Here we go again (Low low down payment)

[CA renter]

[quote=FlyerInHi]CAr, there is value added in selling things back and forth. Not zero sum.
Think of the eBay business model where we just mail junk back and forth to one another.[/quote]

Speculators, in general, are not creating the infrastructure by which people trade (like eBay does). And the people who create the infrastructure do not need to speculate. Speculation is zero sum.

[scaredyclassic]

[quote=CA renter][quote=FlyerInHi]CAr, there is value added in selling things back and forth. Not zero sum.
Think of the eBay business model where we just mail junk back and forth to one another.[/quote]

Speculators, in general, are not creating the infrastructure by which people trade (like eBay does). And the people who create the infrastructure do not need to speculate. Speculation is zero sum.[/quote]

Perhaps its value is on entertainment. To stave of boerdom.

[FlyerInHi]

[quote=CA renter] Speculation is zero sum.[/quote]

There are other services involved in speculation. They need real estate and all the other stuff involved in living day to day.

Speculation can make markets more efficient. Same with underground black markets. They get goods to people who would otherwise go without.

Speculating with your own money is actually very healthy. Even speculating with other people’s money is fine if the people investing with you understand the risks. But speculating with money benefiting from Federal insurance is different.
There’s a good NYT piece:

[Anonymous]

Speculate is a subjective term – when does investment become speculation? Nevertheless, I’ll allow it…

To speculate, one must buy something and sell it later (or the reverse.)

Every transaction has a counterparty. To buy something there must be a seller.

The seller wants something – to sell at a particular price. The buyer gives the seller what he/she wants. The seller’s wants are fulfilled by the buyer.

Simply buying something – for any purpose – fills the need of the seller. It creates value.

Value is also created when the “speculator” sells the asset to some other party.

The speculator, the party that sells to the speculator, and the party who buys from the speculator all transact at the price they agree upon. All three get what they want.

No zero sum. It’s win, win, win.

[CA renter]

[quote=FlyerInHi][quote=CA renter] Speculation is zero sum.[/quote]

There are other services involved in speculation. They need real estate and all the other stuff involved in living day to day.

Speculation can make markets more efficient. Same with underground black markets. They get goods to people who would otherwise go without.

Speculating with your own money is actually very healthy. Even speculating with other people’s money is fine if the people investing with you understand the risks. But speculating with money benefiting from Federal insurance is different.
There’s a good NYT piece:

Speculators tend to buy in anticipation of a supply shortage or increased demand. They sell in anticipation of a supply glut or decreased demand. IOW, they exacerbate booms and busts; if it goes on long enough, they create bubbles that can be absolutely devastating to an economy. They do not make markets more efficient because they are often behind price manipulation — whether intended or not. Speculation is zero sum.

[CA renter]

[quote=harvey]Speculate is a subjective term – when does investment become speculation? Nevertheless, I’ll allow it…

To speculate, one must buy something and sell it later (or the reverse.)

Every transaction has a counterparty. To buy something there must be a seller.

The seller wants something – to sell at a particular price. The buyer gives the seller what he/she wants. The seller’s wants are fulfilled by the buyer.

Simply buying something – for any purpose – fills the need of the seller. It creates value.

Value is also created when the “speculator” sells the asset to some other party.

The speculator, the party that sells to the speculator, and the party who buys from the speculator all transact at the price they agree upon. All three get what they want.

No zero sum. It’s win, win, win.[/quote]

This is how I define it:

It’s speculation if a person is buying (or selling) an existing asset in the anticipation of selling (or buying) at a higher (or lower) price. I also think of rent-seeking as speculation if the activity takes more from the economy than it provides and/or if it causes adverse effects for those who are the original providers or consumers of those goods.

It’s investing if a person is providing funds or other resources that create or expand productive capacity.

[Anonymous]

[quote=CA renter]It’s speculation if a person is buying (or selling) an existing asset in the anticipation of selling (or buying) at a higher (or lower) price.[/quote]

So the local grocery store is speculating with every can of beans on the shelf?

[CDMA ENG]

[quote=harvey][quote=CA renter]It’s speculation if a person is buying (or selling) an existing asset in the anticipation of selling (or buying) at a higher (or lower) price.[/quote]

So the local grocery store is speculating with every can of beans on the shelf?[/quote]

Yes.

Have you ever seen a can of beans on sale? Well then that means the grocer speculated on a higher price and couldn’t sell it.

CE

[FlyerInHi]

[quote=CA renter]
It’s investing if a person is providing funds or other resources that create or expand productive capacity.[/quote]

Productive capacity is over rated. I assume you mean factories and physical infrastructure.

More services that simply evaporate after they are rendered provide enjoyment to people and do increase overall wealth. More entertainment.

[CA renter]

[quote=harvey][quote=CA renter]It’s speculation if a person is buying (or selling) an existing asset in the anticipation of selling (or buying) at a higher (or lower) price.[/quote]

So the local grocery store is speculating with every can of beans on the shelf?[/quote]

We’ve discussed the grocery store issue before. They are providing a service because they make it more convenient for people to obtain the goods they need and also make it easier for the farmers/producers to sell in large batches to a few buyers vs. having to sell onsie-twosie to every individual purchaser. That being said, some would argue that it’s better for everyone to simply buy at farmers’ markets, but most of us like the convenience of having a grocery store that is open more hours/days. Speculators don’t provide any similar benefits.

[scaredyclassic]

[quote=CA renter][quote=harvey][quote=CA renter]It’s speculation if a person is buying (or selling) an existing asset in the anticipation of selling (or buying) at a higher (or lower) price.[/quote]

So the local grocery store is speculating with every can of beans on the shelf?[/quote]

We’ve discussed the grocery store issue before. They are providing a service because they make it more convenient for people to obtain the goods they need and also make it easier for the farmers/producers to sell in large batches to a few buyers vs. having to sell onsie-twosie to every individual purchaser. That being said, some would argue that it’s better for everyone to simply buy at farmers’ markets, but most of us like the convenience of having a grocery store that is open more hours/days. Speculators don’t provide any similar benefits.[/quote]

grocery stores only sell a tiny bit of food. Most if the store is packaged processed crap.

[FlyerInHi]

There are laws against price gouging although the sellers are selling at market prices. So I guess you cannot always sell at what the market will bear.

[Anonymous]

[quote=CA renter]Speculators don’t provide any similar benefits.[/quote]

Then why does anybody transact with them?

[CA renter]

[quote=harvey][quote=CA renter]Speculators don’t provide any similar benefits.[/quote]

Then why does anybody transact with them?[/quote]

In many cases, it’s because they largely control the market.

[SK in CV]

[quote=harvey][quote=CA renter]Speculators don’t provide any similar benefits.[/quote]

Then why does anybody transact with them?[/quote]

Taken together, these two comments are a perfect example of begging the question. The claim that speculators don’t provide any benefits in the real estate market is presumptive. They do provide a service. Real estate speculators both buy from a willing seller, and sell to a willing buyer. With very minor exceptions, real estate speculators have never controlled markets as, for instance, the Hunt brothers controlled the silver market 35 years ago. That doesn’t mean that they (speculators) have no effect on market prices. They do. Just as grocery stores and Costco have en effect on prices.

[Author]

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