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Admin
This reminds me of another man, whose blunder is now a cautionary tale known to almost any restaurateur in New York City.
A chef went into business with his friend to open a new restaurant. His friend, being in charge of the business angle, took the list of needed ingredients and went to make a purchase order the week before they opened.
As this was the "non-perishable" order (flour, spices, oil, etc.), and fearing running out early, he bought in nice large round numbers. Only later did it become apparent that this friend was woefully unfamiliar with several of the items on the list.
So he bought 50 lbs. black pepper (not overkill for a busy restaurant), 100 lbs. salt, 50 lbs. red pepper....50 lbs. saffron....
3 days later, the good arrive, along with the bill. The saffron (hands down the world's most expensive spice, generally sold by the GRAM) alone came to over $250,000.
The restaurant went under before it even opened, and he is now known as "That guy who bought all the saffron."
Admin
It wasn't difficult to understand?
Admin
Admin
Heh! LOL! Perfectly said...
And futures are not such a special case.
Ever worked at a VC-funded software corp? Those VC's are buying future deliveries of SW products and services and speculating on the future value of the contract. (The stock.) You and your company have sold a contract, of sorts, for the future delivery, and you spent the money on gas, groceries, coffee, and $2500 Mac notebooks.
The VC's have no intention of "taking delivery" of the SW, they are totally planning to dump the stock and sell the SW to a third party. Everybody wins!
Furthermore, in all these futures scenarios, the party most capable of handling the loss is the one taking the risk.
Admin
This reminds me of what happened at my previous employer: our sales manager talked on the phone to his old pal. Said pal was in the business of selling environmentally friendly pallets. The friend of our sales guy asked, if we we needed any pallets. Our sales guy said SURE! Send us five! The sales manager's pal said GREAT!
A couple of weeks later an 18 wheeler parked outside of our office. The driver came to ask where our loading bay is located. Loading bay? WTF?
Turns out the sales manager's pal thought we needed five THOUSAND environmentally friendly pallets! The sales manager only wanted five samples!
Admin
I find this hard to believe as true. The trader would have realized the error as soon as the contract expired, long before the physical commodity was delivered. He had a position out and didn't realize in his internal systems that he was long the future or he mistakenly marked a physical future as financial. This is a mistake that any real trader/"top energy trading company" would never make.
Admin
Gold is not difficult to take physical delivery, whoever told you that it was is incorrect.
Admin
Sorry to be a spelling cop, but it's "accidentally", not "accidently"
Admin
Oz being a bit of an Agricultural nation at the time, there were people trying taking physical delivery of Beef contracts back when Beef futures were introduced to .AUS
And (1) Even though there was a parallel physical market, it was not usual to take physical delivery of a futures contract. The normal process was a closing trade. (2) It turned out it wasn't worth it. The futures market doesn't track the physical market exactly, but you can't effectively arbitrage the difference when you are dealing with a physical market. (3) Delivery was at a particular market.
But (4) it wasn't impossible, (5) in the nature of these things, the delivery point was a place at which it was easy to organise pick-up and delivery.
Also (6) It wasn't so long ago that I can't remember it. And all the systems were new then. Just because you can't do it now doesn't mean he couldn't do it then.
Admin
My dad tells a story that when he was at Cal Tech, as a practical joke they made a one-unit trade in soybean futures for a guy in their house. Six months later that guy got a call from the railroad yard "what did he want to do the boxcar"?
Admin
It didn't. It's a total nonsense.
Admin
Admin
It's funny, but it's a lie. Search for Æxecor and try to find any details other than this story.
Admin
Search for 'idiot' and see if your name comes up.
Admin
Whoops.
Admin
Own coal.
Admin
This is a true classic, the type that typifies the quality of the reporting at this here site. Bravo.
Admin
This is seriously disappointing. I can find no evidence that a company named "Æxecor" ever existed. Why would you post something so obviously made up?
Admin
Idiot
Admin
Yea but that wouldn't make a good story. We want a good story!
Admin
Given a lot of the comments/ discussion above, it's interesting to note that the Economist has a piece online this week discussing a concrete example of a hedge fund which has taken physical delivery (albeit not at their own offices) of 240,100 tonnes of cocoa beans:
http://www.economist.com/node/16743659
Admin
Nice story. Are we supposed to believe that?
Admin
Stock market is a place where many new stock market traders join the share trading league daily and trade daily in NSE and BSE. Intraday traders, stock market investors and market beginners should understand the meaning of the stock market for beginners cutting the learning curve
Admin
This can happen the other way. My father, when he was alive, told me a tale from the 1960s about a futures trader (in its infancy back then) who, on a drunken overseas trip was cajoled into buying future peppercorns, and bought 60 tons. This was in the days when dealers actually received the stuff. And 60 tons (or whatever he bought) was a sizeable proportion of the world's annual production. So, when he returned, hung over, to London, a very few people started wondering what they were going to do with all that pepper. Meanwhile, the salesman, relishing his commission, bragged to his bosses about his wonderful deal and they duly started panicking about where they were going to find all that pepper. They decided the best thing to do was to buy forward contracts. The price started to rise - rapidly - and the London firm merely sold them back their own pepper and made a fortune!
Better than success, anyone?
Admin
Reread the article. "Æxecor" did have an address linked to a pier, which could have been useful originally to load/unload bulk commodities. "Of course, since Æxecor’s offices were in located on Pier 53, a recently redeveloped warehouse district off the river, it would have seemed like the logical place to accept delivery of a whole bunch of coal, especially to a rules engine."
Admin
Well, I think the point is that all of those arguments and flags came up, but this "brad" fellow kept telling the office to deal with it and do whatever they said. I think that's the part of the story that makes it believable - an executive who's too busy to listen to the warning signs - it's certainly not unheard of! ;-)
Admin
If this had happened for real somewhere at Canary Wharf I'd not be in the least surprised.
Admin
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