On Oct 10, 2006, at 2:05 PM, Sean Andrews wrote:
> a few weeks ago on your show you said that part of the reduction in
> gas prices could be because hedge funds were finally selling off their
> overpriced futures in that area (or something like that.) Is this
> your informed observation or are there data out there that would
> indicate it was the case? I mentioned this to a friend who works at a
> hedge fund and he seemed to get his feelings hurt that hedge funds get
> picked on so much. I wondered if I could point him to some evidence
> so he can start working through some of this.
>
> More generally, how would (or could) someone prove the effect a single
> group of investors were having a certain effect on a market? Where
> would this show up?
The hedge funds' behavior was all over the financial press. The reason they get "picked on" is that they're big, move fast, and generally move together. It's shorthand for "speculative capital," but the hedge funds are a big part of what we might call the speculative community.
Someone who felt ambitious could look up the CFTC's "Commitments of Traders" reports on the oil market. They reveal the collective positions of "commercial" (in this case, oil producers and users) and "noncommercial" (in this case, speculators) interests. (There's some pundit, it might be Steve Leuthold, who puts these together for the various markets, but I don't think the info comes for free.)
The Lex column in today's FT reports: "For the first time since March, speculators are running a short position overall in crude oil and refined products contracts in New York."
Doug