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Showing posts from March, 2013

For Your Easter Sunday

From Albert Schweitzer, The Mystery of the Kingdom of God.

All italics in the original.

"Jesus, however, reached back after the fundamental conception of the prophetic period, and it is only the form in which he conceives of the emergence of the final event which bears the stamp of later Judaism. He no longer conceives of it as an intervention of God in the history of the nations, as did the Prophets; but rather as a final cosmical catastrophe. His eschatology is the apocalyptic of the book of Daniel, since the Kingdom is to be brought about by the Son of Man when he appears upon the clouds of heaven (Mark 8:38 - 9:1).

"The secret of the Kingdom of God is therefore the synthesis effected by a sovereign spirit between the early prophetic ethics and the apocalyptic of the book of Daniel. Hence it is that Jesus' eschatology was rooted in his age and yet stands so high above it. For his contemporaries it was a question of waiting for the Kingdom, or excogitating and d…

Cyprus linkfarm II

I left off this chronology/linkfarm on Friday morning (eastern time) March 22, mentioning tough talk from Germany at that time. So we resume there.

 That was also the morning when Greek banks swooped in to buy the units of Cypriot banks that operated in Greece.  For some reason this seemed to calm world markets.

A bit later Friday, an EC spokesman, Simon O'Connor, announced "an improved spirit of cooperation on the part of the Cypriot authorities." Its parliament passed a law allowing it to restructure the failed Laiki Bank, separating some of its assets into a so-called "bad bank." Under this plan, uninsured depositors would lose up to 40 percent o their savings, though the insured deposits would remain protected within the "good" bank.

But this still left the question of raising the bail-in money that the Troika demanded. And by this time the crisis in Cyprus had analysts wondering about the next domino. One emerging markets researcher, Tim Ash,

Cyprus linkfarm I

The Cyprus/bank/bailout story is big. Really big . Too much for me to handle in my own voice just now. So I'll just provide a few links, following chronological order, in this post and the next.

The above photo is Cyprus' finance minister, Michael Sarris.

By February 28, Cyprus was clearly 'next up,' the new center of the ever-shifting limelight in Europe's traveling crisis over banks and sovereign debts. The new president of Cyprus, Nicos Anastasiades, said that day that though Cyprus would have to negotiate terms of a bail-out, "no reference to a haircut on public debt or deposits will be tolerated."

A big EU meeting in Brussels began on March 3d, and involved a good deal of discussion of the matters that Anastasiades had tried to wish off the table.

Skipping ahead a bit ... by March 14th, EU officials, as well as those from the IMF, were in round-the-clock talks on a bail-out of Cyprus that would include a depositor sacrifice, known politely as a bai…

Disreputable, Unloved, Invaluable Adjectives

Working writers, aspiring writers, and struggling writers have often encountered the hint, sometimes even phrased as a rule, "Eliminate adjectives." Usually Hemingway is invoked just before or after that is propounded.

Since the first word of this blog entry served as its first adjective, you might already have grasped that I don't take that hint to heart.

But don't listen to me. I'll invoke a higher authority:  Roald Dahl. "He had a fine white mustache and bushy white eyebrows and a wrinkly pink face." That is how Dahl describes the title character in his short story, "The Umbrella Man."

That sentence breaks at least three of the rules associated with the authoritative manuals. It uses a weak predicate (the verb is a form of "to have," which is almost as bad as "to be"!) It says something in a lot of words that it might have said in fewer ("he was old but still healthy" might do it for a minimalist). And it is …

Risk-return tradeoff: Going to the dogs

One of the central elements in modern finance theory is that of a risk-return tradeoff.

The idea is simply that investors are risk averse, and accordingly must be paid to incur risk. There is, then, a constant trade-off in the investment world: safe investments carry low return, high-return investments aren’t so safe. Fortunately, this conforms with almost everyone’s intuitions.

What exactly is risk, though? Yes, we have an intuitive idea. The guy jumping out of an airplane is taking a risk that the appreciative audience standing on firm ground below is not. Further, if he has neglected tocheck his gear properly he is taking an extra, unwarranted, risk.

But we can be a good deal more specific about what the word means in the world of investments. It means the size of the standard deviation of return. It means the width of that bell curve we've discussed in earlier posts.
Standard Deviation

A standard deviation is the “average distance from the average” here’s a simple example: the…

Billy Budd

I'm still working my way through Leon Chai's book on the relationship between Europe's Romantics and America's mid-19th century Renaissance.

I'll say something today about Chai's take on Melville's novella, Billy Budd, Sailor.

We begin, as usual in this book, with the relevant European, Balzac. Chai writes about Balzac's attachment to a particular understanding of the "great chain of being," and of how it implied that matter is continuous with spirit, animal nature continuous with that of humans, etc.

In this connection, Chai alludes to Balzac's tale, Une passion dans le désert, published more than half a century before Billy Budd.  the passion between panther and soldier is plausible on the assumption that there is a smooth continuum, no sudden break separating soul-endowed humans from organic-but-mechanistic felines.

Related: in Seraphita Balzac writes of the body and the spirit in these terms, "The body has redemanded the flame…

The Pseudo Morgan Freeman Was Right: Courant

The Hartford Courant is reporting on the word of unspecified sources apparently involved in the police investigation that the Sandy Hook school shooter was in fact motivated by a spirit of rivalry with other mass murderers.

Where have I heard that idea, now confirmed as fact? Where did I hear it first?

Oh, yes, I remember. In the hours after the shootings, this is the view of the matter that became affixed to the name "Morgan Freeman." It seems to have disappeared from discussion after Freeman himself disowned it.

Let us at least learn a lesson here about the invalidity of discrediting any argument by virtue of where it does or doesn't come from.

The Word From Morgan Stanley

We can reasonably hypothesize that “Mr. Market” is rational, and knows a lot of stuff, because there are a lot of people out there looking to make a buck off of any slip-up, looking to get an edge, to learn something he doesn’t know, and to trade on that basis. Further, all their trades on the basis of what they learn in that effort make him smarter. They contribute to determining prices, so that an “edge” that still worked a month ago may be outdated now, as Mr. Market has learned to factor it in.
And that is why (especially according to advocates of the ECMH) stock prices move in a random walk. It is random to any observer not as smart as Mr. Market himself. Any given neuron will presumably see the thoughts of the whole of the brain as a random result of who-knows-what. There is nothing mystical about this – the confused neuron, in its own trading, helps to bring the situation about.
Now, when I’m asked whether I believe in ECMH, I generally reply, “yes and no.” It makes points that…

A Limerick for NoHo

I saw a tea shop named LimeRed whilst walking about in downtown Northampton, MA recently. At first glance, I thought the sign said Limerick.

When I realized my mistake, I began to wonder how long it would take me to compose a LimeRed.

The answer? -- not long at all.

There was a small shop name of LimeRed,
I went there 'fore I went to bed.
I dreamt of a Lime
Then I knew 'twas time
To get LimeRed out of my head.

The Bachelor of Arts degree

The Winter 2013 issue of Cato's Letter (a publication of the Cato Institute) carries a meditation by Charles Murray on the value, or rather on the over-valuation, of the B.A. degree in the U.S. at the present. Indeed, he calls it a "bubble."

The word "bubble" is surely inexact. Bubbles in the economic sense involve commodities that are readily transferable. It is because they are transferable that they become over-valued in a very specific way. I can sell you my tulip bulb, or my dot-com company stock, or my mortgage derivatives' portfolio, simply because you are a greater fool than I am. You might buy them in the expectation that you can find someone even more foolish. Thus, we both make use of the ready transferability and the transaction is quickly concluded. This continues until the over-valued commodity is in the hands of the greatest available fool, after which point by definition it can not continue, and the bubble bursts.

I can't give you my …

The Case for Behaviorism

Someone recently asked me, as a sort of rhetorical exercise, if I could make the best possible case for behavorism. By behaviorism my friend and I both understood the same thing, the view that mind is only a name for the collection of predictable behaviors exhibited by certain physical organisms, and that it is confused or just meaningless to speak of a mind as some sort of entity inside of or transcending that organism, and directing its actions.

To be clear, my friend and I both reject behaviorism so understood, but the challenge was to make the best case I could for it anyway.

As someone who once trained in the art of advocacy, I found the challenge irresistable.

I answered that I would in that case make three points:

1. Behaviorists are the knights of Ockham's razor. They want to eliminate entities that are  unnecessary and non-explanatory from scientific discussion. Suppose we see a boy standing in front of a strawberry bush. He plucks and eats a strawberry. I say to you, …

Stock Prices and Alpha

Aside from the considerations we discussed last week, there is this to remember about stock performance, the performance of a stock as an investment is not (entirely) a matter of whether it rises or falls in price. A stock also entitles its holder to a portion of whatever dividends the issuing company may declare. Suppose, then, that we do the arithmetical magic to factor in the dividend stream as if it were being paid out day by day, and we included that along with the stock price move as the performance of XYZ. Once we do this, we’ll want to be sure that we’re matching the stock price against a broad market benchmark that also includes dividends as part of performance.
Fortunately, these are readily available. The S&P Index, for example, comes in three variants: one that considers solely the price of component stocks; one that factors in dividends (the “total return” index); and a third that subtracts the tax on those dividends (“net return.”)
We might make discussion easier by …

Winston Churchill II

Four brief passages from the Manchester/Reid book. The italicized  materials below are each taken from pp. 506-07.

"It was over India and empire that Churchill and Roosevelt had their first serious political argument. Roosevelt presumed he could speak frankly to Churchill on most matters, including -- and mistakenly -- India. Churchill, out of politeness, kept Roosevelt abreast of Cripp's progress, or lack thereof."

Stafford Cripps, in the spring of 1942 the most prominent member of the Labour Party in the War Cabinet, had gone to India to attempt to negotiate an understanding with the nationalist leaders, in particular Gandhi, by offering them semi-independent for India after the war if they would assist in the resistence to Japan in the meantime. It wasn't going well. But back to the book:

"When the talks broke down, Roosevelt blamed Churchill, in the most frank terms. The two men had very different long-term objectives. Beyond the defeat of Hitler, Churchill …

Winston Churchill I

Late last year the publisher Little Brown brought out the third volume of a biography of Winston Churchill that has been in the works for decades, The Last Lion.

The first volume, by William Manchester, The Last Lion: Visions of Glory, appeared in 1983.

The second volume, subtitled Alone, came out five years later.

Then Manchester put the final volume on the back burner and turned to another project, A World Lit Only By Fire, his informal meditation on medieval Europe, published in 1992.

In 1998, Manchester suffered two strokes. He had, by this time, compiled extensive research materials for volume three, including interview transcripts, but had only made a start onthe actual composition.

Over the following years, Manchester realized that his condition was not going to allow him to complete this project, and in 2003 he told his friend Paul Reid, a feature writer for Cox Newspapers, "I'd like you to finish the book." Manchester passed away the following year.

So now w…

Bertrand Russell: A Quotation

Russell said this about one subject that we've discussed on this blog of late:

"Mathematics, rightly viewed, possesses not only truth, but supreme beauty -- a beauty cold and austere, like that of sculpture, without appeal to any part of our weaker nature, without the gorgeous trappings of paintings or music, yet sublimely pure and capable of a stern perfection such as only the greatest art can show."

Bell Curves and Stock Prices

Last week our discussion took us as far as to a description of the normal or Bell curve. See a depiction above. The numbers at the bottom of the graph refer to “standard deviations” from the norm.

We were discussing specifically mileage errors on maps. One standard deviation from the mean (the area between -1 and +1 on our graph above) accounts for roughly 68 percent of all the maps in our hypothetical database. Two standard deviations from the mean (the area between -2 and +2) account for roughly 95 percent of the maps. Three standard deviations account for 99 percent.
A normal curve for a phenomenon is taken as evidence of randomness. If there were some reason why the mapmakers of 17th century England were inclined to make a particular error that reason would show up as some non-normality in this chart. Perhaps the roads between these two places were especially good by the standard of the day, and the ease of travel created a general impression that the cities were closer than was/is …

Interactionist Dualism Defended II

Koksvik is especially concerned with the argument that interactionist dualism can't work because for it to do so would violation the law of the conservation of energy (supplemented perhaps by the law of the conservation of angular momentum).

The idea behind this argument is that IF my thoughts cause me to do something I wouldn't otherwise do, then they must do so by exerting energy. Energy after all is that which does work, that which which moves matter around.

Thus, if interactionism is true, energy is leaking into the phenomenal world from some trans-phenomenal source. Surely this would violate that law.

If we're going to say, "so much the worse for the law then!" we can do so. Laws sometimes have to be modified and sometimes abandoned. Still, these leaks of energy into the phenomenal world should be in principle detectable, and anyone arguing for interaction should be able to make a case that they exist, that the law is violated, before arguing for a view o…

Interactionist Dualism Defended I

Here's a link to a philosophical defense of old-fashioned interactionist dualism, dated 2006 and submitted by a candidate for an M.A. in philosophy at Monash University.

I'll come to Koksvik's argument in another post, but for now I'll review my understanding of the state of play.

Interactionist dualism was famously Rene Descartes' answer to the question of the relationship between mind and body.

There exist a lot of different possible answers to this question, from the materialist reductionism that says in essence that the 'mind' is an illusion, to the Berkeleyan idealism that says in essence that the 'body' is an illusion.

Dualists all by definition say that mind and body are very different things or types of thing, and that they are both real.

Dualists differ among themselves on whether the mind and body really interact. They certainly SEEM to interact! If I skip lunch, the thought "I'm hungry" will be in my mind by 2…

Proving Causation in Finance

I said in an entry last week that a downgrade from Morgan Stanley was a reasonable candidate for the cause of a downward stock price move, as we intuitively understand the idea of cause.

But proving this would be a trickier matter. It would require showing that there was nothing else happening that evening or morning that may also have had consequences for that demand. Or, if there were other things happening, if would require some measure by which we could distinguish this causation candidate as more potent that the others.

Even if it is a very general rule that similar announcement proceeds stock price fall, other explanations are possible. After all, since we’re assuming that Morgan Stanley’s analyst was working from publicly available information, we could hypothesize that a lot of traders and in-house buy-side analysts reached the same conclusion at the same time Joe Smith did and would have reached it even if Joe Smith had had nothing to say, or had through some analytical failur…