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Strategies & Market Trends : New US Economy Policy
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To: Arthur Tang who wrote (100)1/5/1998 6:47:00 AM
From: Arthur Tang  Read Replies (1) of 435
 
The new economy and futures, commodities, and derivatives?

Futures, commodities, and derivatives never have any products or merchandises change hands even if the traders or dealer talk of "moving out of warehouses". It is extremely important to understand what each contract costs and how big a quantity is involved. You could as Hunts brothers proved buy so many contracts to move price of silver from $5 to $18.50/oz. But nobody can unwind Hunts' position when they ran out of money. In the mean time silver was replaced by antimony for plating silverware. Stainless steel became the substitute. The demand dropped off never recovered.

Oil prices in the 1980's came down ($12/barrel)so much that price support ($18.50/barrel) has to be put in to get people to explore oil fields again in the 1990's.

All the ills of some big money gambling, shows up in our economy in the futures, commodities, and derivatives market. Some countries have been smart enough to decouple these markets from the real prices you can buy from producers. Deflation (raw material) will never happen because of price support. Deflation of end products will happen because of automation and increased demands. Direct labor (30%) and raw material (10%) costs are small components in the profit and loss as well as earning in the balance sheets. Wall street smart money better hire some management (MBA) analysts to understand how the real world operates.
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