Gas Prices and Elections: Totally Unrelated!

trickynick said: "I enjoyed this article, especially Tony Snow's comments. [url]http://www.topix.net/content/ap/3947626284388809034938969572262079709859[/url] I just can't believe how many people buy this barstool conspiracy theory. If I were to say,"If there were an invisible cat in the chair then the chair would appear empty. The chair appears empty so there MUST BE an invisible cat in the chair," everyone would think I was nuts if they thought I was serious. But if I were to suggest the Bush Administration is manipulating gas prices with the SAME underlying logic supporting my conclusion and no actual evidence this has happned, 42 percent of the country would agree with me. Absolutely amazing..."

Rickster said: "The energy markets were ready to tip over anyway. They just needed a little help. I wont say that the government or Bush did it. But I will say this. Any group with the money and power to get GWB elected to the white house could easily have provided the little help that was needed. I can tell you another thing. I have studied a lot of charts and have gotten very good at recognizing the difference between natural market action and managed market action. The manner in which oil prices dropped fits managed patterns and not natural patterns. Dont get me wrong, I am not some bitter Democrat or Liberal. I generally vote Republican but consider myself rather neutral. And I understand and support what the current administration has done to date. All I am saying is that Republicans and the friends of republicans firmly control the political landscape these days. I dont bet against them and I dont put anything past them. If you dont think they did it, thats fine. But you have no more proof that they didn't than I have that they did. Neither has a solid basis for saying we are right. I just think my theory is more plausible than yours."

trickynick said: "I am unconvinced the energy markets, oil in particular, needed any help in order to move lower. From what I can see, oil spent over a month in the neighborhood of $75 and was being held there by the market's expectation that either hurricanes would happen that would disrupt oil supply, there would be sanctions against Iran or it would turn out to be a long time before the Alaska pipeline was restored to full capacity. When these bullish stories seemed less and less likely, the price fell. I am equally unconvinced that "managed market action" is possible in such a liquid market as oil. If it is than it could only be possible for a short period of time and now oil has stayed low enough for long enough that no one person, company or country can be held responsible for how the market has behaved. If you have seen something in price action that you think is evidence that the market had this "help" in moving lower I would be interested to know what it is that you noticed. Can I prove that the Bush Administration (or someone else) HAS NOT manipulate the oil market? Of course not because it is a logical fallacy to attempt to prove that something DID NOT happen, one can only prove that something did. All I can say is that *I* see nothing to distinguish between what has happened to the price of oil and what we would expect in the circumstances absent any market manipulation that may have occurred. You say you HAVE noticed something that suggests otherwise, which I would like to hear about if you'd be willing to share it."

buzneg said: "look at this chart: [url]http://www.stockhouse.com/shfn/editorial.asp?edtID=18774[/url] If you can answer my question please do: what's the percentage of oil held by investors, and who are they?"

Rickster said: "Although a negative can not be proven with absolute certainty, it can be proven with reasonable assurance. For example, it is easy to prove with reasonable assurance that the sun did not come up in the west yesterday. Although no one can force a large liquid market into an extended run against the grain, it is easy if the market is near its tipping point. Recognizing managed action is simple and easy. If you were sitting beside me I could point out what I see. As it is, I will just say that natural action has a wild and unpredictable appearance. Even though there may be a steady major trend due to steady underlying forces, the secondary movements provide an unmistakably random element. On the other hand, managed action has a regulated appearance. In the recent case of crude, it consisted of a long linear run with no significant countermoves. The secondary movements were regulated and easy to follow. In this case, the difficulty was not getting it moving, or even getting a large move, the challenge was keeping it from moving too fast. Had it gone into free fall, traders would have stepped aside or even gone against it. It would not have gone as far. But since it was so well managed, traders were able to stay with and facilitate the move. Am I convinced? No. I am rarely convinced of anything regarding the markets. And I wont try to convince anyone else. What I do is use my knowledge and experience to assess the odds. In this case, I think the odds favor the barstool conspiracy theory. YMMV."

trickynick said: "Interesting. How would you say this was likely done? Through the futures market on the NYME or in the cash market for oil? My father (who doesn't follow the markets like we do at all) thinks Bush called the Saudis and asked them to increase production as a favor to him, but it seems unlikely to me that they could have dumped enough oil on the world market to have caused what has occurred without it coming to the whole world's attention that it is they who had done it and done it quite diliberately. What do you think?"

Rickster said: "I am reasonably sure that it was done through futures or options. I have seen both used for this purpose on stocks, but have never had access to the data needed to be able to see it on commodities. Futures and options are preferred because they are liquid, leveraged and anonymous. My guess is that a heavy short position was taken at the top. Then, the short position was gradually covered as the price fell. The short position would also have to be partially re-established at times as required to regulate the fall. I dont think oil itself could have been used because lag times would not support timing precise enough to produce regular stair steps (similar to dominoes falling). [url]http://customer1.barchart.com/custom/gptc/3121.htm[/url] I dont know much about the cash markets, but I would also think there would be a lag before these transactions impacted the futures markets. I also suspect that cash purchases/sales involve more records than are desired by the operator. This fall bankrupted at least one hedge fund (Amaranth). If the operation was traceable, the hedge fund would good basis for a suit. On the side: I was surprised to lately discover that the gasoline futures market ranks so low in liquidity. [url]http://www.traders.com/Documentation/FEEDbk_docs/Liquidity/FutLiq.html[/url]"

trickynick said: "Amaranth's losses were related to trading natural gas, not oil, but it has fallen similarly precipitously. And from what I understand the fund is actually going to continue to operate, just no more energy trading. Interesting legal question: Are you sure that a hedge fund that experienced large losses as result of something like this (be it Amaranth or whoever) would be able to sue someone they could prove deliberately "made" this happen? I am not aware of circumstances under which it would be illegal to take large amounts of sell positions in publically traded commodity futures contracts, just that if you bought enough of them you'd have to accept lower prices at which to sell. Obviously the whole endeavor would be very risky for whoever it is who would undertake it, but would it actually be illegal or cause the selling party to be responsible for losses on the part of others? Certainly once the positions are taken, no one person could be responsible for what the market did thereafter...right? Maybe if they could prove it was with the intention of causing losses specifically for that fund or it was someone WITHIN the fund with knowledge about the fund's positions who had done it that would be different. Curious about that. And I do agree that if this oil price manipulation did occur, it would have to be through the futures market if for no other reason the anonimity you mentioned. I think if tanker traffic in the Persian Gulf suddenly multiplied 10-fold this issue would come under immediate and widespread scrutiny much more so than it has now. As you might guess, I am still very incredulous about the whole thing, but I nonetheless appreciate your willingness to discuss it with me."

Crazy Trader said: "People love conspiracy theories. In reviewing everything I have yet to see any conspiracy to drive prices up or down. The upward motion of these positions in my estimate mimick the results of last fall. The weather people predicted a Hurricane season very similar to last fall. Iran was and still is ripe for bombing. So with these signs looming it was evident that we would have a gas price boom. Those that held these stances quickly became dissillusioned as the hurricanes died out and yielded no destruction. Iran appears to be getting in line and the administration is handling things appropriately. Just remember the rule. For every person that knows something about this issue they have told 7 others. A secret of this magnitude cannot be withheld. Charlie"

Rickster said: "Latest intel I have is that Amaranth is liquidating. Regarding legalities. I am not a lawyer, but from what I've seen, you dont need a good legal basis to sue. Sometimes the other party will settle just to avoid the aggravation and embarrassment. I have commented on the games I have seen played in the market on numerous occasions over the years. I usually get accused of being a conspiracy theorist. They seem to think that the markets are like the banking business, or a club where everyone makes money. It seems most people dont understand is that this is a high stakes sport played by anonymous parties. The objective of the sport is to get the other guys money. In some cases, it is very much like war. Almost anything is fair. I dont see the games as conspiracies, just strategies and tactics. I remember seeing an interview with Soros where they discussed how he "broke the Bank of England." The Brits were trying to prop up the pound and he knew they couldn't hold out forever. So he borrowed the pound and invested it in German securities. One day he sensed the pound was faltering so he gave his trader the go ahead to sell the pound as hard as he could (giving a little help). The pound broke. He was reported to have made $5 billion "overnight." He declined to confirm the number. If playing hardball was illegal, he would have been in jail a long time ago. But IIRC, he has been sued. I enjoy discussing things with you Nick. Hope I didnt come off as too snippy. It is just that I have gotten a little frustrated over the years with people referring to market games as conspiracies."

Rickster said: "Regarding secrecy. Soros borrowed pounds and invested them in Germany because currency traders watch him like meerkats watch hawks. But no one got alarmed because he was taking out a loan to make an investment (real estate, IIRC), so to speak. And it is standard practice to keep business loans confidential. This way he remained cloaked until he was ready to play his hand. These guys can (and have to) be very creative. That is why it is almost impossible to be sure how they did it, unless they want you to know."