Shane Mage wrote: > How illiterate can an "expert" get? Who does he think is on the other side > of > every speculative transaction except another "oil speculator?"
Can't a speculator trade with a hedger? or with someone else? As I understand it, a "hedger" buys an asset in order diversify, to minimize risk. On the other hand, a "speculator" buys an asset in order to take a risk, in hopes of making a big profit. In non-bubble situations, the hedger is paying the speculator to take some of the risk. Of course, other people assign other meanings to these words. > How can the > gains of one set of speculators not be exactly (excluding transaction costs > profiting only intermediaries) offset by the losses of the other set of > speculators? isn't the usual story not about the net profits made by an aggregate of folks in the market (i.e., profits of speculators - losses of other folks)? Isn't instead about how the first group (the speculators) make a big profit _and_ that drives up the price of the commodity in question (until the bubble bursts)? Consider a simple case. Mr. S buys a few thousand barrels of oil in 2009 and holds it in his reservoirs, selling it at the start of 2010. If there's enough of this activity going on, the price rises in 2009 (especially given the low price elasticity of both supply and demand). If he's lucky to sell at the peak, S makes a profit. The refiner buys the oil at the start of 2010, paying the high price (assuming S to be lucky). The customers pay the high price, allowing S to make a profit. In this story, S makes a profit by speculation -- and consumers pay for those profits. (Of course, a lot of speculation does not pay off.) What's wrong with this story? > Why are speculators always blamed for rising prices but seldom > if ever blamed for falling prices? don't "short sellers" sometimes get blamed precisely for this phenomenon in financial markets? I understand that, generally speaking, short sellers have a bad reputation (perhaps undeserved) in the financial community, precisely for driving down financial prices. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
