what do you think the short and long term effects would be if we just banned futures trading all together? if speculation is what drives up the price of oil and other commodities artificialy,... then why not ban it and force investors to put thier money into real product.
The same thing crossed my mind during the GFC. By all means, let genuine buyers place advance orders with conditions, or resell surplus stock before they take delivery. I'm sure that's how the futures market started.
I'm sure abolishing the futures market wouldn't stop the speculators doing deals with those genuine buyers in an attempt to make a quick buck. But the existence of futures exchanges makes it easy for them to do so, and puts a stamp of respectability on it.
All share trading is gambling, but you are dealing in actual shares in actual companies. Futures and derivatives are gambling in its purest form.
the reason that the flipping that knolyourself speeks of can ocour soo easily is that only a small fraction of the actual price is needed to secure the purchase of futures,... in some cases as little as 5% of the total market price at that moment,...
you dont need a lot of money to make or loose money,... if you had to fork over the full sum, .... that would be game changer
Its not the speculation itself, by people who actually buy commodities. Its the huge banks, hedge funds and the like who never take control but merely flip it for profit.
Perfect,You want to buy 100,000 barrels of oil? When will you be picking it up?
point taken,... however,... i can arange the purchase of 100 head of cattle three states away and make arangements for them to be picked up in 60 days, all the while taking into account the maintenance fee for them,.... oil does not need to be fed or watered,... so i would assume, (assumption being the mother of all,.. well) that i should be able to actualy purchase said oil while not phisicaly driving up in my 3/4 ton truck with a holding tank in the back,.... yes?
To be honest I have no idea what the answer is.The one thing I do know is that the current system is destroying the little guy that goes to work every day at their job but does not have either the smarts or the money to get in the market. The 5% factor you spoke of is also true,I just used the oil as an example,I read that a barrel of oil was on average traded 27 times during the run up in 2008. This is my opinion :The funds that run up commodities are not adding or creating wealth but rather siphoning it off from the people that can least afford it, only lining their own pockets. A 30 something ounce can of Maxwell House coffee was $14 at the grocery store yesterday when it was about $9.00 2 months ago,while gasoline (cheap for us)compared to the rest of the world,gas has gone up $1.50 in about 12 months. I listen to news radio during my commute and they use every BS reason under the sun to try and explain gas price increases. Uncle Ben flooding the world with near worthless dollars isn't helping matters one bit either.
You assume that the costs for obtaining oil storing oil and shipping oil not to mention refining oil are fixed and unaffected by geo political factors currency valuation differences and inflation. Don't forget that there are legitimate "speculators" in the markets with an interest in controlling the cost of commodities like oil such as airlines. Let's not forget that "speculators" are also partially responsible for driving prices down at times except then nobody complains.
no disprespect, but honest curiosity,.... demonstrate for me an instance in which speculation drove down the costof something?,....
i can understand that purchasing surplus of corn and selling it the next lean season would help the over all price durring the lean season stay somewhat lower,... but the average speculator these days is only interested in making money, not preserving a market,... he/she will sit on thier comodity untill the price is high and sell at the inflated shortage price,... you and i both know it.
the last speculator that did things such as this for the comon good was joseph
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