And Here They Go For Round Two: CME Hikes Brent, Crude Margins By 25%, First Of Many Such Moves

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Mon, 05/09/2011 - 17:22 | 1256953 tmosley
tmosley's picture

I'm amazed no-one seemed to have advanced notice of this. The market didn't move down, but strongly up all day today.

Mon, 05/09/2011 - 17:25 | 1256979 Rainman
Rainman's picture

double down hand before the casino bus leaves.

Mon, 05/09/2011 - 17:31 | 1257008 dark pools of soros
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Mon, 05/09/2011 - 17:38 | 1257051 SobaYobonay
SobaYobonay's picture

+ 2.88M barrels/day.

Mon, 05/09/2011 - 19:32 | 1257376 camaro68ss
camaro68ss's picture

I thought you could dig oil out of the ground for $5?

Mon, 05/09/2011 - 19:41 | 1257410 Dr. Porkchop
Dr. Porkchop's picture

No, that's silver. Oil comes out of the creamy caramel center of the earth.

Mon, 05/09/2011 - 19:59 | 1257447 camaro68ss
camaro68ss's picture

o thats right. thanks for the correction

Mon, 05/09/2011 - 20:04 | 1257464 akak
akak's picture

No, Porkchop, Hell is at the center of the earth --- all the oil lies in a thick layer between us and the eternally damned.  That is what keeps the fires stoked, all that oil dripping from Hell's ceiling.

Mon, 05/09/2011 - 17:32 | 1257031 Spaghetti Monster
Spaghetti Monster's picture

Well, actually; On Oslo Stock Exchange (which is all about the oil, in fact the whole friggin' country is) unusually large short positions were established in the previous week, with total short interest about twice the size of the rest of European exchanges. Also specific rumorus about some brokerage house trying to find a counterparty for an unusually large short on the OBX. Maybe somebody knew...

Source (Google Translate it!):

Mon, 05/09/2011 - 17:36 | 1257053 Turd Ferguson
Turd Ferguson's picture

Anyone reading this thread without first reading this one:

does not understand the context of this hike in crude margins.

Mon, 05/09/2011 - 19:01 | 1257287 Zer0henge
Zer0henge's picture

What happened to that silver margin hike that was suppoed to happen today?  Maybe tomorrow...

Mon, 05/09/2011 - 19:20 | 1257342 Quintus
Quintus's picture

It happened.  Why do you ask?

Mon, 05/09/2011 - 19:26 | 1257353 speconomist
speconomist's picture

Probably waiting to BTFD, but that couldn't be as this hike was announced last week.

Mon, 05/09/2011 - 19:45 | 1257420 randocalrissian
randocalrissian's picture

Second margin was priced in with the first as both announced concurrently... it just gave more flexibility to liquidate positions, so any additional margin hike-related liquidation today was quite a bit less than Thursday.

Mon, 05/09/2011 - 19:52 | 1257435 tmosley
tmosley's picture

It was already announced and priced in, dipshit.

Keep up, troll boy.

Mon, 05/09/2011 - 17:53 | 1257112 1100-TACTICAL-12
1100-TACTICAL-12's picture

seems to me as they keep raising margins , and the shit recovers in a few days like gold,silver & oil did today. It just shows how little faith there is in the dollar..

Mon, 05/09/2011 - 19:39 | 1257399 CPL
CPL's picture

That's because PM's don't behave like stocks.  Eventually they have to make good on their delivery of the physical PM.


Fucked if I've heard of anyone worrying about more paper being delivered if a company goes bust.

Mon, 05/09/2011 - 17:22 | 1256959 surfsup
surfsup's picture

Those dang speculators... 

Mon, 05/09/2011 - 17:47 | 1257094 Cleanclog
Cleanclog's picture

Airline ticket prices up - cost of hedging (margin expenses) another add on fee.

Mon, 05/09/2011 - 17:21 | 1256965 Turd Ferguson
Turd Ferguson's picture

This is simply unmitigated bullshit. 

The goons hike margins to "cover" "volatility" that they themselves created.

An absolute sham, farce and joke.

Mon, 05/09/2011 - 17:26 | 1256994 Math Man
Math Man's picture

So, what would you do if volatility had picked up and you owned the exchange?

You HAVE to raise margins...  it is the only way to protect yourself.

Unfortunately, every time vol moves, you have to do it again.

The thing is, if you are truely a long term holder, like all the ZH readers claim to be,  you should welcome this - it removes speculative froth from the market.

Mon, 05/09/2011 - 17:26 | 1256998 Turd Ferguson
Turd Ferguson's picture

chicken or egg?

Mon, 05/09/2011 - 17:34 | 1257012 Math Man
Math Man's picture

Exactly.  Problem is right now is the vol picked up, but the reaction is causing more vol...

It will pass eventually, but my guess is we'll be lower across the board for commoditites.  Too much speculative long money in there right now.  As it stands, you can still take on massive amounts of leverage in the commodities markets...  even w/ the new numbers, you can lever massively


Mon, 05/09/2011 - 18:09 | 1257146 Ratscam
Ratscam's picture

I'd prefer 100% margin, hence no margin.

End with the fractional reserve system.

True value of all goods to all the people.

Mon, 05/09/2011 - 18:12 | 1257154 Rynak
Rynak's picture

CME: "Dammit, why are you always making me beat you? It's all your fault!"

Mon, 05/09/2011 - 18:20 | 1257176 Teamtc321
Teamtc321's picture

Volume was low all day on slv Meth........

Mon, 05/09/2011 - 19:02 | 1257280 Math Man
Math Man's picture

Sorry vol = volatility in trader speak.


Mon, 05/09/2011 - 19:05 | 1257290 Bicycle Repairman
Bicycle Repairman's picture

We all know why the margins were raised, you trifling a$$hole.

Mon, 05/09/2011 - 18:21 | 1257180 BigJim
BigJim's picture


Forgive my ignorance, but I'm just beginning to see the ramifications of this.

When you expand the money supply broadly, you increase the (nominal) prices of everything. But when you make money cheaper (or more expensive) for specific things, it will be the prices of those specific things that will be bid up/down... and the difference will not be nominal at all, but real, relative to everything else. And the difference will be the result of credit-rate distortions, rather than the market's perception of relative value per se, ie, if all these items had to be bought with money that cost the same.

So by changing margin rates on different items bought on credit, the PTB can engender (and pop) bubbles of any specific commodity at will.

Can anyone point me in the direction of someone who's done more analysis of this?


Mon, 05/09/2011 - 18:19 | 1257181 BigJim
BigJim's picture

A graph showing prices of various commodities vs margin rates vs time would be quite interesting.

Mon, 05/09/2011 - 18:42 | 1257231 Burnbright
Burnbright's picture

That would be interesting to see, however correct you may be it is really only correct about the paper market as that is where and how the bubble is formed. If they raise margin on paper markets and collapse the difference between dealing with the risk of holding a piece of paper that says you own something and holding the real thing then they will reach the threshold where a majority say it isn't worth holding paper over the real thing a divergence will occur between paper and physical. 

You can tell it has already begun to happen in silver premiums. I am going to guess that the threshold I am refering to happens at less than 50% of the cost of the real thing or slightly less than 2x leverage. 

Mon, 05/09/2011 - 21:26 | 1257673 BigJim
BigJim's picture

I hear what you're saying... but even with silver, for a long time, physical price has followed paper, and will only stop once the paper price is clearly disconnected from reality - ie, we have a comex default, or are within nine yards of one.

Housing is a good example here, I think, of a physical market that's prices have been determined entirely by cheap money. When the cheap money ends, prices have to drop...

Mon, 05/09/2011 - 19:30 | 1257320 michigan independant
michigan independant's picture

Keynes’s aggregative analysis not formally wrong, but empty, redundant.

Keynes denied the existence of a liquidity trap. So they are fixated on wage.


For in 1986 Samuelson was still claiming that “we [Keynesians] always assumed that the Keynesian underemployment equilibrium floated on a substructure of administered prices and imperfect competition” [C-L, 1996, p.160]. When pushed by Colander and Landreth as to whether this requirement of rigidity was ever formalized in his work, Samuelson’s response was “There was no need to” Keynes explicitly demonstrated that even if perfectly flexible money wages and prices existed (“conceding a little to the other side”), there was no automatic mechanism that could restore the full employment level of effective demand . In other words, Keynes’s general theory could show that, as a matter of logic, less than full employment equilibrium could exist in a purely competitive economy with freely flexible wages and prices. Obviously Samuelson, who became the premier American Keynesian of his time, had either not read, or not comprehended, (1) Keynes’s response to Dunlop and Tarshis or even (2) chapter 19 The General Theory which was entitled “Changes in Money Wages”.

 The point is Mr. Market wants "poking" you to be bag holder only again and margin calls will do just that. When shit really the fan in the GD remember what classes "products" managed to survive? The point is top thinking can solve some sticky wages issues, and the manufacuring class wants to eliminate signal noise to supply chain reality's in there quest to mop up loose ends. These monsters 10 feet tall wish the 5 foot  no harm but total annilation. Remember this first and foremost, Governments tolerate innovation since Statist have what purpose only than there survival and interests directed only. The days on getting it done are over and have been. You are allowed to survive only. Many are finding that market cap "property rights" is deemed nationalized assets are filtering back it appears. IMO Vanilla money may never come back since inflated base mop that up to welfare equilibruim.




Mon, 05/09/2011 - 19:36 | 1257375 akak
akak's picture

MI, the trick lies in putting your words together in a logical order which conveys a coherent thought, or thoughts.  Your posts, instead, consistently read like a crowded Scrabble board.

In other words, when your neurosurgeon reconnects your hemispheres via your corpus collosum, get back to us, and not a minute before.

Mon, 05/09/2011 - 21:31 | 1257680 BigJim
BigJim's picture

I appreciate your taking the time to answer my question, and I'm pretty sure you're saying something very interesting here... but I can't for the life of me work out what it is. Sorry :-(

Would you mind editing it into a format that other (and, admittedly, possibly lesser) human beings can understand, and re-posting?

Tue, 05/10/2011 - 09:47 | 1258914 schizo321437
schizo321437's picture

MI, is a 1 percenter I think. You forgot that the US isn`t the only country on the planet. Self interest is the problem. Solve that and you`ll get equilibrium maybe, social engineering hasn`t worked up till now though, so skeptics abound, which is why you get there in an oblique fashion.

Mon, 05/09/2011 - 17:32 | 1257029 AbandonShip
AbandonShip's picture

And how/when do the margins go down? 

I think the lack of transparency of all this is what bothers everyone. Sure, the casino cannot die, but moving the goal posts w/o warning is irksome.   Nice to see HKMex launching gold futures shortly.  Maybe CME will reconsider their longs-assault with some global competition (unless they go ahead and buy HKMex to regain monopoly status).

Mon, 05/09/2011 - 17:56 | 1257120 pitz
pitz's picture

Margin hikes hurt shorts as well.  ie: producers will have to devote more of their capital to margin payments, and less to production. 

Mon, 05/09/2011 - 18:23 | 1257185 BigJim
BigJim's picture

If most of the big shorts are TBTF banks (as in the case of PMs) then the margin changes are irrelevant to them, as they have unlimited 'free' money courtesy of the Fed.

Tue, 05/10/2011 - 02:32 | 1258244 pitz
pitz's picture

Are the 'big shorts' not firms such as miners, oil companies, etc., who want to hedge their production for financing purposes?  If they are forced to tie up their retained earnings in US treasuries, then many new mines and oil wells simply do not get drilled, and prices spiral up even further.  Hedged commodity producers could even go bankrupt if commodity prices exploded high enough as they might be unable to pull the stuff out of the ground fast enough to cover the increased margin requirements of the forward sales/shorts.

Mon, 05/09/2011 - 17:54 | 1257105 traderjoe
traderjoe's picture

So why did they expand the circuit breakers intra-day when crude was down $10?

Mon, 05/09/2011 - 20:04 | 1257384 Jason Bourne
Jason Bourne's picture

Math Man - It's not about fucking PROTECTING yourself, that is NOT what the fucking market is about, its about being a place where the Market decides the fucking market price, not PRICKS who own the exchange.


FUCK i can't stand it when people change the rules when it doesn't suit them!  The CME is an organization that needs to be removed from ownership of the exchange.  They are pricks too and you are obviously a shill for them so maybe get another user name so you can keep shilling without being identified as easily.


Mon, 05/09/2011 - 19:53 | 1257437 I am a Man I am...
I am a Man I am Forty's picture

not sure why you are junked so much for this, i am heavily invested in energy companies and I don't care if they hike margins, it will build a new base and may give me a chance to buy at better prices, i'm not invested because i'm worried about people having to put more money up to purchase oil

Mon, 05/09/2011 - 17:26 | 1257000 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Whats up Turdman....Do we have silver resistance at $50, or are we caught in a range below there?

Mon, 05/09/2011 - 17:32 | 1257014 Turd Ferguson
Turd Ferguson's picture

Hi, Jimi! Here's an uneducated guess for you.

Up to 39 or so. Back down to 35. Then buy, buy, buy late next week.

Mon, 05/09/2011 - 18:15 | 1257167 Rynak
Rynak's picture

Then afterwards, desperate firing squad? Or are they out of .... oh wait.... paper..... shit.

Mon, 05/09/2011 - 18:32 | 1257209 Hephasteus
Hephasteus's picture

The trolls have outted what they need. They need silver under 26 to cover shorts. I don't know what they got going on with oil but I guess there's similar problems. My guess is they will do another massive spook job. From there they'll label everybody terrorists and start liquidating the US.

Mon, 05/09/2011 - 19:02 | 1257278 Rynak
Rynak's picture

I'd rather go long flying pigs, than take advice from psyops.

If i were to use them to gain any information, i would instead analyze what they attempted to make us do.

What was that?





How did they communicate this message? In the following ways:

- Fear mongering about retaliation (you have no chance against us, give up and go away!)

- Indicating that the PM market is a ruined wasteland and uninteresting (better buy stocks!)

- This is the interesting one: Pulling random bottom prices out of their ass, which seemed unprobable to be reached, and then telling one that they WILL be reached and that one should wait (ergo:: not buy). The interesting part, is that those prices were all below 30$

If there is a shortage, and the psyops folks actually wanted us to believe what they said, and they are not incompetent, then blythe does not plan for prices to go below 30$ nearterm. Considering that they probably added some headroom, that would make the lower limit 33-35$...... which so far precisely is the new bottom.

Mon, 05/09/2011 - 19:51 | 1257430 Hephasteus
Hephasteus's picture

Seems like a good analysis. Just going over frequencies of numbers they throw out. 9 was their lowball but they concentrated mostly on 40 35 30 25. I wonder what the date is for the short covering.

Mon, 05/09/2011 - 20:24 | 1257502 Rynak
Rynak's picture

err, they really mentioned 40 and 35? I mean, 40 was already almost reached during the OBL attack (i think spot was 42 at that point)..... not disagreeing that some said this, i just cannot remember them. I remember 9, 15, 24 ... i think 28 was the highest that i saw, and if i recall correctly, the 28 target AND the 9 target, was both posted by bothsidesnowy (and both values in a matter of 5 minutes in the same thread.... hilarious multi-personality disorder))

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