4 ms·

This is evidence that speculators are not to blame. If you remove speculators, you remove liquidity. No liquidity, higher volatility, and higher probability of

This is evidence that speculators are not to blame. If you remove speculators, you remove liquidity. No liquidity, higher volatility, and higher probability of price manipulation (think Enron). It's also worth noting that the distaste for market speculation is inversely proportional to how well the market is doing.

breck 18y ago
This is evidence of nothing except that one number looks more volatile than other numbers if you measure that number more frequently. "Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April." I mean, seriously? For oil and corn they compare two points, but for onions they compare October 2006-April 2007, April 2007 - March 2008, and March 2008 - April 2008. I could just as easily look at the change in onion prices between October 2006 and now, and then pick 3 arbitrary dates when oil prices hit extremes, to "prove" how having a futures market makes prices more volatile.
- steveplace 18y ago
  The selective timeframes showcase the volatility. If a security moves 5 points in a week, and a year later it moves 5 points in a day, it becomes more volatile. Going up 400% in half a year versus 300% in two years is pretty volatile. That being said, they probably use bad stats to dumb it down for the average reader. What you want to look at is the {rolling stDev, average true range, volume} to get a better feel for it. Also, it's happened in other commodities that you can trade contracts on, but they are so thinly traded that they can make really big moves.
  - breck 18y ago
    "Going up 400% in half a year versus 300% in two years is pretty volatile." But for all we know the latter item could have gone up 1,000,000% in the interim and then settled down to 300% at the end of two years.
    - steveplace 18y ago
      Then they would have pointed that out. I agree with your point that it's not the best statistic to show the basis, but the underlying premise remains the same.

breck 18y ago

This is evidence of nothing except that one number looks more volatile than other numbers if you measure that number more frequently. "Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April." I mean, seriously? For oil and corn they compare two points, but for onions they compare October 2006-April 2007, April 2007 - March 2008, and March 2008 - April 2008. I could just as easily look at the change in onion prices between October 2006 and now, and then pick 3 arbitrary dates when oil prices hit extremes, to "prove" how having a futures market makes prices more volatile.

steveplace 18y ago
The selective timeframes showcase the volatility. If a security moves 5 points in a week, and a year later it moves 5 points in a day, it becomes more volatile. Going up 400% in half a year versus 300% in two years is pretty volatile. That being said, they probably use bad stats to dumb it down for the average reader. What you want to look at is the {rolling stDev, average true range, volume} to get a better feel for it. Also, it's happened in other commodities that you can trade contracts on, but they are so thinly traded that they can make really big moves.
- breck 18y ago
  "Going up 400% in half a year versus 300% in two years is pretty volatile." But for all we know the latter item could have gone up 1,000,000% in the interim and then settled down to 300% at the end of two years.
  - steveplace 18y ago
    Then they would have pointed that out. I agree with your point that it's not the best statistic to show the basis, but the underlying premise remains the same.