Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (35149)	4/21/1999 12:30:00 PM
From: Defrocked	Read Replies (2) \| Respond to of 86076

Okay,okay. The well known pedophile Keynes proposed in the early 1930's that hedgers are usually short futures since they generally hold spot inventories. He argued that hedgers had to pay a premium to speculators to take the opposite side of the trade, the long position. According to Keynes, hedgers thus sell-into-the-hole in order to get their short postions established which implied that futures prices will be lower than expected future spot prices. This phenomenom is called "normal backwardization". While originally used to refer to the difference in expected spot and futures prices, most futures traders use the term to describe only the term strucure of futures prices: declining prices over the futures contract spectrum is called backwardization while increasing prices over the futures term structure is called a contango. Oil and natural gas, for instance, are usually in backwardization because of storage constraints. Gold is usually in contango because it is easy to arb relative to interest rate costs.