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To: nihil who wrote (84537)	12/10/1998 8:15:00 AM
From: BGR	Respond to of 176387

Nihil, You write: Every study of commodity futures speculators I have seen indicates that most futures customers lose money. No wonder ROICs for certain financial businesses are not spectacular. But I guess for some the temptation to be considered a Master of the Universe comes with no price tag. -Apratim.

To: nihil who wrote (84537)	12/10/1998 8:25:00 AM
From: Geoff Nunn	Respond to of 176387

Good point, nihil. Given the fact that commodity futures speculators lose money (on average) we really have no grounds to assume their presence helps stabilize prices. It has been suggested that speculators actually do make profitable trades, on average, but lose money because of transactions costs. If that is true, the Friedman argument could apply. Keynes offered a conjecture to explain why trades by speculators might be profitable, paid for at the expense of the hedgers. (normal backwardation) I have heard, but cannot confirm, that a study was done years ago of the potato futures market after it had been shutdown. Apparently the study compared price volatility of cash potatoes before and after the termination of futures trading, and concluded that the shutdown had led to increased price volatility. If this was in fact the case, it would suggest speculators may be providing the salve envisioned by Friedman. Take the story for what it's worth! Geoff