Ideosphere Forum

fx-discuss: Re: FX Claim POIL30

Author: Michael Cowley
Conversation: fx-discuss: FX Claim POIL30 ( prev | next ) reply!
Topic: fx-discuss ( prev | next )
In-Reply-To: Michael Cowley's post
Date: Thu May 14, 2020 08:57 pm
Michael Cowley
Michael Cowley




I've updated the judge's statement on POIL30 to the below. Questions or comments welcome.

regards
Mike



I intend to judge this claim on the original intent of the claim.

The key area of judgement is to decide whether there are "temporary freak circumstances" that have caused any decline from a peak that meet one of the four sets of criteria in the claim. I interpret this to only apply if the circumstances are unrelated to the normal operation of the oil market, which I understand as excluding changes in oil demand caused by voluntary shifts in consumer behaviour.

For example, a sudden drop in demand caused by a time-limited lockdown on travel by multiple governments in response to a pandemic might be considered "freak", but I would not consider a long term decline in demand caused by social changes (including regulated travel restrictions with broad public support) following such a pandemic "freak" for the purposes of the claim if the balance of evidence does not suggest that an increase in demand is imminent. Such persistent changes in consumer behaviour, even if to an extent triggered or exacerbated by a "freak" event, are in part what the claim is trying to predict.

I will interpret "widespread agreement amongst experts" from the claim and "balance of evidence" from my statement above as requiring agreement from experts both within and without the oil industry, and including both experts on oil as well as on more general economic and political matters. I will judge whether shifts in consumer behaviour caused or exacerbated by government policy (such as lockdowns) are "voluntary" or have "broad public support" by looking at polling and particularly election results. Whether circumstances are "temporary" or not is covered by the definitions in the claim.

________________________________
From: owner-fx-discuss@ideosphere.com <owner-fx-discuss@ideosphere.com> on behalf of Michael Cowley <MCowley@blackandwhitecabs.com.au>
Sent: Monday, 11 May 2020 15:55
To: chrisran.bma e-mail <chrisran.bma@virgin.net>; fx-discuss@ideosphere.com <fx-discuss@ideosphere.com>
Subject: fx-discuss: Re: FX Claim POIL30

I am now recalling fondly what you wrote in our initial discussions about this claim: "I think temporary freak circumstances are pretty rare and unlikely to trouble you". Ha ha.

I've only just noticed that I hadn't bothered to add a judge's statement to this claim so I should take the opportunity to do that. My current thinking on what I'll add is below, any comment or question welcome. I'll give it a couple of days before I update the claim.

cheers
Mike




I intend to judge this claim on the original intent of the claim.

The key area of judgement is to decide whether there are "temporary freak circumstances" that have caused any decline from a peak that meet one of the four sets of criteria in the claim. I expect that judging such circumstances as "temporary" will be unlikely, as early judgement will only be triggered by a decline over at least three years. I would only judge circumstances with an effect on demand lasting longer than three years as "temporary" if there were abundant evidence that demand for oil will rebound once the influencing circumstances are over AND there is abundant evidence the circumstances will be over within the timeframe of the claim. And "freak" would only apply if the circumstances are unrelated to the normal operation of the oil market, which I understand as excluding changes in oil demand caused by voluntary shifts in consumer behaviour.

For example, a drop in demand caused by a time-limited lockdown on travel by multiple governments in response to a pandemic might be considered "freak", but (if long enough for that drop in demand to trigger A, B or C criteria from the claim) could only be considered "temporary" if there were a clearly predictable end to the lockdown within the timeframe of the claim AND good evidence that demand would rebound. I would not consider a long-term drop in demand caused by social changes (including regulated travel restrictions with broad public support) following such a pandemic either "temporary" or "freak" for the purposes of the claim.



________________________________
From: chrisran.bma e-mail <chrisran.bma@virgin.net>
Sent: Sunday, 10 May 2020 07:03
To: fx-discuss@ideosphere.com <fx-discuss@ideosphere.com>; Michael Cowley <MCowley@blackandwhitecabs.com.au>
Subject: FX Claim POIL30


This claim included

"The precise meaning of 'temporary freak circumstances' is at the judges discretion but should be expected to include things like natural disasters, terrorist action on oil production/refining or other facilities, wars that are significantly more widespread than previous years, pandemics, or government action like bans/rationing possibly taxes etc provided that the circumstances are expected to last 18 months or less and have highly significant impact on oil production."

It later indicates

"The temporary decision should mainly be based on whether it is intended or expected to last 18 months or less. If this isn't clear the judge doesn't have to make an immediate decision. If there is new peak or no circumstances requiring judgement if it is not temporary freak circumstances, then the decision doesn't have to be made."


As pandemics is listed, I think nature of covid 19 potentially qualifying as 'temporary freak circumstances' is fairly easy and obvious. I also have no doubts about it having 'highly significant impact on oil production' so the remaining requirement is "the circumstances are expected to last 18 months or less".

Lockdown is, I think, clearly 'expected to last 18 months or less' but the judge may well take the view that 'the circumstances expected' include a significantly longer period of effects such as from some social distancing measures continuing for much longer than just lockdown measures or even as long as the economy taking time to recover from recession effects or the virus spreading or the virus being widespread or the virus still being a threat such that social distancing cannot be completely removed or some other meaning of 'the circumstances'.

So two issues:

What "the circumstances" covers, and

Is this expected to last 18 months or less.

These issues may or may not matter and, if unclear, the judge doesn't have to make a decision now. However, if the judge thinks it is clear enough then he may want to decide, and possibly also announce decision, at a time close to event starting rather than having to try to figure out what "was expected" at a later time. Even if unclear and not announced, preliminary judgements made at a more appropriate time might be useful later.

If it is 'temporary freak circumstances' then the decision on when the circumstances cease is clearly a decision for a later time.

If the judge wants to know what I think as claim creator, I am happy to provide this but I don't want to usurp the judge who clearly has discretion.

I hope I haven't created a plethora of difficult judgments and sorry if the wording of the claim makes these issues awkward to decide upon. (I think this was risk we knew about but need for temporary exception is possibly? justified and clarifying what 'the circumstances' covers in advance for all possible circumstances would have been difficult and lengthened the claim further.)

FWIW, I prefer such decisions (or details of what the judge will consider) to be publicly available as early as reasonably possible, preferably in judge's statement, so people are making 'investment' decisions on the substance of the claim rather than speculating on what the judge will think, but clearly the judge has discretion to decide how to deal with these issues.

Best Regards

Chris Randles

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