Facts On Futures

While losses can and do occur both in stocks and commodities, here are some facts on futures that should prove informative:

  • Warren Buffett’s best performing investment since July 25, 1997, has been in commodities (silver), up 66% according to a February 9, 1998, Wall Street Journal article. Thus far, silver surpasses gains of even his best stock, Walt Disney (+37%).

  • According to Jim Rodgers, in 1996 the Goldman Sachs Commodity Index outperformed every major stock index in the world.
  • In 1996, futures were the best performing portion of Harvard University’s portfolio, returning 46%.
  • The average CTA tracked by Managed Account Reports from 1994-1996 returned 31.1%.**
  • Of 119 commodity funds and pools ranked by MAR from 1990 through October 1996, 81% were profitable.**
  • In 1997, 82.5% of commodity pools tracked by MAR were positive with 51% experiencing double-digit returns.**

  • In 1973 and 1974, when stocks dropped 41%, commodity prices soared 114%.
  • When the S&P 500 fell nearly 30% from September to November of 1987, managed futures rose 10%.

  • While the S&P 500 fell 15% during Iraq’s invasion of Kuwait, managed futures rose 19%.

These statistics show futures on their own can be an attractive investment. However, we believe futures most attractive feature is in offering profound diversification to a stock and bond portfolio. Studies show futures can increase the performance and reduce overall portfolio risk when combined with stocks.*

Introduction

“Trading commodities is the world’s one perfect business”, or so some people say, but is it for you? This is something that you must decide for yourself and hopefully after this course you, will agree that it really is the world’s one perfect business.

I started trading a few years ago and have found that it’s the most exciting business I’ve ever been in. Yes, I said business. It’s not a game, it’s a business. If you don’t treat it like a business you won’t reap the many rewards that are available to you; at least not in the long run. It can be a part time business or a full-time business, but it’s still a business.

I now have a freedom that I’ve never had before. Not only do I have a business that can provide financial freedom; it’s much more than that. I work a couple of hours a day on trading, not every day mind you, and then the rest of the day I have to myself. I decide, not someone else, what I do all day. I have time freedom, I have financial freedom, I have a “job” that I can do anywhere in the world. I have the ability to provide a comfortable lifestyle for my family. And equally important, I have fun!

Let me tell you a few of the things I don’t have. I don’t have a boss, I don’t have employees, I don’t have deadlines, I don’t have office rent, I don’t have meetings to attend, I don’t have to worry about rush hour traffic, I don’t have to worry about being laid off or fired, I don’t have to wear a suit and tie everyday, I don’t have customers, I don’t have inventory, I don’t have to play office politics, I don’t…… Well I hope you get the picture.

Get In Or Get Out

If You Can’t Get 100% Into What You’re Doing, Then, You’d Better Get 100% Out Of What You’re Doing.

Before I learned, (yes I said learned) to trade, I had several different businesses. Some successful, some not so successful, and some that went straight down the tubes along with more money than I care to remember. Then, one day, I looked at what I was doing with my life and discovered I wasn’t really happy, wasn’t really successful, wasn’t really satisfied and I wasn’t really making any money. Ever been there? It’s called “burnout.” That’s when I decided to get 100% out of what I was doing. But I didn’t think I had many choices at the time. Little did I know that my life was about to change, and change in a big way.

I was introduced to trading through an offer in the mail and like many others bought a mail order course. I learned enough to be dangerous. I thought that was all I needed to know. Boy, oh boy, was I wrong. I hadn’t even learned the basics but jumped in anyway and started trading. I won’t go into all the details, but I will say that I “paid” over $10,000 for that course. This is one of the reasons I wrote and teach this course; so that you don’t do the stupid things that I did when I first started trading.

I later learned that the person who put out this course, was a great promoter, but his trading methods were a far cry from what someone needed to know to trade for a living. I then went to work reading and studying everything I could about commodities. I invested the time to learn. I invested in good books. I invested in good tapes, good videos, and spent a year studying and paper trading. Paper trading is simply trading an account on paper without using real money. It’s a great learning tool.

There is no one course that is going to teach you everything you need to know to trade successfully, and that includes this course. What this course can do, is to teach you many of the basics and give you a good foundation to build on. Learning anything is a continuing process and the longer and harder you work at it, the better you become.

What I found is that most of the books and courses talk about the same things, just explaining it in a little different way. That’s when I realized that there are some basic principals, rules if you will, that anyone can learn and once you do, you can be a successful trader.

Commodities Yesterday-Today-Tomorrow

Yesterday

Back in the mid-1800’s the McCormick reaper was invented which greatly enhanced the production of wheat in America. About the same time, Chicago was becoming a major commercial center. Wheat farmers from across the country were coming to Chicago to sell their wheat to the grain dealers who then sold it to commercial buyers all over the county.

At that time, Chicago had almost no place to store wheat and poor methods for weighing and grading it. This left the farmer at the mercy of the wheat dealer.

In 1848, a central exchange was formed where farmers and dealers could meet to deal in “spot” grain which is selling wheat for cash and delivered immediately.

Soon after this farmers and dealers began to deal in “futures contracts.” This simply means that the farmer (seller) would contract with a dealer (buyer) to deliver wheat at a specific date in the future for a pre-determined price. Hence, the name “futures” trading evolved. This worked well for both parties as the farmer knew in advance how much he was going to be paid and the dealer knew his cost beforehand.

These contacts became so common that banks started to take them as collateral for bank loans. Sometimes the farmer might not want to deliver the product and would sell his contract to another farmer who would take on the obligation to deliver. Other times the dealer might not want to take delivery and would then sell his contract to someone who wanted to take delivery. Before long, speculators, who saw an opportunity to buy and sell these contracts, hopefully at a profit, came into play. These were the first commodities “traders” as we know them today and they had no intention of ever buying or selling wheat. They began trading these contracts hoping to buy low and sell high or sell high and buy low. Read the rest of this entry »