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How the Commodity Markets work

I really have no idea whether this story–where a commodities trader accidentally winds up having 28,000 tons of real, actual, physical coal dumped off at his workplace–is real. But it’s a good yarn, and it shows how the world of commodities traders is so unrelated to the stuff being traded that the very idea of a commodities trader actually buying a real-life commodity is way-out wacky, “News of the Weird” type stuff.

In real life, the commodity markets are dominated, not by farmers locking in the price for their corn while it’s still in the field, but by professional traders who never see a bushel of corn or an ounce of tin. These traders just take empty bets on the price of commodities, not actually contributing in any useful way to the market’s ability to judge supply and demand.

This isn’t quite the definition of a bucket shop (which is illegal), but it’s still pretty clearly gambling rather than investment.

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