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Comment by Jim Noble
Entered on:
This analogy completely misses the point. The typical speculator is not at all interested in owning a drop of oil, not one pork belly, nor one ounce of frozen orange juice. He only wishes to capitalize on what he hopes will be an increase in the future value of that commodity, by purchasing a promise to be able to buy x amount of that commodity in the future for less than what it will then be worth; and primarily to others who are similarly disinterested in actually acquiring that commodity.

In this case, a speculator would have gone to the candy broker and offered to purchase an option to buy candy bars next year for 60 cents, since he has also heard that they will be 75 cents next year (or so he hopes). Next year he can sell his 60 cent option for 70 cents and both he and his buyer each can reap a profit. But WHY is the candy bar going to be 75 cents? I posit that without the speculative transaction, the price would not have risen beyond the 60 cents; the balance has gone to the speculators. Who's getting screwed here? The consumer AND the booster club snack bar, who not only pay for the candy, but also for the profits skimmed off by the speculators, who don't even want the candy.

regards, Jim

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