Tim Harford — Article — Still think you can beat the market?.
Quoting from this article, “The efficient markets hypothesis is surely false. What is striking is that it is very close to being true. For the Warren Buffetts of the world, “almost true” is not true at all. For the rest of us, beating the market remains an elusive dream.”
The Grumpy Economist: Debt Maturity. Excellent financial advice for the US Treasury Department concerning the importance of taking advantage of (historically) low long term interest rates by lengthening the maturity structure of the federal government’s massive debt. As University of Chicago finance professor John Cochrane notes, “Our Government has taken the opposite tack. When you include the Fed (The Fed has bought up most of the recent long-term Treasury issues, in a deliberate move to shorten the maturity structure) the US rolls over about half its debt every two years.”
See today’s Houston Chronicle article entitled Foreign holdings of US debt hit $5.46 trillion”. Putting this number into perspective, this represents an increase over the past two years of roughly $1.26 trillion. As I document in my November 5, 2010 blog posting entitled “Political economy and the (inflationary) future“, foreign holdings of US debt two years ago stood at around $4.2 trillion.
For my friends out there who are data geeks, the US Treasury Department regularly updates information concerning foreign holdings of treasury securities (by country) at http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt.
This coming Saturday will mark the one year anniversary of the creation by the Obama administration of the “Financial Fraud Enforcement Working Group” (see the MSNBC article from 4/21/2011 entitled “Obama says new task force will examine gas prices”, available on the web at http://on.msnbc.com/JdlbDx). The article referenced below (entitled “Cracking Down on Oil Market Manipulation”) is from the White House blog and is dated 4/17/2012.
While the notion that “high” gas prices result from “price gouging” by a cadre of unsavory and greedy oil companies, energy traders, and speculators makes for a provocative political narrative, it’s really bad economics. As canards go, this one is particularly favored by politicians; indeed (as you can see from the time-date stamps of the April 2011 MSNBC and April 2012 White House blog articles), you can almost set your watch on these kinds of things.
I wrote a blog posting about the economics of “high” gas prices on April 23, 2011 (source: http://blog.garven.com/2011/04/23/is-gas-price-gouging-to-blame-for-high-gas-prices), and many, if not most of the points I raised in that article are as applicable today as they were then (now the geopolitical risk du jour is Iran; back then it was Libya)…
Cracking Down on Oil Market Manipulation | The White House
www.whitehouse.gov
“President Obama announces a new series of steps to strengthen oversight over the energy markets.”
President Obama raised this question a couple of days ago during a “town hall” meeting in California. The MSNBC article entitled “Obama says new task force will examine gas prices” quotes him as saying, “”We are going to make sure that no one is taking advantage of the American people for their own short-term gain.” This article also quotes the President as saying that “The task force will focus some of its investigation on “the role of traders and speculators” in the oil-price surge”.
An article which appeared in the The Globe and Mail entitled “U.S. launches probe into energy prices”, notes that “U.S. Attorney-General Eric Holder made no allegation of wrongdoing against companies or speculators on Thursday. But the multi-agency Financial Fraud Enforcement Working Group will play a key role in identifying fraud in the energy market, he said” (italics added for emphasis).
While the notion that “high” gas prices result from “price gouging” by a cadre of unsavory and greedy oil companies, energy traders, and speculators makes for a provocative political narrative, it’s really bad economics. As canards go, this one is particularly favored by the political elites; indeed, as Tim Evans, energy analyst with Citi Futures Perspectives, told Reuters news service, “You can almost set your watch on these kinds of things.”
I can think of several reasons why gas prices are high compared with historical norms and likely to remain so for some time:
Therefore, in order for gas prices to become cheaper for Americans, this will require some combination of 1) a slowdown in the global economy, 2) a favorable resolution of political risks in the Middle East, 3) a credible commitment on the part of the US government to rescind its deepwater drilling moratorium, and/or 4) a recovery in the value of the US dollar vis-a-vis other currencies.
]]>President Obama raised this question a couple of days ago during a “town hall” meeting in California. The MSNBC article entitled “Obama says new task force will examine gas prices” quotes him as saying, “”We are going to make sure that no one is taking advantage of the American people for their own short-term gain.” This article also quotes the President as saying that “The task force will focus some of its investigation on “the role of traders and speculators” in the oil-price surge”.
An article which appeared in the The Globe and Mail entitled “U.S. launches probe into energy prices”, notes that “U.S. Attorney-General Eric Holder made no allegation of wrongdoing against companies or speculators on Thursday. But the multi-agency Financial Fraud Enforcement Working Group will play a key role in identifying fraud in the energy market, he said” (italics added for emphasis).
While the notion that “high” gas prices result from “price gouging” by a cadre of unsavory and greedy oil companies, energy traders, and speculators makes for a provocative political narrative, it’s really bad economics. As canards go, this one is particularly favored by the political elites; indeed, as Tim Evans, energy analyst with Citi Futures Perspectives, told Reuters news service, “You can almost set your watch on these kinds of things.”
I can think of several reasons why gas prices are high compared with historical norms and likely to remain so for some time:
Therefore, in order for gas prices to become cheaper for Americans, this will require some combination of 1) a slowdown in the global economy, 2) a favorable resolution of political risks in the Middle East, 3) a credible commitment on the part of the US government to rescind its deepwater drilling moratorium, and/or 4) a recovery in the value of the US dollar vis-a-vis other currencies.
My favorite econ blogger, George Mason University’s Russ Roberts, posted the following (short, less than 4 minutes) video called “nature by numbers” yesterday on Cafe Hayek. This video provides a remarkable and beautiful presentation concerning how Fibonacci numbers appear in nature.
For more information concerning the math used in this video, go here. Peter Bernstein (author of the worldwide best seller “Against the Gods: The Remarkable Story of Risk”) traces the origins of risk theory and finance back to a 13th century Italian mathematician by the name of Leonardo Pisano, who was known for most of his life as Fibonacci (see pages 23–26 from Bernstein’s book for historical context on the Fibonacci number series). For some examples of applications of Fibonacci numbers in finance, go here.
Dartmouth finance professor Ken French very clearly and succinctly explains how inflation affects bond prices by comparing and contrasting TIPS (Treasury Inflation Protected Securities) with short-term Treasury securities:
Click on Professor Eugene Fama’s image below to view a 3 minute 48 second Bloomberg interview in which he “…discusses financial regulation and capital requirements for banks”:
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