Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Snowshoe who wrote (72512)	2/12/2010 7:45:05 PM
From: Maurice Winn	1 Recommendation Read Replies (2) of 74559

It pays to read the fine print of contracts. When iron ore buyers in China agree to buy a certain amount for a certain time at a certain price, the seller should ask themselves "Who is going to enforce that they do?" Since the government of China is going to assist the robbery process, the miners should easily figure out that it's better to be paid cash on the barrel BEFORE delivery of the ore. When giving credit to deadbeat contract breakers, it's wise to allow for that risk in the price of the product. It might be worth taking that risk for the right price. But normally the risk is too high. Qualcomm agreed to special low royalty rates in China. I'm sure that was because they realized that China companies would not pay and the government in China would back them. It was not just to support local development of CDMA. In the early 1970s, Texaco Canada Ltd had fixed price heavy oil supply agreements with power stations and when crude oil prices quadrupled, Texaco was stuck with those loss-making contracts which were fulfilled. Laws work in such countries. From then on it was posted prices and volume discounts. Mqurice

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