Bond Market Leverage & Manipulation
From Peak Oil, The Myth, The Legend, The Fraud
In spite of the fact that Brent Crude now represents less than 0.4% of worldwide production, its "spot" price determines the price of 60% of global oil production.
Open contracts exceed annual production by a ratio of 3.41 to 1. Total annual barrels controlled by contracts exceed annual production by a ratio of 212 to 1.
Traders call futures contracts "paper oil": the contracts are a paper claim against oil, which is far in excess of the volume of oil produced and actually delivered at oil terminals on behalf of those contracts.
From the obvious mathematical ratios and pricing LEVERAGE represented above, it is readily apparent that OIL PRICES ARE MANIPULATED BY SPECULATORS, nothing more, nothing less.
We have the same thing going on in the bond markets today. From Brad DeLong, commenting on a Financial Times report in his missive Market Liquidity:
"There is now about eight times the number of outstanding futures contracts as bonds eligible and available to fulfill them."
"In June, some large holders of the June 10-year Treasury futures contract, including Pimco, demanded settlement -- taking delivery of actual bonds -- instead of, as usual, rolling their positions into the next contract. The scramble to find the necessary notes was made worse by the fact that one account, possibly the hedge fund Citadel, already held the bulk of the cheapest notes to deliver."
"The real problem is that the US economy is just too leveraged. Starting with the housing industry, the country is too dependent on derivatives markets to create the illusion that interest rate risk can be conjured away. The technical problems of the 10-year are just another early warning sign of this fundamental weakness."
More on the 'morrow regarding the derivatives markets.
In spite of the fact that Brent Crude now represents less than 0.4% of worldwide production, its "spot" price determines the price of 60% of global oil production.
Open contracts exceed annual production by a ratio of 3.41 to 1. Total annual barrels controlled by contracts exceed annual production by a ratio of 212 to 1.
Traders call futures contracts "paper oil": the contracts are a paper claim against oil, which is far in excess of the volume of oil produced and actually delivered at oil terminals on behalf of those contracts.
From the obvious mathematical ratios and pricing LEVERAGE represented above, it is readily apparent that OIL PRICES ARE MANIPULATED BY SPECULATORS, nothing more, nothing less.
We have the same thing going on in the bond markets today. From Brad DeLong, commenting on a Financial Times report in his missive Market Liquidity:
"There is now about eight times the number of outstanding futures contracts as bonds eligible and available to fulfill them."
"In June, some large holders of the June 10-year Treasury futures contract, including Pimco, demanded settlement -- taking delivery of actual bonds -- instead of, as usual, rolling their positions into the next contract. The scramble to find the necessary notes was made worse by the fact that one account, possibly the hedge fund Citadel, already held the bulk of the cheapest notes to deliver."
"The real problem is that the US economy is just too leveraged. Starting with the housing industry, the country is too dependent on derivatives markets to create the illusion that interest rate risk can be conjured away. The technical problems of the 10-year are just another early warning sign of this fundamental weakness."
More on the 'morrow regarding the derivatives markets.
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