TPS

How are you defining the crash? The bear market that lasted for 2+ years (and, yes it began in Clinton's last year)? Or the initial drop in 2000? In percentage terms, one of the largest "crashes" over the past 40 years was in October 1987. But, hey, what do I know...

Coming from the guy who thinks the administration controls monetary policy. It's quite a stretch to go from my statement that "it took 6 years to break the previous high," to I must believe stock prices should always go up. I'm getting used to people stretching my statements though. The obvious inference from my statement is that the down turn in the Dow must have been pretty severe, and the resultant recovery a long, slow process. But maybe that's too complicated...

Whew! That sure took a long time. I never said the prices were being affected by the index weight change after that. I agree prices will eventually settle to what the fundamentals dictate. Oh, oh! In one paragraph you admit there can be a "pop", and the next there's no effect? Who said they were manipulating it for their own benefit? You asked some flippant question earlier about who the GS traders work for, not about manipulation for their own benefit. Try to stay on topic. The topic: Both articles STATE that the change in the weight had a significant impact on gasoline prices in August. Are both the NYT and FT articles incorrect? Who should we believe? Them, or you and the monkey? Seems to me the only contentious issue is, what was the underlying reason for the change? As i said, I lean toward the serendipity explanation.

By the way, I wouldn't get too cozy with the DOW at the moment; the put-call ratio on the index is about 2-1.

You're celebrating the fact that the DOW's at a new high. I pointed out that it took 6 years to do that. I am happy that it finally did, especially for my pension. I am unhappy though that it took so long to get back to this point. You inferred I blame Bush. However, I've never disagreed with the fact that presidents have very little control over the economy. Sorry I pushed the Clinton button...

I guess the other quotes are irrelevant? That article states how influential the index can be and was on unleaded prices. I quoted Vergler on the explanation. For one, he's not with GS. Yes, they don't want to be a leader in the new product--they don't want to influence its price. However, their action on "not wanting to influence the price" for the new product, caused price changes in the old unleaded product--and the FT article said it was a significant influence. The gist of the article you link to (and the NYT article) supports the idea that GS's move DID influence the price of unleaded, and it was significant. Are you now disputing the gist of that article? Or since it's the position I've taken all along, is it that you have no choice but to continue to dance around and try to dispute that fact? Conspiracy or serendipity for Bush? More likely serendipity, but the connection with his new T-sec allows for the possibility of the first. The link I initially found makes that contention. While I lean toward serendipity, the former wouldn't surprise me either. Because after all, no one has ever tried in the past to influence prices....

This is fantastic news! The Dow has grown 0% since the previous high in 2000--under Clinton!!!!

Thanks for finding that. It supports my point entirely. From the article: The article quotes an independent energy economist to explain the move: That has nothing to do with "market conditions," rather how influential the index can be on the futures price--which is the point I've made all along. So the decision by GS, according to this economist, was made to reduce their influence on the new RBOB futures contract, but it actually lead to influencing the old unleaded contract. Serendipity or conspiracy, who knows?

That's what I've been saying. The decision by GS added another kick to the factors putting downward pressure on gas prices. That would help explain the initial "unprecedented" drop. Prices are staying down because of the demand-supply conditions. My argument is not inconsistent with that. Not according to GS's August press release. It looks pretty well distributed between the remaining energy-related products--crude wti, brent crude, heating oil (the largest shift), and gasoil. Now that your jumping on monkey's bandwagon, my response to both of you is that, as I've said all along, there were multiple factors causing the drop in prices; supply and demand conditions were going to lead to a drop. Under most conditions, the drop would've been more gradual, not "unprecendented," yes? With most factors indicating a drop in energy prices, the reallocation by GS to the other energy future's contracts would certainly not be followed by market speculators. When multiple factors are causing prices to fall, and you add another, that helps the momentum; when multiple factors are causing prices to fall, and only one factor adds upward pressure, certainly one would not expect prices to reverse. AS for your last question, I trust you know that most participants in the futures markets are speculators--taking long positions when they believe prices will head higher, shorting when they believe prices will fall. They are not holding oil in their portfolios, they are speculating in a derivative security. When the market turns against their bet, they get out--as you mentioned before--by offsetting longs with shorts. I'm surprised (maybe I shouldn't be) that you can't see this possibility adding "fuel" to the drop in gas prices: Market conditions were leading to a drop in gas prices--we all agree there. Under most circumstancess prices would fall at a steady or moderate clip. The argument being made is that Gold-Sachs' decision to re-weight the amount of unleaded gas in the GSCI meant downward pressure on future's contracts. when they addounced this move, that caused speculators in the futures market for unleaded to reverse their long positions--closing them out and then moving to short positions. The drop in unleaded futures prices helped create the "unprecendented" drop in spot gasoline prices in August. A quote in the article, "at the start of the week (Aug. 9) everyone was talking about $4/gal gas." That means most speculators were still in long positions that week. When the market turned, for all reasons cited, including GS's announcment, that created "unprecedented" momentum for prices to fall. Again, I don't know if it was a "conspiracy" or serendipity. The focus of this topic was on whether the Admin "manipulated" prices. I think I posted something early on that it was market conditions. I recently came across this interesting possibility. People can draw their own conclusions.

It would be helpful if you provided the source for your statement of a "50% increase in the oil weight." While they announced a transition to the reformulated gas in June, initially they were supposed to "roll" 1/3 of the unleaded into the reformulated over a 3 month period. Instead, they rolled 1/3 in August, then phased out the unleaded contracts over sept and oct. So the end result was that the weight (formerly for unleaded, now reformulated) was reduced over a 3 month period. Again, I'm not saying the move by GS was the only factor. I'm saying it helped push the prices even lower. Couple of quotes from the NYT article: “They (GS) started unwinding their positions, and those other longs also rushed to the door at the same time,” said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation. “We saw gasoline fall 82 cents in the wholesale market over a four-week period, which is unprecedented,” he said. Mr. Goldstein said that the decline in gasoline prices helped send prices of the whole group of energy-related products down.

I never said market forces caused a change in the weights. See the explanation on how the weights are determined. I did agree that market forces were putting downward pressure on gasoline prices. The point I have made is that the decision to change the weight in the index helped create even greater downward pressure on gasoline prices (and not just by the influence of the reduced demand from GS's index, but also the announcement by GS of its decision to reduce the weight, which caused other traders to change their positions in the unleaded futures). Was it a conspiracy to help the Bush admin? I certainly don't know. However the change in the weight seems inconsistent with what's stated on their web site. Here's their quote: "The GSCI is world-production weighted; the quantity of each commodity in the index is determined by the average quantity of production in the last five years of available data. Such weighting provides the GSCI with significant advantages, both as an economic indicator and as a measure of investment performance. For use as an economic indicator, the appropriate weight to assign each commodity is in proportion to the amount of that commodity flowing through the economy (i.e., the actual production or consumption of that commodity). For instance, the impact that doubling the price of corn has on inflation and on economic growth depends directly on how much corn is used (or produced) in the economy."

Did you read the quote I posted from the GS site on the GSCI index and how the weights are determined? Your explanation makes no sense based on the gold sach explanation. Your question on GS traders is irrelevant to the issue unerlying the change in the weight for unleaded gas in the GSCI index. This change is analogous to the DJIA making a change in the composition of the stocks contained in their index. They only do so when the structure of the economy has changed. so they need to add companies to the index that reflect the changed structure of the economy. Traders don't change the index, but you already knew that...

Boy you guys sure like to stretch my arguments... I never said I didn't know the components of the GSCI. I actually went to the GS web site and found and posted the information on how they determine the weights--and their site has all of the components and weights listed. Maybe I wasn't clear enough. I did state that market forces were aligned to push prices lower, but this particular "adjustment" also helped speed the process, especially after other market players found out about the adjustment. The article from the Times (did you read it?) is an objective business piece much like you'd find in the WSJ. There are no hints of conspiracy there (the blogger link, yes). The article, quoting industry traders and GS announcements, makes the case that this readjustment helped reduce unleaded gas prices. Based on the GS web site and their own words on how they determine the weights, the change they made in August is inconsistent with their explanation of how the weights are determined. Google GSCI and you can find the gold sach's link. But of course, your usual counter-argument is that it's a NYT article. Gee, how can anyone argue against that point. It does serve you well though...

Having just described how the weights are determined in my previous posts, and after going to the GS web site on the index, it does raise the question of why they changed the weight, which is supposed to be based on the proportion of unleaded gasoline's consumption/production in the economy. Yes, I agree the market forces were there to cause the price of oil to fall, which would then cause gas prices to fall. This index change is not the same thing. Their decision added another factor to the falling price of unleaded gas, and a factor that could immediately impact prices. As my last posted stated, they closed out the positions by not "rolling over" the contracts--not buying new ones to maintain the composition of their index. That drained $6 billion out of the unleaded gas futures market on the NYME. While you are correct that closing out a long position occurs when one offsets it with a short, that is not the same thing as taking a short position. One only takes a position when it is "open." but you already knew that....

Yes, I was thinking about looking into that. Unfortunately, the article in the NYT doesn't state how they reallocated their weights. It did say "to other commodities," so they didn't pile it all into one area. And if market participants knew which areas, they would've been smart to jump on those futures too, creating the effect you mention.

Yes, that's what the second (and most likely) scenario implies--the market conditions were there to cause the price of oil to decline, which would then cause the prices of oil-related goods to start falling. It's a bit different in this case though. The GSCI is an index of commodity prices, but the "index" is created by purchasing underlying commodity contracts, the amount of which is based upon the weights that GS gives to each commodity. Every month, when contracts expire, GS will "roll over" the contracts to keep the underlying composition of its index intact. In August they announced they would reduce the weight of unleaded gasloline in their index (from about 8% to 2%) and redistribute the change to other energy commodities. In effect, they reduced their purchases of unleaded gas futures in August by $6 billion, and used the funds to purchase other (energy) commodity contracts, increasing the weights in those other categories. Here's the rub: they created a product to sell. That product's value is determined by the weights of each product in the portfolio, which determines the quantity of contracts to purchase of each commodity, and the value of the contract itself. The GSCI is the sum of weight times the value of each contract. The GSCI is a derivative that GS sells to investors. The question is what determines the weights of each commodity? In this case, GS made a decision to change its product by changing the weight of an asset in the index. According to their web site, "appropriate weight to assign each commodity is in proportion to the amount of that commodity flowing through the economy (i.e., the actual production or consumption of that commodity). Did the amount of unleaded gasoline consumption/production change recently to make GS change its Weight? Again, by doing this, it reduced the demand (I had this reversed in the other post) for unleaded futures by $6 billion, putting downward pressure on futures prices, then, when other players got wind of this move, they sold off futures based upon the expected impact. The more I think about this, the more it raises the question of why they changed the weight.

first, I gave you a couple scenarios. I didn't say which one I believed (although I knew the conspiracy angle would ruffle some feathers... ). Second, GS did not "go short on gas," they reduced their long position in the futures market by a significant amount, big enough to influence the futures price, and also start a move by other players in the same direction. Do you know what happens when there is a large sell off of futures contracts (hint: when you increase the supply of something, the price goes down)? And, when futures prices fall, that sets into motion a fall in spot prices. Does that mean GS controls the gas market? Of course not. Can a significant player influence market prices in some markets? Hell yes. In fact, the NYME limits the amount of futures contracts one can purchase, in order to limit the possibility of market manipulation. In the case of GS, the futures contracts are part of their commodity price index (GSCI)** which they sell to other investors, so the NYME restriction didn't apply (it only applies to daily traders). By re-weighting their index though, that meant a sell off of the quantity of unleaded gas futures, the quantity of futures contracts which exceeded the NYME limits. What it means is that the sell off by GS started a fall in futures prices (of unleaded gasoline), and other players followed suit, which continued the fall in futures prices, which led to a fall in the spot price. The question underlying this is, which isn't answered, why did GS decide to "re-weight" the amount of unleaded gas futures in their commodity index? Amaranth's natural gas position had nothing to do with their re-weighting the GSCI. You are correct about one thing, someone has a "frightening misunderstanding" of markets... ** The GSCI is an index of 24 commodities, and GS purchases various types of commodity contracts which make up its underlying value. The amount of the contracts purchased for each commodity is determined by the weight (%) GS gives to each. These weights are not changed too often, because then the underlying value of the index has changed, which obviously influences the price of the GSCI.

A stronger dollar means it purchases a greater amount of foreign currency, which means it affects the ability to purchase anything priced in another currency--a stronger dollar reduces the prices of imported goods from non-dollar countries. However, since oil (and other commodities) is priced in dollars, the dollar does not "strengthen" against its own value. The only way "a dollar buys more oil on the spot market" is if the dollar price of oil declines. Also, "a sitting administration" does not determine the course of monetary policy, The FED does. RkFast, if you want a good conspiracy as to how this administration could affect prices, I just came across a doozy: Spot prices can be, and often times are, driven by futures prices. Many market players were making significant bets on continued increases in the price of oil and gasoline in the futures market, that is until August.... In June, henry Paulson, head of Goldman Sachs, was named Treasury secretary. In August, Goldman Sachs announced it was reducing its investment in gasoline futures to the tune of $6 billion (via a commodities index it trades to other investors). Other players shortly followed suit. I can think of a couple possibilities here: 1. A "conspiracy" to lower prices before the election. 2. Coincidently, GS decided to reduce their position in August because of changing market conditions--demand for gas falling and excess oil supply inventories. This blogger raises the conspiracy issue, but the underlying facts of the market change by GS can be found in the article he has linked in his column. futures gas price manipulation?

I would add, to force the CBs to play tighter, which would open up the deep ball.

As stated in one of the B-News articles today, about 10-15 percent of the fans are coming in from Canada....

Watching him last season, I certainly thought he didn't have the accuracy to stick in the NFL. So maybe you're right about the nerves/jittery thing. Like JDG, this season I've questioned his ability to make the short "touch" passes. However, those are the passes he still looks like he's rushing or "jittery." Hopefully, as the game continues to "slow down" for him, he'll get better at those as well. With regard to the Bills' throwing a lot of quick passes to their WRs (or WR screens,) I think it's a great way to utilize the talent they have at WR. It appears they made an extra effort to get Evans the ball yesterday, and he almost always made the first defender miss on those quick passes.

quit whining Everyone knows constitutional rights should be suspended until the "war on terrorism" is over...

If you actually read the paper, you wouldn't need to ask that question. Hmmm...you don't agree with much in it. Well, there are some very speculative and contentious issues I raise, but I also use some very standard explanations, as well as historical facts. I'll start with some of the standard stuff: 1. Do you disagree with the discussion about seigniorage? If so, do you have an alternative measure? I'll admit, I introduce what I believe are some new measures for seigniorage. Which in particular do you disagree with? 2. What specifically do you disagree with about my discussion of the Bretton Woods System? That's basically historical fact. 3. With respect to the last section, do you disagree with the standard analysis of the "twin deficits?" Do you disagree that Asian economies peg their currency to the dollar in order to support their export-led growth strategies? The contentious issues: 1. I rely on a single source for the argument about the US-Saudi relationship and ensuring that oil will be priced in dollars and in return the US will "provide a security umbrella" for the Saudis. The point here is that by ensuring oil is priced in dollars it creates what I call a supra demand for dollars in the FX markets. My cursory evidence suggest that when the price of oil rose significantly, so did the dollar. 2. The premise of my paper is that we will look back on this current era as the point in time when the dollar began its decline as the premier international reserve currency. In the last section of the paper I discuss what it would take for a collapse of the dollar. I argue that in the era of "fiat" currencies, central banks can intervene in the FX markets to a level of "any means necessary" to prop up the dollar. I gave the example of Japan wanting to prevent the dollar from going below 100 yen to the $--essentially printing yen and buying dollars. This was described in the Financial Times and other publications--do you disagree with that? At any rate, I argue that central banks can prevent a dollar collapse because of their ability to print their own currency, and that Asian CBs do this because they want to keep their currencies from appreciating, which would reduce the demand for their exports. Now, my major speculation, and yes, it is a prediction on my part based upon my analysis: I ask is there a possibility that the dollar will collapse? My speculation is that it wil happen because of a Political event. I base this speculation on historical precedent (US and England and the Suez crisis as discussed in the paper) and the ability of CBs to prevent a collapse of the $ because they can print their own currency. Given the fact that Asian CBs hold about $1 trillion in dollar assets--mainly treasury securities, the scenario I envision of a dollar collapse is based upon the current administration's unilateral foreign policies. The largest supplier of oil to China is Iran. If the US decides to once again pusrue a pre-emptive war (justified or not) on Iran, I speculate that China will "attack" us economically, dumping its dollar assets, thus causing a collapse of the dollar, and an economic crisis in the US. I admit, this is a very speculative argument. I think we'll see shortly whether I'm right or not. Now, if you read my paper, you would realize that this explanation of the possible collapse of the dollar is based upon the Bush administration's foreign policy--it can only happed because of a political crisis. So, yes, duh...it depends upon Bush being elected. Now the rest of the paper--the majority of it, much of which is based upon standard economic arguments, I find it difficult to comprehend your statement that you "disagree with most of it." Unless of course you only read the first page... If you want to have a serious dicussion about this, I will be more than happy to reply.

In comparison to Haloti Ngata (0 tackles in 2 games), who many (including myself) wanted at the #8 spot, McCargo is holding his own (1 A in 2 games). The point: it's silly to speculate that either one is a dud at this point.

Is a WR screen considered a "gimmick" play? By the way, with the exception of the .03 seconds of "pre" contact, it was very well-executed.