[POD] Futures Fundamental Analysis

Numerous charts, tables, and examples illustrate all key concepts, and the text itself is written in the clear, nontechnical style that has helped make Jack Schwager one of today's most widely read and highly regarded investment writers.

PART ONE: PRELIMINARIES
The Great Fundamental versus Technical 3 (4)
Analysis Debate
For Beginners Only 7 (20)
Purpose of This Chapter 7 (1)
The Nature of Futures Markets 7 (1)
Delivery 8 (1)
Contract Specifications 9 (2)
Volume and Open Interest 11 (1)
Hedging 12 (6)
Hedging Examples for a Commodity 12 (3)
Hedging in Financial Futures 15 (1)
General Observations Regarding Hedging 16 (2)
Speculation 18 (1)
Types of Orders 19 (3)
Commissions and Margins 22 (1)
Tax Considerations 22 (5)
PART TWO: FUNDAMENTAL ANALYSIS
Fourteen Popular Fallacies, or What Not to Do 27 (14)
Wrong
Five Short Scenes 27 (2)
Scene 1 27 (1)
Scene 2 28 (1)
Scene 3 28 (1)
Scene 4 28 (1)
Scene 5 29 (1)
The Fourteen Fallacies 29 (12)
Viewing Fundamentals in a Vacuum 29 (1)
Viewing Old Information as New 30 (1)
One-Year Comparisons 30 (1)
Using Fundamentals for Timing 31 (1)
Lack of Perspective 31 (1)
Ignoring Relevant Time Considerations 32 (1)
Assuming That Prices Cannot Decline 32 (1)
Significantly Below the Cost of Production
Improper Inferences 33 (3)
Comparing Nominal Price Levels 36 (1)
Ignoring Expectations 36 (1)
Ignoring Seasonal Considerations 37 (1)
Expecting Prices to Conform to Target 38 (1)
Levels in World Trade Agreements
Drawing Conclusions on the Basis of 38 (1)
Insufficient Data
Confusing the Concepts of Demand and 39 (2)
Consumption
Supply/Demand Analysis: Basic Economic Theory 41 (16)
Supply and Demand Defined 41 (4)
The Problem of Quantifying Demand 45 (1)
Understanding the Difference Between 46 (3)
Consumption and Demand
The Need to Incorporate Demand 49 (2)
Possible Methods for Incorporating Demand 51 (5)
Why Traditional Fundamental Analysis 56 (1)
Doesn't Work in the Gold Market
Types of Fundamental Analysis 57 (16)
The ``Old Hand'' Approach 57 (1)
The Balance Table 57 (1)
The Tabular and Graphic Approach 58 (9)
Regression Analysis 67 (1)
Econometric Models 68 (1)
The Analogous Season Method 69 (1)
Rank Classification Method 69 (1)
Index Models 70 (3)
Applying Technical Analysis to Fundamental 73 (28)
Data
Methods of Trend Definition 73 (1)
A Practical Example 74 (4)
Detrending Data 78 (6)
The Need to Incorporate Data Lags 84 (6)
Measuring Time Lags 90 (4)
The Danger of Optimization 94 (2)
Lags for Data Availability 96 (1)
Weighting the Indicators 96 (1)
An Example of an Index Model 97 (3)
A Final Caveat 100(1)
The Role of Expectations 101(7)
Using Prior-Year Estimates Rather Than 101(4)
Revised Statistics
Adding Expectations as a Variable in the 105(1)
Price-Forecasting Model
The Influence of Expectations on Actual 106(1)
Statistics
Defining New-Crop Expectations 107(1)
Incorporating Inflation 108(7)
Seasonal Analysis 115(34)
The Concept of Seasonal Trading 115(1)
Cash versus Futures Price Seasonality 115(1)
The Role of Expectations 116(1)
Is It Real or Is It Probability? 116(1)
Calculating a Seasonal Index 117(9)
Average Percent Method 117(4)
Link Relative Method 121(5)
Segmented Seasonals 126(4)
Deseasonalizing Data 130(4)
Maximum Gain/Maximum Loss Seasonal 134(1)
Comparisons
Counterseasonal Price Action 134(2)
Chart Detection of Seasonalities 136(12)
Conclusion 148(1)
Market-by-Market Seasonality 149(35)
Interpreting the Tables in This Chapter 149(1)
Interpreting the Charts in This Chapter 150(1)
A Word About the Price Data Used in 151(1)
Constructing Seasonal Indexes
Caveats in Using Seasonal Information for 152(1)
Trading
Seasonal Tables and Charts 152(32)
Analyzing Market Response 184(12)
Evaluating Market Response for Repetitive 184(6)
Events
USDA Hogs and Pigs Report 184(5)
October Orange Production and Yield 189(1)
Estimate
Counter-to-Anticipated Market Response 190(6)
Repetitive Events 190(3)
Isolated Events 193(3)
Government Programs and International 196(20)
Agreements
A Focus on Price Influence 196(2)
U.S. Agricultural Policy: A Conflict of 198(1)
Goals
Acreage Programs 199(3)
Acreage Reduction Program 199(1)
Normal Flex Acreage 200(1)
Optional Flex Acreage 201(1)
Paid Land Diversion 202(1)
The Price-Support Loan Program 202(4)
Basic Loan Rates 203(3)
Target Prices and Deficiency Payments 206(1)
Marketing Loan Program 206(1)
Farmer-Owned Reserve 207(2)
Import/Export Controls 209(1)
Export Support Programs 210(1)
Summary: Domestic Government Programs 211(1)
International Agreements 212(2)
Bibliography 214(2)
Building a Forecasting Model: A Step-by-Step 216(4)
Approach
Fundamental Analysis and Trading 220(21)
Fundamental versus Technical Analysis: A 220(1)
Greater Need for Caution
Three Major Pitfalls in Fundamental Analysis 221(7)
Combining Fundamental Analysis with 228(1)
Technical Analysis and Money Management
Why Bother With Fundamentals? 229(1)
Are Fundamentals Instantaneously Discounted? 230(4)
Fitting the News to Price Moves 234(1)
Fundamental Developments: Long-Term 235(3)
Implications versus Short-Term Response
Summary 238(3)
PART THREE: A PRACTICAL GUIDE TO REGRESSION
ANALYSIS
Introduction to Regression Analysis 241(8)
Basics 241(3)
Meaning of Best Fit 244(2)
A Practical Example 246(2)
Reliability of the Regression Forecast 248(1)
A Review of Elementary Statistics 249(25)
Measures of Dispersion 249(2)
Probability Distributions 251(6)
Reading the Normal Curve (Z) Table 257(3)
Populations and Samples 260(1)
Estimating the Population Mean and Standard 260(2)
Deviation from the Sample Statistics
Sampling Distribution 262(2)
Central Limit Theorem 264(2)
Standard Error of the Mean 266(1)
Confidence Intervals 267(2)
The t-Test 269(5)
Checking the Significance of the Regression 274(19)
Equation
The Population Regression Line 274(1)
Basic Assumptions of Regression Analysis 275(8)
Testing the Significance of the Regression 283(1)
Coefficients
Standard Error of the Regression 283(1)
Confidence Interval for an Individual 284(2)
Forecast
Extrapolation 286(1)
Coefficient of Determination (r2) 287(4)
Spurious (``Nonsense'') Correlations 291(2)
The Multiple Regression Model 293(13)
Basics of Multiple Regression 293(3)
Applying the t-Test in the Multiple 296(2)
Regression Model
Standard Error of the Regression 298(1)
Confidence Intervals for an Individual 299(1)
Forecast Yf
R2 and Corrected R2 299(2)
F-Test 301(2)
Reading the Computer Printout 303(3)
Analyzing the Regression Equation 306(41)
Outliers 306(4)
The Residual Plot 310(2)
Autocorrelation Defined 312(1)
The Durbin-Watson Statistic as Measure of 312(3)
Autocorrelation
The Implications of Autocorrelation 315(1)
Missing Variables and Time Trend 316(11)
Transformations to Achieve Linearity 327(3)
Transformation to Remove Autocorrelation 330(2)
Heteroscedasticity 332(2)
Dummy Variables 334(6)
Multicollinearity 340(7)
Practical Considerations in Applying 347(14)
Regression Analysis
Determining the Dependent Variable 347(2)
Selecting the Independent Variables 349(2)
General Considerations 349(1)
Should the Preforecast Period Price Be 350(1)
Included?
Choosing the Length of the Survey Period 351(1)
Sources of Forecast Error 352(2)
Simulation 354(1)
Stepwise Regression 355(1)
Sample Step-by-Step Regression Procedure 356(1)
Summary 357(1)
References (Chapters Fifteen-Twenty) and 358(3)
Recommended Readings
PART FOUR: FUNDAMENTAL ANALYSIS APPLIED THE
MARKETS
Forecasting Hog Prices 361(14)
Projecting Supply 361(3)
Demand Considerations 364(1)
Price Forecasting Model 1 364(5)
Price Forecasting Model 2 369(1)
Allowing for Forecast Error 370(1)
Projecting Price Highs and Lows 371(1)
Price Forecasts and Trading 372(1)
Conclusion 373(2)
Forecasting Cattle Prices 375(17)
Bill Gary
Consumption Is Entirely a Function of 375(1)
Production
Long-Term Supply Factors 376(3)
Feedlot Inventories 379(2)
Seasonality 381(7)
Production Seasonality 382(2)
Consumption Seasonality 384(1)
Price Seasonality 385(3)
Major Secular Changes in the Cattle Industry 388(3)
Conclusion 391(1)
Forecasting Grain Prices 392(16)
The Stocks/Disappearance Ratio as a Key 392(3)
Fundamental Indicator
A Background Sketch of Wheat Fundamentals 395(4)
Classes of Wheat 395(2)
Production 397(1)
Disappearance 397(2)
Annual Wheat-Price-Forecasting Model 399(5)
A Background Sketch of Corn Fundamentals 404
Production 404(1)
Disappearance 404
Quarterly Corn-Price-Forecasting Model 401(6)
Summary 407(1)
Forecasting Soybean Prices 408(25)
Anne Frick
The Analogous Season Study: A Fundamental 408(2)
Timing Approach
Background Sketch of Fundamentals 410(6)
The Soybean complex 410(1)
U.S. Soybean Production 411(1)
U.S. Exports 411(3)
Soybean Meal Usage 414(2)
Soybean Oil Usage 416(1)
Ending Stocks 416(1)
Key Factors 416(6)
Carryover Stocks 418(2)
Production 420(1)
Total Supply 420(1)
Usage 420(2)
Price Action 422(1)
Combining Factors 422(1)
Consistent Seasonal Patterns 422(4)
Crop-Scare Rally High 423(1)
Harvest Low 424(1)
Postharvest High 425(1)
February Break 425(1)
Selection of Contracts for Seasonal 425(1)
Studies
Examples of Analogy Studies 426(4)
Pro