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Comment by legitster | Hacker News Reader

In the short term I would worry about consumers adjusting to the lower prices and start buying more gas guzzling vehicles. In the long term, once the supply glut for oil is over the prices should normalize. Right now oil producers are basically playing chicken to see who can outlast the others, but I would expect prices to creek back eventually as the competition clears out.

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How confident are you in this belief? Are you shorting a diverse set of oil company stocks and/or buying oil futures, or just posting on the internet?

Shorting profitably requires having a specific timeline for when oil stocks will be priced lower than today. You can't (profitably) just short something you think will be lower at some point in the future. You have to know when.

You can short sell over a term of years, usually at interest rates of ~1% (but varying depending on the company).[1] If you believe that there is even a 20% chance of a company going bankrupt over the course of the next 5 years, placing the bet will only cost you 5%-6% of your potential winfall, so your expected ROI is 15%. Commodity futures can also be purchased a few years out, as can options.

[1] https://en.wikipedia.org/wiki/Short_(finance)#Short_selling_...

I don't know if a guy "putting his money where his mouth is" is more or less trustworthy than a guy who isn't:

* If I have a position, I'll want to convince everyone that I'm right because it'll make me right (if everyone thinks energy stocks are worthless, they will be.) That's why most people with lots of skin in the game, long or short, are very happy to publicly argue that their bet is correct.

* Someone very risk-averse can think, correctly, that he's likely right, but loathe the 10% probability to lose money. Conversely, someone can be near-addicted to gambling and make bets based on very little, or someone can just be wrong regardless of their risk preference.

Overall, a random commenter's arguments seem more interesting to me than their claim to have bet on being right, even if I trust this really hard to verify claim.

Prediction markets work much better than polls. This is because those who know are willing to bet on it, and those who do not are (rightly) reluctant.[1] Some such as Tetlock have (plausibly) claimed they can do even better than prediction markets, but not by listening to random commenters with no skin in the game.[2]

TLDR; Talk is cheap, and people are much more careful with their wallets than their mouths (or keyboards).

[1] https://en.wikipedia.org/wiki/Prediction_market

[2] https://en.wikipedia.org/wiki/Philip_E._Tetlock

Well, prediction markets do better than polls, but actual financial markets are in part prediction markets and they do pretty badly at times and sometimes there's a guy who calls a bubble long before it pops. And that guy doesn't necessarily stake a huge fortune on that prediction. So yeah, talk is cheap, and yeah, on average people are more careful with their wallets than their mouths, but on the other hand, people sometimes have interesting things to say, and asking how much money they bet on being right is less interesting to me than asking how they arrived at their conclusions. Now in some cases I will ask someone how much money he'd put on being right, but I'll do that when I think they're either wrong or fairly uninformed and yet very opinionated.

To your first point, of course people "talk their book." It's a chicken and egg problem. And though it's in theory possible for someone to convince the market that the price of something should be higher, it's virtually inconceivable for this to happen in the global energy market, especially if the party in question's financial interests are publicly known. (In less liquid markets, this can become a valid concern.)

Your second point is much more solid. I'd like to see more empirical data regarding people's risk preference across different contexts and magnitudes. Seems like an interesting topic.

I didn't mean that energy prices are affected by a guy on HN voicing his opinions on them, just that many people become more likely to voice their opinion because of having a position, because they feel good when they convince others, even if doesn't actually affect anything (much the way I'm typing this comment right now... WTF am I?) So someone saying that they have a position in a commodity is not necessarily a good source of cool-headed arguments supporting that position. (At the very least convincing others makes those others lose money together with you and I believe it's tremendously more fun to many people to lose similar amounts together than losing more than your reference group.)

But I agree that in hindsight, I did not phrase my original comment to convey the above, I ended up conveying what you refuted...

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