I wonder what Adam Smith would have thought about irrational behavior in a marketplace, like we see in the airline industry today.
Not to take away from Bob Crandall's obviously brilliant existence, I too wonder what Adam Smith would say about the current situation. I have been watching Congressional hearings on the state of affairs vis a vis futures trading this afternoon and what an eye opener that is~!
I was especially interested in what Michael Masters (Masters Capital Managemet) had to say although the three other panelists with him were edifying as well.
Masters' firm does not trade in futures, so that gives him street cred right there. He says that there is not an oil "bubble' but an oil tumor and what do you do when you are faced with a tumor? You remove it as quickly as possible.
Apparently if measures were taken right away...widening the margins for non-physical traders, oil would come down to well under $60.00bbl in less than thirty days. Sure some pension funds would take a bath but then think of what would happen to the stock market!!! They would make up on that side of it much more than they would lose on the futures side.
Goldman Sachs pretty much calls the shots on oil futures and they have since 2000. But I posted about that before.
Masters and his panel mates all said that not drilling in our own country and off of our shores is not a very bright policy. Just saying we would could make the futures market blink.
If you want to see this testimony, it will be well worth your while to punch up CSPAN.org and find that panel. I believe the airlines have also testified before the same congressional committee. Airlines are physical hedge funds whereby they take delivery of what they hedge. Any physical hedge fund should have a low margin rate, vs a 50% rate for non-phyical traders.
There really is a light at the end of this idiotic tunnel. Unfortunately the Democrats will do all in their power to see to it that it is attached to a train.
So hunker down USAir!!! This too shall pass.
Cordially,
UU
