I’m not savvy in financial affairs, but isn’t it this Commodities market and trading in it’s futures where people have lost their shirt? Sort of like legal gambling? Betting on corn or wheat or soybeans or pork prices?
Substantial risk is involved. You can lose more than your original investment. Batteries not included. Your mileage may vary........
However you can as a pure speculator, just get in and out, sell long and short as you please.
Right now, prices are falling, so buyers are on the sidelines waiting for tomorrows lower price. So, there are not too many customers.
By and large the producers of the commodities need to sell, and are really getting hammered. Arab, Moscow, Iran, Venezuela in the oil markets must beginning to really get desperate. One of these clowns would love for the other oil producers to go off production.
Everything I know about commodities trading, I learned from ‘Trading Places’:
We are commodities brokers, William.
Now, what are commodities?
Commodities are agricultural products. Like coffee, that you had for breakfast. Wheat, which is used to make bread. Pork bellies, which is used to make bacon, which you might find in a bacon, lettuce and tomato sandwich.
Then there are other commodities like...frozen orange juice...and gold.
Though, of course, gold doesn’t grow on trees like oranges.
- Clear so far?
- Yeah.
Good, William.
Now, some of our clients are speculating that the price of gold will rise in the future. We have other clients who are speculating that the price of gold is going to fall. They’ve placed their orders with us and we buy or sell their gold for them.
Tell him the good part.
The good part is that no matter whether
our clients make money, or lose money, Duke & Duke get the commissions.
Well, what do you think, Valentine?
Sounds to me like you guys are a couple of bookies.
I told you he’d understand.
The problem is not speculating, but using one dollar down to buy ten dollars worth of commodity contracts. Since the 1980’s Wall Street has invented leveraging schemes that buy mortgage notes tainted with subprime notes, and in turn another fund uses leverage funds to buy into the leverage funds. Essentially we have a crisis similar to the Savings and Loans crisis. Back then people brought an S&L, borrowed against its equity/assets to leverage buyout an even larger company and use its equity to get another loan and use that money in another leveraged buyout of another larger company until the bubble burst. The key to reform is tighten the regs on leveraging money to buy something very large.
Usually the people who ask this question are those who either hate markets, love gambling, or honestly don't know. We'll give you the benefit of the doubt.
Las Vegas customers know that the odds are against them but they vainly hope they'll be exempt from the laws of probability. Market workers have to work hard to measure risks before they buy or sell because they know that probability laws are always enforced over time . If they work hard then they feed their families. If they don't work hard they complain and vote Democrat.