I certainly won't say you are wrong in your overall conclusion that
the price of gas and other petroleum products will drop from the point
they were at when you and the Sarge statred your little dance. If
nothing else, wisdom would say "never back any horse that the Saudis
aren't backing, too." The Saudis want oil at US$25 to US$29 per
barrel. They will get it there sooner or later.
But, as I recall, the Sarge put a time frame of September on this
wager. You might want to wait until the finish line has been crossed
before you declare your horse has won. You haven't got past the second
turn, yet.
-- Brian McLaughlin (brianm@ims.com), July 06, 2000.
NOPE. **HE** should wait and watch the call go to zip. He could cut
his losses short but he is probably waiting for the "technical
recovery". He lost when he started. Any sophisticated player would
know this was a spot shortage. IPSO FACTO: spot shortages END when
someone SHIPS. Saudi will ship and the rest of OPEC will then fall in
line. Only a WAR can interrupt that process. "Y2k" was not
that "war".
His error was made when he *bought* the future. He needed in excess
of 97 to clear. His temporary profit was the excessive premium and he
was NEVER in the Black. He just "thought" he was (as much as such a
person can "think".) He is a good demonstration of why the Commodity
regulatory people and the SEC doesn't like unskilled people "playing
the market".
Saudi is telling the world of speculators, "we told you in March what
the price is going to be and you don't seem to want to listen". The
Saudi numbers are not picked from "out of the air". To be blunt: THEY
KNOW....you do not. And they have the money to manipulate the markets
to their will. You may assume they were shorting all over the board
before the announcement over the weekend. They are not "constrained"
by such things as the Comm. Reg. bodies and the SEC. They simply buy
and sell in their London or European offices.
And remember, every thing.......THEY SHORT.........they can
DELIVER!!!! That is why the "inverted market" tells you
something.
The only thing that might slow the slide in futures is that the open
interest was going down so the "Margin Calls" may not be as high.
The "calls" ride off the futures.
If he is lucky, he will be able to buy a frame for the transaction
record as a reminder not to assume he knows one thing more than what
OPEC was up to. 100% loss is a suitable price to pay for a lesson
that should have cost him zip. He could have "paper traded" and while
his gain would have been zero so also would be his coming loss.
What part of "we want the price to be no higher than $25 U$" did
anyone not understand. The inverted market told you this was a "spot
shortage" and what did "Sgt." do? He bought an intermediate call.
Then he insulted everyone's intelligence by announcing his "loss
would be limited". Of course it was: 100% lost when the call expires
unexercized.
This is a typical "investor" error. The stupidity involved was
thinking an outsider could defy what OPEC had clearly announed. They
wanted OIL in a price range that would max. their profits but NOT
SLOW DEMAND. They pay "Economist" millions and millions of dollars to
determine proper pricing.
OPEC hardly cares about "input" from online extremists
and "Chatters" on the net. Their sheer buying and selling power is
the Elephant to their dung beetle.
-- cpr (buytexas@swbell.net), July 07, 2000.