Originally, they were the good guys.

In ancient Rome, speculators were sentries who looked out for signs of trouble. By the 17th century, “speculate” meant “to consider, examine, or reflect upon with close attention,” seemingly an activity to be encouraged.

Speculators aren’t getting much encouragement these days. They’ve drawn the enmity of the left and the right, and been blamed for everything from high gas prices and the collapse of Lehman Brothers to the debt crisis that’s hit Greece.

When the Greek prime minister, George Papandreou, complained about speculators at a recent meeting with President Obama, he found a sympathetic audience. Mr. Obama himself blamed “a small group of speculators” for Chrysler’s collapse last year.

And in an attempt to protect the falling euro recently, Germany’s finance minister even suggested enlisting spy agencies to monitor “who is getting together with whom” in betting against the currency.

Perhaps its time for a reconsideration: March marks 10 years since the technology bubble peaked, and among the few who warned of the coming implosion were speculators who had targeted tech stocks.

“If there are heroes in the financial system, these are the heroes,” said Frank Partnoy, a professor of law and finance at the University of San Diego. “They’re the people who bet against Enron, who bet against Lehman and warned it was insolvent.”

It’s not just academics who are coming to the defense of speculators. BaFin, the regulatory agency that oversees financial markets in Germany, concluded that speculators weren’t behind Greece’s problems. A more likely cause was that investors were simply wary of lending the Greek government any more money following years of heavy borrowing and widening budget deficits. The popular view is that speculators are gamblers . They wreck companies and economies simply because they’re wreckable. They inflate bubbles that then burst with disastrous results for all of us.

This view began to emerge with the rise of stock trading in 18th-century London. By the beginning of the 20th century, the New York Stock Exchange was considered the province of speculators, with true investors preferring the safety of bonds. Today, if you listen to the critics, speculators are seemingly everywhere and wield vast power.

The former chief executive of Lehman Brothers, Richard S. Fuld Jr., blamed short-sellers for the demise of his firm, and Vikram Pandit, the chief executive of Citigroup, recently complained they’d nearly brought his bank down.

And despite new revelations of accounting tricks in Lehman’s collapse, the role of speculators in that debacle remains a hotly contested issue, both on Wall Street and in academia.

Charles Geisst, a professor of finance at Manhattan College and a historian of Wall Street, says he is convinced that speculators are at least partly to blame for Lehman’s collapse and the ensuing financial crisis.

“They knocked down the price of financial stocks and threatened the financial superstructure,” he said. Rather than warn of bubbles, he said, speculators help inflate them on the way up and deflate them on the way down.

Perhaps, but complaints about speculators usually follow a market drop, almost never a rally. Maybe the problem, then, is that speculators are not betting on stocks, bonds or anything else to go up. Instead, they’re expecting trouble, and in today’s jittery climate, that can seem like the financial equivalent of being unpatriotic.

“Every time the market goes down, they blame short-sellers and speculators,” said Jim Chanos, a famous short-seller who manages more than $6 billion and was among the earliest voices to warn about Enron as well as the credit crisis. But his trades aren’t gambles at all. “We do as much fundamental research as anybody,” he said.

If that’s the case, speculators are far from being a plague on the markets. Instead, they help reduce risk by taking on the other side of popular trades, resisting the herd mentality that creates bubbles in the first place.

Perhaps the market needs more people like the original Roman speculator, on the lookout for danger. “Granted, speculators are not angels; many are motivated by gambling and greed, and when given the chance will take advantage of the public as much as the next person,” Victor Niederhoffer, a legendary hedge fund manager and self-described speculator, has written. “But when my daughters ask me if my job is as important as the butcher’s, the doctor’s or the scientist’s, I answer that the speculator is a hero, and has been throughout history.”


Some see speculators as troublemakers but others say they keep the
market honest. Greece blames them for driving up its borrowing costs. / LOUISA GOULIAMAKI/AGENCE FRANCE-PRESSE — GETTY IMAGES