Re: Profit dreariness

From: John Conover <>
Subject: Re: Profit dreariness
Date: 21 Jul 1999 05:58:01 -0000

David Lloyd-Jones writes:
> John Conover<> wrote
> > > BTW, I'll give you a hint. When arbitrage and speculation are
> > > important components of valuation, it is a pyramid scheme.
> Whether this is true of "speculation" is simply a matter of opinion, because
> the definition of speculation is only a matter of opinion.
> However John seems to misunderstand arbitrage. Arbitrage consists of buying
> stuff at one price and selling it at a higher price, generally at about the
> same time, sometimes even selling before you buy. When I was a kid I used to
> buy the two or three US dollars that the post office took in from visiting
> US tourists every day, and sell them to the bank the next day. Can you
> imagine, there was a time when a Canadian dollar was worth anywhere from
> $1.05 to $1.20 US? That's arbitrage, and there's nothing pyramidal about it.

So, you speculated that you would make money buying/selling
currency. Like currency exchanges, I bet if you kept an accurate time
series of your speculative endeavors, you would find that, as you say,
it fluctuated between $1.05 and $1.20 But I bet that it would be in
about 1% rms per day increments, which is similar to what the
international currency exchanges run.  (I bet the distribution of the
increments had leptokurtosis with a persistence of about 0.6. too.)

Pyramid schemes do too.


BTW, did you do the arbitrage in your speculation, like if you got an
offer of $1.05 and held out for more? Similar mechanics to a pyramid
player speculating whether to take the winnings and run, or wait and
hope they continue up, fearing they might come down. I wonder if such
things are a self-referential system. If everyone in the game,
(assuming there were other kids in speculative competition with you,)
is going to hold, then everyone should sell.


John Conover,,

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