Archive for June, 2008
Friday, June 27th, 2008
After weeks of tough sounding rhetoric directed at speculators and the regulatory agency allowing them to speculate, Congress took bold action, kind of.
Thursday the House of Representatives passed the Energy Markets Emergency Act. The bill requires the Commodity Futures Trading Commission (CFTC) “to utilize all its authority, including emergency powers, to take steps to curb excessive speculation in the energy futures markets.” It passed overwhelmingly by a vote of 402-19.
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The bill falls far short of some of the draconian measures being recommended in recent hearings such as manipulating futures’ margins to direct market activity and restricting pension money from investing in commodity index funds. Basically it directs the CFTC to do its job and authorizes it to use the authority inherent to it—including emergency powers—to do it.
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Tags: CFTC, Congress, Energy Markets Emergency Act, Index funds, speculators
Posted in Regulatory/actions | No Comments »
Thursday, June 26th, 2008
Several headlines yesterday highlighted the Federal Reserve’s emphasis on inflation after announcing no policy change in the Fed Funds rate following its June FOMC meeting. But reports of the Fed’s inflation concerns appear overblown as there was no action attached to it.
Evidence of a significant elevation in inflation was right there for the Fed to see back in September when it chose to embark on an historically aggressive easing campaign. Just because it chose to ignore inflation or at least place it on the back burner to worry about on another day and deal with the more immediate concerns of a recession doesn’t mean it wasn’t there.
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Tags: Fed tightening, Federal Reserve, inflation
Posted in economy | No Comments »
Tuesday, June 24th, 2008
It has been almost one year since the subprime problems first surfaced last July as two Bear Stearns hedge funds acknowledged that they had lost virtually all of their funds. It was the beginning of a slow drip of disturbing information regarding the extent financial institutions, primarily investment banks, were affected by subprime holdings.
While it was the collapse of a couple of hedge funds that introduced us to the problem, it was the investment banks that had the greatest exposure. So much so that the Federal Reserve had to open its lending window to these institutions for the first time in 80 some odd years and arrange the bailout of Bear Stearns. And while hedge funds continue to be watched with suspicion, it is the banks who have had to book billions of dollars of losses due to this exposure.
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Tags: Hedge funds, Investment Banks, subprime
Posted in Markets, Mergers, Regulatory/actions, Trader/Managed Funds | 1 Comment »
Friday, June 20th, 2008
CNN is reporting that Sam Israel III’s girl friend Debra Ryan has been arrested and faces 10 years in prison for helping the convicted felon and former hedge fund manager in his failure to report to prison. Israel has been sentenced to 20 years for his role in the $450 million fraud and collapse of the Bayou family of hedge funds.
According to the story, Ryan has admitted to helping Israel load up a white 2007 Coach Freelander RV, which he parked in a rest stop in upstate New York.
I hear Canada is pretty this time of year…
Download the Debra Ryan complaint PDF
Tags: Bayou, fugitive, Sam Israel III
Posted in Uncategorized | No Comments »
Thursday, June 19th, 2008
With the recent Senate hearings and everybody debating the affects of speculation by index funds, we have been inundated with politically motivated noise demonizing everyone from hedge funds to oil companies and those who would both support or oppose offshore drilling. In an effort to go beyond the self-serving blather, here are three unique observations offered to me in the past several days on the subject.
“The typical line of reasoning is that commodity index funds exclusively buy and hold commodities, and this buying represents a permanent increase in demand, which naturally results in higher prices,” says John Joseph of commodity trading advisory SEMA4 Group. “Of course, this buying and holding activity is no different from the buying and holding activity performed by equity index funds. And yet commodity index activity has been branded as a threat to our economy, while equity index funds receive quite the opposite treatment. This is hypocritical at best and disingenuous at worst.”
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Tags: crude oil, David Hightower, excessive speculation, Hightower Report, John Joseph, SEMA4 Group, Todd Buchholtz, Two Oceans Funds
Posted in Uncategorized | No Comments »
Wednesday, June 18th, 2008
When CME Group stock gapped up more than $16 on Tuesday there was little doubt it had to do with the exchange securing approval from the Department of Justice for its proposed purchase of the New York Mercantile Exchange (Nymex). The announcement came out just as the markets closed on Monday.
It was somewhat of a surprise because although the DOJ has caused CME some grief with its comment letter to Treasury regarding clearing structure, few suspected that they would raise an objection to a merger with Nymex. While there may have been an element of buyers remorse with the DOJ regarding its decision to “approve” (DOJ does not actually approve M&As, they either object or leave it alone) the CME/Chicago Board of Trade merger, CME Group’s proposed purchase of Nymex should have raised fewer issues than the CBOT deal that already had been allowed.
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Tags: CME Group, Department of Justice, Nymex
Posted in Mergers, Regulatory/actions | No Comments »
Tuesday, June 17th, 2008
Commodity Futures trading Commission (CFTC) Acting Chairman Walt Lukken should be getting better at testifying before Congressional committees but appeared somewhat weary at yet another hearing on Tuesday morning. One Senator questioned how Lukken could respond that he was not sure of the effect of speculation on commodity prices after noting at past hearings that he thought supply and demand were the determining factors. Apparently the questions are wearing on Lukken and to be fair, it is the Senators who seem to have made up their minds regarding the role of speculation on prices. And based on some of their questions, they clearly have not conducted the level of research into the matter as Lukken has. Lukken however, should be happy that a consensus is forming to appropriate more resources to the CFTC. Sen. Dick Durbin (D-IL) has introduced legislation to increase the CFTC budget and reiterated that pledge at today’s hearings.
I guess we should come to expect more heat than light from such hearings but it is disturbing when members of Congress seem to present disingenuous arguments.
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Tags: CFTC, CIT, COmmitment of Traders Report, Hearings, Index funds, speculators
Posted in Markets, Regulatory/actions | No Comments »
Tuesday, June 17th, 2008
It’s Tuesday, which means it must be time once again for what has become practically a weekly occurrence: a Senate hearing on speculation in the energy markets. Commodities Futures Trading Commission (CFTC) Acting Chairman Walt Lukken testified before the Senate Committee on Agriculture, Nutrition and Forestry, saying basically that the CFTC needed to further investigate these problems and that the agency required increased funding and staffing to do so. It’s a bit of a switch from his previous testimony stating that supply and demand factors were at fault for the increase in commodity prices. Today, the CFTC announced modifications to its Foreign Board of Trade process and amended its “no-action relief letter” under which ICE Futures Europe is permitted direct access to U.S. customers.
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Posted in Regulatory/actions | No Comments »
Tuesday, June 17th, 2008
OK, here it is, Sam Israel III’s wanted poster. while it’s not necessarilly suitable for framing, I for one thought you might want to have a look.
The latest from the Associated Press is that this is now officially a manhunt and that the search of the Hudson River has ended.
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FOR IMMEDIATE RELEASE FOR INFORMATION CONTACT:
June 17, 2008 (800) 336-0102
Wanted by the U.S. Marshals: Samuel Israel III
The United States Marshals Service is seeking information in its investigation to locate and apprehend federal fugitive Samuel Israel III.
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Tags: Bayou, fraud, hedge fund, Sam Israel III, wanted
Posted in Uncategorized | No Comments »
Monday, June 16th, 2008
News flash: Commodity Futures Trading Commission (CFTC) Acting Chairman Walter Lukken has been called before another Congressional committee. Lukken will testify on Tuesday before a joint committee hearing of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry and the Senate the Appropriations Subcommittee on Financial Services and General Government.
Perhaps he will change his mind regarding what he believes is pushing commodity prices higher. It is not popular now to talk about mundane supply and demand factors with so many politicians blaming speculators but a look at the recent price action of crude oil and the dollar index may point out the connection of a historically low dollar and commodity prices.
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Tags: CFTC, The Fed, Walt Lukken
Posted in Markets | No Comments »
