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Brent
when I referr to fundamentals, Im not talking about news events (ie your
saddam comment), but rather things like "mainstrean econmics" vs Austrian
economics, capital flows, intermarket integration & correlations, being
aware of how portfolio mangers utilise CAPM & hence their capital allocation
to different asset sectors in general, what EMU integration means for
fiscal/monetary policy, & why it cant really work, hence what it implies for
US/EU risk premiums, hence ER, & int rates differentials. etc etc, etc etc
FUNNYmentals encompase a much wider scope than you mentioned
Peter
-----Original Message-----
From: BrentinUtahsDixie <brente@xxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Friday, 4 December 1998 6:23
Subject: Re: contango/backwardation
>Pete, although I agree with the sprit of your statement that it is
important
>to understand fundamentals, I don't believe that anyone understands
>fundamentals completly. For example you virtually have to be all knowing to
>know that Sadam ate something that gave him indigestion and kicks out some
>UN guys or something. I followed a Copper backwardation for a while and it
>was just market manipulation as near as I could tell. Surprise, there was
>more Copper in some wharehouse that they didn't count. You can't hardly
>believe a word of the news. So what else is new.
>
>Brent
>
>-----Original Message-----
>From: Peter [ KKD ] <derivatives@xxxxxxxxxxxxxx>
>To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>Date: Thursday, December 03, 1998 9:35 AM
>Subject: Re: contango/backwardation
>
>
>>To be a trader worth your salt, you need to understand fundamentals
>>completely, but then when it comes to trading you need to forget about it
>>totally. This however dosnt detract from its importance......... case in
>>point LTCM Euro positions
>>Peter
>>
>>-----Original Message-----
>>From: BrentinUtahsDixie <brente@xxxxxxxxxxxx>
>>To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>>Date: Friday, 4 December 1998 3:20
>>Subject: Re: contango/backwardation
>>
>>
>>>I'll tell you what contango/backwardation means to me, it means that a
>hole
>>>bunch of fundamentalist traders are going to be taken to the cleaners.
>Just
>>>another good reason to trade 99% technically.
>>>
>>>Brent
>>>
>>>-----Original Message-----
>>>From: I4Lothian@xxxxxxx <I4Lothian@xxxxxxx>
>>>To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>>>Date: Thursday, December 03, 1998 8:19 AM
>>>Subject: Re: contango/backwardation
>>>
>>>
>>>>You normally hear contango and backwardation in relation to New York
>>>>contracts. In Chicago the terms I hear used are a "Normal" market (one
>>>with
>>>>carrying charges ), and an "Inverted" market (one with nearby prices
>>higher
>>>>than deferred prices). Just different terms to describe the same thing.
>>>>
>>>>An example of a normal market to an extreme is the Lean Hog market.
>There
>>>is
>>>>a glut of available nearby supply, not much capability to store product,
>>>and
>>>>weaker demand than anticipated when the farrowings were planned.
>>>>
>>>>Given our glut of supply in most all commodities, and weak worldwide
>>>demand,
>>>>there are not any significant inverted markets I can see right now.
>>>However,
>>>>the corn market of 1996 would be a good example. Nearby prices gained
>>>>dramatically on deferred prices.
>>>>
>>>>Sometimes markets will go inverted when there is a shortage of the
>>>commodity,
>>>>like the 1996 corn market. Other times you will see an inverted market
>in
>>>the
>>>>first couple of months, despite a glut of supply. This will occur
>because
>>>the
>>>>owners of the commodity, like farmers holding and storing soybeans, are
>>>>waiting for higher prices in the future to sell their crop. In the
>>>meantime,
>>>>processors of soybeans need to buy them to fulfill their nearby meal and
>>>oil
>>>>contracts. This creates a strong basis, which supports the nearby price
>>>due
>>>>to the relationship of the cash prices in the country to delivery values
>>of
>>>>the futures contracts.
>>>>
>>>>Regards,
>>>>
>>>>John J. Lothian
>>>>
>>>>Disclosure: Futures trading involves financial risk, lots of it!
>>>>
>>>>
>>>>In a message dated 12/3/98 7:53:09 AM Central Standard Time,
>>>stansan@xxxxxxx
>>>>writes:
>>>>
>>>><< Ketayun:
>>>> This is my understanding of these terms.
>>>> In commodities, e.g. oil, cocoa, etc., the contracts for
>>>> future delivery carry a higher price than contracts for
>>>> near term delivery.other factors being equal.
>>>> So a contract for oil expiring in 6 months would usually
>>>> cost more than the same contract expiring in 30 days.
>>>> This is due to several factors one of which is the carrying
>>>> cost. This normal situation is called "Contango" but I'm
>>>> not sure the origin of the term.
>>>>
>>>> However, a year ago long-delivery oil was priced below the
>>>> short-delivery oil and this unusual situation was referred
>>>> to as backwardation. I believe this term is appropriate
>>>> because the relationship of long term to short term is
>>>> backwards.
>>>>
>>>> I hope the RT'ers who deal in commodities can give
>>>> a better explanation.
>>>> BTW at the time of the backwardation in oil occurred
>>>> it was explained partly as due to temporary loss of
>>>> refinery capacity and was a near term factor only.
>>>>
>>>> Regards,
>>>> Stan R. >>
>>>>
>>>
>>>
>>
>>
>
>
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