Friday, May 30, 2008

FTC: Oil Market Manipulation

On May 2, 2008 the Federal Trade Commission announced its plan for investigating and regulating possible market manipulation by oil companies, traders and others. After Katrina the FTC investigated the industry as to whether gasoline prices nationwide were “artificially manipulated by reducing refinery capacity or by any other form of market manipulation or price gouging practices”. Among other things in their report issued on May 22, 2006 the FTC found;

-No situations that might allow one firm – or a small collusive group – to manipulate gasoline futures prices by using storage assets to restrict gasoline movements into New York Harbor, the key delivery point for gasoline futures contracts.

Will this investigation return the same results, probably.

As I stated in a previous post, Using Oil To Sway Elections, could it be a few billionaires are secretly buying up the futures in oil to increase the price and sway the fall elections. With an army of corporate lawyers and accountants I find it hard to believe the FTC has the ability to honestly answer the question in a 6 month investigation. Like the Enron fiasco it takes years to unravel well hidden schemes and real market manipulation especially in an unregulated market like Hedge Funds and Commodities.

In a recent article in by Cliff Kincaid he points out;

"It is estimated that assets under management by hedge funds are approaching $2 trillion. But nobody knows for sure. The Securities and Exchange Commission currently oversees and regulates mutual funds and many investment advisers, but it does not regulate hedge funds."

Mr Kincaid also points out that George Soros visited John Paulson;

"The Wall Street Journal has reported that hedge fund operator John Paulson got a visit from Soros after Paulson had made about $4 billion betting on a housing market collapse. Soros wanted to know how he had done it. But Soros wouldn’t talk to the Journal about his meeting with Paulson."

We really believe a billionaire like Soros needs to ask a billionaire like Paulson how he made his money. It is more likely Soros invited Paulson to become a member in one of his private billionaire clubs like Democracy Alliance or into a plan to help sway voters into voting for Obama in the fall elections.

According to an article in the New York News & Features the top ten earners in the Hedge Fund Market are:

1. John Paulson, Paulson & Co. ($3.7 billion)
2. George Soros, Soros Fund Management ($2.9 billion)
3. James Simons, Renaissance Technologies Corp. ($2.8 billion)
4. Philip Falcone , Harbinger Capital Partners ($1.7 billion)
5. Kenneth Griffin, Citadel Investment Group ($1.5 billion)
6. Steven Cohen , SAC Capital Advisors ($900 million)
7. Timothy Barakett, Atticus Capital ($750 million)
8. Stephen Mandel Jr., Lone Pine Capital ($ 710 million)
9. John Griffin, Blue Ridge Capital ($625 million)
10. O. Andreas Halvorsen, Viking Global Investors ($520 million)

Two people in the same market making close to the same amount and Soros asks Paulson, How did you dot it, come on Wall Street do you really think Soros has to ask Paulson about investments. The FTC should be asking Soros how many other people on this list have you met with "for investment advice" and how many of these billionaires are buying futures in oil.

Like the guy on the street playing the "hide the pea under the cup game", manipulating oil on the open market can be done in a similar fashion. Look at Iran holding oil in ships off their coast. Saudi Arabia has said there is plenty of oil being produced to meet the demand, are they right and if so where is it going!

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