Former Enron trader Arnold presumably became the second-youngest self-made billionaire in the country in part by exploiting the same speculation spree that two years ago caused gas prices to triple while world oil demand was actually falling.
But today Arnold and fellow energy fund manager Michael Masters will presumably be criticising the investment and regulatory environment that enabled it to happen.
No trader who lived through Enron would probably contend that energy prices are driven by market fundamentals. In commodity markets there will always be an opportunity to exploit the gap between speculators and players who actually need the physical stuff they’re trading on a given date.
That gap has widened over the past decade as the surge in popularity of exchange traded commodity funds with institutional investors has added index fund managers to the latter group, and the market has been further obscured by the fact that some futures contracts are regulated and some are traded over-the-counter.
Arnold will be joined today by Michael Masters, a much tougher critic of speculation. Masters believes “passive” investors should be banned from the market. Arnold’s proposed changes lean more toward streamlining the “purely financial” business and eliminating arbitrary rules that traders expoit when contracts are about to expire, and stiffen limits on physical contracts.
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