Commodity Trader Quotes

The commodity traders are arbitragers par excellence, trying to exploit a series of differences in prices. Because they’re doing deals to buy and to sell all the time, they are often indifferent to whether commodity prices overall go up or down. What matters to them is the price disparity – between different locations, different qualities or forms of a product, and different delivery dates. By exploiting these price differences, they help to make markets more efficient, directing resources to their highest value uses in response to price signals. They are, in the words of one academic, the visible manifestation of Adam Smith’s invisible hand.

On Wall Street, there were futures and commodities traders wagering on what cotton she had yet to pick might go for next October. There were businessmen in Chicago needing oxford shirts, socialites in New York and Philadelphia wanting lace curtains and organdy evening gowns. Closer to home, closer than one dared to contemplate, there were Klansmen needing their white cotton robes and hoods.

About every two generations—roughly every forty-seven to sixty years—there’s a deflationary market. For example, in respect to the commodity markets, we’re currently in a deflationary phase that began in 1980. Over the past two hundred years, these deflationary phases have typically lasted between eight and twelve years. Since we’re currently in the twelfth year of commodity price deflation, I think we’re very close to a major bottom in commodity prices.

The entrepreneur who is reckoning in terms of a currency with a stable value is unable to compete with the entrepreneur who is prepared to make a quasi-gift of part of his capital to his customers. In 1920 and 1921, Dutch traders who had sold commodities to Austria could buy them back again after a while much cheaper than they had originally sold them, because the Austrian traders completely failed to see that they were selling them for less than they had cost.

Turning captives into commodities was a thoroughly scientific enterprise. It turned on perfecting the practices required to commodify people and determining where those practices reached their outer limits (that is, the point at which they extinguished the lives they were meant to sustain in commodified form). Traders reduced people to the sum of their biological parts, thereby scaling life down to an arithmetical equation and finding the lowest common denominator.

By 1900, a small white minority radiating out from Europe would come to control most of world’s land surface, imposing the imperatives of a commercial economy and international trade on Asia’s mainly agrarian societies. Europeans backed by garrisons and gunboats could intervene in the affairs of any Asian country they wished to. They were free to transport millions of Asian labourers to far-off colonies (Indians to the Malay Peninsula, Chinese to Trinidad); exact the raw materials and commodities they needed for their industries from Asian economies; and flood local markets with their manufactured products. The peasant in his village and the market trader in his town were being forced to abandon a life defined by religion, family and tradition amid rumours of powerful white men with a strange god-on-a-cross who were reshaping the world- men who married moral aggressiveness with compact and coherent nation-states, the profit motive and superior weaponry, and made Asian societies seem lumberingly inept in every way, unable to match the power of Europe or unleash their own potential.

We might label this the Hobbesean fallacy: the idea that human beings were primordially individualistic and that they entered into society at a later stage in their development only as a result of a rational calculation that social cooperation was the best way for them to achieve their individual ends. This premise of primordial individualism underpins the understanding of rights contained in the American Declaration of Independence and thus of the democratic political community that springs from it. This premise also underlies contemporary neoclassical economics, which builds its models on the assumption that human beings are rational beings who want to maximize their individual utility or incomes. But it is in fact individualism and not sociability that developed over the course of human history. That individualism seems today like a solid core of our economic and political behavior is only because we have developed institutions that override our more naturally communal instincts. Aristotle was more correct than these early modern liberal theorists when he said that human beings were political by nature. So while an individualistic understanding of human motivation may help to explain the activities of commodity traders and libertarian activists in present-day America, it is not the most helpful way to understand the early evolution of human politics. Everything

The winter of 1789 was the hardest within living memory. No one, not even the old people of the district, had ever known anything like it. The cold weather set in early, and, coming on top of a bad harvest, led to great distress among the tenant farmers and the peasants. We were hard hit at the foundry too, for conditions on the road became impossible, what with frost and ice, and then snow; and we were unable to deliver our goods to Paris and the other big cities. This meant that we were left with unsold merchandise on our hands, and little prospect of getting rid of it in the spring, for in the meantime the traders in Paris would be buying elsewhere—if, that is, they ordered at all. There was a general drop in demand for luxury commodities at this time, owing to the unrest throughout the country.

centuries-long debate over the nature of money can be reduced to two sides. One school sees money as merely a commodity, a preexisting thing, with its own inherent value. This group believes that societies chose certain commodities to become mutually recognized units of exchange in order to overcome the cumbersome business of barter. Exchanging sheep for bread was imprecise, so in our agrarian past traders agreed that a certain commodity, be it shells or rocks or gold, could be a stand-in for everything else. This “metallism” viewpoint, as it is known, encourages the notion that a currency should itself be, or at least be backed by, some tangible material. This orthodox view of currency is embraced by many gold bugs and hard-money advocates from the so-called Austrian school of economics, a group that has enjoyed a renaissance in the wake of the financial crisis with its critiques of expansionist central-bank policies and inflationary fiat currencies. They blame the asset bubble that led to the crisis on reckless monetary expansion by unfettered central banks. The other side of the argument belongs to the “chartalist” school, a group that looks past the thing of currency and focuses instead on the credit and trust relationships between the individual and society at large that currency embodies. This view, the one we subscribe to and which informs

By pointing to the captain’s foolhardy departure from standard procedure, the officials shielded themselves from the disturbing image of slaves overpowering their captors and relieved themselves of the uncomfortable obligation to explain how and why the events had deviated from the prescribed pattern. But assigning blame to the captain for his carelessness afforded only partial comfort, for by seizing their opportunity, the Africans aboard the Cape Coast had done more than liberate themselves (temporarily at least) from the slave ship. Their action reminded any European who heard news of the event of what all preferred not to contemplate too closely; that their ‘accountable’ history was only as real as the violence and racial fiction at its foundation. Only by ceaseless replication of the system’s violence did African sellers and European buyers render captives in the distorted guise of human commodities to market. Only by imagining that whiteness could render seven men more powerful than a group of twice their number did European investors produce an account naturalizing social relations that had as their starting point an act of violence. Successful African uprisings against European captors were of course moments at which the undeniable free agency of the captives most disturbed Europeans—for it was in these moments that African captives invalidated the vision of the history being written in this corner of the Atlantic world and articulated their own version of a history that was ‘accountable.’ Other moments in which the agency and irrepressible humanity of the captives manifested themselves were more tragic than heroic: instances of illness and death, thwarted efforts to escape from the various settings of saltwater slavery, removal of slaves from the market by reason of ‘madness.’ In negotiating the narrow isthmus between illness and recovery, death and survival, mental coherence and insanity, captives provided the answers the slave traders needed: the Africans revealed the boundaries of the middle ground between life and death where human commodification was possible. Turning people into slaves entailed more than the completion of a market transaction. In addition, the economic exchange had to transform independent beings into human commodities whose most ‘socially relevant feature’ was their ‘exchangeability’ . . . The shore was the stage for a range of activities and practices designed to promote the pretense that human beings could convincingly play the part of their antithesis—bodies animated only by others’ calculated investment in their physical capacities.

I once had a foreign exchange trader who worked for me who was an unabashed chartist. He truly believed that all the information you needed was reflected in the past history of a currency. Now it's true there can be less to consider in trading currencies than individual equities, since at least for developed country currencies it's typically not necessary to pore over their financial statements every quarter. And in my experience, currencies do exhibit sustainable trends more reliably than, say, bonds or commodities. Imbalances caused by, for example, interest rate differentials that favor one currency over another (by making it more profitable to invest in the higher-yielding one) can persist for years. Of course, another appeal of charting can be that it provides a convenient excuse to avoid having to analyze financial statements or other fundamental data. Technical analysts take their work seriously and apply themselves to it diligently, but it's also possible for a part-time technician to do his market analysis in ten minutes over coffee and a bagel. This can create the false illusion of being a very efficient worker. The FX trader I mentioned was quite happy to engage in an experiment whereby he did the trades recommended by our in-house market technician. Both shared the same commitment to charts as an under-appreciated path to market success, a belief clearly at odds with the in-house technician's avoidance of trading any actual positions so as to provide empirical proof of his insights with trading profits. When challenged, he invariably countered that managing trading positions would challenge his objectivity, as if holding a losing position would induce him to continue recommending it in spite of the chart's contrary insight. But then, why hold a losing position if it's not what the chart said? I always found debating such tortured logic a brief but entertaining use of time when lining up to get lunch in the trader's cafeteria. To the surprise of my FX trader if not to me, the technical analysis trading account was unprofitable. In explaining the result, my Kool-Aid drinking trader even accepted partial responsibility for at times misinterpreting the very information he was analyzing. It was along the lines of that he ought to have recognized the type of pattern that was evolving but stupidly interpreted the wrong shape. It was almost as if the results were not the result of the faulty religion but of the less than completely faithful practice of one of its adherents. So what use to a profit-oriented trading room is a fully committed chartist who can't be trusted even to follow the charts? At this stage I must confess that we had found ourselves in this position as a last-ditch effort on my part to salvage some profitability out of a trader I'd hired who had to this point been consistently losing money. His own market views expressed in the form of trading positions had been singularly unprofitable, so all that remained was to see how he did with somebody else's views. The experiment wasn't just intended to provide a “live ammunition” record of our in-house technician's market insights, it was my last best effort to prove that my recent hiring decision hadn't been a bad one. Sadly, his failure confirmed my earlier one and I had to fire him. All was not lost though, because he was able to transfer his unsuccessful experience as a proprietary trader into a new business advising clients on their hedge fund investments.

The important point to understand about commodities is that they have extreme cycles. That’s why the best traders make their money in this sector. And sudden weather patterns or mining strikes can cause tremendous short-term fluctuations, often exploding like a bomb! Unless you’re working with someone who has a proven system, don’t trade commodities. You can invest in them, but tread cautiously. Remember that commodities are all different in their ability to ramp up supply (elasticity) when demand accelerates. It’s easier to cultivate more land for crops or livestock in an era of urbanization, but it’s not so easy to drill deeper for more oil or unearth more industrial metals like iron ore, coal, lead, nickel, and copper. Pulling uranium and the rare metals out of the ground is even harder.

[Peggy Gallagher] was also appearing once a month for two hours on WGN Radio [...] During one summer show, a caller asked, 'Do you think there is a seasonal cycle for Beanie Babies?' 'It’s not different than any other kind of investment—the stock market or the commodities market,' was Gallagher’s reply. Then she explained that she used to be a trader on the Chicago Mercantile Exchange. 'There are peaks and valleys. It’s an investment for people. There’s nobody as big as the market. The Hunt [brothers] tried to do it with the silver market. There is nobody bigger than the market. The prices have stabilized a bit right now, but now they’re starting to get more active. So it’s just like any other type of investment'.

The ledger’s double-entry pages and the neat grid of the invoice gave purposeful shape to the story they told. Through their graphic simplicity and economy, invoices and ledgers effaced the personal histories that fueled the slaving economy. Containing only what could fit within the clean lines of their columns and rows, they reduced an enormous system of traffic in human commodities to a concise chronicle of quantitative ‘facts.’ Thus, Mary Poove writes, ‘like the closet, the conventions of double-entry bookkeeping were intended to manage or contain excess.’ Instruments such as these did their work, then, while concealing the messiness of history, erasing from view the politics that underlay the neat account keeping. The slave traders (and much of the modern economic literature on the slave trade) regarded the slave ship’s need for volume as a self-evident ‘fact’ of economic rationalization: the Board of Trade’s reports, the balance pursued in the Royal African Company’s double-entry ledgers, the calculations that determined how many captive bodies a ship could ‘conveniently stow,’ the simple equation by which an agent at the company’s factory at Whydah promised ‘to Complie with delivering in every ten days 100 Negroes.’ But the perceptions of the African captives themselves differed from the slave trader’s economies of scale and rationalized efficiency of production. What appears in the European quantitative account as a seamless expansion in the volume of slave exports—evidence of the natural workings of the market—took the form of violent rifts in the political geography of the Gold Coast. People for whom the Atlantic market had been a distant and hazy presence with little direct consequence for their lives now found themselves swept up in wars and siphoned into a type of captivity without precedent.

The African as immigrant was not an inevitable by-product of the traffic in human commodities but rather a creation of his or her own arduous making. It is this that distinguishes African displacement in the Atlantic slave trade from all other emigration. Slaves’ full personhood was the crux of the contest between Africans and those who commodified them. Traders and masters alike confronted the universal contradiction inherent in the idea of human beings as property; conceding that the slave had a will, in order to better devise means to control it, was not an acknowledgement of the slave’s personhood. The African slave, a victim of forced migration, cannot, then, be taken for granted as immigrant subject. This displaced being had to restore through her unassisted agency the pulse of social integration that saltwater slavery threatened to extinguish. That the Africans enslaved in America were immigrants was thus not an axiomatic truth, but rather one Africans had to fight for. Those who lived to walk away from the slave ship had to address the problem of their unique displacement and alienation. They did so in three ways that gave distinctive shape to their effort to build meaningful life in a new world. First, they engaged with the cognitive problem of orientation: Where are we now that we have escaped the slave ship? Second, they created kinship and community out of the disaggregated units remaining after the market’s dispersal of its human wares. Third, they came to terms with the saltwater journey’s haunting imprint on their communities, regularly reinforced by the slave ships’ return to deposit still more saltwater slaves on these unfamiliar shores.

Making mistakes is part of the learning process when it comes to trading or investing. Every trader makes mistakes in trading that ruin his entire capital. We have listed some common but 5 deadly trading mistakes that a novice or unprofessional trader does in the commodity market: No Patience, Over Trading, Trading Without Plan, Giving Into Emotions, Not Having A Trading Journal. You may include market conditions, the size of the trade, expiration time, prices, whether or not you were successful, and even notes on your emotions. Looking Forward and Join Free MCX Crude Oil Tips, MCX Commodity Trading Trial! Call at 9814289955 or go through our website.

Hedge funds using satellite intelligence on ships and tank levels to identify upcoming impact to oil producers and commodity prices

Who are we, the people who have ADHD? We are the problem kid who drives his parents crazy by being totally disorganized, unable to follow through on anything, incapable of cleaning up a room, or washing dishes, or performing just about any assigned task; the one who is forever interrupting, making excuses for work not done, and generally functioning far below potential in most areas. We are the kid who gets daily lectures on how we’re squandering our talent, wasting the golden opportunity that our innate ability gives us to do well, and failing to make good use of all that our parents have provided. We are also sometimes the talented executive who keeps falling short due to missed deadlines, forgotten obligations, social faux pas, and blown opportunities. Too often we are the addicts, the misfits, the unemployed, and the criminals who are just one diagnosis and treatment plan away from turning it all around. We are the people Marlon Brando spoke for in the classic 1954 film On the Waterfront when he said, “I coulda been a contender.” So many of us coulda been contenders, and shoulda been for sure. But then, we can also make good. Can we ever! We are the seemingly tuned-out meeting participant who comes out of nowhere to provide the fresh idea that saves the day. Frequently, we are the “underachieving” child whose talent blooms with the right kind of help and finds incredible success after a checkered educational record. We are the contenders and the winners. We are also imaginative and dynamic teachers, preachers, circus clowns, and stand-up comics, Navy SEALs or Army Rangers, inventors, tinkerers, and trend setters. Among us there are self-made millionaires and billionaires; Pulitzer and Nobel prize winners; Academy, Tony, Emmy, and Grammy award winners; topflight trial attorneys, brain surgeons, traders on the commodities exchange, and investment bankers. And we are often entrepreneurs. We are entrepreneurs ourselves, and the great majority of the adult patients we see for ADHD are or aspire to be entrepreneurs too. The owner and operator of an entrepreneurial support company called Strategic Coach, a man named Dan Sullivan (who also has ADHD!), estimates that at least 50 percent of his clients have ADHD as well.

The major benefit is that ALBA is essentially a barter system, in which countries decide for themselves what any given commodity or service is worth, rather than letting traders in New York, Chicago or London set the prices for them. That makes trade far less vulnerable to the kind of sudden price fluctuations that devastated Latin American economies in the recent past. Surrounded by turbulent financial waters, Latin America is creating a zone of relative economic calm and predictability, a feat presumed impossible in the globalization era.

Grieving for their future, men and women often took their own lives. Others died when they could not maintain the feverish pace of the march. While the mortality rate of slaves during the Second Middle Passage never approached that of the transatlantic transfer, it surpassed the death rate of those who remained in the seaboard states. Over time some of the hazards of the long march abated, as slave traders - intent on the safe delivery of a valuable commodity - standardized their routes and relied more on flatboats, steamboats, and eventually railroads for transportation. The largest traders established 'jails,' where slaves could be warehoused, inspected, rehabilitated if necessary, and auctioned, sometimes to minor traders who served as middlemen in the expanding transcontinental enterprise. But while the rationalization of the slave trade may have reduced the slaves' mortality rate, it did nothing to mitigate the essential brutality or the profound alienation that accompanied separation from the physical and social moorings of home and family. ... [T]he Second Middle Passage was extraordinarily lonely, debilitating, and dispiriting. Capturing the mournful character of one southward marching coffle, an observer characterized it as 'a procession of men, women, and children resembling that of a funeral.' Indeed, with men and women dying on the march or being sold and resold, slaves became not merely commodified but cut off from nearly every human attachment. Surrendering to despair, many deportees had difficulties establishing friendships or even maintaining old ones. After a while, some simply resigned themselves to their fate, turned inward, and became reclusive, trying to protect a shred of humanity in a circumstance that denied it. Others exhibited a sort of manic glee, singing loudly and laughing conspicuously to compensate for the sad fate that had befallen them. Yet others fell into a deep depression and determined to march no further. Charles Ball, like others caught in the tide, 'longed to die, and escape from the bonds of my tormentors.' But many who survived the transcontinental trek formed strong bonds of friendships akin to those forged by shipmates on the voyage across the Atlantic. Indeed, the Second Middle Passage itself became a site for remaking African-American society. Mutual trust became a basis of resistance, which began almost simultaneously with the long march. Waiting for their first opportunity and calculating their chances carefully, a few slaves broke free and turned on their enslavers. Murder and mayhem made the Second Middle Passage almost as dangerous for traders as it was for slaves, which was why the men were chained tightly and guarded closely.

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De Beers set up a purchasing office in Monrovia in 1954 where they bought diamonds, with the intent of keeping as much of the diamond trade under its control as possible. However by 1956, while I was still in Monrovia, there were approximately 75,000 illegal miners, who were smuggling these valuable stones on a vast scale. At that time I was offered the opportunity to get involved in this bonanza, which I fortunately did not do since some of my friends who did, went missing never to be seen again. At that time I was the Captain of a Farrell Line’s coastal ship and made additional pocket money running booze into the Liberian interior. In those days when someone disappeared or fell off of the grid, as we would say, the chance that they would be found again was exceedingly slim. In 1984 the De Beers Group (SLST) from South Africa, sold its remaining shares, under duress, to the Precious Metals Mining Company controlled by Lebanese National, Jamil Sahid Mohamed Khalil, was a questionable local businessman, as well as a diamonds and commodities trader. He became known throughout the world’s diamond industry as a wheeler-dealer and a politician, influential in Sierra Leone, where the majority of the blood diamonds came from. In 1999, when South African mercenaries invaded Sierra Leone’s capital city Freetown, Jamil attempted to flee from this West African country but was stopped prior to leaving his home. During this altercation, one of Jamil’s sons was shot to death right in front of him. The following year, Jamil died of a stroke after having successfully made his way to Lebanon.

Agricultural commodity traders, on the other hand, buy from thousands of individual farmers. That makes the traders’ job harder, but it also provides an opportunity: dealing with so many farmers gives the largest traders valuable information. Long before the concept of ‘big data’ became popular, the agricultural traders were putting it to work, aggregating information from thousands of farmers to get a real-time insight into the state of the markets. Each month, when the US Department of Agriculture published its update on the world’s key crops, the agricultural houses’ traders were able to bet on what it would say with near-certainty that they were right. Within most trading houses, there was a group of traders whose sole job was to speculate profitably with the company’s money – they were known as the proprietary, or ‘prop’, traders.

Most of us take for granted the ease with which we can fill up our cars, buy a new smartphone or order a cup of Colombian coffee. But underpinning almost all of our consumption is a frenetic international trade in natural resources. And underpinning that trade, from their offices in sleepy towns in Switzerland or New England, are the commodity traders.

Little noticed and little scrutinised, the commodity traders have become essential cogs in the modern economy. Without them, petrol stations would run out of fuel, factories would grind to a halt and bakeries would run out of flour.

Slavery existed long before the outside world returned to where it had originated. Traders in the Sahel region used thousands of slaves to transport vast quantities of the region’s then most valuable commodity, salt, but the Arabs began the practice of subcontracting African slave-taking to willing tribal leaders who would deliver them to the coast. By the time of the peak of the Ottoman Empire in the fifteenth and sixteenth centuries hundreds of thousands of Africans (mostly from the Sudan region) had been taken to Istanbul, Cairo, Damascus and across the Arabian world. The Europeans followed suit, outdoing the Arabs and Turks in their appetite for, and mistreatment of, the people brought to the slave ships anchored off the west coast.

A continuation pattern during the course of a major trend allows me to advance my initial protective stop in the direction of a profitable trade. A breakout of a continuation chart will be accompanied by its own Last Day Rule. I may elect to move the protective stop from the initial Last Day Rule to the new Last Day Rule created by the continuation pattern.

It is also possible that a pattern implying a reversal of trend could develop prior to the attainment of an expected target. I may elect to move my protective stop in relationship to a pattern that carries trend implications counter to my position.

I use two other methods to determine price targeting. The first involves a technique known as swing objectives. The principle of a swing objective is that markets tend to advance or decline in legs that are of approximately equal distance.

As a general rule, the minimum move following the completion of a chart pattern should be equal to the height of the pattern itself,

Reversal patterns offer the opportunity to avoid riding the initial position back to the starting gates (or what I call a popcorn or round-trip move).

Continuation patterns offer the opportunity to both pyramid an initial position and to tighten up the protective stops on the initial position.

And I’m not kidding when I say “craziness.” The University of St. Gallen, Switzerland, has come out with a study that compares traders with psychopaths. The study reviewed the results from an existing study comparing 24 psychopaths in German high-security hospitals with a control group of 27 “normal” people. The funny thing is, this control group of “normal” people turned out to be traders. Stock guys, currency and commodity traders, and derivative types happened to be the normal control group that was stacked up against the high-security, barbed-wire-enclosed psychopaths. In the end, the performance of the trading group was actually worse than that of the psychopaths. The study indicated that traders, “Have a penchant for immense destruction,” and that their mindset would lead them to the logical conclusion of “beating one of the neighbor’s expensive cars with a baseball bat with the sole objective of owning the most beautiful car in the neighborhood.” In other words, traders are nuts. Indeed if you look up the textbook definition of a psychopath, here are some of the tidbits you’ll uncover: antisocial behavior, poor judgment and failure to learn from experience, inability to see oneself as others do, inexplicable impulsiveness … sounds like a typical trader who is struggling against the market and can’t figure out why.

the Koch brothers—owned virtually all of what had become under their leadership the second-largest private company in America. They owned four thousand miles of pipelines, oil refineries in Alaska, Texas, and Minnesota, the Georgia-Pacific lumber and paper company, coal, and chemicals, and they were huge traders in commodity futures, among other businesses. The company’s consistent profitability had made the two brothers the sixth- and seventh-wealthiest men in the world. Each was worth an estimated $14 billion in 2009. Charles, the elder brother, was a man of unusual drive, accustomed to getting his way. What he wanted that weekend was to enlist his fellow conservatives in a daunting task: stopping the Obama administration from implementing Democratic policies that the American public had voted for but that he regarded as catastrophic.

Just as you pay a commission to the retail broker who took your order or provides you trading access via an electronic platform, the market maker must be paid in the form of the bid/ask spread. Think about it: If as a retail trader you are always paying the ask and selling the bid, you are a net loser even if the price of the futures contract remains unchanged.

The term rolling, or rolling over, is commonly used to describe the practice of offsetting a trade in a contract that is facing expiration and entering a similar position in a contract with a distant expiration date. Rolling over is simply offsetting one position and getting into another.

Arbitrage is a "risk-free" profit, but for most of us, it might as well be a mirage. Markets are quick to eliminate such opportunities.

If you can take advantage of a situation in some way, it’s your duty as an American to do it." —C. Montgomery Burns (from The Simpsons)

The common thinking is that you can’t possibly sell something before you own it, and even if you could, some interest likely would be charged for borrowing the asset that you intend to sell. Although that might be true in stock trading, that logic doesn’t apply to the futures markets.

As Koch’s traders developed expertise, they branched out and traded commodities that were never priced on an open exchange. A single transaction might yield $1 million or more in profits without ever being recorded with a paper contract. One of these markets was for industrial chemicals that most people couldn’t pronounce but that they used every day. Polyvinyl chloride, for example, is used in food packaging and bottles.

The traders at Koch and Enron now had market power. What the lawmakers didn’t take into account back then was the peculiar nature of commercial electrons and electrical power. Unlike other commodities such as corn and oil, electrons cannot be stored. They must be transmitted and used in real time as they are created. This made the electrical grid particularly vulnerable to market power. The grid had to be expertly orchestrated to match supply and demand almost perfectly: if enough electrons weren’t forced down the wires to meet demand, then the system could shudder, and blackouts could result. In other words, system reliability dictated that demand must be met in real time—buying that last megawatt of power to meet demand was a necessity rather than a luxury. The market for that last mega-watt hour was a seller’s market, and the savvy trader could exact a ransom price.

Koch Agriculture first branched out into the beef business, and it did so in a way that gave it control from the ranch to the butcher’s counter. Koch bought cattle feedlots. Then it developed its own retail brand of beef called Spring Creek Ranch. Dean Watson oversaw a team that worked to develop a system of “identity preservation” that would allow the company to track each cow during its lifespan, allowing it over time to select which cattle had the best-tasting meat. Koch held blind taste tests of the beef it raised. Watson claimed to win nine out of ten times. Then Koch studied the grain and feed industries that supplied its feedlots. Watson worked with experts to study European farming methods because wheat farmers in Ukraine were far better at raising more grain on each acre of land than American farmers were. The Europeans had less acreage to work with, forcing them to be more efficient, and Koch learned how to replicate their methods. Koch bought a stake in a genetic engineering company to breed superyielding corn. Koch Agriculture extended into the milling and flour businesses as well. It experimented with building “micro” mills that would be nimbler than the giant mills operated by Archer Daniels Midland and Cargill. Koch worked with a start-up company that developed a “pixie dust” spray preservative that could be applied to pizza crusts, making crusts that did not need to be refrigerated. It experimented with making ethanol gasoline and corn oil. There were more abstract initiatives. Koch launched an effort to sell rain insurance to farmers who had no way to offset the risk of heavy rains. To do that, Koch hired a team of PhD statisticians to write formulas that correlated corn harvests with rain events, figuring out what a rain insurance policy should cost. At the same time, Koch’s commodity traders were buying contracts for corn and soybeans, learning more every day about those markets.

But even the biggest Wall Street banks were at a disadvantage when they went up against the traders at Koch Industries, British Petroleum, or Amoco. The Wall Street banks didn’t have access to inside information. Goldman Sachs didn’t own refineries or pipelines and couldn’t get a sneak peek into where markets were headed. The banks had to resort to second-rate information that was publicly available, like government reports on monthly energy supplies. It was a losing proposition. In the mid-1990s, the Wall Street banks came to Koch Industries, asking for help. “We kept getting approached by banks, who say, ‘Hey, Koch. You guys are so good at this physical stuff, we’d like to partner with you,’ ” recalled a former senior Koch executive who was heavily involved in trading operations. The banks came to Koch with the same pitch: the banks would handle “all this financial stuff,” while Koch handled the physical end of trading and shared information from its operations. If Koch executives were flattered by the attention from Wall Street, they didn’t show it for long. “We kind of got curious—or, suspicious is the better term,” the executive recalled. Rather than help the banks out, Koch set up a team to study why the banks were so interested in their business. Koch hired the outside consulting firm McKinsey & Company to study what was happening in commodities markets during the 1990s. McKinsey reported that the world of trading had grown even larger and more profitable than Koch Industries had suspected. As it happened, the futures contracts that Koch was trading had become the “plain vanilla” products in a rapidly booming market. Now there were more exotic, more opaque, and far more profitable financial products on the market. These products were called “derivatives.” That’s where the real money was.

Charles Koch did, this new effort carried its own slogan: “10,000 percent compliance,” meaning that employees obeyed 100 percent of all laws 100 percent of the time.II This slogan might have seemed banal, even empty, to Koch Industries employees in the beginning. There isn’t a company in America that doesn’t profess to obey the law. But the glib nature of the slogan was deceiving: it represented an entirely new way of operating. Koch Industries expanded its legal team and embedded them into the firm’s far-flung operations. Now if process owners like the managers at Pine Bend decided to release ammonia-laden water into nearby waterways, they often had to first consult with teams of Koch’s lawyers. Koch’s commodity traders consulted the legal team when devising new trading strategies. Teams of inspectors from the legal department descended on factories and threatened to shut them down if managers couldn’t prove that a valve had been properly inspected. The mandate to comply with the law was very real, and it served a strategic purpose. Koch would keep state and federal regulators off its property.

Despite arguments against speculation and its place in the commodity markets that shape our economy—and, therefore, our lives—without it, producers and users of commodities would have a difficult time facilitating transactions. Thanks to speculators, there is always a buyer for every seller and a seller for every buyer. Without them and the liquidity they provide, hedgers would likely be forced to endure much larger bid/ask spreads and, in theory, price volatility. Consumers would also suffer in the absence of speculators simply because producers would be forced to pass on their increased costs to allow for favorable profit margins.