A Shuffle of Aluminum, but to Banks, Pure Gold • Hacker News Board

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#21

Post by mabhatter » Sun, Jul 21, 2013, 4:40 AM UTC

smadge wrote: post #14

temphn wrote: post #10

The only way that Goldman could possibly make more money by artificially delaying shipments would be because of a market-distorting regulation. And sure enough, here it is: industry rules require that all that metal cannot simply sit in a warehouse forever. At least 3,000 tons of that metal must be moved out each day. Without looking I'd bet this is some kind of "anti-hoarding" provision, probably intended to prevent…

First of all, the "market distorting regulation" you mention that causes Goldman Sachs to shuffle aluminum around is not a government regulation, it is an industry standard set by the London Metal Exchange. The article suggests that there is a conflict of interest. The Exchange get's 1% of the storage costs, and the same companies that benefit from this rule are the ones that control the Exchange. This is a classic c…

The little guy is an actual Aluminum Extrusion company, with actual people making an actual product. Jacking up prices of raw material even 1% is taking profit out of his pocket because he certainly cannot pass that cost on. (I used to work for a small company in that business)

He is hurt because he is small and barely getting any discount at all. So all these imagined charges hit HIS pocket for 5% or more "off the top" because he can't avoid buying from the warehouses.

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#22

Post by patio11 » Sun, Jul 21, 2013, 4:41 AM UTC

droithomme wrote: post #17

The New York Times is claiming that they have just discovered this scheme through investigative reporting, but the article is a rewrite of a July 2011 Reuters article by other authors. http://www.reuters.com/article/2011/07/29/us-lme-warehousing...

They're presumably avoiding that because they'd have to answer the uncomfortable question "And how many billions of dollars have speculators stolen from hardworking Americans by hoarding aluminum since the Reuters piece?" "Er, the spot price is down by a third, actually."

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#23

Post by fixxer » Sun, Jul 21, 2013, 4:49 AM UTC

patio11 wrote: post #22

droithomme wrote: post #17

The New York Times is claiming that they have just discovered this scheme through investigative reporting, but the article is a rewrite of a July 2011 Reuters article by other authors. http://www.reuters.com/article/2011/07/29/us-lme-warehousing...

They're presumably avoiding that because they'd have to answer the uncomfortable question "And how many billions of dollars have speculators stolen from hardworking Americans by hoarding aluminum since the Reuters piece?" "Er, the spot price is down by a third, actually."

Exactly.

I'm just happy that GS found a use of Detroit.

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#24

Post by chm » Sun, Jul 21, 2013, 5:12 AM UTC

droithomme wrote: post #17

The New York Times is claiming that they have just discovered this scheme through investigative reporting, but the article is a rewrite of a July 2011 Reuters article by other authors. http://www.reuters.com/article/2011/07/29/us-lme-warehousing...

Ha! Great, I don't have to pay to read this one ;)

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#25

Post by MikeCapone » Sun, Jul 21, 2013, 6:21 AM UTC

patio11 wrote: post #22

droithomme wrote: post #17

The New York Times is claiming that they have just discovered this scheme through investigative reporting, but the article is a rewrite of a July 2011 Reuters article by other authors. http://www.reuters.com/article/2011/07/29/us-lme-warehousing...

They're presumably avoiding that because they'd have to answer the uncomfortable question "And how many billions of dollars have speculators stolen from hardworking Americans by hoarding aluminum since the Reuters piece?" "Er, the spot price is down by a third, actually."

People need to realize that if you hoard something, you might be reducing supply now, but if you want to make money you have to eventually sell and that increases supply at some later point.

There's no cure for high prices like high prices, and vice versa.

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#26

Post by Qantourisc » Sun, Jul 21, 2013, 7:23 AM UTC

Banks/big capitals are evil, I prefer them dead (well the financial instance not the person. The persons however deserve a good old fashion whipping, at the least.)

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#27

Post by Zakharov » Sun, Jul 21, 2013, 7:32 AM UTC

They talk about the money made storing aluminium in the warehouse, who's paying that? It sounds like Goldman owns both the aluminium and the warehouses, so all they're doing is buying aluminium and refusing to sell it.

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#28

Post by danbmil99 » Sun, Jul 21, 2013, 8:07 AM UTC

I think it's an old trick, called "cornering the market". One of the clearest ways Ayn Rand's vision of unbridled capitalism is not a practical reality.

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#29

Post by jbert » Sun, Jul 21, 2013, 9:11 AM UTC

temphn wrote: post #10

The only way that Goldman could possibly make more money by artificially delaying shipments would be because of a market-distorting regulation. And sure enough, here it is: industry rules require that all that metal cannot simply sit in a warehouse forever. At least 3,000 tons of that metal must be moved out each day. Without looking I'd bet this is some kind of "anti-hoarding" provision, probably intended to prevent…

Could you elaborate on how the "metal must be moved" rule incentivises delayed shipments?

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#30

Post by anon1385 » Sun, Jul 21, 2013, 9:54 AM UTC

patio11 wrote: post #20

guard-of-terra wrote: post #3

Could not figure out what is going on from reading the page one, can somebody explain using simple terms?

Some people believe that the future price of aluminum is going to be sufficiently higher than the prevailing price today that they would prefer to pay to store their aluminum and sell at some point in the future. The NYT correctly suggests that this increases the price of aluminum today and that this generates (literal) rent for people who own warehouses. The NYT is furious about it, because they are not envisioning…

Wasn't the point of the original Routers article that GS owned the storage warehouses and therefore could (and did) control the speed/amount of aluminium being shipped out, against the wishes of those who owned the metal. i.e. GS have huge control over the supply of a finite resource. Saying 'well the price did fall' doesn't undermine the argument that GS were controlling the supply to their own benefit since we don't know what positions GS took on aluminium over that time.