Mind's Eye Re: Can You Cotango?

Isn't this just a variant of supply and demand? You could state
something similar for the diamond industry. Plus royalty owners must
face the depreciation of their investment- i.e., the dwindling supply.
There may be freshwater traders already or soon.

I know just what I would wear to attract your attention...My tangos
tend to be break-out moves around the house that I can't resist. I
succumbed once shopping with my daughter at the Gap- yes, she gasped
"Mother!'.

On Mar 6, 8:29 pm, archytas <nwte...@gmail.com> wrote:
> I should add this is one of the ways the rich tax the rest of us with
> no democratic mandate.
>
> On Mar 7, 2:13 am, archytas <nwte...@gmail.com> wrote:
>
>
>
> > Surprisingly, perhaps, this isn't me and rigsy doing the Latin
> > American at some embassy party of the past.  It's about trading oil
> > and other commodities and the very strange efficiencies of such.  Not
> > that I would have declined with someone on hand to hold my service
> > issue revolver, of course.
>
> > Producers of (say) oil enter into contracts with investment banks and
> > transfer ownership of the production on a short-term basis.  They get
> > dollars for cash flow interest free, but also agree to buy back the
> > oil on a given date (after all, investment bankers drink champagne).
> > The producers now need to sell less oil to refiners, which gives them
> > chance to broker the price up - which we pay for at the pumps.  Just
> > another way to rip off the jolly old consumer.
>
> > Another effect in this is that the demand for forward contracts for
> > the producer to buy the oil back again drove the forward price higher,
> > and this created what is defined as a 'contango' market. In fact, it
> > was so pronounced it was called a 'super-contango'.  What happened as
> > a result was that traders began to buy oil, and to sell it forward,
> > since the contango difference in price enabled them to pay to insure
> > and finance the oil; to lease tank storage, and even to charter the
> > fleets of tankers which sat as floating storage off the UK coast
> > through spring and summer 2009.  Passive investors, for their part,
> > lose money in such a contango market, because the oil lease contracts
> > are rolled over from month to month at a loss to them, since they
> > would (say) sell June delivery oil contracts which they are in no
> > position to perform, and have to buy July delivery oil contracts at a
> > higher price.
>
> > When no one wants to buy into the financial instruments created in the
> > above (which is about cash flow before the quick buck initiatives
> > start), the producers have to buy back oil that has never left their
> > wells.  This has a knock on effect called backwardisation, unless a
> > wad of characters turn up with more dollars to buy oil futures
> > believing the price will go up.
>
> > The 'secrets' of  much of the financial services industry are all
> > rather like this - and the trick is to do something obviously highly
> > inefficient and parasitic, claiming to 'make markets'.  The role of
> > the rest of us is to pay up at the gas pump.  Have you been cotangoed?- Hide quoted text -
>
> - Show quoted text -