Saudi's Wheat production dries up.

[farmaholic]

Pardon my ignorance but did you just describe a derivative?

Sometimes it is better to keep one's mouth shut and be thought ignorant than to open it and remove all doubt...

[farming101]

Yes, sorry. It is tough to think, type and be clear.
<a title="Derivatives" href="http://www.investopedia.com/terms/d/derivative.asp">Derivatives</a> - hate em.

No wonder Las Vegas is in a downturn.

[cottonpicken]

If you didn't want the world to spin out of control with money printing you would probably want to stop gap the commoditie futures and if you wanted to do that you would create a lot of paper and hold a few billion bushels that you could dump if you needed to control something.

[farmaholic]

Years ago I remember my "financial advisor" fancy title for "salesman" talking up the derivative market. It was happening then already. It spooked me.

Cotton, so when does the house of cards collapse? You shouldn't be able to trade paper and have no threat of having to deliver or take delivery. Why the **** have things been allowed to evolve to this point.

Paper is worthless without something physical to back it up???????

Be patient with me.

[farming101]

When I hear of paper commodities I think of the people who took their worthless stock certificates and wallpapered their house.

[farmaholic]

It gets me thinking of what this whole economic cluster**** has done to farm property values. Smart people that probably see the economic turmoil ahead and park money in a hard asset that hopefully holds value and has a meager ROI. Now what does that do to the productive value of that asset for a person who would like to buy it, pay for it and make a living with it. Totally different scenarios.

[samhill]

Agreed, without delivery there is no reality.

[cottonpicken]

Don't worry i have endless patience on the subject,like anything else it takes 10,000 hours.

Hard to say how it will all shake out,total collapse is a path you don't want to think about and that has never really happened in the past so i don't bother with it.

Usually its war or/and debt restructure and currency debasement.War might be off the table now even with all the crazy stuff happening basically globalization and the masters and commanders of the world probably see it as not good for business,they all know each other.

I see a lot of entropy going on,can't really have globalization without living standars rising in the third world and falling in the first,maybe its better in the long run certainly not now.

Dervatives are just insurance contracts that can't be paid out if there is ever a fire,the isda(international swaps and derivatives association is run buy the same people who sell them(funny).My concern would be if something happens say in japan and your insurance policy on your sovereign debt holdings is worthless,what is now the value of any bond anywhere and that is a 200 trillion plus market,the dervitave market itself is ballpark a quadrillion,so obviously a lot of naked specs buying insurance on burning homes they don't own.

On the surface its hard call on paper vs physical trade,i've said on here before look at ag commodities that are not traded and the ones that are,maybe its normal maybe its not and I've hardly spent any time on it but its well known gold has been suppressed lots of on going litigation,so in my mind what else is happening,we don't know about,just the stuff we know about like zirp is scary enough.