NeverLNG posted:

"First of all, is he implying there is something wrong with "speculation?" Isn't that at least partly how markets operate?"

I could 'specutlate' that this is really not how they were originally designed. Not specifically for speculators.

The farmers and those who purchased their grain,beef,etc. needed a method to ensure delivery and at a agreed upon price. This means they could depend on that commodity to be delivered at the time and price and could therefore plan accordingly.

For instance I used to work on the mainframes at Ralston Purina Hdqtrs at Checkerboard Square in St. Louis. They used linear programming to mix various chows. If there was a glitch in the system,,in the case I recall they would start to lose rather large amounts of profits if the mainframe was down. In fact they pushed a virtual timer that calculated the losses for each minute. They would place a call with us and tell us how much it was costing them. It was a pressure tactic but truthful anyway.

So glitches in the market worked the same way.

Farmers live and breath the futures market. This is what I understand created it initially.

As to corporations. They went public so that stockholders could share in the profit, since they were the actual owners, and did this by means of divideneds.

When I started work we had an employee stock option plan that we would buy company(read corp) stock thru. It was steady almost always then at about $500 /share. The dividends were what you made money on.

But these days a stockholder could care less about the corporation. All they care about is buying and selling and making money via trades. Of course as the corporation made more money they would split the stock. I recall some of my cohorts became quite rich as a result of the above. They never sold. They always brought. They in reality owned part of the corporation and one of the reasons for the plan was that when you owned part of the corporation,known as Blue Chip Stock, you were naturally interested in its outlook.

So it was just normal to make a profit and share it with the stockholders.

Today its gone awry and the speculation IMO has been the undoing of the whole concept.

Day traders!!!! My brother was given lots of Sun Micro stock for his outstanding work as they became sucessful. He had over half a million. One day he decided to do some day trading. He died penniless.

There are those who feed erronous information to websites in order to stir the stock and make it move.

They are after one thing only. Money. They really could care less about the company or the country and its economy...and.....

So here we are today watching a meltdown. The business leaders(zany MBAs..et. al.) took the industry to other countries. Outsourced the rest. Downsized and fired many workers.

All this was what led us to the greed and ego stroking of CEO and the cohorts of theirs who used us and the country to cook the books, lie cheat and steal and all ...

the while shouting this mantra "The primary purpose of a corp is to make profits for the shareholders"...you can read this lot of different ways...

But the fact is that the corp I worked for had the shareholders interest at the very next to last of 8 company beliefs and stated it many times in the past.

If you hired good employees, paid them well, demanded an excellent endeavor by them, tried to get them to stay with the company and retire then you made excellent products and delivered excellent service of them.

This resulted in one of the top corporations in the history of business in the USA.

Of course it all changed when other factors came into play and we are all aware of that.

From congratulating an employee for his years of service he was treated very well and made to feel important and given gifts of recognition...these days its just a 'perp walk' to the door by a guard and his badge removed.

This is the way it was up until the late 80s where I worked and did the best I could and reaped the rewards.
I carry a card that states those 'beliefs' that were in place that I speak of above.

Airdale-there was no HR back then for no one needed that impersonality..or the rest of that baggage
Our desire for nothing by pure greed at the loss of everything else took us here. To where we think now that this is the way its supposed to be and was created to be.

I'm not sure the term 'speculation' is accurate; a better term would be market manipulation.

When large amounts of liquidity pile into a relaitvely illiquid market that market can be pushed a long way; this isn't speculation. There was a lot of hedge fund money in the commodity markets last summer and the markets were jobbed. Of course, the CFTC looked around the outside pf the various buildings and reassured everyone that 'everything is fine!'

Both Martin Kindleberger and John Kenneth Galbraith described how this was done during the runup to the Great Depression;

http://www.amazon.com/Manias-Panics-Crashes-Financial-Investment/dp/0471...

http://www.amazon.com/Great-Crash-1929-Kenneth-Galbraith/dp/0395859999/r...

Back then it was confined to the stock market and the technique was called, 'Taking the stock in hand'. Rich investors would quietly buy stocks in a particular company then create media interest about that company and their interest in it. There were paid flacks who would specialize in 'highlighting' companies that were selected for manipulation. Once the public started rushing in, the big boys would quietly sell their positions letting the whole enterprise crash. Then, they would move on to another company's stock.

Confined markets can be manipulated, here is a good example:

Short sellers make VW the world's priciest firm
Tue Oct 28, 2008

By Sarah Marsh

FRANKFURT (Reuters) - Volkswagen (VOWG.DE) briefly became the world's biggest company by market value on Tuesday, as short sellers caught betting on a price drop with borrowed stock scrambled to find shares after a buying spree by Porsche.

http://www.reuters.com/article/ousiv/idUSTRE49R3I920081028

This was legal, but you can see how the process can work. The more things change, the more they remain the same ...