some definitions

[James Devine]

At 04:07 PM 9/29/98 -0700, you wrote:
>A
>>farmer sometimes "hedges" by signing a contract with someone to pay a 
>fixed
>>price for some of his product in the future. This "locks in" the price, 
>so
>>that the farmer doesn't suffer in a big way from price declines. 
>
>I seem to remember reading in Wall Street about how this "fairy tale" 
>explanation (hardworking farmers transfer risk to speculators and 
>everyone lives happily ever after) is just that:  only a tiny portion of 
>futures contracts have anything to do with producers or consumers of 
>actual commodities.  Doug, if you could elaoborate?

yeah, it's "only a tiny portion" -- but that's still _some_. It's easier to
explain hedging with agricultural examples. Besides, it you listen to the
radio in rural areas, they'll fill your ears with hog belly futures data. 


>>btw, how 'bout those Cubs?!? I expect to see pigs flying soon. 
>
>Bastards.  I already had my tickets on order for the playoffs in 
>Candlestick.  And, speaking as a born-and-bred New Englander, the pigs 
>will start flying when the Sox win the Series.  The Cubs just suck - 
>they don't have the awesome tragic power of those afflicted with the 
>Curse of the Bambino...

the White Sox?
;-)
Jim Devine jdevine at popmail.lmu.edu &
http://clawww.lmu.edu/Departments/ECON/jdevine.html