Re: cash ,,,,

[Val Clancy <valclancy@xxxxxxxxxxxxx>]

There were studies done in 70s, 80s, 90s,
on what leads what, cash or futures.
The result always was that futures lead cash.
In the 70s it was up to 45 min, in 80s up to
15 min and in 90s up to max of 5 min ( ave of about 1 min ).

And of course the most important consideration is that futures
markets were designed to serve  two primary purposes, one of
which is widely known and the other one is not.
The first purpose is a hedging mechanism ( with speculation as the other side of it ).
The second purpose is to control the cash  market. Two of those are actually
the same coin, different sides. Having high leverage and low margin cost
it is easy to control cash market with futures. You want to induce supply/
selling in the cash, you start selling SPs... and the other way around.
The large contract value and the make/take delivery mechanisms gave futures the
necessary weight to accomplish that.
Arbitrage is a side product of any dual market futures, cash or both.

Overall the cash market ( investment pool ) was designed for one purpose:
to prevent hoarding of paper money by labor force and to suck that money
back into the system for it to work more efficiently, preventing outflow of
money from the system. Profit making by speculating in stocks or futures
or investing ( same thing ) is not the main purpose. The market/money pool  is a zero
sum game ( including stocks ) and that proves the point.
Whoever thinks that  the market is a free market or that everything just
evolved by itself is a very naive human.


Clint Chastain wrote:

> I had always assumed that cash prices followed futures prices, although I
> don't actively follow the futures. Seems to me that the futures would be the
> most efficient and rapid vehicle available with which to allow the pros to
> express a change in sentiment. If that is accepted as fact, then stock
> prices would have to quickly follow futures prices or else there would be
> free money - arbitrage profits - left on the table. And of course that
> doesn't happen.
>
> Could it be that variations in individual user reception circumstances are
> at the root of the wide variance in user perceptions of which index leads
> which? For example:
>
> cable vs. modem vs. satellite vs. fm
> fast computer vs. slow computer
> good eyesight vs. poor eyesight
> good weather vs. bad weather
> near of far from exchange
> squirrel chewing on the cable insulation on the roof of data vendor A's
> building vs. no squirrel on data vendor B's building.
>
> I myself dunno, just trying to understand.
>
> Clint
>
> -----Original Message-----
> From: Allan Havemose <havemose@xxxxxxxxxxxxx>
> To: Omega-List <omega-list@xxxxxxxxxx>
> Date: Friday, January 29, 1999 9:24 AM
> Subject: Re: cash ,,,,
>
> >In my experience, the most significant "feature" of SPX is that it is not
> >manipulated by the locals at the CME. I have found it worth the minute of
> >two it takes to confirm an SP move with an SPX move.
> >