Bitcoin: the perfect bubble

Wow that is sloppy:

“If Bitcoins cease to be accepted in payment for goods and services, their value will be precisely zero.
According to the efficient-markets hypothesis (EMH), which still dominates the analysis of financial markets, this should be impossible.”

And how is that different than US dollars? You claim U.S. dollars can be used to meet obligations to the U.S. government. What is that worth? What is the worth of Greek government bonds or Cyprus bank deposits? Sounds like you have an opportunity to make free money … have at it.

Dunning-Krugerrands

(as originally posted on Fark and all over Twitter)

I’m not sure how this is supposed to be a refutation of EMH, since the weak EMH hypothesis is that asset prices reflect (and adjust to) publicly available information. If you believe Bitcoins are an asset (and I’m not convinced that’s the case), then that’s what’s happening – the value of them is continuously adjusting in response to changes in the supply and demand for them. It’s just that the overall Bitcoin market is smaller, so particularly large transactions have a disproportionately large impact on the overall market, causing price swings.

There is a market for Bitcoin derivatives that should allow just such shortselling.

This is overstating the case rather severely. Exactly one company presently exists that will let you trade bitcoin futures, and it’s very new– others that came before have folded.

The essential problem is that you can’t borrow bitcoin– or rather, you can’t lend it, and then expect your local monopoly on the legitimate use of force to assist you in collecting your debt, in bitcoin, at the contractually agreed-to end of term.

But John, last week I had x Bitcoin. Today I have x Bitcoin. So value is unchanged. Constant at x Bitcoin. Dollar is volatile though. #ThinkBTC

Gareth Rees gets it partly right.

My (admittedly simplistic) model for the exchange value of Bitcoins is:

A) Contraband buyers exchange something already agreed to have value (e.g. $ USD) for bitcoins.
B) Contraband sellers exchange contraband for bitcoins.
C) Contraband sellers exchange bitcoins for something already agreed to have value (e.g. $USD)

Steps A and B jointly “back” the value of bitcoins. A provides convertibility into other currencies, but B is the beginning of a true Bitcoin-based market. If more hoods and services become available in Bitcoins, eventually folks will stop thinking of them as merely a special-case means of exchange and start thinking of them as a normal sort of currency.

Perhaps Bitcoin’s new popularity as a store of value will overwhelm the ability of these markets to absorb new bitcoins – but then again, perhaps it will lead to Bitcoin’s use as a medium of exchange.

Chas Simmons ,

Your argument is rather self-refuting: Zimbabwe’s government also accepts its own currency as payment for taxation, yet people mostly trade in US dollars. Millions of productive people in Zimbabwe are also forced to pay taxes in local currency, yet said local currency is virtually worthless.

Money has value because of the _expectation_ that one will be able to use it in the future. If the expectations about the government change, the value of the money also changes. Having a stable government require that its taxes be paid in a currency does wonders for that expectation, but that is not the only possible form of money.

The historical origins of money is also completely irrelevant except for historians. There are plenty of historical examples of private currencies.

What makes BitCoin special is that it is based on neither debt nor a commodity — it’s purely based on the expectation that there will always be a demand for anonymous transactions and that those anonymous transactions will use BitCoin for payment.

On that basis I don’t see why BitCoins will necessarily tend to zero value, although I see plenty of reasons for why it should be volatile. Only a regulated (hence non-anonymous) BitCoin will necessarily have a value of zero: the only reason to trade in BitCoin as opposed to other currencies is Bitcoin’s anonymity. Without that, there is no reasonable expectation that it will hold value in the future.

Bitcoin does not (per the Bitcoin wiki) claim to be an anonymous system, although a surprising number of people make that claim on its behalf.

bitcoins don’t provide anonymity at the moment. they are pseudoanonymous and unless you have cooperation with a trusted third party to hide your identity (bitcoin washing service) then it can be sometimes quite easy to track your transactions to a real person.

for example lets say you want to buy some drugs from silk road. you make a trade on mtgox to convert USD to bitcoin. mtgox sends bitcoin to your public address. this bitcoin transaction is on the public record. you then transfer bitcoin from your public address to the sellers public address. this bitcoin transaction is on the public record. if the government links the drug sellers identity to their public bitcoin address then they can force mtgox to disclose your identity.

mining provides one option of anonymously converting real currency into bitcoins without leaving a trail to a real identity.

part of the demand presently might be because people incorrectly believe bitcoin is anonymous. but it is worse than cash or electronic transactions because there is a distributed public record of all bitcoin transactions that is effectively immutable. i think part of the demand is for electronic payments that the government does not approve of. this can be for things that are illegal like drugs or legal things like donations to wikileaks. presently, if your business is frowned upon it is hard to receive payments via credit card companies or paypal but at the moment bitcoin doesn’t do any filtering of payments. it also interesting to note that there is nothing stopping miners from colluding to prevent transactions they don’t like but this can be a quite difficult problem because of pseudoanonymity.

A quote from a leaked FBI assessment of BitCoin:

“What Users Can Do To Increase Anonymity
• Create and use a new Bitcoin address for each incoming payment.
• Route all Bitcoin traffic through an anonymizer.
• Combine the balance of old Bitcoin addresses into a new address to make new payments.
• Use a specialized money laundering service.
• Use a third-party eWallet service to consolidate addresses. Some third-party services offer the option of creating an eWallet that allows users to consolidate many bitcoin address and store and easily access their bitcoins from any device.
• Individuals can create Bitcoin clients to seamlessly increase anonymity (such as allowing user to choose which Bitcoin addresses to make payments from), making it easier for non-technically savvy users to anonymize their Bitcoin transactions. ”

Naturally there is no full-proof guarantee of anonymity for anything (if nothing else, a police state could monitor every action of every citizen). But those interested in anonymity can make it so costly for an agency to trace them that they will be mostly left alone.

The heart and soul of Bitcoin is just another exercise in libertarian wish fulfillment. In this case, the desire to avoid taxes.

What amazes me about this and other such schemes is that I see so many commenters on other sites worried sick about inflation, crying fire during a flood, so to speak.

If there was just some way I could harness that stupidity and profit from it, I’d be rich.

“It would be nice to have an electronic decentralized money transfer system that didn’t try to ape gold and gold-mining, turning its users into steampunk prospectors. I don’t know how that would be possible.”

@Matt #8: Consider Ripple. Not yet decentralized, but it will be.

http://jpkoning.blogspot.kr/2013/02/ripple-or-bills-of-exchange-20.html

no bank account required, no credit card or debit card, no mailing address, no social security number, no phone number, no postage, no particular geographic location…

…and no recourse at all, should the receiver of bitcoin simply vanish, rather than provide the goods or services promised to the sender.

If there was just some way I could harness that stupidity and profit from it, I’d be rich.

Step One: Advertise custom ASIC-based bitcoin mining machines with a notable but at least sniff-test plausible speed increase over the current generation.

Step Two: Take preorders. In BTC, of course.

Step Three: Vanish, chuckling all the way.

There but for a residual sense of morality and a desire to stay out of jail go I. But perhaps you’re feeling braver.

@ Dr. Memory

Are you Dr. Memory of Participate fame?

I’m distressed at how many smart, educated people buy the claim about bitcoin anonymity.

Bitcoin is fundamentally based on pseudonymous identities, not anonymity. And it’s fully, completely, 100% traceable. Every transaction is logged, this is crucial to how the whole thing works. Every “coin” effectively comes with its entire transaction history (and you can look up the histories of all other coins as well).

Once a government adversary starts attaching names to addresses (accounts), I wouldn’t like to be in the position of having used bitcoin to buy something illegal or hide income. Once they know one identity, it’s going to be easier to find others, and they’ll know every transaction you’ve made. In fact, I’m wondering if the government hasn’t done so already is that they’re in “give them enough rope” mode, hoping to bust big criminal activity.

this is somewhere between a local currency (based on money muling traffic into/out-of eastern europe, where most of the larger cybercrime networks reside that control the major trojans) and a pump-and-dump scam.

Bitcoin’s a bubble, certainly. But then bubbles do accompany the introductions of new technologies. For no one actually knows what the ultimate effects of that new technology are going to be. Thus there’s speculation about what it will be.

Tulipmania was clearly a bubble. Yet Holland still plants 10,000 acres of the things every year and harvests some 3 billion bulbs. A little village by Schipol is still the world HQ of the cut flowers market.

Canal and railway mania, the dotcom boom financed Pets.com but also Amazon.

There have also been bubbles that didn’t lead to anything of lasting value: South Sea as mentioned perhaps, maybe the 70s commercial property boom in England.

I don’t think that the anonymity (which as above isn’t actually there) or ease of use or Silk Road or whatever are a reason why Bitcoin will survive long term. But the bubble, the speculation, is that others disagree.

As I see it there’s two different questions here. A bubble? Sure. Will Bitcoin survive long term? Isn’t that what the bubble is partly about? That people have different views on that second question?

@JQ: I agree that PayPal is probably the closest. There is pretty much no advantage for Bitcoin over PayPal if you use PayPal only to send funds, not send and receive, if you don’t use it too much, and if you already have a regular bank account.

I have used PayPal since 2002. I originally set up a PayPal account rather than using a credit card directly everywhere because I wanted an additional layer of protection in case a vendor abused credit card information or had that information stolen. One day in 2010 I discovered that even though I had a few thousand dollars in my PayPal account, the funds were effectively frozen until I had verified my account by linking it to a bank account. I would not be allowed to spend what was already in my account because I had hit a little-advertised $10,000 lifetime spending limit. PayPal says that this limit is to prevent fraud, but I’m not sure what the real explanation is; I had used the account for years without dispute or incident, and surely a real fraud-prevention scheme would contact the cardholder by another channel for verification instead of freezing the funds in PayPal’s hands. I had my funds tied up for about a week while I created another bank account (I wasn’t going to have PayPal linked straight to my primary account when I was using it to firewall against potentially dodgy sellers!) and had it confirmed by PayPal.

I also used PayPal to process credit cards for a small online retailer. The fixed monthly fees are lower than with PayPal than with a “real” payment processor, but the per-transaction fees and percentages are higher. Bitcoin takes a smaller piece than either to process a transaction, and an unreasonable buyer can never reverse a charge (though on the buyer’s side that is a worry rather than a reassurance). Bitcoin also offers simpler APIs for programmers than PayPal and CC processors. There’s no risky persistent data like credit card account details, hence no special security standards for storing the data*.

That said, I still use PayPal today despite my past annoyances with it, and my only foreseeable BitCoin use is making payments to parties that PayPal won’t deal with. BitCoin’s payment mechanism is great but the exchange rate volatility means users need to almost immediately convert BTC to/from local currency as the transaction happens. And if you have to do that you are dealing with exchange fees and terms so transactions are no cheaper or more convenient than using PayPal in the first place.

*Except the wallet file. Do not keep the wallet file on the public machine that runs e-commerce software for a store. Do not keep a wallet file on an internet-connected machine with more than an immediate buffer of funds in it, unless you are very confident in your security measures. I only kept a wallet file on my main computer because it was inside a virtual machine and the client was routing all Bitcoin data through TOR.

Using bitcoins rather than dollars is sort of irrelevent for guaranteeing security of delivery; Elance.com is dollar-denominated and in order to ensure clients get the work done and that workers get paid, they hold funds in escrow. Absolutely no reason you couldn’t do that with Bitcoins, too.

Harold K: “Bitcoin is fundamentally based on pseudonymous identities, not anonymity. And it’s fully, completely, 100% traceable. Every transaction is logged, this is crucial to how the whole thing works. Every “coin” effectively comes with its entire transaction history (and you can look up the histories of all other coins as well). ”

Thanks for summing it up well; I hadn’t thought of that. Bitcoins have to be uniquely identifiable and traceable, or the system would be destroyed by counterfeiting.

Bitcoins are deflationary—fewer will be produced over time, and eventually it will not be possible to produce them at all. It is an anti-economic currency; there is a built-in incentive to hoard them. It is difficult to see why I, as a businessperson, would want to do business in a deflationary currency—it is just like having a demand-reducing tax on every transaction. If people continue to demand bitcoins, I suppose currency changers will get very rich, much as brokers in rare and precious items. Bitcoin also depends on the network of computers that create and track them. It is not clear this network will always be available.

Edmund @50

Fair enough if you’re talking +/- a couple of percentage points – that’s well within a retailer’s margin. Equally I doubt there are many retailers getting a meaningful portion of their revenues via bit coin so small differences are frictional costs. That said, recent movements of >75% could be disasterous.

Asyou note, most people are unwilling or unable to speculate and the perfectly easy default is simply to only accept payment in dollars (or whatever your local currency is) and bear no uncertainty whatsoever. Accepting bitcoins is a choice a seller makes and the volatility of his payment stream is inherent in that – if he doesn’t believe on balance he’ll profit by that exchange he’s not going to do it because he has an alternative. In my view this makes him at least some flavor of speculator – even if its only small time. A buyer has a different motivation since he knows his cost basis in the bitcoin and is parting with it.

I’d note that merchants accept non-local currency all the time in many parts of the world but they either build a margin of safety into their exchange rate or put the currency risk on the buyer via credit/debit card payments. With a bitcoin both sides essentially bear an FX risk since bitcoins are ‘local currency’ to no one.

Trader Joe, what people do in practice is to use a company like BitPay, which absorbs the currency risk for them: The price gets converted into Bitcoins when the customer pays, and BitPay give the customer that amount of money in dollars. Presumably BitPay are deferring their own risk by trading in and out where necessary, although in the long run the gains and the losses should mostly come out in the wash.

Doing it that way there’s zero currency risk for the vendor. They have to pay BitPay for this service, but IIUC it’s still a lot cheaper than what credit card companies would charge, especially when you factor in charge-backs and credit card fraud. (Presumably there’s some counter-party risk if BitPay go bust before they get their money out.)

Obviously the customer who holds Bitcoins still has FX risk, which would mean you wouldn’t want a large part of your net worth in Bitcoins, unless you were speculating on them.

@55

I would argue that a vendor using a service like BitPay is not in fact accepting payment in bitcoin. They’re instead accepting BitPay, much as they might accept, say, Discover cards.

Not worrying about chargebacks is great for the vendor, but that gain comes entirely at the expense of customers, because they can’t reverse charges when a purchase goes awry.

I can see how shifting risk from the seller to the buyer is an attractive prospect for some, but others might not be so happy about it.

robotslave @55: You’re right to the extent that a vendor who uses BitPay or similar may not ever actually handle any Bitcoins. But the customer does, and the vendor sees the benefits of lower charges, which they can pass on to the customer, and we get to work around a lot of the brain-damage inherent in dealing with PayPal and credit card companies.

You’re also right that in a lot of cases the ability to make a charge-back is a useful feature for the customer. There are times when I’d use a credit card for just that reason. But charge-backs are a bit of a blunt instrument; In exchange for the customer having the ability to cancel the transaction, consumers have to carry a lot of overhead for people who abuse the ability to make them, and also for the costs of operating a cumbersome and not particularly equitable dispute resolution system. For most of economic history our dispute resolution systems have been separate from our payment systems, and it’s good to have an option to do without it, especially for small transactions.

If Bitcoin or an online cash system like it makes serious inroads into online payment (no small if, I know), I wonder if we might start to see the credit card companies hurt by a kind of adverse selection death spiral, where people who manage to go through life without getting into acrimonious disputes with vendors use online cash, and credit card companies are left supporting an ever-increasing proportion of fraudsters and complainers who value the ability to reverse transactions, and having to charge ever more to cover the costs…

“That would be fine if Bitcoin were simply a unit of account, used to keep track of transactions. But all the interest in Bitcoin is in the idea that it is a store of value, one that may be expected to show steady appreciation rather than depreciation.”
No, there is great interest in it as medium exchange (Silk Road being an obvious example, countries blocked from the international financial system being another). If the value of BitCoin was expected to increase indefinitely, that would constitute a violation of the EMH conjoined with any pricing model I can think of. My understanding is that the EMH predicts that the future value of BitCoin is expected to be the current value (with a weighted likelihood of increased value equalling that of decreased value), with some caveats about discounting the future and the cost of borrowing to buy the asset.

Wonks
EMH can only work where there is sufficient depth of market, price transparency and information flow that “the market” can properly price an asset. A limited distribution asset trading on a single exchange has none of this – its like the pink sheets of the US stock market. Intra-HOUR trading swings of more than 10% on a near daily basis suggest none of these criteria are present and that the apparent valuation of the asset is highly subject to manipulation.

I tried to get data on this to construct a rudimentary volatility index and at least over the last 30 days its a figure that isn’t comprehensible compared to even the most volatile days of the NASDAQ….maybe there are commodities that move that violently.

Over the 4+ year trading life of the bitcoin it has traded between $0.05 and $20o. I don’t think there is a lot of EMH going on here in any form.

@63

I don’t think “single exchange” really matters much there, given the other factors. And bitcoin is of course traded on several different exchanges (of varying reliability).

The volatility is a thing to behold, though, isn’t it? And the potential for manipulation is sort of hilarious, given the way bitcoin enthusiasts tend to bridle at the thought of governments “artificially” adjusting fiat currency.

The Raven: “If the world economy is growing, the only way for bitcoins to remain a medium of exchange is for them to rise in value over time. So a holder of bitcoins has an incentive to hoard them.”

Right. And if everybody hoards them, they become worthless. Therein lies the paradox.

The volatility is a thing to behold, though, isn’t it? And the potential for manipulation is sort of hilarious, given the way bitcoin enthusiasts tend to bridle at the thought of governments “artificially” adjusting fiat currency.

I have picked up most of my knowledge of economics as an accidental byproducts of reading history, blogs like this, and the stuff printed on the back of cereal boxes, so bear with me. Saving for the future is a funny thing. It’s possible but unwieldy to physically accumulate goods that you might need in your old age (clothing, furniture, housing, fuel, nonperishable foods). People generally try to accumulate something other than the exact goods they hope to consume in the future: maybe real estate, precious metals, financial instruments.

Accumulating savings is an expression of hope that in the future people will labor on your behalf even after you have ceased to provide labor in return. Specifically accumulating gold or other assets that are (hoped to be) stable or deflationary, and immune to politics, is an expression of distrust in other people, and at the same time a fearful anticipation of the inevitable end of self-reliance that comes with age. I earlier noted that you could take physical delivery of goods that you anticipate needing during your old age, rather than holding proxies like stocks, land, gold. But it’s impossible to accumulate services you may need. There’s no way to take physical delivery of surgery in your 30s and save it for your 70s.

People looking for financial certainty in geography (they’re not making any more real estate!), geology (the easiest gold has already been mined!) or cryptography (it’s mathematically impossible to forge bitcoins or inflate the supply!) are seeking magic fetters that will bind people yet to be born in service to needs they have yet to experience. The only fetters that actually work this way — empathy, social convention, law — are frighteningly dependent on humanity if you distrust humanity. So there’s an enormous body of nonsense written by and to people trying to prove that certain conventions (gold is valuable!) are not really social conventions but laws of nature, and contradictory data is just experimental error or interference.

Billikin@35: not the the best of my knowledge. The name comes from the Firesign Theatre’s album “I Think We’re All Bozos on this Bus”, and while it’s a somewhat obscure reference I’m aware of at least a few people other than me using it as a handle.

(Also I’m not 100% sure which Participate you’re referring to.)

Just to add on the deflation thing, it would be different if Bitcoin was a normal national currency that people got paid in and had contracts in, because in that situation prices are sticky. For example, people don’t get a pay cut every day until the price of their labour prices in the potential for future appreciation in the value of their currency.

But no sensible person thinks Bitcoin is going to take over as the main currency anywhere. (A lot of not very sensible people think this, admittedly.) We’ll carry on doing what we do now for the forseeable future: Everybody thinks in dollars (or similar) and sets their prices in dollars and converts to Bitcoin based on the exchange rate at the time.

@70

I’m still a bit confused about why it is impossible to express one’s confidence about the true valuation of BTC in the futures market, rather than on the Op-Ed page.

Because you can’t borrow bitcoin.

why not just take out a mortgage denominated in BTC, &c.?

Because nobody will lend you bitcoin.

Mao: What do bitcoins add?

First, a minor point: I’d imagine consumers would typically hold a balance in bitcoins and live with the volatilty, but only for a small part of your net worth. That’s what I do. That means that I only occasionally have to interact with the banking system, which is painful and expensive, and can do everyday trades with online vendors painlessly and cheaply.

It’s true that technically you could get some of the same effects with a company like PayPal that holds a balance for you in their own database, rather that holding the money in the medium of an intermediate cryptocurrency. But the advantages of Bitcoin are:
– International. They are many countries where PayPal is not allowed to operate for regulatory reasons.
– Unbureaucratic. PayPal verification is a PITA.
– Anonymous. PayPal keeps transaction records attached to a real-world identities, again for regulatory reasons.
– Non-judgemental. PayPal have lots of opinions about what you should and shouldn’t use their service for, and will suddenly freeze accounts if they suspect you’re doing something wrong.
– Irreversible. PayPal will sometimes reverse transactions for various reasons. Sometimes this is what you want as a consumer, but sometimes it isn’t. (See earlier comments.)
– Cheap, because Bitcoin doesn’t have to do all the stuff above.

Note that in the offline world regular cash already has most of these properties. If the Bank of Japan or the Fed made an online cash system based on private/public keys, it would be able to do pretty much all that stuff. But they won’t, because somebody would complain in could be used by terrorists or something. Likewise, a private company can’t do it for regulatory reasons, at least not internationally.

Mao: What do bitcoins add?

Fun.

There are “strong” and “weak” forms of the EMH.

In this context, the weak form would be something like: you can’t reliably predict whether you make the most by selling your bitcoins (e.g. for US$) now, or holding on to them for a while longer and then selling them. This weak form could very well be true. (At least, I don’t see strong evidence against it).

“Being early is the same as being wrong” applies to this form of the EMH.

Non-judgemental. PayPal have lots of opinions about what you should and shouldn’t use their service for, and will suddenly freeze accounts if they suspect you’re doing something wrong.

AKA illegal, in many cases presumably. So, bitcoin is extra-good for buying or selling things that are illegal, or doing your buying or selling illegally. Go bitcoin!

Katharine:

AKA illegal, in many cases presumably.

Bitcoin is certainly very useful for illegal transactions, and also for things that aren’t necessarily illegal in your jurisdiction, but might be illegal somewhere, and they’d rather not deal with it.

But that’s not the only thing that’s hard. For example, I did payment system integration for a school in Japan that sells its courses online. They’re a regular, bricks-and-mortar company with a good reputation. Their model has always been that you sign up for a set of courses, pay at the beginning, then choose when to take each course later. PayPal’s TOS bans you from doing things with delivery dates more than 20 days from payment, and the credit card companies wouldn’t take their business for similar reasons. I ended up building payment system integration for a credit card processor for them, but they can only use it for a tiny proportion of their courses, where you can download videos immediately and there’s no component of the course that gets delivered later.

It’s understandable that the payment processors do that – the problem is that the payment processor could be on the hook for many months of payments if the school went out of business. But the inconvenient upshot is that their customers can’t start using the courses immediately after they apply, because they have to wait until they have a chance to pay cash or clear a domestic bank transfer.

Really, there are lots of problems like this. And it’s very hard to fix on the model where you have to have a balance with the company that handles payment confirmation and dispute resolution etc, especially if it’s got to be done worldwide. It’s much better to unbundle it and enable each bit (interface with the bank, payment confirmation, dispute resolution) to operate independently.

BTW – per my last point as Bitcoin at least being a pioneer to economic innovation – as well as anarcho-capitalists interest in new forms of money there are of course a lot of leftist and green decentralist interests in this too, so at least BC as an experiment might do some good there.

E.g. people like Brian Milani in his book “Designing the Green Economy: the Postindustrial Alternative to Economic Globalization” argue that money should be evolved digitally into a pure account system, with no value-store element. Or Lietaer and Hallsmith have a nice article on the Solutions Journal about currencies like the Terra linked to commodities and with a built-in ‘demurrage’ feature.

Finally this upcoming Transforming Finance conference in the UK looks interesting – especially re how currencies could be better modified to explicitly aim to mitigate climate change.

Hey, JQ, the next time you call a bubble, call it before it bursts and I’ll believe your argument. As for the EMH, no one thinks a Ferrari is worth the money you earn from having it.

Katherine @44: So, there is a government involved. A privately owned and run government [Satoshi Nakamoto].

Or maybe the Satoshi Nakamoto is a pseudonym for some group at the CIA that came up with a scheme to identify international criminal organizations. Not that that’s likely, but it raises a question: If some governmental agency announced it was behind bitcoin, what do you think the price of BITC would be two hours later?

I like the Felix Salmon article, too. Perhaps the way to look at electronic currency is to reverse what we are trying to do it: include more history in exchanges, not less. Meantime, caveat emptor, caveat vendor, caveat argentarior.

30 March 2000 is 10 days after the Barron’s cover article on cash burn rates. (Source: Wikipedia) So not only were you late calling it, but you were calling it as continuing at a point when it was clear to quite a few market participants it wasn’t going to go well.

Trader Joe, I think extreme volatility is compatible with EMH. It says the price reflects all available information, and new information may continually present itself to disrupt the price. What’s incompatible with the EMH is if there is a predictable path of the future price, instead that expectation should already be “priced in”.

Pretty cool, Watson. Can you give a link.

dsquared 04.21.13 at 11:58 pm

” that’s pretty pathetic, Watson. You’ve been given a timestamped sell call on the NASDAQ dated March 2000, and your response is to babble about Barron’s magazine. The phrase you are looking for is “Oh, sorry; it appears that you do know what you’re talking about, John. I wish I hadn’t been so rude in the first place because now I look a fool”.”

Come on, Daniel – if Watson refrained from looking like a fool, he’d have to shut up completely –

Oh, that would be a feature, not a bug, wouldn’t it? :)