The Oil Drum

73 comments on Update on the Simmons-Tierney Bet

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Gail the Actuary on March 17, 2008 - 9:34am

You think smooth curves. Some of us think in terms of curves with discontinuities. If there is an upcoming discontinuity, the nice smooth curve doesn't really tell us anything. Simmons may be thinking in terms of discontinuities also.

With enough stresses, there are likely to be fractures in the system.

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expat on March 17, 2008 - 10:14am

Discontinuities was the thing that I was thinking too - essentially, the system is running flat out, and America seems to be wobbling from its position at the top. E.g. - the price in dollars may continue to rise beyond any reasonable expectation, as the dollar loses its value to those selling oil to America.

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oregon7 on March 17, 2008 - 2:51pm

Well Simmons is a smart guy... who's to say (except him?) that he didn't peg this bet to the dollar value as opposed to Euros or a currency basket because of his assessment of the likely future value of the dollar?

If I were a betting man, I'd have taken that into account.

(Although he might then have put the bet itself in Euros or a currency basket if he believed that ... although it would perhaps have been more clever not to do that so as not to alert his betting partner to the reason he took his position in dollars...)

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Stuart Staniford on March 17, 2008 - 10:17am

Well, as I said:

Of course, there are still two years, nine months, and a couple of weeks to go before the end of 2010 when the bet will be settled for sure. Who knows what will happen in the intervening time.

I agree that there could be geopolitical discontinuities, though with the release of the Iraq NIE (and consequent drop in Bush-Administration Sabre Rattling Index (BASRI), the world looks a little safer. We are also in the middle of financial market discontinuities, though at the moment, they are not as discontinuous as all that. They would have looked a lot more discontinuous this morning if the Fed hadn't operated so swiftly over the weekend.

Even the great depression took four years, peak to trough!

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shepseskaf on March 17, 2008 - 3:46pm

... with the release of the Iraq NIE (and consequent drop in Bush-Administration Sabre Rattling Index (BASRI), the world looks a little safer.

I beg to differ. With the recent stepping down (firing) of Adm. Fallon, and the continuous ramping up of anti-Iran rhetoric, the chances for more American military action in the Middle East looks to have increased, not decreased. All-out war in that region would certainly make a very strong case for discontinuities, perhaps for extended periods of time.