Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hi everybody. and welcome to HardAssetsInvestor.com. I’m Mike Norman, your host. We’re here for the second half of my interview with Todd Horwitz, who’s the chief strategist at Adam Mesh Trading. Well, Todd, basically, in our last discussion, your position was pretty much: Look; you're going to see what comes along.

You mentioned that you thought copper looked like it could be at the end of that bull market, which sort of tied in with a view that some people have that we’re seeing some deflationary forces start to broaden out in the economy. But let me ask you something else, which pertains directly to markets like commodities and futures and other derivatives.

We’re seeing movement now, political movement, to maybe curtail some of the speculation in the financial reforms that are being proposed by Congress, talking about banks not being able to trade for their proprietary accounts anymore.

How much impact do you think that’ll have on these markets? Because we’ve certainly seen, over the past several years, a huge amount of activity on the part of financial institutions. If they're going to have to stop now, do you think these markets will really shrink down in size, or their activity will shrink? Or how will it affect prices?

Todd Horwitz, chief strategist, Adam Mesh Trading: I don’t know about the pricing dramatically, but I think it’ll affect the markets dramatically. The banks and all these big people, they provide liquidity. The key to being able to make money in a market is to have liquidity. Illiquid markets are impossible. And with all the regulations that this government is trying to put on us, they are trying to take away the liquidity. They're trying to take away the ability for us as traders and investors to get involved in this market. So I think it will have some sort of a dramatic effect if they're allowed to get this passed through. I think it’s …

Norman: But don’t you think, by the same token, all the trading activity and the speculation that we’ve seen led to some distortions in the market? There was a story a year and a half ago, when the grains were really going crazy, that farmers who were hedging, short-selling their physical crop, were getting margin calls like every day, because the prices were being run up for no fundamental reason. And they were not able to secure financing for those positions. And the market essentially became very distorted. Don’t you think that’s a danger, too?

Horwitz: I think that it might be part of the danger. But don’t you think that greed also is a part of that? These big bubbles, these big markets, they come down to what? Fear and greed. I mean, that’s what we come to. Greed was what drove the market. If you remember, you bring up the example of the wheat, Minnesota wheat, winter wheat was $15 a bushel. They never …

Norman: That was not the farmers’ fault, was it?

Horwitz: Everybody’s hedging and everybody’s doing their thing. I don’t know who was greedier. When that almighty dollar starts coming out, people get greedy.

Norman: So what you're saying is that the regulations, if they're imposed, the downside will be greater than whatever distortion maybe was created by excess speculation.

Horwitz: That’s what I think. I think that the way the markets function now is fair, they're seamless, they provide liquidity. What the regulations are trying to do is take away that liquidity and give the guy not the ability to get involved in trading the markets. They're trying to put a rein on everything you do. And, as you know, from being an ex-trader, it’s very hard when you're rule-driven and there isn't free market, because this country was built on free market.

So, why do we want to start tying up all these derivatives and all these markets? I mean, you can even go to the Goldman Sachs thing. Goldman Sachs, the derivatives they were doing, the people who bought them, they could have sold them short as well. They had the same opportunity. They chose to buy the package. It’s got nothing to do with anything else, in my opinion.