By Bryan Caplan
Suppose the following:
1. You know now that the price of oil will be flat for five years, then fall by 10% per year every year thereafter. Everyone else thinks the price will be flat forever.
2. The longest oil-futures contract goes out 3 years.
3. A hundred other people will suddenly “see the light” and start agreeing with you one year from now.
Do you see any arbitrage opportunity in this market? If so, describe it in detail. If not, how can such valuable knowledge be so useless?