Jeff  Carter

When you dip a bucket in the ocean and pull out some water, is there a dent in the ocean where you pulled the water out?

Of course not. Water runs in and immediately fills the gap.

Too many people think that marketplaces are like bathtubs. They think in terms of fixed pies. Market places are not like bathtubs. They aren’t fixed unless something sets up constraints to fix them. That something could be a government regulation, but it could also be market forces from another marketplace interacting as well.

Listening to the debate about things like the Volcker Rule, and fear mongering over China owning US debt really start to stick in my craw after awhile. Most of the people commenting have zero experience with an actual marketplace, and they are just trying to score political points by scaring people.

Markets are living breathing things. Each marketplace has its own heartbeat, it’s own rhythm. As a guy who traded in several markets I noticed that immediately. Eurodollars ($GE_F) didn’t trade like S&P’s ($ES_F). The crowd that was in the pit, and culture of the pit was different as well. And no pun intended, but trading hogs ($HE_F) was different than Eurodollars and S&P’s, but it was a different animal than cattle ($LE_F) too. If you ask a trader from the NYMEX, I am sure they will tell you Crude ($CL_F) was not the same as Natural Gas($NG_F) and at the CBOT, none of the grains($ZC_F, $ZS_F, $ZW_F) were alike. I hope you get my point.

Marketplaces have thousands of individual entities interacting within them. Each person trying to maximize their gain. Even when trading them on a computer, each has a slightly different beat. Although the computer has commoditized a lot of the differentiated culture.


Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.