The funny, far-reaching business of regulatory reform.
"I don't think anybody has read it," says cowboy Brett Crosby of the 2,300-page FinReg bill. "War and peace is only 1,400 pages, for crying out loud, and people don't even read that." ?
Crosby is very concerned that somewhere in the just-signed monumental piece of legislation are rules that will hurt his ability to manage risk at his Wyoming cattle ranch. This self-described "MBA Cowboy" has been using futures contracts for years to provide a hedge against the often volatile price of cattle. Crosby prefers feeder cattle futures, as they most closely match his business.
An agricultural economist for Wells Fargo recently encouraged farmers to use more tools like futures contracts to stabilize cash flow. However, the new legislation will move many futures contracts onto exchanges where they can be better regulated and monitored, and speculators who don't own any of the underlying commodity—in this case, cattle—will have to put up more cash on margin. Some believe even commercial hedgers, people who, like Crosby, actually own cows, will have to also put up more money.
"Feeder cattle futures may not survive," says Crosby, though he admits that is a "doomsday scenario".Page 1 of 2 | Next Page