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On November 26 2011 00:05 TanGeng wrote:Biff, it has never been a conversation. It has always been to show how full of shit you are, and that you have no credibility in this arena of discussion. You can talk all you want, but nobody should listen. Points of gross ignorance in the premise: Show nested quote +On November 25 2011 18:40 Biff The Understudy wrote:
My cousin buy, for example, sugar. He waits that the rate goes up, and sells. Right? So by buying this sugar, he has artificially created a demand that didn't exist (what happens when he sells - a creation of supply? then where is a profit?). He exploits AND creates artificially the rise of prices, that won't benefit the producer.
Moving money doesn't create value. Speculation is just a clever way to steal money from the real economy: the money he does for his bank comes from the consumer pocket, and doesn't have any positive impact for the producer. (what happens when he outbid everyone else to buy?)
These are simple, simple logic inconsistencies that are not thought out. In Biff's own words, if you had a brain, you'd see them.
I'm sorry to tell you man, but insulting the one you are discussing with is not the best way to prove you are right.
Even if Biff's way of sayings is not the best, his argument is perfectly clear : speculating does not produce value.
And if you think he is wrong, then good for you, but in economy nobody is clear on the subject : the simple use of input or factor mean that you have a different approach on this very subject.
I have seen very good posts from you on TL, but this time you're seriously overreacting.
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Sanya12364 Posts
On November 26 2011 22:21 radiatoren wrote:
Thanks for the clarification. I agree with your analysis here.
Just to be clear: When all comes to all, the problems you are mentioning are related to the NRSROs (credit rating agencies) who are private companies. The ratings are given by NRSRO's who have a permit by the government-agency called SEC.
If SEC has the right tools or another kind of regulation should be imposed is thus a very valid discussion, but in a I/O-regulated market like this it is the permitted NRSROs who are at fault, and not the government regulations!
I mentioned AAA ratings out of recognition rather than accuracy. I personally think they are obsolete.
The credit default swap market gives a much quicker signal of credit worthiness and often the NRSRO rating upgrades and downgrades will lag the CDS market. The general market still respond to rating agency changes because certain organizations (mutual funds, pension plans, etc still have rules to respond to the slow reacting ratings of NRSROs rather than CDSs). In theory, the financial markets could dispense with the ratings agencies and base itself purely on CDS pricing.
Ironically, CDS make up a large part of the speculative financial market that is "much bigger" than the economy itself, and the CDSs was a trigger of crisis because certain organizations (AIG et al) had inordinate downside exposure. It's quite the double-edged sword.
The US regulatory regime is a mass of SROs that the SEC oversees. FINRA, credit agencies, FASB, etc. are all influenced to degrees by the SEC. The SEC itself does little directly. It mostly acts by proxy. They are all part of the government sponsored regulatory regime as created by the Securities Act of 1933 as amended. It'd be difficult to assess the effectiveness of the regulatory structure and regime without examining it in totality.
One point of control would be at the registration and securitization of the structured debt instruments. It might be possible to create a different category for financial novelties and include greater transparency into the underlying structure. A second point of control would be in accounting practices, but it would be unclear how to proceed unless the financial novelties were identified at securitization. None of the options are all that great.
FINRA and the SEC are ill-suited organizations to regulate synthetic debt packages. They suffer the usually struggles of regulatory agencies with innovation. The novelty either disrupts the usually process or require matching innovation in effective regulatory oversight. They are not responsive to investor demands and susceptible to political pressure from above via lobbyist of federal government and from below from securitizers that have clout at the SROs. Again, not an unusual flaw for federal regulatory regimes.
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On November 27 2011 05:24 TanGeng wrote:Show nested quote +On November 26 2011 22:21 radiatoren wrote:
Thanks for the clarification. I agree with your analysis here.
Just to be clear: When all comes to all, the problems you are mentioning are related to the NRSROs (credit rating agencies) who are private companies. The ratings are given by NRSRO's who have a permit by the government-agency called SEC.
If SEC has the right tools or another kind of regulation should be imposed is thus a very valid discussion, but in a I/O-regulated market like this it is the permitted NRSROs who are at fault, and not the government regulations! I mentioned AAA ratings out of recognition rather than accuracy. I personally think they are obsolete. The credit default swap market gives a much quicker signal of credit worthiness and often the NRSRO rating upgrades and downgrades will lag the CDS market. The general market still respond to rating agency changes because certain organizations (mutual funds, pension plans, etc still have rules to respond to the slow reacting ratings of NRSROs rather than CDSs). In theory, the financial markets could dispense with the ratings agencies and base itself purely on CDS pricing. Ironically, CDS make up a large part of the speculative financial market that is "much bigger" than the economy itself, and the CDSs was a trigger of crisis because certain organizations (AIG et al) had inordinate downside exposure. It's quite the double-edged sword. The US regulatory regime is a mass of SROs that the SEC oversees. FINRA, credit agencies, FASB, etc. are all influenced to degrees by the SEC. The SEC itself does little directly. It mostly acts by proxy. They are all part of the government sponsored regulatory regime as created by the Securities Act of 1933 as amended. It'd be difficult to assess the effectiveness of the regulatory structure and regime without examining it in totality. One point of control would be at the registration and securitization of the structured debt instruments. It might be possible to create a different category for financial novelties and include greater transparency into the underlying structure. A second point of control would be in accounting practices, but it would be unclear how to proceed unless the financial novelties were identified at securitization. None of the options are all that great. FINRA and the SEC are ill-suited organizations to regulate synthetic debt packages. They suffer the usually struggles of regulatory agencies with innovation. The novelty either disrupts the usually process or require matching innovation in effective regulatory oversight. They are not responsive to investor demands and susceptible to political pressure from above via lobbyist of federal government and from below from securitizers that have clout at the SROs. Again, not an unusual flaw for federal regulatory regimes.
Now we are getting somewhere!
CDS has indeed destabilizing properties and are probably one of the biggest problems in the Wall Street market. Who is at fault and why are very complex problems and relates to a lot of different parties.
- The companies making the CDS's are obviously a large part of the problem.
- The NRSROs have been completely lacking actually setting a reliable rating.
- The traders on Wall Street are at blame for not actually caring about, what they are trading.
- The SEC could be blamed for allowing the NRSROs to effectively rate the market.
- Wall Street in itself is responsible for actually allowing those kinds of products onto the market in the first place.
- The Government for not being cautios enough about unwanted effects of their changes in regulation.
- Many others are probably at fault too at some level. I however am not sure who based on my limited knowledge.
A lot of different reasons can be given for why those parties are not at as much fault as the others. Some of them might even have solid alibies. My point is, that a broad blame will always fall back on the government if there can be any doubt about it and in this case most will argue that the companies and the government both have a large stock in the problems.
Now your proposed solutions - barring an obscure implementation - are strictly direct regulation of the market and would be frowned upon by many free market proponents. A powerless regulatory agency is by no means loved in the market, but it is a lot more elastic than direct regulation and therefore a better choice from a free market stand-point. The ultimate free market dream is a completely free market, with the ups and downs it will give, but there are many reasons why that would be completely unrealistic for the government since they will take the fall for each naturally occuring recession and they would have to be involved somehow anyway because of monetary issues i.e. the national bank/Fort Knox. The compromise is easy, but maybe it is even the worst of these three choises.
I am of the opinion that it is possible to find a lot better options than the three mentioned above but all of those are somewhere between direct regulation and the elastic goverment agencies. Turbin taxation, a demand of a certain value behind what the bond is issuing as a requirement for Wall Street, a vigillant government agency with authority to summit the companies directly and right to sanction hard on anyone breaking the law and many more I could not think of in a short moment. The point is that most of these solutions will be harder to swallow for Wall Street and the free marketeers.
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Sanya12364 Posts
On November 27 2011 08:42 radiatoren wrote:
Now we are getting somewhere!
CDS has indeed destabilizing properties and are probably one of the biggest problems in the Wall Street market. Who is at fault and why are very complex problems and relates to a lot of different parties.
I wouldn't characterize the CDS market as a destabilizing force. The market destabilized because the market severely mis-priced default risk, and a few financial houses were exposed to too much of it. The CDS is quite an interesting invention because it prices default risk and functions just like a rating agency does except its signal is much faster. The problem is a combination of over exposure and the mis-pricing of risk. The mis-pricing of risk is in CDO / structured debt / synthetic debt. CDSs covering traditional debt instruments are working well.
Your list of culpables:
Over exposure:
- The companies making the CDS's are obviously a large part of the problem.
>>> Leveraged CDS issuances is part of the over exposure problem.
Mispriced risk:
- The NRSROs have been completely lacking actually setting a reliable rating.
>>> NRSROs didn't understand CDO / structured debt / synthetic debt risks.
- The traders on Wall Street are at blame for not actually caring about, what they are trading.
>>> Traders care very much about what they are trading. Every little bit of information can mean the difference between profit or loss.
- The SEC could be blamed for allowing the NRSROs to effectively rate the market.
>>> Limited number of NRSROs is a concern, but it's not central to the collapse. NRSROs and the market were largely in agreement on the risks of CDO / structured debt / synthetic debt until the collapse started to happen.
Burden of losses:
- Wall Street in itself is responsible for actually allowing those kinds of products onto the market in the first place.
>>> Firms of Wall Street are responsible for their own mistakes.
Regulatory design:
- The Government for not being cautious enough about unwanted effects of their changes in regulation.
>>> The regulatory control can be restrictive or it can be relaxed. The quality of regulation is in being restrictive when needed and relaxed when allowable. Relaxed control when regulations should be strict will lead to abusive behavior. Restrictive control when regulations can be relaxed will stifle innovation or unnecessarily burden companies in the industry.
As for the rest, I'm not in agreement. Good regulatory control is strict when it needs to be and lax when it can be. This allows situations where someone can argue for both more regulatory control and less regulatory control at the same time. The market likes good regulatory controls. It inspires confidence of quality when that is required and allows innovation when that appears.
P.S. Wall Street and free marketeers are hardly the same group of people. I don't know if you were meaning to equate them.
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"The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity." -Abraham Lincoln
"Issue of currency should be lodged with the government and be protected from domination by Wall Street. We are opposed to…provisions [which] would place our currency and credit system in private hands." – Theodore Roosevelt
The Money Masters: A Non-Fiction Documentary on the History and Manipulation of Money
The Money Masters Website
I'm very surprised nobody has linked this documentary or its creators yet. This is by far and wide the most widely-distributed and well-backed proposal for world-wide monetary reform. Its been shown in its entirety on networks like PBS for years and been discussed in depth on radio networks like NPR. I plead with anyone wishing for a solution to the The Great Recession to spread this documentary and educate above all else. Its not conspiracy-theories, its not fiction. This is completely real. Share. Spread. End the Fed.
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Thats the worst post this thread has seen in a while. Industrialization has been about lowering the amount of workers in favor of higher productivity and more efficiency. Now instead of dangerous hard labor factory lines you have mechanics and engineers working at high paying jobs with no real risk and thus much higher working conditions and quality of life.
If you want to go back to the stone age for a "working economic system" then your as bad as fox makes ows out to be.
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On November 29 2011 14:13 sermokala wrote:
Thats the worst post this thread has seen in a while. Industrialization has been about lowering the amount of workers in favor of higher productivity and more efficiency. Now instead of dangerous hard labor factory lines you have mechanics and engineers working at high paying jobs with no real risk and thus much higher working conditions and quality of life.
If you want to go back to the stone age for a "working economic system" then your as bad as fox makes ows out to be.
No i do not want to go back to the stone age, completely the opposite. the problems is how smooth or painful humans can make the transition period. I mean a transition to a new type of economy much like ones proposed bye "the zeitgeist movement".
my thread said nothing if this is bad or good, you made the assumption. so don't be ows FOX NEWS blah blah on me.
this news to me means we need to be ready to transition to a new type of economy.
lol people here walk around with a stick stuck up there butt i'm done posting.
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Russian Federation4447 Posts
bah rather stay out of this thread.
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So for those of you who didn't know, Citibank reached an agreement with the SEC to pay a $285 million fine for misleading investors in one of their mortgage-backed securities. Citibank shorted these securities themselves and pocketed a cool $160 million, while the investors lost somewhere in the range of $700 million.
A New York District judge has thrown out this settlement, calling it not just a betrayal of the public interest, but the product of an approach “hallowed by history but not by reason”.
It seems the judiciary is getting fed up with the SEC not doing its due diligence:
The nature of this settlement, and other similar cases, leave little information divulged, even to the judge. Without those details, Rakoff wrote that he had little basis to decide if the settlement was fair. The judge questioned why the settlement was so modest, why there was so little evidence for the charges, and why the SEC decided on lesser charges despite allegations of fraud: “The SEC, for reasons of its own, chose to charge Citigroup only with negligence.”
“An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous,” Rakoff wrote. “The injunctive power of the judiciary is not a free roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts - cold, hard, solid facts, established either by admissions or by trials - it serves no lawful or moral purpose and is simply an engine of oppression.”
Rakoff and other federal judges have opposed settlements for alleged wrongdoing at major banks. In 2007, U.S. District Judge Ellen S. Huvelle of the District of Columbia refused to approve a $75 million settlement between Citigroup and the SEC, writing, “You expect the court to rubber-stamp, but we can’t,” according to the Wall Street Journal. And in 2009, Judge Rakoff rejected a $33 million settlement with Bank of America (it was approved a year later, for $150 million). At that time, Rakoff said that the final result was “half-baked justice at best,” according to the New York Times.
Now I'm sure (?) the SEC would love to launch full-blown criminal charges against ne'er-do-wells in the banking world (ie fraud instead of negligence), but of course something like that would take manpower, years and millions of dollars. And it's not like there are only a few cases of this happening.
Coffee noted that [Judge] Rakoff had taken it a step further by saying a settlement without admitting or denying guilt is viewed as “a cost of doing business” by companies that deal with the SEC.
What's the solution here? The SEC seems pretty incapable of doing what it was designed to do, as shown by the above and Bernie Madoff and etc. etc., but who is?
I'm reminded of what my industrial organization teacher once told me: If one company does it, it's illegal. If every company does it, it's an industry standard.
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On November 29 2011 14:13 sermokala wrote:
Thats the worst post this thread has seen in a while. Industrialization has been about lowering the amount of workers in favor of higher productivity and more efficiency. Now instead of dangerous hard labor factory lines you have mechanics and engineers working at high paying jobs with no real risk and thus much higher working conditions and quality of life.
If you want to go back to the stone age for a "working economic system" then your as bad as fox makes ows out to be.
"You are about to become obsolete. You think you are special, unique, and that whatever it is that you are doing is impossible to replace. You are wrong. As we speak, millions of algorithms created by computer scientists are frantically running on servers all over the world, with one sole purpose: do whatever you used to do, but better."
http://www.kickstarter.com/projects/federicopistono/robots-will-steal-your-job-but-thats-ok
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Nobody finds it disturbing that Police are now telling Media/Journalists they cannot cover the raid on protesters or they will face arrest?
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On December 01 2011 04:15 {CC}StealthBlue wrote:
Nobody finds it disturbing that Police are now telling Media/Journalists they cannot cover the raid on protesters or they will face arrest?
It's disturbing but hardly a new development. Cops really seem to dislike cameras being pointed at them.
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On November 27 2011 01:17 WhiteDog wrote:Show nested quote +On November 26 2011 00:05 TanGeng wrote:Biff, it has never been a conversation. It has always been to show how full of shit you are, and that you have no credibility in this arena of discussion. You can talk all you want, but nobody should listen. Points of gross ignorance in the premise: On November 25 2011 18:40 Biff The Understudy wrote:
My cousin buy, for example, sugar. He waits that the rate goes up, and sells. Right? So by buying this sugar, he has artificially created a demand that didn't exist (what happens when he sells - a creation of supply? then where is a profit?). He exploits AND creates artificially the rise of prices, that won't benefit the producer.
Moving money doesn't create value. Speculation is just a clever way to steal money from the real economy: the money he does for his bank comes from the consumer pocket, and doesn't have any positive impact for the producer. (what happens when he outbid everyone else to buy?)
These are simple, simple logic inconsistencies that are not thought out. In Biff's own words, if you had a brain, you'd see them. I'm sorry to tell you man, but insulting the one you are discussing with is not the best way to prove you are right. Even if Biff's way of sayings is not the best, his argument is perfectly clear : speculating does not produce value. And if you think he is wrong, then good for you, but in economy nobody is clear on the subject : the simple use of input or factor mean that you have a different approach on this very subject. I have seen very good posts from you on TL, but this time you're seriously overreacting.
While speculation doesn't create value it does help regulate the prices.
By speculating you're basically trading information for money. You're using the insight that you think you have about how much something is worth to either create the demand or supply that will result in the price of that good to stabilize at the price you think is right... this is IF you actually have accurate information. People that try to speculate, but are wrong lose money.
In the end it doesn't drain money from the market that produces stuff, it only drains money from others that are trying to speculate and are wrong. On average the producers who buy goods based on their own demand will have a zero net benefit/loss as a result of speculators.
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On December 01 2011 08:20 Kiarip wrote:Show nested quote +On November 27 2011 01:17 WhiteDog wrote:On November 26 2011 00:05 TanGeng wrote:Biff, it has never been a conversation. It has always been to show how full of shit you are, and that you have no credibility in this arena of discussion. You can talk all you want, but nobody should listen. Points of gross ignorance in the premise: On November 25 2011 18:40 Biff The Understudy wrote:
My cousin buy, for example, sugar. He waits that the rate goes up, and sells. Right? So by buying this sugar, he has artificially created a demand that didn't exist (what happens when he sells - a creation of supply? then where is a profit?). He exploits AND creates artificially the rise of prices, that won't benefit the producer.
Moving money doesn't create value. Speculation is just a clever way to steal money from the real economy: the money he does for his bank comes from the consumer pocket, and doesn't have any positive impact for the producer. (what happens when he outbid everyone else to buy?)
These are simple, simple logic inconsistencies that are not thought out. In Biff's own words, if you had a brain, you'd see them. I'm sorry to tell you man, but insulting the one you are discussing with is not the best way to prove you are right. Even if Biff's way of sayings is not the best, his argument is perfectly clear : speculating does not produce value. And if you think he is wrong, then good for you, but in economy nobody is clear on the subject : the simple use of input or factor mean that you have a different approach on this very subject. I have seen very good posts from you on TL, but this time you're seriously overreacting. While speculation doesn't create value it does help regulate the prices. By speculating you're basically trading information for money. You're using the insight that you think you have about how much something is worth to either create the demand or supply that will result in the price of that good to stabilize at the price you think is right... this is IF you actually have accurate information. People that try to speculate, but are wrong lose money. In the end it doesn't drain money from the market that produces stuff, it only drains money from others that are trying to speculate and are wrong. On average the producers who buy goods based on their own demand will have a zero net benefit/loss as a result of speculators.
Your assumptions have to be:
1. The share of stocks owned by speculators are insignificant compared to the total. (Or else speculators will have the ability to influence the company directly, which is against everything you represent speculation to be.)
2. You are buying enough stocks to truely set the price and other speculators have the same priorities as you on your specific shares. (Most likely true in most cases.)
Now if those assumptions are met you are creating what is called bubbles. Bubbles are generally seen as bad for the economy since the bursts can totally cripple a company or even a branch who have expanded as a result of the stock-price, thus actually cripple the market and the speculators are in that case draining money from them! Another thing is the price of acquiring a company will be severely effected by the stock-price, thus the speculations will have significant net benifit/loss on sale of companies.
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On December 01 2011 17:31 radiatoren wrote:Show nested quote +On December 01 2011 08:20 Kiarip wrote:On November 27 2011 01:17 WhiteDog wrote:On November 26 2011 00:05 TanGeng wrote:Biff, it has never been a conversation. It has always been to show how full of shit you are, and that you have no credibility in this arena of discussion. You can talk all you want, but nobody should listen. Points of gross ignorance in the premise: On November 25 2011 18:40 Biff The Understudy wrote:
My cousin buy, for example, sugar. He waits that the rate goes up, and sells. Right? So by buying this sugar, he has artificially created a demand that didn't exist (what happens when he sells - a creation of supply? then where is a profit?). He exploits AND creates artificially the rise of prices, that won't benefit the producer.
Moving money doesn't create value. Speculation is just a clever way to steal money from the real economy: the money he does for his bank comes from the consumer pocket, and doesn't have any positive impact for the producer. (what happens when he outbid everyone else to buy?)
These are simple, simple logic inconsistencies that are not thought out. In Biff's own words, if you had a brain, you'd see them. I'm sorry to tell you man, but insulting the one you are discussing with is not the best way to prove you are right. Even if Biff's way of sayings is not the best, his argument is perfectly clear : speculating does not produce value. And if you think he is wrong, then good for you, but in economy nobody is clear on the subject : the simple use of input or factor mean that you have a different approach on this very subject. I have seen very good posts from you on TL, but this time you're seriously overreacting. While speculation doesn't create value it does help regulate the prices. By speculating you're basically trading information for money. You're using the insight that you think you have about how much something is worth to either create the demand or supply that will result in the price of that good to stabilize at the price you think is right... this is IF you actually have accurate information. People that try to speculate, but are wrong lose money. In the end it doesn't drain money from the market that produces stuff, it only drains money from others that are trying to speculate and are wrong. On average the producers who buy goods based on their own demand will have a zero net benefit/loss as a result of speculators. Your assumptions have to be: 1. The share of stocks owned by speculators are insignificant compared to the total. (Or else speculators will have the ability to influence the company directly, which is against everything you represent speculation to be.)
Buying stocks isn't speculation it's investing or trading. Speculation is when you buy goods, products, or raw materials.
Maybe you're talking about short term traders? Even so, if short term traders own significant shares of the stocks, then they are DEFINITELY not taking money out of the market... The only people that can lose money through investing or speculating are people have put their money into the market, if short term traders own the majority of stocks, then the majority of losses is also borne by the traders... What you're saying just doesn't make sense.
2. You are buying enough stocks to truely set the price and other speculators have the same priorities as you on your specific shares. (Most likely true in most cases.)
What? I think we're working under the assumption that short term trading can move the market, otherwise we wouldn't be having this conversation. The real question is, who is it moving the market against? And the answer is against other short term traders. Will some real investors be hurt by short term collateral damage? Sure, but will others often-times benefit from it? yes. Only careless investors suffer serious losses from short-term trading.
Short term traders also aren't trying to set the price to anything, they are simply trading their information for marginal profit, and if they were wrong they suffer marginal losses. The market generally only moves as a compounded result of many short-term traders, not a few, so to say that one trader can move the market is absurd.
Now if those assumptions are met you are creating what is called bubbles.
No you're not... Bubbles are pretty much always a result of existence of easy credit in an attempt to get a good beat on inflation. Trading doesn't create bubbles, they simply cause some volatility, and there's a difference because a bubble generally implies mal-investments occurring, but when you're talking about trading, we're not talking about any investments occurring in the first place, because a trade isn't an investment.
Bubbles are generally seen as bad for the economy since the bursts can totally cripple a company or even a branch who have expanded as a result of the stock-price, thus actually cripple the market and the speculators are in that case draining money from them!
Once again, it's traders and not speculators, and they don't cause bubbles they only cause volatility. Most of traders' revenue comes from other traders losing money, and some from poor investments, and when you're making a long-term investment short-term volatility can lose you some money, but it can also help depending on your timing.
Another thing is the price of acquiring a company will be severely effected by the stock-price, thus the speculations will have significant net benifit/loss on sale of companies.
Net price is severely effected by stock-price only in the long run, when you're trying to buy a company, you don't just go to your trader and say " I want to buy 51% of all of this company's stocks," because no corporation is traded in sufficiently high volume for that, you go to the people that actually have these stocks, and you negotiate a price with them, so if the stock has been rising, or has been at a high in the long-term, then yeah they have more bargaining power, but day to day volatility doesn't give them any bargaining power.
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On December 01 2011 19:05 Kiarip wrote:Show nested quote +On December 01 2011 17:31 radiatoren wrote:On December 01 2011 08:20 Kiarip wrote:On November 27 2011 01:17 WhiteDog wrote:On November 26 2011 00:05 TanGeng wrote:Biff, it has never been a conversation. It has always been to show how full of shit you are, and that you have no credibility in this arena of discussion. You can talk all you want, but nobody should listen. Points of gross ignorance in the premise: On November 25 2011 18:40 Biff The Understudy wrote:
My cousin buy, for example, sugar. He waits that the rate goes up, and sells. Right? So by buying this sugar, he has artificially created a demand that didn't exist (what happens when he sells - a creation of supply? then where is a profit?). He exploits AND creates artificially the rise of prices, that won't benefit the producer.
Moving money doesn't create value. Speculation is just a clever way to steal money from the real economy: the money he does for his bank comes from the consumer pocket, and doesn't have any positive impact for the producer. (what happens when he outbid everyone else to buy?)
These are simple, simple logic inconsistencies that are not thought out. In Biff's own words, if you had a brain, you'd see them. I'm sorry to tell you man, but insulting the one you are discussing with is not the best way to prove you are right. Even if Biff's way of sayings is not the best, his argument is perfectly clear : speculating does not produce value. And if you think he is wrong, then good for you, but in economy nobody is clear on the subject : the simple use of input or factor mean that you have a different approach on this very subject. I have seen very good posts from you on TL, but this time you're seriously overreacting. While speculation doesn't create value it does help regulate the prices. By speculating you're basically trading information for money. You're using the insight that you think you have about how much something is worth to either create the demand or supply that will result in the price of that good to stabilize at the price you think is right... this is IF you actually have accurate information. People that try to speculate, but are wrong lose money. In the end it doesn't drain money from the market that produces stuff, it only drains money from others that are trying to speculate and are wrong. On average the producers who buy goods based on their own demand will have a zero net benefit/loss as a result of speculators. Your assumptions have to be: 1. The share of stocks owned by speculators are insignificant compared to the total. (Or else speculators will have the ability to influence the company directly, which is against everything you represent speculation to be.) Buying stocks isn't speculation it's investing or trading. Speculation is when you buy goods, products, or raw materials. Maybe you're talking about short term traders? Even so, if short term traders own significant shares of the stocks, then they are DEFINITELY not taking money out of the market... The only people that can lose money through investing or speculating are people have put their money into the market, if short term traders own the majority of stocks, then the majority of losses is also borne by the traders... What you're saying just doesn't make sense. Show nested quote +
2. You are buying enough stocks to truely set the price and other speculators have the same priorities as you on your specific shares. (Most likely true in most cases.)
What? I think we're working under the assumption that short term trading can move the market, otherwise we wouldn't be having this conversation. The real question is, who is it moving the market against? And the answer is against other short term traders. Will some real investors be hurt by short term collateral damage? Sure, but will others often-times benefit from it? yes. Only careless investors suffer serious losses from short-term trading. Short term traders also aren't trying to set the price to anything, they are simply trading their information for marginal profit, and if they were wrong they suffer marginal losses. The market generally only moves as a compounded result of many short-term traders, not a few, so to say that one trader can move the market is absurd. No you're not... Bubbles are pretty much always a result of existence of easy credit in an attempt to get a good beat on inflation. Trading doesn't create bubbles, they simply cause some volatility, and there's a difference because a bubble generally implies mal-investments occurring, but when you're talking about trading, we're not talking about any investments occurring in the first place, because a trade isn't an investment. Show nested quote +
Bubbles are generally seen as bad for the economy since the bursts can totally cripple a company or even a branch who have expanded as a result of the stock-price, thus actually cripple the market and the speculators are in that case draining money from them!
Once again, it's traders and not speculators, and they don't cause bubbles they only cause volatility. Most of traders' revenue comes from other traders losing money, and some from poor investments, and when you're making a long-term investment short-term volatility can lose you some money, but it can also help depending on your timing. Show nested quote +
Another thing is the price of acquiring a company will be severely effected by the stock-price, thus the speculations will have significant net benifit/loss on sale of companies.
Net price is severely effected by stock-price only in the long run, when you're trying to buy a company, you don't just go to your trader and say " I want to buy 51% of all of this company's stocks," because no corporation is traded in sufficiently high volume for that, you go to the people that actually have these stocks, and you negotiate a price with them, so if the stock has been rising, or has been at a high in the long-term, then yeah they have more bargaining power, but day to day volatility doesn't give them any bargaining power.
Sorry, short term traders are called speculaters sometimes.
Most money on the stock exchange has been made due to increased investment in the last decades: More money in the market means less chance of loosing money for any type of investment which attracts more money in good times. In less good times the markets will start to see a stagnation and more short term trading since that is where people think the money can be made. Yes it increases losses significantly and also causes volatility and makes it very hard to gauge the real value of a stock... It is affecting the value of the 51 % of the stocks, call it bargaining power or whatever. Bubbles are not only created because of easy credit, but is a result of some psychological phenomena. Admittedly not as much directly because of short term trading, but trading with the wish of stable economic gains without involvement.
Speculation in commodities are a lot more subtle and I think I remember that economists are pretty uncertain of the effects.
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On December 01 2011 20:03 radiatoren wrote:Show nested quote +On December 01 2011 19:05 Kiarip wrote:On December 01 2011 17:31 radiatoren wrote:On December 01 2011 08:20 Kiarip wrote:On November 27 2011 01:17 WhiteDog wrote:On November 26 2011 00:05 TanGeng wrote:Biff, it has never been a conversation. It has always been to show how full of shit you are, and that you have no credibility in this arena of discussion. You can talk all you want, but nobody should listen. Points of gross ignorance in the premise: On November 25 2011 18:40 Biff The Understudy wrote:
My cousin buy, for example, sugar. He waits that the rate goes up, and sells. Right? So by buying this sugar, he has artificially created a demand that didn't exist (what happens when he sells - a creation of supply? then where is a profit?). He exploits AND creates artificially the rise of prices, that won't benefit the producer.
Moving money doesn't create value. Speculation is just a clever way to steal money from the real economy: the money he does for his bank comes from the consumer pocket, and doesn't have any positive impact for the producer. (what happens when he outbid everyone else to buy?)
These are simple, simple logic inconsistencies that are not thought out. In Biff's own words, if you had a brain, you'd see them. I'm sorry to tell you man, but insulting the one you are discussing with is not the best way to prove you are right. Even if Biff's way of sayings is not the best, his argument is perfectly clear : speculating does not produce value. And if you think he is wrong, then good for you, but in economy nobody is clear on the subject : the simple use of input or factor mean that you have a different approach on this very subject. I have seen very good posts from you on TL, but this time you're seriously overreacting. While speculation doesn't create value it does help regulate the prices. By speculating you're basically trading information for money. You're using the insight that you think you have about how much something is worth to either create the demand or supply that will result in the price of that good to stabilize at the price you think is right... this is IF you actually have accurate information. People that try to speculate, but are wrong lose money. In the end it doesn't drain money from the market that produces stuff, it only drains money from others that are trying to speculate and are wrong. On average the producers who buy goods based on their own demand will have a zero net benefit/loss as a result of speculators. Your assumptions have to be: 1. The share of stocks owned by speculators are insignificant compared to the total. (Or else speculators will have the ability to influence the company directly, which is against everything you represent speculation to be.) Buying stocks isn't speculation it's investing or trading. Speculation is when you buy goods, products, or raw materials. Maybe you're talking about short term traders? Even so, if short term traders own significant shares of the stocks, then they are DEFINITELY not taking money out of the market... The only people that can lose money through investing or speculating are people have put their money into the market, if short term traders own the majority of stocks, then the majority of losses is also borne by the traders... What you're saying just doesn't make sense.
2. You are buying enough stocks to truely set the price and other speculators have the same priorities as you on your specific shares. (Most likely true in most cases.)
What? I think we're working under the assumption that short term trading can move the market, otherwise we wouldn't be having this conversation. The real question is, who is it moving the market against? And the answer is against other short term traders. Will some real investors be hurt by short term collateral damage? Sure, but will others often-times benefit from it? yes. Only careless investors suffer serious losses from short-term trading. Short term traders also aren't trying to set the price to anything, they are simply trading their information for marginal profit, and if they were wrong they suffer marginal losses. The market generally only moves as a compounded result of many short-term traders, not a few, so to say that one trader can move the market is absurd.
Now if those assumptions are met you are creating what is called bubbles.
No you're not... Bubbles are pretty much always a result of existence of easy credit in an attempt to get a good beat on inflation. Trading doesn't create bubbles, they simply cause some volatility, and there's a difference because a bubble generally implies mal-investments occurring, but when you're talking about trading, we're not talking about any investments occurring in the first place, because a trade isn't an investment.
Bubbles are generally seen as bad for the economy since the bursts can totally cripple a company or even a branch who have expanded as a result of the stock-price, thus actually cripple the market and the speculators are in that case draining money from them!
Once again, it's traders and not speculators, and they don't cause bubbles they only cause volatility. Most of traders' revenue comes from other traders losing money, and some from poor investments, and when you're making a long-term investment short-term volatility can lose you some money, but it can also help depending on your timing.
Another thing is the price of acquiring a company will be severely effected by the stock-price, thus the speculations will have significant net benifit/loss on sale of companies.
Net price is severely effected by stock-price only in the long run, when you're trying to buy a company, you don't just go to your trader and say " I want to buy 51% of all of this company's stocks," because no corporation is traded in sufficiently high volume for that, you go to the people that actually have these stocks, and you negotiate a price with them, so if the stock has been rising, or has been at a high in the long-term, then yeah they have more bargaining power, but day to day volatility doesn't give them any bargaining power. Sorry, short term traders are called speculaters sometimes.
I actually looked it up, and speculating can also be used when talking about stocks, but apparently there are either speculative investors or speculative traders, so I think in general we can just keep it at investors and traders.
anyways:
Most money on the stock exchange has been made due to increased investment in the last decades: More money in the market means less chance of loosing money for any type of investment which attracts more money in good times.
Well in a lot of cases this IS the bubble. The "good times" when everyone wants to invest is often-times in today's world the "boom" period of the business cycle, which is resulting from everyone investing, and the reason everyone invests is that inflation is going up (due to QE's bailouts, and etc.) and the interest rates are suppressed by the FED, when interest rates are low it's generally a stimulus for for investment, but this is only true when they are naturally low, as a result of savings. The FED provides easy credit via low interest rates, so this makes investing seem like a really good idea.
In less good times the markets will start to see a stagnation and more short term trading since that is where people think the money can be made.
Trading will always occur even in the "good" times, but yes trading is often times not heavily effected by a slow down, and that's BECAUSE trading is short term.
Yes it increases losses significantly and also causes volatility and makes it very hard to gauge the real value of a stock... It is affecting the value of the 51 % of the stocks, call it bargaining power or whatever.
No it doesn't it simply presents itself as volatility. It doesn't give any bargaining power. When you're buying a company you're not gonna be looking at the value of the stock too much in the first place. You may want to see earnings per cost ratio, because the price of a stock isn't a good indicator of how profitable a company is, it's earnings on the stock that tells you this, and you base that on the dividends, and etc.
Bubbles are not only created because of easy credit, but is a result of some psychological phenomena. Admittedly not as much directly because of short term trading, but trading with the wish of stable economic gains without involvement.
See this isn't true. Traders dont' try to make money from a stable economic gain, they make money off of the volatility in the market. There are psychological phenomena involved, but they never cause bubbles, because traders sell for marginal profit. Like you said it is the "wish of stable economic gains" that results in bubbles, and that's not trading that's investment, and it's not just any investment it's mal-investment, and mal-investment is driven by credit expansion.
Speculation in commodities are a lot more subtle and I think I remember that economists are pretty uncertain of the effects.
Commodities are generally used to hedge inflation. Although some commodities are speculative for other reasons as well.
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On December 01 2011 04:15 {CC}StealthBlue wrote:
Nobody finds it disturbing that Police are now telling Media/Journalists they cannot cover the raid on protesters or they will face arrest?
I hope the journalists don't give a crap. I see no justification for such restrictions.
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EPT
