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Walter,
I don't know where the cut-off for big Pee and little Pee begins and ends.
I trade for producers who do four to eight thousand acres of wheat. Jane
Smiley wrote in "A Thousand Acres" that the measure of wealth and standing
in Iowa was her title (1,000 acres under production). Of course, that was
fiction. Some of my boyz yield 75 to 100 bushels an acre in our fertile
"loess" soil. To here them talk, they all "poor mouth" anyone who will
listen and complain about being poor dirt farmers. To me, these are large
wheat producers. Some have lost 300k a year during this deflationary
spiral.
I don't know who the author of the article was, but "trust me" (and hey,
never trust a broker that says: "trust me"), producers go net long all the
time. I've seen feedlots in the OK and TX panhandles go out of business
because of their speculative long positions. I also witnessed two silver
refineries close their doors because of their speculative long positions in
the precious metals. I've never traded for a grain farmer, large or small,
that has ever priced their crop on the board of trade.
One of the questions, when opening an account is: "is you is or is you
ain't" a hedger/producer. All the ag-accounts check the little box that
allows them to trade at the reduced/favorable margins. A typical 5,000
bushel wheat contract requires $675 in margin for a speculator. The same
contract can be held by a producer for a mere $400. Brokerage houses,
exchanges, and brokers don't give a rip that most producers don't "properly"
hedge their crop. The farmers get the advantage of the hedging margins
(theoretically, because they are not at risk...after all, they are all using
these markets correctly...right?) and then blatantly speculate in the
direction they "wish" the markets will go (up).
If the "commercials" were all using these markets in the classic hedging
scenario, why did Orange County and the one of the largest Japanese banks
take it in the shorts? (maybe they took it in the longs?) Since it's not
against the law for a reporting commercial to speculate, the numbers can be
misleading.
Let me stoop to one lower rung on the ladder. After interviewing hundreds
of farmers, I've come to the conclusion that "most" farmers LIE to their
county extension agents about what they have under production. Most county
extension agents claim that they know most producers lie, so they "fudge"
the numbers to compensate for the little fibs when the producers feed them
the "funny numbers". Now, that's about as far as I have followed the
dishonesty of "reporting", but as you can imagine: the govt. reports that
come out are not necessarily accurate.
Don't believe everything you read in Futures Magazine...even I was quoted in
the April '00 edition and as Groucho used to say: "I'd never belong to a
club that would have me as a member." Producers go long everyday. The text
book examples of what should be done does not necessarily play out in
reality. This "tired" discussion has been rehashed a dozen times on the
"Realtraders forum" over the last three years. Survey brokerage principals
or reps and the broad smile of recognition appears when this topic is
discussed.
This in no way diminishes the value of the COT report (I guess), but is this
information a real tool in creating wealth? Steve Briese would argue: YES.
Briese's broad "brush strokes" vaguely frame the market (my very subjective
opinion) and are not very much use for someone trying to catch a couple of
pennies on one side, only to flip and reverse their position.
Walter, you're contributions to the forum are terrific. Please continue to
provide us with your valuable insight. I just had to speak my piece on the
Big P, doing the right thing, thing. By the way, who is accountable for
assigning individuals to the categories that comprise the COT and how
accurate is the reporting? Always remember: the only thing that is 100%
the truth, on a continuing basis, is the price.
Thanks for making me "think", or whatever it's called when my head hurts,
Steve Karnish
Cedar Creek Trading
http://www.cedarcreektrading.com
----- Original Message -----
From: Walter Lake <wlake@xxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Wednesday, April 26, 2000 5:49 PM
Subject: Re: KW0K/KW0N
> Hi Steve
>
> We are talking about reporting Commercials aren't we? ... and Producers
with
> a Capital "P" <G>
>
> But since I'm such a wicked mouth piece for exchange literature <G> ...
> maybe you could help me out with "...have taken advantage of hedging
> margins, but have always been "long in the field and long on the board".
> ..."
>
> Best regards
>
> Walter
>
> PS: For others that wrote ... I received this back from the author of the
> Futures Mag article on COT analysis.
>
> "... when Producers cover short positions they just REDUCE their total
> shorts--I don't believe they ever go net long (likewise for Users selling
> their long positions).
> I get my COT data from the CFTC website, but I don't use spreadsheets; I
> save the data as a text file & import it into my own programs. ..."
>
>
> ----- Original Message -----
> From: "Steve Karnish" <kernish@xxxxxxxxxxxx>
> To: <metastock@xxxxxxxxxxxxx>
> Sent: Wednesday, April 26, 2000 5:46 PM
> Subject: Re: KW0K/KW0N
>
>
> | "Producers are usually short in the market. Because Producers are going
to
> | deliver product against their short
> | positions, they rarely go long."
> |
> | Walter,
> |
> | Nothing could be farther from the truth than the above statement. My,
my,
> | my Walter...please don't influence "young and tender" newbies with such
> | wickedly false sentences, gleaned from exchange literature. I've traded
> for
> | hundreds of producers (grain, cattle, pig, metal and "you-name-it"
> | producers) and 99% of them have taken advantage of hedging margins, but
> have
> | always been "long in the field and long on the board". It's just the
way
> it
> | is. I'm not saying it's the right thing to do. All I'm saying is:
that's
> | the way it is.
> |
> | The truth is out there,
> |
> | Steve Karnish
> | Cedar Creek Trading
> | http://www.cedarcreektrading.com
> |
> |
> | ----- Original Message -----
> | From: Walter Lake <wlake@xxxxxxxxx>
> | To: <metastock@xxxxxxxxxxxxx>
> | Sent: Wednesday, April 26, 2000 12:47 PM
> | Subject: Re: KW0K/KW0N
> |
> |
> | > To Steve and Scheier and others who wrote
> | >
> | > "... My experience with the commercials is that they accumulate a long
> | > position often well before the bottom has arrived, and even more of
> | > interest, will begin dumping this position long before the top. ..."
> | >
> | > Commercials are not a monolithic block but are composed of two
separate
> | > "hedger" groups in the grains complex: Users or "millers and bakers
and
> | > cereal makers, etc." and Producers i.e., farmers, elevators, etc..
> | >
> | > Both are hedging from different points of view.
> | >
> | > Users are usually long and Producers are usually short in the market.
> | > Because Producers are going to deliver product against their short
> | > positions, they rarely go long. The reverse is true for Users.
> | >
> | > This simplified explanation is how I understand the COT positions.
Maybe
> | you
> | > could explain some more about how to think about how to trade against
> | > (contrarian maybe) hedging strategies Steve.
> | >
> | > Commercials are positioned for a longer time frame.
> | >
> | > The Funds are where the "danger" or "opportunity" lies. This is why
the
> | > Research Departments track their positions so carefully.
> | >
> | > Best regards
> | >
> | > Walter
> | >
> | > PS: For others who wrote here's an end-on look at the last 30 years of
> SK
> | > front months. It'll give you an idea of how flat they are and cheap Vs
> | dear.
> | > You can do the same with the spreads. Seasonalities are different. If
> you
> | > don't like using Demetra then you can use "P" values for the dailies.
> | >
> | > ----- Original Message -----
> | > From: "scheier" <scheier@xxxxxxxxx>
> | > To: <metastock@xxxxxxxxxxxxx>
> | > Sent: Wednesday, April 26, 2000 9:55 AM
> | > Subject: Re: KW0K/KW0N
> | >
> | >
> | > | The question I guess is whether you should ever buck the
> | > | commercials in the commitment of traders report as they
> | > | accumulate a position, in this case, the grains. I think you have
> | > | to consider whether your system is designed to trade short term
> | > | signals or you're a longer term trend follower. I don't see it
very
> | > | relevant for Adam's P&L techniques, and even's Steve K's
> | > | oscillator signals could continue to give accurate calls for short
> | > | term cycles while the commercials continue to accumulate.
> | > | My experience with the commercials is that they accumulate a
> | > | long position often well before the bottom has arrived, and even
> | >
> | >
> |
>
>
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