Poe wrote on both.
Not permanently, like coal mining does. Eventually, natural processes will restore land that is left fallow. Coal won’t do that, ever.
Ah, so the governor is not a corporate lackey; he’s just an economic moron. Got it.
No, but like I said, we use natural gas to make fertilizer that puts nitrogen back into the soil. We could just as easily fill coal mines with crude oil and feel just as smug. And I forgot to mention how irrigation dries up ground water supplies and fucks with diverted rivers.
So tell me again, what’s the point of this tangent? To bitch and moan about the coal industry or to chastise those that earn income from the land they own.
It all goes back to my so hated thread about risk. The guy that ponied up the capital to purchase the mineral rights gets the royalties once extracted. If you buy an apartment complex you get income from charging rent.
Sure it would be nice to all live in a system of shared ownership where a person that can’t pay rent lives free because he’s a swell guy. But it ain’t gunna happen.
You need people betting against investments. Only an idiot thinks investments always go up.
Then how do you account for the housing bubble? I personally had a client who was a real estate agent who said exactlly that, “real estate never goes down”. I don’t know if he believed it, but that is what he was telling his clients, and I have no problem that some of them believed it.
An insurance company creates wealth by decreasing its reduction through taking risks that other people are unwilling to take.
I realize you are incredibly stupid, so I know these questions I’m about to type are wasted effort on my part. But I will try to guide you through a rational thought process, and perhaps this time you will learn something (then again, perhaps not).
So let’s begin:
Do you see any difference at all between (i) a coal mine and (ii) land that may or may not have a bunch of coal underneath it?
That’s exactly how I account for the housing bubble. Idiots thought real estate couldn’t go down. And that includes all kinds of idiots, including real estate agents, stock brokers, mortgage lenders, HGTV program developers.
The funny thing about the housing bubble was that prior to the 2000s house prices didn’t really go down much, and they didn’t really go up much. As far as investments go, it was a nice easy way to earn 5-10%. Foreclosure rates were so low that buying mortgage backed securities were the standard way for pension plans to invest.
So a lot of well meaning idiots saw house prices triple and thought nothing of it. I mean come on, look at the rate of increase in house prices. How was it not glaringly obvious?
Meanwhile, the smart people realized prices can’t keep going up like that, bet against the market and made a shit load of money. The ones that made the most money were betting against the market while it was still going up and everyone else called them crazy.
Got news for you, for every long there is an offsetting short position. Just the way the system works. There may be leverage, lack of collateral, collateral made of fairy dust, etc, but the stock market and all derivatives are a zero sum game.
That’s not news for him. Seems you’ve misunderstood his post–he’s saying the same thing you are.
Wealth is not reliably distributed to those who created wealth, it is frequently distributed to those who already have wealth. That is the whole capital v labor issue that people bring up.
An insurance company creates wealth by pooling and distributing actual risk. Insurance companies cover the risk of actual losses. There may be elements of the market that approximate gambling (buying and selling commodity futures or stock options without a position in the underlying commodity or stock) but insurance serves a societal purpose.
Why do you NEED people betting against investments?
I could see how in the case of hedging, you might need someone to take the other side of the hedging arrangement.
For example if a corn grower needed to lock in the price of corn so he could plan for the next year and there wasn’t enough interest from the eventual purchasers of corn in locking in their future purchase price to soak up all the offered corn. These people are called speculators and are a necessary part of the hedging process.
But when you create synthetic securities, you are frequently doing little more than taking opposite sides in a bet on the movement of some economic indicator. I buy weather futures without and stake in what happens to the weather and you sell them to me without having any other stake in the outcome of weather. Why is this sort of activity necessary or even desirable?
Shorting stocks are said to create better price discovery but the price of that extra price discovery is higher stock volatility and and speculation. The stock amrket has one major economic purpose. To create a market place that will give stocks liquidity. The liquidity makes IPOs more marketable and makes it easier to raise cash for businesses. There is no need to permit shorting in order to accomplish this goal (at least not at the retail level). We do it because the people who operate the markets want it.
Wall Street believed this. Or are you forgetting that several investment banks no longer exist (or no longer exist as independent entities).
The smart people didn’t bet against he real estate market as it was going up and everyone was calling them crazy. The ones that made the most money times it just about perfectly.
If you can’t short, then you can’t hedge. Seriously, in that case you can only be long or in cash. Now, an significant number of those that short are taking a naked position and not hedging, but the fact is you can’t hedge without the ability to short.
Thats not true. If I have a share of IBM stock and it doubles, who has lost money? Who is the counterparty to my share of IBM stock?
This may be true for futures and options and some forms of derivatives and swaps but if I am long 3 bars of gold sitting in my safe, who is short those three bars of gold?
Hedge what?
Hedge against naked option positions?
Why do shouldn’t short calls all be covered calls, why allow naked call selling at all. Oh but then I can’t buy a put to protect me from downside risk on my stock.
Well there’s this thing called put call parity that allows me to mimic the effect of being long stock and long a put by selling the stock I already own, buying an in the money call and putting the rest of the money in an interest bearing instrument. We don’t need shorting.
I don’t see what you can’t do without shorting that you would actually want to encourage doing.
Now, I’m with you on the naked shorts - at least for retail if not for all non market makers.
Hedge your long position. Someone has to take the other side of your trade. Your long put needs someone else to be short that put, correct? And buying the long in the money call requires someone else shorting that call, correct? So, how can you hedge if no one is allowed to take the short side of your long options or long underlying?
Put call parity *requires *being able to be both long and short, right? Long call + short put = synthetic long underlying, etc.
Well, you’ve managed to (i) use “distribute” in exactly the way I showed was stupid and (ii) ignored that one can enjoy the wealth created by their parents or other relatives (as I indicated).