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Dick Morris on oil futures

While not actually about oil prices, the first paragraph of this article asserts that oil price movements recently have had little to do with supply and demand by demonstrating the correlation between the weak U.S. Dollar and the movement of crude oil prices.

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/art...

“Why does anyone still think that the US economy is in recession? A week ago, this belief acquired a host of new adherents when Jean-Claude Trichet, the European Central Bank President, more or less promised to raise eurozone interest rates on July 3, while US statisticians reported a jump in the unemployment rate from 5 to 5.5 per cent. Financial markets duly bid up the euro and dumped the dollar. This currency move triggered the biggest one-day leap in oil prices on record. This price surge, in turn, confirmed that recent movements in the oil price, which have had a 97percent daily correlation with the dollar-euro exchange rate, have been driven almost entirely by financial players and have had very little to do with energy supply and demand.”

Compelling.

Hokies

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S&P 500 would be at 800 if we required 50% margin.

So what is your point? Regulation brings down pricing BUT ALSO EFFICIENCY of any market. It does not mean that this price that has been “speculated” is any less correct.

Remember there are two sides to the trade. And someone bought it this supposed “overvalued” price.

buddha Wrote:
——————————————————-
> S&P 500 would be at 800 if we required 50%
> margin.
>
> So what is your point? Regulation brings down
> pricing BUT ALSO EFFICIENCY of any market. It
> does not mean that this price that has been
> “speculated” is any less correct.
>
> Remember there are two sides to the trade. And
> someone bought it this supposed “overvalued”
> price.

You’re assuming that the benefit of “efficiency” is outweighed by the cost of “efficiency”.

If the last 11 years has shown us anything it’s that deregulated “efficient” markets do nothing but lead from one self destructive bubble to another in an increasing amplitude and area of effect of destruction.

Efficient markets are only efficient when they price in all information, are unbiased about that information’s uses, and can rationally determine a price. In otherwords, efficient markets are impossible when it comes to human implementation.

I think the biggest downfall of finance professionals is that they think that models, “efficiency”, and capitalistic driven supply/demand, trump all other motivations of humans to the detriment of the rest of humanity. In otherwords, they practice the highest amount of hubris possible, the idea that whatever they create is infallable.

As I said, the last 11 years has shown that to be anything but true.

buddha, two or more people also agreed to buy and sell real estate that was widely out of whack with reality. Two or more people also agreed to buy and sell tech stocks that were widely out of whack with reality.

Hokies