Punt: A kick in which the ball is dropped from the hands and kicked before it touches the ground. What the Fed did this week.
Punt: Chiefly British Slang. To gamble. What has been happening to Oil and Gas futures.
Strong criticism today;
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/27/cnbarclays127.xml
Echoing the RBS warning;
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml
Right or wrong there was no way the Fed would win. There has been a systematic abuse of the available market levers by the Fed (http://www.marketoracle.co.uk/Article1429.html), aside from searching for and getting (http://www.mutualofamerica.com/articles/CapMan/March08/econperspec308.asp) more smoke or mirrors, they are attempting to get a couple of other tools; http://www.forbes.com/afxnewslimited/feeds/afx/2008/06/19/afx5133293.html
If the Fed is a farmer, then it has water (interest rates) and fertilizer (government bonds). If the weather doesn't cooperate, then it is possible to have a bad crop. Expanding the metaphor, somewhere along the way people got confused and thought the central bank could control the weather.
Amidst all the other doom and gloom... We are officially in Lemming Tortoise Mode.
Allow me to elaborate. In markets, there is a herd mentality. Markets are in part or whole psychological, for instance, it is estimated the supply-demand quotient for a barrel of oil is actually about 70 ~ 75 $/bbl, as opposed to its market value of 140 ~ 150 $/bbl, or about 50%. In other words half the cost of oil is market psychology.
To get into some finer points, many would argue that only some of this psychological half is pure panic, fear, or irrationality, and they come up with ideas like "risk premium," as a fancy way of saying that the Nigerians and Venezuelans may stuff up the supply demand balance-- still fear to me, just slightly more fact based fear. Watch the Secretary General of OPEC deny the supply issue;
And just to assuage the markets the Saudis agreed (http://rawstory.com/news/2008/Minister_Saudi_Arabia_can_increase_oil_0622.html) to yet again increase the supply of oil (no mind that USA refineries are at capacity). So what the hell is going on here?
One mans humble opinion (my speculation to the speculators) dont be the last batch of lemmings off the cliff. Speculators are driving the dark market for oil futures, creating scarcity of PAPER NOT OIL! Those last batch(es) of paper-buyers, whomever they may be or become, and this event may be gradual, or sudden, and may take a week, or a year, will be left covering the short on all those futures. The real price of oil has already pooled massive amounts of money to the big corporations for years and years.
Tortoise and the Hare.
Big money, real money, old money, and their followers who tend to also have large pools of money have long ago retreated from many segments of the market. Like lemmings they buy when the market is up, and sell when the market is down... When one goes they mostly all go, hence lemmings... and in spite of government adjusted numbers the smart money understands we are already in a technical recession;
http://www.shadowstats.com/alternate_data
The market is down, and most of the liquidity is Safely tucked away in secure issues with minimal risk... in one version of Tortoise Mode, or another.
In Tortoise Mode the banking families go into their wheel house and invest in banking, the real estate families start land banking, and the oil companies... (hate to paint individuals with the following broad and unsavory brush) well lets just say their presidency is coming to an un-sanctimonious end. This means for a limited time only, there is an opportunity to (a) get "no-bid" contracts from the government in Iraq (http://www.nytimes.com/2008/06/19/world/middleeast/19iraq.html?hp); (b) run up the price for gas on the claim that gas prices are contingent upon oil prices, supply is tight for oil, and demand exceeds supply for gas; (c) not having to parry market forces, and this is evidenced by their well known and publicly traded record profits (and to any who would call themselves a true free-market capitalist I defy you to explain why the oil companies collectively haven't had to absorb the "production costs" of inflated prices for oil like any other producer in the open market [and by the way where is the competition {you know the gas company that charges less for lower quality gas, etc.}]); and (d) I speculate that there is a re-infusion of some of this massive capital into these dark oil markets that are unregulated, and will be until something is done to turn the light on in the kitchen and watch the cockroaches scurry: http://money.cnn.com/2008/06/24/news/economy/oil_legislation/?postversion=2008062413
On this last point, it may take a month, but, probably, like the disappointing Supreme Court ruling against Exxon (where there was almost no punitive damages for the systemic criminal negligence in the Valdez spill), more like a decade or two to fully gather the facts and complete the prosecution of those traders and the speculators who are most probably buying a long call position, and then using some of their anticipated profits to pump up the market price... for the rest of those lemmings.
O, yes, real people, buying real options, in real markets, are making real money here because of this play (or series of plays). And I am totally in the dark from this humble vantage to guess as if this is just a perfect storm, coincidence, or any magnitude of conspiracy. And it doesn't matter. The laws are out of kilter, and I suggest we are witnessing the last act of a corrupt and powerful lobby that has had an administrations ear, which opened with the effusion of billions and billions of dollars from the California Economy in 2001 with the ENRON scandal.
Make your money while you can boys, because if you are the one holding those last call contracts for any penny over the real value of oil even one day after the market begins to correct itself (pending sanity, legislation, and possibly requisite a new administration).... well lets just say thats definitely something to worry about!
