December 24, 2003

Say a Prayer for the Trading Men

ATTENTION RANT READERS: Should any of you hold live or feeder cattle futures or options on such futures, please accept The Rant's sincere sympathy. It will likely be a perfectly nightmarish day for you today, and we must say we feel very badly for anyone stuck with any cattle futures, no matter their expiry date. We further hope the discovery of mad cow disease in one -- one! -- cow in Washington state, a cow not even destined for the food supply, will not ruin your Christmas.

We understand that many readers may not see why we consider this of such import. After all, we here at The Rant realize that commodities investing is akin to thermonuclear war (as the movie put it, the only way to win is not to play). This is because futures trading combines an incredible amount of leverage with the potential for incredible volatility -- which means that big shifts in any given market can result in vast losses (or, in theory, profits). Further, unlike investing in equities and bonds, futures' performance are credited to or debited from one's account on a daily basis. That means a speculator pretty much has no chance to recover from a ruinous loss. It is a very, very dangerous game.

We imagine that today, a lot of people are going to learn that the hard way. For if cattle futures take the hit some folks say they will, it will mean quite a few people will find their investments wiped out this Christmas Eve.

Wonderful life, isn't it?

Posted by Benjamin Kepple at December 24, 2003 08:52 AM | TrackBack