From Steel to Futures: A Trader's Tale of Market Mayhem 2019-07-30

Imagine going from hauling steel to trading futures. That's the story of one trader he shared online. He started as a steel wholesaler, but once he discovered the world of futures trading, he was hooked. The appeal was obvious: put down a small deposit, no need to manage actual inventory, and the potential for big profits. What's not to love?

Initially, he struck gold. His deep understanding of steel demand and supply gave him a significant edge. He and his friends in the industry were raking it in. It felt like easy money. But then, things changed. A lot of other money flooded the market. Suddenly, the old rules didn't apply. The spot market price would rise, but the futures price would drop. The economy would be booming, yet futures prices would plummet. What was going on?

The market had fundamentally shifted. It was no longer driven solely by the simple economics of supply and demand. Now, it was driven by expectations. It was no longer about the steel itself, but what people thought would happen to the steel market.

This perfectly illustrates Ben Graham's famous quote: "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." These futures traders weren't weighing the value of steel; they were voting with their money, based on their interpretation of world news, economic cycles, and even the political climate. He confessed that he had to become a news junkie, constantly trying to predict the steel price from the next US president to their potential policy changes.

Once you get used to this fast-paced, speculative way of trading, it's incredibly difficult to go back. The allure of quick riches is powerful. Even after the bubble bursts, and the easy money dries up, many traders struggle to adapt. They're hooked on the thrill, the potential for lightning-fast gains.

This is where the wisdom of value investing shines. Value investors focus on fundamentals, on things that don't change drastically with the daily news cycle. They look for intrinsic value, not fleeting market sentiment. And while they might not get rich as quickly as a hotshot futures trader, they're far more likely to build sustainable wealth and, perhaps more importantly, enjoy a less stressful, more predictable life. It's a reminder that sometimes, slow and steady wins the race.

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