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June 30, 2008

Each week, The Disciplined Investor Podcast takes a look at the markets, the economy and the worldwide investing scene in search of opportunities. This podcast has an outstanding lineup of guests each episode who help to provide savvy insight and valuable commentary.

Host Andrew Horowitz and guests will help you learn how to profit in any market condition. Economics, Business News, Stocks, Bonds, Funds, Options are all fair game.

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Greenberger on the Hill – Enron Loophole Video

June 29, 2008

As a follow up to to the recent articles you may have read here, you may want to consider watching this. The recent testimony of Prof. Michael Greenberger on The Enron Loophole…Scary Stuff.. (turn your sound down a bit.. it is a touch loud!)

(Note: Prof Greenberger joined us on TDI Podcast #63 to answer some of difficult questions…)

TDI Podcast 63: OIL-OIL-Enron Loophole-OIL-OIL

June 29, 2008

Guests: Prof. Michael Greenberger and John C. Dvorak discuss the Enron Loophole, the London Loophole and the skyrocketing price of oil. We also find out how closing the loophole could bring the per barrel price of oil down 25%!


Since July 2001, Michael Greenberger has been a professor at the University of Maryland School of Law, where he teaches a course entitled “Futures, Options and Derivatives.”

Professor Greenberger was a partner for more than 20 years in the Washington, D.C. law firm of Shea & Gardner, where he served as lead litigation counsel before courts of law nationwide, including the United States Supreme Court.

In 1997, Professor Greenberger left private practice to become the Director of the Division of Trading and Markets at the Commodity Futures Trading Commission (CFTC).

Professor Greenberger has frequently been asked to testify before Congressional committees on issues pertaining to dysfunctions within United States financial markets caused by complex and unregulated financial derivatives. He has also appeared both in the media and at academic gatherings to discuss this subject, including appearances on CNN, ABC’s “World News Tonight,” the CBS Evening News, NBC Evening News, CNBC, MSNBC, The Jim Lehrer News Hour, NPR’s “Fresh Air,” and C-SPAN, where he also commented on financial dislocations arising out of the Enron collapse, the subprime meltdown, and the manipulation of crude oil and natural gas prices by unregulated energy traders.

Additional Reading and Info related to this discussion:

The London Loophole

The Enron Loophole

MSN Article – House Passes Bill to Reverse oil price increases

Video: Greenberger Testifies

Write You Senator, Copngressman or President with your concerns about oil

HUGE Listing (with emails) of your elected officials

* * Fill-in Form on Site and will Auto-Send to your Officials (COOL!) **

ZachZone Stocks: Central European Distribution (CEDC), Energy Recovery, Inc. (ERII), Galiot Capital Corp. (GTC)

Stocks to look at from this episode: ProShares UltraShort Oil & Gas (DUG), ProShares Ultra Oil & Gas (DIG)

CLICK HERE for a Virtual Tour of The Disciplined Investor Managed Growth Strategy


On Oil and Manipulation

June 27, 2008

I have been following the Enron Loophole discussions and had a conversation with Sen. Feinstein’s office last week. I was looking for answers to the very confusing timeline of a bill that initially looked as if it was not passing, but was later attached to the Farming Bill that was passed after veto attempts. See more details here.

I believe my confusion lies with the fact that the “ENRON LOOPHOLE ” is part of CFTC Reauthorization Act of 2008, which is a title attached to the Farm Bill that was recently passed. There seems to be a good deal of confusion here as the Farm Bill was initially Vetoed and then overridden. THEN it was found that 35 pages were “missing” from the original bill that was already passed. Both the House and the Senate eventually passed it with with enough votes to override veto. It is now law.

To be honest,  I am not sure I have seen such a level of obfuscation with any bill before, but that is just me I suppose.

Much of my focus of late has been the concerning fact surrounding manipulation and limited oversight of commodity future’s market…O I L !

In my research, it appears that The Enron Loophole was opened in what seems to be a less than honorable manner by Phil Graham when it pushed in as a last minute attachment to a bill as the Senate was trying to finish up for Christmas break. This is what has been blamed for helping to push oil prices up beyond the simple price/demand levels. In addition, since the loophole was opened, the Intercontinental Commodity Exchange (ICE) has been trading oil futures without U.S regulatory oversight. This is precisely what the  CFTC Reauthorization Act was designed to fix.

Just as I thought the bill’s passage has been able to close the door on excessive leverage and other manipulations of the oil futures market, I find out that it somehow does nothing of the sort. The loophole is closed, but only for the natural gas markets! HUH? How did that happen?

Well, there is now good news for those that believe that oil prices have moved well beyond any normal pattern. The House of Representatives has approved a bill on Thursday, June 26 that would provide for the Commodity Futures Trading Commission (CTFC) to enact emergency measures to “maintain or restore orderly trading.”

There has only been four times before that the CTFC has been able to utilize these broad powers and in their own words:

“The Commission has exercised its emergency powers in response to extreme events, such as manipulation or a specific disturbance that caused a sudden shock to the markets. The CFTC has never exercised emergency powers based on price trends that have developed over months or years.

Go get ’em!

Note: Make sure to listen to The Disciplined Episode Podcast # 63 as we have Professor Michael Greenberger, former CTFC Director of the Division of Trading and Market to discuss his fight against the Enron Loophole and the speculative manipulation within the oil future markets.

(Click here to subscribe via iTunes to get the
Greenberger interview as soon as TDI Podcast #63 is released)

Oil Index Set to Fall?

June 26, 2008

The ETF that tracks the US Energy Sector (AMEX:IYE) is starting to show signs that it may be ready for a real fall. As there has been a significant increase in the noise surrounding sky-high oil prices and regulators and politicians looking to increase oversight, they will surely end up trolling for a scapegoat.

Update 6/29/08 – Prof. Greenberger who has been testifying on Capitol Hill regarding the Enron Loophole is a Andrew’s guest on TDI Podcast #63. Listen Here


Will that cause some of the recent froth to be lifted from the energy stocks? Maybe. Take a look at the index and think about the timing potential for ETFs that short similar indicators/indicies such as the UltraShort Oil & Gas ProShares (AMEX:DUG) which has a 200% negatively correlated price to the Dow Jones Oil and Gas Index. We have been adding that position to client portfolios recently.

The chart shows a recent break below the 50 day for IYE. All things considered, I keep on recalling the phrase: Trees do not grow to the sky.


Disclosure: Clients of Horowitz & Company are LONG DUG at the time of publish.

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