Speculation rules on cotton changed- why not everything else?

The price of gas just jumped. No real reason, Egypt isn’t really a factor in our oil markets, but- speculators are and at least one exchange said enough is enough.

You’ve heard of Egyptian cotton right? And although there is no proof in disruption to the cotton industry yet- speculators have had a field day playing games with the price of cotton- so someone had the foresight to step in:

The main U.S. cotton exchange acted on Thursday to curb speculation in an overheated cotton market that has seen prices soar to heights unseen since the U.S. Civil War.

Hoping to prevent a repeat of 2008, when a sharp rally followed by a steep plunge roiled the industry, ICE Futures U.S. approved a rule change. The new rule would require investors with more than 300 lots in the spot contract to prove they are adequately hedged going into delivery.

Separately, the U.S. Commodities and Futures Trading Commission, the country’s commodities regulator, said it has approved an expansion of the daily trading limits in the cotton market.

Both developments deflated the market, analysts said.

via Exchange tightens reins on rampaging cotton market | Reuters.

Just like you wouldn’t go to all the McDonalds in Dayton and buy every burger- to try to corner the market and create scarcity (because McDonalds would force you to actually eat what you buy)- the cotton exchange is saying you have to actually take delivery of cotton.

We need to do the same for jet fuel, corn, wheat- everything. In fact, that used to be the law before the wizards of Wall Street bought the Securities and Exchange Commission and relaxed laws that forced real markets to engage in real commerce (as opposed to Credit Default Swaps and other BS). And while we’re at it- let’s take the volume on the stock market back to sensible times- before programmed trading made a mockery of true financial analysis and turned the market into a giant slot machine. You buy part of a company-stock- equity- you have to hold it for at least a year if you buy more than say- $10K or .001% of outstanding shares. Sell it before that- and all proceeds are taxed at 90%.

Equity in a company is about promise of a future return based on management making solid decisions for long term growth- not on which way the wind blows.

We’re doing something about cotton futures- now- let’s do something about the future of our economy: Make sure we still have one before the Casinoization of Wall Street takes another bad beat- and asks Uncle to back their bad bets.

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6 Responses

  1. Ice Bandit February 6, 2011 / 2:23 pm
    No real reason, Egypt isn’t really a factor in our oil markets (David Esrati)
     
    ….you’re right David. Egypt plays no role in the international oil trade. As we all know, in order to avoid that 3,500 mile trip around the Horn, mideast oil goes thru the Suez Canal, which is located in, er, near, uh, around, duh, someone in the vicinity of, doh, never mind……….

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  2. David Esrati February 6, 2011 / 4:07 pm

    @IceBandit- you are a fear monger- so far, there has been zero change in canal traffic due to the uprising.

    And- do you really think we wouldn’t step in to open back the canal if there was a problem- nothing a few jarheads and the 82nd can’t handle.

    https://news.fidelity.com/news/news.jhtml?cat=Markets.Int&articleid=201102041232STREETCMREALTIME_10997138&IMG=N

    The point is- the people who are playing with the price of oil- have zero intention of actually taking delivery. Take them out of the equation- and the price of oil wouldn’t be swinging.

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  3. Ice Bandit February 6, 2011 / 11:26 pm
    …..yessir dear David, Egypt is just the latest African nation to descend into basket-casedom. And the guys who buy futures are, by definiton, wagering what will happen next week, month and year. And if you got an Egyptian revolution with money and encouragement from that bunch of malcontents known as Ayalltollahs, that ain’t exactly anyone’s definition of stability. Throw in an Old Guard intoxicated by the lure of Pan-Islamism dear David, and it’s hard to tell the inmates from the doctors or the orderlies. Fact is, as an aside dear David, some of the meanest hombres out that region really are doctors, such as in the case of Mullah Omar. Concede one point, dear David, insofar as a NATO contingent would keep the Canal open, insofar as it was done in the mid-1950s. What was Sarah Palin saying about a particular activity in her state?……………

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  4. truddick February 8, 2011 / 10:26 pm
    Bandit: you think Mullah Omar is in the region of Egypt?
    Another product of a charter school, I guess.  Can you identify which continent Azerbaijan is in–without googling it?

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  5. Ice Bandit February 10, 2011 / 10:03 pm
    Bandit: you think Mullah Omar is in the region of Egypt? Another product of a charter school, I guess (Truddick)
     
    …..well, yes and no dear Truddick. Mullah Omar went to a Madrassah, which is kinda like a parochial school, but without the females and football…….

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