Re: hedge funds and oil prices
On Oct 10, 2006, at 2:05 PM, Sean Andrews wrote:
a few weeks ago on your show you said that part of the reduction in gas prices could be because hedge funds were finally selling off their overpriced futures in that area (or something like that.) Is this your informed observation or are there data out there that would indicate it was the case? I mentioned this to a friend who works at a hedge fund and he seemed to get his feelings hurt that hedge funds get picked on so much. I wondered if I could point him to some evidence so he can start working through some of this.
More generally, how would (or could) someone prove the effect a single group of investors were having a certain effect on a market? Where would this show up?
The hedge funds’ behavior was all over the financial press. The
reason they get “picked on” is that they’re big, move fast, and
generally move together. It’s shorthand for “speculative capital,”
but the hedge funds are a big part of what we might call the
speculative community.
Someone who felt ambitious could look up the CFTC’s “Commitments of
Traders” reports on the oil market. They reveal the collective
positions of “commercial” (in this case, oil producers and users) and
“noncommercial” (in this case, speculators) interests. (There’s some
pundit, it might be Steve Leuthold, who puts these together for the
various markets, but I don’t think the info comes for free.)
The Lex column in today’s FT reports: “For the first time since
March, speculators are running a short position overall in crude oil
and refined products contracts in New York.”
Doug