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On what grounds do you "know" this will collapse oil prices?  That's my whole point.  You haven't demonstrated this.

Your entire point here is that QE props up oil prices.  I'm asking for actual evidence of it, because the chart you've used as "proof" looks like it proves nothing to me.  You're now answering with hand-waving based on the assumption that it does so, because reasons or something.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jan 11th, 2015 at 06:01:17 PM EST
[ Parent ]
I didn't say it was me who knew. I'm not privy to what goes on in high level meetings which may or may not be written about decades from now in someone's memoirs.

I said imagine that you are J P Morgan and you know because you saw the price drop the first time QE ended? What do your traders do when QE2 and QE3 come to an end?

I'm outlining a theory based on my experience of markets in action; my assumptions as to market behaviour/instruments and my analysis based upon my assumptions.

That's the best I can do, I'm afraid.

Firstly, I provide explanations for market anomalies which as far as I know no one else has explained.

Secondly, I made accurate predictions three years ago (and I don't recall anyone else doing so) as to what would happen as a result of QE ending (Mind you, I didn't count on two more years of Twist/QE3).

Thirdly, no-one has yet poked holes in my case other than to say there is no proof.

As for QE propping up asset prices then I submit there is any amount of academic studies to look at if you're masochistic enough.

Oil is not only a consumable commodity, it is also, when stock-piled (or even left in the ground), an asset which through 'passive' Index Funds and Exchange Traded Funds has become a new 'asset class'.

I have been pointing out for perhaps five years that the 'inflation hedging' mis-sold by investment banks to risk averse 'muppet' investors caused the very inflation these investors aimed to avoid, and in so doing gave rise to a windfall to producers on a cosmic scale.

If you disagree with my assumptions and arguments, or perhaps consider that the oil market price reflects physical - rather than financial - supply and demand then I look forward to hearing your reasoning.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jan 11th, 2015 at 07:51:24 PM EST
[ Parent ]
Yes, I've read many of those studies.  I don't think those studies say what you think they say.  But that's not the issue at hand anyway.  

You stated the picture was worth a thousand words, and that there was a perfect correlation between QE programs and oil prices -- implying that it was obvious.  I said it was not, as anything with functioning eyes should see if they actually look at it.  I then asked for statistical evidence.  You didn't provide any.

This is just gibberish, Chris.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Jan 13th, 2015 at 06:37:47 PM EST
[ Parent ]
Where do statistics even come into this?

I am referring to QE programmes: not to the flow of QE within those programmes.

If you think I am saying that oil prices react to every variation in the flow of QE then you are under a misapprehension.

I'm sorry, but you are the only person I have come across to date who cannot see - just by looking at the chart - that when QE programmes begin or soon after, the oil price rises, and when the programme ends - or just before, then prices fall.

But each to his own.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Jan 13th, 2015 at 08:11:39 PM EST
[ Parent ]
There is no way the folks at Chase and Goldman couldn't have known what the end of QE would bring.  As I've been saying for 7+ years, the problem isn't liquidity but solvency, and since QE is a liquidity fix, it had to have some purpose other than actually righting the ship (Many have said that things haven't straightened out because there hasn't been enough QE, that the Fed brought a knife to a gun fight.  Actually, the Fed brought a flamethrower to a funeral: QE was a completely wrong response to the event.).  That purpose was simply to fill Chase's and Goldman's money hoses so they point them wherever they wanted.  They found a way to securitize oil that the Saudis could accept (See my earlier comment on bai' al 'inah.) and went to town with everyone else's money.  They knew that, when QE ended, the hoses would empty, and repositioned themselves accordingly.
by rifek on Tue Jan 27th, 2015 at 02:37:09 PM EST
[ Parent ]
Proofs are for mathematical theorems and for juries. Unfortunately, many, if not most, economists see economics as an axiomatic, deductive 'science', while the rest point out both the absence of any thoroughly agreed premises from which to deduce anything and the lack of agreement between observed reality and the predictions of the axiomatic crews. None of the most important aspects of any science of which I am aware mostly consists of making and attempting to falsify hypotheses based on experiment, which involves additional well known complications in the social sciences.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jan 11th, 2015 at 11:47:51 PM EST
[ Parent ]
Okay?  I guess that's fine.  I haven't the slightest idea what any of that has to do with my comments.  I asked for, you know, evidence.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Tue Jan 13th, 2015 at 06:42:38 PM EST
[ Parent ]
You indicated Chris was trying to 'prove' something. He did offer evidence in the form of the graph, which you denies shows anything. I think you are over constraining the requirements by asserting that the rises and drops should be perfectly aligned with the beginning and end of QE sessions. If we are to assume that there is no insider information in play that might be a somewhat more reasonable assumption. But we know that there are massive dissymmetries in information in these markets. Well, Lucas and his lot would disagree.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 15th, 2015 at 12:07:27 AM EST
[ Parent ]
Also, the intensity of QE was not constant. If I recall correctly, it slowed down quite a lot before being stopped altogether.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Thu Jan 15th, 2015 at 05:30:37 AM EST
[ Parent ]
Another confounding problem.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 15th, 2015 at 11:15:55 AM EST
[ Parent ]
What's confounding is to draw a calendar and mark this or that date as the start or end of QE. One would have to at least look at QE purchase volumes.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 15th, 2015 at 12:27:50 PM EST
[ Parent ]
A good stock and flow analysis could tell a lot - if the data were available.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 15th, 2015 at 05:06:43 PM EST
[ Parent ]

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