Samuel Cashiola

Credit Default Swaps, Counterparty Risk and Free Markets

dlaw,

Thanks for the thoughtful comment. Regarding your point(s), I think people can value any new features (some of you which mention above) that an exchange can offer. As long as demand exists for an OTC market, however, people should not be forced to trade on an exchange. If everyone decides that the exchange format is better, then the OTC market will fail with no business. Let natural market forces decide. Why do forward markets still exist?

Thanks

Five Reasons Steve Ballmer Thinks Apple's a Buy

Apple is definitely a fantastic company. Ballmer's ability to lead MSFT is questionable.

Taking over for Bill Gates, though, is a tough task.

Taking over for Steve Jobs will be a tougher task.

I like AAPL now but those of you claiming it is a long-term buy and hold opportunity ($650 range folks) need to address the issue of Apple's post-Jobs era.

If you think Ballmer is getting it pretty bad (in terms of criticism), just wait till Apple's next CEO takes over and (in all likelihood) can't do as good a job as his predecessor.

Disclosure: Not play on AAPL or MSFT

Speculators Bigger Players in Futures, Options Markets Than Thought

Speculation is part of any market and any good that is traded. Speculation often drives prices of everything from stocks to wine up or down. To take away speculation (or any other type of trading for that matter) would ensure that the underlying commodity will not be trading at intrinsic value. Intrinsic value should reflect total supply and demand forces.

You may not like that the price of oil (or any other commodity) is higher than it used to be but that doesn't mean that it does not reflect its current value.

Just like some people say these speculators are keeping the price of commodities like oil high, regulation would create a quasi-artificial price ceiling and keep the price lower.

Regulation is clearly not the answer if price integrity is your goal. (It certainly might be if all you want is a commodity like oil trading at a lower (and probably incorrect (in terms of intrinsic value)) price.

Institutional Speculators Disrupt Futures Markets: The Evidence Mounts

First, that's a lot of negatives in a single sentence.

I'm not a commodities analyst so I don't know. But I do know that if I personally have a strong conviction that the price of oil will be X dollars in 2015 then I should be able to invest accordingly (whether I'm a farmer or a bank).

Institutional Speculators Disrupt Futures Markets: The Evidence Mounts

Because the institutional speculators are not buying irrationally (just to throw money away), absolutely not. They aren't going long oil at certain price (say $147) for no reason. They obviously feel (if long) that the trading price of oil is too low. Why should anyone be able to stop them from feeling that way (and acting on it)? In a free market, no one can. Free markets are very black and white. Either it's free or it's not.

Institutional Speculators Disrupt Futures Markets: The Evidence Mounts

Donald:

You're still not addressing the issue of price integrity! In order for a price to reflect fair value, it must be able to be driven by both sides of the market (buyers and sellers) freely. If an investment bank goes long oil futures (buying them and sending their price higher) and another investor thinks the price is too high, they are absolutely free to express their dissenting opinion by shorting (and vice versa).

Institutional Speculators Disrupt Futures Markets: The Evidence Mounts

John:

I respect (and disagree) with your opinion.

Why should the (you call) few wealthy irresponsible individuals care about the public's interest? What personal liability and obligation do they have to it? Seriously ask yourself that question.

If there is an opportunity to make money you'd be irrational not to take it. If everyone operated with the mentality of doing what was best for the whole instead of themselves (altruism), markets would be inefficient. You are questioning the institution of laissez-faire capitalism (free markets) when asking for regulation to protect certain individuals. Market efficiency is impossible under those (regulated) conditions.

Institutional Speculators Disrupt Futures Markets: The Evidence Mounts

I will address the questions in order

Whether or not the pension funds, endowments and mutual fund should be speculating in the futures markets (given, you say, their tremendous risks) is entirely their decision, not ours or anyone (like the government) else’s. Just like any other investment opportunity, the investment managers weigh the risk-return characteristics of the investment. If they still see an opportunity then it is their choice to take it. (Just like I’m not going to tell Bill Miller that he’s wrong for being long financials, I’m not going to tell a pension fund manager that his commodity play too risky.)

Your second question is tougher but I’ll begin by stating that I do not believe that market regulation is a good thing. In order for a market to operate entirely efficiently, it must be free. (supply and demand should be able to freely influence price) Farmers and other hedgers trade in futures, forwards (and other derivatives) markets in order to hedge price risk (among others). Why do you assume that the farmers are the only people that have the right to dictate the intrinsic value of the underlying commodity? If someone is willing to pay more for something than someone else then you would be irrational not to sell it to the higher bidder (you’d be throwing away money). Should the regulators be concerned about this? They should not if they want their markets to reflect fair market value.

Institutional Speculators Disrupt Futures Markets: The Evidence Mounts

Those major institutional buyers that you are taking about see an opportunity and they are trying to take advantage of it. They have absolutely no personal obligation or liability to do what is best for other people (like farmers). They need to be doing what is best for their investors and if they believe that going long(or short) a commodity will deliver positive returns than that is their decision (not the governments).

The money managers of the large pools of money are not engaging in these markets with the purpose of hurting farmers (even if that is what is happening). The are involved because they believe that the intrinsic value of the underlying commodity is worth more(or less) than its current market value.

How High Leverage Has Brought Down the Whole Banking Industry

the government shouldn't be regulating at all. if no bank learns from its past mistakes and this happens again then they should be allowed to fail (again). the banks shouldn't be dealing with products incalculable (at least to them) risks. let the strongest entities survive. don't hurt them by bailing out the weak entities that made poor decisions and allowing the them to survive.

people won't learn anything if they're just going to get bailed out.

did anyone ever have that friend who drove a nicer (and possibly faster) car than everyone else that normally sped? when they received a ticket for speeding they were mad because it surely wasn't their fault. when their parents paid off that ticket they forget and started speeding again as if nothing happened? while obviously not entirely the same our current financial situation isn't that much different.

Why I Bought Financials (Despite the Mess)

Is it possible that the current price of financials is an accurate measure of intrinsic value and that we are currently anchored on the prices they exhibited months ago when they were hovering at their highs?

Also, just because a stock has gone up or down 13 or 15 or 27 days in a row doesn't necessarily have anything to do with it's performance tomorrow (they may very well be independent events, see: gambler's fallacy).

Oil/Gold Arbitrage Opportunity

Article title is a misnomer. Arbitrage is riskless profit. The proposed strategy is by no means riskless.

Oil/Gold Arbitrage Opportunity

Article Title is a Misnomer. Arbitrage is riskless profit. This is absolutely not riskless.