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Politics : View from the Center and Left
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To: Lane3 who wrote (71466)6/10/2008 6:39:16 PM
From: Cogito  Read Replies (1) of 543438
 
>>Allen, it occurred to me that part of the problem might be definitional. I had lunch today with a friend who considered everything about the futures market to be speculation. I thought that the normal transactions involving, say, farmers and canners, would not be speculation but that the activity of hedge funds, who have no involvement in the industry, would be speculation.<<

Karen -

I was thinking something similar myself. I've read recently that as much as 95% of the activity in the oil futures markets is from entities that have no intention of ever taking delivery of any oil. Those people are, by definition, speculators.

So although the supply/demand balance of the actual oil is a factor in futures prices, the other big supply/demand factor at stake is the availability of the contracts themselves.

I, too, can't see how it's possible that the prices would not be affected by speculation.

- Allen
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