Who Makes Money On Volatility?

[parsley]

He must have read somewhere, at one time or another, that volatility is part and parcel of risk taking, so I will assume he has been lunching a lot with Flaman.

[parsley]

Newco News
Published by
Newco Commodities Ltd
had a few good words about risk and I'll quote some excerpts:


March 20, 2008

"Under the current market conditions
market risk should be a top priority for everyone involved in the financial markets, and yes that means farmers too."

"Although there are many good reasons for these prices they are all affected by individual economies in a global marketplace.
How these economies interact directly affects your farm gate price. The economic theory that is operating in the background is extensive and complex; it ultimately comes back down
to the most basic of all economic theories, supply and demand.

Canadian producers are directly affected by global policies and practices.

We Canadians must be aware of what
is happening in the world today, so that we can make informed cropping and marketing decisions.


Under the current economic situation marketing must not and can not take a back seat.

Nearby canola for example has decreased from $726.9/mt on March 3 to $567.7/mt as of this writing which equates to a $159.2/mt (3.61/bu) drop in price.

This drop is not considered extreme it is real. Although it is impossible to consistently hit the top of the market it is generally not impossible to lock
in profitable prices.

Locking in profitable prices should be a goal for all producers.

Although there is lots of economic turmoil in the US right now there is still time to make profitable marketing decisions.

[bduke]

I think LWeber's comments might have been referring to the hedge funds which, in my understanding, are deemed "hedgers" on commodity markets and are therefore excluded from taking deliveries of products, i.e. warehouse receipts etc. However, I would strongly argue that the entrance of funds,i.e. private eguiy, investment banks, mutuals, pensions,hedge funds,etc. have been the drivers of the dramatic and long, long overdue rise in grains and oilseeds prices. Try to name 2 or 3 grain merchants, market analysts, Federal or Provincial Ag economists or specialists that predicted these markets last summer. Goldmans, for example,analysed the CRB indecies and concluded the G & O sectors were grossly undervalued. In fact Goldmans have developed there own indecies for investors....only a month or two old.

The other benefit of funds is liquidity, the reason the CWB would not use the WCE even if they(WCE) had developed a milling wheat forum. While the expanding limits are emotionally and economically sensational, they provide entry and exit points which are critical to maintain liquidity.

BTW...I couldn't sign off without mentioning Martha Stewart....another of Spitzer's victims of his unscrupulously ambitious self interest. Martha was charged with insider trading ...alledgedly excercising a tip from her broker...found innocent...but jailed for contempt of court...having changed one answer while under oath....
Bill

[cottonpicken]

Last summer?

Jim rodgers,monty guid,peter shiff,david duval,jim sinclair,richard russel and cottonpicken to name a few.

The volitility is a symptom of a situation.
Whats the situation?
Excess liquidity looking for a return over inflation.
The only show on earth now worth watching is the us bond market and the us dollar.All the kings men cant put those humpties back together again.

Guess what happens when those implode.

[bduke]

I googled the names you provided CP...these people are not "ag economists or ag specialists"....I was referring to grain marketing. Yes, you were the first person I consider "ag related" to predict the Grain and Oilseeds (G&O) dramatic rise. That is why I asked for two or three names. If we were to recognize the predicted precious metals rise to be correlated to G&O buoyancy, I could have provided names also....such as John Embry of Sprott Capital or Don Coxe of BMO Harris. So I give you full credit for you perceptiveness and courage to state hard numbers....very well done!.

Regarding the capital chase of real returns, profits above inflation, I agree that is the current situation. The sub-prime, ABCP, derivitive mess was mostly driven by the enticement of greater rates facilitated by tranched and re-sliced "junk" mortgages being tagged on to investment grade paper and the rating agencies maintained the ratings as before their additions based upon probability of default. The mortgage interest rates are disporportionally higher at the lowest ratings,even considering "normal" probability of default.

You are also warning of a US driven depression. I think it depends if the funds determine the markets are bottoming before Ben gets to 0%. Inflation is often used to reduce the value of debt as well.

So....thanks for your comments CP, and again,..well done!.....Bill

[cottonpicken]

Yes and No.

A delightful rebutall so few and far between.

John Embry was a name i've always held back.

So few as keen.

Nice to see you catching up to the curve..and again well done...cottonpicken.

Why dont you make a name for yourself and predict something that hasnt happened,instead of regurgitated econimist/bloomberg stories.

[TOM4CWB]

C.P.

DISCRETION IS THE BETTER PART OF VALOUR!

[TOM4CWB]

AGSTAR77

CWB CHEQUES have not 'bounced'... but who pays for the lack of risk management in place at the CWB?

'Designated area" grain growers...;

In Basis levels on FPC that cross transfer 100's of millions to poolers...

How can the CWB claim that there is no connection in pricing between FPC/PPO's and the Pools?

Explain to us how exactly the CWB hedges the pool and PPO's ... and how the accounting system keeps these two systems seperate through to sale of the cash grain (FPC/DPC hedged produce vs Pooled sales) at the day of actual grain sale?

So how does the CWB decide who takes the hit on futures that lost big $$$... at time of cash sale of the wheat... when the grower cannot fairly liquidate a FPC position... and the pool/CWB gets to keep the futures gain in the hedge when a gain occured?

Do you understand how this works Agstar77?

[bucket]

One thing is for sure - the CWB does NOT make money on volatility or at any other time for western farmers period.

[agstar77]

Try this link, very good article on disconnect between futures and cash. NYtimes.com/2008/03/28/business/2commodities.html?_r=18ref=todayspaper&0ref=slogin . Diana B. Henriques, Todays N.Y. times.

[agstar77]

T4 I don't use the risk management options and since I am not on the B.O.D. , I cannot answer all your questions nor can I judge whether they are valid. All I can say is that if you want someone to cover your risk, you have to pay a price. Is that price fair? I really can't say. Would you pay a similar premium under an open market, possibly.

[agstar77]

Further to the Conagra deal, one of the perks for the acquiring hedgefunds, is the intelligence on grain movement. Conagra is responsible for commodity transport. So if you know the volume of transport, you can aid your commodity trades. Very interesting, so the farmer is on the bottom of the food chain!