retiredtraveler wrote: Does anyone realize that 'speculator' is simply the current term-in-vogue for investor?
I invest in this stuff too --- I'm financing my retirement by investing in oil. It's going to $175 --- I expect to make a lot of money by investing. It's legal, it's gambling, I may lose, but it's all market capitalism.
Everyone is using this term 'speculator' like this is something new...
Shortly before the Depression crash, one of the big robber barons (Morgan, Rockefeller, I forget which) sold much of his stock. He was later asked how he knew it was time to cash out. He replied: "I heard my shoeshine boys talking about their latest stock picks. At that point, I knew stock prices were way overvalued due to over-investment."
The robber baron knew when to get out. The shoeshine boys did not and probably lost everything.
Oil prices are simply NOT justified by the current supply / demand relationship. They are the new dotcom flashy investment sector that newbies think is easy to cash in on.
Don't be a shoeshine boy. (And this includes your 401k. Stay away from oil commodities, it's gonna bust big time)
I guess it's fun to assume there is some quick fix that will invalidate the law of supply and demand and there are lots of people trying to profit from that: but anyone who follows the futures market knows that the speculators follow the trend: they do not make the trend. Supply is currently restricted by government regulation and taxes most everywhere, and demand is increasing: price has only one place to go and it has done that. Another thing the proponents of the speculator conspiracy theory ignore is that a speculator has to sell their position to make any profit and the futures market enforces fairly short term buybacks. This makes it a zero sum game as the selling will put just as much downward pressure on price as the original buying put on it upwards in the first place.
The one place that had massive potential to increase supply in a 'safe' area of the world were the tar sands in Alberta and Saskatchewan; but now politicians across the U.S. are lining up to make sure that does not happen and the tax grab in Alberta is scaring the producers out of the market there and of course both major federal parties in Canada are one upping each other to put more limits on the supply. It is almost 100% the government interventions that have lead to the cost increases for oil and adding more intervention is guaranteed to make the problem worse in way not foreseen by the politicians putting the restrictions in place.
horton333 wrote: I guess it's fun to assume there is some quick fix that will invalidate the law of supply and demand and there are lots of people trying to profit from that: but anyone who follows the futures market knows that the speculators follow the trend: they do not make the trend. Supply is currently restricted by government regulation and taxes most everywhere, and demand is increasing: price has only one place to go and it has done that. Another thing the proponents of the speculator conspiracy theory ignore is that a speculator has to sell their position to make any profit and the futures market enforces fairly short term buybacks. This makes it a zero sum game as the selling will put just as much downward pressure on price as the original buying put on it upwards in the first place.
Well yes, exactly. It IS a zero sum game when you factor in the crash at the end of the bubble. Unfortunately, the speculators cashing in at the front end are not always the same as the chumps left holding overvalued futures when payup time rolls around.
Just like the dotcom days, just like Enron: it IS a zero sum game, but during the course of the game a whole bunch of wealth gets transferred from the bandwagon-jumpers to the wilier speculators. If Joe public refuses to get caught up in the mania this time, the professional traders won't have any suckers to leach off. An interesting correlary is the idea that institutional investors are just as guilty of pouring continuous money into these futures funds without accountability for the outcome.
Unless you knew what you were doing BEFORE oil futures became the fad, best find another investment idea.
The 29 crash was a result of folks buying on margin(borrowed money) much like many speculator/investors are doing today. Any flaw in the force will send them to the same ledges folks jumped from in 29. I have no doubt the flaw will come.
Weird weather may cook up a sequel to the "dust bowl" to make it more fun.
Come to think of it buying houses folks couldn't afford on the hope of a big rise in value that did't come is a lot like buying on the margin. Look where that got us.
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