Monday, August 4, 2008

never would have paid it

It's been a while, I know. But when Corporate America is paying you overtime for every hour on the grind and you're trying to crank it out until vaca next week, blogging takes a back seat. That being said this will be brief. Edouard (doesn't that look like a typo?) is coming, we gotta hunker down and watch the weather all night apparently. As a few of you all know, (fellow finance majors stand UP) there is more than one way to value a stock. The appropriate method to determine a stock price depends on the time span in which you're interested, your personal belief as to what constitutes a stock prick, and a little bit of sheer luck. There is no proven way to consistently beat the market (well, buy and hold - especially in a solid index fund - seems to work well if you have tens of years to reap your investment) and even if you can vehemently scream the benefits of technical analysis, fundamental analysis, random walk theory, etc. you're likely to find someone next to you (in class, perhaps?) that feels just as strongly about another theory. You can borrow my Investment Management textbook if you want to read about the theories. I bring this up because a few weeks back I read an interesting article on the Freakonomics blog talking about a working paper from some Michigan economists about predicting the price of oil. We constantly hear snippets on the news about crude oil going up to $130...$140....$150 a barrel and, for the most part, you know you have to take that with a grain of salt. It's safe to say oil is going to go generally up (although thank goodness for the recent respite, whatever it indicates, because I'm back to hovering around $40/tank for the Civic!) but all that bologna with specific prices -- how do you know? There are so many factors that are unpredictable -- but I'm just being pessimistic about the models. The researchers have found that the greatest predictor of the oil prices is the current oil price. It makes you think twice before diving into the commodities market, eh? The more recent inexplicable spikes in erratic investor behavior has me pausing for all equities and commodities in general. I might skip straight to options?
"Amazingly, this simple rule did better than the average of dozens of professional forecasters! In fact, the no-change forecast was 34 percent more accurate at predicting oil prices in 3 months time, and 18 percent more accurate at predicting prices in a year’s time. While professional prognosticators might argue that this difference isn’t statistically significant, it sure is embarrassing."
Also, here's a graph of oil prices over the last 40 or so years. Click here to see prices as adjusted for inflation juxtaposed with the real prices. We've covered the conflicts and what affects oil prices a lot in my macro theory classes (fellow economics majors stand UP!) but recently I'm kind of at a loss when it comes to hope for our energy sources. Thank goodness people like T. Boone Pickens (whose NYT editorial I posted a couple weeks ago) have a lot more money and a lot more knowledge on the subject and are pushing for change. Of course it's not enough to just sit and wait for others to incite the change and carry it on their backs. Where do I sign up for a windmill in my backyard?

Speaking of gas prices, combine Marvin Sapp + the Tom Joyner Morning Show + one of the biggest election year issues and what do you get? Sheer hilarity:

1 comment:

Enchanshizzy said...

no you didnt with that never wouldve paaaid it! you cra cra