Going Whole Hog

The air was stifling in the metal trader’s small office as I got up to pace back and forth.  Walking was the only way I could think of to get some of the air to circulate around me.   

“So if someone gets caught short on metal, why can’t you just raise the price to the moon?”, I asked the obvious question.  The trader merely looked back me with a half sad smile…..the kind a teacher gives to a stubborn pupil.     

His office was like a bunker…..like some kind of war room.  Shards of metal littered the book case and a big map of the continental USA dominated the wall in front of him.   

We were performing a hedging project and the trader had been stressing to me repeatedly the dangers of being “a lazy buyer” or being “out of touch” with the market.  He relayed story after story of how, in his world, it was survival of the fittest and those who were not good negotiators, were not market savvy or had some event that forced them to make a quick buy/sell would be turned into hamburger by the metals marketplace. 

The trader shifted in his chair and leaned forward towards me.  “You wanna know why that’s a bad move?”  he said pointing his finger at me.” 

“Yea, I wanna know why”, I challenged him as I stopped mid pace.  “You’ve been filling my head with these tales of the “dog eat dog” metals market and now when you finally get a leg up on someone you have to go easy all of the sudden?” 

“Pigs get fed and Hogs get slaughtered!….that’s why”, the Detroit native retorted.   

“Pigs, hogs…is he trading pork bellies on the side?”, I wondered in my head, as I finally stopped pacing and sat down half exhausted.   

“Explain…please”, I wearily replied while expecting another long, marginally relevant, detour type answer from our intrepid trader.    

“It means don’t get greedy”, came the shockingly simply reply.  “When you’re ahead, you can be a pig and take advantage of the market being on your side but don’t be a hog and totally gouge the other guy.”

“Remember”, he continued, “Relationships play a big part in this.  If you’re a hog eventually the market will turn against you and will get slaughtered by those you gouged.” 

Also, great advice for those in charge of monetary policy.  

For those just arriving from the galaxy’s outer rim, since the financial crisis in 2008 the Fed has responded by trying to counter the effects of deflation with monetary interventions designed to stimulate consumer spending and lending by banks.   

In English….We have been printing money to create inflation so people and banks will spend and lend money.  The official name is Quantitative Easing or QE.   

First there was QE1, then QE2 and now the recently announced QE3.  Before those in the peanut gallery ask…..yes you are correct they keep trying and it doesn’t work, as intimated by the following chart courtesy of bank of America and the NY Fed.  










But wait, this time there is a twist!  QE3 or not just QE3, its QE…Forever.  That right my friends the Fed has gone “whole hog” and will now not stop printing money until they see unemployment come down to an “acceptable” level. 

But as our friend the metal trader says, “Pigs get fed and Hogs get slaughtered.” 

Maybe you can print a little bit of money and get away with it..but print a whole lot of money and you get….bad things.   

“Bechara is such an alarmist” sighs the peanut gallery, “What could be possibly be harmful about the Fed increasing the monetary base indefinitely?” 

At the risk of sounding like a simpleton, I have the following basic questions at this point: 

  • How does diluting the currency create wealth?
  • If one of the primary functions of money is a store of value, are we not taking value away from those who hold money (Savers)?
  • Isn’t this just a new spin on the medieval dream of boiling lead into gold?
  • If the Fed buys bonds & mortgages that no one else wants…who takes the losses? 

But hey, things are getting a little too uncomfortable with all these questions so let’s return to our metal trader’s small , nearly airless office.   

” Ok, ok I get it”, I told him “Relationships are key and you can take advantage of the market but you can’t press someone to the limit.” 

“Exactly”, he replied. “You see… I’m here to make you successful” he added sarcastically.   

As I turned to leave, I asked him one more question, “How do metal buyers know they are getting pure stuff…what if someone put some other metal in as filler?” 

For the first time the traders eyes widened, as if I had spoken blasphemy, he shook his head slowly from side to side as he replied.   

“In this business, you don’t dilute the metal….Geez man, do not dilute the metal”, he repeated slowly.    

Have a great week,  



Michael Bechara, CPA, CRMA

Managing Director

Granite Consulting Group Inc.




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