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Can you name a business that isn’t speculating on anything?

chronic83030 3y ago
> Can you name a business that isn’t speculating on anything? Insurance companies, casinos, stock exchanges, utility companies, universities. If it were not for government regulation, these companies would have near, infinite riskless profit.
- mtoner23 3y ago
  Certainly not riskless. Before government regulation many of these industries went bust often. They are usually credited as some of the first regulated industries due to their societal value and their nature to go under.
- zaroth 3y ago
  All those things are replaceable if the incentives align. So I don’t think large profits would be risk free.
jmyeet 3y ago
Oil refineries, aluminum smelters, steel mills, farms, mines, car manufacturers, chip makers, the list is endless. Often such businesses will use financial instruments to remove risks (and potential rewards) from market fluctuations eg commodity futures, exchange rate swaps, etc. This reminded me of another example of accidental speculation. An airline used rolling 6 month commercial loans because it was cheaper than long term bonds by a few basis points. This was fine until it wasn’t. Interest rates spiked and the airline was suddenly insolvent. They’d inadvertently become a speculator on interest rates.
- antasvara 3y ago
  Farms plant seeds, which costs some amount of money. They then wait for a harvest, at which point they hope that the sale price of that harvest covers their expenses. How is that not speculation on the price of a given crop?
  - jmyeet 3y ago
    Planting seeds to grow crops is an example of creating value, not speculating. If the crop price remains unchanged, the farmer is fine (generally). Often the risk of price movements over the season are hedged with futures as well. Speculating would be needing the price to go up to turn a profit or not selling your crop in the hopes that the prices increases in the future.

> Can you name a business that isn’t speculating on anything? Insurance companies, casinos, stock exchanges, utility companies, universities. If it were not for government regulation, these companies would have near, infinite riskless profit.

mtoner23 3y ago
Certainly not riskless. Before government regulation many of these industries went bust often. They are usually credited as some of the first regulated industries due to their societal value and their nature to go under.
zaroth 3y ago
All those things are replaceable if the incentives align. So I don’t think large profits would be risk free.

jmyeet 3y ago

Oil refineries, aluminum smelters, steel mills, farms, mines, car manufacturers, chip makers, the list is endless. Often such businesses will use financial instruments to remove risks (and potential rewards) from market fluctuations eg commodity futures, exchange rate swaps, etc. This reminded me of another example of accidental speculation. An airline used rolling 6 month commercial loans because it was cheaper than long term bonds by a few basis points. This was fine until it wasn’t. Interest rates spiked and the airline was suddenly insolvent. They’d inadvertently become a speculator on interest rates.

antasvara 3y ago
Farms plant seeds, which costs some amount of money. They then wait for a harvest, at which point they hope that the sale price of that harvest covers their expenses. How is that not speculation on the price of a given crop?
- jmyeet 3y ago
  Planting seeds to grow crops is an example of creating value, not speculating. If the crop price remains unchanged, the farmer is fine (generally). Often the risk of price movements over the season are hedged with futures as well. Speculating would be needing the price to go up to turn a profit or not selling your crop in the hopes that the prices increases in the future.