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MadMarketScientist

Speculators Are Useless to Society

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Hi Friva,

I would not care much. None of the people I shared my view with were laugthing.. they usually remain silent - meaning that they do not understand and/or feel that there might be some truth in it.

 

Most people are convinced they have to do something (eg trading) in order to have what they want (eg lots of money) so that they can become happy. However, the moment they have achieved "lots of money" they understand that they have not become happy and wonder.

I am convinced it is the other way round: If I can be at peace & joy, I am in such a powerful mental state so that I can follow my passion and choose whatever I want (eg lavish abundance of money). Having and Doing are predominant Ego-states that cannot nearly achieve what a powerful consciousness state can.. this is the real source to riches. Most people think this is total "nuts".. for me the only way to freedom.

People think this is not true because "trading" is a very serious fight of survival.. to me it is a game to be played. Whoever loses has the chance to improve and grow...

Does this still make sense?

 

Gabe

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By attempting to predict the future, speculators provide the valuable service of helping the markets prepare for the future, enabling decisions to be made today that prepare for tomorrow.

 

Take futures markets in oil for example. When prices rise in the present because speculators look at the future and see higher oil prices in it, they are effectively transmitting valuable information from the future to the present where it can be acted upon in preparation for the future. This preparation could take the form of additional investments in new oil exploration, or in investments in alternative energy such as solar, wind, etc. It also signals people in the present that they might want to adopt technologies such as hybrid cars to conserve a resource that is becoming scarce.

 

Futures markets also help maintain price stability. Instead of waiting for a given commodity to actually get short of supply, futures enable producers and users to prepare for the future, which results in less dramatic price swings than we would otherwise see. This is illustrated in this article: CARPE DIEM: What Can Onions Teach Us About Oil Prices? which compares the price of onions (which don't have a futures market) to other commodities where futures trading is allowed.

 

And as other posters have pointed out the equity markets have a distinct purpose in helping raise and allocate capitol in the most efficient way possible.

 

It is true, though, that in our modern financial system, a great deal of the useful purpose of speculation has been replaced by various forms of rent-seeking, corruption, and manipulation by privileged parties. However the basic purpose of speculation is still a great benefit to society, because it allows people and markets to prepare for the future.

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thanks for the great article on Onions and Oil!

 

Imagine a market with only really big players... the price would be crazy volatile.

- only block trades between a Mutual Fund and a multinational corporation

- only big quantity trades of Oil between oil companies and airlines

- only annual purchases of a farming community's grain by a cereal company

 

The market needs players of all sizes, and derivatives, to smooth prices and be effective.

Speculators make life better for everyone.

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I think one of the best documentaries on Wall St is "The Alchemists Of Wall St' wherein one of the Quants stipulated that he thinks that the traders, the ones that take the real risk with their own money should be compensated some how for what they do. After all we are the grease that keeps the machine running. Without us we would be paying $20.00 for a box of Corn Flakes!

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A rallying cry for bankrupt governments around the world has been "blame the speculators." It's not the reckless borrowing and spending that have driven overleveraged countries to economic crisis… It's the rumor-mongering and collusion of short sellers – those evil capitalists who profit from other people's trouble.

 

Italian politicians, including Prime Minister Silvio Berlusconi's aide Paolo Bonaiuti, blamed their country's deteriorating market on "speculators." Bonaiuti said Italy would be united "in blocking the effort of speculators." Do you believe investors selling Italian shares short must reveal their positions when they reach 0.2% or more of a company's capital and make new filings for each additional 0.1%. The rule runs through September 9. Consob is also considering banning naked short selling.

 

MMS

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Nobody is going histerical with speculators in Italy ... yet.

 

Consob, the italian stock market watchdog, even acknowledged that most of the stock selling is genuine and is not short selling.

 

Politicians just do what most humans do, ie blame others.

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They should ban it - naked.

 

I do not know if you ever thought why the crisis even started...

 

First to blame is USA's banks greediness and Alan Greenspan in my opinion...

Second "man", and crucial, that put the plug in, are the OIL speculators...

This is very long theory (just my opinion), but I will explain it shortly.

 

1. Everything was ok. People bought houses for profit or they liked it.

-

2. Second, people started buying additional houses for profit ("they got loan for nothing")

-

3. During that time, Alan kept the interest rates very low!

-

4. Once the FED realized that the bubble is present, he/they made the biggest mistake they could ever make to stop the bubble and not that big inflation. Rising interest rates!

-

5. People instead of paying $1500 loan every month (making $4000/per family), they saw an invoice from the bank for $2000 and more! If someone bought house thinking that "will be ok with the payments", "somehow we will make it", then the extra $500+ is crucial.

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6. Oil went up from $40 to $140+, and instead of paying on gas station $100/month, they started seeing check for $300+.

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7. Inflation went up again because of the OIL. FED increased the interest rates to the critical point, and everything got f.....

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8. Crisis Done

-

FED/ALAN was the worst, and Speculators of the oil just increased the whole problem (inflation and interest rates), that could be easily straighten out by the market.

 

Where are the regulations for crucial products that the entire world needs - necessity?

 

Do you trade oil - ok - then please order future contracts - please pay half now, the rest later, and the oil will be delivered on the expiration date.

 

Or Make the margins high enough, to stop moving the market the way the BIG companies want.

 

Speculators are not good, if they have no interest in the product that they bet on; because for big companies it is very easy to set prices they want.

 

Do not agree? Isn't selling 1 mil of shares by specialist from wall street for the best price (they are getting commission if they sell higher) - not to driving the price lower?

 

If the free market/speculators very really moving the prices as it should be not keeping

others - small players thinking that everything is ok - a sick speculation?

Only when very bad news are coming, they have no chance to keep the price (almost),

otherwise they can sell 1 mil share in one day, and nobody will even know that - still

holding or buying that security. This is not a healthy speculation - this is fake,

that does nothing good to the economy, but makes the "people - economy" poor.

Because we pay for it later. In taxes or the stores - not the government or citi group that

took money from gov at 0% interest, and f... the whole business.

The top management still have millions in the pocket anyway...

 

Take care.

 

 

 

spy.png

SPY.png.32d550d017f0f9b2d430d0a1bd151aac.png

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1. Everything was ok.

 

Ha! That's what people always think until it's not! Always the way.

 

These things may have been the trigger, but like the Archduke Franz Ferdinand, they were also not the cause. I'll give you the mishandled interest rates, but oil prices weren't a decider. I'd also point the finger at the government and the public for speculation in housing. I mean, what did they think was going to happen if they said "just tell us what you earn but you don't have to prove it" to people who wanted a mortgage? So many dumb ass things that people were and are doing for short term gain. Dodgy government policies, global economic realignment and so many other things that go on all the time which for the most part people are unaware of until way after the fact. Most you'll never even hear of. Just one last point on the whole oil thing, if the whole move up was purely speculation, why are we now trading around $100 a barrel?

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Why we have 100?, because we have no regulations and too many big companies that hold the price. If the gov would say tomorrow that all contracts have to have 100% security (money on account that the contract is worth) then you would see the price 50, no more. We do not have problems with oil, and have it even more than we thought ( do not tell about cost of deeping)... This price is a fake that would change once we put real regulations in place: like real delivery of oil (this is where from the futures contracts came from - right)? So why we try to regulate market with money that we do not have - fake money = leverage). We all agree that the market regulate itself - yes, that is true, but not betting using fake money - laverage again.

 

Take care,

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