Comments on: Hussman "The Likelihood of $60 Oil" http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html Mon, 23 Nov 2009 00:58:00 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: STS http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10921 STS Wed, 09 Jul 2008 21:09:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10921 Mr. Sparkle,<br/><br/>Thanks for the new chart. I didn't expect any particular correlation -- sort of like trading volume vs. price, which don't correlate much -- just thought it would be entertaining.<br/><br/>I agree with mxq that there is a deeper question about how much of a "shadow futures market" may exist -- essentially speculative swaps that pay out based on performance of commodities futures.<br/><br/>One important re-regulation initiative we need is to put a LOT of this activity onto exchanges with transparency about price auctions, contract terms, etc. Mr. Sparkle,

Thanks for the new chart. I didn’t expect any particular correlation — sort of like trading volume vs. price, which don’t correlate much — just thought it would be entertaining.

I agree with mxq that there is a deeper question about how much of a “shadow futures market” may exist — essentially speculative swaps that pay out based on performance of commodities futures.

One important re-regulation initiative we need is to put a LOT of this activity onto exchanges with transparency about price auctions, contract terms, etc.

]]> By: Mr.Sparkle http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10887 Mr.Sparkle Wed, 09 Jul 2008 12:32:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10887 For those that wondered about front-month prices superimposed over the open-interest, here's that chart. But, there is very little correlation there. (Below 0.25 if I remember correctly.)<br/><br/>http://img254.imageshack.us/img254/8525/crudeoichart070908bf5.png For those that wondered about front-month prices superimposed over the open-interest, here’s that chart. But, there is very little correlation there. (Below 0.25 if I remember correctly.)

http://img254.imageshack.us/img254/8525/crudeoichart070908bf5.png

]]> By: burnside http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10871 burnside Wed, 09 Jul 2008 08:51:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10871 Doc, regarding your 'one last thought' infra,<br/><br/>I think if you'll interleave personal, corporate and governmental insolvencies into that scenario, you're pretty close to describing the domestic reality. Doc, regarding your ‘one last thought’ infra,

I think if you’ll interleave personal, corporate and governmental insolvencies into that scenario, you’re pretty close to describing the domestic reality.

]]> By: mxq http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10866 mxq Wed, 09 Jul 2008 05:56:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10866 RE: Mr. Sparkle<br/><br/>Thanks for posting that chart. However, that is not the full picture. There is a ton of trading for which we have no data.<br/><br/>According to the CFTC, 85% of index investing is done outside of regulated (i.e. reported) futures exchanges. <br/><br/>In addition, the BIS puts the notional value of all otc commodity instruments at $9 trillion (oil is probably the majority of that amount) while total futures (regulated and unregulated) amount to about half that. <br/><br/>As far as I know, nobody has any data on otc contracts, as they are completely unregulated. (all of these stats were cited in this <a HREF="http://online.wsj.com/article/SB121538694287831033.html?mod=rss_whats_news_us" REL="nofollow">wsj</a> piece) RE: Mr. Sparkle

Thanks for posting that chart. However, that is not the full picture. There is a ton of trading for which we have no data.

According to the CFTC, 85% of index investing is done outside of regulated (i.e. reported) futures exchanges.

In addition, the BIS puts the notional value of all otc commodity instruments at $9 trillion (oil is probably the majority of that amount) while total futures (regulated and unregulated) amount to about half that.

As far as I know, nobody has any data on otc contracts, as they are completely unregulated. (all of these stats were cited in this wsj piece)

]]> By: Anonymous http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10865 Anonymous Wed, 09 Jul 2008 05:33:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10865 I have often wondered if a contrived oil shortage is a mechanism to monetize a play on the dollar in some way, which would help bail out and socialize the mistakes made in the wall street subprime era. Collusion, corruption, conspiracy, anti-trust -- who cares if the debts can be spun into profits as fast as possible!<br/><br/>Doc I have often wondered if a contrived oil shortage is a mechanism to monetize a play on the dollar in some way, which would help bail out and socialize the mistakes made in the wall street subprime era. Collusion, corruption, conspiracy, anti-trust — who cares if the debts can be spun into profits as fast as possible!

Doc

]]> By: STS http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10864 STS Wed, 09 Jul 2008 05:27:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10864 What George said, Mr. Sparkle. Thanks for sharing the chart. It would be fun to see the front month price super-imposed on each of those OI peaks. What George said, Mr. Sparkle. Thanks for sharing the chart. It would be fun to see the front month price super-imposed on each of those OI peaks.

]]> By: Mr.Sparkle http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10863 Mr.Sparkle Wed, 09 Jul 2008 03:53:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10863 George - I've actually posted/sent that chart a few places as the "blame the speculators" chorus got louder. (TBP,CR,Mish's) <br/><br/>Nobody seemed to know what was going on though. Open interest data isn't something that's easily accessed for most of us. I've always thought that was odd since it informs so much about the approximate cost average of contracts in the OI. George – I’ve actually posted/sent that chart a few places as the “blame the speculators” chorus got louder. (TBP,CR,Mish’s)

Nobody seemed to know what was going on though. Open interest data isn’t something that’s easily accessed for most of us. I’ve always thought that was odd since it informs so much about the approximate cost average of contracts in the OI.

]]> By: George http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10860 George Wed, 09 Jul 2008 02:51:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10860 Ripper chart Mr. sparkle! well done! keep us updated somehow. Ripper chart Mr. sparkle! well done! keep us updated somehow.

]]> By: Mr. Sparkle http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10857 Mr. Sparkle Wed, 09 Jul 2008 02:11:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10857 I've been watching NYMEX futures open interest since last September when I began to get interested in what I then thought was bizarre behavior in the open interest. Anyhow, here's a chart showing open interest by day for 6 months out so you can see how contracts tend to be rolled month-to-month. However, this past month I noticed that the peak OI was about 325K contracts as opposed to the 380K it has been for the last few months. When it happened I started to wonder why, and then Yves posted the old story about the silver market and the rules change and it started to make sense. Now this piece from Hussman...<br/><br/>Here's the link to the chart:<br/>http://img157.imageshack.us/img157/2553/crudeoichart070808bs0.png I’ve been watching NYMEX futures open interest since last September when I began to get interested in what I then thought was bizarre behavior in the open interest. Anyhow, here’s a chart showing open interest by day for 6 months out so you can see how contracts tend to be rolled month-to-month. However, this past month I noticed that the peak OI was about 325K contracts as opposed to the 380K it has been for the last few months. When it happened I started to wonder why, and then Yves posted the old story about the silver market and the rules change and it started to make sense. Now this piece from Hussman…

Here’s the link to the chart:
http://img157.imageshack.us/img157/2553/crudeoichart070808bs0.png

]]> By: Anonymous http://www.nakedcapitalism.com/2008/07/hussman-likelihood-of-60-oil.html#comment-10855 Anonymous Wed, 09 Jul 2008 01:59:00 +0000 http://www.nakedcapitalism.com/2008/07/hussman-the-likelihood-of-60-oil/#comment-10855 Only they're not holding dollars, they're shorting dollars. Only they’re not holding dollars, they’re shorting dollars.

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