About the FT article: Commitment to accuracy of CFTC data in doubt

A few weeks ago, the Financial Times of London announced an expansion in coverage of the commodity sector. This week they published an article cleverly titled “Commitment to accuracy of CFTC data in doubt,” discussing the impact of inaccurate large trader reporting by Newedge from March through May 2011 (for which the CFTC fined the broker $700,000). Continue reading

Insider Money Annual Outlook Issue

Insider Money is a general investment letter covering longterm outlooks for the economy, stocks, bonds, gold, and oil. I am amused when I see articles on “those got it right,” having foreseen this or that aspect of the financial crisis. Insider Money subscribers have experienced few surprises over the past eight years, having been forewarned (repeatedly, and well ahead) of virtually every facet of the economic crisis. Not just years in advance, but with specific timely advice. It takes a lot longer, for instance to liquidate real estate holdings or a bond portfolio than to sell a stock portfolio. Timing is everything. Insider Money serves two priorities, but in a specific order. My first concern is return of your capital. My second priority is return on your capital.

Insider Money has carried both advance warning of major financial upheavals plus timely actionable investment recommendations.
These are early warnings issued in IM:
2003 Mortgage backed securities huge risk
2003 Derivatives threaten financial system
2003 Debt bubble hangs over economy
2004 Glass-Steagall repeal–history lesson
2004  Fannie Mae & Freddie Mac gone wild
2004 Unprecedented Housing bubble
2004 Musical chairs in Credit default swaps
2007 Triple-digit annual bank failures due
2007 World-wide financial system at risk
Here are the timing calls in IM & BR:
Dec 1998 Generational commodity bull move
Mar 2000 NASDAQ market top
July 2005 Housing bubble top won’t be long
Oct 2007 Major stock market top
Nov 2007 Recession already here
Jun 2008 Commodity prices to plunge 50%
Jul 2008 Oil prices to collapse to $30
Jul 2011 Stocks, special situation selling recommendation
You can buy this 17-page special report here: http://www.insidercapital.com/imorder.htm


Please congratulate Steve on his powerful, comprehensive Insider Money Issue #50. He is extraordinary. JP
I would like to thank you for the excellent Insider Money report, which I purchased yesterday. ND
Current Insider Money is some of your best work during the course of time
that I have been a subscriber. [since June 1989] Jim Dillavou
Steve, I just purchased your Insider Money letter. I am so impressed! Congratulations on your work. RB

Gold may take a breather

Quoted By GENE EPSTEIN in Barron’s

September 2, 2011
One such bear is Steve Briese, publisher of the Bullish Review of Commodity Insiders newsletter and Website. Having strongly recommended long positions in the metal early this year, Briese (pronounced “breezy”), recently put out a virtual S.O.S. to his subscribers. In the Aug. 15 issue of the newsletter, he called the daily gold price chart “as close to straight up as you can get without going vertical,” and then warned, in uncharacteristically emphatic language: “These charts always, always, always end with prices going down, down, down for a long, long, long time. Always.”
BASED ON EXTENSIVE research he did for Barron’s about the performance of similar roaring bull markets, which rose and then collapsed, Briese believes a 33% correction from recent highs, to about $1,250, is quite plausible.
Bolstering his conviction that the gold chart illustrates a classic speculative bubble, Briese further points out that the long side of the vast futures and options market has been in “weak hands.” Based on the Commodity Futures Trading Commission’s weekly “Commitments of Traders” report, he notes that the net short position of traders whose business involves dealing in actual gold has been at near-record levels over the past few weeks. In other words, the smart money, while not always right, has been voting with its dollars that gold will fall. It has mainly been the speculators who have been voting for a continued price rise.
But not wishing to overly bug the gold bugs, he recommends only that they consider taking profits and then wait to buy back eventually at what he believes will be much lower prices. This is a similar prediction to the one Briese made for commodity indexes in the March 31, 2008,Barron’s cover story. In that case, he was proved right by year end.

Sovereign Funds Become Big Speculators

David Chow in the Washington Post has dug up some figures on the involvement of Sovereign funds in commodity indexing. He states that the funds involved did not originate from commodity profits (e.g. Middle Eastern sovereign funds reinvesting oil profits). Since the bulk of Sovereign funds originate from commodity profits of one type or another, and predominantly oil profits, it seems likely that there is more of this type of investment then Chow has uncovered. There is little transparency in the unregulated swap market.

Of course if oil producers are buying oil futures through swap dealers it amounts to shilling–running up prices with leveraged purchases of paper oil.

read the article here…

If the CFTC is not in the wrong, please tell us how.

The debate over the cause of record high commodity prices rages through Congress and the media, not to mention high-fuel-price demonstrations and food riots reported in dozens of countries. Unfortunately, this debate has generated more heat than light. Fundamental “supply imbalances,” “Chinese and Indian demand,” and “the plummeting dollar” are the rallying cries of the bulls. Those hurt by high prices point fingers at commodity speculators. Both cases have merit. Who is right? What, if anything, should Congress do?


There are definitive, obvious answers to both questions. First, the blame must be laid at the feet of speculators who have been allowed to run amuck by the Commodity Futures Trading Commission (CFTC), the very agency charged by Congress with preventing excess speculation. Why am I convinced that speculators are to blame? The answer will be obvious to fans of tv’s Dr. House. We can eliminate causes for which there is no ready cure; including supply shortages, Chinese and Indian demand, and the weak dollar. Ignoring the distraction of causes with no quick fix, we can focus on the one factor that has a prescription: excess speculation.


Continue reading

Gene Epstein Economics Beat Column in Barron’s

Barron’s Online            
Monday, June 30, 2008

A Simple Old Reg That Needs Dusting Off
Fixing the inflation problem.

IN ITS STATEMENT ACCOMPANYING ITS DECISION last week to leave the short-term interest rate unchanged, the Federal Open Market Committee expressed concern about "the upside risks to inflation," specifically mentioning the "continued increases in the prices of energy and other commodities."

Meanwhile, the Homeland Security and Governmental Affairs Committee held Capitol Hill hearings on "Curbing Excessive Speculation in the Commodity Markets."

The connection between the two events was little noticed but is direct: Something can be done about the higher prices of food and fuel — the source of the inflation that concerns the Federal Open Market Committee. Much as I hate to agree with any politician who blames the speculator whenever goods get too dear, which usually amounts to shooting the messenger, Homeland Security Committee Chair Joe Lieberman unfortunately had a point when he accused speculators of "artificially inflating the prices of food and fuel futures."

Continue reading

Saber Rattling at the CFTC

On June 26, 2008 the Commodity Futures Trading Commission posted an ominous "CFTC Emergency Authority Background" on its website. I have to tell you that if this is meant to "telegraph" their intentions, it would not likely be positive for commodity markets in general, and petroleum markets in particular. In my humble opinion, this action may be a prelude to invoking emergency powers to restrict commodity buying, and thus lower prices.

Of course, the laws of unintended consequences pertain. Some commodities have daily trading limits. If a bearish shock were to hit these markets, bulls have to potential to be locked in adverse positions as prices fall day after day without any significant trades taking place. I have been there. It ain’t fun.

If the CFTC simply wants to panic the market, this is a good start. Read the advisory at: http://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/cftcemergencyauthoritybackgrou.pdf

CFTC to Revise Commodity Index Fund Policies

The New York Times reported that the CFTC is set to announce new policies on Monday, June 2. There are no details available, except that the Commission is not expected to enact sweeping changes recommended by me and others. Read the Times article here: http://www.nytimes.com/2008/05/31/business/31cftc.html 

This announcement does have market-moving potential if it is perceived as restricting the buying activity of commodity index traders. I cover the CFTC’s current and historical policies regarding CITs on pages 9 through 13 of my book, The Commitments of Traders Bible. To recap, the Commission has been most accommodating to these long-only commodity “investors” represented by the largest swap dealers. They have granted wholesale exemptions from speculative trading limits imposed on traditional commodity and hedge funds. Last fall they announced their intention to drop limits altogether for long-only commodity indexers. (This idea has since been put on hold.)

Continue reading

CFTC Announces Multiple Energy Market Initiatives

"The U.S. Commodity Futures Trading Commission (CFTC or Commission) today announced a number of initiatives to increase transparency of the energy futures markets. You can read their statement here: http://www.cftc.gov/newsroom /generalpressreleases/2008 /pr5503-08.html , but don’t get too excited. I counted 5 occurrences of the word transparency, plus a "bringing greater sunshine to these markets" thrown in for good measure.

Bunk. The CFTC’s announcement provides not one new piece of public information or data about the petroleum markets. We are simply to take their word that they are increasing surveillance.

If the CFTC truly wishes to provide greater transparency, it would include petroleum markets in the COT-Supplemental weekly report, which breaks out the positions of commodity index players. These are the largest long players in the dozen markets that the CFTC does report, suggesting that they are a dominant player in oil as well.

The curtain has already been pulled on the Commission’s using the "commercial" category to camouflage the big swap dealers holdings. Why don’t they just come clean and report the totals.

These should also include the ICE crude oil contracts. After all, ICE is an American company, which by operating in London allows large traders a certain degree of anonymity not provided here. The CFTC allows ICE trading terminals in the US. They should report the large traders. Just my opinion…