Friday, February 29, 2008


Language matters

The headline of a WSJ article is

Trader Hits Jackpot in Oil,
As Commodity Boom Roars On.

If you read the article you find out that Andrew Hall successfully predicted the increased demand for oil in 2003.

Around 2003, Mr. Hall became convinced big structural changes were looming in the oil markets. For more than a decade, oil had ranged from $10 to $30 a barrel. But growth in demand was starting to outstrip growth in supply. And the once-sleepy economies of China and India were starting to compete for that fuel.

To place his bet, he focused on what was then a stagnant corner of the commodities world: The extremely long-term market in which traders buy and sell oil to be delivered years in the future. [Emphasis added.]

Notice the use of the terms jackpot and bet. They imply that there is a good amount of luck in that this is the same way we describe the winnings of lottery winners. Shame on the WSJ for implying that Mr. Hall's earnings where the product of luck. They aren't, traders who have a long career almost completely eliminate luck from their returns. Mr. Hall had an insight and he placed a futures position to take advantage of that insight.


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