Chez Chesler

Remember when oil prices spiked in the summer? At the time, the blame was placed on speculators. (Other sources did not blame speculators.) I didn't understand this. A speculator doesn't make the market, the speculator is betting on the market. (I've noticed that every time the weatherman says it's going to rain, we get rainly weather. I wish he'd stop saying we're getting rain.) For everyone who commits to buying oil at a certain price, for a price, there is someone who takes that price now, betting that he'll be able to buy the oil to sell at that price at a lower price. I was wondering who those speculators were. Now I know, because the Boston Globe said I'm supposed to feel sorry for people who locked in their home heating oil contracts at $4 per gallon.

Labels: contracts, free markets, laissez-faire, oil, speculators, zero-sum

Jordan's Furniture ran a promotion this past spring: If the Red Sox won the World Series, the entire purchase price of your furniture would be returned.  So that he could cheer for the home team, Eliot purchased an insurance policy.  (Soon after Warren Buffett bought the company, Barry stopped doing the commercials.)  Newsradio was interviewing folks and they kept saying "It's win-win, the Red Sox are happy, the fans are happy, the customers got free furniture, and Jordan's was insured."  Never mind the Indians and the Rockies, somebody has to pay for all this, namely the insurance company.  To be fair, the Boston Globe story cited does note this.

On the other hand, home prices are falling.  The bubble has burst, and prices, which aren't supposed to drop because "they aren't making any more" land, are down to a level not seen for, oh, two or three years.  This is supposed to be a tragedy, but people aren't buying houses for fuel.  One family moves out, another family moves in.  There are still millions of people (30% of the country, half of New Yorkers) who don't own the house they live in.  For every home-seller who loses a dollar because his house isn't worth as much as he hopes, there is a home-buyer who gains a dollar because he didn't have to spend as much as he might have - and there are some people who can afford houses who wouldn't be able to otherwise.

Labels: economics, housing, prices, zero-sum