Читать книгу Taming the Lion - Richard Farleigh - Страница 20

Over the years I have heard a great deal of criticism about speculators. It often pops up when markets or currencies are having a dramatic fall. Funny, speculation doesn’t seem to bother so many people when it’s pushing prices higher. Should speculators be ashamed? No, the fact is that the market needs them.

Speculators add important liquidity. I often invest in small stocks, which would not have much daily turnover if it were not for speculators. The longer term holders of these stocks do not buy or sell very often, so when I need to find a buyer or a seller, it is a great benefit to have speculators as they are much more active.

Speculators also play an important role in absorbing risk that others don’t want. Wheat farmers, for example, may sell their crop well before harvest at a fixed price for a future delivery date. That way, they can remove the risk that there is a bumper season and an oversupply that forces prices lower. The buyers may be speculators who are happy to take on that risk – without the speculators, the farmers may have no one to sell to.

You often hear criticism of speculation based on the flawed argument that it pushes prices to unrealistic levels. The thing is though, speculators are usually punished when they do this, because if they are wrong about real values, they are usually the big losers. The tech boom and bust, where perhaps it was speculators who drove prices to very high levels, is a great example. Most of them paid very heavily when market prices crashed to a fraction of the higher levels. Though what a great opportunity it was for the more savvy investors to sell near the highs.

So, speculation is usually only successful when it is in line with the fundamentals, and when it is pushing prices to a level that more closely reflects fair value.