Comment Text:
10-005
COMMENT
CL-01383
From:
Sent:
To:
Subject:
Ken McCoy
Friday, April 9, 2010 9:56 PM
Metals Hearing
Ted Butler Commentary - A Time to Act
Dear Sirs;
I have been watching the case going on with the CFTC regarding position limits and have written
Chairman Gensler and some of the others Ted Butler recommended a while back. One of the points
made in the letter was that position limits appear to be rather irrelevant when there is no verifiable
supply behind the futures contract and therefore position limits appear to be a stop gap measure to
preclude the runaway short situation we have today.
The argument that position limits will drive business to other markets doesn't hold water. If there is a
supply of a commodity a contract may be written against it - no supply: no contract. The supply should
be verifiable - gold on the moon or an orbiting asteroid should not qualify. Likewise with soybeans, as
there appear to be more contracts chasing soybeans and other food commodities than is currently
available - this could potentially cause famine in some countries that are counting on delivery of those
commodities.
So perhaps the limit should be on the number of contracts written against any given commodity shall be
based on a proven and available supply. Commodity contracts written in the US should be done on
commodities verified available in the US - maybe that would inspire an audit of Ft Knox - then whatever
happens in any other market around the globe may happen; if some governments wish to write contracts
on fictional commodities their markets will not long exist, nor will ours if this situation is not repaired.
This basically boils down to an accounting issue and the banks in London have too long played games
with the measure of gold available in the system. If a limited number of contracts are available for a
given commodity it will obviously be more likely that the price will rise for those contracts when they
are one to one parity with supply. This would alert farmers, for example, to plant more soy beans to
meet a projected shortfall.
Everything that I have read to date suggests that all of the commodities contracts have no correlation to
physical supply, and if this is the case, how will the "free market" system in the United States ever be
expected to work. We otherwise regress into a postwar state of communist quotas and doublespeak to
explain shortages and people waiting in lines for hours to purchase a loaf of bread. Fix it gentlemen,
and fix it right.
Kenneth D. McCoy
Northen Tier, Inc
9701 Benson Rd
kynden, WA 98264
360-379-4837
