Hoarding

Going to our Aunt Beth’s house is always a bit of an adventure. Floor-to-ceiling stacks of newspapers line the hallways, shelves of broken appliances fill the garage, and bags full of clothing no one has ever worn take up pretty much all the floor space in the spare bedroom. That’s right: our Aunt Beth is a hoarder. She buys and buys, but never seems to get rid of anything.

To translate this example to the financial world, let’s replace all of those newspapers and bags of clothing with a commodity, like, say, soybean meal. Or (and this is probably more likely to happen than filling our home with actual soybean meal) let’s replace it with soybean meal futures. When we as investors purchase insanely high quantities of commodities like that, it’s called “hoarding,” because we’re basically the Aunt Beth of the soybean meal world: we buy, buy, buy, but don’t sell, sell, sell.

If our intent is artificial price manipulation or market monopolization, then our hoarding is illegal. If we’re just really into soybean meal and want it all for ourselves, then it’s legal. A little weird, but legal. The problem is that it’s hard to prove the difference, even though the effects can be the same: an artificially high soybean meal price.

Hoarding isn’t just for Aunt Beth and commodities markets, though. Any time we accumulate much, much more of a particular asset than we need—whether it’s soybean futures, ‘80s prom dresses, or working capital for our business—we’re potentially hoarding. And if our stockpiling of assets ends up being directly responsible for price hikes and product shortages and general market chaos, what might have started out as “saving for a special occasion” could actually wind up looking a lot more like market manipulation.