There is a comedian named Norm Crosby who molded a career out of humorous, grammatical gaffes known as malaprops ("Listen to the blabbing brook" or "Find out if she is staying over or is communicating"). Backwardation, at first glance, seems to be a word right out of one his routines ("The car was in backwardation when he got in it!")
Backwardation actually refers to a market condition in which the price of a commodities' futures contract is trading below it's expected spot price at contract maturity. Depending on the source you read, it is argued that backwardation is abnormal, and perhaps even just a theory. It can also be indicative of supply insufficiencies in the corresponding market, and/or perhaps a seasonal aspect of the commodity. Is it perishable? If so, the prices would go down the longer you hold it.
Example: The wholesale commercial gas market entered backwardation during the month of March, 2013. The 2-year contract prices fell below the price of 1-year contracts.
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Finance: What Are Commodities?74 Views
Finance allah shmoop What are commodities This is a comm
owed And this is my monnet ease And neither of
them have anything to do with commodities though if you
say them fast enough well you'll never mind A commodity
is something that is common like it's everywhere See the
com o there for the big hand Like gold is
a commodity it's everywhere oil is a commodity it's everywhere
seven hundred fourteen page paperback copy of moby dick is
a commodity and yes we can't resist clueless politicians are
a commodity as well Well a commodity is basically the
same thing no matter where and how you buy it
That copy of moby dick is the same copy whether
you get it at your local bookstore If a physical
book stores even exist anymore or on amazon the serial
killer of those aforementioned book stores So if something is
the same everywhere well what would be the opposite Well
how about a swim lesson from michael phelps You know
you can't buy that on amazon Not yet anyway Or
say you want to be the proud owner of a
three headed dog Well you might be able to find
one somewhere but it's going to cost you a whole
lot of kibble Or what if you were looking to
buy a blouse like one that was worn by j
edgar hoover Well those are pretty uncommon and or unique
commodities Well the basic idea is that most commodities can
be sold by lots of people so their profit margins
are generally low They may sell an extreme volume but
if you have thirty people competing to sell you that
same copy of moby dick don't don't you think the
last guy just desperate to get it off his shelves
will drop the price really low and you'll take it
Yeah unfortunately then you have to read that book That 00:01:41.357 --> [endTime] book really will be your way
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