Arbitrage:Arbitrage:

Here's the definition from Net Interest, Marc Rubinstein's blog, that sent me to this FT piece:

The concept is simple enough. “Arbitrage is when you can do a set of different trades that cancel each other out and make a free profit at the end,” one likely former customer writes in his book, The Trading Game. [...] Arbitrage is a broad term and it’s often misused. If you want to sound clever in finance circles, simply describe your latest trade as an “arb”.

FT article itself, is a little odd:

The contrast between a world order on fire and a world economy on autopilot is glaring. Some argue that geopolitical crises only have transitory economic effects. Yet if you look closer, strange and profound changes are under way.
In the Strait of Hormuz, tankers have been burning, along with what remains of the post-1945 American-led order. Meanwhile, the IMF’s new baseline forecast for global growth this year is exactly the same as it was six months ago and stock prices have gone up.

...that means the appreciation are debts, not assets... (bonus points if you catch the s/o)

"Now the law of one price is in retreat.""Now the law of one price is in retreat."

Sanctions and economic nationalism create barriers, making markets less fungible. You can see the alarming results in commodities [...] The recent prices of nearly identical barrels of oil traded in Texas, Guyana, the North Sea and Russia ranged between $97 and $147, some of the biggest gaps ever recorded. Last year the price of gold, the ultimate fungible asset, divorced in Europe and New York. Copper, silver and nickel have seen similar dislocations.

Ok, fine... but moving something from where it is worth less to where it is worth more is a service, not an arb. And the huge price differential is there because of some added, extra risk — not because there's, like, a negative shock to transportation technology... See "Electricity is a Weird Commodity."

uh-hu, and here comes said service:

a golden age of arbitrage is under way as traders who exploit disparities, for their own profit or for clients’, thrive. Thanks to volatility and price gaps, JPMorgan’s markets arm has just booked the best result in its history. Energy and metals traders are making a killing. [...] A rush of macro-hedge funds, which bet on geopolitical events and disparities, is opening, 14 years after their patron saint George Soros quit and they were written off as obsolete."

"Arbitrageurs’ profits can be thought of as a tax that the world pays to incentivise firms to try to bridge fractured markets.""Arbitrageurs’ profits can be thought of as a tax that the world pays to incentivise firms to try to bridge fractured markets."

Ah, ha, better! 140bn a year, says the author. Neat lil tax, happy for the "arb" traders.

archive: https://archive.md/4nV1T