Help for Sgt. Friday's Big Mouth : LUSENET : TB2K spinoff uncensored : One Thread

Better "do something". Or have you vanished again like you did in April when AWL dive bombed?

What did you say you paid and HOW MUCH PROFIT did you have when you were BRAGGING? Little did you know that with an open interest of 525 only a few players can run the price up over parity (and you paid over parity).

NOW....... A BAaaaaaaad Day at the Option Pool Hall:

9000 400 400 400 UP 400 11:40 - - - **-85*** 485 525



You are typical. Morons like you only surface when everything is "going your way". Oct 00 8510 8510 8415 UP 8425 12:15 - -169 8594 Call Put

-- cpr (, June 16, 2000



Are you still claiming that an inverted futures market MUST mean lower prices ahead, or are you willing to backpedal to it USUALLY means lower prices ahead?

-- J (Y2J@home.comm), June 16, 2000.

NO. An inverted only means there is a shortage in spot. It is possible that high shifts in demand cause such a case. The reverse of a long slow decline in demand (gold, silver and Diamonds) is more predictable.

It is possible that all prices rise in tandem. Now, heating oil is trying to return to normal and the prices are "all over the board". Ht. Oil is also very seasonable and diesel is falling (down .15 cents at the pump in 2 weeks here.) It has different meanings in different commodities. Most commodities hardly move from year to year. All you look for is changes in the trend lines. NOTE: ALL OIL futures are in a major uptrend. Anyone believing the stories in the media and thinking they "know what to do" would do better in Las Vegas or Atlantic City or their local Bookie. Like I wrote here in Feb. and March, oil "could" go to $35 or 40 but it won't stay there. PERIOD. Then like all commodities when the speculators dump before they get burned and the Crash comes. IT DID in APRIL. $31 down to 25.50 in oil is a major move down. Something that Blow Hard Friday omits from his posts. Then the Shieks turned off the faucets again (and I suspect some of the refiners have cut back to boost prices for the summer season when they know that the tyypical FAT, DUMB and HAPPY American consumers will drive and demand 55 degrees at the Burger King). The public has a lovely habit of buying at the top when the news is the worst and it looks like things will get even worser. Contrast that to the stories from late 1998 when AWL was 12-14 in light and sweet. Stories ran "what happens if oil goes to 5-10 a bbl.?" At that point, the other morons of Y2k, the Gold Freakazoids were talking $1,000 oz. for gold. I suggested in my **usual calm, reasonable way*** gold mining stocks that had always paid a dividend and had a high yield might be a better play then the coins Gary and the GariZoids were pushing online. I also suggested that "AWL can't stay at 12-14 because nobody can make money at it. It has to **return** to 16-22 and at 25 we can start turning on US wells (ask the Lisa-at- person about a debate about getting oil out of the ground later." AWL was in a normal market (not inverted). Then the price of spot rose above long term in heating oil and crude because it was obvious that those who "inventory" were short. All continue to believe (as I do) that this is a temporary situation. WHENCE, the INVERTED MARKET. THAT is for AWL. It all depends on the supply / demand situation in other commodities. If you have production failures (PT, PD) prices sky. If you have crop failures and there is no "grain substitute" prices will rise (Wheat a few years ago). You can also have a "sticks and bricks" shortage where Demand outruns every estimate. It happened in chips and it is happening in AWL NOW. All those Asian Countries the Doomers wrote off as finished from Y2k, have started chugging along in tandem. Japan has not closed its doors. Ipso Facto, spot shortages.

Chips, which are an unregulated market, saw a brief example of this last year with the Earthquakes on Taiwan (Doomers predicted end of chip industry in Taiwan). Six weeks later all the plants were back in gear. End of "spot shortage" and dRAMS came down (offset by Christmas stocking for PCs). Year ago though, in chips, the fire in the packaging plant was critical because you literally could not encapsulate after the chip was cut from the wafers. That is a "sticks and bricks" situation. As the plant comes on and ramps up or returns to full production, the prices fall. In Grains, it should be obvious that a shortage caused by a crop failure will have no meaning year to year. Where you could get killed in the past even in grains is if the Feds

-- cpr (, June 16, 2000.


So is it possible that OPEC is going to continue to keep supply tight, but the futures markets don't believe it? This would account for the inverted crude market, because spot is saying inventory is tight right now, while the price of futures are saying that the market players BELIEVE that supplies will not be as tight down the road.

-- J (Y2J@home.comm), June 16, 2000.

You and others miss the point. Commodity options do not trade on faith and belief and "valuations" or "analysis". Crops get grown and eaten, gold gets melted and used (or stored) and Oil gets used. The Faucets on the pipes from the oil fields control the supply and the industrial useage is the demand.

Some idiot with a web site pontificating on oil can only influence the trading for minutes or days. The Contract closed 10 days before the end of the month and go to spot.

HEDGING is the supply /demand "laying off the bet. It has nothing to do with a guessing game. Profits are predicated on what cost plus labor will be and users MUST know just the same as producers must know what they will get if they pump X millions of BBL.

Estimate wrong and you lose money but in a business like way. The "normal market" is spot plus carrying charges to the month of delivery. That is why the other markets find distant months higher. Go look at the increase of the strike price for gold month to month. That is the "carry".

That is also the point the Sgt. Big Mouth missed. AND his Oct. contract price just went to his purchase price in the last 2 hours but no trade on the Call was online that I could find (In theory, his gains were wiped out today and I don't expect we will hear him oink on line unless it reverses.)

There is no "belief" thing going on here. This is a reflection of the supply demand situation and what OPEN and the buyers think it will be. BUT, sellers must deliver and buyers must take possession.

The speculators historical function is to buffer the process NOT TO RUN THE SHOW as it is with "securities".

Who do you think is selling at the long term lower prices? If the traders inside OPEC (who know far more about the true supply/demand situation) thought prices would be higher in the future, don't you think they would be buying or at least not selling?

Remember it is OPEN which is the supply today and in the future. That is the whole PURPOSE of HEDGING. However, they MUST deliver or buy back to close the commodity option contract (and it is a CONTRACT).

-- cpr (, June 16, 2000.


I follow your argument completely. You are saying that the increase in spot today was because end users underestimated demand months ago when they locked in their (then) future needs, and/or OPEC didn't/couldn't produce as much as it said it was going to produce. In other words, that the futures markets set the price of oil, and that spot is then determined (typically) by working backwards figuring carrying costs.

As long as all of your assumptions hold true, it appears to me that your argument holds up very well. I question some of your assumptions, however.
1)The speculators may indeed be running the show, regardless of their historical function.
2)The suppliers may have sold forward assuming that they COULD pump X million barrels of oil, but now can't (or won't).
3)Maybe it is not OPEC who is selling forward, but other producers who are out of the loop on what OPEC intends to do.
4)Maybe some entity (government) is intervening in the futures markets trying to suppress oil prices.
5)Maybe OPEC is about to walk away from selling oil for dollars, and has no intent of honoring forward contracts.

I'll admit that some of my possible situations are long shots, but they are all possibilities that would also explain the current market situation.

-- J (Y2J@home.comm), June 16, 2000.

Sorry but you still miss the whole point.

Prices of commodities are set by supply and demand.

The are not repeat NOT stocks which are set by "valuations" or OPINIONS of the buying demand and the selling supply.

To wit: GM sells under 10 X Earnings as does C and F.

NOW A Dot Mess sells at 100 X Sales with profit estimated to come in ONLY 5 years (maybe and IF )

A bushel of wheat sells for what a Miller will pay for it. And that is set by what he can process and resell it for.

Same with all pure commodity plays. They pay what they have to pay to make a profit and stay in business.

Stocks rise and fall and are based on the "needs" of the "investors". If they don't need return a Dot Com might interest them.

By contrast even REITs sell on "OPINION". If a yield of 12 % is good in the opinion of a buyer he pays that. If he is satisfied with 8% as some were in the high fly days of 1998 he bought.

-- cpr (, June 16, 2000.

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