I am not sure I am following your reasons. Can you explain? This is where I am coming from.
There are a lot of public policy questions that don't require broad support. Consider the difference between supporting the Apollo program (10 years, a significant chunk of our nations GNP) verse the International Space Station – a very small part of the budget which is kept alive by a few space nuts (and I would like to send out a thank you to those space nuts! Thanks for keeping the dream alive.)
People always complain about the cost and duration of the Iraq invasion – and we where all for it at the start. But significant reducing our green house gas output today would be much more expensive over a much longer period. It will require a big buy in by the public.
The chart shows that 1. Temperatures have risen but 2. Less than what current climate models predict at the 50% confidence level. It has almost broken the 10% level of confidence.
(Which means our current climate models are piss poor and predicting future events, and even less on the right course of action. This does not mean global warming is not happening – just that the models need a lot of work.)
(So, the above question got me to thinking on how science is communicated, and since only a single question is allowed per post.)
Often society is faced with technically complex, nuanced issues. In cases where the evidence is incomplete, technical experts have yet to reach a consensus, yet broad public support is needed. Is there any practical course of action you would like to see? Better science education? Depolarizing the issues by delegating authority to blue ribbon panels staffed by experts?
I am asking because I see your view on climate change being simplified to the point of distortion. You also experienced J. Robert Oppenheimer, security hearing in 1954, where there is speculation that the inquire was triggered not because of security concerns but by rival scientist.
You views, which are nuanced, have been simplified in the public press into a anti-climate change position. What is your view on man-made global warming? What specific areas of research or course of action do you recommend?
I think this works better as a question - more open ended.
I like the idea of this question but I think we need to reword it. Dyson is not a skeptic of global warming – he does believe we are having an impact. IIRC he holds the following views:
You can drive a mac truck though the holes in current models – but that is o.k. because Climatology is a young science and is still developing. What it does mean is that the error bars should be set way further apart and the long term impacts are uncertain.
Because the models are poor, it is hard to come up with specific advice and course of actions. For example, should biomass be encouraged as a energy source? The fuel itself is carbon naturel but production often takes places on marginal lands – where farming could increase greenhouse gases.
So, current plans are huge, expensive, and of unknown value to solve for a future problem with unknown costs.
The future will offer better models that will give better specific advice. Future technology will lower the cost of implanting a fix.
Balance that against current problems with known impact and known costs to cure – for example – world poverty (poor education, unclean water, etc.) The answer therefore is to wait (If I understand what Dyson has been saying I agree with most of what he says – expect that I think that the future costs will grow faster than the advance of future technology so we should start now – but I am not an optimist).
Dollar cost averaging is great (and I did mention it’s cousin, regular rebalancing) – but your point is a bit off base.
One of the underlying assumptions of dollar cost averaging is that you are investing in a productive assets that grows with time. Sometimes you are buying too high, sometimes you are getting a steal by buying too low, but you are always buying productive assets. It is a simple discipline that counteracts the unproductive emotional habits of people pilling money into and out of the market. After a few years of investing you should have a sufficient investment where your compound rate of return / interest takes over.
Which is volatility comes into play. The higher the volatility the lower compounded returns.
But currencies are not a productive asset – it just sits there. It is like buying gold coins each month a burying it. You won’t know how many gold coins you will have at the end of 10 years because the number will change each month depending on the value of gold. And you won’t know how much their worth because, once again, you won’t know the value of gold in 10 years. Without the compounding affect the value of dollar cost averaging drops.
I have tweaked my position a little – see my post below on volatility.
The main thrust of this this argument (or what is should have been) is that there are other trades out there. The less sophisticated out there tend to be the chum for the sharks. BitCoins may have a bit of an advantage because it is new, so fewer sophisticated players.
As to your points – I would mark that down to a risk and complexity problem. Give yourself wide margins and enough cushion to allows for many, many fails. Most program traders are successful when they are right only 55% of the time. And there are times when the program will just fall off the rails. (your program blows up or the market acts irrationally.)
Since most programed trades last minutes to hours, I would not be too concerned about new bitcoins or the fact that nothing backs it – those would be longer term factors. And anything longer than a day is no longer trading or investing – it’s speculating.
That is not what is hard – it is the volatility that will kill you. The higher the volatility the lower the returns.
IRRC, the US Stock market averages a 10% return a year. However, you should not care about average returns, you should care about geometric returns (i.e. holding the asset over multiple periods.) As volatility increases geometric returns decrease. So, the stock market has a standard deviation of 7% to 10% which knocks down the geometric return to 7% - if the stock market was normally distributed – which it’s not. So this knocks it down to 5%. Factor in inflation of 2 to 3%...
So kids, the moral of the story is to rebalance your portfolio – bitcoins or no. Rebalanced portfolios are less volatile.
You’re making a lot of assumptions. Like, BitCoins will tend to go up in value over your time period (be it in days or years). That you will actually be able to execute on a displayed priced – before everybody else does.
Suggestion - find (and read up on) a arbitrage opportunity. For example, a US dollars / BitCons / Eurs / US Dollar trade should net you zero dollars less fees – but does it? I have heard of times that it has not and could be taken advantage of. Also, try to find somebody who knows something about program stock trading – which is basically what you are doing. (and stay away from those green arrows / red arrows FX trading programs you see on TV)
I don't have that information at my finger tips, but research shareholder communications proxy solicitation rules. I think it is a combo of Act 34 and various SEC regulations. So laws may be too strong of a word. Then throw in the extra disclosure that occurs when somebody owns more than 5% of a company.
I was using the generic definition of money. However, Forbes believes in all 3. Now, he says that all other functions of money flows from being a means of exchange explicitly. However, 2 paragraphs down he starts talking about using money to invest and make long term decisions - that would encompass the other 2 parts.
Expected unidirectional volatility is much different then general volatility. That is, we know that computers are going to get cheaper, faster even if we don't know exactly how fast this is going to happen. If we didn't know which direction computer prices were going – that would be something different.
Also, the drop in computer prices is driven by real productivity gains. But we are not talking about the change in value of a economic asset (Computers) – but the change in a financial asset. If you using BitCoins as a unit of account or as a store of value – well – that would be different. (Now, that being said, I can not think of anybody who uses physical commuters as a store of value or as a unit of account.)
To be money, a thing must 1. be a unit of account, 2. a store of value and 3. a means of exchange.
Forbes is arguing that BitCoin (today) kind of satisfies the “means of exchange” but not the other 2 because it's value fluctuates so wildly. So, currently, it is more of a speculative asset bubble then money. If you have hyperinflation of 100% a year you can kind of make it work – you know the direction and rough speed of inflation. With BitCoin it could be up 100% in one year and down 50% the next month.
Your criticisms are fair, but I would like to make a point.
Some boards are strong and independent, others are weak and are captured by management. And there is always questions about balancing management (long term vision, fat contracts) verses the small investor (many contradiction voices, often short term, and the real owners of the companies.)
Historically speaking, boards tend to do poorly when it comes to manager pay / performance, long term planning, and selecting a new CEO. However, they tend to do much better job in kicking out CEOs and handling being bought out.
I would disagree. I would bet that most of the examples you point out were due to fraud, greed, or manias. These are human conditions that exist without the profit motive. Or, another way to put it, capitalism (either in it's left wing “socialism light” or your hard right liberation form) is like democracy – a horrible system whose only saving grace is that it is better then any other system.
And it is a shame that people don't understand what profit is.
Are you doing a good job, are you adding economic value, producing something society wants? If you do, then you generate profits. If not – well – not so much. Don't think corporations are adding value? They you are using a measuring stick that society does not use. Don't like it? Get society to change the measuring stick they use. (And this is not a glib comment.)
No - that not true. If it were M. Dell would have approved his own takeover.
The board has to independently review all offers and pick the best one. That is why the board 1. formed a special sub-committee that M. Dell was not on and 2. got a "shop around" option and 3. was given enough cash to hire some Wall Street investment banker types.. This is standard in terms of handling conflicts of interest like this.
It's not - Dell can not stop Ichan from buying more shares - so they are giving him something different.
Ichan has publicly stated that he has no interested in buying out Dell - just that he thinks it worth more then M. Dell's offer of $14. People are speculating that Ichan wants 30% of the company, let M. Dell keep his 15%, at let the rest remain in public hands.,
So now we get to the tricky part. Companies must treat all shareholders equally. As part of that deal, minority shareholders can't collude behind management's back - they have to do things publicly. (These rules go back to the 1950s). So, from the article "Dell has also granted the Icahn entities a waiver that "facilitates" his ability to engage with other Dell stockholders."
So consider this a pause as Ichan can muster his forces.
AC is right - Commissions means you get paid either on the retail price or the volume of transactions. You don't care if you client makes money or the store makes money- volume is key.
I don't know if trader got paid a commission or not - but he did get a slice of the profits. The idea is to align the broker's interest with the client's interest. Most brokers who operate under this principal get a very small part of their salary paid by commission and the majority of it paid by some kind of profit sharing.
If commissions (i.e the number of transactions) was key he probably would not have made such a huge unidirectional bet on the market. There are "better" was to illegally churn an account then this. It souds like he was reaching for the fence, hoping for a home run, where everything would be forgiven.
And I kind of need to redact my statement - read up on this some more. Not a principal trader on his owns firm account. However, he was entitled to a cut of the profits, so probably was not motived by commissions - and more by wanting to hit one out of the ball park.
Your a bit off base here. You are dead on the money about insider trading - but this is not about insider trading - this is about 3rd party trading - he was playing around with other's people money, hoping his gamble would pay off..
It is very common to give control of a account to a 3rd party either a broker or a outside advisor. They theory is that they are professionals and can trade better then you can. When this happens, certain rules are put in place by the owner of the account. Do a stop loss here, only so much in speculative trading, etc. And it looks like he broke all kinds of rules here. Some accounts he was not even authorized to trade in.
I am going to guess this is going to play out like Nick Leeson - another famous unauthorized trader.
Doubtful. It sounds like the guy was trading on his firms accounts. Such people tend to be principal traders - i.e. no commission. The general rule is that they get to take home, as a bonus, 50% of the money they make for the firm. Thus the reason my he took a huge gamble with the firm's money.
Maybe - I have seen this activity up close. What is the difference between an aggressive successful trader and a rouge trader? Traders tend to be type A personalities who are always testing the boundaries and some of those are subjective. Have I seen successful traders fired for doing such things? Yes - but only at select firms. Others take the profits and let it slide.
I would guess what you were seeing was the purchase order – Where the customer says I want X plans configured with the following trim. It is a contract but no money changes hands (maybe a down payment but that is different). 2 to 3 years later when the plan rolls off of the assembly line – that is when they fly it out over the ocean and exchange ownership for cash.
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I am not sure I am following your reasons. Can you explain? This is where I am coming from.
There are a lot of public policy questions that don't require broad support. Consider the difference between supporting the Apollo program (10 years, a significant chunk of our nations GNP) verse the International Space Station – a very small part of the budget which is kept alive by a few space nuts (and I would like to send out a thank you to those space nuts! Thanks for keeping the dream alive.)
People always complain about the cost and duration of the Iraq invasion – and we where all for it at the start. But significant reducing our green house gas output today would be much more expensive over a much longer period. It will require a big buy in by the public.
Try this:
http://www.economist.com/news/science-and-technology/21574461-climate-may-be-heating-up-less-response-greenhouse-gas-emissions
The chart shows that 1. Temperatures have risen but 2. Less than what current climate models predict at the 50% confidence level. It has almost broken the 10% level of confidence.
(Which means our current climate models are piss poor and predicting future events, and even less on the right course of action. This does not mean global warming is not happening – just that the models need a lot of work.)
(So, the above question got me to thinking on how science is communicated, and since only a single question is allowed per post.)
Often society is faced with technically complex, nuanced issues. In cases where the evidence is incomplete, technical experts have yet to reach a consensus, yet broad public support is needed. Is there any practical course of action you would like to see? Better science education? Depolarizing the issues by delegating authority to blue ribbon panels staffed by experts?
I am asking because I see your view on climate change being simplified to the point of distortion. You also experienced J. Robert Oppenheimer, security hearing in 1954, where there is speculation that the inquire was triggered not because of security concerns but by rival scientist.
You views, which are nuanced, have been simplified in the public press into a anti-climate change position. What is your view on man-made global warming? What specific areas of research or course of action do you recommend?
I think this works better as a question - more open ended.
I like the idea of this question but I think we need to reword it. Dyson is not a skeptic of global warming – he does believe we are having an impact. IIRC he holds the following views:
You can drive a mac truck though the holes in current models – but that is o.k. because Climatology is a young science and is still developing. What it does mean is that the error bars should be set way further apart and the long term impacts are uncertain.
Because the models are poor, it is hard to come up with specific advice and course of actions. For example, should biomass be encouraged as a energy source? The fuel itself is carbon naturel but production often takes places on marginal lands – where farming could increase greenhouse gases.
So, current plans are huge, expensive, and of unknown value to solve for a future problem with unknown costs.
The future will offer better models that will give better specific advice. Future technology will lower the cost of implanting a fix.
Balance that against current problems with known impact and known costs to cure – for example – world poverty (poor education, unclean water, etc.)
The answer therefore is to wait (If I understand what Dyson has been saying I agree with most of what he says – expect that I think that the future costs will grow faster than the advance of future technology so we should start now – but I am not an optimist).
Dollar cost averaging is great (and I did mention it’s cousin, regular rebalancing) – but your point is a bit off base.
One of the underlying assumptions of dollar cost averaging is that you are investing in a productive assets that grows with time. Sometimes you are buying too high, sometimes you are getting a steal by buying too low, but you are always buying productive assets. It is a simple discipline that counteracts the unproductive emotional habits of people pilling money into and out of the market. After a few years of investing you should have a sufficient investment where your compound rate of return / interest takes over.
Which is volatility comes into play. The higher the volatility the lower compounded returns.
But currencies are not a productive asset – it just sits there. It is like buying gold coins each month a burying it. You won’t know how many gold coins you will have at the end of 10 years because the number will change each month depending on the value of gold. And you won’t know how much their worth because, once again, you won’t know the value of gold in 10 years. Without the compounding affect the value of dollar cost averaging drops.
I have tweaked my position a little – see my post below on volatility.
The main thrust of this this argument (or what is should have been) is that there are other trades out there. The less sophisticated out there tend to be the chum for the sharks. BitCoins may have a bit of an advantage because it is new, so fewer sophisticated players.
As to your points – I would mark that down to a risk and complexity problem. Give yourself wide margins and enough cushion to allows for many, many fails. Most program traders are successful when they are right only 55% of the time. And there are times when the program will just fall off the rails. (your program blows up or the market acts irrationally.)
Since most programed trades last minutes to hours, I would not be too concerned about new bitcoins or the fact that nothing backs it – those would be longer term factors. And anything longer than a day is no longer trading or investing – it’s speculating.
That is not what is hard – it is the volatility that will kill you. The higher the volatility the lower the returns.
IRRC, the US Stock market averages a 10% return a year. However, you should not care about average returns, you should care about geometric returns (i.e. holding the asset over multiple periods.) As volatility increases geometric returns decrease. So, the stock market has a standard deviation of 7% to 10% which knocks down the geometric return to 7% - if the stock market was normally distributed – which it’s not. So this knocks it down to 5%. Factor in inflation of 2 to 3%...
So kids, the moral of the story is to rebalance your portfolio – bitcoins or no. Rebalanced portfolios are less volatile.
You’re making a lot of assumptions. Like, BitCoins will tend to go up in value over your time period (be it in days or years). That you will actually be able to execute on a displayed priced – before everybody else does.
Suggestion - find (and read up on) a arbitrage opportunity. For example, a US dollars / BitCons / Eurs / US Dollar trade should net you zero dollars less fees – but does it? I have heard of times that it has not and could be taken advantage of. Also, try to find somebody who knows something about program stock trading – which is basically what you are doing. (and stay away from those green arrows / red arrows FX trading programs you see on TV)
I don't have that information at my finger tips, but research shareholder communications proxy solicitation rules. I think it is a combo of Act 34 and various SEC regulations. So laws may be too strong of a word. Then throw in the extra disclosure that occurs when somebody owns more than 5% of a company.
I was using the generic definition of money. However, Forbes believes in all 3. Now, he says that all other functions of money flows from being a means of exchange explicitly. However, 2 paragraphs down he starts talking about using money to invest and make long term decisions - that would encompass the other 2 parts.
Cute – but off base.
Expected unidirectional volatility is much different then general volatility. That is, we know that computers are going to get cheaper, faster even if we don't know exactly how fast this is going to happen. If we didn't know which direction computer prices were going – that would be something different.
Also, the drop in computer prices is driven by real productivity gains. But we are not talking about the change in value of a economic asset (Computers) – but the change in a financial asset. If you using BitCoins as a unit of account or as a store of value – well – that would be different. (Now, that being said, I can not think of anybody who uses physical commuters as a store of value or as a unit of account.)
To be money, a thing must 1. be a unit of account, 2. a store of value and 3. a means of exchange.
Forbes is arguing that BitCoin (today) kind of satisfies the “means of exchange” but not the other 2 because it's value fluctuates so wildly. So, currently, it is more of a speculative asset bubble then money. If you have hyperinflation of 100% a year you can kind of make it work – you know the direction and rough speed of inflation. With BitCoin it could be up 100% in one year and down 50% the next month.
Your criticisms are fair, but I would like to make a point.
Some boards are strong and independent, others are weak and are captured by management. And there is always questions about balancing management (long term vision, fat contracts) verses the small investor (many contradiction voices, often short term, and the real owners of the companies.)
Historically speaking, boards tend to do poorly when it comes to manager pay / performance, long term planning, and selecting a new CEO. However, they tend to do much better job in kicking out CEOs and handling being bought out.
I would disagree. I would bet that most of the examples you point out were due to fraud, greed, or manias. These are human conditions that exist without the profit motive. Or, another way to put it, capitalism (either in it's left wing “socialism light” or your hard right liberation form) is like democracy – a horrible system whose only saving grace is that it is better then any other system.
I think Mr. Dell has 15%.And my I ask why you are against Icahn getting more then 15%?
To the OP, Greenmail is now illegal, so it can't be that.
And it is a shame that people don't understand what profit is.
Are you doing a good job, are you adding economic value, producing something society wants? If you do, then you generate profits. If not – well – not so much. Don't think corporations are adding value? They you are using a measuring stick that society does not use. Don't like it? Get society to change the measuring stick they use. (And this is not a glib comment.)
No - that not true. If it were M. Dell would have approved his own takeover.
The board has to independently review all offers and pick the best one. That is why the board 1. formed a special sub-committee that M. Dell was not on and 2. got a "shop around" option and 3. was given enough cash to hire some Wall Street investment banker types.. This is standard in terms of handling conflicts of interest like this.
It's not - Dell can not stop Ichan from buying more shares - so they are giving him something different.
Ichan has publicly stated that he has no interested in buying out Dell - just that he thinks it worth more then M. Dell's offer of $14. People are speculating that Ichan wants 30% of the company, let M. Dell keep his 15%, at let the rest remain in public hands.,
So now we get to the tricky part. Companies must treat all shareholders equally. As part of that deal, minority shareholders can't collude behind management's back - they have to do things publicly. (These rules go back to the 1950s). So, from the article "Dell has also granted the Icahn entities a waiver that "facilitates" his ability to engage with other Dell stockholders."
So consider this a pause as Ichan can muster his forces.
AC is right - Commissions means you get paid either on the retail price or the volume of transactions. You don't care if you client makes money or the store makes money- volume is key.
I don't know if trader got paid a commission or not - but he did get a slice of the profits. The idea is to align the broker's interest with the client's interest. Most brokers who operate under this principal get a very small part of their salary paid by commission and the majority of it paid by some kind of profit sharing.
If commissions (i.e the number of transactions) was key he probably would not have made such a huge unidirectional bet on the market. There are "better" was to illegally churn an account then this. It souds like he was reaching for the fence, hoping for a home run, where everything would be forgiven.
And I kind of need to redact my statement - read up on this some more. Not a principal trader on his owns firm account. However, he was entitled to a cut of the profits, so probably was not motived by commissions - and more by wanting to hit one out of the ball park.
Your a bit off base here. You are dead on the money about insider trading - but this is not about insider trading - this is about 3rd party trading - he was playing around with other's people money, hoping his gamble would pay off..
It is very common to give control of a account to a 3rd party either a broker or a outside advisor. They theory is that they are professionals and can trade better then you can. When this happens, certain rules are put in place by the owner of the account. Do a stop loss here, only so much in speculative trading, etc. And it looks like he broke all kinds of rules here. Some accounts he was not even authorized to trade in.
I am going to guess this is going to play out like Nick Leeson - another famous unauthorized trader.
Doubtful. It sounds like the guy was trading on his firms accounts. Such people tend to be principal traders - i.e. no commission. The general rule is that they get to take home, as a bonus, 50% of the money they make for the firm. Thus the reason my he took a huge gamble with the firm's money.
Maybe - I have seen this activity up close. What is the difference between an aggressive successful trader and a rouge trader? Traders tend to be type A personalities who are always testing the boundaries and some of those are subjective. Have I seen successful traders fired for doing such things? Yes - but only at select firms. Others take the profits and let it slide.
I would guess what you were seeing was the purchase order – Where the customer says I want X plans configured with the following trim. It is a contract but no money changes hands (maybe a down payment but that is different). 2 to 3 years later when the plan rolls off of the assembly line – that is when they fly it out over the ocean and exchange ownership for cash.