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Margin Hiker-In-Chief Fires First Warning Shot As CME Raises Crude Oil Margins

Tyler Durden's picture


Back in April, when gas at the pump hit all time highs for that time of the year, and when the world was still hoping the euphoria from the LTRO would last (it didn't), Obama decided to implement his own centrally-planned vision of events in yet another market: crude. Recall: "now that Obama's uber-central planning mandate has proven completely powerless to redirect the flow of zero-cost money from acquiring real, as opposed to paper-based, assets (read crude), the Teleprompter in Chief will have a sit down with the nation at 11:10 am and in the latest sermon from the White House mound, will "confront" oil speculators once and for all. His plan: why encourage margin hikes of course - the same principle that crushed the spine of the gold and silver spike in 2011." Furthermore as part of his then adopted plan, Obama would "Give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position. The administration officials said such authority could help limit disruptions in energy markets." Our conclusion was that "Obama is about to become the Margin Hiker-in-Chief." 4 months later, the MaHinC has fired the first warning shot. After all, while Obama would love to have 1600 on the S&P the day before the election, the last thing he would like is to also have the $150 in WTI that would necesssarily accompany it, and guarantee his reelection failure. Sure enough: the first attempt at disconnecting the hard asset market from the S&P has arrived, as the CME just hiked various Crude margins by about 3.7%.

In brief: central planning is now coming to a commodity market near you. But first the crusade against those evil, evil, oil speculators (read central bankers but not really) is about to hit crescendo all over again.

Be afraid. Be very afraid as this lunatic fancy that someone can control all asset markets is doomed to not only failure but a spectacular crash.


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Thu, 08/09/2012 - 17:49 | 2692300 Hype Alert
Hype Alert's picture

I wish these central planners would make up their minds.  Are we fighting deflation or forcing it to happen?

Thu, 08/09/2012 - 18:04 | 2692340 slaughterer
slaughterer's picture

Obama did not make that margin hike.  Somebody else did.  

Thu, 08/09/2012 - 18:29 | 2692394 GeezerGeek
GeezerGeek's picture

But he'll probably try to take credit if the oil prices drop.

Thu, 08/09/2012 - 18:34 | 2692402 The Monkey
The Monkey's picture

Funny.  It's a little early to hike margins.

Crude and soft commodities still have a loonngg way to go!

Thu, 08/09/2012 - 18:36 | 2692405 magpie
magpie's picture

It won't work and the SPR will be tapped anyway.

Thu, 08/09/2012 - 18:43 | 2692416 vast-dom
vast-dom's picture

and these margin hikes won't work out for him. this is NOT gold and silver COMEX fuckery. these people need to get their own lives and just all go away.

Thu, 08/09/2012 - 19:59 | 2692593 boogerbently
Thu, 08/09/2012 - 20:05 | 2692625 The Monkey
The Monkey's picture

Actually, it's all going to tank.  If you are feeling bullish, which most everyone should be at this juncture, load up 50% in gold (or even better, 30 year US treasuries) and then take the other 50% and load up on FAZ.

FAZ is 3X short financials.  This is a market waiting to be spooked.  All the cogs should start to move within the next 72 hours.

Thu, 08/09/2012 - 21:19 | 2692793 vast-dom
vast-dom's picture

you mean 72000000000000 hours ago this motherfucker needed to tank!

Thu, 08/09/2012 - 18:04 | 2692341 busted by the b...
busted by the bailout's picture

Ha!  Yes, it takes very careful central planning indeed to get house and equity prices up, but commodity prices down. 

Maybe Ben needs two different kinds of money to pull that off.  He can print one kind and tighten the other!

Thu, 08/09/2012 - 18:13 | 2692365 Hype Alert
Hype Alert's picture

Exactly.  And I think, or at least I'm hoping, the public isn't so stupid as to believe after QE1, QE2, Twist 1, Twist 2 and promises of QEx that this is speculators and not something of their own doing.

Thu, 08/09/2012 - 20:02 | 2692609 old naughty
old naughty's picture

Now that we are awared, it makes our doing as well.

What are we doing about it?

Thu, 08/09/2012 - 18:15 | 2692370 scatterbrains
scatterbrains's picture

In making up his mind on which market to jack he went with crude over corn because.. well folks can always eat their Ipods... can't really drink gasoline.

Thu, 08/09/2012 - 18:55 | 2692419 razorthin
razorthin's picture

But it is an alternative to hanging from a billboard.

Thu, 08/09/2012 - 21:07 | 2692766 LawsofPhysics
LawsofPhysics's picture

No shit. Just make margins 100% on everything already. Then who will they blame when prices keep going up?

Fri, 08/10/2012 - 00:44 | 2693194 StychoKiller
StychoKiller's picture

Sorry, didn't quite catch that, say again?

Thu, 08/09/2012 - 21:15 | 2692779 LawsofPhysics
LawsofPhysics's picture

No shit. Just make margins 100% on everything already. Then who will they blame when prices keep going up?

Fri, 08/10/2012 - 00:44 | 2693197 StychoKiller
StychoKiller's picture

Man does my hearing aid need batteries!  Can you repeat that once more?

Thu, 08/09/2012 - 21:15 | 2692780 LawsofPhysics
LawsofPhysics's picture

No shit. Just make margins 100% on everything already. Then who will they blame when prices keep going up?

Thu, 08/09/2012 - 17:50 | 2692301 Stackers
Stackers's picture

Margin requirement for trading commodity futures: 100% or you must take physical delivery ....... problem solved. (sarc.)

Thu, 08/09/2012 - 17:57 | 2692319 duo
duo's picture

I don't have the space for all that corn!

Thu, 08/09/2012 - 18:16 | 2692371 timehill
timehill's picture

Actually, there was a time when physical delivery WAS part of the program!

Fri, 08/10/2012 - 00:45 | 2693198 StychoKiller
StychoKiller's picture

Ohh, well why didn't ya say so in the first place?! :>D

Thu, 08/09/2012 - 17:52 | 2692305 YesWeKahn
YesWeKahn's picture

Send this article to Obama.

Thu, 08/09/2012 - 18:15 | 2692358 Dr. Engali
Dr. Engali's picture

I'm sure the monitors have perused and stored it away already.

Thu, 08/09/2012 - 17:55 | 2692311 Haager
Haager's picture

Not to mwntion the increase in warmongering, now including the Iran (again). May an earthquake be with us...


Oh, I've got an email: I've won a sightseeing tour at the next FEMA-camp location, including free lunch and a basket. Nice!

Thu, 08/09/2012 - 17:55 | 2692314 Sudden Debt
Sudden Debt's picture

well thats acceptably crazy...

Thu, 08/09/2012 - 17:56 | 2692316 busted by the b...
busted by the bailout's picture

"Be afraid. Be very afraid as this lunatic fancy that someone can control all asset markets is doomed to not only failure but a spectacular crash."

My guess is sometime between Nov 7, 2012 and March 31, 2013.

Thu, 08/09/2012 - 17:58 | 2692324 duo
duo's picture

without futures to lock in prices, every marginal acre (that is not pre-sold between two parties) will not be producing.  Hunger games, here we come.

Thu, 08/09/2012 - 18:55 | 2692443 adr
adr's picture

Seems to have worked out just fine before the explosion in futures contracts. I guess nobody planted corn or wheat before Wall Street got involved.

Futures do not benefit producers or consumers anymore, they only benefit speculators and investment banks.

97%+ of oil contracts are held by investors whose only purpose for holding, is to roll the contracts into next month and unload for a profit. Very few speculators buy an oil contract hoping it goes down in value.

That is how you got $25-$147 per barrel in a few short years during a period where there were no supply disruptions.

Thu, 08/09/2012 - 19:16 | 2692500 FieldingMellish
FieldingMellish's picture

Futures contracts for commodities have been with us for thousands of years right back to ancient Babylon. Its only the epic fuck up that is "modern" finance that has propelled it into another dimension where nothing is recognisable.

Thu, 08/09/2012 - 17:57 | 2692321 Jam Akin
Jam Akin's picture

At least this is more out in the open than what happened in the last election cycle.  A triumph for transparency.

Thu, 08/09/2012 - 17:58 | 2692322 rzero
rzero's picture

Tell Obama that margin hikes apply to shorts as well as longs.

Fri, 08/10/2012 - 02:14 | 2693290 GoinFawr
GoinFawr's picture

 Except that in the short term margin hikes are utterly meaningless to a determined few with an agenda plus access to:

a) virtually unlimited virtual fiat

b) a precise overview of everyone else's position

c) a precise overview of everyone else's dry powder

d) foreknowledge of the event

e) and if all of the above isn't enough to git er done there is always the contents of the other side's accounts to be plundered

Thu, 08/09/2012 - 17:59 | 2692325 Arnold Ziffel
Arnold Ziffel's picture

"It's those darn speculators !"

Thu, 08/09/2012 - 18:09 | 2692354 Hype Alert
Hype Alert's picture

They make easy targets for the uninformed muppets. 

Thu, 08/09/2012 - 18:00 | 2692329 JustObserving
JustObserving's picture

From ZH last year

"Remember when earlier we said the CME had hiked silver margins for the 4th time in 8 days? We lied. In fact,what the CME did was to hike margins for the 4th (effective May 5) AND 5th times (effective May 9). That's right, dear reader, in one release, the CME has performed two concurrent margin hikes, which means today's action is the 5th margin hike in 8 days, a previously unheard of event! As of May 9th, the initial margin is $21,600, or 11% of the contract value, while the maintenance is $16,000."

They can increase margins at will and for no apparent reason but to suit undefined interests or parties.  Stay away from manipulated US markets.

Thu, 08/09/2012 - 18:00 | 2692330 hannah
hannah's picture

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Thu, 08/09/2012 - 18:01 | 2692331 buzzsaw99
buzzsaw99's picture

why should commodity traders be immune to the price manipulation that stock, bond, and currency traders get screwed by every day? welcome to the party pal.

Thu, 08/09/2012 - 18:00 | 2692332 monopoly
monopoly's picture

Oh this is getting good. Just the timing. 1/2 my kingdom to get the timing right. :)

Thu, 08/09/2012 - 18:01 | 2692333 earleflorida
earleflorida's picture

? where the fuck did this guy come from,...

Thu, 08/09/2012 - 18:06 | 2692350 Dr. Engali
Dr. Engali's picture

From the bowels of hell.

Thu, 08/09/2012 - 18:25 | 2692389 nmewn
nmewn's picture


Thu, 08/09/2012 - 18:33 | 2692399 GeezerGeek
GeezerGeek's picture

Certainly not Kenya, because even they are not that retarded.

Thu, 08/09/2012 - 18:02 | 2692335 govttrader
govttrader's picture

I've said it before, and I'll say it again...treasury bond futures are the way to go!!

Thu, 08/09/2012 - 18:05 | 2692343 magpie
magpie's picture

It gets more and more suspicious when they start offering strange maturities...oh wait.

Thu, 08/09/2012 - 18:02 | 2692336 Ecoman11
Ecoman11's picture

Check out Obama's trading desk

Thu, 08/09/2012 - 18:03 | 2692337 yogibear
yogibear's picture

LOL, the more the European Central bank and Federal reserve print the higher those countries being stuffed with worthless currencies the higher the prices. The middle East shouldn't accept dollars or Euros anymore for oil. They should ask for a hard asset instead.

The Fed's spanking begins when the US looses it's reserve currency status. The US has abused it's reserve  currency  status for years.

Thu, 08/09/2012 - 18:26 | 2692391 scatterbrains
scatterbrains's picture

which leads me to wonder. Which came first the U.S. embargo on Iran or was Iran already planning to bail out of the fiat ponzi system via trade for gold ?

Thu, 08/09/2012 - 18:33 | 2692398 magpie
magpie's picture

They have been under some form of embargo for a while. The original plan was for a non-dollar resource exchange, presumably Euro (around 2006 or 2007). The gold part seems to be a recent extra.

Thu, 08/09/2012 - 18:03 | 2692338 j0nx
j0nx's picture

Only way Oblamebush wins election is if gas is under $3.00 in November. Even then his chances are dubious.

Thu, 08/09/2012 - 18:06 | 2692349 BurningFuld
BurningFuld's picture

Right. People should vote for Mitt the twit as he will show everyone how to get those gas prices down.  He is back from his "Insult the World Tour" by the way. In case anyone missed him.

Thu, 08/09/2012 - 18:13 | 2692364 Dr. Engali
Dr. Engali's picture

Yeah like this fuck isn't insulting the world with each passing day. Or maybe you missed that.

Thu, 08/09/2012 - 18:18 | 2692377 Lost Wages
Lost Wages's picture

I'm pretty sure the rest of the world likes Obama better than Romney, except for those Orthodox Jews who were chasing after Romney's van in Israel the other day, trying to get a peek at their hero.

Thu, 08/09/2012 - 18:24 | 2692387 Dr. Engali
Dr. Engali's picture

Yeah I'll bet they love the dear leader a great deal as he is accelerating the destruction of this country.

Thu, 08/09/2012 - 18:27 | 2692393 optimator
optimator's picture

Remember, Ron Paul was going to give you gas for ten cents a gallon - NOW.  One real silver dime.

Thu, 08/09/2012 - 19:16 | 2692503 you enjoy myself
you enjoy myself's picture

name something the Palestinians aren't outrageously outraged by.  who gives a crap what they think?

Thu, 08/09/2012 - 18:03 | 2692339 Meesohaawnee
Meesohaawnee's picture

wait.. doest this mean my position in DTO isnt dead?

Thu, 08/09/2012 - 18:04 | 2692342 Quinvarius
Quinvarius's picture

Just what the refiners need.  Obama blowing up their hedges.  Looking forward to $6.00 gasoline.  After nuking refiners like this three times, it is time to pass on the losses.  Burning down your own refinery for the insurance money is starting to look suspicious.

Thu, 08/09/2012 - 23:39 | 2693067 CrashisOptimistic
CrashisOptimistic's picture

What the refiners need is more crude.  Have a look at the Brent spread, or hell, look at the spread to EVERY OTHER FUCKING TYPE OF OIL to WTI.

Only about 500K bpd of WTI is pumped anymore.  It's insignificant.  

The actual oil the world uses is priced about $115 and has been for weeks.

Thu, 08/09/2012 - 18:05 | 2692345 monopoly
monopoly's picture

And this from Jim Sinclair at Mineset. Absolutely nothing has changed. Gotta luv it.

The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance. 

–Roman philosopher and statesman Marcus Tullius Cicero (106-43 BC)

Thu, 08/09/2012 - 18:06 | 2692347 magpie
magpie's picture

But we all know what happened to Cicero

Thu, 08/09/2012 - 19:03 | 2692460 Jam Akin
Jam Akin's picture

Al Capone moved in?

Thu, 08/09/2012 - 19:05 | 2692468 magpie
magpie's picture

His head turned into a stage prop..same what happened to Crassus.

Thu, 08/09/2012 - 18:08 | 2692355 Catullus
Catullus's picture

Controlling margins on real asset markets is slamming the exits shut for this fiat insanity. 

Thu, 08/09/2012 - 18:09 | 2692356 walcott
walcott's picture

physical barrels of oil keep stacking!

Thu, 08/09/2012 - 18:13 | 2692367 timehill
timehill's picture

Yea, just ask the Hunt Brothers, who had the silver market cornered in 1982, how the doubling of margin requirements did for their investment!

Thu, 08/09/2012 - 18:16 | 2692372 you enjoy myself
you enjoy myself's picture

and yet TOTUS wouldn't even dream of suspending the ethanol giveaway mandate.  that would, after all, upset ADM and some needed electoral votes.  incredibly, we use almost as much corn for fuel as we do for feed.  and we have a massive drought.

but no, some margin hikes should solve a supply/demand problem.  f'ing jackass.

Thu, 08/09/2012 - 18:39 | 2692407 Quinvarius
Quinvarius's picture

Learn about the ethanol process and how it creates better cattlefeed.


Thu, 08/09/2012 - 18:16 | 2692374 Arnold Ziffel
Arnold Ziffel's picture

Latest Foreclosure Data May Be A Bad Sign For The US Housing Recovery


But foreclosure starts – default notices or scheduled foreclosure auctions – increased 6 percent on a year-over-year basis.  This represents the third consecutive month of increases after 27 straight months of declines.

And the foreclosure starts increased on an annual basis in 27 states, jumping 201 percent in Connecticut; 164 percent in New Jersey; and 139 percent in Pennsylvania.

The real estate market had started to stabilize on signs that foreclosure inventory was decreasing. But a rise in foreclosure starts suggests that a tidal wave of foreclosures is building, especially in states with a judicial foreclosure process.

Here's a chart from RealtyTrac that shows the 10 states where foreclosure starts climbed the most in July: 


"Summer of recovery?"

Thu, 08/09/2012 - 18:57 | 2692446 Piranhanoia
Piranhanoia's picture

ever get the feeling this story is going to be the longest running horror franchise ever?  

NAR:   "It's going to get better nevery day


Thu, 08/09/2012 - 21:31 | 2692815 Never One Roach
Never One Roach's picture

The foreclosure and short sale markets are horro stories. My friend has tried to buy one after another short sale in Cali only to get severely burned each time -- title defects, unrecorder transfer, lost papers, etc....he finally gave up and is renting since he does not want ot "buy hundred thosand dollar legal problem along with the house" he says.

can't blame him....


I wouldn't touch anything until the fraudclosure scams pan out.....maybe 5-10 years.

Thu, 08/09/2012 - 18:18 | 2692378 vincent
vincent's picture

When they raise metals margins again it will only affect 6 people. Outta bullets. FUCME

Thu, 08/09/2012 - 18:19 | 2692381 Meesohaawnee
Meesohaawnee's picture


Thu, 08/09/2012 - 18:24 | 2692388 optimator
optimator's picture

Of course that doesn't effect those HFT funds.

Thu, 08/09/2012 - 18:33 | 2692396 Duke Dog
Duke Dog's picture

I've long said that before this farce is over, there will be no margin allowed on hard assets (PMs/Oil) in order to keep 'em tamed. The more I've thought about it however, I think by the time they approach 50%, maybe before, there will be no paper players - only honest Owners.

Hell, by then the only brokerage firms left will be JPMC and Goldman anyway. This is so much fun and sad at the same time.


Thu, 08/09/2012 - 18:35 | 2692403 zippy_uk
zippy_uk's picture

Ok so price of plastic dildos stays flat by order of the government. NEXT!

Thu, 08/09/2012 - 18:40 | 2692410 dragoneyes74
dragoneyes74's picture

What's a central planner to do?  If you do QE3 in September, you risk high oil costs preventing your reelection.  If you don't do QE3 in September, you risk a temper tantrum stock market sell-off preventing your reelection.  Seems like we'll get a pretty good idea of whether or not QE3 will happen in September by how aggressive they attack the oil price over the next 5 weeks.   

Thu, 08/09/2012 - 18:43 | 2692418 Meesohaawnee
Meesohaawnee's picture

which begs the question. why wasnt it done in 08?

Thu, 08/09/2012 - 18:49 | 2692432 Jim B
Jim B's picture

CME = Big Fing Joke....


Where is Corzine?..... Not in jail! 

Thu, 08/09/2012 - 18:53 | 2692438 Meesohaawnee
Meesohaawnee's picture

believe me i live 200 yards from the door. i want to vomit on the sidewalk every weekend when i walk by. POS s

Thu, 08/09/2012 - 18:53 | 2692435 no life
no life's picture

Bottle of Bollinger... mutherfucker.

Thu, 08/09/2012 - 18:53 | 2692441 Piranhanoia
Piranhanoia's picture

Oil will be hypothecated by war.   Can't take delivery on futures.

Thu, 08/09/2012 - 18:58 | 2692448 adr
adr's picture

He can hike margins on crude as much as he wants. The vast majority of those playing in the crude futures market shouldn't be doing so anyway.

Wow a whopping 3.7% margin increase. You can still control billions with a few million.

Thu, 08/09/2012 - 19:03 | 2692462 Meesohaawnee
Meesohaawnee's picture

i dont think QE will be done in sept and ive said a thousand times im sick of the talk and by talking about it only plays into their silly game. Fuck em. We should have QE discussion/mention ban on ZH. That being said not after the election either. Like they care after the election. All this bullshit is going on because your 3 months away. After that i think they will let it crack. think like a criminal. If after the election they let the market be one. That will some of the fastest short money made since 08/09

Thu, 08/09/2012 - 19:42 | 2692555 perpetual dilution
perpetual dilution's picture

Reductions for Gold and Silver?

Thu, 08/09/2012 - 20:00 | 2692600 disabledvet
disabledvet's picture

if history is any guide...and it sure lived up to its reputation vis a vis gold and silver when this happened "the margin increases first cause prices to spike" not fall as in effect "you're calling out the market." we'll see what the market does but "this is the oil market" do as is my wont in these here parts..."not merely gold or silver." this sucker is friggin HUGE. The irony that oil is priced in dollars and we STILL feel a need to raise margin should be lost on no one!

Thu, 08/09/2012 - 20:37 | 2692701 orangegeek
orangegeek's picture

It's deflation.  The US government may be able to slow it, but once the US government has spent all their tactics (which is just about now), the intensity of deflation will kick into high gear.



Thu, 08/09/2012 - 21:51 | 2692849 haskelslocal
haskelslocal's picture

ZH posted this obvious conclusion weeks ago.

Not sure why it's important to bash the outcome that was expected.

Fri, 08/10/2012 - 00:55 | 2693215 ReactionToClose...
ReactionToClosedMinds's picture

a pre-emptive strike? ... but is it fighting the last war or 'centrally planning' the outcome you want?

the ancient Greeks learned very well .....don't mess too much with the gods ... your hubris will blow you and everyone else out of the water

Fri, 08/10/2012 - 02:08 | 2693306 dunce
dunce's picture

I like the idea of the administration trying to manipulate the markets. Some of them may learn something about capitalism in the failure though i am sure it will not be obama. The law of supply and demand can not be altered, repealed or amended.

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