Place your bets..come on, place your bets..
I will say up front that I was a Psych major in college, with a Sociology minor. So the commodities futures trading market, specifically the Energy commodities, makes about as much sense to me as Farsi or Dutch for that matter. But this WaPo article, via TruthOut has me scratching my head:
One year ago, a 32-year-old trader at a giant hedge fund named Amaranth held huge sway over the price the country paid for natural gas. Trading on unregulated commodity exchanges, he made risky bets that led to the fund’s collapse – and, according to a congressional investigation, higher gas bills for homeowners.
But as another winter approaches, lawmakers and federal regulators have yet to set up a system to prevent another big fund from cornering a vital commodity market. Called by some insiders the Wild West of Wall Street, commodity trading is a world where many goods that are key to national security or public consumption, such as oil, pork bellies or uranium, are traded with almost no oversight.
Part of the problem is that the regulator, the federal Commodity Futures Trading Commission, has had a hard time keeping up with the sector it oversees. Commodity trading has exploded in complexity and popularity, growing six-fold in trading volume since 2000 – the year that a handful of giant energy companies, including Enron, successfully lobbied to get Congress to exempt energy markets from government regulation.
Is this crap cheating? At the very least it’s screwing over consumers so that a very small, specific group of individuals make a whole lotta money. It’s quite pathetic that we even need to consider government oversight because of that nasty trait in human beings called…
GREED.
Enron manipulated the electricity market to such a degree that, as a resident of California, I was screwed blue and suffered through Blackouts. One of which was indirectly responsible for the death of a good friend of mine in San Diego. I can tell you from first hand experience that it sucked royally and was a legal (at the time) financial mugging of the highest order.
So you can understand my frustration dear reader when I read that WaPo article this past Sunday morning. I definitely felt my blood
pressure rise I can tell you that. But what to do? What should the government, if anything, do about this callous activity fueled by greed? Per the WaPo article:
Lawmakers and even some in the industry say more oversight of commodities is needed. ICE, the unregulated exchange that hosted the debacle, has begun to share some trading information with the CFTC (Commodity Futures Trading Commission). But there is little agreement on how far a new law should go, or whether commodity trading can be effectively monitored.
That’s in part because a significant percentage of commodity trading doesn’t happen on any organized exchanges, regulated or not. They take place in private, as over-the-counter trades. It is difficult to know how many of these are occurring.
Prosecute the perps, on what statutes? Pass laws and provide job opportunities for more federal contractors to oversee the futures market? Ronnie Reagan wanted open markets..he wanted free markets that were not under the scrutiny of watchdog groups, so they could..cough..grow and prosper. Of course the Republican-led administration is continuing in that tradition.
I have a growing hatred for hedge funds my dear reader.
But the Democrats love those market guys too, don’t get me wrong. I am not so blinded that I believe they aren’t culpable as well.
Amaranth did get its comeuppance, praise Buddha on that. The fund had over $9 billion, that’s with a B, under company management and reports indicate their losses may exceed 65 percent, which translates to a whole heck of a lot of money. In 2006 they liquidated their assets. WaPo puts the final toll at 6 billion bucks.
In 2007, Hunter started a new hedge fund don’t ya know, Solengo Capital Advisors.
On July 25th 2007, the CFTC charged Amaranth and Brian Hunter with attempted manipulation of the price of Natural Gas Futures and making false statements to the New York Mercantile Exchange (NYMEX).
But meanwhile..millions of consumers gave much of their hard earned paychecks to gas companies just to heat their homes. Over half of the homes in America are heated by gas. No one is lining up to give them their money back..not the folks invested in the hedge funds anyway.
Tags: Energy Commodities, Cheating the consumer, Brian Hunter, Amaranth, hedge funds
Originally posted at Dark Wraith’s The UnCapitalist Journal
The Sirens Chronicles 
Does anyone anywhere have a choice, as in market competition, for the electricity generated into their home? Or a choice in which company they buy their natural gas from?
I don’t. I can put up a windmill at my own expense, or utilize solar panels, but they are extremely expensive and would cost so much more than the “regulated” utility company. I could change all the orifices on any gas appliance to burn propane, but in many cities and towns, it is illegal to have a propane tank.
The utility companies make plenty of money, plenty of profit. We are told they are regulated so their rates don’t reflect the monopoly they actually have, but they wouldn’t stay in business and sell stock and have stock prices rise if they didn’t make plenty of money, regulated or not.
No competition equals monopoly and price fixing, all for the benefit of the corporation. Not to mention the inside informatrion and trading of options that goeson in the inner circle. If I had the money, I might consider the wrist slap I would get for stealing from the people, NOT!
Welcome to Sirens Joe. As far as I understand it, the monopoly is supposed to be regulated and to some extent it was..then Reagan took many of the oversight controls away..which is why I mentioned him in my post.
The hedge funds and commodities markets are finding new ways to manipulate the prices and that IS cheating the American consumer. If you are interested, one of the links explains how the hedge funds were competing with each other to see who could cheat the public and make the most money..essentially fucking each other over..and the public..along the way. That is how Amanarth was taken down..by ANOTHER hedge fund.
These commodities are not really regulated, its virtually impossible according to some specialists because of the way they are traded. To regulate them, the government would have to change the entire way these markets are traded..like the Mercantile Exchange as an example.
The same goes for the food(beef and pork commodities) market, and the crop markets..they are traded the same way, which means..
We are getting fucked in those areas too with price fixing. Just so a few individuals can make a helluva lot of money in one season.
Dusty
You know there is something underhanded going on. I know you think along my lines and you know my line of thinking particularly of late. I had to make sure you and some others see this because it is to a T the nightmare we keep discussing. Ignore my stuff but read Act 1-6 about The relentless drive for WW3
Jim, that is a fine post you have up at your place. Its all about greed and making as much money as possible..regardless of who you screw over to make it.
The libertarian side of me hates government interference..but in cases like I name above..I fear we have no choice but to regulate the hell out of these markets.
A billion here and a billion there, and before you know it you’re talking about real money.
Every time economists and Wall Street executives think they have acknowledged the full extent of the losses from the meltdown in real estate mortgages, more bad news turns up.
Merrill Lynch said yesterday that it would take a charge for mortgage-related securities on its books that is $3 billion more than the $5 billion it expected just two weeks ago. And a report from the National Association of Realtors showed that sales of existing homes in September fell twice as much as economists had expected, to their lowest level in nearly 10 years.
Stocks fell sharply early yesterday on the news, with the Standard & Poor’s 500-stock index falling 1.8 percent before recovering in the afternoon. Investors also bid up Treasuries as they sought the safety of government-backed debt.
At this juncture, economists say the troubles in the mortgage market could, all told, cost financial firms and investors up to $400 billion.
Shit, that’s almost what it costs for two years of failure in Iraq.
And lastly, to think that economic melt down has even actually begun, is sheer lunacy. For every dollar of bad mortgage loan created by predatory lenders like Countrywide, Wall Street criminals built more than 20 dollars in “leverage” on top of it. The bad loans at the sub prime level were built in to pyramids of scam. All the while, scumbags on wall street, etc, made their commissions on the transactions regardless of the value of the transaction.. so say 100 billion in bad loans at the consumer mortgage level, the loss to wall st. is 20 x’s that, probably more, and that risk, or plain old criminal behavior, was spread around globally, so all financial institutions have losses.
Watch commodities, like oil, gold etc. the regular spin is that its inventories, etc, which is of course part of it, but the root cause is never mentioned: inflation. As more and more dollars get printed at debt, they buy less, so of course commodities are going to require more and more increasingly worthless dollars to buy the commodity.
Housing bubble, the same. houses weren’t worth more, the currency used to buy them was worthless, so it takes more of those units of value to buy one. At this point, the dollar is beginning its soon to come free fall over the abyss, as it has been worthless for a long time, but propped up by more and more debt. Eventually the house of cards implodes.
Jesus Earl..you just freaked me the fuck out my dear. You understand the ‘system’ far better than I do. At this point I am almost glad I don’t understand it or I would be moving out of the country or planning for its financial collapse.