5 ms·

I really wonder if those guys really created $500M worth of “value” for the rest of the world. Because if they didn’t, it means it’s theft...

by Ecco 6y ago

MattGaiser 6y ago
A lot of people gambled and they won.
- ClumsyPilot 6y ago
  Youn are kindsupporting his proposition - that nothijg evonomically productive has happened. Of trading is a zero sum game, liek OP is proposint, their winning just take from other parts of ecobomy
  - Ecco 6y ago
    Yeah, I understand the “when people gamble most will lose and someone will be lucky”. But the big difference I see in this case is that many legitimate businesses work with crude oil so not all of those people are gambling / willing to gamble.
    - gruez 6y ago
      >But the big difference I see in this case is that many legitimate businesses work with crude oil so not all of those people are gambling / willing to gamble. But those aren't going to be the losers. Oil producers typically sell their future contracts immediately to lock in a good price. Likewise, oil consumers are typically going to be buying oil futures early, hold them until they expire, and take delivery. In either case they're not going to be affected by the price going negative on the day of expiry.
Ecco 6y ago
I’m fine with the downvotes - I understand it can be a controversial opinion. But I’d love to get some more detailed feedback!
- nulptr 6y ago
  If you accuse someone of theft, shouldn't the burden of proof be on you? Also, if two people make a bet, and one person wins, is that theft?
  - Ecco 6y ago
    Didn’t accuse anyone though :)
    - bawolff 6y ago
      You accused people who make transactions that don't create value of theft
  - francisofascii 6y ago
    If one person knows the probable outcome and the other one does not, you can certainly frame it as theft.
- javert 6y ago
  Let's take an example. If I buy a stock at $20 from Arthur and sell it the next day for $60 to Bob, have I made $40 of value? Yes. Without people like me, Arthur might have gotten a much worse deal (possibly $0). Again, without people like me, Bob might have gotten a much worse deal (possibly $100, or maybe he wouldn't be able to buy at any price). That's the service that active traders provide to everyone else in the market. It's not for you to judge whether the $40 is "worth" $40. It is. The situation in the oil trading story is the same, in essence. It is "worth" $500M. Unless the traders intentionally manipulated the prices, which may nor or may be true. The same scenario could play out either way. So it could be that such a trade is worth $500M. $500M may sound like rich compensation for this type of work, but everybody's compensation is determined by supply and demand, i.e., the rarity of people who can perform that work, and its utility. [1] (There was also a lot of risk involved, and capital allocation is how a market economy coordinates its activities, but that feels too big to get into here.) When you accuse honest people of theft, that's nasty. That's probably why you are being downvoted. Then again, people also get downvoted unfairly all the time, so who knows. [1] Well, except when the government alters the curve. For instance, $500M can pay for 14,000 American teacher-years. But the government forcibly operates an education cartel and artificially holds down the salary of teachers. They are certainly worth far more than the $35K a year I used in that calculation.
throwaway1777 6y ago
Derivative trading is usually zero sum. There is a loser for every winner. I don’t understand in what world buying and selling oil on an open market could be considered theft. Everyone knows the rules of the game.
- Ecco 6y ago
  Well, let’s consider a simplistic example: an obscure currency, let’s call it FAKE, that can be traded for USD. That currency is only used by people in a small island, and that island only exports clamshells and imports Big Macs. In this scenario, and unless I’m mistaken, the FAKE/USD rate will vary depending on: - how much clamshell those people can export and how much US people value them - how much BigMacs those guys import and how much those guys value them Enters a day trader - someone who will never buy a Big Mac nor any clamshell. The guy speculates and there are two possible outcomes : - He fails. Technically he basically gave “value” to either USD holders or FAKE have holders. Too bad for him, but he kinda made this happen. - He succeeds. Now what? Isn’t that kind of a parasitic behavior? Couldn’t that be considered theft to some extent? I guess the question may boil down to “why would they even let the day trader be part of this?”.
  - baconandeggs 6y ago
    A speculator does one thing only: takes assets not in (peak)demand today and bets they are gonna be in demand in the future. He takes a calculated risk and a lot of times it doesn't pay off. Everybody involved is getting paid and all the transactions are voluntary. If you think that is theft then I don't know what to tell you.
    - Ecco 6y ago
      Well, a theft can be voluntary: that’s what con-artists do all the time!
      - gruez 6y ago
        Con artists are getting your consent via deception. Is this the case what derivative traders are doing?
iav 6y ago
There needs to be a buyer and a seller for any trade. You don't know the stories of the other participants in those transactions - maybe if they didn't get rid of their oil on that day for pennies (or negative dollars), they would have been forced into far worse consequences, defaulted on their legal obligations, or forced into breaking a trade. If you read the terms of the futures market, it is very specific in how you must take delivery and where, and failing to fulfill those requirements exactly would result in way worse consequences (imagine an oil trader who is banned from trading... yeah way worse than losing a bit of money). There is a set of counterparties out there that collectively decided that paying those guys $500M was better than their next best alternative.
- Ecco 6y ago
  Super interesting. Thanks!
  - pjc50 6y ago
    A good angle to think of for options trading is that writing out-of-the-money options is like selling insurance. Occasionally you have to make a big payout, but the rest of the time you're getting small payments. Some of the market participants were effectively insuring others against the price of oil dropping too low.
opportune 6y ago
If you were selling oil and had the option of either getting $45/barrel for all the oil you sell next month or somewhere in the $0-$100 range, which decision would you take?
wonderwonder 6y ago
This would essentially mean that most winners on every trade in equities, crypto, forex (except for central banks I guess) etc. are committing theft. When individuals enter a trade on these markets its soley to make a profit, very rarely is it to take physical delivery of a good that will be used. You make a trade based on your assumption of which way the price of that asset will go. Someone else makes an equal and opposite trade. One person is right. There is not always a loser on every transaction as one person can think an asset has peaked and exit in profit while the asset continues to gain value, but eventually there will be a loser. Its a game that people play and there are winners and losers, but if everyone willingly enters then it is not theft. It could be considered legalized gambling I guess but everyone involved is a gambler.
- AmericanChopper 6y ago
  There is a non-trivial number of people who believe the very concept of private property is theft. Quite a few of them post comments on HN.
  - erikpukinskis 6y ago
    I think you have it a bit confused. We think property is violence not theft.
    - AmericanChopper 6y ago
      I believed the idea was originally popularised by the slogan “La propriété, c'est le vol”, where vol does translate to theft. But violence would certainly be quite similar to Proudhon‘s original meaning for the phrase. Marx didn’t like the idea because he said it presupposes that property exists, which he obviously had a problem with. Fun fact, this disagreement was the primary conflict that split the IWA into seperate anarchist and Marxist movements. With the anarchists later going on to adopt national socialism, which at the time was known as fascism.
jpxw 6y ago
You’re committing theft by earning more on the marketplace than some other person by this logic

I really wonder if those guys really created $500M worth of “value” for the rest of the world. Because if they didn’t, it means it’s theft...

by Ecco 6y ago

I really wonder if those guys really created $500M worth of “value” for the rest of the world. Because if they didn’t, it means it’s theft...

MattGaiser 6y ago

A lot of people gambled and they won.

ClumsyPilot 6y ago
Youn are kindsupporting his proposition - that nothijg evonomically productive has happened. Of trading is a zero sum game, liek OP is proposint, their winning just take from other parts of ecobomy
- Ecco 6y ago
  Yeah, I understand the “when people gamble most will lose and someone will be lucky”. But the big difference I see in this case is that many legitimate businesses work with crude oil so not all of those people are gambling / willing to gamble.
  - gruez 6y ago
    >But the big difference I see in this case is that many legitimate businesses work with crude oil so not all of those people are gambling / willing to gamble. But those aren't going to be the losers. Oil producers typically sell their future contracts immediately to lock in a good price. Likewise, oil consumers are typically going to be buying oil futures early, hold them until they expire, and take delivery. In either case they're not going to be affected by the price going negative on the day of expiry.

Ecco 6y ago

I’m fine with the downvotes - I understand it can be a controversial opinion. But I’d love to get some more detailed feedback!

nulptr 6y ago
If you accuse someone of theft, shouldn't the burden of proof be on you? Also, if two people make a bet, and one person wins, is that theft?
- Ecco 6y ago
  Didn’t accuse anyone though :)
  - bawolff 6y ago
    You accused people who make transactions that don't create value of theft
- francisofascii 6y ago
  If one person knows the probable outcome and the other one does not, you can certainly frame it as theft.
javert 6y ago
Let's take an example. If I buy a stock at $20 from Arthur and sell it the next day for $60 to Bob, have I made $40 of value? Yes. Without people like me, Arthur might have gotten a much worse deal (possibly $0). Again, without people like me, Bob might have gotten a much worse deal (possibly $100, or maybe he wouldn't be able to buy at any price). That's the service that active traders provide to everyone else in the market. It's not for you to judge whether the $40 is "worth" $40. It is. The situation in the oil trading story is the same, in essence. It is "worth" $500M. Unless the traders intentionally manipulated the prices, which may nor or may be true. The same scenario could play out either way. So it could be that such a trade is worth $500M. $500M may sound like rich compensation for this type of work, but everybody's compensation is determined by supply and demand, i.e., the rarity of people who can perform that work, and its utility. [1] (There was also a lot of risk involved, and capital allocation is how a market economy coordinates its activities, but that feels too big to get into here.) When you accuse honest people of theft, that's nasty. That's probably why you are being downvoted. Then again, people also get downvoted unfairly all the time, so who knows. [1] Well, except when the government alters the curve. For instance, $500M can pay for 14,000 American teacher-years. But the government forcibly operates an education cartel and artificially holds down the salary of teachers. They are certainly worth far more than the $35K a year I used in that calculation.

throwaway1777 6y ago

Derivative trading is usually zero sum. There is a loser for every winner. I don’t understand in what world buying and selling oil on an open market could be considered theft. Everyone knows the rules of the game.

Ecco 6y ago
Well, let’s consider a simplistic example: an obscure currency, let’s call it FAKE, that can be traded for USD. That currency is only used by people in a small island, and that island only exports clamshells and imports Big Macs. In this scenario, and unless I’m mistaken, the FAKE/USD rate will vary depending on: - how much clamshell those people can export and how much US people value them - how much BigMacs those guys import and how much those guys value them Enters a day trader - someone who will never buy a Big Mac nor any clamshell. The guy speculates and there are two possible outcomes : - He fails. Technically he basically gave “value” to either USD holders or FAKE have holders. Too bad for him, but he kinda made this happen. - He succeeds. Now what? Isn’t that kind of a parasitic behavior? Couldn’t that be considered theft to some extent? I guess the question may boil down to “why would they even let the day trader be part of this?”.
- baconandeggs 6y ago
  A speculator does one thing only: takes assets not in (peak)demand today and bets they are gonna be in demand in the future. He takes a calculated risk and a lot of times it doesn't pay off. Everybody involved is getting paid and all the transactions are voluntary. If you think that is theft then I don't know what to tell you.
  - Ecco 6y ago
    Well, a theft can be voluntary: that’s what con-artists do all the time!
    - gruez 6y ago
      Con artists are getting your consent via deception. Is this the case what derivative traders are doing?

iav 6y ago

There needs to be a buyer and a seller for any trade. You don't know the stories of the other participants in those transactions - maybe if they didn't get rid of their oil on that day for pennies (or negative dollars), they would have been forced into far worse consequences, defaulted on their legal obligations, or forced into breaking a trade. If you read the terms of the futures market, it is very specific in how you must take delivery and where, and failing to fulfill those requirements exactly would result in way worse consequences (imagine an oil trader who is banned from trading... yeah way worse than losing a bit of money). There is a set of counterparties out there that collectively decided that paying those guys $500M was better than their next best alternative.

Ecco 6y ago
Super interesting. Thanks!
- pjc50 6y ago
  A good angle to think of for options trading is that writing out-of-the-money options is like selling insurance. Occasionally you have to make a big payout, but the rest of the time you're getting small payments. Some of the market participants were effectively insuring others against the price of oil dropping too low.

opportune 6y ago

If you were selling oil and had the option of either getting $45/barrel for all the oil you sell next month or somewhere in the $0-$100 range, which decision would you take?

wonderwonder 6y ago

This would essentially mean that most winners on every trade in equities, crypto, forex (except for central banks I guess) etc. are committing theft. When individuals enter a trade on these markets its soley to make a profit, very rarely is it to take physical delivery of a good that will be used. You make a trade based on your assumption of which way the price of that asset will go. Someone else makes an equal and opposite trade. One person is right. There is not always a loser on every transaction as one person can think an asset has peaked and exit in profit while the asset continues to gain value, but eventually there will be a loser. Its a game that people play and there are winners and losers, but if everyone willingly enters then it is not theft. It could be considered legalized gambling I guess but everyone involved is a gambler.

AmericanChopper 6y ago
There is a non-trivial number of people who believe the very concept of private property is theft. Quite a few of them post comments on HN.
- erikpukinskis 6y ago
  I think you have it a bit confused. We think property is violence not theft.
  - AmericanChopper 6y ago
    I believed the idea was originally popularised by the slogan “La propriété, c'est le vol”, where vol does translate to theft. But violence would certainly be quite similar to Proudhon‘s original meaning for the phrase. Marx didn’t like the idea because he said it presupposes that property exists, which he obviously had a problem with. Fun fact, this disagreement was the primary conflict that split the IWA into seperate anarchist and Marxist movements. With the anarchists later going on to adopt national socialism, which at the time was known as fascism.

jpxw 6y ago

You’re committing theft by earning more on the marketplace than some other person by this logic