| To: marcos who wrote (67051) | 9/15/2009 2:47:10 PM | | From: E. Charters | of 74912 | | | The double peril of selling forward at fixed prices above the market. Your buyer has to make money on shorts and other machinations in order to keep doing business. In the end, the derivatives players have to depend on and endless chain of greater fools losing ever more money, which eventually they will run out of a la LCTM. La Derivative is used to great effect to keep volatile commodities at even prices so producers can afford to, e.g. orange juice, sugar, cocoa, coffee, et al. We are taught that without the sugar and coffee futures and marketing boards, the price of java double double might require forking over pennies and nickles more or less with each passing cup. I don't know about that. Somehow I think it might adjust. Coffee has more or less a constant demand. I believe the real reason for the pits is so middlemen can make scads of money on wholesale and prices can be kept at profitable highly levels thru dearth and excess. Cartels and derivatives seem to be close cousins.
This the intent of gold derivatives and the borrowing-sale of the metal. To keep Barrick and a few other biggie golds in the chips with a steady income independent of the price of Aurum. Sans doot. But evidently it was unsupportable by the borrower-seller as the price plunged inexorably. This seemed to be the only way the in betweens made any money, on declining prices which we take it cannot keep that trick up indefinitely. And it was even more insupportable by Barrick as the price rose just as inexorably. It seems to work out with consumed commodities as the supply and demand are worked out by consumption and renewal, but not with gold, which is not perceived, at least, as consumed per se and has other more fundamental economic forces tied to its price.
EC<:-} |
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