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> If there was lots of oil sitting around in warehouses from people speculating on the price of it People who speculate on commodities do not actually have to
by praptak 16y ago
> If there was lots of oil sitting around in warehouses from people speculating on the price of it
People who speculate on commodities do not actually have to physically keep them. The commodities just change ownership, but not location. Only the final buyer actually picks them up.
- yardie 16y agoSometimes they do change location, and you end up with 28,000 tons of coal on your front door. http://thedailywtf.com/Articles/Special-Delivery.aspx http://thedailywtf.com/Articles/Special-Delivery.aspx
- praptak 16y agoHeh, heh, good article. In addition to the humorous value it actually does explain why traders do not (usually! ;-) ) need warehouses.
- cturner 16y agoThanks. Hence my point that it's not turtles all the way down. Eventually there has to be some real demand to support a high price, or else the price will drop as traders trade away to avoid delivery.
- praptak 16y ago> Eventually there has to be some real demand to support a high price Yes, of course. That's why the bubbles burst. But before that, there's a ton of money on top of the real demand, invested only in hope that more people will invest more money in hope that more people will invest... so it goes until there are no more people willing to invest. > or else the price will drop as traders trade away to avoid delivery. The delivery is not the limiting factor. The traders just roll forward their contracts long before the actual delivery date.