My dog wants me to cash my 401(k).

i have some serious beef with rising prices.

/hot

I thought Winthorpe said it would be pork bellies this week? No wonder the Dukes tried to ruin him.

How are futures markets anything but glorified gambling?

pisceandreamer: YoungLochinvar: How are futures markets anything but glorified gambling?

In theory it's supposed to be a legitimate hedge against price fluctuations. In reality - glorified gambling at this point.

With other people's money.

pisceandreamer: In theory it's supposed to be a legitimate hedge against price fluctuations. In reality - glorified gambling at this point.

I get it when a company that USES a commodity (and I believe southwest did this with fuel for a while) agrees to buy x amount/year of a commodity at a given price - that makes sense to me. They intend to use it, and locking in an affordable rate rather than run the risk of an unaffordably high rate later (while also losing if the price drops precipitously) is one thing.

But when bankers are doing it in an effort to make a buck - well, that's just money that's taken out of the pocket of somebody that might've actually produced something with it...

All commodity trades should be forced to have physical delivery.

Lost Thought 00: All commodity trades should be forced to have physical delivery.

Rectally.

It's because of the wolves.

YoungLochinvar: How are futures markets anything but glorified gambling?

You might be amused to know that ~100 years ago many states did consider it gambling(and thus illegal) to trade in these without having something to hedge or taking physical delivery.

Lost Thought 00: All commodity trades should be forced to have physical delivery.

This.

I could not agree with you more. Buying ANY commodities, then you must take physical delivery for 24 hours before you are allowed to sell it. Oil, gas, cattle, pork, corn, soy beans... any of it. This also means that you must have the food on hand to feed livestock and take care of their wastes as well.

That would "straighten" out the

Gambling that drives up food prices should be criminal.

Incontinent_dog_and_monkey_rodeo: Gambling that drives up food prices should be criminal.

It also keeps farmers from starving, so there's that.

YoungLochinvar: I get it when a company that USES a commodity (and I believe southwest did this with fuel for a while) agrees to buy x amount/year of a commodity at a given price - that makes sense to me. They intend to use it, and locking in an affordable rate rather than run the risk of an unaffordably high rate later (while also losing if the price drops precipitously) is one thing.

But when bankers are doing it in an effort to make a buck - well, that's just money that's taken out of the pocket of somebody that might've actually produced something with it...

Do you realize there was a counter party, probably involving bankers, that took a loss allowing cheap jet fuel for SW possible? Everybody biatches when banks or oil companies make a profit but never realize even when they lose money they still are providing a necessary service.

Cattle futures? You mean dinner and upholstery?

Seriously though, subsidize healthy food instead of crap and put speculators who artificially jack up the price of food in jail. When I'm king, everybody'll get a pony.

Good. People eat too much red meat anyway. I am so vegan, I don't even eat pussy anymore.

Dwight_Yeast: It also keeps farmers from starving, so there's that.

Explain how that does so today.

YoungLochinvar: How are futures markets anything but glorified gambling?

Gambling doesn't have the added sense of satisfaction that comes with knowing that you just screwed over people who are struggling to survive by artificially inflating the price of gas/corn/beef/etc.

MannaxOne: That would "straighten" out the

Oh no! The CBOT got to him before he could finish this comment!

I like futures!

This was an utterly amusing headline. Cud you milk that one any better, subby?

Damnit, there goes the price of my 1.2 lb Porterhouse steaks...

Dwight_Yeast: Incontinent_dog_and_monkey_rodeo: Gambling that drives up food prices should be criminal.

It also keeps farmers from starving, so there's that.

Except that most of the providers of food for your major grocery store chains are, themselves, fairly-decent-sized corporations, all the way down to the farms themselves. Sadly, it's the only way most farms make money these days, by being 10,000-acre-minimum operations, and even then some of these operations, on the lower end of the scale, are suffering from rather small profit margins.

bhcompy: Dwight_Yeast: It also keeps farmers from starving, so there's that.

Explain how that does so today.

Well, the way the market was designed to operate, you have the farmer who sells the commodity, and the buyer who buys it. But what happens when the farmer comes to the market and the buyer isn't there? For that you need the speculator. He's a middle man, but his job is important to keep the market running smoothly. Enter Goldman Sachs (new window).

zarberg: This was an utterly amusing headline. Cud you milk that one any better, subby?

I agree good pun but do you really have to butter Subby up? He'll/She'll just hoof it to the next beef related article.

Good thing I mostly eat chicken these days.

texas, kansas, and oklahoma herds decimated by drought and sold off cheap before they starve

next year beef prices through the roof

obvious thread is obvious

Meh.. my husband went hunting today and brought home a huge buck! So, I couldn't care less about beef at the moment!

/gettin' a kick

pisceandreamer: YoungLochinvar: How are futures markets anything but glorified gambling?

In theory it's supposed to be a legitimate hedge against price fluctuations. In reality - glorified gambling at this point.

Au contraire, it's glorified gambling that affects real life prices!

Interesting, because it wasn't long ago that all the reports were talking-up a GLUT of beef as ranchers in these drought-stricken states chose to cut their losses by slaughtering their herds and sending the beef to markets now. The dip in supply isn't supposed to happen until next year, when calves which ordinarily would have been born had these early slaughters not occurred would come of age.

"Futures" is just an excuse to raise the prices whenever they want, for no logical reason.

I'm a vegeterian so I'm getting a kick out of these replies...

/ lol

/hot like a bbq

oruacat2: "Futures" is just an excuse to raise the prices whenever they want, for no logical reason.

You could buy some and join in the fun.

Bullshiet. The prices of beef will continue to rise not because of grain prices, or drought , or anything other then the monopoly of production. In less then a year the few corporations that have cornered the market in beef will boast historical record profits all the while explaining said profits as a simple case of supply and demand. That's crap because every god damn day I can still see 2-4 doller off coupons on beef which tells me it's not a "demand" problem.

Isn't there some way to restructure the market so that speculation inevitably drives prices down, not up? Eh, probably not.

Zombie Butler: zarberg: This was an utterly amusing headline. Cud you milk that one any better, subby?

I agree good pun but do you really have to butter A1 Subby up? He'll/She'll just hoof it to the next beef related article.

ftfy

pisceandreamer: YoungLochinvar: How are futures markets anything but glorified gambling?

In theory it's supposed to be a legitimate hedge against price fluctuations. In reality - glorified gambling at this point.

What cattle traders might look like...

Donnchadha: [creditsuit.org image 234x291]

Bad cow pun.

They look so stupid, aren't much fun.

Senaldun: YoungLochinvar: How are futures markets anything but glorified gambling?

You might be amused to know that ~100 years ago many states did consider it gambling(and thus illegal) to trade in these without having something to hedge or taking physical delivery.


Welcome to deregulation.

YoungLochinvar:

I get it when a company that USES a commodity (and I believe southwest did this with fuel for a while) agrees to buy x amount/year of a commodity at a given price - that makes sense to me. They intend to use it, and locking in an affordable rate rather than run the risk of an unaffordably high rate later (while also losing if the price drops precipitously) is one thing.

You're exactly right about the motive of a commodity consumer to smooth out costs with futures markets and your choice of Southwest Airlines as an example is an apt one. Southwest made huge inroads in the market with an astute call on jet fuel futures, back in the late nineties I believe, and the competitive edge it gave them then put them where they are today. All airlines attempt to hedge their fuel costs as much as possible and to this day Southwest still seems to have an edge on the tactic.

Airlines are also not necessarily saving money either by locking in future fuel costs. Other than the odd moments in the oil market, most of the time future contracts are actually more pricey than physical prices. The airlines are more worried about predictability than cost (to a degree of course) and often pay a premium in order to discourage volatility in their projections.

Having said that, Southwest has consistently demonstrated that an astute fuel purchasing department can sometimes find opportunity for arbitrage.

But when bankers are doing it in an effort to make a buck - well, that's just money that's taken out of the pocket of somebody that might've actually produced something with it...

See though, here's where you're a little off track...you've left out a rather important part of the hedging process in your haste to blame the bankers.

You talked about the commodity consumer but you didn't even mention the commodity producer.

The jet fuel supplier was also quite happy to contract future deliveries with Southwest. Assurances of future sales, knowledge of future refining and delivery requirements and budgeting for future raw material purchases (probably hedged on the oil future market too) would be essential for the supplier as well.

What the bankers actually do in this process, is facilitate it by running a market, the futures market. This market is huge, liquid, transparent, efficient, essential to the economy and, along with the forex market, the purest form of capitalism we have.

I'm the leftyest lib that ever libbied and when I'm Czar I'm gonna raze and then rebuild the stock, bond and financial markets so they function in a proper capitalist manner, but I'd leave the commodity and currency markets just as they are, a genuine and efficient base for a capitalist system.

This brings us to the third and final player in the commodity and forex markets...the speculator.

Booooooooooo.....Hiss.....BOOOOOOO! KILL THE SPECULATORS!111!1!

No, I'm sorry but speculators are essential to this system and yes, sometimes the speculators can be the banksters we all love to hate...but still...

Wheat crops die. Wheat crops flourish.

Gold mines tap out. New Gold mines are discovered

Hurricanes close whole oil fields. Boycotts are lifted.

shiat happens...gluts, bankruptcies, subsidies, war, pestilence, monopoly, more buyers, less sellers, more sellers, no buyers.

Sometimes the speculator wins big and sometimes he loses big but the consumer and producer rarely do either. Their lives and their business go on with volatility smoothed out for them...the unpredictabilities absorbed by the speculator.

No...any of the dumbass ideas proposed in this thread such as mandating physical delivery, even for a short period, or barring speculators from the market would be an extremely bad idea, akin to throwing a rock into a spinning jet turbine. These are extremely efficient markets, a true testament to real capitalism and it would be foolish to alter them radically.

All the biatchin in the thread about what could be done to rehabilitate the futures markets and not one person touched on the one realistic method to rein them in.

The futures market have a built in throttle. There is no need for any radical changes...all you have to do is something that is routinely done already...adjust the margin requirements. I'd agree that the levels of leverage available in these markets is really quite high. They vary of course but it's routine to be able to control 100's of thousands of dollars worth of a commodity or currency for speculator attractive low levels of cash.

Regulators raise and lower margin levels for effect quite often in these markets but I'd entertain an argument that they should be substantially higher than they are now.

/knows this cause the regulators in the silver comex kicked my ass in Sept.

This is bad news for Obama chickens.

Aladriel: Meh.. my husband went hunting today and brought home a huge buck! So, I couldn't care less about beef at the moment!

/gettin' a kick

By my calculations, what with all the equipment you got to buy and all the time you spend hunting, venison costs $200 a pound.