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The History of Light

This is somewhat apt given that I spent last night in the dark due to a power failure.

Click the player below to be taken to the NPR site and the podcast.

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Sultans Of Super Set On ‘Developing’ Your Wealth

I wish I had written this….

Our latter-day sultans of superannuation have breezily lavished a $20 million junket on their sales force and themselves to boot. Before this year’s Byzantium bash, the AMP held its ”conference” in Dublin, South Africa, Amsterdam, Colorado and Buenos Aires.

If the behemoths of superannuation shell out two bob supporting a charity you will see it heralded in press releases. There was no media for this shameful junket though. Nor was AMP forthcoming with explanatory detail. ”Professional development conference”, was the manicured response this week.

Surely financial planning should be about the adviser using best endeavours to maximise the wealth of the client – allocating retirement savings to the best financial product available. If this was really about education – rather than a reward for flogging AMP product and an enticement to flog more – we solemnly promise to eat our fez.

The keynote speaker, who commands a $100,000 price tag, was one Jeremy Gutsche, a spruiker in the mould of Anthony Robbins. ”Win like you are used to it. Lose like you enjoy it”, is his sort of glib motivational fare which has naught to do with education and everything to do with churning out product.

More here – Sydney Morning Herald

Scariest Chart I have Seen For Awhile

I snipped the chart below from  How Americans Die – parts of this little booklet are not relevant locally since we dont have the same childish fascination with guns that Americans do but the chart below is probably universal to Western economies.

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What caught my eye was the expansion of the deaths related to Dementia, Alzheimer’s and senility. So were are living longer but the probability of contracting one of these awful conditions is increasing.

A Self Fulfilling Fantasy

I came across this interesting piece on the British Psychological Society website. You can read the article in full at your leisure but I wanted to look at one particular piece of the article. In short the article looks at the gamblers fallacy – that is the notion that after a series of losses that a gambler is due for a win. You will often hear this expression from double digit IQ football commentators who state that a given side having been flogged for weeks on end are due for a win. In the paper being examined two researchers set out to examine how this fallacy functions in real life not just within the somewhat sterile bounds of academia where undergraduates are given five bucks and a beer to be tortured. What they initially found was fascinating.

Although the bets were from unrelated events, from football matches to horse racing, people who had a run of wins had a higher probability of winning their next bet. For example, gamblers who had a run of three wins had a probability of 0.67 of winning their next bet, compared to a probability of 0.45 for those who hadn’t had such a winning streak. The researchers analysed streaks of up to six wins in a row and found that the probability of winning the next bet just went up and up. The effect also held for losing steaks, so that those who lost successive bets were also more likely to lose again. The effect didn’t seem to be due to skill, since a control analysis showed that the average winnings for gamblers who had long streaks of luck were the same, or perhaps even slightly lower, than for those who didn’t have long streaks. The result seems to contract the gambler’s fallacy, and even our reasonable faith that bet outcomes should be independent.

This is an interesting conundrum and the answer was found in looking at the actual bets that were placing and analysing both odds the bets were placed at and the size of the bet.

The answer to the mystery was revealed when Xu and Harvey analysed the odds of the bets placed by gamblers in the middle of a streak, and the amount they staked. Gamblers who won tended to take their next bet on a safer odds than the bet they had just won, with the reverse true for people on losing streaks. This, the researchers suggest, is because they believed in the gambler’s fallacy and so expected their luck to turn. This had the paradoxical effect of creating luck for those who were already winning – because they then made bets they were more likely to win – and rubbing in the bad luck of those who were losing – because they made bets which they were less likely to win and so perpetuated their losing streak.

What interests me about this study is that the gamblers were using a form of risk control during their streaks in effect they were trading their equity curve – a tactic too few traders engage in. They also seemed to be moving away subconsciously from high volatility markets to markets of perceived low volatility.


Motivation Monday

I might have to break out the textbooks and get my arse into gear…..

SARAH FERGUSON, PRESENTER: 93-year-old Elisabeth Kirkby has just about done it all. She was a soapy star in the risque 1970s hit TV show, Number 96. She then became a member of Parliament for the Democrats and received the Order of Australia medal. Today she’s become the country’s oldest PhD. Her thesis was a comparative study of the Great Depression and the Global Financial Crisis, both of which she lived through. Monique Schafter has her story.

GRADUATION CEREMONY SPEAKER: It’s my pleasure to introduce to you Elisabeth Kirkby, who’s Australia’s oldest university graduate, if you’ll forgive me, at the age of 93. And …

More here – From Number 96 to Australia’s oldest PhD at 93

Money Can’t Buy Trustworthiness

Try not to be that person.

To relate that to social class, consider this experiment. You’re standing on a corner in downtown San Francisco. It’s a four-way stop, meaning cars are supposed to pause before entering the intersection. As you’re sipping your latte, you look to your left before stepping off the curb. The car approaching is a shiny BMW. Do you cross? How about if it’s a Ford Fusion? The model of trust I’ve been describing suggests you might want to pause if it’s the BMW. There’s really only one way to tell, though. You’ve got to put yourself out there. And that’s just what Paul Piff and colleagues from the University of California at Berkeley did.

As cars approached this busy intersection in San Francisco, a researcher would enter the crosswalk. Unbeknownst to drivers, he also noted the make of their car and their perceived age and gender. The main datum for each car was whether the driver paused to let the researcher cross at the stop sign (as is required by the California Vehicle Code) or sped up to cut him off and thereby proceed more quickly toward the driver’s goals. Paul and colleagues divided drivers into five SES categories based on their cars—think Hyundais on one end and Ferraris on the other. The results were quite remarkable.

At the lowest end of the class gradient, every single driver stopped to let the pedestrian entering the crosswalk continue on his way. Midway up the class ladder, about 30 percent of drivers broke the law and cut off the pedestrian so that they could keep going. At the upper end of SES, almost 50 percent of drivers broke the law to put their own needs first. At the most basic level, these findings offer a provocative warning. When you’re vulnerable, upper-class individuals are more likely to disregard the trust you place in them if doing so furthers their own ends.

More here – The Atlantic

John Henry and the Making of a Red Sox Baseball Dynasty

Then, in 1975, Henry’s father died. Suddenly, at 26, he was back in Arkansas and running a 1,000-acre farm. Farmers often guard against volatile crop prices by buying futures contracts to hedge risk. Henry began purchasing soybean and corn futures and soon realized he was more interested in futures trading than farming. As Seth Mnookin recounts in Feeding the Monster, his 2006 book on the Red Sox, Henry had an enormous tolerance for risk. After amassing soybean contracts on a hunch that prices would rise, then seeing them double, he sold to attend to a sick girlfriend—he was sure prices were going to climb higher. Instead, they collapsed. “It made me realize that trading by the seat of your pants probably wasn’t the best idea,” he says.

To rectify this, Henry embarked on a manic study of commodity price patterns, disappearing into the library for days at a time. “I did research all the way back to the 12th and 13th centuries, any market I could find,” he says. With little more than a calculator and a scratch pad, he built a mathematical model to profit from futures trading. “John’s insight was that he could make more money trading these instruments on speculative terms than he could by hedging crops,” says Kenneth Webster, who later ran Henry’s investment firm.

More here – Bloomberg Business Week

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