THE STORY SO FAR: PART 288: SUNDAY

THERE ARE SOME VERY FINE COMPANIES IN THE U.S.—WHICH TREAT THEIR WORKFORCE WELL

BUT THE BEHAVIOR OF ALL TOO MANY TOWARDS THEIR WORKERS IS REPREHENSIBLE.

OVER THE LONGER TERM, IT WILL PROVE TO BE BAD BUSINESS

There isn’t just one form of capitalism. In fact, it comes in as many varieties as ice-cream. It all depends on the various checks and balances on the free market established in the country concerned.

Most developed countries devote considerable effort to ensuring that workers have a social safety net and an extensive array of worker rights (and still manage to thrive, let me stress).

All seem to understand that to have a good game, you need good rules. No game that is worth playing lacks good, and thoughtful, rules.

In fact, in many cases, countries that look after their workers—extremely well—are doing better than us—much better than us if you count the wellbeing of the average citizen as being important.

After all, what is the point of a country that makes a few rich and exploits the rest of its inhabitants. Traditionally, that was the structure of a classic ‘banana republic’ where a few reaped the rewards and the rest tilled the fields for a minimal wage. Retreat a century and a half, and it was the structure of a slave owning nation—this United States of America. 

It is salutary to note that after all this time, the economic status of African Americans is still so far behind the rest of the population—and though there are many exceptions, it is not good.

Will that be the fate of the Middle Class generally as they slip behind? It seems entirely possible.

Distressingly, that is the economic structure the U.S. has been evolving since the 1970s. Business has dumped any concern for anything other than maximizing shareholder value—a false god at the best of times—and the results have done quite remarkable damage to the economic wellbeing of most Americans, and to the Middle Class in particular.

A byproduct has been underinvestment in infrastructure for decades. Much of the U.S, now looks decrepit or shabby—because it is. Much of it, particularly dams and bridges, is structurally unsound. That scarcely speaks well of the richest country in the world.

What should one call that particular form of American capitalism? The name ‘Predator Capitalism’ fits well because it is a mode of behavior that preys on all for the benefit of a few, which lacks conscience, scruples and loyalty, and where greed is the only accepted value.

Notably, it bears only a passing resemblance to Free Market capitalism, because Predator Capitalists rely heavily on:

• Corrupting Congress, and government at all levels. DONE
• Fixing the legal system in their favor. DONE
• Vast government subsidies of various kinds. DONE
• Forming monopolies, or de-facto monopolies. DONE
• Speculating rather than investing. DONE
• Exporting jobs without regard for their own workers. DONE
• Passing more and more medical costs to their workers. DONE
• Removing the security of defined pensions or raiding pension funds (in some cases). DONE
• Destroying unions. NEARLY DONE
• Removing job security. DONE
• Passing the costs of training onto the government whenever possible. DONE
• Blaming government whenever possible. ONGOING
• Despite raising worker costs, squeezing worker earning power whenever or wherever possible. ONGOING
• Underinvesting in plant, equipment, infrastructure, and innovation. ONGOING
• Evading taxes in every way possible to the point where corporate taxes, when offset by government grants and other subsidies, make—at best—a marginal contribution to the nation. ONGOING
• Polluting our air, land, and oceans to the great cost of the public at large (fatal in many cases)—but at no cost to the corporations responsible. ONGOING

All in all, the above adds up to reprehensible behavior. One could call it disgusting, and not be adrift. By any standards, it is both morally wrong—and incredibly unpatriotic. It’s as if the business community had declared war on the both the people, and the values, of this Great Nation.

Well, they did just that—and they are winning.

But, just look at the state of the country. If wage slavery is the future—and God preserve us if it is—be cognizant of the consequences.

THE STORY SO FAR: PART 287: SATURDAY

I FOLLOW THE FINANCIAL WORLD TO GET MATERIAL FOR A STORY. THERE IT STOPS.

THE MARVELOUS BARRY RITHOLTZ IS THE MAN TO TALK TO ABOUT INVESTING

The following quotes from Barry Ritholtz (see photo) of THE BIG PICTURE blog but was actually written by http://25iq.wordpress.com/ I commend you to the pair of them.

This piece is not the easiest read, but the content, in my opinion, more than compensates. That said, I’m much relieved to be a writer and not involved with Wall Street—except as a fascinated and appalled observer, who would rather like to write a financial thriller once of these days. But there are a number of other major projects in line ahead.

A thoughtful observer, when contemplating both the threat and the actual damage to this country over the years, from both external and internal enemies, might reasonably conclude that terrorism is as nothing compared to the mayhem inflicted by our very own financial community—both recently by way of The Great Recession—and, previously, again and again over the decades. Though how quickly we forget. In every case, these financial geniuses have had to be bailed out by the American taxpayer.

Maybe we should think of them as financial terrorists—and act accordingly. I can think of no finer use for Guantanamo.

 

A Dozen Things I have Learned from Barry Ritholtz about Investing

As part of my “A Dozen Things I’ve Learned” series of blog posts I thought I would take on a list put together by Barry Ritholtz . My self-assigned task is to add my support to what Barry wrotehttp://www.ritholtz.com/blog/2012/10/ritholtzs-rules-of-investing/, while staying with my usual 999 word limit for any given blog post.  The task I assigned to myself is to elaborate on what he has written (rather than just repeating what Barry wrote) since the best support for the investing maxims themselves comes from Barry himself. Given Barry’s towering intellect, this is a scary exercise.

1.   “Cut your losers short and let your winners run.”  Loss aversion is highly dysfunctional for investors since it causes people to hold on to “losers” for too long to avoid the pain of a loss. The first half of Barry’s first maxim pushes against that aspect of loss aversion. Cutting losses short pushed against a tendency to hold tightly to losers hoping that they recover before then need to acknowledge the loss. The second half of Barry’s first maxim helps lower transactions costs, fees and taxes, but is also about the value of opportunity cost analysis.  Charlie Munger once put it this way:  “There is this company in an emerging market that was presented to Warren. His response was, ‘I don’t feel more comfortable buying that than I do of adding to Wells Fargo.’ He was using that as his opportunity cost. No one can tell me why I shouldn’t buy more Wells Fargo.”

2.  “Avoid predictions and forecasts.” The less complex the system you are trying to understand, the greater the likelihood you can make a bet which is both non-consensus and correct. Making a bet which follows the consensus and it correct will only deliver beta. The most complex system of all is the macro economy since it is composed of a nest of complex adaptive systems rife with both uncertainty (probabilities unknown) and ignorance (probabilities not computable). On a relative basis, the most tractable system on which one can make an investment and try to generate alpha is an individual company. Very few people can make non- consensus  bets which are also correct at a company level, but its is at least possibl;e if you are smart and work hard. 90%+ of people are better off buying a low fee index even when it comes to making bets on individual companies.  The greatest for investors often comes from the fact that 70% of people think they fall withion the 10% who can generate alpha. When it comes to self-appraisals humans are too often vastly over generous.

3.  “Understand crowd behavior.”  Humans often herd. People like what others like (path dependence) and especially in the presence of uncertainty or a requirement that they actually do some work, will follow other people.  Most notably when diversity of opinion breaks down, crowds are often *not* wise.  Buying when others are fearful and selling when others are greedy. is wise.

4.  “Think like a contrarian (occasionally).” As I noted in my post about Howard Marks, http://25iq.com/2013/07/30/a-dozen-things-ive-learned-about-investing-from-howard-marks/   you must both adopt a view that is contrarian *and* be right to outperform the market. Being a contrarian for its own sake is a ticket to losses since the crowd is often right.

5 .  “Asset allocation is crucial.” The amount you allocate to each investing category is a more important decision than the individual assets you pick within that category.  My thoughts on asset allocation for muppets are here: http://25iq.com/2013/05/13/asset-allocation-for-muppets-with-a-401k/  Giving advice to “know something investors” is something I have not yet tackled since they are know-something investors already (seems like bringing coals to Newcastle).

6.   “Decide if you are an active or passive investor.” My thoughts on active vs. passive are here: http://25iq.com/2013/01/16/charlie-munger-on-investment-concentration-versus-diversification/  As Dirty Harry said to the cornered criminal in the movie Magnum Force: ”A man’s got to know his limitations.”  “I feel lucky” is not the way a genuine investor conducts his or her affairs.

7.   “Understand your own psychological make up.” As Feynman famously said, the easiest person to fool is yourself.  Genuine self-knowledge is hard-won knowledge since no one has perspective on yourself by definition.   On this topic it is wise to read Charlie Munger  http://25iq.com/charlie-munger-book-to-date-chapters-1-5/

8.   “Admit when you are wrong.” Heuristics like “public commitment consistency” bias cause us to hold on to positions long after a reasonable analysis by a neutral observer  would have concluded that we were wrong.  For example, once you say publicly “X is going up”  it gives your brain a shot ofstupid juice when it comes to concluding that you might be wrong.

9.    “Understand the cycles of the financial world.”  Barry seems in agreement with Howard Marks http://25iq.com/2013/07/30/a-dozen-things-ive-learned-about-investing-from-howard-marks/    on this point.  Nothing good or bad goes on forever.  As Billy Preston sings in the well-known song things “go round in circles.”   Mr. Market is bipolar and for that reason market swings will always happen.  By focusing on the intrinsic value of individual investments And tuning out the talking heads blathering about their macroeconomic  forecasts, market swings can become your friend.   The irony is: the more you focus on what is micro in nature, the more you will benefit from macro trends.

10.  “Be intellectually curious.”  It is in “the micro and the obscure” where one can learn things which  others do not know.  To make a bet that is contrary to the consensus of the crowd you must possess  knowledge that the consensus has not adopted. You will mostly likely find that non-consensus knowledge on the frontiers of your own knowledge.   Really great investors read constantly and actively seek out alternative viewpoints.  Shutting out views you disagree with is a step toward an echo chamber.

11.   “Reduce investing friction.” John Bogle formed Vanguard on the basis of the “cost matters hypothesis” not the efficient market hypothesis. On that you might want to read  http://www.vanguard.com/bogle_site/sp2004AIMRefficientMrkts.html. Paying high fees, costs and commissions is one of the simplest investing errors to correct.

12.  “There is no free lunch.”  There is no substitute for hard work and rational decision making.

THE STORY SO FAR: PART 286: FRIDAY

I’M MORE THAN HAPPY TO TALK ON THE PHONE, BUT HATE MAKING PHONE CALLS. THERE IS A REASON FOR THE LATTER

If I’m writing and somebody calls me, I often sound a little vague (even dazed)—and will forget to say something or other which would have been entirely germane to the conversation—and possibly even important.

The reason is fairly obvious. When I write, I switch into ‘the zone’ almost instantly, and from then on I’m in another world where the transmuting of thought into writing is all encompassing. Nothing else is relevant.

Well, such focus is both necessary, extraordinarily helpful, and deeply satisfying—and arguably rivals good sex (though I wouldn’t have thought that when I was younger) but it is not a state I leave with ease, and it can take me some minutes to adjust to the real world. In fact, if the phone goes, or someone knocks on the door, I normally feel shock initially; so if I sometimes seem confused when I answer the phone, that is the reason.

In fact, I rather like the phone, and regard chatting to people I hold in high regard as one of the great pleasures of life. So, if that is the case, why am I reluctant to make phone calls?

Well, this is where we bump into my particular form of dyslexia. Quite simply, I find it very hard to transfer a number, even if written clearly in front of me, to the point of actually dialing. Either I forget the number completely, or else I will transpose the digits. Beyond that, I can’t remember telephone numbers at all—not even my own. It is a deficiency which has inconvenienced me for my entire life. I also cannot remember house numbers, vehicle tags, credit-card numbers, numeric codes—or any of the miserable numeric inventions that so infiltrate our world today.

But, we all have our difficulties, and mine is slight in the scheme of things.

Now, at this point you will probably be thinking: Why doesn’t the idiot simply enter all his important numbers into his cell phone—and then it will dial them automatically at the press of a button?

Because, my good friend, I find entering numbers into my cell even more traumatic than dialing. But, I have battled away and have managed to enter some of the essential ones—and hope eventually to reach Nirvana.

What I would really like to do is dial directly from my computer through my wonderful Polycom loudspeaker phone—but I have never been able to find a computer guru to make that happen yet.

When I was growing up in chilly Ireland, back in the days when phones looked like the above illustration, and you had to go through an operator, the phone was always kept in the hall. This had the advantage of ensuring that calls were kept short, because in those days before central heating, the hall was normally freezing. Extensions were unheard of.

I used to ask my grandmother about ‘the olden days’ when she was growing up. Now I have ‘olden days’ of my own—and I value them. Mind you, I’m damn glad we now have central heating.

THE STORY SO FAR: PART 285: THURSDAY

THERE IS A TIME TO WORK—BUT WHILE FLYING ISN’T ONE OF THEM

I have never been a fan of working while flying, but prefer to read or sleep. Though I love movies, I don’t like watching them while in the air. I have never really analyzed the reasons, but the Business Week chart I have included below does offer some credible explanations.

What is clear is that airline flying, whatever about its associated hassles, is unhealthy on top of everything else. That’s a thought we should probably ponder more than we do.

THE STORY SO FAR: PART 284: WEDNESDAY

OUTSTANDING WRITING ADVICE IS OUT THERE—IF YOU ARE PREPARED TO LOOK

This blog covers a fairly eclectic range of subjects—everything from creativity to some of the more interesting developments in aviation—but I try not to wander too far away from writing (a broad enough topic in itself).

In particular, the budding writer is never far from my mind, so—every so often—I try and insert pieces which may be of some assistance to him or her. In that spirit, here is some advice from Elmore Leonard. I have trimmed the piece for length, so regard it as no more than a pointer. The full article is well worth reading—and is thoroughly entertaining. You’ll find it in that outstanding newspaper, the New York Times

ELMORE LEONARD
Published: July 16, 2001

1. Never open a book with weather.

2. Avoid prologues.

3. Never use a verb other than ''said'' to carry dialogue.

4. Never use an adverb to modify the verb ''said'' . . .

5. Keep your exclamation points under control.

6. Never use the words ''suddenly'' or ''all hell broke loose.''

7. Use regional dialect, patois, sparingly.

8. Avoid detailed descriptions of characters.

9. Don't go into great detail describing places and things.

10. Try to leave out the part that readers tend to skip.

Do I agree with everything? No, I don’t, but it is hard to argue with Elmore Leonard’s extraordinary success in the marketplace.

THE STORY SO FAR: PART 283: TUESDAY

KEEP A WEATHER EYE ON YOUR SUBCONSCIOUS MIND.

IT HAS VAST APPLICATION—BUT LACKS BOTH MORALS AND JUDGEMENT

(I have some affection for it, nonetheless—it helps my writing a great deal—and I can’t help feeling it has a sense of humor)

I went to an excellent boarding school in the UK (an Anglo-Irish custom), and was taught a great many things—some useful, and some a complete waste of time—but I don’t  recall ever being taught anything about how the mind works.

We were just instructed to use ‘it’ as if we were born with a Mind Manual in our tiny hands. Sadly, as best I can confirm—I was very small at the time—we were not.

I confess I have taken my mind—strengths and insights, flaws and all—for granted for most of my life. More recently, I have become intensely curious as to how the whole thing works—and whether you can improve it in various ways.

I have become convinced you can, if only because of my own efforts—long and difficult, though they were—to overcome my dyslexia so I could write. My determination to re-program my brain—for that, essentially was what I was doing—was, eventually, successful.

But I still feel I could do vastly more if I understood more. If that is the case—as I believe it is—I have to wonder why we aren’t all taught vastly more about the mind from a very young age. 

I found the following few non-sequential extracts on a blog written by S. Ali Myers

So why haven’t you heard more about the subconscious mind?  To this point, scientists and neuro-fanatics have been unable to explain what the approximately 90% of your brain that you don’t use does?   The subconscious mind exists within that 90% majority. 

Your subconscious mind is programmed by you, your family and friends, society and everything else outside of you.  Your subconscious mind does not discern between what is true or false.  Your conscious, or rational and reasoning mind does that.  The subconscious accepts everything.  That’s why it’s critical that you filter what is embedded in it.

We use the automatic functions of our subconscious mind on a daily basis.  Any activity that you have done repeatedly is planted prominently in your subconscious mind.  It is not by chance that repetition is one of the best ways to program the subconscious mind.  Ever wondered why you see the same commercials over and over?

Techniques for programming your subconscious mind:

1. Positive Affirmations & Mantras – An affirmation is any statement that you affirm, or speak.  A mantra is an affirmation or phrase that is repeated over and over.  When you repeat a positive affirmation, it is eaten up by your subconscious mind making a lasting impression.  Some examples of positive affirmations that you can repeat are:

• “I am filled with peace, harmony and joy.”
• “My positive thoughts produce positive things.”
• “I love myself and everything that is around me.”

You can say affirmations for a set amount of time or quantity.  Also, try repeating them in your head throughout the day.  The more you say your positive affirmations, the better your results will be.  Try the provided affirmations or make up your own.

2. Create positive habits and routines

Eventually, any activity or practice you partake in will become what we call, second nature.  Remember, anything you try that may be difficult or awkward initially, will become easier with time and practice.

Written by S. Ali Myers

THE STORY SO FAR: PART 282: MONDAY

JUST BECAUSE I’M FOCUSED ON ONE PROJECT DOESN’T STOP MY SUBCONSCIOUS FROM LOBBING OTHER IDEAS AT ME

I’m very proud of learning to focus—God knows it took me long enough—but though I write about ‘total focus’ and ‘being in the zone,’ and I am describing the situation accurately, I will admit that when I am not actually writing—say doing something in the kitchen—my mind may well drift to other projects, or even away from writing

(I can’t believe I revealed that—I rather like the image of being an obsessive writer).

Actually, I think about lots of different things if only because I have a wide variety of interests, and, of course, I think about people—probably a great deal more than they realize—but my fundamental point is that even when I’m totally focused on one writing project, my subconscious (which, as you know, I don’t control) seems to enjoy working on another. That would be bad enough, but sometimes it likes working several books ahead.

Currently, it seems interested in my long planned military novel which isn’t scheduled for quite some time. To that end, I’m exploring—when I’m away from writing—concepts like Maneuver Warfare, and the total integration of ground and air. Given how high-tech war has become, some of the details are rather hard to master.

Now I see why people write historical novels.