Apologies

I offer my sincerest apologies for not posting as regularly lately as I have been able to previously. However, for your wait, I am releasing a paper which I have been writing for recent college courses geared towards a degree in finance.

The paper describes the seven fundamental tools that can be used to determine movement in a stock--one which makes money. I am using it as a proof of concept for a program that makes investing accessible by any investor, extremely, and very foolproof.

The paper is in Adobe's Acrobat formatter. The free Adobe Reader or compatible software is required to read the software.

Download the paper here!

Please Take My Survey

As part of a required paper I must write for my forthcoming degree in Finance, I am needing to have a survey completed.

Please take a few moments to fill out my survey.



Please take my online survey here!

Nature or Nurture?

The age-old question: What affects a person’s behavior more: Nature—a person’s genes and other physically intrinsic characteristics; or Nurture—the environment with which a person interacts? While the general population loves to put a “this or that” perspective on things of this sort, I have long believed that it is, in fact, a combination of the two. Science has now vindicated that position.

Daniel Nettle, Reader in Psychology in the Centre for Behaviour and Evolution, Newcastle University, offers some research presented in the London Times:

“Today, personality researchers almost uniformly agree that the things that make you the way you are consist of a combination of your genes, your peers and the idiosyncratic, chance experiences that befall you in childhood and adulthood. Your parents influence your relationship with them – loving or contentious, conflicted or close – but not your “personality”, that package of traits we label extroverted or shy, bitter or friendly, hostile or warm, gloomy or optimistic. Your genes, not your parents, are the reason you think that parachuting out of planes is fun, or, conversely, that you feel sick to the stomach at the mere idea of doing such a crazy thing voluntarily. You can’t do much about your personality, though you can tweak it a bit with cognitive therapy.”

The Lipstick Economy

Interesting story determining the measure of how well or how poorly the economy is doing, courtesy the reporters from the New York Times.

Not only is the lipstick theory plausible, “it’s perfectly consistent with all kinds of economic theory,” said Richard DeKaser, the chief economist with National City Corporation, a financial holding company and bank in Cleveland.

Emotions, On the Face of It

When I was in high school my biology teacher said, very early on in the class, that the human face can give away what a person is feeling--no matter how well we can control our body language, our face can show our emotional state at any one time.

Well, recent research from Canada proves my former Biology teacher correct.

From the Reuters article:

Researchers at Dalhousie University's Forensic Psychology Lab in Halifax conducted the first detailed study on the secrets revealed when people put on a false face or inhibit various emotions, and found their faces told the truth.

Maximizing Utility and the Brain: Cash or Status?

Scientific American has an article regarding a study of the brain that indicates the brain places a high value on money, but a higher value on social status. From the article:

"Our study shows that both behaviorally and in the brain, people place an importance on social status," says Caroline Zink, a postdoctoral fellow in neuroscience at the National Institute of Mental Health (NIMH) in Bethesda, Md., and co-author of one of studies. "It's hugely influential even [when we're not] in direct competition with someone else."

The Power of the Banana

Excellent article over at Salon.com regarding the power of the banana.

Economics and the Common Man

Have you ever seen those polls where John Q. Public is asked about questions of a general economic nature? How many of them have, at the very least, a basic understanding of economics?

Yeah, me too; I think such an exercise is akin to asking a medical doctor about auto repair, an auto repair technician about quantum physics, or a particle physicist about literature: It makes about as much sense as, well, insert a colorful metaphor here.

Before Warren Buffet was interviewed that one Monday morning on CNBC and said that we practically have a recession, though we may not be in one technically, many people can only say as much when they’re asked about the “R-word.” In addition, I’ve noticed that the public tends to insert more emotion into their economic analysis than such things warrant.

Let me say this first: There is room for emotion in economics. When, however, a person’s opinion regarding the nation’s current economic state is based more on emotion than well-founded rational thought. Henceforth, my point: John Q. and Jane Public don’t know enough of a darned thing about economics to offer their opinion; at least not enough for it to be meaningful. In the spirit of that I’m going to point out a couple of economic concepts that might help to alleviate the problem.

Gross Domestic Product, otherwise GDP, once taught as Gross National Product, or GNP, is the number that sums all of the products and services rendered in the United States (or any country, for that matter). Right now GDP is around $13 Trillion or so, give or take a few hundred billion dollars. GDP is calculated as a combination of many things:

GDP = consumption + gross investment + government spending + (exports − imports)

While there are several nuances associated with each variable, there are a few things to point out.

· Consumption is the largest driver of the economy; essentially that is all of the dollars that you and I spend.

· Investment is nearly as powerful as consumption

· Government spending is relatively valued at one quarter the effect of investment spending.

This illustrates exactly the reason why it would be great for government to curtail spending, lower taxes, and help the marketplace—government spending doesn’t do nearly enough for the economy, lowering taxes allows for individuals to have the option to save or consume more (marginal propensity to save or marginal propensity to consume, respectively) –driving consumption and, perhaps, helping investments.

This makes sense to me, but I consider myself a fiscal conservative.

There will be the contingent out there that says that paying taxes is good because it funds essential services that the government must supply to people, and there’s the whole debate about which rights one has in regards to healthcare and such—that is not within the scope of this article—but if government were forced to act like business in their daily management then we would be able to get a lot more value from our investment in government than not. Put another way, we allow government to spend too much and, I think everyone can agree, that we get too little from it. Wasteful government spending becomes something four times as bad when you have this understanding.

So, in an ideal world there is a happy medium between extreme government spending and extreme tax breaks for everyone. We don’t live in an ideal world, however, and economics works in cycles. The best thing to remember is the economy will go up most of the time, but will go down every now and again. Panic is not something that needs to happen when it goes down. Markets correct, stocks fluctuate, and indexes do the same. It’s nothing to worry about.

Why do I say this? I say this largely because of my believe that our most recent economic downturn in 2008 has been worse than it needed to be because people tend to overreact to what they feel are negative changing market conditions. If they understood the underlying dynamics of the market and the philosophy that “this, too, shall pass,” it wouldn’t have been as bad as it was.

My tone about “was?” There are multiple indicators that are pointing towards the worst of the current downturn being over, and us being on our way back up. The recent rallies in the stock market, the change in CPI and labor numbers all point towards an increasing economy.

So, in light of whatever the market is doing, irrationality rarely does the market good in the long run. In fact, if it did well with it then we wouldn’t have had the downturn in the market which we have had.

All That Lies Between

Once upon a time there was a man named Schrodinger and he had a cat. In his own words:

“One can even set up quite ridiculous cases. A cat is penned up in a steel chamber, along with the following device (which must be secured against direct interference by the cat): in a Geiger counter there is a tiny bit of radioactive substance, so small, that perhaps in the course of the hour one of the atoms decays, but also, with equal probability, perhaps none; if it happens, the counter tube discharges and through a relay releases a hammer which shatters a small flask of hydrocyanic acid. If one has left this entire system to itself for an hour, one would say that the cat still lives if meanwhile no atom has decayed. The psi-function of the entire system would express this by having in it the living and dead cat (pardon the expression) mixed or smeared out in equal parts.

It is typical of these cases that an indeterminacy originally restricted to the atomic domain becomes transformed into macroscopic indeterminacy, which can then be resolved by direct observation. That prevents us from so naively accepting as valid a "blurred model" for representing reality. In itself it would not embody anything unclear or contradictory. There is a difference between a shaky or out-of-focus photograph and a snapshot of clouds and fog banks.”

Meant to be a thought experiment about quantum physics: “When does a quantum system stop existing as a mixture of states and become one or the other? (More technically, when does the actual quantum state stop being a linear combination of states, each of which resemble different classical states, and instead begin to have a unique classical description?)”

A question that can be derived from this and/or the Heisenberg Uncertainty Principle is one of observation: What happens to a situation once it is observed. The short answer is that the mere act of observing something changes everything.

When I first started using computers in a serious sense, my school’s library had a 2400 baud modem which could connect to various bulletin board services, BBSs, which one could use for pen pal-style rudimentary communication. In the early 90s this is one of the things which I found myself doing. Though I did not know it, I was networking in my early teen years. I began a lengthy correspondence with a Lutheran pastor from somewhere in Michigan or Wisconsin, I believe (the actual location escapes me), through which we began discussing quantum physics. He posed the ageless rhetorical question to me: If a tree falls in a forest, does it make a sound? I always like bringing this question up as an introduction to the general strangeness of quantum physics. The answer is that if there is no one to perceive—observe—the tree, then it is not there: It does not exist. If no one is there to observe the forest, it does not exist. Therefore, if there is no one able to perceive the action of the tree falling, it does not fall because it does not exist.

It took me some time to reconcile this notion, but eventually came to terms with it. Over time I came to find the universal truth in this notion that anything and everything changes with observation. In our classical world which we can see, feel, taste, touch, and hear on a daily basis we can express the question of “have we observed that?” as a binary function—yes or no, or “1” or “0,” the fundamental essence of a “bit,” or binary digit. Does my cat exist? Yes! (“1”). Is the moon out tonight? No! (“0”). What about if you can’t answer these questions? Herein lies what makes quantum physics so creepy to many. The notion of Schrodinger’s Cat dictates that while something hasn’t been observed it can exist in a state of “superposition,” that is a position that is not necessarily natural and exists outside of a “0” or a “1,” or yes or no.

If you don’t know about something then it exists in an odd place…one that is not easily definable; as a side-note, however, this is how the concept of quantum supercomputing works, in a sense: This sort of theoretical, almost-real device stores bits of ones and zeros in superpositions instead of in absolute states. Because of this it can calculate much faster because it is not constrained by the classic laws posed by Newton in the mechanical world, and computes things much faster than Intel or AMD could muster with their fastest processors.

How can we make this apply to our everyday lives? Have you ever feared something that was “just around the corner,” or otherwise out there in a place in your world that might be slightly unknown enough to you as to cause you to feel things that might be irrational? Fear of something, someone, or some other type of emotion of an event happening which has a low probability or likelihood of actually happening once it is observed? The superposition concept that I discussed earlier wherein any number of all possible states exist, but it isn’t necessarily true or false, is where irrational thought and feeling resides—in a place that even likes to confuse the brightest minds of the 20^TH Century deriving the basis for modern science.

Don’t let your fear, depression, anxiety, or other unproductive thoughts or feelings get the best of you. In the end you will find that your emotions or irrational thoughts are skewing the actual values of the situation which you are otherwise making more out of than you should: There is no need to kill the cat unnecessarily!