Sep

11

In several of Patrick O'Brian's novels, Jack Aubrey's warship carries political officials to or from remote locations. Unlike the crew, these dignitaries are willing to directly state grievances to the captain or openly criticize the captain. In one case, Jack is told that an official has conveyed frustration with the slow passage. Aubrey asks incredulously, does this man not realize that these ships are utterly dependent on the wind?

Speculators are in a similar position. We try to profit by harnessing forces far larger than ourselves that we cannot control and that can be lethal at high intensities. Consider volatility, for example. This word has a negative connotation in the financial media. Volatility allegedly undermines the public's confidence in markets and dissuades some from participating. Consider, however, what would happen if there were no volatility. Like a sailing ship becalmed in the equatorial doldrums, using up its stores and surrounded by increasing filth generated by its crew, a speculator in a market with little or no price change can get nowhere. Such a market would become increasingly unhealthy if the lack of volatility persisted.


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