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RUSH: Here’s Karen in Greeley, Colorado. Karen, hi. Nice to have you on the EIB Network.

CALLER: It’s such a pleasure, Rush.

RUSH: Thank you.

CALLER: I really enjoy it.

RUSH: Thank you.

CALLER: I’m a former executive professor of finance at the University of Northern Colorado, the business school. It’s the only business school to get the Malcolm Baldrige Award of Excellence in the United States, by the way. And I always taught that the premiere example of a windfall profit was the real estate taxes that states and localities charge. A homeowner does everything to increase the value of his house, they reassess it upwards, it’s taxable. That’s a windfall tax.

RUSH: Yes. And since you are a former executive professor of finance explain to the audience here, if you will — I did this the other day — I want you to back me up. Define a windfall profit. You just did, but put it in actual words.

CALLER: Well, it’s a profit on something that you had no participation in. The windfall profits, so-called, of oil companies, that’s not windfall, because that’s their business. So it’s just a normal profit.

RUSH: Right.

CALLER: But if it’s something that you take no participation in, that you had nothing to do with, that’s a windfall profit.

RUSH: Well, a windfall profits tax is portrayed, again, by lying little people in the Democrat Party, the Drive-By Media, as too large, unfair. A windfall profit results from people being screwed, people being shafted by Big Oil and we therefore have to focus and target them and make sure that they pay their fair share of that windfall profit to the lovable and benevolent United States government.

CALLER: May I make another point? We moved here from New York City after 9/11 and bought a lovely house, and it wasn’t until seven months later we realized, we’re on oil and gas. That’s when we started getting checks from an oil company. I consider myself smarter than a caribou. If I don’t know we’re on oil and gas, I doubt the caribou would know either.

RUSH: Well, in fact, where the Alaskan pipeline is concerned, one of the original concerns was that the pipeline would upset the caribou population, and physically reduce it. Turns out the caribou have multiplied ’cause they like the warmth —


RUSH: — that surrounds the pipeline. Well, this is great, you’re absolutely right, Karen, and I’m glad you called. You said you’re a former professor. Are you retired now?

CALLER: Yes, well, I spent my entire career on Wall Street. I was a commodities floor trader, and the business school here —

RUSH: Well, wait a second.

CALLER: (laughing)

RUSH: Wait a second. You may be someone in whom I can tap further information.


RUSH: Commodities trader. Were you a speculator?

CALLER: No — well, yes, technically, because there are two types of trades: hedging, which let’s say a farmer might do, or speculator. And we take the risk away from the hedgers, so that’s what a speculator does.

RUSH: Right.

CALLER: I was a speculator.

RUSH: You were a speculator?

CALLER: Yes, as a floor trader. I provided liquidity for people who wanted to do business in various commodities.

RUSH: Okay. So when you see the latest assault — and the most recent assault has come from Senator Lieberman and Senator McCain —

CALLER: Yeah. And Schumer.

RUSH: — and Schumer on the speculators as culprits, and these people are artificially jacking up the price of oil, and I guess peanuts and soybeans and whatever else, what’s your reaction as somebody who’s —

CALLER: Well, that’s stupid. The first rule in commodities trading is the trend is your friend. So if the trend is up, any speculator is going to be buying. But usually when there’s a bubble — and I believe we are in a bubble right now — when they break, they break very violently. And if President Bush could somehow announce that we were going to start drilling in ANWR, for example, I would bet that oil would be down $30 to $40 a barrel immediately, just because anyone who had bought on speculation would want to get out. There wouldn’t be enough room getting through the doorway.

RUSH: Wait a second there, Karen, I agree with you. I think if we announced we were going to drill anywhere, ANWR, the Outer Continental Shelf or wherever, I think the price would reflect it, but 30 or 40 bucks a barrel in one day or a week? That’s significant because we’re not going to have any results for ten years if we go to ANWR, so they say, it may be less than that.

CALLER: Don’t forget commodities traders look ahead to the future, so I would be looking what the trend is going to be. The trend then will be downward, so I wouldn’t want to be long, I wouldn’t want to own futures contracts, especially over a weekend or overnight. Maybe during the day, but not overnight.

RUSH: What’s your husband do?

CALLER: My husband was actually chairman of two stock exchanges, until he got blown out of the World Trade Center on 9/11.

RUSH: Wow.

CALLER: And that’s why we came out here. And he was a professor, an executive professor of finance also at the University of Northern Colorado.

RUSH: Wow. So you end up buying a house on tracts of oil and gas that you didn’t know were there when you bought, nobody told you?

CALLER: No. No. We didn’t understand about mineral rights and all that stuff, you know, who knew, being from New York.

RUSH: New Yorkers know everything. Ask Curtis Sliwa.

CALLER: Well, actually, the people out here are very, very nice. And very lovely people, but, yeah, apparently the checks kept going to the previous owners, and when their mail forwarding expired the oil company tried to find out who — and got the checks back. That’s when —

RUSH: You mean the people selling you the house didn’t tell you that this was —


RUSH: It’s amazing. All right. Well, look, I gotta run here because of time. Karen, it’s been great. Thank you so much for calling.

CALLER: Thank you, sir.

RUSH: Excellent.


RUSH: One thing more on the speculators. We talked about this earlier in the week, and I’m glad we had the call from Greeley, Colorado. She’s a former speculator, and she validated what I had told you. There is a letter to the editor in the New York Times today also. It is by Donald Boudreaux. Donald Boudreaux, chairman, department of economics as George Mason University. To the editor: ‘Regarding Senator Lieberman’s efforts to reduce speculation. Whenever commodity prices behave in ways that government officials dislike, and especially when these prices reflect the costs of ill-advised government policies,’ such as we can’t drill here, ‘officials invariably blame speculators. This is a conveniently nebulous group of investors whose financial expertise being greater than that of the average literature professor enables demagogues to portray them as practitioners of a dark art. In fact, though, speculation is nothing more than betting on the future course of prices. If done profitably, it makes resource supplies more predictable and smoothes out changes in prices. A speculator who correctly predicts say the price of oil will be higher tomorrow than it is today buys oil today for resale tomorrow. That is, he buys oil when it’s relatively abundant and makes it available when it’s in shorter supply. His doing so raises today’s price of oil lowers tomorrow’s price. Without successful speculators, markets would be more volatile, and resource supplies less certain. Speculation done unprofitably, of course, hurts no one as much as it does the speculators themselves.’

Senator Lieberman is demagoguing an issue about which he knows nothing. He was joined by Senator McCain at the town hall event last night in New York City. An unidentified guy said, ‘Prices with oil are skyrocketing ’cause of the stock market ’cause a lot of people are trading in the stock market for investments to jack up the prices. Nobody is looking into it. Why has that happened? Please Senator, do something for this.’

MCCAIN: I believe there needs to be a thorough and complete investigation of speculators as to find out whether speculation has been going on, and if so, how much it has affected the price of a barrel of oil. I also think that the whole international global financial system, the world financial system that we are in that we need to understand that there’s a lot of things out there that need a lot more transparency and consequently oversight.


MCCAIN: I’m very angry, frankly, at the oil companies, not only because of the obscene profits they make —

RUSH: Oh, no!

MCCAIN: — but the failure to invest in alternate energy to help us eliminate our dependence on foreign oil. They’re making huge profits —

RUSH: Oh! Oh! (hyperventilating) You idiot! Get somebody who understands economics talking to you, please.

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