Working Papers

The Ever Receding Doomsday Cult Trade

For those of you who have given up on a US recession in 2008, Intrade has rolled out a contract for a US recession in 2009.  A 2008 recession is still priced at around a 30% chance, with the contracts for individual quarters still implying a better than even chance that growth will be positive for every quarter this year.

Intrade has also rolled out recession contracts for Japan, Germany, the UK, France, Italy and Ireland for 2008 and 2009.  Like the contracts for the US, the bids and offers suggest little real conviction behind the idea of a global recession.

Intrade is also running contracts on who will be the next leader of Australia’s federal parliamentary Liberal Party.

posted on 02 July 2008 by skirchner in Economics, Financial Markets

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Tell me, what did Intrade say was the chance of $140 oil 12 months ago?  0%?  1%?

Posted by .(JavaScript must be enabled to view this email address)  on  07/02  at  11:49 AM

There are people shorting the >$135 Feb 09 contract as we speak.  Go take their money!

Posted by skirchner  on  07/02  at  05:45 PM

There have been people shorting oil all the way up to $140.  As I understand it there have been more speculators on the short side than long for the past 12 months, which kinda blows the “its all because of those evil speculators” story out of the water.

Oh, look what the IEA has to say in the FT today…
IEA warns of tightening oil supplies
Oh dear, it seems the IEA has joined the heretics.

Posted by .(JavaScript must be enabled to view this email address)  on  07/02  at  06:06 PM

Part of the problem is that there is an increasing divergence between an official recession and what people consider to be a recession

Posted by Tejvan Pettinger  on  07/02  at  09:36 PM

Yeah right, things are just looking super-rosy in the U.S. at the moment.

What kind of happy drugs are you on, cause I could use some of those.

Posted by .(JavaScript must be enabled to view this email address)  on  07/16  at  11:56 AM

And yet the 08 recession contract continues to fall in price.  I hope you are on the bid David!

The 09 contract is now trading at around 60, which is consistent with my point that recession forecasts keep being pushed further out.

Posted by skirchner  on  07/16  at  12:25 PM

Sure, we’ll be right.  After all, George W. Bush says he’s an optimist, the economy is growing, and the banking system is sound.  Pity Bernanke doesn’t sound so confident.

Is it just me, or do you find reassurances by Bush not entirely convincing.

Posted by .(JavaScript must be enabled to view this email address)  on  07/16  at  12:45 PM

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