Get out of the Dark: Jim Cramer: The Oil Market Is Broken

Well, it looks like Cramer agrees with Bill O'Rielly that the margin for trading in oil and commodities is too low. I happen to agree. Any time you can buy on cheap margins, made especially cheap in the last 6 months with low interest rates, the low margin markets will move up very fast. I think these investors ought to be required to supply 80% to 90% of the capital up front, and only buy 10% to 20% on margin.

Changing the margin rates would deflate all of these markets overnight. High margin expectations works very well at controlling the volatile "less-than-ten-dollar" stocks from going completely haywire, because you cannot buy them on margin without supplying a large percentage of capital up front.

Time for a market change. I think that 10 years ago, we didn't have to worry about putting in these types of restrictions in commodities, because hardly any small or individual players were in them. Now that they are all computerized and easy to access by anyone with a discount brokerage account, the system has been broken.

In the late 80's and early 90's, "curbs" were introduced into the markets because computerized trading led to the stock market crash of '87. Looks to me like computers, easy "democratized" access, and large money movement from institutional traders who lost billions in the financial industry recently, have combined to form a perfect storm for a broken commodities market.

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Cramer: The Oil Market Is Broken

Jim Cramer

06/10/08 - 05:23 PM EDT

This column was first published on RealMoney at 2:04 p.m., June 10, 2008. For more commentary on today's action from the RealMoney writers, click here for a free trial.

Every market's so thin here and so easily pushed around by derivatives and aggressive buying and selling that it's hard to trust any prices. Does anyone believe that some large buyer of oil paid up $10 the other day? Does anyone think that a major airline or a energy user came in and said, "Buy 200,000 barrels of oil with a $10 limit"?

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Get out of the Dark

Wednesday, June 11, 2008

Jim Cramer: The Oil Market Is Broken

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