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  1. the liquidity trap has a lot to do with companies rethinking their cash positions and having a better understanding of risk and refinancing implications. Also a lot of tweaking of balance sheets in banks to make sure they can survive another crisis (stress testing), and individuals finally awakening to the fact that being mortgaged to the tits on homes, cars and pay me later furniture stores is not sustainable.

    We really have lived in a world based on financial engineering for far too long. I think we agree on that.
  2.  
    Originally Posted by JAAAAA!!!! View Post

    You're the dumbest smart guy alive. If they are buying oil contracts to protect their fuel costs they are HEDGING. It's the definition of hedging. Of course if you do anything in any market by the Websters definition you are speculating (again, you're just splitting hairs to be obnoxious). When you speculate in futures because you have to buy fuel you are hedging.

    The fact you're completely missing is that when Southwest wins on their oil futures they lose on fuel prices. H E D G E R S

    Speculators buy oil futures, they go up, they don't have to buy more expensive fuel, and it's all profit.

    crickets
  3.  
    Originally Posted by JAAAAA!!!! View Post

    crickets

    lol - dont know if this analogy will help or hurt but let me try ...

    Dyzalot wants to enter the WSOP ME. He decides that the entry fee is quite a bit of risk, so he sells a piece of himself to you and me and dolphin. Let's say we each buy 25% and he keeps 25% for himself. He has hedged his position by 75% which allows him to get a nice payday with a much lower risk.

    Dyz has hedged his position because 100% of his money was at risk and has now reduced it to 25%. The rest of us are speculators because we are strictly betting on the outcome of the game. We have 100% of our money at risk.
  4.  
    Originally Posted by saxman View Post

    killer, i think the confusion maybe that you're mixing up cause and effect in your specific industry with fed policy regarding inflation objectives and economic growth.

    The fed policy on interest rates is to maintain low rates to encourage investment because inflation is relatively low (separate argument). This in theory promotes economic growth although companies are still not investing as much as they would like, which has caused the economy to remain stagnant. It's been called a liquidity trap by those on the left.

    The wages in the trucking industry is a totally different argument / discussion because there are a lot of different factors that may influence your wages / profits. For example, i know that there has been a huge influx of east indian drivers in my area who work very long hours for lower wages. This is a huge benefit to the companies that employ them but has a negative impact on other drivers in the industry. Major trucking companies have also been adding a fuel surcharge to people like me that purchase services for many years but i am often told by owner / operators that in a lot of cases, those fuel surcharges do not get passed on to the drivers / operators. It's a fucked up world.


    while i don't deny the many other factors, as the same in all industries, if the fed hadn't been trying to control the economy through "managed" inflation then even when the wages remained stagnant like they have then people wouldn't be hurting so much.

    but my thinking is based of the premise that inflation through monetary supply is wrong thus the whole federal reserve and in general while not necessarily fiat money is a mistake.

    i can see where you come from and how if things worked right how the federal reserve and fiat money would be a good thing, that's where we would get into an argument of your theoretical ideas being good but in reality are not wise due to the numerous unintended consequences.

    federal reserve/fiat money reminds me of a teenager that wants a car for work but wants it now and takes out a loan to get the immediate car. fine hes working and needs a car for work, problem is instead of buying a reasonable used car goes and buys a sports car, not thinking about the fuel costs, higher maintenance costs and insurance costs compared to a more reasonable car. where he coulda bought a more reasonable car and then worked and saved and bought the fancy car down the line. then his hours get cut back at his job and he can't find another and goes belly up.

    dot.com bubble, don't want to have a recession so lets inflate the monetary supply. well those investment dollars gotta go somewhere hey real estate there we go, jobs housing lots of good stuff, not to mention all the people that have the i want it now eventhough i cant really afford it.

    my analogies prolly suck for you each persons mind analyzes differently but it works for me. but basic premise has always been federal reserve tries to lessen pain for now. sounds good til you view the big pictures of where that puts us down the line.

     
    Originally Posted by saxman View Post

    We really have lived in a world based on financial engineering for far too long. I think we agree on that.


    absolutely
  5.  
    Originally Posted by saxman View Post

    lol - dont know if this analogy will help or hurt but let me try ...

    Dyzalot wants to enter the WSOP ME. He decides that the entry fee is quite a bit of risk, so he sells a piece of himself to you and me and dolphin. Let's say we each buy 25% and he keeps 25% for himself. He has hedged his position by 75% which allows him to get a nice payday with a much lower risk.

    Dyz has hedged his position because 100% of his money was at risk and has now reduced it to 25%. The rest of us are speculators because we are strictly betting on the outcome of the game. We have 100% of our money at risk.

    Better:

    Dyz enters the main event and puts up his own money.

    He bets someone $10K that he will NOT cash - Hedging

    I bet someone $10K that he will not cash- Speculating
  6.  
    Originally Posted by JAAAAA!!!! View Post

    crickets

    All you are describing is different reasons for speculating. Also, since everyone uses energy there is some "hedging" even by "speculators".

     
    Originally Posted by JAAAAA!!!! View Post

    Better:

    Dyz enters the main event and puts up his own money.

    He bets someone $10K that he will NOT cash - Hedging

    I bet someone $10K that he will not cash- Speculating

    It is the same bet. It matters not what other bets you have.

    Saying someone is "hedging" and not "speculating" makes no sense. Hedging is just a kind of speculating you do to hedge against another speculation. It doesn't mean you aren't speculating.
     3
  7.  
    Originally Posted by Dyzalot View Post

    All you are describing is different reasons for speculating. Also, since everyone uses energy there is some "hedging" even by "speculators".



    It is the same bet. It matters not what other bets you have.

    Saying someone is "hedging" and not "speculating" makes no sense. Hedging is just a kind of speculating you do to hedge against another speculation. It doesn't mean you aren't speculating.

    You don't cash: You break even. I make $10K

    You cash: You make money, I lose $10K

    Yep, exactly the same.

    Give up. I'm tired of disgracing you.
  8.  
    Originally Posted by JAAAAA!!!! View Post

    You don't cash: You break even. I make $10K

    You cash: You make money, I lose $10K

    Yep, exactly the same.

    Give up. I'm tired of disgracing you.

    You are comparing your one bet to my two bets. That is not an equal comparision.

    In your example I am betting that I cash and I am betting that I don't cash. You are only betting that I don't cash. Our bets that I don't cash are exactly the same. It matters not what other bets I or you also have going.
     3
  9.  
    Originally Posted by Dyzalot View Post

    You are comparing your one bet to my two bets. That is not an equal comparision.

    You are exactly right. There is nothing equal about a speculator and a hedger.

    The airline ( the hedger) has to buy fuel (1 transaction), wiping out the gain in futures (2 transactions), the speculator doesn't.

    You (the hedger) put up $10K (1 transaction), wiping out the gain of the bet (2 transactions), I (the speculator) didn't.

    I'm really starting to feel bad now. This is unfair. It's like beating up an infant. Please stop.
  10.  
    Originally Posted by JAAAAA!!!! View Post

    You are exactly right. There is nothing equal about a speculator and a hedger.

    The airline ( the hedger) has to buy fuel (1 transaction), wiping out the gain in futures (2 transactions), the speculator doesn't.

    You (the hedger) put up $10K (1 transaction), wiping out the gain of the bet (2 transactions), I (the speculator) didn't.

    I'm really starting to feel bad now. This is unfair. It's like beating up an infant. Please stop.

    The speculator and the hedger are exactly alike if you compare apples to apples and disregard the other bet that the hedger has.
     3
  11.  
    Originally Posted by Dyzalot View Post

    The speculator and the hedger are exactly alike if you compare apples to apples and disregard the other bet that the hedger has.

    Which would make them a speculator. Are you actually retarded?

    A moose is exactly like a horse if you take away the antlers, shrink it, give it long hair, make it run fast, ...
  12.  
    Originally Posted by JAAAAA!!!! View Post

    Which would make them a speculator. Are you actually retarded?

    A moose is exactly like a horse if you take away the antlers, shrink it, give it long hair, make it run fast, ...

    All bets should be evaluated on their own merits, not based upon what other bets you have as well. A hedge is just a specific type of speculation. You are a speculator whether you are doing it to hedge against another position or not.
    Edited By: Dyzalot Mar 2nd, 2012 at 06:31 AM
     3
  13.  
    Originally Posted by Dyzalot View Post

    All bets should be evaluated on their own merits, not based upon what other bets you have as well. A hedge is just a specific type of speculation. You are a speculator whether you are doing it to hedge against another position or not.

    Why, because you say so, because it is the only way to justify your moronic and stubborn stance? That makes zero sense. None. If you have separate bets on the same underlying event of course you have to look at them together. You can not possibly quantify how the event affects the bettor without looking at both.

    You're arguing against basic math.

    A guy bets $100 on black and $100 on red on the same spin. It comes up red. Dyz, "Congrats man, nice bet."
  14.  
    Originally Posted by JAAAAA!!!! View Post

    Why, because you say so, because it is the only way to justify your moronic and stubborn stance? That makes zero sense. None. If you have separate bets on the same underlying event of course you have to look at them together. You can not possibly quantify how the event affects the bettor without looking at both.

    You're arguing against basic math.

    A guy bets $100 on black and $100 on red on the same spin. It comes up red. Dyz, "Congrats man, nice bet."

    You don't need to quantify how the event affects the bettor. You only need to quantify how each bet affects the bettor. Every bet has its own odds and results and those odds and results are independent of any other bets. That's basic math. It is like the bet in blackjack where you can "hedge your bet" when the dealer is showing an ace. Sure its a hedge but it is still a separate bet that should be evaluated on its own merits to discover if it is +EV or not.
     3
  15.  
    Originally Posted by double_kyan View Post

    u can wish for ron paul, but dude isn't going to magically make the dollar rise in value

    these gas prices keep going up and nobody will be able drive anywhere to spend the weak dollar ,this ought to be gr8 for the economy,go gas companies u guys are doing a great job reaping mega profits,............................amazing this can't be controlled,since the govt. wants to control more than ever i say go out and control the price hikes on gas..................wp


    no shit he's not going to magically make the dollar rise, he's a step in the correct direction, not the fix.

    oh and im lazy and don't feel like reading past the first page :)
    Edited By: sXeffects Mar 2nd, 2012 at 02:48 PM
  16.  
    Originally Posted by Dyzalot View Post

    You don't need to quantify how the event affects the bettor. You only need to quantify how each bet affects the bettor. Every bet has its own odds and results and those odds and results are independent of any other bets. That's basic math. It is like the bet in blackjack where you can "hedge your bet" when the dealer is showing an ace. Sure its a hedge but it is still a separate bet that should be evaluated on its own merits to discover if it is +EV or not.

    A guy bets $100 on black and $100 on red on the same spin. Red comes.

    He wins the red bet. He walks away with no money which is the bottom line. You're an idiot. You want to disregard the very thing which makes a hedger a hedger and not a speculator.

    There is 0% chance you're right. Hedger and speculator aren't just words or ideas like you think. They have been official designations in the futures industry for over 300 years. At the top of every account form literally the first check box is [ ] Hedging Account [ ] Speculative Account. They are separate designations because they have different very margin requirements.

    Southwest Airlines with 100% certainty has a hedging account. Period, end of story, debate over.

    You can not reason away actual financial designations, history, or facts.
  17.  
    Originally Posted by JAAAAA!!!! View Post

    There is 0% chance you're right. Hedger and speculator aren't just words or ideas like you think. They have been official designations in the futures industry for over 300 years. At the top of every account form literally the first check box is [ ] Hedging Account [ ] Speculative Account. They are separate designations because they have different very margin requirements.

    Southwest Airlines with 100% certainty has a hedging account. Period, end of story, debate over.

    You can not reason away actual financial designations, history, or facts.

    Now you are just talking about arbitrary legal definitions. I notice you don't address my blackjack example though. By your definition anyone that speculates on an energy product is hedging since they will use and buy energy in the future.
    Edited By: Dyzalot Mar 2nd, 2012 at 02:58 PM
     3
  18.  
    Originally Posted by Dyzalot View Post

    Now you are just talking about arbitrary legal definitions. I notice you don't address my blackjack example though. By your definition anyone that speculates on an energy product is hedging since they will use and buy energy in the future.

    Arbitrary legal definitions? I started this debate by telling you that Southwest Airlines was actually a hedger not a speculator which was and is 100% correct. Not debatable, The speculators being blamed, incorrectly as we agree, in causing the huge price spike in oil do not include Southwest Airlines.

    I never play blackjack so I don't have a good grasp of the hedging to be honest. That said at the end of the hand or event the money won or lost is a result of all bets. That's the bottom line for a hedger or gambler. How the event hits their pocket.

    You bring up something interesting about +EV tho. What you may not realize is that when fuel prices are ripping higher and the market panics futures spreads widen. Hedgers like Southwest pay a bigger premium for the protection. Often they make less in their futures than they lose in higher fuel costs. The overall hedge is a loser but still +ev because they still paid less for their fuel than they would have without the futures trade.

    Hedging 101.
  19. A hedge is just a specific kind of speculation that offers insurance against a position you already are betting on. It is still speculating. That has been my point all along. Anyone betting on futures is speculating regardless of whether they are using that speculation as a hedge,or insurance, against another position or speculation.

    If I speculate by buying 100 units in a futures contract and SWA hedges their fuel costs by buying 10,000 units in a futures contract, who is having the larger affect on the market? How is the market affected if we buy the same amount of units? Does the market care if I am hedging or speculating when it comes to the affect it has on that market?

     

    Short of trading flat or perfectly hedging production in accordance with a well-defined risk policy, there is no practical way to verify the classification of transactions as hedges or speculation on a trade-by-trade basis. There will be some uncertainty. A clear risk policy, a robust risk system, and a strong risk manager can help minimize classification problems. But hedging and speculation are fellow travelers, the Siamese twins of risk. Find one and you won't have to look too far to find the other.

    http://www.ogfj.com/articles/2011/01...n-hedging.html
    Edited By: Dyzalot Mar 2nd, 2012 at 03:34 PM
     3
  20. Just finished buying some Australian sovereign debt.
  21.  
    Originally Posted by Dyzalot View Post

    A hedge is just a specific kind of speculation that offers insurance against a position you already are betting on. It is still speculating. That has been my point all along. Anyone betting on futures is speculating regardless of whether they are using that speculation as a hedge,or insurance, against another position or speculation.

    If I speculate by buying 100 units in a futures contract and SWA hedges their fuel costs by buying 10,000 units in a futures contract, who is having the larger affect on the market? How is the market affected if we buy the same amount of units? Does the market care if I am hedging or speculating when it comes to the affect it has on that market?



    http://www.ogfj.com/articles/2011/01...n-hedging.html

    Your example is backwards as to what actually happens.

    SWA is buying 10,000 contracts to hedge their costs. There are only so many actual hedgers and we'll use 10,000 units each. The speculators aren't just hedging the amount they need with 10,000. They are buying 500,000 contracts each which is why the markets are blaming them and not the hedgers.

    Have meetings the rest of the day. Good stuff.
    Edited By: JAAAAA!!!! Mar 2nd, 2012 at 03:42 PM
  22.  
    Originally Posted by JAAAAA!!!! View Post

    Again, see the post right above yours. The USD vs. the world is irrelevant unless you're converting it to buy goods in other countries. All that matters is the USD vs. the goods, that's the relative you should be looking at.

    Allot of our goods are purchased in other countries where the strength of USD versus YEN/YUAN/EURO matters a great deal and affects prices at home.


     
    Originally Posted by JAAAAA!!!! View Post

    EDIT: Dyz is right about speculators. Speculators slow futures markets down, not the other way around. The futures markets were created for hedging. The ONLY reason speculators are allowed is because the volume adds liquidity and LOWERS volatility. The people crying to get rid of speculators are fucking retarded.

    You claim that speculators lower volatility. Can you explain why? Last year the COMEX raised margin requirements 5 times in a week, they stated it was in order to drive out speculators to lower volatility. If speculators lower volatility then why drive them out?
  23.  
    Originally Posted by JAAAAA!!!! View Post

    Your example is backwards as to what actually happens.

    SWA is buying 10,000 contracts to hedge their costs. There are only so many actual hedgers and we'll use 10,000 units each. The speculators aren't just hedging the amount they need with 10,000. They are buying 500,000 contracts each which is why the markets are blaming them and not the hedgers.

    Have meetings the rest of the day. Good stuff.

    I'm not claiming that "hedgers" are buying as many units as speculators. I am stating that every unit bought, whether for speculative purposes or for hedging purposes, has the same affect on the overall market. Just because hedgers buy less units does not mean they have less of an impact per unit bought.

     
    Originally Posted by StlngMyChps View Post

    You claim that speculators lower volatility. Can you explain why? Last year the COMEX raised margin requirements 5 times in a week, they stated it was in order to drive out speculators to lower volatility. If speculators lower volatility then why drive them out?

    As an example of how speculators lower volatility in a market look at what the onion market was like before speculating in it was outlawed and after.

    The reason speculation lowers volatility is because a speculator is betting on a change in market price in the future and thus causes a change in the market price today towards that future equilibrium. Therefore whenever the event happens that would have changed the price, such as changes in supply or demand, some of the change in market price has already been "priced in" by the speculators giving you much smoother price changes compared to if there were no speculation.
    Edited By: Dyzalot Mar 2nd, 2012 at 03:55 PM
     3
  24.  
    Originally Posted by saxman View Post

    up until recently, the USA has been paying about half as much for gas as the rest of the developed world and I have no idea why that is. Maybe its been kept artificially low with subsidies, but i really don't know the answer. I'm sure its been a major shock to you guys but welcome to reality.

    It's too bad really. Without government propping up the energy industry we probably could have a much more green and more efficient energy industry today. But since government essentially fucked that up with subsidies, tax breaks. etc. What do we do now?

    I have an idea. How about we have government aid and support the green energy industry, so we can end up the same place we are now 50 years from now.

    Looks like we are doomed to repeat history.
  25. Government picking winners and losers almost always means the common man loses.
     3
  26. Any point sticking up for the value of the dollar is obviously a short term one

    The dollar is in massive long term decline

    We screwed the pooch
  27. Wow this thread sucks.

    1. Southwest did hedge using derivatives by locking the price of their main cost. Done. Its that simple. No need to fucking go two pages and 6 analogies about it.

    2. JAAAA Must be levelling. Rolling futures of commodities if he had a million dollars? really? The fact that the dollar is strengthtening agains other currencies doesn't matter? America doesn't trade with other countries? WHAT IS THIS I DON'T EVEN.
  28. A hedger sells risk, a speculator buys it. The distinction is not arbitrary.
  29. I'm a Canadian that lives ~30 minutes from the border so I frequent America lots. Many years ago Canadians used to pay $1.40 for an American dollar. As of late last week, the Canadian dollar was worth slightly more than the American dollar.

    My uneducated opinion: Yeah, I would say your dollar is tanking parallel with the remainder of your economy (ie. jobs, industry, etc). Wish North America would stop outsourcing.
  30. Just look at the exponential growth in the money supply. 2% inflation?!?! pffffff. If inflation today was calculated honestly we'd be closer to 10%. Removing food and gas from CPI isn't the only way the BLS cooks the books. Substitution, weighting, Hedonics. Your dollar will become worthless and you'll have to see this on your TV

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