Word: investors
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Dates: during 1970-1979
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...cash grain) and rules. Technically, anyone who buys a future agrees to take delivery of-and pay for -a certain amount of a commodity that can be sent to him anywhere from a day to a year and a half after purchase. That arrangement has given more than one investor nightmares about having 5,000 bushels of wheat or five tons of sugar dumped on his doorstep. In fact, only 2% of all futures trades result in actual deliveries to a bakery, metal-processing plant or other users of the goods. The rest are purely paper transactions; if the holder...
Another attraction of commodity speculation is that the investor can wheel and deal on a tycoon's scale with relatively little of his own money. Most futures can be purchased on 5% margin, meaning that the speculator can buy a $100,000 future contract by putting up only $5,000 out of his pocket and promising to pay the rest upon delivery. If the price then rises 5%, he can buy another $100,000 of futures with his $5,000 paper profit, and so on and on in a process known as pyramiding. Obviously, pyramids built on such...
...soybeans is that schools of Peruvian anchovies for a while mysteriously disappeared from the Pacific. As hardly anyone but a commodity trader would guess, that removed from the market anchovy fish meal-the only product that competes effectively against soybean meal for animal-feed protein. Last winter, a Manhattan investor bought some orange-juice futures on the calculation that "all I need to make a profit is two hours of frost in Florida." It did not happen, and he lost...
...moving, at least temporarily, toward floating currency values. Moneymen long believed that such a system would create enough confusion to dampen the desire for international investment. Because no one could be certain, for example, how many Swiss francs a dollar would be worth on any given day, the investor would not only have to take a risk on his project but also on the currency transactions necessary to finance it. Thus the usual practice for the past 25 years has been for governments to agree on official exchange rates and to defend them by using national reserves to buy their...
...When an investor wants to buy shares in a typical mutual fund, he goes to one of the fund's own salesmen or to a broker who has been designated by the fund as its agent. For his services, which may include counseling but often consist of no more than filling out a form and mailing it in to the fund, the salesman or broker-agent is rewarded with the sweetest commission in the securities industry: an average of 8% to 8.5% of the total purchase price, compared with an average of 1.45% on trades in corporate stocks such...