Lesson 22: More About Mrs. B

With all this being understood, we return to our question, which is,

"Is it humanly possible for a hypothetical investor like Mrs. B to make money speculating in commodity futures in the year 2001?"

This is a good question. If the answer is yes, there is a reason for Mrs. B to speculate in commodity futures in the year 2001. If the answer is no, there is no reason for her to do so. This seems simple enough.

Mrs. B was born an optimist. She believes the answer is yes. Mrs. B was also born a realist. She knows that money does not fall from the sky like rain and that profits do not gush forth from the ground like popcorn. Mrs. B is 45. She is a smart self-driven lady who does not deceive herself about the nature of the challenge she is about to undertake. She is going to try to make a profit in a market where it is estimated that more fail than succeed. Maybe this challenge is what drives her on. Maybe the fact that she is a woman has something to do with it. Perhaps she was captain of her high school volleyball team. She may have been in honor society and competed on a team that won first place in a state-wide tournament. Mrs. B is organized. It is very helpful to be organized. It is especially helpful to be organized if you want to succeed in trading commodity futures or options contracts. To illustrate how organized she is, hypothetical Mrs. B divides her hypothetical capital into two equal hypothetical amounts,

$5,000 hypothetical capital is committed to commodity futures.

$5,000 hypothetical capital is committed to a savings account.

By dividing her hypothetical capital into two equal amounts, Mrs. B is doing more than dividing; she is establishing a means of measure or a standard by which to judge her success or failure in her commodity futures ventures. In essence, Mrs. B is cloning herself. She is giving a Mrs. B1 the sum of $5,000 to invest in commodity futures and she is giving her clone, a Mrs. B2, the sum of $5,000 to invest in a saving account. She considers herself to be Mrs. B1. She wants to see if she, B1, can by her market decisions outperform Mrs. B2. If the results of the market decisions of B1 do not exceed the results of the market decisions of B2, why should B1 make any market decisions at all? Why not just give the whole $10,000 to B2 and let the money sit in a bank from January 1, 2001 to January 1, 2002?

There is one reason and one reason only for Mrs. B to become B1 and try to outperform the results of the static investments of B2. That reason is that Mrs. B believes she can by her market decisions not only outperform B2's results but also substantially outperform B2's results. It is high school volleyball all over again. B1 believes she can score more points than B2. The challenge of making more money by trading in commodity futures than she might make by having her $5,000 sitting in a bank for 365 days is what drives Mrs. B on. In 365 days, we will know. Did Mrs. B1 earn more money by her trading than Mrs. B2 earned by letting her money earn interest? We return to our original question posed at the very beginning of this discussion,

Is it humanly possible for a hypothetical investor like Mrs. B to make money speculating in commodity futures in the year 2001? (And we might add, will the amount of money she makes by speculating in commodity futures exceed the amount of money she might have earned had her hypothetical $5,000 simply been sitting in a bank earning interest for the 365 days of the year 2001?)

How will Mrs. B proceed? What will be her first trading step in the year 2001? To continue reading, simply click on the link below. Before you do that, however, if you have any comments that you would like to send to Mrs. B concerning this introductory material, or suggestions you might have for her, you may send those comments along in the form of an e-mail by directing your mouse arrow to this e-mail button below.

After sending Mrs. B your thoughts, suggestions, or observations, you may then proceed by clicking here.

Bruce Gould