SemGroup Goes Bankrupt Trading Oil

[conehead433]

Just an example of greed in the marketplace, especially in regard to oil futres trading. In this case it was shorting oil futures and not the case of helping run the price even higher like most of the traders have done recently. I just wish all the traders helping the price go higher would go bankrupt as well and maybe the price of oil would stabilize at lower levels.

"The Tulsa-based SemGroup shorted NYMEX crude oil futures to hedge against a decline in the value of the oil it purchased as part of its 500,000-barrel-per-day trading business, according to court documents, before surging crude prices forced it to recognize billions of dollars in losses on futures positions."

Article

 

[Fern]

"The Tulsa-based SemGroup shorted NYMEX crude oil futures to hedge against a decline in the value of the oil it purchased as part of its 500,000-barrel-per-day trading business, according to court documents..

Somethings wrong with that sentace.

If they were just hedging they would not have lost money. They just would not have benefited from the increased value of the oil they purchased under contract.

I.e., the unexpected gains just would have been negated.

Fern

 

[jpeyton]

Bahahahahaha

 

[WHAMPOM]

I read the article and am totally confused by it. But it sounded they tried to be another ENRON and succeeded.

 

[StageLeft]

Yeah based on what Fern said, how does this make sense?

 

[ElFenix]

hedge against a decline in the value of the oil it purchased as part of its 500,000-barrel-per-day trading business

the problem is that they really had a 50,000 barrel per day trading business.

 

[JS80]

Originally posted by: conehead433
Just an example of greed in the marketplace, especially in regard to oil futres trading. In this case it was shorting oil futures and not the case of helping run the price even higher like most of the traders have done recently. I just wish all the traders helping the price go higher would go bankrupt as well and maybe the price of oil would stabilize at lower levels.

"The Tulsa-based SemGroup shorted NYMEX crude oil futures to hedge against a decline in the value of the oil it purchased as part of its 500,000-barrel-per-day trading business, according to court documents, before surging crude prices forced it to recognize billions of dollars in losses on futures positions."

Article

LOLOLOL

Leverage + volatility = bankruptcy

 

[her209]

This is a clearly an example of Congress, the SEC, and the Federal Reserve failing to act to protect investors in the marketplace.

 

[Slew Foot]

I think we should have a taxpayer funded bailout of these guys.

 

[Mark R]

Not necessarily any shens here.

They may simply have hedged a very long way out. E.g. they called the top at $120 and sold short 1 year's worth of production at or above that level, only to have the market price continue to rise.

After all, a whole bunch of airlines hedged a year at a time, long, to cover their fuel costs - they did very well from that.

 

[Craig234]

Why shouldn't the government, using independant experts for a plan, regulate the types of investments done when it has such an effect on the economy?

There are rules to protect you as an investor, somewhat, from going in without understanding the risks of short-selling, and getting nailed. The rules are very non-oppressive, just making the broker ask you that you understand the risks, basically. We have rules about the maximum leverage permitted in leveraging, ot prevent you from using 100% of your investment value as leverage for options trading - and letting too much risk happen for greed. Few complain about that rule, it's pretty limited, not very oppressive at all. Why shouldn't some of the more useless practices that may make a big profit, but entail risks for society and which contribute little to society, be restricted?

One minute it's 'leave the private sector alone while they make money', the next it's another many-billion disaster, predictable by unregulated risky financial schemes, which affect a lot of people, not just those who are more directly involved. The basic system seems to get corrupted when the voters are not interested and the financial schemers are big donors to discourage regulation.

 

[LegendKiller]

Originally posted by: Craig234
Why shouldn't the government, using independant experts for a plan, regulate the types of investments done when it has such an effect on the economy?

There are rules to protect you as an investor, somewhat, from going in without understanding the risks of short-selling, and getting nailed. The rules are very non-oppressive, just making the broker ask you that you understand the risks, basically. We have rules about the maximum leverage permitted in leveraging, ot prevent you from using 100% of your investment value as leverage for options trading - and letting too much risk happen for greed. Few complain about that rule, it's pretty limited, not very oppressive at all. Why shouldn't some of the more useless practices that may make a big profit, but entail risks for society and which contribute little to society, be restricted?

One minute it's 'leave the private sector alone while they make money', the next it's another many-billion disaster, predictable by unregulated risky financial schemes, which affect a lot of people, not just those who are more directly involved. The basic system seems to get corrupted when the voters are not interested and the financial schemers are big donors to discourage regulation.

What's sad is that the tools needed to stop this crap were in place 7 years ago. The great republican operation removed them, allowing a global manipulation of the markets.

Then, Congress only acts when the furor of the people are loud enough. It doesn't help they are paid to be lazy, by the very people manipulating the system.

It's not that voters are not interested. They are just easy to manipulate. How many blowhards are on MSNBC and Bloomberg saying this isn't a bubble? Many of those claiming it isn't are the ones heavily invested in oil. Thus, they have a complete conflict of interest. Many don't consider this.

 

[Pliablemoose]

Originally posted by: LegendKiller

Originally posted by: Craig234
Why shouldn't the government, using independant experts for a plan, regulate the types of investments done when it has such an effect on the economy?

There are rules to protect you as an investor, somewhat, from going in without understanding the risks of short-selling, and getting nailed. The rules are very non-oppressive, just making the broker ask you that you understand the risks, basically. We have rules about the maximum leverage permitted in leveraging, ot prevent you from using 100% of your investment value as leverage for options trading - and letting too much risk happen for greed. Few complain about that rule, it's pretty limited, not very oppressive at all. Why shouldn't some of the more useless practices that may make a big profit, but entail risks for society and which contribute little to society, be restricted?

One minute it's 'leave the private sector alone while they make money', the next it's another many-billion disaster, predictable by unregulated risky financial schemes, which affect a lot of people, not just those who are more directly involved. The basic system seems to get corrupted when the voters are not interested and the financial schemers are big donors to discourage regulation.

What's sad is that the tools needed to stop this crap were in place 7 years ago. The great republican operation removed them, allowing a global manipulation of the markets.

Then, Congress only acts when the furor of the people are loud enough. It doesn't help they are paid to be lazy, by the very people manipulating the system.

It's not that voters are not interested. They are just easy to manipulate. How many blowhards are on MSNBC and Bloomberg saying this isn't a bubble? Many of those claiming it isn't are the ones heavily invested in oil. Thus, they have a complete conflict of interest. Many don't consider this.

Did anyone catch Paulson mentioning how some of the hedge funds are at risk?

If the Fed starts bailing out hedge funds, I'm going to be seriously pissed.

 

[LegendKiller]

Originally posted by: Pliablemoose

Originally posted by: LegendKiller

Originally posted by: Craig234
Why shouldn't the government, using independant experts for a plan, regulate the types of investments done when it has such an effect on the economy?

There are rules to protect you as an investor, somewhat, from going in without understanding the risks of short-selling, and getting nailed. The rules are very non-oppressive, just making the broker ask you that you understand the risks, basically. We have rules about the maximum leverage permitted in leveraging, ot prevent you from using 100% of your investment value as leverage for options trading - and letting too much risk happen for greed. Few complain about that rule, it's pretty limited, not very oppressive at all. Why shouldn't some of the more useless practices that may make a big profit, but entail risks for society and which contribute little to society, be restricted?

One minute it's 'leave the private sector alone while they make money', the next it's another many-billion disaster, predictable by unregulated risky financial schemes, which affect a lot of people, not just those who are more directly involved. The basic system seems to get corrupted when the voters are not interested and the financial schemers are big donors to discourage regulation.

What's sad is that the tools needed to stop this crap were in place 7 years ago. The great republican operation removed them, allowing a global manipulation of the markets.

Then, Congress only acts when the furor of the people are loud enough. It doesn't help they are paid to be lazy, by the very people manipulating the system.

It's not that voters are not interested. They are just easy to manipulate. How many blowhards are on MSNBC and Bloomberg saying this isn't a bubble? Many of those claiming it isn't are the ones heavily invested in oil. Thus, they have a complete conflict of interest. Many don't consider this.

Did anyone catch Paulson mentioning how some of the hedge funds are at risk?

If the Fed starts bailing out hedge funds, I'm going to be seriously pissed.

I definitely agree there. Anybody socking money into the HF's have net worth at 1+MM. Boo fricking hoo.

 

[Kuragami]

You mean anybody in the US who has a net worth of 1M+. Foreign investors are not bound by that.

In truth how the heck can they ever be called a Hedge Fund when they don't hedge against the market? Trading exclusively in oil is no different than trading exclusively in the housing market. Those HF managers went against the very concept of a HF and decided to be greedy in hopes of winning big short term. No wonder they went into the toilet. They won't be the last either.

How a HF does is entirely up to the HF manager and quite frankly if someone needs to pour money into only one sector while running a HF has no business being a HF manager. The good Hedge Funds regularly return 200-2000% in 12 month runs and you won't ever see them in the news for exactly that reason. They aren't ran by idiots.

 

[JS80]

SemGroup fails and oil falls...hmmmmmmm geeeeee are speculators the cause of high oil prices??

 

[Special K]

Originally posted by: LegendKiller

Originally posted by: Pliablemoose

Originally posted by: LegendKiller

Originally posted by: Craig234
Why shouldn't the government, using independant experts for a plan, regulate the types of investments done when it has such an effect on the economy?

There are rules to protect you as an investor, somewhat, from going in without understanding the risks of short-selling, and getting nailed. The rules are very non-oppressive, just making the broker ask you that you understand the risks, basically. We have rules about the maximum leverage permitted in leveraging, ot prevent you from using 100% of your investment value as leverage for options trading - and letting too much risk happen for greed. Few complain about that rule, it's pretty limited, not very oppressive at all. Why shouldn't some of the more useless practices that may make a big profit, but entail risks for society and which contribute little to society, be restricted?

One minute it's 'leave the private sector alone while they make money', the next it's another many-billion disaster, predictable by unregulated risky financial schemes, which affect a lot of people, not just those who are more directly involved. The basic system seems to get corrupted when the voters are not interested and the financial schemers are big donors to discourage regulation.

What's sad is that the tools needed to stop this crap were in place 7 years ago. The great republican operation removed them, allowing a global manipulation of the markets.

Then, Congress only acts when the furor of the people are loud enough. It doesn't help they are paid to be lazy, by the very people manipulating the system.

It's not that voters are not interested. They are just easy to manipulate. How many blowhards are on MSNBC and Bloomberg saying this isn't a bubble? Many of those claiming it isn't are the ones heavily invested in oil. Thus, they have a complete conflict of interest. Many don't consider this.

Did anyone catch Paulson mentioning how some of the hedge funds are at risk?

If the Fed starts bailing out hedge funds, I'm going to be seriously pissed.

I definitely agree there. Anybody socking money into the HF's have net worth at 1+MM. Boo fricking hoo.

Wasn't LTCM bailed out because none of the banks lending to it knew just how highly-leveraged it was, or how big of a stake each of the other banks had in the fund? Basically if the fund were allowed to fail, the effects would have extended far beyond the fund's investors?