NHsorter wrote:LT, are you saying that they painted the tape today (pumped up stock prices) and that they are gonna sell tomorrow to cash in and get their profits on the books for the end of the year statements?
I have been suspecting the unexpected lately. I think the market is too high right now and anything over 12K is NOT justified. Therefore, I fully expect tomorrow to end in the green. But if thinks pop upward in the A.M. I plan to bail out on everything and wait for a dip in January.
Jonflyfish wrote:theo wrote:Jonflyfish wrote:
Hi LT. Thanks again for the kind reply. Your excellent post deserves a lengthy reply. However, I'll have to be brief for now.
The exchange does not require the contracts to be fully backed by physical becasue the futures market was not designed to be a procurement vehicle. Not only that but it would rarely make sense to use it as such. It is costly to exercise this transaction through the exchange and there are a lot of restrictions and terms that you must agree to. It is far costlier than closing out a position financially and arranging to make a purchase via your favorite large dealer. Also, only a few transactions would even qualify to take delivery. If you used the futures market as a hedge, there isn't any reason, also, if you were a spec short it would make no sense. So, there is already a large number of transactions that get removed from even considering delivery.
If you were a spec long and the price went up, what is the benefit of using the costly exchange brokered delivery assignment/matching at the maturity date? Let's say you are speculating that prices rise. You post your margin and go long some contracts. It rises. Now you decided that you no longer want to trade financial products with a certain % of your capital and want physical. You must make sure that you have 100% of the purchase value in your account. What have you gained by going through the costly exchange transaction instead of elsewhere and why would you want to take delivery now instead of when the metal was cheaper? If you are long contracts and the price goes up your account is reflected mark to market at each settlement. There is nothing generally speaking that makes purchasing physical silver at the time a contract matures more beneficial than not. I know one can come up with any number of reasons to answer the above questions in a way that makes sense to take delivery and rarely that happens but on the whole, there are a lot of costly restrictive reasons NOT to take delivery along with determining why to do so at that point in time vs any other. You don't get the metal cheaper via the exchange. It is a costlier transaction. With the contracts you are not buying below the market even though you may have gone long several points below the current market. That difference is already financially credited to your account daily on a mark to market basis.
As far as risks go- the exchange is there to match buyers and sellers. It is a liquid auction. Do crooks jump in the ring from time to time and make headlines? Of course and usually some new rules are established to prevent whatever crime from taking place again, or at least making it more difficult.
Is buying physical always a safe risk free bet? Are there physical thieves just the same as there are financial thieves and do you always get what you paid for? Is entering a business venture with your neighbor or relative safe?
I will not argue that your points are not valid. They are! You are savy and sharp.
There is risk in practically anything we do as humans. The presence of risk may stop some folks from checking the mailbox while others will line up for a chance to take a spacecraft to the moon.
Cheers!
I understand that the futures market is an inefficient mechanism for trading physical metal, but shouldn't every participant be confident that they could obtain the physical asset IF THEY WANTED.
There is a contradiction in what I'm hearing from you. How can a market that is not sufficiently backed by the physical metal post a price that accurately reflects the supply and demand for that same physical metal?
Actually the futures market is very efficient as a central pricing mechanism. The market is very liquid and you can transact in milliseconds. How do you suppose PM dealers price their bullion? Call a large dealer .i.e. Tulvng or Apmex and tell them you would like to sell to them. Ask them what the quote is and how they determined that price. COMEX.
To the other point, COMEX is not a procurement conduit for physical metal. It is not designed to be a physical marketplace futures are derivatives (derived from the underlying). Transaction costs and terms generally make no sense to look at COMEX for physical metal. I only speak from experience. People trading on the exchange are risking many thousands and millions, not a few rolls of junk here and there so they must understand a few of these points instead of surmising what they think the exchange should be but isn't nor was it intended.
Cheers!
Cheers!
Jonflyfish wrote:I sincerely hope everyone has hedged their positions long ago.
Cheers!
SteelCityCopper wrote:
I think one of Theo's questions here is key and was not addressed "... shouldn't every participant be confident that they could obtain the physical asset IF THEY WANTED?" I get the fact that the exchange does not require the contracts to be fully backed by physical because the futures market was not designed to be a procurement vehicle (to quote JFF), however, it seems like they should back it or they shouldn't... everything else appears as though the exchange is trying to pull the wool over someone's eyes. I have a hard time believing that everyone in the futures market fully understands that their contracts are partially backed (or that this has been appropriately communicated). The fact that the first folks in line get served soup and the others don't has many on edge (including folks here) and casts doubt and worry about the exchange. This is a primary reason we stack vs investing too much in paper markets. I know there are other reasons Some of us just feel safer with a silver brick under our pillows at night... not the most comfortable by the way However, as JFF has said, live in the now and you can profit from it because the system works... for now.
aristobolus wrote:Jonflyfish wrote:I sincerely hope everyone has hedged their positions long ago.
Cheers!
Jon Fly Fish Rocks! He called it months ago! Dollar up for a time, but what's next?
Jonflyfish wrote:Having said that, if you as a member are supposed to provide me with good delivery bars and don't, you are in default. Does that mean that the clearinghouse has a magical stockpile of bars to ship me, in the event of your nonperformance? Nope. But they will make the financial guarantee to make me whole.
SteelCityCopper wrote:Thank you for the in-depth response. It’s more than I expected and appreciate it. No need to apologize for not addressing the question man. It’s just a topic I’ve seen posted here and there quite often and was interested in your take on it. One of your statements I still have a question about though…Jonflyfish wrote:Having said that, if you as a member are supposed to provide me with good delivery bars and don't, you are in default. Does that mean that the clearinghouse has a magical stockpile of bars to ship me, in the event of your nonperformance? Nope. But they will make the financial guarantee to make me whole.
So if they make the guarantee that they will make you or I whole by covering the difference financially (in the absence of physical) and all participants know this, then why are so many worried about a shortage of physical in inventory and being able to satisfy a run on demand for physical? SHOULD anyone be concerned about inventory levels at all?
neilgin1 wrote:why argue with you Jon?....you're always right. i'm NOT being sarcastic either, i'm just obeying the 'law' of the noted sociologist W.I. Thomas, "the Thomas Theorem": "It is not important whether or not the interpretation is correct-- if men define situations as real, they are real in their consequences."
time is short, why argue, but if you doubt the premium is stretched, offer one roll of ASES at 740 BIN on Ebay, and tell us how long till you get hit.
the time is more short than we even realize. i would suggest any preppers here put pedal to the metal, thats not "doom", nor am i personally curling up into a "fetal position", or wracked, paralyzed with fear, just try and accelerate for the day of the new paradigm, but you're right Jon. btw, truly, i did find it impressive that Southwest tapped you to design their fuel procurement models, Ole Herb has always been a favorite of mine, all the best mate.
neilgin1 wrote:
the time is more short than we even realize. i would suggest any preppers here put pedal to the metal, thats not "doom", nor am i personally curling up into a "fetal position", or wracked, paralyzed with fear, just try and accelerate for the day of the new paradigm, but you're right Jon. btw, truly, i did find it impressive that Southwest tapped you to design their fuel procurement models, Ole Herb has always been a favorite of mine, all the best mate.
Jonflyfish wrote:Interestingly Southwest doesn't use many exchange traded NYMEX contracts. The hedging is done primarily with OTC fixed for float swaps and OTC strips and collars. I only know this because I spent the majority of my summer 2009 updating and implementing their model. The other carriers have largely been unable to hedge because they are not good counter parties. Unlike Southwest that maintains $1 on deposit for every $1 hedged, the other carriers are cash poor and can't compete with the "no frills" approach of being a fuel hedging consumer that happens to fly planes.
I suspect most people don't appreciate lower airfare due to hedging, let alone the lack of hidden fees i.e. no baggage fees.
I wonder if someone will do the same to beat out traditional bullion dealers.......
!
camtender wrote:
That's interesting Jon. Since the current Director of Internal Audit @ Southwest is one of my former managers (while I worked for one of the Big 4 in Dallas), I will be sure and alert them to you disclosures of a publicly traded company information on a public forum.
camtender wrote:Jonflyfish wrote:Interestingly Southwest doesn't use many exchange traded NYMEX contracts. The hedging is done primarily with OTC fixed for float swaps and OTC strips and collars. I only know this because I spent the majority of my summer 2009 updating and implementing their model. The other carriers have largely been unable to hedge because they are not good counter parties. Unlike Southwest that maintains $1 on deposit for every $1 hedged, the other carriers are cash poor and can't compete with the "no frills" approach of being a fuel hedging consumer that happens to fly planes.
I suspect most people don't appreciate lower airfare due to hedging, let alone the lack of hidden fees i.e. no baggage fees.
I wonder if someone will do the same to beat out traditional bullion dealers.......
!
That's interesting Jon. Since the current Director of Internal Audit @ Southwest is one of my former managers (while I worked for one of the Big 4 in Dallas), I will be sure and alert them to you disclosures of a publicly traded company information on a public forum.
barrytrot wrote:
That conversation will be hilarious. You will say, "hey this guy posted some vague common knowledge on a forum." The director will say, "who are you and how did you get this number." [click]
Ok, not hilarious, but somewhat funny.
camtender wrote:Jonflyfish wrote:Interestingly Southwest doesn't use many exchange traded NYMEX contracts. The hedging is done primarily with OTC fixed for float swaps and OTC strips and collars. I only know this because I spent the majority of my summer 2009 updating and implementing their model. The other carriers have largely been unable to hedge because they are not good counter parties. Unlike Southwest that maintains $1 on deposit for every $1 hedged, the other carriers are cash poor and can't compete with the "no frills" approach of being a fuel hedging consumer that happens to fly planes.
I suspect most people don't appreciate lower airfare due to hedging, let alone the lack of hidden fees i.e. no baggage fees.
I wonder if someone will do the same to beat out traditional bullion dealers.......
!
That's interesting Jon. Since the current Director of Internal Audit @ Southwest is one of my former managers (while I worked for one of the Big 4 in Dallas), I will be sure and alert them to you disclosures of a publicly traded company information on a public forum.
JJM wrote:camtender wrote:Jonflyfish wrote:Interestingly Southwest doesn't use many exchange traded NYMEX contracts. The hedging is done primarily with OTC fixed for float swaps and OTC strips and collars. I only know this because I spent the majority of my summer 2009 updating and implementing their model. The other carriers have largely been unable to hedge because they are not good counter parties. Unlike Southwest that maintains $1 on deposit for every $1 hedged, the other carriers are cash poor and can't compete with the "no frills" approach of being a fuel hedging consumer that happens to fly planes.
I suspect most people don't appreciate lower airfare due to hedging, let alone the lack of hidden fees i.e. no baggage fees.
I wonder if someone will do the same to beat out traditional bullion dealers.......
!
That's interesting Jon. Since the current Director of Internal Audit @ Southwest is one of my former managers (while I worked for one of the Big 4 in Dallas), I will be sure and alert them to you disclosures of a publicly traded company information on a public forum.
WOW, hopefully you realize that you were just in a pissing match with a complete stranger on the internet, and regardless of how you perceive the outcome, it's not worth attempting to cost someone their livelihood. Nice edit on the post above this by the way.
I will take your threat to be real, and will be all the more reluctant to post here and elsewhere as the days click forward. I'm sure others will as well. Thanks for making this, one of the last places where LIBERTY was both cherished and advanced, a little less so.
camtender wrote:Anytime you work or engage with a publicly held company, you have a fiduciary duty for non-disclosure of certain matters. It took my post for you to realize this, Wow? What does protecting stakeholders of a company have to do with liberty? Would SWA's methodology on energy hedging not be an intangible asset protected under liberty for stakeholder benefit? What if I am a shareholder of SWA - does your statement of liberty make sense?
JJM wrote:
I could care less................... I could care less....................... consider you a fool..........................
I could also care less.................. I gave up.................. I have even less desire.........................
None of this means................... .
no longer to my liking.................
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