Rush Limbaugh

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RUSH: If you have time, take a gander at just a roster of news stories on any site. Look at Drudge, if you find the AP page, look at the AP page, or any of them, and look at how many stories are not about what’s happening, but on what might happen, from global warming, to 25% of the world’s oil under the North Pole, to what Hugo Chavez might do, to what Cuba might do. Everything is speculation, 90% of it is speculation. None of it is news. None of it is what is happening. It’s all polls. McCain may lose in this field, and Obama is picking up ground here. It’s all meaningless because it’s all speculation. Speaking of speculation, how many miles do you get on a gallon of Harry Reid? How many miles do you get on a gallon of Nancy Pelosi? Here’s the problem for the liberals in Congress. Gasoline prices are soaring. I saw a statistic out there the other day. Gasoline demand is down 2.7%. People are using it less. Diesel prices are soaring. Everybody in America is feeling the pain of this. The rich, the poor, black, white, brown, young, old, red, blue, religious and secular, everybody’s feeling this.

The Democrats are feeling the pressure, the no-drill Democrats, the no-nuclear Democrats, the no-coal Democrats. And they need a demon. They need a demon to demonize. They can’t blame this one on Ken Starr. They can’t blame this one on Donald Rumsfeld or Karl Rove or Tom DeLay. They need a demon, and they need this demon fast. So, my friends, the demon has become speculators. All of this, the price rise in oil and the accompanying rise in gasoline is the fault of the speculators. So once again, my friends, it falls to me, becomes my responsibility to give you a short course on speculators and speculation. We’ve done this a couple of times before, but let me try a different tack. What is speculation? What is the commodities market? It’s the futures market, by definition, speculating on what’s going to happen in the future, which means that people are betting on the price of whatever commodity in the future is going to be, be it soybeans, be it corn, be it oil.

Now, in the futures market you buy and sell contracts. No one can buy a futures contract without finding somebody to sell a contract. Same as stock. If you want to go out and sell some of your stock, somebody’s gonna buy it. You don’t just turn it in and get the money. Somebody’s buying your stock. Same thing when you buy stock, you’re buying it from somebody selling it. You may not know who they are, but somebody selling. The government can print money, but the commodity exchanges cannot print contracts. They are genuine and they are real. You can’t buy an oil contract without somebody willing to sell it to you. And if there aren’t any sellers, then you have to bid a higher price to find one. This is no different than any other transaction that takes place except we’re dealing with the out years, or the out months. We’re dealing with the price of a commodity before it’s available. Speculators are just bettors, and they make money both ways if they’re right. If they bet the price is going to go down and they sell their contract and it goes, they’ve made money. If they bet it’s going to go up and they buy a futures contract, they make money.

Every time somebody makes money in the speculation market, somebody loses. Speculation does not distort the value of anything. It establishes the value, and this is why so many people in the commodities business, or have businesses related to commodities, enjoy the speculation market because it helps establish certain costs of doing business in the years ahead. If you run your own business, you know, you try to get a big a handle on your fixed costs, you try to get them established for as long a period of time as you can so you can plan other aspects of the business around those costs. You might even say that speculation is one of those rare real examples of a zero-sum game. The reason I say that, and I might get some economists argue with me on this, but for the sake of illustration, for everybody speculating that prices are going to go up, say in oil, somebody is speculating prices are going to go down. There is heavy speculation in the heavily regulated corn market. Prices are going up, and in the US dollar, where future price is going down. Either your congressman and your senator know this and is feeding on your lack of understanding, or your congressman has too little understanding of the economy to be in Congress.

But there’s nothing about futures or options that makes it any more attractive to bet that commodities will go up than to bet they will go down. If you guess wrong on the direction, you lose money. That’s all you need to know about speculation. When you speculate on the price of a commodity, what you’re doing is betting on whether the price will rise or whether it will fall. You’re not betting on whether you want it to rise or fall. This is the difference. Everybody thinks that the speculators are trying to drive the price up or trying to drive the price down, that’s not what they’re trying to do. They’re guessing. They’re betting. It may be educated guessing, educated betting, but they still are. You’re not betting that you want what you’re doing will cause the price to rise or fall, not whether you hope it will rise or fall. Your money is going to do nothing to cause the price of oil to rise or fall. It’s gonna base itself, all the results on the good old laws of supply and demand.

Let me give you another example of speculation. Oh. I should point this out. Oil inventories were reported late yesterday, early this morning, oil inventories — supplies, for those of you in Rio Linda — have been reported to have increased sharply. And guess what? I haven’t checked since the program began but right before the program began the price of oil per barrel was down about five bucks, a little under five dollars. There haven’t been any gasoline lines. The oil price fell five dollars not because of the visible hand of Congress, not because of some nefarious action by some wizard behind the curtain pulling the strings. Now, you might be thinking, good, if the price came down to speculators, why they lost big time. No. No, no, no. Some did, but other speculators won. The speculators who were long lost. The speculators hoping for the price to go up, they lost. Speculators who were short, who were betting on the price to come down, they won.

Now, if we’re going to outlaw long speculation, if we’re going to say you can’t speculate on the price of oil to go up, then we’re going to have to outlaw speculating the price is going to go down. The only thing that Congress can’t or won’t allow is the spectacle of them blaming speculators. It’s just economics 101 and it all will come down to the basic laws of supply and demand in the long run. Those are always the determining factor.

Now, let me bring Tiger Woods into this equation for just a second, because one of my favorite sports columnists is Phil Mushnick of the New York Post. Phil is an old curmudgeon when it comes to the Drive-By sports media on television. He’s a critic and so forth, and he’s pretty spot-on. Over the years Mr. Mushnick has duly noted that all of the networks that televise golf have been totally in the tank for Tiger Woods, that when Tiger is playing, even if he’s not in the lead, even if he’s way off the lead, even if his round is finished, they still show Tiger Woods, at the expense of showing any other golfers that are out there playing. The US Open, NBC televising, you would have thought even before the playoff on Monday that Tiger Woods was the only guy on the course. They would spend time watching Tiger put his tee in the ground. They would then spend time with Tiger selecting his club. All the while, other people are playing golf. But you didn’t see it. We saw Tiger walking down the fairway after his shot. We saw Tiger communicating with his caddy in the meantime. We saw all Tiger, all the time. All the networks do this. He’s a ratings grabber.

But in the process of doing this, a lot of other players on the tour have not been exposed on television, and so when Tiger doesn’t play, nobody cares. But they all know that Tiger is coming back, he mostly plays 15, 16 tournaments a year. He plays all the majors, but he doesn’t go to many other tournaments, a couple that Buick sponsors and some others, but you can go five weeks on the PGA Tour and not see Tiger Woods. And you can see what happens to TV ratings when he’s not playing. Now, the networks — CBS and NBC and throw the Golf Channel in there, ESPN on Thursday and Fridays in some tournaments — have bet the ranch in their golf coverage on Tiger Woods. They have speculated that Tiger Woods is going to be their cash cow ratings-wise, advertising-wise, for who knows how many years in the future. They have so invested in Tiger Woods that they haven’t taken the time to establish other personalities and celebrities on the tour, other than perhaps Phil Mickelson.

Aside from that, whenever anybody else does well, they’re shocked. My man Rocco Mediate is one example in the US Open. That’s right, Rocco Mediate. I met Rocco the first time I played in Bob Hope. It was during a practice round when I was out there with Fuzzy Zoeller and his gang, John Daly, Joe Pesci, and we’re taking our time, and Rocco and his gang came up in golf carts and they were just taking practice, and they’re going to various holes and practicing various shots, they were not playing a round and they interrupted us on the 18th and they started from about 280 yards trying to hit a shot over the water to the green in what would have been two shots. And I had my Stogie Vise on the golf cart, Rocco said, ‘What’s that?’ I said, ‘Stogie Vise,’ and I showed him how it worked, put the cigar in it, he was mesmerized. So I gave it to him, and I haven’t seen Rocco since. (laughing) I’ve seen him in tournaments. My point is that all of this speculation on Tiger Woods, they looked into the future, they risked their capital, that Tiger Woods was going to be healthy. They put it in writing that Tiger Woods was professional golf. Nothing against Woods, now, don’t anybody misunderstand here. Trying to make a point. And now they are panicked ’cause Tiger is out for the season.

He had his ACL surgery yesterday. He’s gone for the year. He’s not going to play. I mean this is an ACL, folks, you know, two stress fractures there in the left tibia. As a football player, it’s a year. I don’t know about a guy who has to walk golf courses, but it’s going to be calendar 2009 and somewhere far into calendar 2009. So we’ve got the British Open coming up, no Tiger. We’ve got the PGA Championship coming up, and we’ve got the FedEx Cup, no Tiger. He won’t commentate. Tiger won’t commentate. But even if he commentated, that’s not going to increase ratings. They want to see Tiger play. What’s the way around this? Well, they speculated and they threw it all in on Tiger, or 80% of it. So now they’re going to have to go back to the drawing board, they’re going to have to establish that there are other guys out there that are worth watching. They could have been doing this the whole time Tiger is playing by not only televising him, but also televising some of these other players. Speculation happens all over the place, and sometimes you lose as well as win.


RUSH: I wonder, folks, should I propose a bailout for CBS and NBC? Maybe we can find a way for them to get some of the money back they paid the PGA Tour? After all, Tiger is not there; their ratings are going to be down. Their advertising revenue is going to be down. Should we have a bailout? I mean, just like we’re bailing out members of Congress because they had sweetheart mortgages with Countrywide. We’re bailing out the mortgage industry. We’re bailing out all these other people that speculated and bet. Have you ever bet on a professional football game with a bookie? Have you ever? They have the line. The odds makers make the line. Let’s say Patriots-Steelers is coming up Sunday; it’s at Foxboro, and let’s say they make the Patriots say a six-point favorite. A lot of people say, ‘Six points on the Patriots? They’re going to cream the Steelers.’ The worst thing you can do when you get involved in betting the points in a football game is worry about your favorite team. You’re making a bet.

You are making a bet! The people that make the odds don’t care who wins. They’re trying to get equal amounts of money on both sides so that no matter who wins, they win. And they’ve gotta set a line that’s going to attract much money. So if Steelers fans think their team is going to get blown out by ten, and the line is six, they’ll take the six. If the Patriots fans think the opposite: ‘Wow, six points? We’re going to blow these people out by ten, 15. Sure, I’ll lay the six,’ and they’ll take it. So the bookies are doing just what happens in the oil speculation market. They’re trying to get both sides. There’s as much money on both sides of this, and everybody is speculating on what’s going to happen at the end of the game. And it is no different in the oil speculation market, in the commodities markets. When you put your money on the Steelers versus the Patriots, you know your money is going to have no impact on the Steelers winning, and it’s the same thing in the oil futures market.

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