Dakryn's Batshit Theory of the Week

[zabu of nΩd]

nor the time to do so with educated intent

I have a hard time believing that given how much ground you and Pat cover in this thread haha, but I'm glad to hear you're interested.

The way the financial news establishment is set up right now, it's very hard to get a meaningful high-level overview of a company that offers real perspective on its future earnings potential. Getting free Morningstar stock reports as a perk through my brokerage (Merrill Edge) was oddly the one big turning point in my self-education, and almost three years later Morningstar is still the only company whose stock reports I trust.

Most of the mainstream "analyst consensus" analysts make recommendations primarily on short-term/technicals-based smoke signals, but Morningstar does only long-term valuations. They also include uncertainty levels in their valuations (which to me is crucial to finding safe investments), and they have good writeups on the competitive advantages, unique risks, and management quality of each company, which I've seen nothing close to in other analysts' reports.

 

[Einherjar86]

I'm totally unqualified to invest any of my money in individual stocks. My wife handles all that stuff; but other than the company she works for, we don't own any individual stocks. We have money with some investment funds.

I'm too bewildered by how the stock market works to be comfortable handling my own investments.

 

[Dak]

If I focused on it I think I could do alright. My main concern is that, as you said, typical public analyst info I expect is either just groupthink or intentional disinfo. Goldman has been caught redhanded advising clients in such a way as to make money for GS, so you know any other sort of "guidance" is going to be no better. On top of this, certain hedge funds/investment banks hold positions large enough to move the market on their own, so trying to make any money on temporary positions as a solo investor is extremely risky. There is, in general, currently a very loose connection between fundamentals and performance, all of which makes it almost impossible to do anything other than go long.

While I could probably right now come up with market sectors I would invest in, it would take some serious study to pick actual stocks.

 

[zabu of nΩd]

I've had a lot of free time to study it, and I was still pretty clueless for a long time. Macroeconomics, industry dynamics, competitive positioning, valuation, uncertainty and risk, portfolio strategy... understanding each of those concepts is a project all its own. I think I have enough knowledge of each to think critically about them, but I also know my knowledge is not at a professional level, and at the end of the day I have to trust a professional's opinion on any stock I consider.

I was thinking more about this idea of "disaster preparation" investment last night, and figured I could use a list of scenarios in order of how likely (in my totally subjective opinion) each one is to cause the next major disruption in our economy. Right now I've got:

1) communications infrastructure disaster (hacking, electrical grid attack, etc)
2) financial crisis
3) major war overseas
4) accelerating artificial intelligence / robotics breakthroughs
5) accelerating renewable energy efficiency
6) urban WMD disaster in US
7) mass civil unrest in US
8) rapid/runaway climate change
9) accelerating human longevity / anti-aging treatments
10) disease pandemic

Some of those scenarios lend themselves mainly to super-risky investments like silver or solar companies, but if you're buying shares of a defense contractor for #3, or a big pharma company for #9 and #10, you're not necessarily taking a big risk (in my case, those would actually be helpful for diversification).

 

[Dak]

2 words for long term, non-disaster based investment: Nanotech and drones (including the non-flying kind).

 

[The Ozzman]

I would put mass civil unrest higher

 

[Dak]

The thing about mass civil unrest is it's going to probably come along with 1/2/8/10, not just merely happen by itself.

 

[Dak]

Speaking of conspiracy theories: The old "Baptists and Bootleggers" situation:

http://freebeacon.com/issues/foreign-firm-funding-u-s-green-groups-tied-to-state-owned-russian-oil-company/

A shadowy Bermudan company that has funneled tens of millions of dollars to anti-fracking environmentalist groups in the United States is run by executives with deep ties to Russian oil interests and offshore money laundering schemes involving members of President Vladimir Putin’s inner circle.

This isn't radical by any means. "Rebels", "activists", etc usually have no inherent source of funding, and money comes from somewhere where there are moneyed interests. Whether it's the United States Govco, some other national govco, or some individual private corporation or cartel. To put it in quasi-literary terms: quoting some random thing I saw somewhere "Who is funding the Rebellion in Star Wars?"

Edit: Also related to Russia:

http://www.zerohedge.com/news/2015-02-13/thirst-war-sen-inhofe-releases-fake-photos-russian-troops-ukraine

In his best attempt to impersonate war crazed Senator John McCain, Sen. Jim Inhofe of Oklahoma released photographic proof of Russian solders in Ukraine in order to push forward his bill to provide U.S. arms to Ukraine. Or so he thought…

Fuhkin kunspercy thuhrees!

 

[Dak]

On money systems:

Henry Dampier -

If we can learn anything from history, an attempt to reform would probably be the worst thing for America, because nation-states, due to the way that they are structured (reliant on fixed institutions of ever-metastasizing growth), a mere slowdown in the rate of growth is sufficient to implode most of its critical institutions, in part owing to the ironic lack of flexibility inherent in an ‘elastic’ monetary system requiring ever-exponentially-rising issuances of new debts to support older debts.

The reason why it’s ironic is that the elastic monetary system, resting on ideas that hold that the quantity of money can be ‘insufficient’ to fuel economic growth, is supposed to be the flexible option, whereas hard-money systems are supposed to be a ‘straitjacket’ which prevents economic growth. The truth is actually inverted — a hard money system permits expansion and contraction in the economy depending on real conditions, whereas a pure paper-money system demands permanent expansion regardless of real conditions, which leads to routine collapses in activity owing to that predictably excessive enthusiasm.

 

[Einherjar86]

The fist sentence in that quoted segment is not only excessively long, but also incomplete. There's a verb missing somewhere: "Because nation-states" what? Should it say "Because for nation-states"?

Paper money is only a placeholder for something else. It doesn't matter what the currency is: gold, silver, etc. would serve the same function. I'm not sure what a "hard money" system would be.

 

[Dak]

The fist sentence in that quoted segment is not only excessively long, but also incomplete. There's a verb missing somewhere: "Because nation-states" what? Should it say "Because for nation-states"?

Paper money is only a placeholder for something else. It doesn't matter what the currency is: gold, silver, etc. would serve the same function. I'm not sure what a "hard money" system would be.

Yeah it's a poorly written run on, and yeah, it should be "because for nation states".

Hard money, I imagine for that writer, is specifically metal, and mostly likely gold and or silver. It's physically hard, and the limits of the supply, particularly relative to fiat currencies (I hesitate to use either fiat or paper, since most national currencies are no longer printed but digitally "appeared", and you could have a hard money system via fiat) are "hard". In the latter sense, bitcoin is also relatively "hard".

Not anything can function as money, but many things could. But that shouldn't be the standard. Paper money is "functioning". Salt has "functioned". Beads have "functioned".

 

[Dak]

http://www.theatlantic.com/features/archive/2015/02/what-isis-really-wants/384980/

This is a long read, but felt a lot more even-handed than anything else I've read regarding ISIS. I was waiting for wardrumming at the end given the outlet source, but the author seemed to conclude that airstrikes were probably the best of a bad list of options. War of attrition without the botg and nation building.

 

[Dak]

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2564009

You may or may not be interested in this Pat.

'We Do Not Sow': The Economics and Politics of A Song of Ice and Fire

Abstract:
George R.R. Martin's fantasy epic A Song of Ice and Fire brilliantly illustrates a number of basic principles of political economy. In particular, the richness of his world allows for a detailed account of economic and political relations in human society, and the saga uses its fantasy setting to dramatize and explore important questions about power, conflict, and the state. This essay discusses three economic themes in A Song of Ice and Fire. First, Martin's novels illustrate some fundamental ideas about political institutions, showing that organized economic exploitation is the foundation of the state. Second, they dramatize the relationship between war-making and public finance, describing the immense (networks of) political power created through control of the treasury, as well as the political logic that drives Lord Baelish and the Lannisters from taxation to borrowing to inflation in order to sustain and conceal the crown's war debt. Third, we examine how the rhetoric of Westeros's ruling class prevents the emergence of institutions friendly to peace and social cooperation, especially in the form of market exchange.

 

[rms]

Isnt Game of Thrones fantasy based on Medieval England? So of course it would apply to those things?

 

[Dak]

Loosely based on Medieval England. But it's not like these issues in political economy are restricted to a particular geotemporal situation.

http://www.theguardian.com/news/2015/feb/18/yanis-varoufakis-how-i-became-an-erratic-marxist

Interesting read. His knowledge of Marx is much more complete than his knowledge of "vulgar economists" though. He also implicitly defends a sort of not knowing what to do by condemning SJWs and neoliberals. The most striking section was this:

How could Marx be so deluded? Why did he not recognise that no truth about capitalism can ever spring out of any mathematical model, however brilliant the modeller may be? Did he not have the intellectual tools to realise that capitalist dynamics spring from the unquantifiable part of human labour; ie from a variable that can never be well-defined mathematically?

Because he was working with what he had. Between a ltov and blank slate theory that's what you get. Unquanitifiable and fluctuating differences in ability and preferences (the latter being subjective value theory) explain the unquantifiable aspect that makes capitalism work.

 

[Einherjar86]

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2564009

You may or may not be interested in this Pat.

Yeah, that's interesting. Probably won't impact my research at all, but it's still neat to see people from different fields looking at fiction for evidence.

Isnt Game of Thrones fantasy based on Medieval England? So of course it would apply to those things?

A Song of Ice and Fire is a modern rendition of an already romanticized vision of Medieval Europe. Martin is working partially from the romance tradition, which, while it was the literature of the Middle Ages, does not accurately portray the Middle Ages. It is a romantic, idyllic vision of the Medieval world.

Martin takes the clothing of that tradition and spatters a little bit of blood on it; and for this, we call him a more "realistic" fantasy writer. The truth is, he is still beholden to a very romantic view of the whole epic fantasy tradition. However, he modernizes the language and the diegetic relations (i.e. the relations between characters and events within the story), and thus turns the content of the story into one that is marginally applicable to our society today.

As it is a contemporary portrayal of pseudo-Medieval life, filtered through the lens of epic fantasy (which is a modern subgenre), I think it's a relevant text for looking at these economic aspects. I'm not sure I would call it "brilliant" though.

http://www.theguardian.com/news/2015/feb/18/yanis-varoufakis-how-i-became-an-erratic-marxist

Interesting read. His knowledge of Marx is much more complete than his knowledge of "vulgar economists" though. He also implicitly defends a sort of not knowing what to do by condemning SJWs and neoliberals. The most striking section was this:

Because he was working with what he had. Between a ltov and blank slate theory that's what you get. Unquanitifiable and fluctuating differences in ability and preferences (the latter being subjective value theory) explain the unquantifiable aspect that makes capitalism work.

The author doesn't seem to agree with you; he has his own answer:

Did he not have the intellectual tools to realise that capitalist dynamics spring from the unquantifiable part of human labour; ie from a variable that can never be well-defined mathematically? Of course he did, since he forged these tools! No, the reason for his error is a little more sinister: just like the vulgar economists that he so brilliantly admonished (and who continue to dominate the departments of economics today), he coveted the power that mathematical “proof” afforded him.

Why did Marx not recognise that no truth about capitalism can ever spring out of any mathematical model?
If I am right, Marx knew what he was doing. He understood, or had the capacity to know, that a comprehensive theory of value cannot be accommodated within a mathematical model of a dynamic capitalist economy. He was, I have no doubt, aware that a proper economic theory must respect the idea that the rules of the undetermined are themselves undetermined. In economic terms this meant a recognition that the market power, and thus the profitability, of capitalists was not necessarily reducible to their capacity to extract labour from employees; that some capitalists can extract more from a given pool of labour or from a given community of consumers for reasons that are external to Marx’s own theory.

Alas, that recognition would be tantamount to accepting that his “laws” were not immutable. He would have to concede to competing voices in the trades union movement that his theory was indeterminate and, therefore, that his pronouncements could not be uniquely and unambiguously correct. That they were permanently provisional. This determination to have the complete, closed story, or model, the final word, is something I cannot forgive Marx for. It proved, after all, responsible for a great deal of error and, more significantly, authoritarianism.

The author suggests that Marx wasn't "deluded" at all.

 

[Dak]

I didn't say he was deluded.

In economic terms this meant a recognition that the market power, and thus the profitability, of capitalists was not necessarily reducible to their capacity to extract labour from employees; that some capitalists can extract more from a given pool of labour or from a given community of consumers for reasons that are external to Marx’s own theory.

Subjective differences are that thing that is external to Marx's theory, and his determination for the "closed story" (for Marx is telling a story) is Varoufakis' point of departure.

 

[Einherjar86]

No, but you responded to Varoufakis's remark as though you accepted the premise that Marx was deluded. That was his first question, after all.

 

[Einherjar86]

Subjective differences are that thing that is external to Marx's theory, and his determination for the "closed story" (for Marx is telling a story) is Varoufakis' point of departure.

I feel as though subjective differences are external to any economic theory, even the most basically market-driven theory, even microeconomics. Individual preference cannot be theorized into a coherent system; or, rather, that system wouldn't be economics - it would be psychology.

Soviet communism (i.e. socialism) failed because of atrocious missteps in management and gross political criminality; and by "failed" in this sense, I mean that it failed only according to 20th-century standards. To move the discussion into more recent history, we have argued a lot about the futility and catastrophic trajectory of this country's contemporary economic situation. Individual preference, it seems to me, is a fine way to critique homogenization and institutionalization, but it doesn't lead to any advanced organized program of economics.

All this is a long way of saying that I don't think individual preference, or subjective value, is a necessary component of a successful economy. Our criteria for successful economies simply haven't caught up with that possibility yet:

In respect to the initial formulation of a question along the rough lines “How is suspension of consequences possible?” there are only three basic options:

(1) It’s not. All deferral of consequences is illusion. The reality is something akin to instant karma. (There’s something about this line of thinking I respect, but I’ve no idea how it could be coherently put together, and then knitted with explanatory plausibility to evident historical fact.)

(2) It’s complicated.

(3) That old problem is over. Haven’t you heard of the Death of Reality? Postmodernism, bitchez. (This is Derrida and Baudrillard — smart, terminally decadent, and radically inconsistent with NRx. It’s also the implicit principle of post-liberal macro-economics.)

I think it's telling that Land assumes "reality" is a fixed thing.

 

[Dak]

I feel as though subjective differences are external to any economic theory, even the most basically market-driven theory, even microeconomics. Individual preference cannot be theorized into a coherent system; or, rather, that system wouldn't be economics - it would be psychology.

I think the most important contribution of Austrian economics is to base economics on psychology, in the sense that the subject is necessary for both psychology and economy. That is exactly what Varoufakis is pointing out as necessary without putting it in that language.

Soviet communism (i.e. socialism) failed because of atrocious missteps in management and gross political criminality; and by "failed" in this sense, I mean that it failed only according to 20th-century standards. To move the discussion into more recent history, we have argued a lot about the futility and catastrophic trajectory of this country's contemporary economic situation. Individual preference, it seems to me, is a fine way to critique homogenization and institutionalization, but it doesn't lead to any advanced organized program of economics.

2 issues here. First, Soviet/Chinese communism failed by all measures which relate to quality of life (sufficient food, etc), which is failing regardless of era. They did also technologically, if that's what you meant.

Secondly, I don't know what you mean an "advanced organized program".

All this is a long way of saying that I don't think individual preference, or subjective value, is a necessary component of a successful economy. Our criteria for successful economies simply haven't caught up with that possibility yet:

If you take the subject out, "success" is meaningless.

I think it's telling that Land assumes "reality" is a fixed thing.

Reality, or the subject? Really, or relatively? Evolution does not proceed fast enough for any policy changes to ever need even the discussion of adjustment in recognition of the biologically based organization of the subject. However, amalgamation with machines may or may not require such discussion through that potentially accelerative interaction. I'm guessing Land is banking on failure of AI and/or the subject merely being augmented rather than fundamentally changed.