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And Here They Go For Round Two: CME Hikes Brent, Crude Margins By 25%, First Of Many Such Moves
Some brilliant Chicago-based exchange apparatchik just ask himself this simple question: "If it worked so well with silver, why not do it with crude?" The answer is here: the CME, as we predicted last week, just hiked initial and maintenance margins on Crude and Brent by 25%, as well as FX, and other petrochemicals. And, oh yes, this is prudent risk management, because while the CME kept margins flat when WTI was at $115, the massive spike from $97 to $102 is unbearably destabilizing. At this point one can only stand back and watch as the CME proceeds with hike after hike, in an absolute vacuum from the administration, which certainly had nothing to do with this decision. And really who cares: free capital markets died on March 18, 2009.
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I'm amazed no-one seemed to have advanced notice of this. The market didn't move down, but strongly up all day today.
double down hand before the casino bus leaves.
+X2
+ 2.88M barrels/day.
I thought you could dig oil out of the ground for $5?
No, that's silver. Oil comes out of the creamy caramel center of the earth.
o thats right. thanks for the correction
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.
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!): http://e24.no/boers-og-finans/investorer-vedder-milliarder-paa-oslo-boer...
Anyone reading this thread without first reading this one:
http://www.zerohedge.com/article/guest-post-anatomy-silver-manipulation-...
does not understand the context of this hike in crude margins.
What happened to that silver margin hike that was suppoed to happen today? Maybe tomorrow...
It happened. Why do you ask?
Probably waiting to BTFD, but that couldn't be as this hike was announced last week.
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.
It was already announced and priced in, dipshit.
Keep up, troll boy.
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..
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.
Those dang speculators...
Airline ticket prices up - cost of hedging (margin expenses) another add on fee.
This is simply unmitigated bullshit.
The goons hike margins to "cover" "volatility" that they themselves created.
An absolute sham, farce and joke.
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.
chicken or egg?
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
I'd prefer 100% margin, hence no margin.
End with the fractional reserve system.
True value of all goods to all the people.
CME: "Dammit, why are you always making me beat you? It's all your fault!"
Volume was low all day on slv Meth........
Sorry vol = volatility in trader speak.
We all know why the margins were raised, you trifling a$$hole.
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?
A graph showing prices of various commodities vs margin rates vs time would be quite interesting.
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.
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...
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.
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.
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?
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.
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).
Margin hikes hurt shorts as well. ie: producers will have to devote more of their capital to margin payments, and less to production.
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.
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.
So why did they expand the circuit breakers intra-day when crude was down $10?
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.
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
Whats up Turdman....Do we have silver resistance at $50, or are we caught in a range below there?
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.
http://tfmetalsreport.blogspot.com/2011/05/1520-3950.html
Then afterwards, desperate firing squad? Or are they out of .... oh wait.... paper..... shit.
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.
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?
Do
Not
Buy
Now
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.
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.
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))
.
It's a WAR on 'speculators'....and it's gonna smell like napalm in the mornin'
No, more precisely, its a "war" on any boogeyman they can create in order to distract attention from the real cause of price increases...their disastrously failing monetary policies.
Distraction, misdirection, disinformation
There ya go Turd. Spot on.
+54.21
Exactly Turd,
That is why Chris Powell of GATA should be listened to and not treated like some conspiracy stooge over at Mish's board. I'll never understand why Mish attacks these fine people. TD was good enough to post this earlier today and it's on point to what you are saying yourself.
http://www.journalinquirer.com/articles/2011/05/08/chris_powell/doc4dc41fbe6bab9239324621.txt
I've never once checked his site or read his stuff but, from what I've heard it's same to say: Mish is a douchebag.
If Mish is a douchbag (and I am not arguing against the premise), then Turd, you would just LOVE Karl Denninger, who is literally a Saturn V-sized douche, no, make that an ocean of douche, an entire planet of douchebaggery, nay, his very own universe composed of doucheons, banions and stupidos, in which the douche-time continuum is warped not by gravity, but by the incredibly dense discontinuities of logic generated by the sheer maniacal hysteria, hypocrisy, contradictions and incoherence of Karl's rants.
Note: While there is no possible arrangement of doucheons, banions and stupidos that can combine to form the element gold, there are an almost infinite number of combinations of those Denningerian subrational particles which can combine to form anti-gold --- and which often do.
"...douche-time continuum"...
Fucking classic!
@ akak
Hahahahaha. Thanks for the laugh, over-the-top really hits the spot.
Nicely done.
So you write here so people can read you?
This is very bullish for silver which is why they got the silver hikes out of the way. Why you ask? Simple: silver delivery trumps oil delivery.
+1
Where are the ES hikes?
*crickets*
+ 1
This is bullish for re-election.
Just the opposite. Obama will have gasoline rationing and long lines at the few service stations that will remain open by election time.
Five gallons per voter id card, is what I hear. But if you have an Obama bumper sticker, you might be able to get six.
And if you have a Ron Paul sticker, your car will be impounded and destroyed.
CST.... Commodity Suppression Team.....
They can manipulate and suppress the trend, but the market laughs last!
Headline incorrect? Doesnt the big'liquid Brent contract trade on ISE and not CME? WTI increase ouch..
Doesn't prevent CME from hiking across the board. 33 pages of hiking goodness.
If somebody is that levered-up that this upsets their oil investment strategy, they wouldn't be in the game for long anyway. The volatility would kill them.
Seems to me like the FX market is going to be the next big bubble....Those requirements are the only ones decreasing. No volume with equities, commodities tougher, but FX is easy! Am I wrong?
Banks got exempted
Um, free capital markets died well before March 18, 2009.
Glad someone else caught that.
They just got tired of staring at its corpse and decided to throw a TARP over it.
Is this what you are in reference to?
http://www.federalreserve.gov/newsevents/press/monetary/20090318a.htm
IMHO.
They will hiking the margin on everything except the copper, which JPM is betting long on.
I think they will continue to hike on oil to suppress it for Obama's re-election.
And they want to force people to put money on stock market instead of options, fx and future. Another move to make economy look strong and healthy. Stock market ties to the consumer confidence. If the stock market goes down, then Obama will go down.
Can Obama bin Lyin' kill Osama one more time?
Maybe resurrecting him and chasin' a dead man and his dialysis machine for the next ten years will solve our problems. Raise that debt ceiling, Timmy.
LOL
+23
The fact that the margin hike came after crude come down significantly demonstrates that the hikes have nothing to do with manipulating the price. LMFAO~!
Fuck this I know trading futures is supposed to be risky, but this just takes it to a whole new level.
Nothing quite like playing games where your opponent keeps changing the rules in his favor.
And the friends of comex insiders know about the rule changes ahead of time.
But the government would rather go after an Amish man, selling raw milk, with a massive sting operation.
Yet the shills keep lining up, knowing that this time it's a sure thing. Why? Well see, my brother know this guy who knows...
So my first post on the site and I would like to ask you guys, "who wants blythe masters personal phone number?" Because really I have it unless she changed it in the last 3 years. So who wants it?
.
I do.
I will call her and take the chance this is a hoax.
You may want to consider, that the one on the other end, will be able to identify you :)
nice try; I used to pull that shit with every girl who dumped me in college. Memories.
Her manhattan # is 212 834-5677 ...
who cares about her work number? anybody can get that
Double Post Deleted
A little bump in the road, it buys them time till the shit storm comes
CME Hikes Brent, Crude Margins By 25%,
if you pay in silver...
no one wants that number
Pretty much everyone on ZH already has her fuckin number.
Tricky Dick did price controls to win an election. Obumble's throwing a spin on that play book apparently.
Exactly, only now we're talking world wide price controls with the dollar being world reserve currency and all. The end will follow if they keep this shit up.
I hope so. 57 states are too hard to control when the cat Herder's money goes bad.
Two predictions:
1. This will scare some people, who are not on the inside, out of oil speculation.
2. Oil prices will still go up because the plan is $200/bbl in 2012
No free rides on the varsity bus.
Some people may find the notion of the CME banging the oil price down concurrently when the FED banging the dollar price down wholly unacceptable. No one cares, until it is some guy who controls a NOC and is being paid increasingly smaller quantities of increasingly worthless paper, for his oil. Then the difference between oil and silver becomes glaringly apparent, very few people can live without PHYSICAL oil.
A lot of weak players will have been removed from the market by the crash last Thursday. Saying that these hikes won't help risk trades in commodities of any kind, particularly as people know QE2 is ending (Yes, sure QE3 will likely be announced, but I don't think it will come in June).
JJust gotta wait for equities to go.
.
Looks like fascism. Smells like fascism. Hey, i think it's fascism.
Yes folks, fascism is here to stay in the good old USA... enjoy what you've created cattle.
So my first post on the site and I would like to ask you guys, "who wants blythe masters personal phone number?" Because really I have it unless she changed it in the last 3 years. So who wants it?
So - did you, or didn't you?
Well I now know this is the right number, wow this is fantastic
I would like the number. I think this is a hoax but i know how to find out. I will call immediately and report back if this is a hoax.
I want it. I think she has some Prince Albert in a can.
LOL!
Bring it!
Hoping for 85 WTI on leg 2 down, then up... violently.
ten-four.... brain-surgeon on teevee other day sez $80 to $85. The latter sends UCO down to 35-36... a steal down there!
I see no problem with these margin increases at all. If it means I can spend less on the petrol and buy physical silver cheaper, that is a good news for me. I do not think the markets have been free in my lifetime, and this has not changed in recent years, just became more obvious.
What it means is you will pay the same at the pump as refiners now have to cover the cost of their losing hedges.
That is probably right, and I do not think the physical silver is going to be any cheaper either...
I wonder if they know it is the hedgefund turned bank holding companies they are giving 0% money to that are doing most of the oil speculating.
"March 18, 2009"? Hit me with the clue bat.
That was the start of the bull.
also it was the day before the 27 year anniversary of Randy Rhodes plane crash
what's supposed to happen May 18, 2011? guess i'm out of the loop.
Give me the phone number prodigy.
I will report back if it is legitimate.
hum how do i get it to you without posting it all over the internet. I think i would rather not have my name connected to this shitstorm more than it already would be haha
kprice1670 at gmail dot com
There will not be a shitstorm. I am going to ask her to let a high school newspaper interview one of her traders to learn about how commodity exchanges work.
I should be able to.confirm veracity then i will report back.
The suspense is killing me.
FYI I get mad props for this on this site. :)
i sent you an email
waiting for response to the email i sent you
Why did they reduce margin on Hungarian Florint and Polish zloty FX contracts (and I didn't even know they had those contracts on the CME until today.)?
FAS 157
JPM and GOLDMAN ready to load up on oil again, as the CME sets up the game.
Price Controls never work and inevitably this will fail just as Nixon's attempts failed and inflation raged. Make no mistake these margin increases are really price controls and like the 1970's we will have inflation in spades. Bernanke will imo be run out of this country in shame in the not to distant future.
They made so many changes to encourge FX speculation and discourage oil speculation. I really have no idea what is going to happen here.
Markets are disintegrating, or they realise they are about to, pure and simple.
What I fail to understand is why they just don't do away with the crap and offer lower leverage rates to investors/speculators across the board. Why give anyone amazing leverage in the first place? All that is ever going to do is welcome speculators with open arms and invite them to speculate...unless that is their end game, knowing they hold all the best cards and they can change the rules whenever they like to shake 'em out.
Oh! wait a minute.
I'm sure this hike isn't collusive in any way, shape or form.
Ah, election season!
like Obama Bin Lyin is going to last another 18 months? i dooooon't think soooo!
And the next part of the puzzle: Who lit the fuse in the Middle East?
and Why? Who is going to lit the fuse in the Magreb? Why?
Whoever gets it right gets an A+
All three:
ICG
CFR
Brookings Institute
Cheap gas for everyone. WOOHOO!
Did they lower the margin requirements on bonds, the Russell 2000 and AAPL??......;>)
Seeing as we are all here to make money as priority 1 (and 2) and we all saw what margin req. hikes did to silver, wouldn't it make sense to buy puts on crude and short the crude ETF rather than watch crude go from $102 to $90 and not benefit from our experience? But I do need to ask which ETF would best be shorted, I don't think it's the OIH, suggestions please....Thanks much
I was thinking the same thing. But I would feel more comfortable doing this if I understood exactly why the hikes seem to crash the commodity of interest.
And how in the world is it justified to increase margins despite recent declines in prices of said commodity.
Someone send me a link-o-lurnin', please!
(See my question below.)
Don't overthink it, higher rates = higher cost to trade, take crude oil (CL) each contract = 1000 barrels, if crude is $102 a barrel the value of a contract = $102,000, the min req. is $12,150, each $1.00 crude moves is a change of $1,000 and if someone must maintain the $12k if crude drops $3 they need to come up with $3,000 well there are those who don't have much extra $$$ and when they get a margin call aren't able to bring in $3k thus they must sell, multiply that by 1000's of people and 1000's of contracts and you can see why all those contracts being sold causes a drop, especially when the brokerage firms KNOW there is forced selling, they drop their bids to buy cheaper which forces more margin which causes more selling....so a drop is unavoidable unless something happens to cause crude to spike and offset the higher requirements, otherwise $90-$95 here we come. I hope that helps
Question: suppose i have $100K to invest. Can I just buy a contract for 1000 barrels of oil and take delivery and have a certificate held by my broker? Yes I know there is risk the price of oil might drop but it also might go up as well. How long can I hold the oil and wait for the price to go up? How much would the storage charges be? Am I nuts for thinking this might be a good place to put $100K for 1-2 years? any thought you have on this issue would be appreciated.
Yes and no. You may indeed accept delivery of 1000 Barrels of oil..or a truckload of Wheat, Corn, Oats, Beans, Sugar, Rice...ect. The "certificate" you mention does not make sense. You accept delivery..it will be delivered if that is what you want. That is why Brokers will get a bit curious if you still hold up to Last Trade Day!! The storage, shipment, and insurance to cover the transport fall on your shoulders, no one else. You can also do the same with Silver, Gold, Platinum, Palladium...which "concentrate" the same physical wealth in a much smaller package. They are also traded in US Dollars (for now anyway). The EPA will not be on your case for the Metals..they WILL be all over your case in a heartbeat if your oil barrels start to leak. Just so you'll know, you may also be specific in the type of Metals delivery. In other words..lets say you wish to accept your 1 Contract in May 2011 Silver. You may have delivery made in Eagles, Maple Leaf, Libertad, or even pre 64 90% so called "junk Silver" if you so desire. Be aware..it may take a little while to deliver (I say with a bit of sarcasm) A word to the wise..ONLY the Silver Eagle is exempt from reporting this transaction to Treasury (that is supposed to be the case anyway!). It is the only .999 Bullion coin I know of that Congress exempted at the levels you mention.
thanks for the info, especially about the Silver Eagles.
Imagine the shipping fees associated with delivery of that much oil...
And the size of the refrigerator you would have to store it in to keep it fresh.
Thanks, got it!
I'm here to save the world. That's why i'm shorting SD and OIL.
Can someone describe why margin hikes reduce demand? What are the mechanics involved?
It is interesting that these hikes are being applied to commodities in decline...