I wanted to, but the site has no place for comments and no info on how to reach him.
His conclusion at the end is that the total dollar volume is approximately flat, and he bases this on the graph, but it's not completely flat - it's bumpy, so you can't actually tell on a linear graph if it's flat or not.
>> I was surprised that the number is just based on a survey of bankers
The numbers that LIBOR is measuring ultimately represent a human’s opinion. Well, it’s the opinions of several humans then the highest and lowest opinions get discarded and the rest averaged.
It’s not measuring a value derived deterministically from some inputs, so how else could you capture it?
> But could you explain that in this particular case?
Sure, its helps me to think through these things too. :-)
In your graph, you probably don't mind that its almost flat, but if I am someone who makes money by trading every day, I'm interested in very small moves, a couple of pennies, maybe 0.5% over the course of a day. And that's _all_ I'm interested in. Where is the price over the last few days and how does that compare to the price of some other thing?
Knowing the relationship of the current price to zero is really not important because it a) has never been at zero, b) is not going to go to zero, and c) zero is meaningless in pricing anyway.
That last one is kind of unintuitive. You can't buy or sell a share at a $0 price. A $0 price implies that there are no buyers or sellers. No buyers or sellers means means the price is undefined, not $0. No matter how low the price gets, it can never be assumed to trade at $0. No stock has traded at a $0 price (even in bankruptcy there are always some value to the shares right up until they are liquidated and cease to exist). No stock has ever opened at $0, they IPO in the $20-30 range (or somewhere non-zero anyway).
So if zero doesn't mean anything, then you have to say, what should the minimum be? Well, you can say $0.01, but that's just as arbitrary. Assets are infinitely divisible in theory, and lots of trades are made at lower denomination that the currency, take the $0.000000008 / share SEC fee.
If any choice is going to be arbitrary, then you have to go back to the intention, which is to compare current price movements to recent price movements to understand what's happening, so just make sure your chart has all the recent price movements and then add +/- something like 10% on either side to give some padding and emphasize breakouts... a.k.a a flexible axis.
In this particular case, I suppose it is the author's intention. If they wanted to emphasize the volatility of recent movements, a flexible axis is right for that. If they wanted to minimize the volatility, a fixed axis starting at $0 is better.
But, objectively, there is no reason to _insist_ on starting at $0.
>the compensation should reflect the confluence of supply and demand in the market.
Yeah. There's no way way it's more complicated than this. If there are other effects not reflected on a simple X/Y axis then I don't wanna know about it!
You've got the FUD covered, but you also need to add at least some substance to your claim. How do you know this figure would not be accurate? Why is your (hypothetical, not offered) estimate better than the author's?
> Money is a poor measure of value. Plain and simple. Are you drawn to the volume of the transaction because you think it signifies true success?
Money is just a number. I can't quite tell if you're suggesting that value can't be quantified, or if you believe we could quantify value some other way that would be more functional than capital markets. Do Tell.
> Do you accept that the following line is nominally linear?
> If you do, then you must accept that time is the only input to the supply function.
Er, no, even assuming the omitted x-axis is linear, I don't. The other inputs being relatively constant or having variation which mostly cancelled out each other's effects over a one year period is indistinguishable, on such a chart, from time being the only input. (Plus, the implicit function to which time would hypothetically be the only input isn't a supply function, which is a mapping from price to quantity people are willing to sell.)
>If he were indeed an expert in Finance, he should know that the value is driven by demand and supply, and not by what one guy thinks it's reasonable.
And if you have given it ten seconds of thought, you would have understood that demand and supply are not arbitrary ranged values, and that their levels can be estimated just like anything else, given enough information.
> This is something that I've always found odd about how the actual value in the economy is tracked. Specifically, how the stock markets continue to rise despite the decline in productivity.
I'm confused. Are you talking about the economy or the stock market? I don't see why the two should be related. Productivity is (unit of output / unit of input). The value of the stock market is the sum of the discounted cash flows from the market's member firms.
Unless you mean will it pop tomorrow, then yes that is unlikely. But the chances it pops “soon” seem quite likely. And it will be very ugly. I don’t know if we have ever seen a spring coiled this tight from money printing.
> I wouldn't get anywhere as much as the price was beforehand.
that's not a conclusion, but an assumption you make.
The price of a stock can only be found by transacting, and if this isn't taking place, you cannot draw any conclusions about the price of a stock. You can only guess it - via some method like cashflow analysis, or some other model.
>I always struggle with these valuations because like I said above the true value of something is what someone else will pay for it so I think they are an estimation at best.
This is true of anything. I own a used car, it is an asset, and has an estimated value that will only be verified/or disproven if I need to go through with selling it.
If a company is liquidated, share holders are indeed behind creditors in getting paid out, so they would not get this full value.
It seems that you understand it fully, what exactly is the struggle you are having?
>The biggest market there, by far, is on whether Ether will trade above $500 at the end of the year. This is an interesting market because Augur bets are made in Ether. So even though the market (as of last time I checked) says it’s 74% percent to be trading above $500 and it’s currently $480 (it’s currently Thursday, July 26, and I’m not going to go back and keep updating these numbers). When I first saw this the market was at 63%, which seemed to me like a complete steal. Now it’s at 74%, which seems more reasonable
Hi. My job is to essentially figure out reasonable probability distributions for securities on which to price derivatives contracts. Certainly, due to some securities having negative skewedness, it's common for a stock to have more than a 50% chance of going up. I've seen it as high as 65%, but the counterpoint to that is that there's usually very small probability that it goes a lot higher.
I would love to know what probability distribution this guy is using to think that the probability of going up over $20 being 74% is reasonable.
> He had always been good at math, so he put together a formula—a proprietary algorithm that he loves talking about but declines to explain in detail, saying only that it “measures the supply of cattle every day and determines that if we buy a certain percentage of cattle, we have a seventy percent chance of winning.”
There’s a whole other science to cattle pricing so hard to tell what he’s hinting at. Cattle are priced using either cash pricing, or grid pricing, or formula pricing. Sounds like he working formula pricing to his advantage
> It's not remotely clear why the actual value seems to be so small, especially since it's not exactly zero.
It is very clear actually: one or both of the models producing the conflicting result are wrong. Smart money's on both, because we have good other reasons to think each of them is wrong.
> I was pointing out, that your note about the GP being hyperbolic is untrue - he was in the ballpark.
Essentially as in the ballpark as $80 is, both are off by 2.5x. Claiming they are “same order of magnitude, so it’s not hyperbolic” is laughable. $100k and $250k are both same order of magnitude, but are radically different prices, no?
I wanted to, but the site has no place for comments and no info on how to reach him.
His conclusion at the end is that the total dollar volume is approximately flat, and he bases this on the graph, but it's not completely flat - it's bumpy, so you can't actually tell on a linear graph if it's flat or not.
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