The Utter Most BASICS, of Market Trade: History
Looking at the picture above (click on it and take a close look); but take a thought on; what if you had say a thousand acres of wheat, ready for harvest such as the 1st picture, and it goes on as far as the eye can see. What would you do with it? After all if it has value, and you have to harvest it or spend a lot of time, or it spoils and dies, and is now worthless; just what would you do? The weather could go south over night and you lose it all? Perhaps even a tornado comes along and wipes it all out? Of maybe, just maybe everyone in the central USA had a crop as great and beautiful as yours and they are already as we speak rushing it to market to get the best price? So this is as short a history lesson as I can do on Trading, and I hope it makes sense.
Some people call this Market Trade, some Futures, and Some Gambling?
So the definition of a Commodity is; any raw material, or raw agricultural product that can be bought and sold, such as coco, copper, oil, coal, corn, rice, wheat, hogs, cattle, electricity, gold silver, diamonds, or even coffee. But, this isn’t all of the definition, for we can also add anything of a useful, or of value such as financial instruments, or tangible assets such as water or time. Time? Yes, time is an asset, not often mentioned or considered, but it took that wheat time to grow, and mature, and during this time, great risk, and money is involved. Then many use a term of time management equates to dollar value, Wal-Mart and many very large companies wager man hours to their investment gain or loss for the year.
So what does all of this mean?
Simple really! Anything that can be considered a tangible asset, or is in large enough quantity and in large enough demand as to have a controlling factor on an economy. That is why water and or time was last, mentioned.
All people need and demand water in order to live, but not all people actually have to have say; steel to live. But, then we have to have steel to build cars, boats, trains, tracks, and buildings. People have to have raw food products, and this is how the original ideas got it’s start. I always use the story in the Bible of Joseph who was hated by his brothers, and sold into slavery. Joseph being a man of God, and was protected in all of his trials by God, finally fore told a story to the Pharaoh of Egypt, about an up coming drought and how to live through it, and save the Pharaoh’s nation. Joseph’s idea was to store as much grain as possible during the good years, and then be very careful to sell it back, or trade, to the people during the hard years, and so the idea goes something like this:
The world’s first commodities arose from agriculture practices, and archaeological discoveries indicate that agriculture developed around 10,000 BC, as humans began settlements and farming. An agricultural revolution started around 8,500 BC, which led to trading commodities between settlements. As trading developed, producers and dealers looked for ways to preserve the price of their products. Factors such as weather, conflict, and supply and demand wreaked havoc on pricing. (see my story of Joseph) “In addition, as supplies became more plentiful, storage was necessary; merchants sought ways to raise money while their product sat until being sold. This is how futures agreements began. According to Bruce Babcock, a noted commodity authority, the first recorded commodity futures trades occurred in 17th century Japan, though there is some evidence that rice may have been traded as far back as 6,000 years ago in China.” (Babcock, 2009)
So as we study this we see there are many reasons why Market Trading is a good thing, for it stabilizes the price and cost of any given commodity to be used by the greater economy.
Some people have no idea how new, and evolving these ideas really are, and so I also submit a more current history of markets based solely on one unit as an example: Chicago Mercantile Exchange started in 1848, with it 1st contracts in 1851. But, the CME began as the Chicago Butter and Egg Board in 1898, and evolved into the Mercantile Exchange in 1919. It has led the way in many futures trading initiatives. Starting as an agricultural exchange, the CME added livestock in 1961 with the first frozen pork belly contract. It introduced the world’s first financial products in 1972, dealing contracts on seven foreign currencies. The first international link was established, with the CME and the Singapore Exchange Derivatives Trading Ltd. connecting in 1984. In addition, the Exchange introduced the world to the Globex system in 1992. Refer to; http:// www.cmegroup. com/company/history/timeline-of-achievements.html.
But, please notice that all of these instruments, or markets, took time to work themselves out, which is where we are right now! Also, notice if you read about the markets, a very vast and diversified history across the globe, that it was all also a huge gamble, as to whether they would succeed or fail in what they were trying to do. These ideas were based upon facts, and upon the notion of helping the greater good, and therefore were needed as tools to help all peoples, of all nations. The problems were also trying to control those that would want to corrupt these instruments in order to gain huge wealth at the expense of those who invested their time, energies, and money.
So this is where we with Compumatrix are, and we must be willing to take a leap, and move forward!
Oh, but before I leave this subject one must also know something else, that word Gamble, I used only once in this story so far. Folks no one on earth can predict the future, and that is why the markets I am talking about are also called; The Futures Markets; but that is also the truth of all markets including the one most of you know about most, the stock exchanges which are company growth tools.
I use the story of Joseph for a very good reason; Joseph was given a gift of seeing, or dreaming about future events such as the drought that would hit Egypt. And Joseph believed in God, and trusted God’s visions, and His judgment. In so doing Joseph, told wild tales and stories that had to be accepted, and he often had to prove his stories in order to be trusted. Now, there is a word; Trusted.
This leads us to certain people with a record of being right, and indicators and tools that for the most part are right more often than they are wrong. Why would I say this? Folks other than God telling you what is going to happen in the future there is no way, no man or no computer can accurately predict all things that can go wrong, and therefore all markets are truly a gamble and not for the faint of heart. I traded heating oil futures, and know from experience it is great thing, but it is also a way to go broke in one move, or even lose all that you have if you have to take hold of an actual contract of 52,000 gallons of heating oil, transport it, and then store it until you can find a buyer that might , or might not give you what you need to get all of your money back. A very scary thing! But, I did accurately find that bubble where heating oil was going to hit a 30 year low, and my broker, who did not trade this commodity but was into financials, got in, and he made a killing, while I being soft did just OK. I had the facts but I also was scared, and I could have been set for life on this one trade. I do believe ‘Bear’ made close to a million on his very staggered trade, and that is a complicated statement, and he stayed on top of it almost hourly for days. It took over a four months. Now days some valued trades take over a year. But, the fact is you get out of it what you put into it.
Anyway, this is where we are slowly trying to become part of the world’s global markets and thus becoming of age, and putting a value to our asset which is paying for time, and I hope this all makes sense to you, for Henry has put it into many words, and tried so hard and yet there are a few that still wonder, for I see it in many responses, the worry, and the hope all mixed and never quite knowing. Is that how you feel? Well, so this all of those early investors into what became the world’s economy!
Love you guys, and through these trials we grow ever closer to the day we too, will be seen and become part of the Greater Good!