> My understanding is that, under the basic premise that gas and crude
> prices are highly correlated, lowering the weight of gas in the GS
> index is read by followers as a signal by the leader that oil futures
> in general are to be shorted. In the short run, the dynamics in a
> market can be perverse. Small changes in expectations can unleash
> large consequences. Asset prices overreact. Etc. If GS doesn't have
> much to lose (according to Peter Stojan) and there's some large
> political gain, then why not? Again, I'm not agreeing or disagreeing
> with this. Just trying to make sense of it. If oil prices go back up
> in mid November, then this "conspiracy theory" will look more
> plausible. No? I mean, the fundamentals of oil supply and demand are
> not likely to change much in a few months.
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It would be interesting to know whether the GS proprietary traders were
shorting futures on the understanding that the index was going to change and
would have the kind of profound impact on the oil price that is being
attributed to that action.
And even if this were established, on what basis would it then be warranted to conclude that the firm was manipulating the index in order to elect Republicans rather than to turn a fast profit - other than that the mid-term elections happen to fall within this period?
Until there's more substance to the allegation, I'll continue to assume that the easing of tensions over Iran and Lebanon, fears that both the Chinese and American economies are on the verge of slowing, and an unexpectedly tame hurricane season have in combination been the factors which have been mainly responsible for the speculators running for the exits and bringing down the price.