The True Reason Behind the CFTC’s Revocation of Exemptions in Position Limits in Wheat, Corn, and Soybeans

Last week, many analysts that were looking for some clue as to whether the CFTC will establish reasonable position limits in gold/silver futures markets and additionally not grant bullion banks (i.e. HSBC and JP Morgan) exemptions to these position limits in the near future were encouraged by the below CFTC press release.

Washington, DC – The U.S. Commodity Futures Trading Commission today announced that it is withdrawing two no-action letters that provided relief from federal agricultural speculative positions limits set forth in CFTC regulations (17 C.F.R §150.2). “I believe that position limits should be consistently applied and vigorously enforced,” CFTC Chairman Gary Gensler said. “Position limits promote market integrity by guarding against concentrated positions.” In CFTC Letter 06-09 (May 5, 2006), the agency’s Division of Market Oversight (DMO) granted no-action relief to DB Commodity Services LLC, a commodity pool operator (CPO) and commodity trading advisor (CTA), permitting the DB Commodity Index Tracking Master Fund to take positions in corn and wheat futures that exceed federal speculative position limits set forth in CFTC Regulation 150.2. Subsequently, in CFTC Letter 06-19 (September 6, 2006), DMO granted similar no-action relief to a CPO/CTA employing a proprietary commodity investment strategy that includes positions in Chicago Board of Trade corn, soybeans and wheat futures contracts. Among other things, DMO’s no-action position in both cases stated that any change in circumstances or conditions could result in a different conclusion. DMO has previously stated that the trading strategies employed by these entities would not qualify for a bona fide hedge exemption under the Commission’s regulations. DMO will work with each of these entities as they transition to positions within current federal speculative limits. The withdrawal of these no-action positions is very specific and limited and does not affect any other no-action or regulatory positions taken by the CFTC or its staff with regard to these entities or other market participants. Read more …

2 comments August 25th, 2009

The Massive Disconnect – Why Today’s Stock Markets are All About Confidence & Gullibility

Sometimes despite knowing of the historical precedents that illustrate that public masses are easily deceived at times regarding massive lies, I still have a difficult time comprehending how any intelligent person can possibly buy into the statement of Goldman Sachs’s chairwoman of the investment policy committee, Abby Cohen, that, “We do think the new bull market has begun.” Given that global stock market behavior seems to reflect so well the Consumer Confidence Index with particularly close correlation between the US Conference Board CCI and the behavior of the US S&P 500 index, perhaps the CCI should be renamed the Consumer Gullibility Index.

The last time, I specifically wrote an article about an imminent US market crash titled, “Will US Markets Crash Now – or Later?” on April 23, 2008, the S&P 500 peaked just 17 business days after I made that call, at about 1,440, and then proceeded to fall until it bottomed at about 673 in early March of the following year. I think that we would all agree that a plunge of more than 50% aptly qualifies as a crash, yet if you visit that article, you will see that the bulk of comments that followed my article ridiculed my prediction back then, even though I was supremely confident of that my prediction would manifest itself. Today, by my estimation, there are just two possibilities to a global stock market rally that has occurred on the backs of government deception and financial industry executive lies.

(1) Once the low summer volume trading ends and the computerized trading programs of Goldman Sachs et al cannot manufacture fake rallies, the market will crash; or

(2) The bulls will be right about US and other global markets rallying another 10% to 20% higher from this point, as anything is possible given markets that are driven by fraud; but this surge higher will ultimately end in a crash as well. Read more …

August 10th, 2009