Wheat prices, oil prices near all-time highes — no wonder it costs so much to live

Waaaayyy back in the Dark Ages -- okay, it was actually 1991 -- I had a small amount of money to invest in an obsession I had developed. Wheat futures contracts, I thought, were the name of the game that would make me a fortune.

If you don't understand commodity markets, commodity brokers, and all the rest, you only need to understand two things to figure out my sad tale: 1) commodity futures trading has no limit to the down-side, i.e., you can lose far more than you put into the "investment," and, 2) see number 1.

I bought one (yes, only one) wheat futures contract when wheat was trading for, I think, $3.58 a bushel. I had heard rumors and even learned the rudiments of reading trading charts (big mistake) and was pretty sure we were entering an all-time bull market for wheat futures.

I was right about the bull market part. Within four days, the price had shot up, I don't remember how much now, but it had shot up enough that I had made $350+ profit on my lowly little wheat contract. Of course, looking back on the next three months, I see I should have held onto that single contract then sold it about three months after I'd bought it. I would have made something over $2,500 or some other ridiculously huge (at the time) profit figure.

Nope. I was caught up in the whole buy/sell commodity futures craze. As sure as addicted gamblers are spanked and humiliated by the casinos, I was broken and shamed by the wheat futures market. I simply couldn't stop trying to reap daily and weekly profits so I got caught up in repeatedly buying and selling, hoping to "guess" the next big up or down turn.

My downfall came when I had to leave town on a business trip. I promised my good wife not to have any wheat trades open during the trip. But, hey, as it happened I was headed to Chicago for a week -- and I would be able to actually visit the gallery and watch wheat contracts trading at the Chicago Board of Trade: Mecca for wheat futures traders. I couldn't resist the fascination of buying two contracts and watching the prices move while I was actually there to see the pits and the boards and all that stuff.

But after I placed my order, I was pulled away for a conference I was required to attend.

By the next morning, wheat had taken some big plunges. Later that next day, wheat plunged again. I wasn't watching all that because I was busy with the business trip which took me to Chicago.

We lost almost $3,000 on the wheat futures market that week before I could straighten it out and get out of the market. Since I had started the week with only something like $1,800 in my trading account -- can you say, hello loan company.

Today, I see that wheat is trading around $10.74 a bushel. Wow. With $10+ wheat and $110+ oil, is it any wonder the economy is in the tank? Think of how all that impacts the cost of a loaf of bread and getting that loaf to the store to sell it.

Maybe this time, when I get fleeced by wheat, corn, oil, natural gas, etc., I'll have to borrow money again. Only this time, instead of borrowing to pay off terrible investing decisions, I'll have to hit up the loan company just to put groceries on the table??

Ah, well, what do I know? I'm just a guy who reads the papers.
[tags]commodity futures trading, wheat futures trading, high cost of living, just a guy who reads the papers[/tags]

March 19, 2008 | Filed Under Business News