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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Jack Be Quick who wrote (21463)	1/5/2015 11:12:14 PM
From: TigerPaw	Read Replies (1) \| Respond to of 34328

"No genius needed to know oil was the culprit." I think, from what I have read, that it is too simple to say that oil is the culprit. It is the immediate cause of today's drop but that is because of the way the oil market has been setup lately. That is to say, the oil market is similar to the way the real estate market was structured in 2007, and when there is a little hickup in oil supply or demand there is a crash in the underlying commodity. As I understand, oil futures purchased with a lot of leverage have been packaged into securities derivatives which have been bought on margin by investors (or speculators). Since the oil futures are owned in securities in which they are unwilling to be sold until there is a profit, the price of oil kept rising to cover both the commodity price and the interest from the margin. When there was a bit too much supply the borrowing on borrowing popped like the enormous bubble it was. The culprit was less the oil than it was the financial manipulations behind the price of oil for the last several years. Once the commodity price starts to crater the margin calls begin and the commodity goes down even faster. Even the nice companies which are not leveraged are caught in the collapse. I wonder how to tell what items are being bundled into derivatives prior to them becoming a public crisis ?