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.

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