A.I.M. Users Bulletin Board

[SFSecurity]

Hi Tom, You say:

I think the markets have just reached a steeper part of the Wall of Worry. They need to rest before the next Ascent.

I wonder if it will be an ascent or a decent.

Tell you, and everyone else here, I'll suggest a pair of pools. One as to the week that will be identified as the week when the next correction - 20% or a bit more down - starts. The other pool is for the week that is identified as when the bottom is hit.

I have prizes for the winners, a custom card deck from Profits Run called Trading Basics. He had them on sale so I bought a few to give out to some friends who needed some basic information. I have a couple left over and was wondering what to do with them so now I know.

The aces are bulls and bears, quite cute. Each of the rest of the cards have a tidbit of information either about a term or a bit of history. Things like "A down trend is present when prices make a series of lower highs and lower lows." or "The first use of futures can be traced back to the 1650's during the Tokugawa era in Japan. Feudal lords used to collect rents from their tenants in the form of rice."

I'm not sure I agree with that history of futures even though it is commonly referred to as the origin of futures. The Economist has an article ( http://www.economist.com/blogs/freeexchange/2013/10/economic-history ) that has this about Tulip Mania which started in the early 1600's:

Earl Thompson, formerly of UCLA, takes a different approach. He reckons that the market for tulips was an efficient response to changing financial regulation—in particular, the anticipated government conversion of futures contracts into options contracts. This ruse was dreamt up by government officials, who themselves were keen to make a quick buck from the tulip trade.

In plain English, investors who had bought the right to buy tulips in the future were no longer obliged to buy them. If the market price was not high enough for investors’ liking, they could pay a small fine and cancel the contract. The balance between risk and reward in the tulip market was skewed massively in investors’ favour. The inevitable result was a huge increase in tulip options prices (see below right). (The price of options collapsed when the government saw sense and cancelled the contracts.) Spot prices (the price that traders paid for immediate delivery of tulips) and futures prices (the prices that traders would be compelled to pay for future delivery of tulips) were not volatile. And any movement of the spot/futures price was determined by simple supply and demand—the fall-out from the Thirty Years’ War, one of the bloodiest in European history, was one important factor.

If they had futures then I suspect futures actually started earlier. However, it is a good intro to many of the basics of the markets. Might make a good gift for your grandkids.

Best,

Allen