CAVEAT! I'm an amateur philosopher and idea-generator. I am NOT an investment professional. Don't take any of my advice before consulting with an attorney and also a duly licensed authority on finance. Seriously, this my personal blog of random ideas only for entertainment purposes. Don't be an idiot.
Sunday, November 25, 2012
Friday, October 05, 2012
Sunday, July 15, 2012
Tuesday, June 05, 2012
My main reasoning is based on the fact that any other alternative (of which I'm currently aware) is WAY worse.
All of the major players in the Eurozone (EU) are highly educated and well aware of decision theory. This is not to say that it's impossible for them to make mistakes because of course they have and they can in the future. They're human and biased and have competing priorities and assumptions (we're all flawed).
So here's my thinking when I game-out possible scenarios:
(those who work on Wall Street can jump to "Alternate Scenario#3: The Slacker Son Scenario" where I might have a potentially interesting perspective compared to the well-tread terrain of scenarios#1 & #2).
THE CURRENT COURSE OF ACTION:
a) The EU holds together and doesn't expel Greece from the Euro.
b) Germany and the rest of the EU countries (especially those other than the PIIGS) subsidize Greece, as necessary, to prop it up to the minimum degree they can rationalize for the foreseeable future.
c) Everyone "whistles past the graveyard" and hopes we all grow enough to be able to support our current and future obligations.
ALTERNATE SCENARIO#1) "The EU Expels Greece from the Euro Publicly & Outright":
a) As soon as any word of this leaks out (and it basically must): "Bank runs" happen in Greece as customers transfer their cash primarily to German banks (but perhaps, even worse, literally under mattresses which is the most economically unproductive way possible).
b) The rest of the PIIGS fear for a similar fate. Consequently, citizens of Portugal, Italy, Ireland and Spain soon after have similarly terrible runs on their banks.
c) The German banks do very well but now the holders of PIIGS' debt (primarily the banks & investors) are holding horribly precarious (or virtually worthless) paper. If you were the (significantly Socialist) government of Greece why would you pay back your creditors? Why not simply default completely? Life is currently crap in Greece and paying back that debt makes life worse (at least in the short run) for Greek citizens. BTW - Everyone should read "The Shock Doctrine" by Naomi Klein.
d) The Greeks create their own currency and are instantly subjected to insane inflation (since they've ruined their credibility by getting expelled from the EURO and now there's no "German brother" to bail them out).
e) The EURO loses value worldwide because of the rest of the Eurozone countries lose credibility for embracing and then so soon after expelling Greece. A currency is attractive because of its stability & credibility.
f) So the downside is comprehensible and there's no upside since the creditors get burned anyway (likely worse then would had Greece not exited the Euro).
CONCLUSION FOR ALTERNATE SCENARIO#1 = TERRIBLE FOR EVERYONE IN THE EU
ALTERNATE SCENARIO#2) "The EU Attempts to Surreptitiously Expel Greece from the Euro"
a) The EU takes some preliminary (shady) steps towards this plan:
- Flagging Euros/Accounts with an asterisk of sorts denoting the country of origin or the holder's nationality.
- Enacting (likely opaque/incomprehensible) legislation "under the radar" that enables all of the other EU countries to "freeze & isolate" (quarantine) bank accounts of Greek citizens.
b) Now when the inevitable "bank run" happens in Greece the Greek citizens get burned the most because their money (which they thought would be safe in German banks) gets confiscated to pay off creditors.
c) The rest of the PIIGs still suffer the same terrible fate of bank runs (albeit at a slightly slower pace).
d) Some Creditors do better then they currently fear because they confiscate Greek's investment (but creditors still lose principle).
e) German banks do less well because "flagged currency/accounts" will encourage Greeks to transfer their cash to other countries (especially those in Asia).
f) Greeks more certainly default on the rest of their debt (because they were just robbed and aren't concerned with paying their robber even if the robber was previously the creditor and there is debt outstanding).
CONCLUSION FOR ALTERNATE SCENARIO#2 = ASIA DOES WELL, CREDITORS GET SOME PAYMENT, MAXIMUM HORROR FOR GREECE and STILL SUBSTANTIALLY TERRIBLE FOR EVERYONE IN THE EU,
ALTERNATE SCENARIO#3) "The EU Expels Greece but Simultaneously Gives Stipends & Guarantees (to prevent Greek bank runs)" - aka "The Slacker Son Scenario"
DESCRIPTION: This scenario is a bit like parents who let their slacker son move back into the house after college but he's been such "a pain in the neck & a drain on the finances" that they gotta kick him out. If they simply kick him out on the street there's a chance he'll become an actual bum or criminal (which is bad for the parents). So instead, while the parents do kick the kid out to live on his own they also generously give him a stipend to cover his living expenses. The understanding is that the kid has to start to make it on his own and the stipend will eventually decrease to zero. In this way the rest of the EU publicly promises to subsidize Greece for the foreseeable future.
NOTE: This could also simultaneously be done with the shady elements of "Alternate Scenario#2" to flag & quarantine Greek accounts.
a) Since this third scenario is so functionally similar to the current course of action (continued inclusion in the EU) there is the possibility that it would indeed prevent Greek bank-runs (and those ensuing bank-runs for the rest of the PIIGS). However these subsidies & guarantees would have to be gigantic and rock-solid to prevent panic (and bank-runs in Greece). This third scenario would basically makes explicit, ironically in expulsion, the implicit promises it made to Greece by means of inclusion in the Euro. It's the same (or a better) level of protection & support with a largely semantic/paper distinction that paves the way, eventually, for a return to entirely separate currencies.
b) Such gigantic & rock-solid subsidies and guarantees would not be at all politically popular in any EU country that is not one of the PIIGS (especially Germany). This generosity would be unambiguously seen as "zero sum" (good for Greece and by extension the rest of the PIIGS and bad for everybody else, especially Germany).
c) Since this is still a big change it adds "unpredictability" and thus "risk" to the situation and in so doing enables greater unforeseen potential outcomes. All of that, ceteris paribus, is bad for investors & creditors.
CONCLUSION FOR ALTERNATE SCENARIO#3 = Not so terrible in results for the EU (compared to "the current course") but quite terrible in political "optics" for the subsidizing nations in the EU. Why would a non-PIIGS politician pursue this course of action if there's no clear net benefit?
CONCLUSION FOR ALL KNOWN SCENARIOS:
Alternate Scenarios #1 and #2 would have terrible results and #3 has no clear net benefit. Also, not insignificantly, there is always gigantic inertia in these matters so making a big change would ordinarily require a "shock" to scare people into changing course assuming such a change would make things better (side note: seriously, please read about Naomi Klein's "Shock Doctrine").
Consequently, I predict the EU stays on "the current course" for the foreseeable future and keeps Greece in the Eurozone/using the Euro.
Let's see how well my prescient streak continues.
I do hereby promise to not delete this post out of embarrassment even if I'm ultimately proven wrong.
I sincerely hope to maintain my intellectual integrity by keeping track of my bad calls as well as my good ones.
And I hope others do the same (and not "cherry pick" there accurate predictions like deluded psychics & astrologists).
Monday, April 09, 2012
But I'd rather you make a quick and modest profit by my recommendations.
Sunday, March 25, 2012
(Reuters) - "The United States, European allies and even Israel generally agree on three things about Iran's nuclear program: Tehran does not have a bomb, has not decided to build one, and is probably years away from having a deliverable nuclear warhead."
BUT AS A HEDGE I WOULD ALSO ADVISE BUYING OIL STOCKS (especially BP)!
But you may ask: Wait a minute? Isn't that counter-intuitive?
I reply: It's a hedge (to reduce risk) but also I'm considering basic fundamentals.
For Example: BP is trading at a ridiculously low P/E ratio of 5.65 (when 10 to 15 would be more reasonable by historic standards) - Add to that the fact that no one seems to be clamoring for the heads of executives over there anymore. I also suspect their actual payout on damages to the Gulf will also be substantially less than most feared/projected (IMHO).
• Royal Dutch Shell is also pretty cheap (P/E ratio of 7.10) and so is Chevron (P/E ratio of 7.92).
Whereas Exxon has a P/E ratio of about what it should be = 10.16
NOTE: Keep in mind that oil prices have gone up considerably in the past quarter and new production is ramping up big. Both of those factors bode well for Big Oil revenue/profits.
• Short Oil at $106.87 and then take profits if it drops to $101 and cut your losses if it spikes to $112.
• Buy BP stock at $45.59 and then take profits if it climbs to $51 and cut your losses if it drops to $41.
Let's see if my prescient streak continues. We'll see.
Sunday, February 05, 2012
My prediction: OBAMA WILL WIN REELECTION and the Democrats will regain control of congress (while retaining the Senate).
Friday, February 03, 2012
2,000 years ago (heck, maybe only 200 years ago) it was possible for a single human being to know virtually everything there was to know at the time. One could be expert on everything because there simply wasn't so much to know.
Since then there has been an increasing "division of labor" which has enabled accelerated advancements in ever more subjects.
Today it's impossible to know everything (the world has just grown too complex). So humans rely on "Experts/Authorities", "Paradigms" (mental assumptions & models) and "Heuristics" (mental short cuts) to navigate life and solve problems.
But avoiding critical thinking and relying on such experts, assumptions and short-cuts leaves us vulnerable to fallacies.
If a person has survived (and especially if he has thrived) he naturally assumes his paradigms and heuristics are effective. Consequently, when he encounters evidence that is contrary to his predictions he must naturally first assume that evidence is somehow flawed. This is as it should be. It would be untenable for people to immediately abandon their world views whenever they first encounter contrary evidence. Because, after all, that particular piece of evidence could indeed be flawed, fabricated or insignificant compared to the preponderance of evidence at large.
We should all agree, however, that it is therefore continually necessary for all of us to ensure we are using the most effective experts/paradigms/heuristics available. If we repeatedly encounter evidence that is contrary to our paradigms then that should lead us to question their effectiveness and require us to consider other possibilities. If another paradigm is more effective at explaining the world and, most crucially, better at predicting the future then we have a duty to accept it (until an even more accurate system arises). Indeed that is the essence of "The Scientific Method" which has brought humanity such amazing progress.
All of the above is so intuitively obvious and proven and unanimously accepted by literally all reasonable people that this post may seem superfluous.
But now I ask you to take a bit of a (hopefully somewhat original) new leap with me:
Given the above is true, I contend that those who repeatedly make bad predictions or speciously argue claims that are ultimately disproved should necessarily be distrusted. And, perhaps more importantly, the paradigms held by such people should be questioned first and investigated most thoroughly because they are highly likely to be wrong.
In short: If your "side" has a disproportionally large percentage of liars and ineffective prognosticators then you should probably question the "side" itself and whether you want to be on it.
The people who have an honest and accurate view of the world and consequently make better predictions needn't lie nor make deceptive arguments in political debates.
OK, I tried to make the above as non-partisan as possible so that my Republican friends would be willing to consider it (and its ramifications).
But now I'm gonna get "Liberal/Progressive"...
Somebody should make a website with video clips & pictures of all of the presidential campaign ads with crucial follow-up.
Show what Obama promised in his ads and what he delivered (also noting where he fell short). Then show the crazy "doom" the GOP supporters predicted in their ads if Obama won (e.g. "3am Phone Call", "Kenyan/Muslim" etc.) and how virtually NONE of that happened.
Do the same for GWBush vs. Kerry and also GWBush vs. Gore and also Clinton vs. Dole and also Clinton vs. GBushI.
NOTE: It is practically worthless to fantasize about "counterfactuals" (fictions about how someone thinks history "would have gone" in an alternate timeline where a different choice was made). A counterfactual is utterly unprovable in any direction (for the reality-based delorean-less population).
What would be the result of this glorious website?
I would bet the majority of its visitors would fairly recognize how relatively terrible the GOP is at predicting the future (with results often going entirely opposite of their predictions) and how the Democrats are substantially more effective (albeit too timid when governing and overly optimistic about the efficacy of its policies).
WARNING: ONLY THE BIGGEST POLICY WONKS & ECONOMIC NERDS SHOULD CONTINUE READING...
A very smart and successful friend of mine is an active member of the Republican party in notoriously conservative (and wealthy) Orange County, California. He earnestly believed that "government regulation" is the biggest problem for Americans. He cited an SBA report that absurdly claimed that regulations cost America $1.75 Trillion (out of our $14.5 Trillion economy) and so I actually read the entire report.
That SBA report was embarrassingly specious on the whole. While it validly mentioned $281 Billion for environmental regulations (conceivably higher than it "should" be), $75 Billion for OSHA (which didn't seem crazy high IMHO) and $160 Billion for "Tax Compliance" (which seems to me to be way higher than it "should"), it then laughably added $1.23 Trillion in "economic regulation cost" by magically multiplying the World Bank's Regulatory Quality Index (which itself doesn't even claim to measure the regulatory costs other than "Environmental/OSHA/TaxCompliance") by the size of our economy (i.e. they used their own dubious and complex equation, that includes an artificial variable derived from another dubious & complex equation, and then basically multiplied by $14.5 trillion = WTF?).
That fundamentally flawed SBA report makes no effort to discount "double counting" (q.v. how can it determine the $1.23 trillion of artificially calculated costs doesn't already include Environmental/OSH/TaxCompliance costs?). But those aren't even the most flawed parts of the SBA's conclusion.
Get this: In that SBA report's very first paragraph it writes - "Regulations are needed to provide the rules and structure for societies to properly function. This research, while mindful of this fact, does not consider the benefits of federal regulations…" <<<That's in its own words!
Don't forget: Many, if not most, of those trade tariffs clearly HELP American businesses profit by making their international competition more expensive.
That SBA report speciously cites "Economic Regulations (based on the WB's RQI)" and yet makes NO EFFORT to calculate how much those regulations help American businesses.
It would be like saying Apple is a poorly run company because its Liabilities totaled $40 Billion and ignoring that its assets totaled $116 Billion.
In every remotely fair analysis of literally anything one must count the "PROs" and also the "CONs".
If one only measures one without the other then the conclusions must be viewed hyper-skeptically until the flip-side is fairly researched. This is so shockingly obvious that I feel like I'm condescending to you, dear reader. It should be the most basic "given" that having a trial where only the prosecution is heard from and the defense gets no say is fundamentally ridiculous. Even attempting to argue your point without at least citing the counter-arguments must be seen as sophomoric and not worthy of serious attention.
If I'm the first to write this then I hope I get quoted with the following: "Public policy debate should not be like advertising a fashion product. Art & Fashion are subjective so its marketing can't practically be "falsified". Whereas Public Policy Debate requires knowable truths and must actively eject deception."
And, of course, anyone who "knows better" but still deliberately makes deceptive arguments or promotes provably-false information should be ignored in public debate by all reasonable people. There must be a price for such damaging deception and in a free society that price can't be literal censorship because "Shunning" by other authorities can be just as effective.
Everyone should understand the difference between the following concepts...
• "Lie" = an untruth told by someone who knows the truth
• "Error" = an untruth told by someone who doesn't know the truth
• "Broken Promise" = an unfulfilled action by someone who predicted he would complete it
• "Bad Prediction" = an eventuality that runs contrary to someone's prophecy
Consequently, Obama didn't "lie" when he said the stimulus would drop unemployment to 8%. He simply made a bad prediction (albeit one that is not so terribly far off all things considered). Contrast that with GOP doom predictions if Clinton's tax hikes were enacted (which were followed by massive economic growth) and GWBush's predictions about what would happen if supply-side economics were further enacted (tax cuts for the top and the resulting Great Recession of 2007/8).
Friday, January 27, 2012
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- ► 2010 (23)
- ► 2009 (25)
- ► 2008 (20)