Market signals

At the hospital shop, a woman puts a £1.15 bottle of mineral water on the counter. The till operator says, "If you buy a Telegraph, the water's free."
"How much is the Telegraph?"
"90p."
"Okay." She rings it up. "Do you want the paper?"
"No."
She folds it and puts it to one side.

Everybody happy.

A gross miscarriage of justice?

The proposed release, on medical and compassionate grounds, of the supposed Lockerbie bomber Abdelbaset Ali Mohmed Al-Megrahi, is controversial and currently leads the TV news agenda here.

It is well known that GP Jim Swire, who lost his daughter in the atrocity, attended the trial in the Netherlands and became convinced that Al-Megrahi was innocent of the charge laid against him.

It is also most interesting to read a blog set up two years ago by Robert Black QC FRSE, Professor Emeritus of Scots Law in the University of Edinburgh. His blog supports Swire's contention and discusses the way in which the legal case against Al-Megrahi was conducted. The very first post contains this paragraph:

It is my firm view that the crucial incriminating findings made by the judges were unwarranted by the evidence led in court and were in many cases entirely contrary to the weight of that evidence. I am convinced that no Scottish jury, following the instructions traditionally given by judges regarding the assessment of evidence and the meaning and application of the concept of reasonable doubt, would or could have convicted Megrahi. So how did it come about that the three distinguished and experienced judges who concurred in the verdict felt able to convict him?

Black summarises and comments critically on numerous points of evidence and the court's findings in relation to each. He posts again today and says:

The families of Pan Am 103, as victims, deserve justice; they deserve to know the truth. My own dark thought is that any decision made by Mr MacAskill will not really be based on compassion but on political expediency. There seems to be a desire to get Mr Megrahi out of the country and to have the appeal halted at all costs. Perhaps the Crown Office and governments fear what might be revealed as the appeal continues.

Black's blog stat counter shows that he has had only some 33,000 visits since October 2007. Perhaps, reader, you will look at what he has to say and encourage others to do so.

Taking a break from blogging - back soon

Liberty: a debating point

We've been arguing liberty vs addiction recently, and my own latest comment is:

Libertarian laissez-faire needs to mean more than simply standing aside and watching the rich and powerful cock it up for everyone. Paradoxically, libertarianism implies some kind of rule-setting and limitation of power.

Does that seem reasonable?

Back where we started

As concern grows for the future of the dollar, we should reinterpret stock movements to take account of currency exchange fluctuations. The above chart shows the Dow since the start of the year (red line) and adjusted for relative value of the US dollar against the Euro (green line).

If you have any suggestions as to what other currency to use instead, I'd be glad to read them. I fear that future weakening of the British pound and the US dollar may well undermine apparent future recoveries on their stock exchanges.

Why are you doing so well, dummkopf?

The Economist has its needle so stuck in liberal economics that its leader writer almost audibly busts a gut trying to find something wrong with Germany. As far as I can see, the daft Krauts are to be roundly condemned for...

1. Basing their economy on manufacturing
2. Running a trade surplus
3. Saving money instead of spending it on more imports
4. Not paying others to provide services they can perform for themselves
5. Not lending money to encourage more new businesses to start up (despite the fact that, as I learned years ago, 80% of new enterprises fail within two years)
6. Allowing women to stay at home
7. Saving jobs in order to preserve the skill base

We should all be so stupid.

A couple of days ago, I tried reading The Guardian newspaper again, and although there were one or two peanuts to pick out of the ordure, mostly it was, as I said to my wife, "Facebook for tw*ts". The writers even include their pictures in their by-lines so you can see they're still congratulating themselves on how well they used to do in the sixth form debating society.

But I think The Economist may have beaten them by a short head this week.

Addictive behaviour is the West's major challenge

"I finally decided to give up", say some. Yet I made that decision about smoking many times, before the last time (1977) that worked. I haven't seen an account of how to make a decision that sticks. Otherwise most of us would be slim, fit etc.

Gerald Durrell, in "My Family and Other Animals", tells how as a child he let his sister take care of some orphaned baby hedgehogs while he was away. He told her to be strict with the milk, not to overfeed. When he came back, he found that she'd fed on demand and they'd all died, because they couldn't stop demanding.

We live in a society that has plentiful cheap food, readily available and aggressively marketed alcohol, easily obtainable tobacco, easily found illegal drugs (and glamourised a thousand times by the media), computer games everywhere. It's surprising that anything gets done.

Some argue for decriminalisation of "harmless" drugs like cannabis, contrasting it with the undoubted dangers of alcohol. I agree with them in a way they won't like: alcohol is far too easy to get hold of.

Libertarians overestimate the amount of control we have over our behaviour, I think. Sartre argued stubbornly against the theory of the unconscious, because it undermined his philosophy of existentialism. I incline to the Buddhist analysis, that we continually form strong attachments and only the most determined can break the chains. Few manage it on their own. Some would say only 5% per year break free of alcohol, and perhaps a far smaller percentage stay off it permanently.

In our debates on liberty, should there be some discussion about restrictions that make us more free?

Forget the teepee

Green, not hippie, is Tim Smit's view (htp: Brian Gongol)

Perhaps more practical is the Transition Towns initiative, which has already recruited Totnes and Monmouth, for example.

And an even wider perspective is offered by Charles Hugh Smith's thoughtful "Of Two Minds" blog, which is founded on the principle that individual survival is necessarily a collective issue. He believes in this so firmly that he is making his book* available for download free of charge. * "Survival+: Structuring Prosperity for Yourself and the Nation"

Social implications of advancing technology

... the economic problems of the future will not be about growth but about something more nettlesome: the ineluctable increase in the number of people with no marketable skills, and technology's role not as the antidote to social conflict, but as its instigator.

The battle will be over how to get the economy's winners to pay for an increasingly costly poor. ... In a future with higher taxes, the divide between rich and poor would be the central economic challenge.

- Economist's View

We're in for a big theoretical debate with highly practical consequences. Liberty, individualism, redistribution of wealth, where the wealth comes from in the first place, what is the Good Life... There must be somewhere between Goldman Sachs and Karl Marx. I don't like the two-party State (cosy-cosy) and I don't like bipolar philosophy.

Interpreting US LTV problems

"Almost one-third of all U.S. households have no mortgage. If you adjust for that, the 70-80 percent debt-to-equity ratio suddenly becomes a major challenge because it means that the two-thirds who do have a mortgage already face a debt-to-equity ratio in excess of 100%. Even worse, once the mean reversion has run its course, two-thirds of US households will be facing a debt-to-equity ratio of 120-125% on average. U.S. CONSUMERS ARE EFFECTIVELY BROKE."

New Deal (htp: Credit Writedowns)

Has he got this right?

And how about us in Britain? Can anyone make sense of it for me?

Bubble 3

It's getting to the point where things go worryingly quiet. First we had a speculative and debt-fuelled stock market bubble; then ditto a housing bubble; and now that the US/UK governments have swallowed the grenades of debt instead of throwing them over the firing-step, a government finance bubble.

I started this blog two years ago, because I thought precious few people sniffed what was in the wind - though I've since discovered that there are quite a few, mostly in the US, who did. I don't know why the UK is so poor at this, unless it's to do with not being used to retaining much of our income. Or a hangover from aristo-landlord days, of pretending to be uninterested in money but always expecting it to be there when needed.

But where can I go from here? There's not much point in continuing to cry iceberg when the ship's side is ripped open. Both Karl Denninger and James Kunstler are saying today that the disaster is far from over, the difference between the two being that Denninger still believes in fixing it with due legal process and decisive action, whereas Kunstler has no such hope and almost looks forward to the final scene because it will usher in a postmodern bucolic age and restore human values. (Kunstler's latest echoes what I've said recently, about drawing some cash for just in case.)

I feel like the Chinese philosopher who dreamt he was a butterfly and when he woke, was not sure whether he wasn't a butterfly dreaming he was a Chinese philospher. The sun shines (beautifully today), I have my teaching to prepare for September, I am proceeding with my plan to revive my IFA business. And yet these projects seem insubstantial, a soapskin full of emptiness.

For now, I have to go on with the assumption that Denninger is right - that when it gets bad enough, tough action will be taken and we'll pull through. That's the horse I'm backing. For I don't believe the proto-Marxist fantasy that a better society will rise out of a collapse, especially not on an overcrowded island like the one where I live.

Off on my hols again next week; and when I get back, time to tackle real life.

Swirly Marmite

According to this and this, the "dark matter" (that nobody can observe directly) influences the distribution, spin and orientation of galaxies. As Haldane said, "The Universe is not only queerer than we suppose, but queerer than we can suppose."

Bias

Thought-provoking article in The Guardian today, about how even medical research can end up with an unreliable consensus skewed by influential reviews:

A small number of review papers funnelled large amounts of traffic through the network. These acted like a lens, collecting and focusing citations on the papers supporting the hypothesis.

Worse, science can be "spun":

One paper reported no beta amyloid in three of five patients with IBM, and its presence in only a "few fibres" in the remaining two patients; but three subsequent papers cited this data, saying that it "confirmed" the hypothesis.

This is an exaggeration at best, but the power of the social network theory approach is to show what happened next: over the following 10 years these three supportive citations were the root of 7,848 supportive citation paths, producing chains of false claim in the network, amplifying the distortion.

This leads one on to consider the implications of social network theory. I suppose it's a talent for this that helped Mao and Stalin rise, but also it may explain how people in other fields (e.g. finance and banking, the media) can be both successful and dangerously dumb. (Remember Mao's bright idea of 1958, culling sparrows because they ate crops? The resulting explosion in the crop-gobbling insect population forced him to ask Russia for thousands of birds to restock).

And have you watched the celeb version of "Who wants to be a millionaire?" and been struck by the ignorance of some of them? Yet they know enough (of what they need to know) to make a sight more than most of us. The technique seems to be, get the job first, then learn how to do it from those around you. Duffers try to learn first, then apply for the post, by which time it's gone. Look at chancer Blair as against plod-towards-it Brown. (Some say that Blair has never read a book; but then, he doesn't need to. As Disraeli said, "When I want to read a book, I write one.")

Connected to social network theory is Cass Sunstein's notion of "group polarisation", where like-minded people get together, not only reinforcing their views but making them more extreme. I suppose this has implications not just for political caucuses and media advisers, but for how we choose our newspapers.

And what blogs we read.

Happy or clever

"If you're so clever, why aren't you happy?" a friend's mother would say to him.

I'd turn that around. I think that for some, being unhappy is what stimulates the mind. That doesn't mean that I believe it's a good thing; it's just that your brain accelerates, looking for a way to survive. Having taught Looked After Children for a couple of years, I'd say that typically, although they were academic under-achievers, they were unusually sharp for their age in other ways. Maybe that's also why girls from broken homes become sexualised earlier.

But the one thing that all this cleverness doesn't address is the root of the cleverness itself. It may seem an impertinence to judge people one hasn't met - though that is the bread and butter of the modern media - but would you regard, say, Stephen Fry or Dawn French as happy, well-balanced people?

A clever person is more likely to out-argue you than to put right anything about themselves. I've read that psychoanalysts find highly intelligent patients the hardest to cure; and that successful entertainers avoid seeking a solution for their neuroses, because it might turn off the tap of their talent.

I hope for a world that is fit, not for heroes nor for geniuses, but for the dully contented.

Our Achilles heel?

The Contrarian Investor suggests that the next market destabilizing factor is the need for minor European nations to refinance.

Nail on head

The cure will be to increase the median wage, and to stop the transfer of the national income to fewer and fewer hands. For that is how the system is set up today. It is not the result of 'free markets' but a sustained transfer of wealth through regulatory and tax policies, and a pernicious corruption of the nation most significantly starting in 1980, although a case has been made for 1913.

- Jesse

Turkeys Reunited

Goldman Sachs are on the brink of a massive new consultancy contract, it is rumoured. An unnamed source within the organisation hints that ITV may be asked to take over Lloyds Bank and Northern Rock.

"ITV's £105 million operating loss is peanuts," said the trader. "We at GS paid out £1 billion more in bonuses than we got in bailout money last year. The guys at ITV don't think big enough. If they don't wise up fast, they could be in danger of making a profit."

This alleged development lends credence to the long-standing speculation that the American and British governments are secretly planning the creation of a "Super-Turkey", merging all remaining manufacturing, banking and finance into a giant loss-making enterprise that will employ increasing numbers of the population until everybody starves.

The power of ignorance

If we were as ignorant of what goes in political circles, as country folk were in the Middle Ages, how could we tell which party was in power? Unless we had been pressed into military service, wouldn't we pretty much go on as usual from day to day? The papers rage about tax but most people haven't a clue how much they pay in income tax and NIC on their salary slips. Is it OK, rational, to be politically apathetic? Isn't personal action to improve one's life 100 times more important than who you vote for every 5 years?

1984

It hasn't happened the way Orwell said it would, they keep saying. Yet:

The Children’s Secretary set out £400million plans to put 20,000 problem families under 24-hour CCTV supervision in their own homes.

They will be monitored to ensure that children attend school, go to bed on time and eat proper meals.

(htp: Mark Steyn)

Soon, I shall wake up and discover it was all a dream.

What's happening to houses?

Mish gives us a few interesting graphs on the US housing market and asks whether it's hit bottom yet. I did leave a comment but it disappeared, so here's the gist:

It looks as if most of the air has come out of the balloon - in the US. Houses doubled in 5 years, and in some cities have now halved again.

As the tide recedes, it uncovers evidence that the market is segmented - look for example at New York compared to the others. The "best" areas are holding up better, and I'll bet the best houses within those areas ditto.

I think this segmentation will continue to be important, because of growing inequalities of wealth. This has been going on over there since 1980, but also historically (as Fischer in "The Great Wave" points out) the rich get comparatively richer in times of crisis.

I also think that the not-the-best-but-better-than-average housing sector will enjoy support for some time, because I suspect that there are not a few people downshifting from the most sought-after areas. These will be aware that they could have got more if they'd sold in 2007 (when I was mooting a caravan to my dearest), but have still done okay and so will not haggle too hard to get that nice little place in the country, especially since many sellers are hanging on stubbornly, waiting for an upturn.

Here in the UK, we have much less land available for residential development, and nothing like the oversupply of housing that exists in the US, so quite possibly our house price bottom will not be so deep. Of course, if our government hadn't encouraged the (legal and illegal) import of masses of poor people who also need a roof over their heads, the picture might have been somewhat different.

In both countries, we still face long-term economic decline; lower real wages as we continue to lose our manufacturing sector, higher energy and food prices and so on. So I expect house prices to continue their decline in real terms over the next generation.

On average, that is. I think we can take the Blair's real estate coup in Connaught Square as not untypical of what will happen in the best end of the market. Speaking of whom, I note that Tony's practising the "sneer of cold command" these days. Pitiable, really.