Comment Text:
10-002
COMMENT
CL-00059
From:
Sent:
To:
Subject:
martin
Thursday, January 28, 2010 8:38 PM
secretary
Federal Speculative Position Limits for Referenced Energy Contracts and
Associated Regulations
Buyers are not the problem. If government or whoever, with enough
funds, believes the price is too high, they can just sell into the
rising price until it collapses. If it doesn't collapse then bully for
the producers for a change. But it will always collapse. The up and
down routine is standard practice. Troughs in price usually last for
some time but peaks in price are short lasting. Producers jump at the
chance to sell into the peaks.
In commodities shorts limit price moves up and limit moves down, but not
in equities. In equities they limit moves up and the limit down is
zero, broke, kaput, out of business. If you have a CDS on a company
then shorting is the way to go. Right until they default on a payment
and the stock goes to zero. The short makes money all the way down, on
any call options he sold or put options he bought and then he collects
on his CDS (credit default swap).
In commodities a long stimulates the price upwardly. The limit is
whatever he is willing to pay. If he is a long not willing to take
delivery then he must sell again. If he bought in huge volumes then he
will be lucky if he can sell his position without a loss because now he
is driving the price down. So that will limit a longs position without
controls or regulations because if he is not wise to the market he will
go broke. Just think of anyone who tried to corner a market. Hunts and
silver pop up in my mind.
Who is the real deterrent to production and economic stimulus here? I
don't think it is the buyer, but that is what position limits will
control.
