Just over a month ago, I wrote an article about the likely direction of gas prices. Although the U.S. average gasoline price didn't increase much before its monthly decline, the trade did play out for a profit. This took less time than I originally thought. I originally thought that it would take a few months for gasoline prices price to reach the current U.S. average of about $3.51 per gallon. Gasoline prices began to decline just a few days after the article was written. I thought that the average price would break $3.70 before declining, but the price peaked just under $3.69. Nevertheless, my suggested trade to buy the October 2014 $60 puts on the United States Gasoline ETF (NYUGA) has turned a profit.
At the time of the article, the price of the October 2014 $60 put option was $0.78. The Put now has a value of $2.05
by Robert Waldmann
Editor's note: Originally published on July 24, 2014
My earlier article has received more attention than I would have guessed. This should be a semi-serious post on the topic.
The puzzling fact is the persistently too high forecasts of next year's consumer price index inflation reported in the University of Michigan Thomson Reuters Survey of Consumer Sentiment. The median forecast has consistently been over 2.9% in the most recent three years available to non-paying customers so through December 2013. Actual CPI inflation for the periods being forecast has been quite a bit lower CPI inflation over the preceding 12 months has been 2.1% or lower for the periods of the forecasts.
This is anomalous. The median response in the U Michigan survey of lots of ordinary people has historically been a remarkably good forecast comparing favorably with the median response in the Livingston Survey of Experts
By Sumit Roy
Precious metals outperformed, energy and grains underperformed.
Commodities saw volatile, split performance this week as precious metals rallied while other commodities plunged. Stock markets fell from record highs; the S&P 500 lost more than 1 percent, bringing its year-to-date gain down to 6.2 percent.
This week was relatively light when it came to news flow. Second-quarter corporate earnings season kicked off, but only a handful of companies reported. The pace of earnings releases will pick up in the coming weeks. Analysts expect profits for companies in the S&P 500 to have increased by 6.2 percent year-over-year in the quarter.
In central bank news, the Federal Reserve released the minutes to its June policy meeting on Wednesday. From those we learned that most Fed officials are targeting October as the month in which QE will officially end. Assuming the economy continues to recover as expected, the