Letters to the Editor
logicalresponse
Published Letters: 169 Editor's Choice: 19
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Musical chairs
[Read the article: Another major staff shake-up in the McCain campaign]
[Read more letters about this article: Here]At a time when most Americans are fed up with Bush, it is noteworthy that the Republicans have not had anyone to run a political campaign except the likes of Rove, for over eight years. Now that Rove-politique is not going to work, they have no one else with the talent to do something different. So all they can do is shift people around into different positions.
On top of that, McCain mistakenly has abandoned the 2000 McCain style for the 2000 Bush style. Talk about having the timing backwards. If McCain 2008 were more like McCain 2000, Obama would have a much more difficult fight ahead of him.
That said, I hope the last couple of weeks of Obama explaining himself will end soon and he will get on with the job of communicating what the voters need to hear. No one is going to think Obama is a patriot because he gave a speech about it, if that person thought he was not patriotic before the speech. I can see the need to get some of that stuff out there, but I hope his campaign quickly gets past dwelling on the nature of Obama's identity and get on to talking about the economy and how bad Bush's third term will be.
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bagels
[Read the article: American epitaph: "More is more"]
[Read more letters about this article: Here]Bagels are twice the size today as they were 20 years ago. I say this on a health web site that was showing how proportions have changed for the bigger in the last 20 years. I have suspected something was up with the bagel, but the size was really small back then.
I suspect that it there is something psychological working here. Maybe we perceive that something bigger is worth a lot, and the marginal cost to make something bigger is not as much as our perceived increase in value. Thus, more profit. For example, when I go into a restaurant, I seem to be less frustrated at higher prices for the food, if there are larger portions. Which I, of course, feel I must eat to get my money's worth, which is why I was looking at a health web site.
As for the Japanese and everyone else, they will catch on. Those not too young will remember that a job in Japan once lasted for life -- no layoffs. Not any more.
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It's impossible to decide
[Read the article: Speculation and the price of oil]
[Read more letters about this article: Here]I have been trying to figure out what is going on for some time now -- sort of a hobby, playing detective. I have finally admitted to myself that I am at a loss. I suspect until someone can fund a multimillion dollar study, no one else is going to do better just by knowing more math than I do. Here is a quote from a comment to an economics professor's blog that sums it up (The commenter is taking the prof to task for making an oversimplified argument against speculation, and tells the prof some more information is needed.):
1. establish the size of the aggregate oil derivatives market,
2. hopefully while you did that, you found the different groups of derivatives, e.g., exchange-traded futures, OTC futures, OTC forward contracts, exchange traded options, OTC options, and everything else,
3. for each of the above groups, you need to determine how much of the aggregate notional is hedged using the commodity. for example, positions in the options might be hedged using positions in futures contract, i.e., no additional demand for the commodity has been created.
One of the commenter's arguments was that somebody like Southwest Airlines is not likely to go to an organized market to buy futures, but will go to some large broker and buy OTC. Unless you know how much the OTC market counts for, you can't know the effect on price of any other market. Good point, I thought.
I am also not exactly sure how to define "speculation." I continue to hold on to my opinion that there are two kinds of demand that can affect oil prices, demand for oil and demand for contracts. The second sounds as if it is speculation driven, but if I think the demand for oil in the future is going to push the future price to x and I can now buy it for y < x, then unless I can get a better risk adjusted return in another investment, I not only will, but should buy oil futures, shouldn't I? If other people agree with me, then the demand for futures is going to go up.
Now one of the things that I do not know is what is the upper limit of futures contracts that can be written. If the amount of oil that will be available in 2010 is able to support z contracts, and z + w contracts have been sold, someone is in trouble and is eventually going to have to bid up the oil to cover the contract, if they have not already bought the oil itself. (Just covering the contract with another contract or option just passes the problem down the line a bit -- someone eventually has to cover.)
How then do you possibly know how to cover the supply risk if you are writing the contracts? Well, if there is lots of excess capacity, then you can figure you are safe. If its close, though, then I think you have to price in that risk in significant dollars. So the price of the contract goes up. Is that price increase, "speculation" or is that just the limited supply for oil reflected in the price?
And that is just the tip of the iceberg.