History of Bubble Creation
Everyone on Wall Street are a bunch of evil speculators, paying off ratings agencies to rate garbage mortgage backed securities triple A, so they could resell them, pushing up worthless companies beyond ridiculous valuations like Crocs, Inc. (NASDAQ:CROX) and many others only to leave a trail of carnage on the downside, the tech bubble, apple stock, the various oil bubbles, the silver bubble, cotton, coffee, corn you name it and Wall Street will try to manipulate up far beyond the fundamentals. If you bought a car from Wall Street, they would juice it up to $200,000 for a Honda Civic, and you think you have a depreciating asset now.
Well gas prices are going up again due to those evil speculators even as the economy shows signs again of recovery, the economy is threatened once again by lowering disposable income in order to pay for exorbitant gas prices. This cycle just keeps on repeating itself over and over again. The economy starts to pick up, the evil speculators juice up gas prices, consumers can`t afford these prices, the economy goes back near to recession levels as consumers and small businesses pull back discretionary spending.
When are we ever going to learn in this country, and protect essential commodities from the evil speculators by instigating physical delivery? Physical delivery will ensure that when the economy is strong enough to actually support a given price, demand will be there to support higher prices.
But what we have is paper demand screwing consumers once again due to the over zealous evil speculators in the oil market, and not true demand, so this Wall Street Gas Tax, just throws the economy back into recession territory. The average American cannot afford to fill up there gas tank for $65 every week without taking money out of some other money basket items in their budget. They usually charge up their credit cards, cut back on eating out or entertainment options, and some much worse scenarios for meeting these out of whack fuel costs.
Further Reading – When Natural Gas Replacing Diesel in Frac Jobs
Driver #1: Ben Bernanke & the Federal Reserve
The drivers of the oil market for the evil speculators on Wall Street are several; one of them is supported by your own government in the branch of the Federal Reserve. When Ben Bernanke and the fed switched from concentrating on mortgages with their previous QE program which didn`t give banks the extra juice for the commodity markets and equities, and then started again with another 45 billion per month of treasury purchases; well we have seen how that juices markets from past QE treasury buying. Buying mortgages doesn`t juice up asset prices like buying treasuries that is clear as day!
So the federal reserve is again helping those who have stocks in their portfolio, at the expense of the entire country who now has to pay higher gas prices than the fundamentals would dictate because 45 billion dollars is being injected into financial markets, and big banks are using this liquidity to juice up asset prices including oil and gas.
Concentrate on mortgages Ben Bernanke I thought you finally learned something and were focusing on concentrating your liquidity programs where they could minimize the negatives of the easing program and still provide some overall positives to the economy.
However, the fed slipped back to the old give on one hand; take on the other hand bi-polar monetary policy which just does more harm than good to the overall economy.
Further Reading – President Obama: Greek Politicians Won Elections Too!
Driver #2: Japanese Prime Minister Shinzo Abe
The other is good old Japan, and their new policy of bringing the country inflation at all costs, by considerably weakening the Yen, this has not only raised Japanese gas prices, but their currency is used as a major carry trade funding currency. So weakening the yen just provides juice to all financial markets, not just Japanese markets. Traders take this weak Yen, and fund their other trades, and you guessed it juice up risk assets like oil, which then juices up gas prices. So you can thank the new Japanese Prime Minister Shinzo Abe for your higher gas prices as well.
Driver #3: Wall Street Levered to the Hilt once again
Wall Street is again using leverage, with margin at its highest point in five years as all the banks and hedge funds are levering up for the bullish first quarter, and this increased leverage is juicing up all asset prices, including oil and gas. So as Wall Street banks and traders juice up their returns, again the American consumer is footing the bill via higher gasoline prices at the pump. Too bad they don`t give consumers a cut of those big fat bonuses. But somebody has to pay, again the powerful take from the poor.
Driver #4: Fear Mongering over “Potential” Supply Disruptions
The other long standing trick on Wall Street is to use fear mongering to push up the oil markets, so any even remote pipeline leak, or incident in the Middle East is used to scare up the market. The latest is Algeria with a Natural Gas plant hostage situation. I know it doesn`t matter if it is not even related to oil infrastructure, it doesn`t matter.
There has been no real supply disruption in the last 30 years with all kinds of flare ups in the Middle East, and requisite hype run-ups in oil markets. Never one major supply disruption where actual supply in the oil markets was scarce over the past 30 years!
Why because everybody needs money, and it doesn`t matter if you’re a terrorist, a dictator, an insurgent, you’re going to sell oil because this is what supports the entire region. So whoever is in charge is going to protect the oil fields at all cost, and they are for the most part, the most secure assets in the world. Safer than your Gold in a safety deposit box!
These incidents are used to hype markets and push up prices regardless of actual legitimate threats to supply disruptions where oil would actually be a scarce commodity.
Strategic Petroleum Reserves is crucifix for Evil Speculators
It’s all a money game on Wall Street, and without a physical deliverable market, the only solution to thwarting these evil speculators in the oil markets is the tool of the SPR release.
It worked last year as these speculators started pushing oil up, yeah it doesn`t matter if supplies are booming right now, and President Obama threatened to release the SPRs and this turned around the market and sent it back down.
You see this is highly effective as the speculators need to make money like crack addicts, so once they realize that the game is over to the upside, they get out of the market, and look for other markets they can juice up.
This threat and actual release of the SPRs is the only thing that has thwarted the evil speculators in the oil markets the last two years. If it was left to their own devices we would all be paying for $150 oil, and 5 dollar gasoline. They don`t care who they hurt in the process of getting their fat trading bonuses.
So once again, as oil markets are rampant with excessive speculation, President Obama needs to bring out the old SPR Release Hammer and send these evil speculators back to juicing up penny stocks on the OTC markets or Netflix, Inc (NASDAQ:NFLX) to $400 a share.
Further Reading – Counterpoints to Goldman Sachs Chief Commodity Strategist