I admit I’m a month behind on this but a friend recently pointed me to this Heritage Foundation Web Memo by Ben Lieberman. Now I’m sure that the author is undoubtedly much smarter than me and I largely agree with the stated “Lessons” in his memo but some of this lacks the substantive analysis required to be taken seriously. The two lines that really bother me are:
And if speculators were capable of profiting by driving prices ever higher, why would they allow themselves to be caught holding the bag in a free fall?
Clearly, the drop in prices is strong evidence that the market is not so easily manipulated
Regarding the first, I didn’t notice any real evidence that speculators were not capable of “driving prices ever higher”, just the assertions that the FTC found past allegations (not related at all to the current circumstances) “to be without merit” and that price drops somehow prove the rise was free of manipulation. (HINT: Manipulating speculators make money on the way down also.)
I’d argue that this hints very strongly that someone over at the U.S Commodity Futures Trading Commission at least suspected that something out of the ordinary was going on. Furthermore, given the four month warning on these new position limits and reporting requirements, I’m confident that none of the suspected speculators were left holding the bag and the author gives no evidence to the contrary. (HINT: How many times during that 120 day period did Goldman Sachs project oil prices above $150 per barrel?)
Regarding the second quote…and maybe I’m just not smart enough to follow Heritage Foundation logic but again…I just don’t understand how dropping prices are in any way evidence, let alone strong evidence, that manipulation wasn’t extremely easy in the formerly CFTC oversight-free ICE playground.
Alternatively, I’ll continue to argue that dropping prices coinciding with the graciously forewarned implementation of new regulation…and sunshine…on the process would deserve more investigative reporting than the shallow Heritage analysis referenced above would lead one to think necessary.
Anyway, that’s my $0.0125 worth on the subject. (Times are hard and I thought I should get that in before its worth even less.)
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