The Wash. Times has a good Ed. piece today.

Here is the link…

http://www.washingtontimes.com/news/2009/jul/12/in-defense-of-speculators/

And for a bit of shameless self promotion from the article…

To help decide whether speculators or politicians know better, Americans don’t have to go any further than intrade.com, a futures market. This is one place where people place bets on what will happen not only on economic outcomes but on current political or entertainment events, such as who will win an election or an Oscar. In 2004, speculators on Intrade correctly predicted which presidential candidate would win the electoral votes of every state in that year’s U.S. presidential election. In 2006, Intrade predicted who would win each and every Senate seat up for election. You would think such accuracy would earn some respect among politicians.

Cheers,

John

Also, you could also run this experiment cost free by getting regulators who thought they were up to to create dummy portfolios of “bubble” assets to check there was any credibility to these claims without taking a massive speculative bet. Then you’d only be stuck with the almost insurmountable probably of separating skill from judgment, which would take a good couple of decades of data to establish. THEN, I’d say you ideas a goer.

I think you just don’t care about baseball cards.

It would be a bubble if the value really did come almost entirely from what people thought they could sell them for, but the reason the prices stay high is because there are people who actually want the cards enough to pay those prices, in and of themselves, rather than because they can sell them to someone else. In this case, it’s not a bubble — it’s just what people value those things at.

What do you mean by “broken conservation of cashflows” and how do they raise prices?

Original source: http://upload.wikimedia.org/wikipedia/en/d/de/Nasdaq2.png

There are ways to predict that something is a bubble, and they’re often right. However, these methods are really bad at predicting when bubbles are going to pop – and in order to make money by shorting a bubble, you have to know when it is going to pop.

Look at this graph of the NASDAQ Composite index during the dot-com bubble.

If you were a regulator with a pile of cash in 1999, what could you have done to pop the bubble?

It sounds like you disagree with the regulators who claim they can spot bubbles. I didn’t claim they could; I said that if they could, here was an accountable way to have them use that info.

Oops. Never mind.