Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (22669)	9/9/2009 6:02:25 PM
From: ggersh	Respond to of 71456

Thanks, I thought it was all metals, had forgot about Copper.

To: Elroy Jetson who wrote (22669)	9/9/2009 7:04:34 PM
From: axial	Read Replies (1) \| Respond to of 71456

EJ if Financial Times is correct, crude oil definitely. Probably includes others like copper, as you say, but haven't seen any info. Message 25924253 Jim

To: Elroy Jetson who wrote (22669)	9/14/2009 1:11:25 AM
From: axial	1 Recommendation Respond to of 71456

China threatens to default on oil derivatives trades About one year after the Lehman bankruptcy, we are getting rumors of more impending bankruptcies, this time from China. The problem started last year when the price of oil dropped from $147 to $32 per barrel. Many companies use the futures markets to hedge their buying of oil. When prices skyrocket, they get scared and buy futures contracts for future delivery to lock in a price and to be assured of getting the product. So, some companies were buying oil at the height of the market last year. Companies that place hedges usually leave them on until delivery. What happened was that when the price of oil collapsed, these companies were still holding high-priced contracts. They saw the price plummet and took horrendous losses. [See: The Foreigners Are Learning - "The rigging of markets benefits insiders and strains international relations. The significance of this issue is now becoming clearly evident as we are just beginning to see the empirical manifestations of these unfair dealings" marketoracle.co.uk ... Don't agree with everything in the article, but if you had high-priced hedges at $147, would you pay?] Usually such deals are struck in Hong Kong or Singapore. Apparently these deals were not made on listed exchanges. When commodities are traded on a listed exchange, all margin monies must be paid by noon the next day, usually via bank wires. If the margin is not met, the house automatically sells out the account. This keeps losses from growing too large. If banks had been forced to use clearinghouses, these same rules would have been in effect, and chances are we would not have had the financial meltdown that occurred last year. This is what happened to some Chinese companies. They lost millions of dollars in the oil market last year. Now, the Wall Street Journal (subscription required) reports that the companies are in such dire straits that they may default on their losses. China Eastern Airlines (NYSE: CEA), Air China Ltd. (OTC: AICF) and China Ocean Shipping sent letters to a handful of banks, including Citigroup (NYSE C), Deutsche Bank (NYSE DB), Goldman Sachs Group (NYSE GS), JPMorgan Chase (NYSE JPM), and Morgan Stanley (NYSE MS). The letters warned that the companies had the right to default. Cases such as these usually go to arbitration. However the Chinese have stated that they reserve the right to overrule any judgments set out by arbitration. These cases bear watching. We haven't had defaults since last year. Now, out of left field we see this happening. What is also strange is that these deals have been left hanging for the almost a year. You can bet that if these three are still open, that there many more still out there. This is a reminder that the big banks still have losses that they are hiding. Who knows? China may default on these deals. bloggingstocks.com Jim