Tuesday, June 30, 2009

 

What's Wrong With This WSJ Snapshot?

Von Pepe sends along the following screen shot. Notice anything ironic about the two circled stories?


# posted by Bob Murphy @ 4:07 PM


Comments:
Bob,

The view from here seems to be that someone is using Internet Explorer to view web pages for some odd reason.
# posted by Blogger Taylor Conant : June 30, 2009 at 5:13 PM
 
Taylor,

You're cold. Hint: It has to do with cause and effect.
# posted by Blogger Bob Murphy : June 30, 2009 at 8:10 PM
 
When in doubt, blame oil. Finance news always goes along the lines of '[random commodity/stock/currency][today's movement description verb] as [oil/dow jones/stocks/currency of choice] [today's movement description verb]'

I should know. I wrote that kind of garbage for a living...
# posted by Blogger James Rothfeld : June 30, 2009 at 8:38 PM
 
But to answer your question:

"Rain falls harder on umbrellas being opened more rapidly"
# posted by Blogger James Rothfeld : June 30, 2009 at 8:40 PM
 
This is exactly what happened when the Euro and oil peaked and crashed last July. Day in and day out for a month, the oil traders pointed to the Euro and the FX guys blamed oil, then one day it just stopped. The rest is history, ugly history as the markets imploded.
# posted by Anonymous Anonymous : June 30, 2009 at 9:01 PM
 
Well let me end the suspense: What von Pepe (and I) found funny is that the WSJ headlines are saying:

(a) the euro gained against the dollar because crude oil rose,

and

(b) crude oil rose because the euro gained against the dollar.
# posted by Blogger Bob Murphy : June 30, 2009 at 9:10 PM
 
I'm sorry if any of what I say is completely stupid... just bear in mind I'm the consummate layman (no economic background other than reading some books in my spare time).

Anyway, I'm struggling to grasp what the two headlines are implying.

So, as the dollar weakens, oil cost rises, causing the euro to strengthen? I'm really missing something basic I guess, why wouldn't both the euro and dollar appear weaker amidst rising oil prices? Does the cost of oil in dollars differ by a large amount from the cost of oil in euros?

For some reason reading those two headlines really messed with my brain and I need one of you economist types to help me out. Thanks, and really I'm sorry if this is so amateur.
# posted by Blogger Jesse : July 1, 2009 at 2:43 PM
 
Jesse, that's the point. They are stupid. There is no real link between either the movement of the oil, the dollar, or the europ. It's far too simplistic to claim any such thing.

However, it is possible that the dollar fell vis-a-vis the euro, and while oil holds rather steady vis-a-vis the euro, it rises vis-a-vis the dollar.

Since both the US and Euro zone IMPORT oil, rather than export it, oil price changes should affect them in the same way, not different ways. If at all.
# posted by Blogger James Rothfeld : July 1, 2009 at 3:04 PM
 
Ok, thanks, that does help to unwrap my brain a bit... and it does give me an idea for a new verse to that "Ironic" Alanis Morissette song...
# posted by Blogger Jesse : July 1, 2009 at 3:24 PM
 
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