WHAT IS WRONG WITH SPECULATION?
July 23rd 2008 00:00
This is a digression. This is not part of the plan I lined up for the week. But somehow, I guess, somebody needs to be reassured that there is NOTHING wrong with speculation IN GENERAL. The truth is, I agree with the basic example on hedging (which I read from a textbook) which was narrated almost verbatim by one of the bloggers here.
So, back to the question: What is wrong with speculation? In general, nothing. It is a legitimate business strategy. Anybody can speculate by hedging and make a lot of money in the process and, if the speculator stay above board, he/she has nothing to worry about the law.
So, why am I even bothering to write about this? Well, it is because somebody took offense when I keep hollering about the inflationary effects of using OIL as hedge. Maybe he is not aware how fast the prices of oil have gone up the past two years. Please take note that I have not criticized the use of other hedging instruments.
Why is it wrong to use oil as hedge? Actually, it is not. In fact, if you had used oil to protect your dollars these past months, you would have made a lot of money...
And at the same time, you would have greatly contributed to the SUFFERINGS of the people who can no longer afford to buy even their most basic needs.
These people do not know anything about hedging. What they know is that, a few months ago, they were able to buy rice at P8.00/ kilo. Now, a kilo of average rice is being retailed at P42.00 to P46.00 per.
And why are they in a line like that? Answer: Because they have to wait for the arrival of the supply of rice from the National Food Authority. NFA sells a kilo of rice for P18.00 per. And each of them is only allowed to buy a few kilos per day.
Am I still supposed to explain how the skyrocketing price of oil has affected the prices of almost everything the people in this world needs?
Or, that those people in the pictures, and other people like them, need more than just rice in order to live?
Last Sunday night, two of the biggest oil companies in the Philippines were forced (convinced) to reduce their retail price of diesel (which was raised by P3.00 last Friday night - the 22nd increase since January 2008) due to the threat of a massive transport strike. PDI story click here
Well, if you cannot get what I am saying…
I think I better stop explaining.
I hope you don't end up like one former president of NYSE.
So, back to the question: What is wrong with speculation? In general, nothing. It is a legitimate business strategy. Anybody can speculate by hedging and make a lot of money in the process and, if the speculator stay above board, he/she has nothing to worry about the law.
So, why am I even bothering to write about this? Well, it is because somebody took offense when I keep hollering about the inflationary effects of using OIL as hedge. Maybe he is not aware how fast the prices of oil have gone up the past two years. Please take note that I have not criticized the use of other hedging instruments.
Why is it wrong to use oil as hedge? Actually, it is not. In fact, if you had used oil to protect your dollars these past months, you would have made a lot of money...
And at the same time, you would have greatly contributed to the SUFFERINGS of the people who can no longer afford to buy even their most basic needs.
These people didn't have to waste time here before the price of oil started rising every week
These people do not know anything about hedging. What they know is that, a few months ago, they were able to buy rice at P8.00/ kilo. Now, a kilo of average rice is being retailed at P42.00 to P46.00 per.
If god didn't want them to be slaughtered, he wouldn't have created them as lambs, eh?
And why are they in a line like that? Answer: Because they have to wait for the arrival of the supply of rice from the National Food Authority. NFA sells a kilo of rice for P18.00 per. And each of them is only allowed to buy a few kilos per day.
Am I still supposed to explain how the skyrocketing price of oil has affected the prices of almost everything the people in this world needs?
Or, that those people in the pictures, and other people like them, need more than just rice in order to live?
Last Sunday night, two of the biggest oil companies in the Philippines were forced (convinced) to reduce their retail price of diesel (which was raised by P3.00 last Friday night - the 22nd increase since January 2008) due to the threat of a massive transport strike. PDI story click here
Well, if you cannot get what I am saying…
I think I better stop explaining.
I hope you don't end up like one former president of NYSE.
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Comment by Louie
Climate Red
randomthoughts
Phil's Wellness Tips
Comment by Fobzy
Fobz
Punk, nothing wrong with speculation - you can make big bucks, but then again you can also lose big bucks,
Bit like the horses, ever see a broke bookie, no, he gets wealthy on the specualtion of others, in the stock market are u?
Ever my pal, Punk, remember there's always a job for you down on the farm.
Comment by Market Newbie
Gizmo Peek
Stock Market Punk
I'm still ok with my day job income, Fobzy. Probably not as ok as your bookie, but I can still survive. I wonder though what a newbie can do as a farm hand of the old (but young) Esq.