Wednesday, July 23, 2008

Congress to Curb Oil Speculation

July 23 (Bloomberg) -- Congress may outlaw elements of oil futures trading that lawmakers found distorted demand and contributed to the 69 percent surge in prices in the past year.

U.S. legislators are considering limits on the number of oil contracts an investor can hold and may increase disclosure requirements. Speculators such as Goldman Sachs Group Inc. use the practices to bet on price swings, which may drive up prices, though they have no intention of taking delivery of underlying goods, lawmakers say.

Proposals being debated this week in the Senate would bring prices more in line with demand, proponents say. Excluding the effect of speculation, oil would be around $80 a barrel, 38 percent lower than yesterday's price, according to Jesus Reyes Heroles, the chief executive officer of Petroleos Mexicanos. Critics say restrictions may interfere with the functioning of a $4 trillion annual market for crude oil.

Remember a couple of weeks ago, when we heard that we may never see oil at "100 a barrel in our lifetime again?"

Anyone remember Digital Equipment, when it was at 140 a share in 1987? Didn't they say the same thing?

Already every pundit is lining up to sell the financials. What an original idea! Short them for the two points they can pull back.

The financials will rally early because no one has the locate for all the shorts, except the early riser hedge funds. So every hedge fund has the same playbook. Pick up the SKF, on the early morning financial rally, at around 111, and play it as the financials reverse.

You could get a reversal, but not a decent one, as the animal spirits will probably be gunning the NASDAQ names.

But the onus is on the bears to prove that this rally isn't real. I don't think they are up to the task.

Those thinking the easy money is to be made by shorting the financials here, for a trade longer than a couple of days, will probably be mistaken.

I think they hit oil again. And that will blunt any attack that the bears can mount.

That's the hedgie's playbook for tomorrow.

Not mine. I need more than 5% in a trade to get excited in this market!

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