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Economy of Scale
Posted by Reality (more from Reality) on Fri, 13 Jan 2012 10:11:27
In Reply to: hoarding gasoline..., James, Fri, 13 Jan 2012 09:01:18
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That's where economy of scale actually makes sense; i.e. let the warehouses store the volatile commodities, and the investor hold the warehouse receipts. That is, if one wants to speculate in those commodities; I'm not advocating such speculation at the current time at all.
Capital market is an information distribution mechanism. Economy of scale in that is possible if insider trading is allowed (i.e. information wholesaler arbitraging). The current legal system however only allows those in the government to do that on a large scale (e.g. Congressional insider trading, front-running the FED market interventions etc.) arbitraging what is essentially political information that has impact on the market. Fund managers not politically connected enough and trying to build a consistent information advantage regarding non-political information like Rajarathnam end up in jail. It's an interesting cat and mouse game, or shall I say, fox and hen house game.
The massive fraudulent financial engineering in the past decade and half is reflective of the fact that after technology cut brokerage fees to near-zero, big wall street firms have very little economy of scale advantage left to justify their continued existence . . . except for the political economy of scale known as "Too Big To fail." Stripping out the massive bailouts every decade or so (now shortening towards every half decade), much of the big players in the industry have turned into negative-sum games.
posted by 75.67.1...
Posts in this Thread:
- investing...throwing darts...., GFW3pedals , Thu, 12 Jan 2012 11:09:33
- it just depends on what kind of fund your looking for, vvack0matic , Sat, 14 Jan 2012 15:13:12
- Open a fidelity account, pony, Sat, 14 Jan 2012 03:55:36
- Re: investing...throwing darts...., pennydini, Fri, 13 Jan 2012 12:37:43
- It's all about asset allocation and costs, RodM, Fri, 13 Jan 2012 09:23:16
- It's all about the fund managers tr.............., soccersaab, Thu, 12 Jan 2012 19:41:44
- Re: investing...throwing darts...., Reality, Thu, 12 Jan 2012 17:11:41
- Re: investing...throwing darts...., davidgmills, Thu, 12 Jan 2012 17:07:14
- Re: investing...throwing darts...., TML , Thu, 12 Jan 2012 14:59:25
- Re: investing...throwing darts...., John Myers, Thu, 12 Jan 2012 12:14:16
- Index Funds vs. Actively-Managed Funds, Bill Homer , Thu, 12 Jan 2012 12:10:58
- Re: investing...throwing darts...., James, Thu, 12 Jan 2012 11:50:47
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