Fei’s Website Everything about Fei

August 14, 2008

In Mystery Cotton-Price Spike, Traders Hit by Swirling Forces

Filed under: Economics,Readings — Fei @ 11:56 am

In yesterday’s WSJ, an article is about cotton option (future) price spike earlier in the year: In Mystery Cotton-Price Spike, Traders Hit by Swirling Forces

I don’t want to go into the details. What I want to say is that besides the housing crunch, this is yet another indication of the failing market.

A regularity oversight caused huge margin calls? What a market! It is too fragile, too unstable.

The financial system is getting too complicated… commodities, derivatives, derivatives of derivatives etc. Traders “hedge” their positions… it seemly can correct itself when something goes wrong… yah, to some extent…. the small fluctuations can be hidden… but the underling forces are still there. they don’t lose strength… it’s just the time is not there yet.

When traders utilize complicated tools, they actually hide the real problem, delay the break-out of the problem. And when the issues cannot be hidden or delayed any further… the aftermath gets too severe and devastating….

That’s what happens in the current capitalism world….

Well, the good news is that capitalism is actually evolving into socialism….

The 1929 crash indicates the death of free market. All economies after that are carefully regulated…. to now… because the market is more efficient, the financial tools are more powerful… even a slight oversight can trigger snowball effect… It is obvious the trend is more regulations and less freedom… and you can imagine where it will end up to…

well, aren’t you happy? what do you think?

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

Powered by WordPress