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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: anachronist who wrote (45564)	11/15/2005 3:02:21 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

If the majority of people recognize something as a forthcoming crisis, they will change their behavior to mitigate the damage that's a good point in general--certainly market pricing is a feedback mechanism which can alter outcomes and introduce a measure of self-correction to the exchange of goods and services. however, it does not affect the weather. i don't object to the general point you made (if that's what Heinz meant, even if it's not what he wrote). but the point was made in reference to a particular case to which it is not applicable imo. in the case of natural gas, a crisis is pretty much guaranteed by a bad winter--not an extremely rare, (hopefully only) once in 100 years weather event like Katrina was, but just a garden-variety once in 5 or 10 years bad winter--therefore, averting the crisis has nothing to do with anybody expecting or not expecting a crisis. it is just a random weather event. and the weather is not influenced by the spot price of NG, unless one posits the existence of a supernatural mechanism which contradicts Occam's Razor.* so, i think the "miracle" of crisis aversion in the case of NG this winter is random and not a result of market feedback. by contrast, the aversion of, e.g., the "year 2000" crisis was at least in part the result of people perceiving a potential crisis and then taking corrective steps to avoid it. *if it turns out that this Fairy does not in fact exist, then i think it's a good bet we will indeed have an NG crisis during a winter in the next few years. that does say another thing about crises: even if you can predict them, they're very hard to time. i learned that when i shorted GM back in 2002 or 2003 or whenever, and lost a lot of money, based on the same reasons for which the stock and its bonds have been tanking this year. so even if people can recognize "warning signs" (or conversely, "auspicious signs" as in a stock that one goes long), whether the "market" will agree with you in a time frame that is personally convenient is another matter. that's my interpretation of market efficiency, anyway.