Yesterday I told the story of Joe, an unfortunate victim who got caught in the jaws of the credit trap. Joe made liberal use of his credit to buy all the things he never wanted. Then watched as it spiraled out of control.
To be fair cheap credit can be a great thing. It is the [...]
Entries Tagged as 'Economics'
Avoiding the Credit Trap
January 6th, 2009 · 4 Comments
The Credit Trap
January 5th, 2009 · 5 Comments
Joe, an average office worker, has been pre-approved for a $300,000 mortgage plus he has a three credit cards with a total limit of $25,000 and a constant bombardment for other ‘pre-approved’ cards. Joe earns $48,000 per year at his office job as a pencil pusher. After taxes and deduction Joe earns $3000/m. Joe’s favourite [...]
To every market cycle (turn, turn, turn)
December 24th, 2008 · 1 Comment
For those in the the northern hemisphere, we are experiencing the longest night of the year. Indeed, this is a dark time, the nights are long and it appears that we are being consumed by financial calamity. Banks are failing. The auto industry, led by the so-called Big 3, is on the brink of ruin. [...]
Futures Arbitraging
December 24th, 2008 · 3 Comments
Continuing on my previous discussion of futures pricing, I will introduce the concept of arbitrage.
Arbitrage is taking advantage of a price difference in multiple markets. In the futures market an arbitrage opportunity presents itself when the basis between the spot and futures prices deviates from the normal cost of carry.
There are times when a futures [...]
Tags: Derivatives · Economics
Futures Prices When Things Aren’t Normal
December 23rd, 2008 · 1 Comment
Yesterday I discussed the difference between spot and futures pricing and how things work in a normal, contango, market. Today I will look at what happens when things are not ‘normal.’
The difference between the spot and futures price is called the basis. In a normal market there are adequate supplies of the underlying asset for [...]
Tags: Derivatives · Economics
