Markets And Black Swans

The current global stock market turmoil handily demonstrates that market professionals and most of their customers don’t understand statistics.

Nassim Talieb wrote the definitive primer on market foolishness. To (over) summarize this excellent book, he explains that most market events are random, but that humans are hard wired to find patterns whether or not they exist, and these false patterns blind market operators to underlying truths.

So when an analyst says “The market went up because of XYZ”, he’s making an unprovable, and probably false, connection between XYZ and the movement – which most times is just noise.

Black Swans are events – like yesterday’s – which blow a hole in the consensus (in this case that markets would continue to rise). It’s the problem of inference first identified by David Hume, and elaborated by John Stuart Mill thus (p117, paperback):

No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.

So the longer a market has been rising does not effect the probability that it will tank tomorrow.

(Incidentally, scientists and pols who claim the debates on Global Warming, Darwinism etc are “over” are all ignoring or ignorant of this basic rule of inference).

Yesterday that black swan quacked (hissed? squawked?), and in spite of all the analysis, nobody really knows why – that’s why I follow Taleb and bet on black swans.

This is not – of course – financial advice.

Winning In Afghanistan

The two biggest problems we face in Afghanistan are the Pakistani safe haven, and the criminality fueled by the poppy harvest. Both are easily fixed.

First, the good news. In addition to sending more troops to Afghanistan, Blair’s government is providing them with more and better equipment.

That fills the gaps left by our useless NATO “allies”, but leaves these problems:

…American, British, Canadian and Dutch forces in the south and east will continue to face an enemy with a bolt-hole across the border. An insurgency with that luxury is very hard to defeat.

The Taliban will also take heart from the corruption which is undermining the poppy eradication campaign in Helmand.

The Pakistani safe haven is the result of a mountainous border that’s impossible to seal, and the inability of Musharraf, the Pakistani dictator, to control the tribal frontier areas. The solution is that adopted by the Brits to shut down the Indonesian safe haven in Malayan insurgency – hot pursuit.

Air mobile special forces backed by air strikes chasing the Taliban into the tribal areas will quickly make these havens unsafe. And Musharraf, having admitted he can’t control these areas, can’t complain too loudly.

Bribing and threatening poor (in both senses) farmers not to grow poppies is daft – bribes encourage more growing, and threats alienate the farmers. So rather than waste money digging an ever deeper hole, we should buy the crops at market prices.

The opium poppy is as source of valuable pain relief drugs, for example morphine and codeine. As our populations age, we’re going to need more of such medication, so creating a drug mountain now is a sensible investment.

With the Taliban unable to hide, and the farmers legally prosperous, Afghanistan is much better positioned to return to normality.

Next, We Come For The Lettuce

US brutality knows no bounds.

Iran’s president said on Sunday the country’s enemies had hatched a range of plots to push the Islamic Republic to give up its disputed nuclear programme, including driving up the price of tomatoes…

Rising prices, particularly the cost of tomatoes which form an important ingredient in Iranian food, have prompted growing public criticism of Ahmadinejad’s government.

“In order to harm us, they (enemies) make plots, for instance they come and push tomato prices up in the market. They think we will give up our ideals with their plots,” Ahmadinejad said in a speech in which he said Iran would not reverse its atomic plans…

It is not the first time the president has sought to deflect criticism for the rising price of tomatoes.

Soo, let’s consider how this impacts the typical Iranian BLT.

Absent bacon of course, so it’s an LT.

But absent tomatoes, it’s just an L. And when we take that out what’s left?

Toast – get the picture, Mr A?

Fatal Error

Contrary to MSM reports of his demise, the president is wildly popular with his base. The Mullahs are going to learn this surprising fact the hard way.

The report, hat tip Drudge (my emphasis):

The Feb. 9-11 poll puts Bush’s job approval at 37%, but among people who identify themselves as Republican or leaning Republican, his approval rating is 76%.

Thus, despite bad news from Baghdad and carefully crafted hand-wringing by high-profile GOP war critics in Congress such as Sen. Chuck Hagel of Nebraska, three of four Republicans in the country are hanging in there with the president.

The poll also shows that rank-and-file Republicans have higher regard for the president than they do Republicans in Congress. They gave GOP lawmakers a 63% job-approval rating, 13 points below Bush’s. And 72% of Republicans do not think Bush made a mistake sending U.S. troops to Iraq…

The latest congressional skirmish over Iraq underscores the point. In the House’s non-binding vote to oppose the president’s deployment of more troops to Baghdad, 17 Republicans voted with 229 Democrats to pass the measure. Four GOP representatives didn’t vote. Lost was the fact that 180 Republicans stuck with Bush. By that count, Bush gets a 92% loyalty standing among House Republicans who voted.

Republican voters are the backbone of America – they have more kids than Dems (the Roe effect), they give more to charity (money and labor), they run its economy, and they’re more likely to vote. From personal experience, they also provide the bulk of its military, and they’re more patriotic.

None of which is news in America – that’s why Congressional Dems are trying to hide their assaults on the president and military by using slow bleed tactics rather than outright opposition.

But the Mullahs get their news from the US MSM, and think a powerless president will be replaced by an appeaser within 2 years.

Their ignorance will be the death of them.

Brit Slaves

The UK is not a Fear State, but Brits act as if it is, so there’s trouble ahead for its ruling elite.

Blair’s government wants to charge drivers during peak times, but a poll today shows strong majorities think the scheme won’t cut congestion or pollution, won’t increase use of trains and buses, and that the government will just pocket the cash.

But fully 67% think the scheme will be introduced whether voters like it or not!

This fatalism characterizes the bulk of the population in Fear States. These folks try to live their lives neither supporting nor opposing the ruling elite, like the Brit 67%. But there’s always another group that opposes the regime, and this gets bigger (through recruits from the apathetic middle) as the regime weakens.

Fear States aren’t stable, since they create their own opposition and implode after triggering events – for example the Boston Tea Porty or the fall of the Berlin Wall.

There’s no doubt that the Brit socialist government is weakening, so Brits just have to wait for – or create – the trigger.

Mob Rule, 2007 Style

The “serious” blogosphere has become infested by lefty kids, and to survive, it needs adult supervision.

The theoretically attractive Digg mechanism has been subverted:

The idea behind an ostensibly non-partisan site like Digg.com is that people submit links to interesting things, and other people rate the links, so that interesting stuff gets more votes and rises to the top.

But at Digg, this utopian web fantasy has turned into rule by kids.

Case in point, our post today about the ACLU’s newest attempt to get Islamist spokesman Tariq Ramadan into the US: Digg – ACLU: US Can’t Bar Terrorism Supporters.

As soon as this post was “made popular” (received enough votes to get listed on the front page), leftist Digg readers swarmed all over it, clicking the “bury” button like busy little progressive beavers. They also voted against almost every supporting comment, so that they disappeared from the list.

A review of the comments reveals the censors are lefty kids, perhaps illustrating the maxim that anyone who isn’t a socialist in their college days has no heart. But the effect is that using Digg is the equivalent to trying to conduct a serious political debate while surrounded by self-obsessed teenagers.

YouTube has been similarly subverted (the lefty Google management doesn’t help either). It’s taken down political comment that’s normal in the MSM, for example here and here, while promoting fascist propaganda, for example here.

So the blogosphere suffers from its strengths – it’s free (so you can’t keep kids out with subscription fees), and its open to every idiot with access to a PC.

There is an answer – alternatives to YouTube, Digg etc with adult supervision. That doesn’t come free, but without it, political discourse is ruled by the uneducated mob.

Observations Of A Long Distance Runner

Today’s half marathon provided its usual mix of discomfort, pleasure, and sociological insight.

The  discomfort goes with the territory of course. The pleasure is the splendid springtime scenery, the competitive burn from overtaking oldsters, cripples etc, but mainly sinking a large beer after finishing.

Acute sociological observation of fellow runners revealed that a) Germans are very polite but a bit rigid, so get upset when everything doesn’t go exactly to plan, b) Brits are stoical, matey and make self-deprecating jokes all the time, c) Dutch don’t like being mistaken for Germans.

But the main observation was the tremendoes social spirit in this little place in the Southern Med. Thousands of volunteers – adults and kids – gave up half their Sundays to manage the traffic, marshal the runners,  hand out sponges and water, tend to the inevitable causalties, and keep the course safe and tidy. And thousands more tolerated traffic delays caused by closed roads.

A splendid show.

Why They Won’t Fight

The hard-pressed Brits are filling the gaps left by their European “allies” in  NATO force in Afghanistan – here’s an interesting theory that explains European weaseling.

The story:

An extra battle group of up to 1,500 British troops is to be sent to Afghanistan to take on the Taleban over the next few months, the Government will announce on Monday. The extensive reinforcement, bringing the number of British troops in Afghanistan to about 7,000, has been agreed with NATO after alliance partners failed to offer more infantry units to fight in the south.

The Brits are stepping in because only they, the US, Canadians, and Poles are fighting – the other NATO nations provide token forces, which they insist mustn’t fight.

So what happened to NATO? Conventional wisdom is it’s a victim of national selfishness, but that doesn’t explain why the weasels want to send even token forces – why not just stay home?

Here’s a possible explanation from the military historian John Keegan analyzing European anti-Americanism in his book The Iraq War (my ellipsis and emphasis):

The (public) mood (in France Germany and parts of the UK)…was a distaste for and hostility towards military action for state purposes. The mood was not one of pacifism but of a changed outlook on the world that might be defined, in a term chosen by Professor Kenneth Minogue, as Olympianism.

Olympianism…seeks to influence and ultimately control the behavior of states not by the traditional means of resorting to force as a last resort but by supplanting force by rational procedures, exercised through a supranational bureaucracy and supranational legal systems and institutions…

…the European Union…a truly Olympian body…. seeks to supersede the governments of its constituent member states but to do so while lacking any ultimate means to enforce its decisions. Treaties, laws and regulations – millions of regulations – are the media of its power.

To many Europeans the (EU) provides an example and a vision of how the whole of the world might one day be governed.

Game theorists will recognize this as a classic Dove strategy, and predict Europeans will be successfully colonized by groups following the Bully strategy (Islam) and the Hawk strategy (Russia).

European pols aren’t idiots, and they can see this too. So by sending token forces to Afghanistan, they hope to leave the door open to rejoining the alliance when they need it. Meanwhile by leaving us to fight they keep their Dove populations happy.

The risk is that if Europeans do ask the US to rescue them again, it probably won’t.

So it goes.

Taking Back The Media

A Brit entrepreneur creates compelling news feeds from outside the MSM, marking a dramatic change – for the good – in our news sources.

The YouTube video The World Without America has been picked up across the blogosphere – starting yesterday on Flopping Aces then appearing today on LGF:

At the time of writing, this has had 140,000 views. I’d cavil that the message misses other important American contributions – its unlikely that there would ever be color TV in a UK that struggle post WW2 without Marshall Aid and never got the transistor from Bell Labs. But it’s a splendid counter to the BBC distortions many Brits take as gospel.

The outfit that produced it is a very Brit innovation. 18 Doughty Street combines a conservative think tank with a well written on-line daily (now added to the DU blogroll) and produces its own videos:

18 Doughty Street is a five storey terraced house in Bloomsbury…

The state-of-the art television studio, which houses seven cameras, is in a self-contained, secure suite that houses two sets – one that is primarily used for Up Front and the main set that is used for the bulk of our programming.

The ground floor also houses two offices, comprising ten work stations. This is the editorial and creative hub of 18 Doughty Street. It is in this room that editorial decisions are made, guests are booked, articles written and our campaign agenda refined.

The chairman (and presumably prime source of funding) is Stephan Shakespeare, who founded YouGov, a Brit company that pioneered on-line opinion polling.

18 Doughty Street has similar creativity and smarts to Vigil, the private Brit organization that works to disrupt and expose terrorist activity. With people and institutions such as these, it’s very likely the UK will remain the freest, least corrupt large economy in the world.

A Great Idea

There’s a story Blair’s government wants to host part of the National Missile Defense system. That’s good news for Brits who hate being nuked, and those of the opposite persuasion can always move to France!

The Brit Daily Telegraph (my sequencing):

Britain is in negotiations with the US over the possibility of siting part of its controversial “son of Star Wars” missile defence system on UK soil, the Government confirmed today.

It suggested that a new missile silo could be sited at an existing US military base in the UK, but not at RAF Fylingdales in Yorkshire, which already houses early-warning radar equipment used in the system.

Talks are under way about the possibility of constructing a silo for 10 further interceptors in Europe to provide defence against any long-range missile fired from the Middle East…

One wonders who would possibly consider as “controversial” a defensive system that stops Brits being fried by the Mullahs & NoKos, but then:

The US, which already has silos in Alaska and California, claims it could provide protection from “rogue states” such as Iran and North Korea, but Russia says it will trigger a new arms race…

All is now clear – the Telegraph has lots of readers in the Kremlin.