Tom Basso wrote in in response to last week’s question.
Van,
Regarding the question on the value of trading to society [in the newsletter a couple of weeks ago], I would cite a study I did long ago showing hedgers laying off risk to speculators that would, by taking positions, take the risk off the hedging community. For the risk the speculator takes on, he or she is paid a reasonable profit over time. The hedging community pays a price for reducing their risk and that is earned by the speculators. Without the traders of the world, the market for hedging would sometimes be one sided and illiquid, and their cost to lay off risk would increase. Businesses would be more affected by market swings and planning would be difficult.
Then, there’s the money manger aspect, which I was for 28 years. Being a trader with other peoples’ money means trying to add value to their net worth, so they can send their kids to college, afford retirement, etc. Most of my clients appreciated what I did for them.
All the best,
Tom Basso
