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Pete,
Somebodys always wanting to quit just when your about to learn something:-)
I did a quick brush up on these "schools" as I wasn't familiar with the
terms. It would be interesting to hear how you think that this understanding
allows you to be able to understand whats happening in Japan & whats
happening in Asia at the moment & why it occurred.
Brent
-----Original Message-----
From: Peter [ KKD ] <derivatives@xxxxxxxxxxxxxx>
To: brente@xxxxxxxxxxxx <brente@xxxxxxxxxxxx>; RealTraders Discussion Group
<realtraders@xxxxxxxxxxxxxx>
Date: Thursday, December 03, 1998 11:39 PM
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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