Speculation - futures markets - good or bad

lolr2 · #1 15th March 2008, 10:43 PM

lol my first post on this site

Oil and commodity prices are going up based on speculations on weaker $,driving inflation up around the globe but i don't see anything good with speculations for the consumers who are the end of this supply demand chain. Day traders or funds or investors make money or lose but at the end its the consumer who is getting affected with the higher prices.

so should this speculation be allowed ? just like the CDO's which led to credit crunch in US could futures markets lead to some problems in future ?

CreditViolet · #2 15th March 2008, 10:50 PM

I agree, speculation should not be allowed, I suggest 10 years of imprisonment and a sex-change operation for anyone who speculates

kkseal · #3 16th March 2008, 12:37 AM

Quote:

Originally Posted by lolr2

lol my first post on this site

Oil and commodity prices are going up based on speculations on weaker $,driving inflation up around the globe but i don't see anything good with speculations for the consumers who are the end of this supply demand chain. Day traders or funds or investors make money or lose but at the end its the consumer who is getting affected with the higher prices.

If it's getting overdone on the upside rest assured it'll get overdone on the downside too (when the consumer will benefit). And just as the upside is being rationalized there'll be simillar rationalization for the downside.

Quote:

so should this speculation be allowed ? just like the CDO's which led to credit crunch in US could futures markets lead to some problems in future ?

Not as long as the underlying is a REAL asset. Trouble starts when you have a paper having another paper as the underlying which in turn has another paper .... till no one knows what the real asset is let alone what it's worth.

Regards,
Kalyan.

P.S.: The question 'What if we do not have a Futures Mkt' is also a form of speculation How do you know it'll stop price rise? Maybe a grey mkt will develop with more unbridled speculation. Nature always finds a way.

g_kab35 · #4 4th April 2008, 12:55 PM

Quote:

Originally Posted by kkseal

P.S.: The question 'What if we do not have a Futures Mkt' is also a form of speculation How do you know it'll stop price rise? Maybe a grey mkt will develop with more unbridled speculation. Nature always finds a way.

What Mr Kalyanji says is just ok on theory, but in practical it is a big speudo-thinking. Just like Prostitution shld be legalised, or it will find its natural ways.

Dont make fear for gray market, as their was trading before future market came into existance. So anyone cant says that future market is essential for trading, or gray market will rise. Currenly future market is in full flow, but Mr Kalyanji did u confirm that whole gray market is closed now? Even the size of gray market get bigger from last 3-4 yrs. What did it shows?

In fact, from ever this future trading started, commodity prises get rises. we can regret this just luck. Ask any old exprienced merchant or trader in any mandi, he will confirmed the same. Exprience matters!

If someone wants proof of "prise rise due to future trading" theory, then just check the price rise in pulses 2 yrs ago. As soon as the govt bans the future trading on pulses, suddenly the prices falls. (Not just to export ban). Even at this bull run in each commodity, pulses do not rises as compared to its peers.

So one fact is clear, due to future market end user always suffers.

Due to online future trading, many young generation of business families lost their faith in actual physical trading, and trapped in cage of sweatless easy money bhulbhulaiyya. Most of them get naked and came onto road. Only some biggie get all the cream. Do anyone pay attaintion on this bad social aspect?

So its really bad!!!