So does anyone still believe in Efficent Markets?

[halik]

Originally posted by: SleepWalkerX

Originally posted by: miketheidiot

Originally posted by: SleepWalkerX

Originally posted by: LegendKiller

Originally posted by: SleepWalkerX

Originally posted by: LegendKiller

Originally posted by: SleepWalkerX

Originally posted by: LegendKiller

Originally posted by: yllus

Originally posted by: Dissipate
First of all, the price of oil has been going up because the dollar has been dropping like a stone.

Originally posted by: halik
This time last year crude was trading for ~$67/barrel. Year later the price doubles? USD declined 15% since then and the supply kept pace with demand - there is no real reason for 50% appreciation.

?

Essentially he's a narrow minded anti-Fed fool. He's more than willing to miss the forest from the trees in order to belittle the Fed.

He's his own leaders perfect pet. One who demonizes one aspect of the problem, yet completely fails to realize the real root causes. Just like his leader, he'll remain in obscurity while the rest of us realize what the problem is.

Want to explain why the price of oil per goldgram or silver ounces remains relatively unchanged than that of oil per dollar?

http://www.kitco.com/ind/Turk/turk_sep282007.html

Gosh, I dunno? Both are part of a speculative bubble?

I guess its relative, isn't it? Instead of saying that the dollar is dropping in value you can say there's a commodities bubble. :disgust:

Everything is going up in price. Even groceries, but slow enough for many people to just get used to the new prices. I wasn't born 30 years ago, but I'm pretty sure a gallon of milk wasn't $4 a gallon. And analysts are predicting it going over $5 after the summer.

The value of the dollar is going down. Deal with it.

If the dollar falling were the only reason for the increase in oil, then explain how oil has also increased dramatically in Euros, Yuan, Pound Sterling, and Yen, in the last year?

What can you redeem a euro for when you go to the bank? Ultimately, they suffer the same fate as the dollar. When your currency is backed by a commodity then you can't have a "commodity bubble."

yes you can.

do you really want your currency tied to something that can be speculated on?

Like when people speculate the value of the dollar compared to other currencies?

Except the small issue that institutional and private funds don't have enough capital to make market in FX (also the reason why FX markets are largely unregulated). In the commodity sector they can easily do that (see LK's post on how much $ worth of contract for consumption are out there per day)

 

[LegendKiller]

Originally posted by: TastesLikeChicken

Originally posted by: tagej
I fail to see the issue here. Speculators do just that --- they speculate. If by doing so they drive up the price of something higher than the fundamentals of supply and demand dictate, then eventually the bubble will burst and they will end up losing a lot of money. The price of everything in the long term is driven by fundamentals. Speculation and a herd mentality can drive the price up or down in the short term, but in the long term it must return to the level supported by the fundamentals. No government interference needed.

Also, with regard to the OP's point about efficient markets (or lack thereof), I don't see any evidence of market inefficiency. All public information is included in the price of oil. Speculation is part of that public information, as are the events around the world that impact the price of oil. The market is efficient as it relates to the price of oil.

Unfortunately the amount of money pouring into hedge funds and speculation for oil is phenominal. That's what is artifiicially inflating the market.

I argued long, long ago in here that it was speculation and large investment funds stepping into oil futures that were inflating the price of oil. Of course I got beat down by the shrill ones who were absolutely positive that it was really ME instability, Iraq, the US government's fault, and/or the weak dollar for the reason oil prices were so high (in the $60 - $70 range at the time).

Vindication often doesn't come until later.

Will the bubble burst in this case? Sure. But it will never return to normalcy (a realistic value for oil). Oil has been so over-inflated that an artifiicial value due to the current market will always be a noose around its neck.

I don't complain though because high oil prices are the absolute best motivation provided to wean the US off of the oil teat. In the short term investors and countries in the ME will profit. In the long-term they are cutting their own throats. I'll laugh and have no pity when they're coughing up their own blood though. In fact, I'll revel in it.

Hey, Tulip Bulbs was an efficient market, devoid of the Fed or any other legal constraints. There was never any bubble there, it was all "efficient speculation" that was completely grounded in fundamentals. Because Tulip Bulbs are naturally worth more than a house.

The .bombs was an efficient market, devoid of chinese walls between analysts and investment bankers, full of well run companies being chased by efficiently allocated money. All rational information was priced into the .bombs, because websites that sucked ass which sold absolutely nothing needed to consumers were naturally worth more than a medium sized country with the stamp of approval from Henry Blodgett and Jack Grubmann.

Enron, worldcom and Adelphia were also efficient markets too. Efficient markets knew that Enron was full of shit and not prone to bubbliciousness. Nope, no bubble here.

Ohh and housing was even more efficient, in fact, it was one of the most efficient markets yet. Marginal government oversight, complete "free market" capital influxes, devoid of any controlling bodies, peskily limiting the amount of shit mortgages pushed. Yup, really efficient there.

And now, we have an even more efficient market. Lets see, very little oversight (libertopian dream). Double margining. Huge capital influx. Ohhh and the ability to rapidly increase price because, unlike houses (where you can always build more) and shit tech stocks (where you can always pump and dump more) you can't MAKE ANY MORE OIL, OR FOOD!

HELLS YES! INELASTIC PRICING CURVES! That'll really kick the shit out of returns. Double leverage *AND* inelastic returns? WHOA, JACKPOT!

But, as we said, it's an efficient market, whereby the actual players in the market are able to price in this information, squeezing out pricing inefficiencies being driven by hedge funds.

Ohh, did we mention that the hedge funds are deploying more capital, double leveraged, into this sector THIRTY TIMES GREATER THAN THE WHOLE SECTOR?


Damn, I think EMH missed something, don't you?

 

[halik]

Originally posted by: LegendKiller

Originally posted by: TastesLikeChicken

Originally posted by: tagej
I fail to see the issue here. Speculators do just that --- they speculate. If by doing so they drive up the price of something higher than the fundamentals of supply and demand dictate, then eventually the bubble will burst and they will end up losing a lot of money. The price of everything in the long term is driven by fundamentals. Speculation and a herd mentality can drive the price up or down in the short term, but in the long term it must return to the level supported by the fundamentals. No government interference needed.

Also, with regard to the OP's point about efficient markets (or lack thereof), I don't see any evidence of market inefficiency. All public information is included in the price of oil. Speculation is part of that public information, as are the events around the world that impact the price of oil. The market is efficient as it relates to the price of oil.

Unfortunately the amount of money pouring into hedge funds and speculation for oil is phenominal. That's what is artifiicially inflating the market.

I argued long, long ago in here that it was speculation and large investment funds stepping into oil futures that were inflating the price of oil. Of course I got beat down by the shrill ones who were absolutely positive that it was really ME instability, Iraq, the US government's fault, and/or the weak dollar for the reason oil prices were so high (in the $60 - $70 range at the time).

Vindication often doesn't come until later.

Will the bubble burst in this case? Sure. But it will never return to normalcy (a realistic value for oil). Oil has been so over-inflated that an artifiicial value due to the current market will always be a noose around its neck.

I don't complain though because high oil prices are the absolute best motivation provided to wean the US off of the oil teat. In the short term investors and countries in the ME will profit. In the long-term they are cutting their own throats. I'll laugh and have no pity when they're coughing up their own blood though. In fact, I'll revel in it.

Hey, Tulip Bulbs was an efficient market, devoid of the Fed or any other legal constraints. There was never any bubble there, it was all "efficient speculation" that was completely grounded in fundamentals. Because Tulip Bulbs are naturally worth more than a house.

The .bombs was an efficient market, devoid of chinese walls between analysts and investment bankers, full of well run companies being chased by efficiently allocated money. All rational information was priced into the .bombs, because websites that sucked ass which sold absolutely nothing needed to consumers were naturally worth more than a medium sized country with the stamp of approval from Henry Blodgett and Jack Grubmann.

Enron, worldcom and Adelphia were also efficient markets too. Efficient markets knew that Enron was full of shit and not prone to bubbliciousness. Nope, no bubble here.

Ohh and housing was even more efficient, in fact, it was one of the most efficient markets yet. Marginal government oversight, complete "free market" capital influxes, devoid of any controlling bodies, peskily limiting the amount of shit mortgages pushed. Yup, really efficient there.

And now, we have an even more efficient market. Lets see, very little oversight (libertopian dream). Double margining. Huge capital influx. Ohhh and the ability to rapidly increase price because, unlike houses (where you can always build more) and shit tech stocks (where you can always pump and dump more) you can't MAKE ANY MORE OIL, OR FOOD!

HELLS YES! INELASTIC PRICING CURVES! That'll really kick the shit out of returns. Double leverage *AND* inelastic returns? WHOA, JACKPOT!

But, as we said, it's an efficient market, whereby the actual players in the market are able to price in this information, squeezing out pricing inefficiencies being driven by hedge funds.

Ohh, did we mention that the hedge funds are deploying more capital, double leveraged, into this sector THIRTY TIMES GREATER THAN THE WHOLE SECTOR?


Damn, I think EMH missed something, don't you?

Honestly, all of the EMH folk are desperately trying to make EMH fit/work in reality.

No matter what alpha strategy you look it (growth - value, high minus low post-earnings etc. ), it's always "somehow those companies in the High decile became more risky". It's beta ...somewhere... somehow... but it's definitely beta. Nothing more than fitting a square peg into a round hole.

 

[dmcowen674]

Originally posted by: halik
Because refineries benefit from increasing oil prices...

I suggest you read up on their business, lately their margins have been squeezed since sweet crude far outpaced gasoline prices.

Like I said, if they are losing money then they should close up shop.

 

[halik]

Originally posted by: dmcowen674

Originally posted by: halik
Because refineries benefit from increasing oil prices...

I suggest you read up on their business, lately their margins have been squeezed since sweet crude far outpaced gasoline prices.

Like I said, if they are losing money then they should close up shop.

Huh? Not sure how you got losing money from margins but alright. My point was don't blame oil prices on oil companies or refineries, they're not the ones buying the futures.