Insanity: Screening elements in the HV

tlb wrote:In Trading Places their plans to corner the orange juice futures market failed because of a forged market forecast.

Just a small nitpick, to be precise. The Duke's plan to corner the market failed because of a forged report. Valentine and Winthorpe did succeed at cornering the market using the real report.

tlb wrote:
–snip–

But I am glad to see that you agree with me as to the meaning of "cornering the market" (in the highlighted text). You have to dominate the market to force people to buy at the inflated price; if they could buy sufficient and cheaper elsewhere, then the corner has failed. At that point you are stuck with overpriced goods, which you will have to sell at the market price (taking a loss if you paid more).

No, tlb.

Again. Although dominating a market can lead to cornering a market, cornering a market has absolutely nothing to do with dominating a market. Winthorpe and Valentine were able to sell off their shares and make a tidy profit. But their customers were part of a much larger market and those customers flipped their sales who knows how many times. Winthorpe and Valentine cornered the market on OJ. But they were not trying to dominate the market, nor did they. The market’s sales of OJ were much too large to dominate.

Let me try to explain it in another way. I grew up on a farm. I love hamhocks. A hamhock is a part of the pig for those of you who do not know. One real hamhock is about the size of a baby’s head. If I cornered the market on hamhocks, I would not dominate the market for hamhocks. Not even close! Because after each buyer buys my hamhocks, each of them in turn will have many more sales as opposed to mine. For those of you who are familiar with hamhocks you may know what I mean. By the time one hamhock makes it to the market (grocer) it is split several times. One hamhock is oftentimes split 6-8 times, or more, and each of them will still be packaged and sold as a hamhock. Sometimes they are split even more than that as I've seen, especially after the pandemic! What is sold in the store as a hamhock is simply one knuckle. So, even after I cornered the market and sold my shares, I could not dominate the many more sales that will follow in the market as a whole. And those market sales will make much more of a profit than I will.

It goes back to my example of Jose and Drug Wars. If Jose gets into the drug market and sells one ounce of cocaine to Bandito. Bandito is going to split (cut) that one ounce of cocaine into five or more ounces. So how has Jose dominated the market, when he has made only one sale of one ounce of cocaine to Bandito, but Bandito will have five or more sells of one ounce, depending on Bandito’s greed and what his market is willing to pay. Multiplied by how many ounces of cocaine Jose sells to Bandito. Multiplied by Jose's other buyers ad nauseum. Understand now? IOW, the market outside of Jose’s cornered market dwarf's his own, making dominating the cocaine market a pipe dream. And Bandito will make a lot more money than Jose.

****** *

tlb wrote:You have in this thread suggested that Manticore is taking the market for goods away from Solarian sellers. Here is an example:

penny wrote:SL markets can't afford not to buy Manticoran goods. Manticoran goods are both convenient and cheaper!

???

Yes. I said that. RFC said the same thing if you'd bother to sew some threads together.

1. Corner the market on trade.
2. Forcing Solarian shippers to lower prices to compete is the epitome of a takeover.
3. Not “completely” dominate markets.

Beware double post.

penny wrote:No, tlb.

Again. Although dominating a market can lead to cornering a market, cornering a market has absolutely nothing to do with dominating a market.

Have you bothered to search the internet to see if this position is widely held? I have, because I wanted to be sure that what I was saying about "cornering the market" was not just a personal opinion. I have already given you a quote from the Quickonomics website, which you have ignored. Here are two more:
From Wikipedia

Cornering the market wrote:In finance, cornering the market consists of obtaining sufficient control of a particular stock, commodity, or other asset in an attempt to manipulate the market price.

Companies that have cornered their markets have usually done so in an attempt to gain greater leeway in their decisions; for example, they may desire to charge higher prices for their products without fears of losing too much business. The cornerer hopes to gain control of enough of the supply of the commodity to be able to set the price for it.

Strategy and risks
Cornering a market can be attempted through several mechanisms. The most direct strategy is to buy a large percentage of the available commodity offered for sale in some spot market and hoard it. With the advent of futures trading, a cornerer may buy a large number of futures contracts on a commodity and then sell them at a profit after inflating the price.

Although there have been many attempts to corner markets by massive purchases in everything from tin to cattle, to date very few of these attempts have ever succeeded; instead, most of these attempted corners have tended to break themselves spontaneously. Indeed, as long ago as 1923, Edwin Lefèvre wrote, "very few of the great corners were profitable to the engineers of them."

A company attempting to corner a market is vulnerable due to the size of its position, which makes it highly susceptible to market risk. By its nature, cornering a market requires a company to purchase commodities or their derivatives at artificial prices; this effectively creates a situation where other investors attempt to profit off of these machinations through arbitrage. This has a chilling effect on the cornering attempt, since these investors usually take positions opposed to the cornerer. Furthermore, if the price starts to move against the cornerer, any attempt by the cornerer to sell would likely cause the price to drop substantially, subjecting the cornerer to catastrophic risk.

In nearly all cases, the company simply runs out of money and disbands before getting close to controlling prices. In the few cases where companies have purchased a dominant position in a market, governments and exchanges have intervened. Cornering a market is often considered unethical by the general public and has highly undesirable effects on the economy.

From the Investopedia website

Corner A Market: What it is, How it Works, Legality wrote:
By James Chen Updated April 25, 2022
Reviewed by Michael J Boyle
Fact checked by Kirsten Rohrs Schmitt

What Does "Corner A Market" Mean?
To corner a market means to acquire enough shares of a particular security type, such as those of a firm in a niche industry, or to hold a significant commodity position to be able to manipulate its price. The term implies that the market has been backed into a corner, and there is nowhere for the market to move to find other sellers and buyers. An investor needs deep pockets to be able to corner a market because it means acquiring significant physical assets. It can also mean to accumulate a major share of economic activity in a particular area. A phone company that dominates 90% of the wireless market could be said to have cornered the market.

Understanding "Corner A Market"
Large institutions can often corner a market through legal means. A company that has cornered the market has a significant competitive advantage compared to others operating in the same market. However, any time a company has a large market share, it may be scrutinized by the Department of Justice's Antitrust Division—especially if competitors complain.
 Indeed, Microsoft faced such a fate because of its large share of the computer operating system market.

When it comes to cornering the market in shares, bonds, foreign exchange or commodities, the Securities and Exchange Commission and Commodity Futures Trading Commission regulate and monitor the securities and commodities markets, and attempt to prevent and prosecute illegal trading behavior.


Cornering the Market Illegally
Most of the time, the idea of cornering the market is associated with illegal activity. Markets are intended to foster competition and allow for competitive price discovery. If someone has cornered a market by limiting the number of willing sellers and buyers, this process breaks down and can require regulatory intervention to restore it.

One way speculators try to corner a market is by hoarding large amounts of physical assets. One of the most famous cases of hoarding occurred in the silver market in the 1970s and early 1980s when three brothers, known as the Hunt Brothers, tried to hoard silver to corner the market and drive up the price. After approximately 10 years the attempt finally failed when the brothers were not able to borrow any more money to continue buying silver. This caused the price of silver to crash when the market realized there were practically no willing silver buyers left apart from the Hunt Brothers. So if they were not able to buy silver, then the price was destined to fall.

Corner A Market

Can you produce text from financial sites to support your view? Please include the text and pointers to the websites.

penny wrote:Let me try to explain it in another way. I grew up on a farm. I love hamhocks. A hamhock is a part of the pig for those of you who do not know. One real hamhock is about the size of a baby’s head. If I cornered the market on hamhocks, I would not dominate the market for hamhocks. Not even close! Because after each buyer buys my hamhocks, each of them in turn will have many more sales as opposed to mine. For those of you who are familiar with hamhocks you may know what I mean. By the time one hamhock makes it to the market (grocer) it is split several times. One hamhock is oftentimes split 6-8 times, or more, and each of them will still be packaged and sold as a hamhock. Sometimes they are split even more than that as I've seen, especially after the pandemic! What is sold in the store as a hamhock is simply one knuckle. So, even after I cornered the market and sold my shares, I could not dominate the many more sales that will follow in the market as a whole. And those market sales will make much more of a profit than I will.

It goes back to my example of Jose and Drug Wars. If Jose gets into the drug market and sells one ounce of cocaine to Bandito. Bandito is going to split (cut) that one ounce of cocaine into five or more ounces. So how has Jose dominated the market, when he has made only one sale of one ounce of cocaine to Bandito, but Bandito will have five or more sells of one ounce, depending on Bandito’s greed and what his market is willing to pay. Multiplied by how many ounces of cocaine Jose sells to Bandito. Multiplied by Jose's other buyers ad nauseum. Understand now? IOW, the market outside of Jose’s cornered market dwarf's his own, making dominating the cocaine market a pipe dream. And Bandito will make a lot more money than Jose.

That does not follow. In both examples, you're talking about two different markets. The fact that there are multiple players in one downstream (retail, usually) market who must buy from the same source does not sudden free this source from having cornered the market. We can take a different but similar example: let's say there's a single source for aluminium and steel, from whom auto makers, screw-driver makers, and soda can makers must buy. Does this mean the steel and aluminium market isn't cornered? No, it is cornered.

1. Corner the market on trade.
2. Forcing Solarian shippers to lower prices to compete is the epitome of a takeover.
3. Not “completely” dominate markets.

There was no cornering in the first place. This is describing a short-term competitive advantage. It wasn't very difficult for the Solarian shippers to copy that advantage.

ThinksMarkedly wrote:That does not follow. In both examples, you're talking about two different markets. The fact that there are multiple players in one downstream (retail, usually) market who must buy from the same source does not sudden free this source from having cornered the market. We can take a different but similar example: let's say there's a single source for aluminium and steel, from whom auto makers, screw-driver makers, and soda can makers must buy. Does this mean the steel and aluminium market isn't cornered? No, it is cornered.

1. Corner the market on trade.
2. Forcing Solarian shippers to lower prices to compete is the epitome of a takeover.
3. Not “completely” dominate markets.

There was no cornering in the first place. This is describing a short-term competitive advantage. It wasn't very difficult for the Solarian shippers to copy that advantage.

This does tangentially illustrate a limitation on cornering the market. The predatory price must not be set so high that it drives all buyers out of the market; someone must be able to afford to buy at the newly set price. When the Hunt Brothers could no longer buy silver, the price of new silver entering the market crashed to whatever other buyers were willing to spend.

If someone reselling the cocaine from a single seller could not find a way to make a profit, then they would stop reselling cocaine and that single seller would have priced himself out of the market. Presumably raising the price of car parts by 25% will not stop car manufacturers from selling new cars.

From long ago there was a comedy skit from Dick Emory (English comedian) illustrating a thick street vendor selling panty hose.
Another vendor set up next to him selling cheaper, so he beat that price, after about four exchanges when the price was below rock bottom the other vendor bought up all of his stock.
Then the other vendor went back to the original high price.

Daryl wrote:From long ago there was a comedy skit from Dick Emory (English comedian) illustrating a thick street vendor selling panty hose.
Another vendor set up next to him selling cheaper, so he beat that price, after about four exchanges when the price was below rock bottom the other vendor bought up all of his stock.
Then the other vendor went back to the original high price.

Very nice story that illustrates several points:

1) Prices are kept lower when there is competition and no price fixing.
2) One way to eliminate competition is to lower prices even more, even if it means you run at a loss for awhile.*
3) The other way to eliminate competition is to buy the competitor out when he is close to bankruptcy.*
4) When competition is eliminated, then prices can be set up to whatever the market will bear.

*Both steps can work together, but require that you have more resources than him.

PS: There are a lot of stories about Microsoft using their market share to punish and perhaps buy out competitors in the early days before the Justice Department got interested. One story is that Bill Gates was dating an Apple saleswoman who excitedly told him about a big sale she was about to have. He went and made a phone call and it was cancelled.

tlb wrote:In Trading Places their plans to corner the orange juice futures market failed because of a forged market forecast.

penny wrote:Just a small nitpick, to be precise. The Duke's plan to corner the market failed because of a forged report. Valentine and Winthorpe did succeed at cornering the market using the real report.

They did NOT corner the market, because they were selling as the price went up. So they were NOT trying to accumulate orange juice, they were promising that at some future date that they would deliver orange juice bought at the present price. This worked for them, because (unlike the Dukes) they knew the harvest would be good; so they would be able to buy the promised orange juice after the price dropped when the true market report was made public.

In summary. while the Dukes were buying futures (using borrowed money and their own) trying to corner the market, they were selling futures in the knowledge that the price would drop before they had to settle. The result was that they had money left over, while the Dukes had to sell at a loss and could not repay the money they had borrowed.

Important: Futures trading requires investors to settle their contracts. This is in contrast to options trading, which gives the trader the right but not the obligation to settle their contracts.

I'm going to attempt this one last time. One!

I had a huge wall of text that fleshed out my position. After all, I did say I needed to flesh out certain points. But I lost that post somehow.

I continue to be hacked. My hacker has begun to be a bit disgusting. I have had a scare in my health. Apparently I passed a kidney stone without ever having passed a kidney stone. I was passing blood in my urine. Well that frightened me! My hacker gained control of certain folders on my phone. And has the nerve to type the words kidney and other words in a post I was working on just to show me he has hacked me as if I didn't already know. And other disgusting and distasteful habits. Absolutely disgusting.

At any rate, my time is very limited in the forum now. Constantly fighting hackers don't make it easy. Anyway, I have taken on other responsibilities which will continue for a few months. At least.

Having addressed these issues, moving on.

I cannot believe I am the only one in the forum with formal business education, training and experience. But whatever. I'm being left out on a limb alone again I suppose, when I know that many of you very well know better. What's more, everyone continues to post facts that are in opposition to your own stance. Incredible.

(Wikipedia I think:) Market share is not a perfect proxy of market dominance.

Although there are no hard and fast rules governing the relationship between market share and market dominance, the following are general criteria:
A company, brand, product, or service that has a combined market share exceeding 60% most probably has market power and market dominance.

Market dominance (dominating a market) and cornering a market are two entirely different things. After all, they are two different terms. People oftentimes use them interchangeably and oftentimes they are interchangeable for a given situation. But they are not the same.


Market share does not guarantee market dominance. There are many other external factors that come into play. For example, the collective buying power of consumers. (A statement found on any page on the subject, BTW ).

As a matter of fact, that fact has been recently highlighted in the current OJ market. How apropos. Orange Juice prices have risen to an insane all time high because of the disaster that befell the orange crop this growing season in the form of an orange crop disease.


That disease has resulted in the price of OJ rising from a normal spread of $4.99 - $5.99 per gallon of OJ to $9.99 to $14.99 per gallon for premium brands!!! Some offerings are not even a gallon! Well, what is happening is that the buying power of the customers have spoken and gallons upon gallons of OJ are sitting on the grocer’s shelves past the expiration date. It would be the same if the Dukes had cornered the market on OJ and artificially inflated the price beyond what consumers are willing to pay.


The reason that is happening to the OJ market is because of the existence and importance of external factors in the mechanics of cornering or dominating a market. And that is viable market alternatives. In the case of OJ, there exists a very viable substitute for that market because of the sought after ingredient Vitamin C. Parents need their kids (and themselves) to consume Vitamin C to fight off the common cold and the flu. My mom always used it as one of several preventive measures. But! OJ has a much better alternative, and without all of the acid. Certainly as far as kids are concerned. Most if not all kids rather have Welch's Grape Juice. Welch's Grape Juice has always cost significantly more than OJ to the dismay of kids across the country. But now that the price of OJ has skyrocketed, suddenly Welch's Grape Juice is a readily available competitor. And it tastes a lot better. After all, many religions serve it as a symbolic representation of the blood of Jesus on Communion.

Customer power

Countervailing Buyer Power is something else that should be considered when calculating market dominance. In market where the buyers have more power than suppliers in determining prices or changes in the market a firm of high market share may not exercise its powers against competitors easily as it always has to be accountable to customers that give it its high market share and are not hesitant to switch product preference to the next firm. Such customers will need to have sufficient bargaining strength which will normally come from its size or its commercial significance in the industry sector.


The final point that must be considered is the bargaining strength of the undertaking's customers, also known as the countervailing buyer power. This refers to the competitive constraints that customers may exert where they are a large size, or commercially significant, for a dominant firm. However, the commission will not come to a final decision without examining all of the factors which may be relevant to constrain the behavior of the undertaking.

But again, market dominance is not solely dependent upon market share. And market share does not guarantee market dominance. That fact leads to one of the first impediments to students continuing in their business courses (sadly and inexplicably) when they are introduced to what many students say is a complicated equation (???) to determine market dominance. Some students drop out.

Herfindahl–Hirschman index
Kwoka's dominance index

Again, market dominance does not signify cornering a market. China dominates the EV (electric vehicle) industry, but China surely has not cornered the EV market.

My overarching point is that in the HV the distinction is much more important. For instance, the MBS has cornered the market in trade with the assistance of its monopolistic Merchant Marine. But it's MM is not the Ace-in-the-Hole, because the SL can duplicate its MM. Even exceed it. However, the MWJ is the MBS’s Ace-in-the-Hole.

P.S. BTW tlb. You are correct. Winthorpe and Valentine did not corner the market. That should have been in quotation marks, and it was made as a jest. I oftentimes require more from my audience than I get. When I spell it out I get admonished for walls of text. It is difficult to strike a balance.

But of course they did not corner the market. Cornering the market requires a huge investment. Valentine was essentially a pauper. And I doubt even Winthorpe had the means.

But they cornered the market on the selling room floor enough to make a killing. Which is all they were trying to do. They certainly lacked the buying power of the Dukes.

penny wrote:But they cornered the market on the selling room floor enough to make a killing. Which is all they were trying to do. They certainly lacked the buying power of the Dukes.

If you mean that they were one of the few groups selling OJ futures as the price was being driven up by the Dukes, then we are agreed. But you continue to use the phase "cornered the market" in a way that does not match its common usage in articles on markets. I found three articles that state that it requires market dominance, which you seemingly still deny. If I am so wrong, it should be easy to find articles to support that contrary position.

Note that stating "market dominance does not signify cornering a market" is something that we can agree about; but it is not that same thing as saying "cornering a market" does not signify "market dominance".

PS: You call Manticore's Merchant Marine "monopolistic", which does not seem to fit the case. Within the League (by their numbers):

"Better than two-thirds of our total interstellar commerce - the percentage is higher for freight, lower for passengers and information - travels in Manticore-registered bottoms at some point in the transport cycle, Innokentiy. Almost thirty percent of it travels in Manty ships all the way from origin to to final destination; another twenty-seven percent travels in Manty bottoms for between thirty and fifty percent of the total voyage. Another ten or fifteen percent of it travels in Manty bottoms for up to a quarter of the total transit."

That is a lot, but still over a quarter of their interstellar commerce never touches one of Manticore's ships. Plus this says nothing about the size of Haven's merchant marine, which will now have the same advantage in using the Manticore wormhole junction.

tlb wrote:

penny wrote:But they cornered the market on the selling room floor enough to make a killing. Which is all they were trying to do. They certainly lacked the buying power of the Dukes.

If you mean that they were one of the few groups selling OJ futures as the price was being driven up by the Dukes, then we are agreed.

They were the only group who were selling OJ futures; at least until/at a certain price/point. Winthorpe made sure of that by initiating the chaos at a certain point. "Not yet Valentine." There were other sellers, but their price could not match Winthorpe's and Valentine's.

tlb wrote:But you continue to use the phase "cornered the market" in a way that does not match its common usage in articles on markets.

The last part of my previous post about the two making a killing by "cornering the market on the selling room floor" was again, a joke. There, I used quotation marks this time. I buy so many vowels that I either can't afford or I forget to buy quotation marks in my haste. LoL

tlb wrote:I found three articles that state that it requires market dominance, which you seemingly still deny. If I am so wrong, it should be easy to find articles to support that contrary position.

Gees. Those are articles tlb. Not a formal class in Business. Those articles, as I do myself, require a little understanding of business. And a thorough digestion of the article. I gave you two of the examples of the mechanisms (stated by each of your articles!) that may thwart having cornered a market. Market alternatives. And the buying power of consumers. I can buy up all of the prophylactics in the world and offer to sell them for whatever. But if consumers aren't amenable and there are alternatives, what do you think people will do? Stop having intercourse? Cornering a market does not guarantee market dominance. Microsoft cornered the market on the Windows operating system. A lot of people fled to Apple and Linux.

tlb wrote:Note that stating "market dominance does not signify cornering a market" is something that we can agree about; but it is not that same thing as saying "cornering a market" does not signify "market dominance".

???

tlb wrote:PS: You call Manticore's Merchant Marine "monopolistic", which does not seem to fit the case. Within the League (by their numbers):

"Better than two-thirds of our total interstellar commerce - the percentage is higher for freight, lower for passengers and information - travels in Manticore-registered bottoms at some point in the transport cycle, Innokentiy. Almost thirty percent of it travels in Manty ships all the way from origin to to final destination; another twenty-seven percent travels in Manty bottoms for between thirty and fifty percent of the total voyage. Another ten or fifteen percent of it travels in Manty bottoms for up to a quarter of the total transit."

tlb wrote:That is a lot, but still over a quarter of their interstellar commerce never touches one of Manticore's ships. Plus this says nothing about the size of Haven's merchant marine, which will now have the same advantage in using the Manticore wormhole junction.

Two-thirds represents ~ 67%.

100% minus one-quarter = 75%.

Every website you posted accepts 60% as a dominating share.

.