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RTs,
> I think maybe some of you are missing the point on economics. As a
> Ph.D. in financial and macroeconomics, I certainly understand all that
> stuff. Fudamentals are important, no doubt. Fundamentals drive
> markets, acting almost as a magnet pulling or pushing values and
> variables to economic equilibriums. This takes time to work. Lots of
> other forces in the market drive prices and trends. The shorter the
> time frame we are talking about, the less economic fundamentals have
> to do with the price of anything and the more other factors, such as
> psychology, orders, timing etc will drive prices.
>
> Nick
>
> -----Original Message-----
> From: Peter [ KKD ] [SMTP:derivatives@xxxxxxxxxxxxxx]
> Sent: Friday, December 04, 1998 1:37 AM
> To: RealTraders Discussion Group
> Subject: Re: contango/backwardation
>
> Brent
> Austrian Economics is a school of thought, like Keynsian, its not
> the
> economic well being of the Austrian economy. Your missing the point.
> Knowing the difference betweeen Austrian & mainstream economics allows
> you
> to be able to understand whats happening in Japan for example & whats
> happening in Asia at the moment & why it occurred.. Austrian economics
> is
> just one facet of fundamentals
> You state " Economic forces are what move most everything but they
> are
> difficult to fully understand and conceptualize"..... thats
> exactly my
> point, . Without having a proper understanding of Fundamentals your
> not able
> to understand whats going on.
> Dont confuse this with trading. I said that a trader worth his
> salt
> needs to understand fundamental but to ignore it in trading.
> You keep on reffering to news, fundamentals is not about news,
> its
> about "laws" that govern economics & markets.
> how about we just leave the discussion at then
> cheers
> Peter
>
> -----Original Message-----
> From: BrentinUtahsDixie <brente@xxxxxxxxxxxx>
> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> Date: Friday, 4 December 1998 9:32
> Subject: Re: contango/backwardation
>
>
> >Pete,
> >
> >This is getting close to splitting a hair but how do you get your
> >information on Austrian Economics? Do you go there and personally
> collect
> >data and measure it? I don't think so. You probably rely on the news
> like
> >most all of us. I think that you are talking about how you utilize
> >information that is most likely obtained from the news. Economics is
> simply
> >the amalgamation of all input and output of an economic system and
> news is
> >simply the reflection of that. Economic forces are what move most
> everything
> >but they are difficult to fully understand and conceptualize. In 1980
> >everyone's idea of the economy didn't tell them that for the next 20
> years
> a
> >bull market was going to ensue or everybody and especially the
> economists
> >would be richer than Bill Gates. My point is that no one can possibly
> know
> >all fundament input whether it comes from the news, the boardroom, or
> the
> >local tavern. And one key missing piece of information can negate all
> the
> >other input. For example a dock strike can cause a price rally even
> though
> a
> >large supply of something is produced and expected.
> >
> >Brent
> >
> >
> >
> >-----Original Message-----
> >From: Peter [ KKD ] <derivatives@xxxxxxxxxxxxxx>
> >To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> >Date: Thursday, December 03, 1998 12:49 PM
> >Subject: Re: contango/backwardation
> >
> >
> >>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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