Speculators

A speculator is the current convenient scapegoat. I doubt that many of our politicians know what they mean by the term. I would assume they mean people who buys and sells future contracts. I guess our politicians don't have too much faith in our free market system.

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In the futures markets speculators normally do not take delivery, but speculators can well take delivery or deal in the cash market of any commodity. The Hunt brothers did this with silver in the late 1970's. In the stock and bond markets it is the norm for speculators to possess stocks and bonds.

Speculators are necessary for any normal price based market to function as they are key to providing liquidity. To see what a market is like without active speculators just look at some of the illiquid pink sheets stocks where the bid/offer spreads are wide enough to drive an tandem 18 wheeler through sideways and a stock may not trade for weeks.

Speculators make a ripe target for people who don't know better and don't want to do the mental work to understand supply/demand and fear/greed in the marketplace. Note that there are plenty of speculators who lose money. In particular, in the futures makets it is a distinct minority of speculators that make significant profits and the vast majority are losers.

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On Jul 14, 7:02 pm, "catalpa" wrote: [snip]

Yes, much of what you say is standardly accepted. But is it not true that in today's hedge-fund world:

a) the speculators (hedge funds, investment bankers, bankers, etc.) over-leveraged in unprecedented amounts b) with financial instruments not available to individuals (many "derivatives" contracts are custom-made) c) used money other than their own, garnering obscene fees for themselves d) then when trades went against them, expect the rest of the world to bail them out e) and created unprecedented chaos across many financial markets?

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