Victor "Trader Vic" Sperandeo, a widely known commodities trader, author, and head of Alpha Financial Technologies, talked to Index Universe's Contributing Editor Cinthia Murphy about current regulatory efforts that are aimed at doing everything from slowing down ETF launches that use derivatives to keeping speculators in check in commodities markets. Having survived more than a dozen bull and bear markets, Sperandeo says all these efforts are part of a federal scheme to eradicate freedom, and investors need to brace for hyperinflation down the line as the government keeps printing money to pay the bills ...

This article originally appeared in its entirety on IndexUniverse.com. It is reprinted here with permission.

There's been a lot of movement on the regulatory front. Recently the SEC decided to freeze applications for all ETFs that rely on derivatives. Is that a valid issue? I don't think that's the issue. If you look at leveraged ETFs, they are indebted, so the costs associated with them should be clearly disclosed, but that's usually spelled out in a prospectus. So as long as there are fee disclosures, we are OK. The thing is that these geared strategies use derivatives to expand leverage, and that has a cost. The key to this entire discussion is the accurate disclosure of those costs. There are no inherent risks with derivatives that warrant protection. The derivative sellers merely mirror what's going on in the market and the ETF has collateral to put up. Having said that, it's a fair criticism that mutual funds and businesses in general do try to hide costs. That's not inherently wrong, but people are entitled to know how much they have to pay and what they are paying for. It's really a simple fix: Define and simplify what it is that it costs to own these derivative instruments. So, it's not about risk, but about cost disclosure.

So, is the SEC move a smoke screen for something else?

The issue here is that the Obama administration is trying to take profits out of everything. Look at the recent health care reform; look at what they did to the student loan programs where they got in between banks and students. Look at the financial reform they are working on. It all leads to cherry-picking [the bigger companies] and it eliminates any profit incentives. The government doesn't want people to make money, they want to make the money. This is a socialist process; it's all about control. If you believe in capitalism, this is insane.

Speculators have gotten a really bad rap recently, and are said to be the reason behind the CFTC's position limits campaign in the commodities markets. What do you make of that issue?

It's, again, about control. The government is working to restrict people's ability to hedge away the risk of inflation. In the 1930s the government confiscated all the gold for a low price. Back then we were on the gold standard and we were forced to turn in all the assets because gold ownership was restricted. It was the government taking control, which inevitably led to much higher gold prices, and everyone got screwed while the government pocketed the difference.

The reality is that while the government claims that by limiting positions it will stop the speculative rising of prices in commodities, it has no intention of keeping prices in check. It simply wants to make sure that the profits that come with price hikes end up in their pockets and not in investors'. It's terribly hypocritical, not to mention that position limits will drive business offshore. It will restrict the ability of pension funds, endowments and individuals to hedge their exposure against inflation.

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