patrick.net

tatupu70 says

It's not ignorance. Short term trading is just legal gambling. It adds nothing to the economy. Commodity trading should be about hedging risk--not gambling.

I prefer to promote activities that add value to the overall economy. Gambling is not one of them

You're wrong. Let's say you're right that commodity trading should be about hedging. Okay. Right. But how do you think the market for those that would hedge exists, without the gamblers (traders) ? I say you have no clue what you are talking about. (And you are making me ashamed to be a liberal, because too many liberals are equally clueless).

Let me boil it way down for you with an oversimplified example. Say we're looking at the corn futures market. And suppose in one particulr 3 day period, the only really significant big hedgers (your real participants) are Archer Daniels Midland (ADM) laying off some risk, selling futures in chicago because of all the farmers that have locked in prices with them (so they are selling 50,000 contracts starting on Tuesday), because ADM fears the price could be going lower exposing them to too much risk. Meanwhile, not until Thursday is there a really significant buyer, General Mills locking in a price on some corn for their products based on whatever assessments they have made about risks of higher prices or the quantities they need to buy.

Who is supposed to buy the futures from ADM on Tuesday ? There is a reasonable price range at which they are trading, but some people are going to have to take on the risk of buying them at current prices (or a little below) until one of your hedgers gets there to buy. What the hell man, these are some of the most basic principals behind the idea of trading that have been going on for thousands of years.

If some guy in the import export business is in asia has an opportunity to buy 50K worth of envelopes at a price that he thinks he can make a 20% profit on back in the U.S. is that gambling ? (maybe it is).

How is it different (other than the fact that the profit margin is way bigger for the guy with the envelopes) than the guy trading on the exchange ? IS it because the futures contracts are traded on a centralized exchange and that somehow makes it seem just too easy for someone with capital to buy and sell ? I won't dispute that ultimately it is gambling (in a sense). But you are extremely ignorant if you can not understand that there is a service to the market performed by all of the speculators.

Again, this has gone on in various forms for many thousands of years. It's an integral part of capitalism. It's one of the parts that works.

bob2356 says

Go to the end of the second paragraph and hunt for the word subsidiaries.

Okay. THat word is there. But these are subsidiaries located in tax havens.

If we were talking aabout a subsiciary of P&G in France, that sells soap in France, and pays taxes on profits in France, then that would be one thing.

But I don't know. I think these may be subsidiaries set up in tax havens for the sole purpose of not paying taxes on profits made in the U.S. (not because the profits are actually made in the locations of the subsidiaries).

marcus says

Okay. THat word is there. But these are subsidiaries located in tax havens.

If we were talking aabout a subsiciary of P&G in France, that sells soap in France, and pays taxes on profits in France, then that would be one thing.

But I don't know. I think these may be subsidiaries set up in tax havens for the sole purpose of not paying taxes on profits made in the U.S. (not because the profits are actually made in the locations of the subsidiaries).

No they are not tax havens for profits made in the U.S. Profits made in the U.S. have corporate taxes paid. Read your own article. Ireland, Luxembourg, and Belgium are some of the tax havens mentioned. Hardly third world countries. As much as the US government hates it the US can only collect taxes what the money is in it's borders. Until companies bring the profits back then the US government can't have it. Allowing loans and stock buybacks with profits held offshore should be illegal.

What does any of this have to do with offshore funds?

marcus says

Okay. Right. But how do you think the market for those that would hedge exists, without the gamblers (traders) ?

First of all--I'm not saying to eliminate gamblers. That would be impractical. Just to tax them.

But to answer your question--it typically goes like this. A farmer wants to hedge corn prices because he wants a guaranteed price so he can reduce risk, and plan for next year. He hedges the sales price. Any food producer of your choice (General Mills, etc.) that uses a great deal of corn in their product wants to guarantee their raw material costs so they hedge the purchase price. That's both sides of the trade with no gamblers.

marcus says

And suppose in one particulr 3 day period, the only really significant big hedgers (your real participants) are Archer Daniels Midland (ADM) laying off some risk, selling futures in chicago because of all the farmers that have locked in prices with them (so they are selling 50,000 contracts starting on Tuesday), because ADM fears the price could be going lower exposing them to too much risk. Meanwhile, not until Thursday is there a really significant buyer, General Mills locking in a price on some corn for their products based on whatever assessments they have made about risks of higher prices or the quantities they need to buy.

This isn't really hedging--more like unhedging. If General Mills has contracts with the corn producers there is no risk to them if the price falls. They were happy signing the contract so that price should be OK to them. They still have the same contracts. Hedging is when they don't have contracts, but want to lock in a future price.

marcus says

Who is supposed to buy the futures from ADM on Tuesday ? There is a reasonable price range at which they are trading, but some people are going to have to take on the risk of buying them at current prices (or a little below) until one of your hedgers gets there to buy. What the hell man, these are some of the most basic principals behind the idea of trading that have been going on for thousands of years.

Anyone can buy or sell--but that is gambling. They are basically betting on the future based on whatever almanac or algorithm they think predicts the future. Yes, people have been gambling for thousands of years. So what? We have huge taxes on other forms of legal gambling-why not this one too?

marcus says

If some guy in the import export business is in asia has an opportunity to buy 50K worth of envelopes at a price that he thinks he can make a 20% profit on back in the U.S. is that gambling ? (maybe it is).

Nope--if he plans on taking possession and reselling the envelopes, that's not gambling (in my mind). If he is buying and selling those same envelopes 25 times a day with a goal of making 1/16 point profit on each trade with no chance that he ever takes possession of any envelopes? That's gambling.

marcus says

How is it different (other than the fact that the profit margin is way bigger for the guy with the envelopes) than the guy trading on the exchange ? IS it because the futures contracts are traded on a centralized exchange and that somehow makes it seem just too easy for someone with capital to buy and sell ? I won't dispute that ultimately it is gambling (in a sense). But you are extremely ignorant if you can not understand that there is a service to the market performed by all of the speculators.

I'm not even sure what you are asking here. If your point is that market makers/speculators increase liquidity--studies have actually found that they only increase liquidity when it's not needed. When liquidity is needed during turbulent times--they are nowhere to be found. I find their "service" to be vastly overrated.

Regardless--as I said--I'm not advocating banning them. Just adding a tax.

bob2356 says

What does any of this have to do with offshore funds?

Forgetting whether you were right or wrong about the meaning of offshore funds (I don't care really), there is a lot of money essentially being parked in accounts (hows that - not funds).

If foreign profits of U.S. companies are parked in accounts because they are going to be reinvested in the same overseas businesses that made the profits then that would be one thing. But if it is monies (I'm trying really hard not to say funds) that are parked in places like Ireland or Bermuda only for the purpose of not paying U.S. taxes, then that's questionable.

I don't know what the answer is, but there is a question here.

tatupu70 says

But to answer your question--it typically goes like this. A farmer wants to hedge corn prices because he wants a guaranteed price so he can reduce risk, and plan for next year. He hedges the sales price. Any food producer of your choice (General Mills, etc.) that uses a great deal of corn in their product wants to guarantee their raw material costs so they hedge the purchase price. That's both sides of the trade with no gamblers.

Yes, and my whole point is that they buy and sell large amounts, but not at the same time. Exchange traded contracts give them a place where there is relatively deep liquidity except at the moment crazy news is coming out.

In my example there are buyers for ADM on Tueday, even though General Mills isn't buying until THursday (maybe more than 2 days laters). That is the liquidity I was talking about. Not the liquidity of selling an infinite amount taking on short positions the moment when news just came out suggesting the price should go up a lot because of destroyed crops. ("studies have actually found")

tatupu70 says

Tax the hell out of the speculators and day traders. They add no value to the US economy. They're a cancer.

This was simply wrong. I disagree about taxing them, but I was mostly arguing that they do provide a value, as traders have for thousands of years. And even if the value they add is less than I believe it is, there are many businesses that are nothing more than vehicles for making money. Porn. The garbage part of the music industry. Junk food. Capitalism allows for making money in ways that don't contribute to the betterment of society. But I don't believe trading is even in a negative category, let alone "a cancer."

IF it was too easy to simply skim profit off of market by trading then I might agree about taxing trades. But this is not the case. There might have been moments when it was true, like the early advent of high speed trading, but once that got competitive their edge is reduced. IT does need to be policed though, to prevent front running etc. IF there were taxes on trades other than existing fees, that policing is what those taxes should go toward. Not toward simply making it less profitable. That would only help the big guys (by killing the competition) and they already have more of an edge than the smaller traders.

marcus says

This was simply wrong. I disagree about taxing them, but I was mostly arguing that they do provide a value, as traders have for thousands of years. And even if the value they add is less than I believe it is, there are many businesses that are nothing more than vehicles for making money. Porn. The garbage part of the music industry. Junk food. Capitalism allows for making money in ways that don't contribute to the betterment of society. But I don't believe trading is even in a negative category, let alone "a cancer."

Again--I'm not saying to ban them. I just question their value. Is it that valuable to a farmer to be able to get this crop hedged in 2 milliseconds vs. 2 days? Or to General Mills?

marcus says

IF it was too easy to simply skim profit off of market by trading then I might agree about taxing trades. But this is not the case. There might have been moments when it was true, like the early advent of high speed trading, but once that got competitive their edge is reduced. IT does need to be policed though, to prevent front running etc. IF there were taxes on trades other than existing fees, that policing is what those taxes should go toward. Not toward simply making it less profitable. That would only help the big guys (by killing the competition) that already have too much of an edge.

What competition would it kill?

tatupu70 says

Is it that valuable to a farmer to be able to get this crop hedged in 2 milliseconds vs. 2 days? Or to General Mills?

If all there are are the end producers and users, little guys would be taken advantage of, and how do they even arrive at a price without a "price discovery" mechanism that speculators provide along with the end users and hedgers. Together they make up the "market" that is the mechanism for price discovery.

No offense, but you really know very little about this subject.

marcus says

If foreign profits of U.S. companies are parked in accounts because they are going to be reinvested in the same overseas businesses that made the profits then that would be one thing. But if it is monies (I'm trying really hard not to say funds) that are parked in places like Ireland or Bermuda only for the purpose of not paying U.S. taxes, then that's questionable.

I don't know what the answer is, but there is a question here.

Why does it matter if profits sit offshore? They can't be realized until they are returned, then they are taxed. If the shareholders put up with their dividends locked up sitting forever somewhere then what is the problem? If they are actually reinvested overseas then there is no profit, again where is the problem? I have a serious problem with being able to use profits held offshore for low cost operating loans and stock buybacks in the US since then the profits are in effect going to the shareholders. Again, the US can't tax profits till they come back to the US. Multinationals definitely play games with the tax laws country by country, but they stay within the legal boundaries. The problem is the tax laws are far outdated and totally unworkable.

So you are saying the US government should have the power to determine what the future use of money sitting in foreign subsidiaries of US corporations and decide what to tax? Other than the fact it's not practical or legal is this really the kind of power you want to hand to the government? What makes you think they will stop at corporations and not do apply the same thinking to individuals? Ever hear the term slippery slope? I'm not at all in favor of giving the government broad sweeping new powers.

The US is one of only a 2-3 countries that tax corporate profits made in other countries. The very legitimate argument for this is the US uses the military to protect US (read US corporate) interests abroad. Perhaps the US should give up on that, let corporations protect themselves if the spam hits the fan anywhere in the world and cut the military budget by the amount of lost taxes. Never happen, way to many politicos are on the military/industrial gravy train.

http://www.dailykos.com/story/2015/04/21/1373920/-Why-Does-The-U-S-Tax-Corporate-Profits-From-Overseas-And-A-Modest-Proposal#

America’s multinational corporations still need the Navy to protect shipping lanes and the Commerce Department to safeguard US copyrights. They also expect the Federal Reserve and Treasury Department to intervene to provide bailouts and cheap money when the corporate financial swindlers get into trouble, like GE, which almost went aground when its GE Capital financial wing got caught in the great banking meltdown.

Corporations want a huge US government to finance scientific breakthroughs, educate the future workforce, sustain the infrastructure and provide for law and order on the home front, but they just don’t feel they should have to pay for a system of governance, even though it primarily serves their corporate interests. The US government exists primarily to make the world safe for multinational corporations, but those firms feel no obligation to pay for that protection in return.

bob2356 says

Why does it matter if profits sit offshore? They can't be realized until they are returned

Can they be invested in totally different foriegn businesses than the ones that generated the profits ? Can they be used for speculation or hedging in currencies or foriegn stock markets ? If multinationals are growing, and expanding in to other businesses, why would they have to ever be "realized" in the sense that they pay U.S> taxes on those profits ?

bob2356 says

So you are saying the US government should have the power...

Actually I'm saying very little. I said up front I don't know enough about this to have a strong opinion. More recently I said:

marcus says

I don't know what the answer is, but there is a question here.

marcus says

If all there are are the end producers and users, little guys would be taken advantage of, and how do they even arrive at a price without a "price discovery" mechanism that speculators provide along with the end users and hedgers. Together they make up the "market" that is the mechanism for price discovery.

No offense, but you really know very little about this subject.

No offense taken because I know much more than you.

Price discovery sure as hell does not need a middleman. Do you need a go-between every time you buy something? Every transaction is price discovery.

Are you telling me that little guys aren't getting taken advantage of by market makers?? Are you kidding me?

Strategist says

PCGyver says

If you really want to see this economy take off get the money into the hand of the 99% instead of letting it stagnate at the top 1%

That's where we run into trouble. A lot of that money would go towards buying Bud Lite, and cheap Chinese junk, instead of investing it towards innovation and production.

Maybe we should try out to see what our economy would look like? We've seen what the economy looks like with all of the money in the hands of the 1% - they aren't investing in innovation and production, what makes you think that would change if given more of it?

finehoe says

What difference does it make if it's paid down or not?

There goes the half-wit. attaboy!

mell says

There goes the half-wit. attaboy!

He's right, of course. If the budget was balanced from now on, the debt would eventually become meaningless as it became a smaller and smaller % of GDP.

tatupu70 says

No offense taken because I know much more than you.

Funny, you sound like you are actually making a concerted effort to sound like an idiot. YOu obviously have no idea how markets work. You have never read anything on the subject. Probably not even Marx. But if yu have read marx, what have you read on the other side of the issue ?

People like you give liberals a bad name. When you don't know anything about a subject, sure you can just make blind and stupid assertions. But I am vicariously embarrassed for you. I would encourage you to be a life long learner. It's never too late to learn things. There is tons of information available on this subject if you are interested.

tatupu70 says

Do you need a go-between every time you buy something?

Maybe you can tell me why that is beyond stupid. Can you ? Do I really need to explain to you what the difference is between hundreds of retailers competing with each other to sell me a bottle of wine, versus the market place for a large farmer who wants to lock in a price on the crop he's in the middle of harvesting ? Or if he wants to hedge when he has several silos full of grain months later ? That market is far easier to manipulate without speculators than with speculators. This is what you don't understand.

tatupu70 says

I know much more than you

Well, I was a floor trader for many years, and I've forgotten hundreds of times as much about this subject than you have any interest in knowing. You would rather just make stupid asertions and sound like an idiot.

tatupu70 says

Are you telling me that little guys aren't getting taken advantage of by market makers??

No, I'm telling you that having more market makers, including little ones competing with the bigger ones is analogous to having many retailers competing to sell me that bottle of wine at the price that's best for me. Having way less market makers makes it easier for the ones that are there to steal from the guys that are using the market to sell product, or stock, or to hedge or whatever.

Read a book or something, then come back and make up your nonsense. At least then it might almost sound intelligent..

marcus says

Maybe you can tell me why that is beyond stupid. Can you ? Do I really need to explain to you what the difference is between hundreds of retailers competing with each other to sell me a bottle of wine, versus the market place for a large farmer who wants to lock in a price on the crop he's in the middle of harvesting ? Or if he wants to hedge when he has several silos full of grain months later. That market is far easier to manipulate without speculators than with speculators. This is what you don't understand.

Certainly, I'll try to help you if you're willing to learn. There are LOTS of farmers. There are LOTS of users of corn. Just like there are lots of retailers.

I understand quite well, thank you. I just disagree. IMO speculators manipulate far more than a market without speculators.

marcus says

Well, I was a floor trader for many years, and I've forgotten hundreds of times as much about this subject than you have any interest in knowing. You would rather just make stupid asertions and sound like an idiot.

Clearly your feelings are biased by your previous experience as a trader. That is clear. Try to take a step back, let go of your bias, and look at the big picture.

marcus says

No, I'm telling you that having more market makers, including little ones competing with the bigger ones is analogous to having many retailers competing to sell me that bottle of wine at the price that's best for me. Having less market makers makes it easier for the ones that are there to steal from the guys that are using the market to sell product, or stock, or to hedge or whatever.

Read a book or something, then come back and make up your nonsense. At least then it might almost sound intelligent..

I don't need to read a book silly. This is not that complicated. You continue with the liquidity argument that I, number one, don't find convincing, and number two, don't see a small tax causing problems. Yes, it would make arbitrage more difficult. So what?? Liquidity has been shown to be overrated.

Yes, I am biased. But that bias is based on a lot of experience.

tatupu70 says

I don't need to read a book silly. This is not that complicated.

Wow. How surprising.

Maybe we should also do away with all wholesalers and retailers and middlemen traders of of everything. Manufacturers could just sell their goods through some not for profit government run hub. All transactions would occur online, and be delivered by drones. Hey, it could just be a high tech expansion of what the post office does now.

Then after we get that up and running, there is the profit of the manufacturers that also serves no real purpose. The government could take over all of that functionality over too, right ?

Let's just make some assertions that this all makes sense, you know, because obviously it just does, and stuff.

Weeeeeee ! It's fun pretending to know a lot when one really doesn't know squat.

Liquidity is used to justify HFT in milliseconds faster than a human can even register numbers on a screen in their brain.

marcus says

Maybe we should also do away with all wholesalers and retailers and middlemen traders of of everything. Manufacturers could just sell their goods through some not for profit government run hub. All transactions would occur online, and be delivered by drones. Hey, it could just be a high tech expansion of what the post office does now.

No, you're right. Let's create "market makers" for every good and service. If I want to get my Corolla washed, I shouldn't be able to just go to the local car wash--I should have to pay someone to "discover" the price for this service. Otherwise, how would I know how much it costs to get a car wash???

a href="http://patrick.net/?p=1285606&c=1233284#comment-1233284">marcus says

Let's just make some assertions that this all makes sense, you know, because obviously it just does, and stuff.

Weeeeeee ! It's fun pretending to know a lot when one really doesn't know squat.

That's all you bud. You can't even have a normal conversation about the merits of liquidity in the futures market. Your biases have so clouded your judgment that it's impossible to have a discussion with you.

tatupu70 says

Your biases have so clouded your judgment that it's impossible to have a discussion with you.

You're the one that said this:

tatupu70 says

They add no value to the US economy. They're a cancer.

That's kind of extreme. Yes, I was offended. And it's too stupid of an assertion to be the basis of any real conversation. But in spite of this I did try.

After you said this,

tatupu70 says

It adds nothing to the economy. Commodity trading should be about hedging risk--not gambling.

I prefer to promote activities that add value to the overall economy. Gambling is not one of them.

I made a couple of my best attempts to help you (or others) understand. I know it accomplished nothing and that you are close minded on the subject. But your argument is no better than this assertion.

marcus says

we should also do away with all wholesalers and retailers and middlemen traders of of everything. Manufacturers could just sell their goods through some not for profit government run hub. All transactions would occur online, and be delivered by drones. Hey, it could just be a high tech expansion of what the post office does now.

How does anyone even begin to explain how wrong that is, even if it might seem reasonable to some naive idiots. Manufacturers being able to sell quantity at a discount to entities that will take on large volume and risk is to the manufacturers advantage, and it's all part of a refined system that has evolved over many centuries to what it is now. A rather amazing system for distributing good and services. One could make assertions that middlemen don't add value. But not only is that not a proof, it isn't even a reasonable assertion to anyone that's studied how the system works.

The same can be said for the way that markets work. But you're right that you can make any blind assertion you like.

By the way, traders do pay taxes on profits, if they are profitable.

tatupu70 says

We have huge taxes on other forms of legal gambling-why not this one too?

marcus says

I made a couple of my best attempts to help you (or others) understand. I know it accomplished nothing and that you are close minded on the subject. But your argument is no better than this assertion.

Yep, you made some arguments, but I didn't find them particularly convincing.

marcus says

marcus says

we should also do away with all wholesalers and retailers and middlemen traders of of everything. Manufacturers could just sell their goods through some not for profit government run hub. All transactions would occur online, and be delivered by drones. Hey, it could just be a high tech expansion of what the post office does now.

The reason this is so wrong is that the vast majority of wholesalers and retailers were needed for distribution. Getting the physical goods to the locations where customers are willing to buy them. Do market makers perform this function? In the case of commodities and/or stocks, the exchange is the retailer. It's the location where people can go to make the transactions.

Not sure if you think the drone analogy is so ludicrous that it makes your point, but Amazon is already moving toward that business model.

You're right that traders do pay taxes on income so my analogy was poor.

tatupu70 says

Getting the physical goods to the locations where customers are willing to buy them. Do market makers perform this function?

No they perfom a different (but similar in the abstract) function. They buy and sell, providing additional supply and demand for the purposes of providing depth to the market, providing a price discovery mechanism that usually decreases volatility, that is compared to what would happen if a big seller brought a lot of contracts to market and had to wait for buyers without having any sense of how low he would have to go in price, and increasing the likelihood of fear or panic causing him to sell too low rather than being patient, when he doesn't know how many buyers are there.

You make assertions about these aspects of markets which have a long history of existing and working without any evidence that you have done any real research into what I'm even talking about. I really do feel that it's worthwhile to explore the opposing view, maybe do at least a little homework, before making blind assertions.

Arguments about the benefits or not of modern day high frequency trading are a separate discussion from the more general question of whether speculative trading provides a benefit to a market.

On the most simplistic level, speculators help keep markets honest. Trust me, given a chance if people say on the sell side of some commodity market thought they could rig the market in any way to make the price artificially high when they are selling, they would. But in order to do that, they need someone to bid the price up. IF there is no supply there to sell to this guy who is trying to move the price up to a fake level, he can do it easily. But if informed speculators are there to sell to this cheater - because they know that before long the supply will be there and the price will be lower, then now it becomes too risky, and even a losing proposition to try to bid the price up to a fake level.

I understand that concepts such as this are maybe even too much too take in, if you aren't really interested in understanding how markets work, so I'll leave it here.

(as a side note: I'm not total a believer in efficient markets theory or the idea that markets can not and never do get to a "fake" level. I think that there has perhaps been too much indirect govt involvement in some markets in recent years, and certainly the concept I just described can occur sometimes in slow motion, that is over longer time frames. Still, I do believe in markets. For those who bring up the oil market craziness of 07 - 08 as an example a speculation gone crazy ? I actually believe the oil market was reflecting the fact that we would not be able to sustain the then current rate of global economic growth. That is, markets are forward looking and we were on a trajectory that was unsustainable. The oil market ended up being one of the precursors of the impending crash.)

marcus says

No they perfom a different (but similar in the abstract) function. They buy and sell, providing additional supply and demand for the purposes of providing depth to the market, providing a price discovery mechanism that usually decreases volatility, that is compared to what would happen if a big seller brought a lot of contracts to market and had to wait for buyers without having any sense of how low he would have to go in price, and increasing the likelihood of fear or panic causing him to sell too low rather than being patient, when he doesn't know how many buyers are there.

Yes, we've been over that already. You think they add liquidity to the market. I say studies have shown that the value is greatly overrated as they add zero liquidity when it is needed most.

marcus says

You make assertions about these aspects of markets which have a long history of existing and working without any evidence that you have done any real research into what I'm even talking about. I really do feel that it's worthwhile to explore the opposing view, maybe do at least a little homework, before making blind assertions.

marcus says

I understand that concepts such as this are maybe even too much too take in, if you aren't really interested in understanding how markets work, so I'll leave it here.

OK, Marcus. Let me see if I can sum up the arguments that I am too stupid to take in:

1. It's always been done this way.
2. It adds liquidity to the market.

If and when you want to have an adult conversation, let me know. I can assure you that I understand anything you can post here. I may not agree, but don't misunderstand disagreement for misunderstanding. You can dispense with appeal to authority logical fallacies too.

Give it a try Marcus.

tatupu70 says

I say studies have shown that the value is greatly overrated as they add zero liquidity when it is needed most.

You don't even understand what you are saying here. IF a price is clearly way too high, and everyone finds out the value is way different at a given moment, a given second then of course expecting people to step in and buy at that moment is asking way too much.

Logic flaw: If speculators don't add liquidity when it is needed most (for example at the very second when extreme market moving news is coming out), then therefor they don't add liquidity the rest of the time ?

This is beyond stupid.

I would love to see your study, but won't hold my breath. . Maybe your study was one of those bullshit studies out there that have only one purpose, to back up the agenda of some mindless liberal that thinks that because of their powers of magical thinking, they know what works better than systems that are in place and working.

Statistics aren't alway used to lie. And it's not true that all researchers are mindless assholes with an agenda. But it does happen every now and then.

tatupu70 says

OK, Marcus. Let me see if I can sum up the arguments that I am too stupid to take in:

1. It's always been done this way.

2. It adds liquidity to the market.

Where does this fit in ?

marcus says

providing a price discovery mechanism that usually decreases volatility, that is compared to what would happen if a big seller brought a lot of contracts to market and had to wait for buyers without having any sense of how low he would have to go in price, and increasing the likelihood of fear or panic causing him to sell too low rather than being patient, when he doesn't know how many buyers are there.

or this ?

marcus says

On the most simplistic level, speculators help keep markets honest. Trust me, given a chance if people say on the sell side of some commodity market thought they could rig the market in any way to make the price artificially high when they are selling, they would. But in order to do that, they need someone to bid the price up. IF there is no supply there to sell to this guy who is trying to move the price up to a fake level, he can do it easily. But if informed speculators are there to sell to this cheater - because they know that before long the supply will be there and the price will be lower, then now it becomes too risky, and even a losing proposition to try to bid the price up to a fake level.

tatupu70 says

I can assure you that I understand anything you can post here. I may not agree, but don't misunderstand disagreement for misunderstanding.

tatupu70 says

If and when you want to have an adult conversation, let me know.

No, I'm done. You've proven where you are at on this and where you're going to stay. What I wrote in argument with you was for the benefit of others, or perhaps myself. I have no illusions about what it is you wish to be true, or about the magnitude, depth and breadth what you are closed to learning on this subject.

marcus says

You don't even understand what you are saying here. IF a price is clearly way too high, and everyone finds out the value is way different at a given moment, a given second then of course expecting people to step in and buy at that moment is asking way too much.

Of course I understand. Market makers buy and sell when there are already many buyer and sellers available. At time periods when buyers or sellers are absent, market makers do not buy or sell either. They're in the market when not needed, and out of the market when needed.

marcus says

Logic flaw: If speculators don't add liquidity when it is needed most (for example at the very second when extreme market moving news is coming out), then therefor they don't add liquidity the rest of the time ?

Except that's not what I said. I said they add liquidity when it's not needed. Not that they don't add liquidity.

marcus says

providing a price discovery mechanism that usually decreases volatility, that is compared to what would happen if a big seller brought a lot of contracts to market and had to wait for buyers without having any sense of how low he would have to go in price, and increasing the likelihood of fear or panic causing him to sell too low rather than being patient, when he doesn't know how many buyers are there.

That is basically the definition of adding liquidity. If you don't even know the definition of basic terms, how can you think you know more than anyone on the subject.

marcus says

On the most simplistic level, speculators help keep markets honest. Trust me, given a chance if people say on the sell side of some commodity market thought they could rig the market in any way to make the price artificially high when they are selling, they would. But in order to do that, they need someone to bid the price up. IF there is no supply there to sell to this guy who is trying to move the price up to a fake level, he can do it easily. But if informed speculators are there to sell to this cheater - because they know that before long the supply will be there and the price will be lower, then now it becomes too risky, and even a losing proposition to try to bid the price up to a fake level.

Same argument. It's liquidity.

Here's one study for you:

http://www.jstor.org/stable/25656291?seq=1#page_scan_tab_contents

tatupu70 says

Here's one study for you:

http://www.jstor.org/stable/25656291?seq=1#page_scan_tab_contents

And the inferences you make or conclusions you draw from this abstract, that are relevant to our disagreement here, are ?