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Jun.17
7:55 PM ET
Wednesday, 17 Jun 2009
Natural Gas Prices: True Demand or Market Manipulation?

The United States Natural Gas exchange-traded fund might be too powerful for its own good, Cramer said on Wednesday. The ETFs sudden popularity seems to be artificially driving up the commodity’s price, far beyond what the actual demand would require.

Here’s how the ETF works: When investors buy shares of the UNG [UNG  Loading...      ()   ], the fund buys more natural gas futures contracts. As a result, nat gas the commodity goes higher. This ability to move prices takes on added significance when you consider the UNG’s growth to $3 billion now from $670 million in February. The world’s need for more natural gas didn’t catalyze that move.

As dangerous as the UNG could be, Cramer sees an even larger issue here: the US government – the SEC, in particular – and its lack of market regulation. Washington slept when short sellers, free of the uptick rule, relentlessly hammered down stocks, and it ignored the damage done by ultrashort ETFs, which allowed these same short sellers to side step margins rules. The SEC must crack down, Cramer said, before the rest of us get hurt.

Watch the video for more of Cramer’s outrage at the UNG.

Call Cramer: 1-800-743-CNBC

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