Here are things that the commodities traders' lobby always stops: margin increases and any sort of regulation against manipulation. They always claim that the markets are too "deep" and they always have stats that back it up. We saw this in the commoditization of stock sectors that are now dominated and manipulated by power ultra futures.
The "deepness" of any sector is, of course, an illusion if you actually trade, but if you don't trade you are tempted to attribute anything to the rise and fall of a sector except manipulation, because manipulation means common-sense margin regulation, which cuts down on fees and therefore ruins the business. No one ever allows a cut in fees -- too much money at stake, too many politicians that can be easily bought, too many agency regulators that can easily be captured.
Manipulation's just part of the game -- a sanctioned part.
But even I, a seasoned realist who is willing to show that manipulation -- legal manipulation, as all manipulation is with these non-rules we have -- was taken aback by the ease with which a single trader could move up oil on a $10 million investment.
What a farce. This guy caused the world to wonder whether gasoline was going over $3 for the July 4 weekend. This guy determined the fortunes of the airline industry. This guy caused people to believe that the consumer-led recovery would "derail" because of higher oil prices. He revealed how fraudulent this commodities market is. (Caveats to all of the usual commodity trading apologists: Of course you are right and my eyes are lying to me again).
It is a great mystery to me why the big oil companies don't sell oil through futures for later delivery when they see these spikes. But maybe they are just as confused or maybe they aren't producing enough to take advantage of the spikes. Whatever. I can only imagine how stupid they feel that they have to be held to this silly little market and how much better off we would be without it. (Usual caveats: Of course we need to be able to trade anything to be able to hedge it, another canard that means more commissions and more fees).
There's a particular pathetic and corrosive series of arguments that make real regulation seem stupid and they will prevail again. Nothing will happen from this unlimited leverage that makes the prices as phony. If nothing happened after the phony $140 spike that contributed mightily to the recession/depression, nothing will happen from this rogue trader's action. The lobbyists and the academics they own will stop anything real from happening.
But at least it is worth pointing out what a gigantic farce it is. Just to make people realize that, once again, our markets are fixed regularly and the regulators, even these new regulators, simply abet it with their lack of initiative and their lack of power to tame the interests. And it is in no one's interests to point it out. I only do so because I have stopped caring about the criticism I receive for believing and talking about what so many do believe but are justifiably afraid to say.
And with that, let the onslaught begin:
1. Jim, you know nothing about commodities. (Wrong, I traded them for years.)
2. Jim, you know nothing about oil trading. (You don't need to know anything to spot manipulation.)
3. Jim, margin requirements have nothing to do with it; we have 42 studies from important universities saying so. (Not one of those professors has ever traded professionally in these markets.)
4. Jim, if there were so much corruption, the Commodities Futures Trading Commission would do something about it. (Sorry, this one's pure comedy -- the CFTC's main job is to fight off regulation from real regulators who want to do something about it in Washington.)
Finally, to all of those people who will now attack me, ask yourselves, do you have any financial interest in the debate? I don't. What's my angle? I hate manipulation. There's a dirty agenda.
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.
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Reader Comments (Page 2 of 2)
7-06-2009 @ 4:17PM
John Kiegiel said...
When Bloomberg mentioned that we as a nation had more than a 2 month supply of oil in the ground and most oil tankers full waiting to dump it somewhere because we are not buying while the price still keeps on rising? The oil market is pure manipulation at its best. Too many people are getting there hands greased to stop it!!!
7-06-2009 @ 5:43PM
randy said...
and all you libs said bush was in bed with big oil well it looks like george needs to slide over there is a new oil monger in the bedroom toooo funny
7-06-2009 @ 4:52PM
jgpsdca said...
Duh
7-06-2009 @ 5:20PM
John Laou said...
Cramer some times you talk too LOUD...but your 100% right on this one. When oil was running up to $140, I, no Greenspan or Bernacke, said: "these jerks have completely turned aroun the Supply and Demand model, and THAT WE WOULD SEE $35 OIL AGAIN!"
And we did, and we'll see it again! But, Jim lets hope these jerks don't blow the whole system up this time.
7-06-2009 @ 5:45PM
IMUNOZJEFE said...
I'm glad to know that I'm not the only one thinking how corrupted the system is. It's a shame that few people with power to manipulate the price of oil can cause so much damage to many without remorse.
7-06-2009 @ 7:06PM
mjames2497 said...
and what particular beach have you had your head in the sand Mr. Cramer. It's BEEN going on.
7-06-2009 @ 7:30PM
cabo79 said...
This can be added to the many regulations that need to be written and to be reinstated: Regulate commodities trading. I resent the fact that anyone can gamble in and try to control the commodity markets, these are the commodities we use in our everyday lives. I don't believe that it should be a gambling casino. Only let traders in the market that they have a stake in, and they can only trade up to 150% of that stake, they need to put 50% down for the trade, no leverage allowed. And they would have to be registered to trade.
7-06-2009 @ 7:31PM
cabo79 said...
The only way to end this BS is to go to term limits. You cannot have a Free Society without rules, laws, a police force to catch the bad guys and prisons to put them in. The same goes for a Free Market capitalist society, you have to have rules, regulations, a police force and prisons to put the bad guys in. Our government is not maintaining a Free Market. Too many political contributions (pay-offs), it is obvious laws are bought and sold. Folks we need to correct this, it happens over and over. Our government is paralyzed by the need for pay-offs (political contributions). We need a major change to end this professional politician form of government. We need TERM LIMITS and real campaign finance reform. How about three 4 year terms for Congressmen, two 6 year terms for Senators, and keep the current two 4 year terms for President. The most you can serve in the Senate and Congress combined is 14 years. We need an end to the professional politician form of government.
7-06-2009 @ 7:57PM
Bug said...
So hey...I been saying that for years. I told my congressman I was speculating I couldn't pay my taxes next year because gas prices were eating all my cash.
Only a fool can't see this economy and all Americans are being had by the pound and that stimulus in September was the biggest government sanctioned heist of all time.
7-06-2009 @ 8:08PM
RUBEN said...
JIM BEFORE I HAD LOST SUM RESPECT FOR YOU FOR FEW PAST MISTAKES BUT YOU SEEM TO HAVE CORRECTED BUT NOW YOU HAVE REVIVED MY RESPECT OF YOU WITH LETTING AMERICA KNOW THERE IS SOMEONE WITH A VOICE FOR THE PEOPLE THAT BIG RICH INVESTORS SHOULD STOP MANIPULATING OIL BIG BANKS THAT BLOAT UP OIL AS A SAFE PLACE WHEN THEY ONLY DO IT TO MOVE OIL HIGHER BECAUSE THEY MAKE MONEY FROM THEIR INVESTMENTS OIL SHOULD BE 20 TO 30 DOLLARS LOWER THEIR IS NO REASON SHOULD BE SO HIGH AMERICA WILL SOON ADMIT ITS IN A GREATER DEPPRESED THEN ITS EVEN BEEN THREW WERE FALILNG APART AMERICA IN THE HANDS OF OBAHMA HE IS TRYING TO HOLD AMERICA TOGETHER WITH SCOTCH TAPE HE NEEDS TO REFORM OUT HEALTH SYSTEM PUT STRONG I MEAN STRONG REGULATION ON WALL STREET AND BANKS NOT ALLOW LOBBYIST OR GIFTS TO GET INTO THE WHITE HOUSE SEE ALL WHITE HOUSE OFFICIALS FUNDS TRACKED FOR ILLEGAL GAINS FOR VOTE SUPPORT
7-26-2009 @ 4:09AM
glenn cernicky said...
Manipulation? Jim, we live in the most manipulated country in the world. The Zionist control over our money supply is way worse then Big Oil. Think about it. Just don't read what I'm saying, understand it please! Oil could drop to $10. per barrel, however without a job and money it's quite unimportant. We are supposed to create our own money, in which we would not charge interest on. Our national debt, could slowly be reduced. Madoff was nothing. The Zionists have created the biggest PONZI scheme ever! in OUR own country! This has been going
on for over 100 years, please do some homework on this subject! The Zionists have taught our politicians very well, such as how to cheat, steal, show dull care to the average citizen, swindle, scam, con, financially rape, rob, buy our precious metals, use our S.S. program to NOT provide what had been intended, etc., etc.
I hope those PIGS swallow all the gold in the world and die from metal poisoning. They still have no idea that you can't take it with you. So my friend Jim, Oil is small potatoes. The sad part is when we have massive earthquakes, hurricanes, and other natural disasters,
the Zionist insurance companies, we continue denying claims, because we can't read the fine print. Also, we have a natural human tendency to trust, and they have violated that to the utmost degree. The media never reports of this very much, because the media is owned by
Zionists. The our the most disrespecting hate group of all time, easily surpassing the KKK, Nazi's, Black Panthers, etc. They want to steal our livelihood (job loss) and then steal out homes too! Criminal bastards are worse then the US Calvary mistreated the Native American Indians. Maybe I'll write an E-book about it, and get invited on the Daily Show, and see if Jon Stuart can find anything amusing about all of this crap?
http://www.realzionistnews.com/
7-06-2009 @ 10:33PM
Ynot said...
And the stock market is not manipulated? When things go bad just change the accounting rules and all looks well. Too big to fail. Don't be fooled by this government owned blowhard. He is not the average americans friend.