the top of the syndicate.
This is obviously a boldfaced lie. First off, who owns a public firm? A: Shareholders. This IPO is co-led by Citigroup, whose biggest shareholder is Saudi Prince Alwaleed bin Talal, member of a minority group that is highly ostracized by contemporary American culture. (Note: Prince bin Talal has not donated any money to Jesse Jackson) Second, Schwarzman belongs to a minority group himself, and a much smaller one than African Americans. (Note: Jesse Jackson hates Hymies.) Finally, note that while 7 so called "minority owned" banks did make the cut, heavyweights Goldman and JP Morgan were originally excluded, but finally were allowed to take a third-tier spot. (Note: Goldman and JPMorgan did not donate any money to Jesse Jackson and thus are of no importance to him.) So in case you haven't figured this one out yet, only firms that give money to Jesse Jackson, like Blaylock Capital, matter to Jesse Jackson. Hey, the man has illegitimate children to feed.

clipped from blogs.wsj.com Jesse Jackson is not impressed with Stephen Schwarzman’s new-found wealth. What Jackson is more focused on is the list of underwriters for the $4.7 billion IPO of Schwarzman’s firm, The Blackstone Group. In an interview with Deal Journal, Jackson says the share sale unfairly shortchanges minority-owned firms. “We’re going to protest this pattern of exclusion,” Jackson says. He calls it “Wall Street apartheid.” “We are qualified people to be on the front side of this deal.” He named minority-owned firms including Blaylock & Co., Loop Capital and Williams Capital. Such firms have “not a capacity but an opportunity deficit.” Jackson says that because firms going public are subject to regulation, Blackstone is “obligated to be inclusive and fair.” He says he will push for hearings on the matter on Capitol Hill if his concerns aren’t addressed. We should also note that [a] number of minority-owned firms have contributed to Jackson’s various causes

Red Losers - Crybaby Hedgies Whine about a Bear's Fierce Chomp

To sum up: 30 different funds who did speculative CDS trades on subprime names with Bear are suing the bank for allegedly manipulating the market by flexing its renowned fixed income muscle and buying up some subprime bonds and servicing a few mortgages which would tighten up the CDS and cause the aformentioned hedge funds to incur losses serious enough that it could start that downward spiral of investors withdrawals.

Unfortunately for the hedgies, the fact is that Bear can make its own bets regardless of what its prime brokerage clients do. In fact, as counterparty by default (no pun intended) to the CDS trade it is entirely rational that Bear would scale its risk as needed. It's job as PB is to ensure that all trades are booked and executed correctly, nothing more. To those in the business who still haven't realized it yet - the prime broker is not your friend. It's not even a very good butler. More like the butler from Clue (sometimes helpful, most of the time full of shit), but that's just how the game works.
In any case, there's little that the hedgies could do against the dirty Bear even if they were correct. Neither the SEC, nor any other regulatory body has direct jurisdiction over CDS contracts.

clipped from online.wsj.com Hedge-fund managers accuse Wall Street's Bear Stearns Cos. of attempting to manipulate the market for securities backed by subprime loans by purchasing shaky mortgages. Bear's main antagonist in the squabble, hedge-fund executive John Paulson of Paulson & Co., used to work for the investment bank. "All we're after is very simply to maintain the market's integrity," says Kyle Bass, a former Bear employee who is now managing partner of Hayman Capital, which oversees about $3 billion in the subprime market. Bear is one of Wall Street's largest players in the market for credit default swaps, or CDS, instruments that act as insurance policies on various kinds of bonds. Many hedge funds have bought these swaps, effectively making a bet on an acute downturn in subprime home loans. Bear is widely believed to have taken the opposite position, selling swaps and making a bet that conditions will improve or won't deteriorate as much as some people think. Bear's mortgage desk had sent Paulson a copy of new language it was proposing to the International Swaps and Derivatives Association. The proposed rules would codify its right to prop up a faltering pool of home loans in a mortgage security, even if it knew its clients bet those loans wouldn't perform. "We were shocked," says Paulson vice president Michael Waldorf, that a firm "like Bear would introduce language that would try to give cover to market manipulation."