By: ang101000
25/11/2009
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Hi Fire,
Thanks for looking at Franks lecture-video. Everything that he says about water (rain, run off etc) is absolutely correct. He knows his stuff (that is according to my partner who is an engineer/researcher/acade mic) water specialist.
I have also posted some links on an other site (not as specific as this) given that there are only a handful of climate specialists.
Have a look, those links are really informative and entertaining (as you would expect) from Australian experts.
Thank you
Ang |
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By: firefly_au
25/11/2009
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Hello Ang :)
I took a look at it and I would like to make the following comments -
1 It is a fairly amusing and entertaining video presentation. I think I would like being in the good Professor Franks lectures he he :)
2 While I am not a weather or climate specialist much of what he says seems very reasonable to me and he is correct in that the weather patterns and rainfall in relation to run off and dams filling is NOT linear.
From what little I do know about our climate in eastern Australia it is also effected by events in the Indian Ocean and not just the Pacific Ocean.(southern oscillation) and IPO as mentioned by the good professor.
This effect may indeed be indicated by the IPO or it may not as the Indian Ocean effect is more statistical significant in the south east of the continent.
What he is saying about engineers and their changing view of flood risk is true of many. I can't comment on his implied view on "Climate change Scientists" but it could be true but I doubt if it is these days as I suspect this has been recorded without the knowledge of all the research available these days to indicate the effect of human activity on climate.
Having said that there has been I believe a resent trend in global temperatures in the opposite direction to those we would normally expect with global warming - it is believe explained as a natural cycle caused by solar activity overwhelming the effect we humans are supposedly having on the weather. Who knows?
Time will tell because I doubt very much anything will be achieved unless all nations work very hard to reduce greenhouse emitions and that is highly improbable IMO!
BYE :) |
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By: angelajacab
25/11/2009
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Hi Fire,
When you have the time could you please have a look at this link and post your opinion about it (climate change science).
http://www.youtube.com/watch?v=Wm826GwqFBY
Also, a short article written by Franks;
http://www.co2science.org/articles/V5/N15/C2.php
He seems to me genuine (I don't have any engineering training) your views would be greatly appreciated.
Like many, I am perplexed about the whole carbon trading market and trying to understand the arguments for and against it.
Thank you,
Ang |
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By: jaymarcel
25/11/2009
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Hi billy,
Your point on the value of $1 of earnings & what its worth is in a years time is an interesting one as it will depend on what you are buying with that $1, I think you may find if your buying electricity with your dollar there may be some flexability.
Your right about angs post she regularly manages to put or entries to shame. |
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By: billy.holliday@rocketmail.com
24/11/2009
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Excellent post Ang! If you wrote that yourself (not saying you didnt), then you are extremely articulate and I would guess you do it to some degree as a living: it was an excellent summary.
Good points too, Jay, and in that vein I diverge a bit from one of Ang's main concepts. I know that we can get Black Swans in markets, and the "Price is (NOT) Right" all the time, but the best descriptions are ones of statistaical oscillation around the mean. Its a fuzzy kind of the "Price is nearly right nearly all the time" where prices are routinely oscillating around the "right" price and where prices can over shoot and under shoot in the short term providing all sorts of "Free Lunches", but do converge to a rationally supported intrinsic value in the long term.
Sometimes, and very rarely, you get prices so obviously wildly out of line with fundamentals in bubbles and crashes, but most of the time prices are reasonably well behaved in markets such as the bond markets or share markets.
Property, on the other hand, has never made any sense to me as a professional investor: I can tell you instantly what a $1.00 of earnings is worth in 1 years time, but I have no clue what a 2 bed apt in Redfern is worth instrinsically.
Companies gnerate cash flows that can be valued, property can be rented out at rates that are determined by someone else but doesn't generate little bits of property for the owner every year. Thats why to me, its a "speculative" investment. |
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By: firefly_au
24/11/2009
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Hi Ang :)
Another set of posts that are well written and entertaining from you. Thanks for that and I agree with much of your comments.
While EMH probably does more or less apply when the market is well and accurately informed. It seems to be a regrettable part of human nature to try to obscure the less favorable facts about any property, company, operation, or marketable product to artificially inflate the price. The fact that the advertising industry exists to influence purchasing patterns and price rather than rely on the merits of the property or product to sell it is a case in point. With equities we also have rampant "ramping" up and down by some to influence the price. Caution and skepticism is required if you want to keep your wealth.
So yes maintaining rational price is probably the main weakness of the EMH. Even with the EMH there are "noise traders" (the ill informed punters and the true insiders that are in the know!) I guess most of us are in the "noise" camp just using what ever tools come to hand to do the best we can whether that be in property equities bonds or running our own business.
If the EMH generally holds true - In the end it may be better to invest in Index funds that at least should perform as well as their relevant index or you can do what I currently am doing and try to cherry pick the better companies. The jury is still out on that one for me only time will tell.
BYE :) |
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By: jaymarcel
24/11/2009
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Just adding my two cents worth, I'm no EMH follower, everyone reads differently into information given & there can be too many variables for this to be any more accurate than second guessing.
Pricing in a on a change is obviously too late to join in on the buying or selling process & so is not the main driver of a purchase or sale. |
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By: ang101000
24/11/2009
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The bad news for EMH lovers is that the price is right component is in more trouble than ever. Fischer Black (of Black-Scholes fame) once defined a market as efficient if its prices were 'within a factor of two of value' and he opined that by this (rather loose) definition 'almost all markets are efficient almost all the time'. Sadly Black died in 1996 but had he lived to see the technology bubble and the bubbles in housing and mortgages he might have amended his standard to a factor of three. Of course, no one can prove that any of these markets were bubbles.
What lessons should we draw from this? On the free lunch component there are two. The first is that many investments have risks that are more correlated than they appear. The second is that high returns based on high leverage may be a mirage. One would think rational investors would have learnt this from the fall of Long Term Capital Management, when both problems were evident, but the lure of seemingly high returns is hard to resist. On the price is right, if we include the earlier bubble in J@panese real estate, we have now had three enormous price distortions in recent memory. They led to misallocations of resources measured in the trillions and, in the latest bubble, a global credit meltdown. If asset prices could be relied upon to always be 'right', then these bubbles would not occur. But they have, so what are we to do?
While imperfect, financial markets are still the best way to allocate capital. Even so, knowing that prices can be wrong suggests that governments could usefully adopt automatic stabilising activity, such as linking the down-payment for mortgages to a measure of real estate frothiness or ensuring that bank reserve requirements are set dynamically according to market conditions. After all, the market price is not always right. |
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By: ang101000
24/11/2009
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Tests of this component of EMH are made difficult by what Mr Fama calls the 'joint hypothesis problem'. Simply put, it is hard to reject the claim that prices are right unless you have a theory of how prices are supposed to behave.
However, the joint hypothesis problem can be avoided in a few special cases. For example, stock market observers - as early as Benjamin Graham in the 1930s - noted the odd fact that the prices of closed-end mutual funds (whose funds are traded on stock exchanges rather than redeemed for cash) are often different from the value of the shares they own. This violates the basic building block of finance - the law of one price - and does not depend on any pricing model.
Compared to the price is right component, the no free lunch aspect of the EMH has fared better. Mr Jensen's doctoral thesis published in 1968 set the right tone when he found that, as a group, mutual fund managers could not outperform the market. There have been dozens of studies since then, but the basic conclusion is the same. Although there are some anomalies, the market seems hard to beat. That does not prevent people from trying. For years people predicted fees paid to money managers would fall as investors switched to index funds or cheaper passive strategies, but instead assets were directed to hedge funds that charge very high fees.
Now, a year after the crisis, where has it left the advocates of the EMH? First, some good news. If anything, our respect for the no free lunch component should have risen. The reason is related to the joint hypothesis problem. Many investment strategies that seemed to be beating the market were not doing so once the true measure of risk was considered. Even Alan Greenspan, the former Federal Reserve chairman, has admitted that investors were fooled about the risks of mortgage-backed securities. (continued with the last bit) |
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By: ang101000
24/11/2009
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Modern finance began in the 1950s when many of the great economists of the second half of the 20th century began their careers. The previous generation of economists, such as John Maynard Keynes, were less formal in their writing and less tied to rationality as their underlying tool. This is no accident. As economics began to stress mathematical models, economists found that the simplest models to solve were those that assumed everyone in the economy was rational. This is similar to doing physics without bothering with the messy bits caused by friction. Modern finance followed this trend.
From the starting point of rational investors came the idea of the efficient market hypothesis, a theory first elucidated by Gene Fama. The EMH has two components that I call 'The Price is Right' and 'No Free Lunch'. The price is right principle says asset prices will, to use Mr Fama's words 'fully reflect' available information, and thus 'provide accurate signals for resource allocation'. The no free lunch principle is that market prices are impossible to predict and so it is hard for any investor to beat the market after taking risk into account.
For many years the EMH was 'taken as a fact of life' by economists, as Michael Jensen, a Harvard professor, put it, but the evidence for the price is right component was always hard to assess. Some economists took the fact that prices were unpredictable to infer that prices were in fact 'right'. However, as early as 1984 Robert Shiller, the economist, correctly and boldly called this 'one of the most remarkable errors in the history of economic thought'. The reason this is an error is that prices can be unpredictable and still wrong; the difference between the random walk fluctuations of correct asset prices and the unpredictable wanderings of a drunk are not discernable. (Based on The Myth of the Rational Market by Justin Fox) continued.. |
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By: almurrie1@y7mail.com
23/11/2009
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h.diew
I do not wish to offend you, and I certainly was casting aspersions on neither the Austrian nor the German postal systems. They behaved admirably. However the parcel was sent by UPS incorrectly and they seem to have taken care of things, because there were no stamps of any kind on the parcel, except for the tracking barcode and like slips.
I imagine in Germany the parcel was opened for postal inspection, just as they do in Australia, hence the Deutsche Post sticky tape resealing it.
I admit in the original posting I made the obvious error of incorrect spelling for which I humbly apologise. I still do not think a clearly addressed parcel to Australia could have arrived in Germany by mistake, except that it was redirected from Austria, but this is pure surmise on my part and I have no direct proof.
Al |
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By: billy.holliday@rocketmail.com
23/11/2009
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It's worth noting that the Hawke-Keating government's decision to move to ''self-assessment'' shifted the risk of inaccuracy in a return from the taxman to the punter. Claim something you shouldn't and the taxman will let it through, but then may come after you with bills and fines.
Clearly, anything that could be done to reduce the need for so many people with simple returns to pay for the services of a tax agent - say by using the taxman's electronic data collection from employers, banks and so forth to send taxpayers pre-filled returns which they could simply sign or amend before signing - would strike a huge blow for simplicity.
This, at least, is one good thing safe to emerge from Henry's review.
Ross Gittins is the Herald's Economics Editor. |
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By: billy.holliday@rocketmail.com
23/11/2009
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(Conventional economists are convinced that, in asserting the primacy of economic growth above almost all else, they're merely reflecting the public's top preference for an ever-higher material standard of living. I have doubts about that but, in any case, there's precious little sign of the public being keen to accept the efficiency improvements that lead to faster economic growth.)
On simplicity, behavioural economics reinforces the point that complexity actually adds to unfairness. Tricky decisions are ''likely to impose a relatively greater burden on those with less experience and education'', the study says.
''Young people, people with limited education or cognitive capacity and people with limited social networks are likely to be the least well equipped to deal with complexity. By contrast, those who know more, and have access to professional advice, are in a far better position to take full advantage of the system.''
This is ironic because many of the complexities in the system are intended to reduce inequity.
Delivering welfare through a complex tax system, as opposed to through direct payments - a favourite trick of John Howard's - may therefore be self-defeating because many of the people at whom the welfare is targeted are the least well equipped to deal with complexity.
Perhaps the greatest case of complexity imposing a burden on ordinary taxpayers is the requirement to submit annual tax returns. It seems people take one look at the TaxPack and freak out. Three-quarters of taxpayers employ a tax agent to prepare their returns. |
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By: billy.holliday@rocketmail.com
23/11/2009
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The reason the task of tax reform is never-ending is that there's huge potential for conflict between those three objectives. Much of the time, the greatest conflict is between equity and efficiency: what's efficient tends not to be fair and what's fair tends not to be efficient.
So, as with many problems in economics, the game is about finding the best available trade-off between those two equally desirable but conflicting objectives.
All too often, however, this two-way trade-off has come at the expense of the third goal: simplicity. This, combined with the breakdown in ''voluntary compliance'' with the tax laws - the eternal search for loopholes - has made those laws ever more voluminous, complex and risky for the badly advised.
So Henry will have his work cut out if he wants to make significant progress in reducing complexity without going backwards on efficiency or equity. But behavioural economics has light to shed on all three objectives, and some of it points towards better trade-offs.
On efficiency, the main message is that if you're relying on a defective model of human behaviour you'll end up with a lot less efficiency and a lot more unintended consequences than you expected.
On equity, the main message is that humans care deeply about perceived fairness, are willing to sacrifice some efficiency for greater fairness, and are just as concerned about ''procedural fairness'' (the way things are done) as about fair outcomes (the way things end up).
Fortunately, Henry believes he's found the sweet spot in the trade-off, where certain reforms will improve both efficiency and equity. I guess that's easier to do when you use behavioural economics's wider definition of fairness.
In such cases, he's wisely concluded that emphasising a particular reform's advantage in terms of greater fairness is likely to be more persuasive with the electorate than emphasising its advantage in terms of greater efficiency. |
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By: billy.holliday@rocketmail.com
23/11/2009
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Taxman needs a better handle on how we behave
SMH November 23, 2009
If the Henry tax inquiry is to achieve Ken Henry's ambition of providing a blueprint for tax reform over the next decade or two - if it's to stay relevant, that is - it will need to take full account of the findings of behavioural economics.
Likewise, if it's to achieve Henry's longstanding goal of reducing the tax system's complexity and riskiness, it will need to learn from behavioural economics.
And if its reforms, when implemented, are to involve fewer of the legendary "unintended consequences" that bedevil policy changes, it will need the much better handle on how taxpayers actually behave that behavioural economics provides.
Fortunately, it seems Henry understands all this because last week the review released a commissioned study on Behavioural Economics and Complex Decision-Making, by Andrew Reeson and Simon Dunstall of the CSIRO.
Their study offers an excellent summary of the findings of behavioural economics, and I commend it to anyone seeking a crash course on what this newish branch of economics is on about. It can be found on the review's website taxreview. treasury.gov.au.
Behavioural economics is the study of the many ways in which that unfamiliar creature h0mo sapiens differs from the much more predictable (but non-existent) inhabitant of economic models, h0mo economicus. It draws on economic experiments and psychology to bring a deeper understanding of human behaviour into economic theory and policy.
The Henry review, like all tax inquiries, will wrestle with the three great objectives of tax design: efficiency (in the allocation of scarce resources), equity (fairness) and simplicity (low costs of administration and compliance). |
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By: hdmausguy
22/11/2009
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| al - In response to h.diew's diluluted single apology for both of us,(even though he's ended up with substantial "egg on his face") I hereby (like a football)pass that apology on to you.Cheers. |
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By: h.diew
22/11/2009
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"Only one language, yes English. Even if someone could speak 10 languages,the true facts are the true facts."
You are monolingual and your language is English? I think that is debatable. I mean your assertion that you have English is debatable, not the fact that you are monolingual.
To your post, as far as I know, "facts" are "facts". You cannot have false facts, so "true facts" is a tautology. I know that word is unfamiliar to you, so you'll have to look it up. For future reference, should you need to hear that word in Russian, French or German, simply ask. I will kindly oblige.
Since your ego is such that you require an internet apology, consider it given. After perusing this website, I'm confident you will pass on my apology to your friend Al. I think only one will be sufficient for (both of) you. LOL ;) Next time, tell us about the Osterreich Post stamps on the parcel. We may then believe the mailed item eventuated in the Austrian Republic. |
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By: hdmausguy
22/11/2009
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| diew - First up seems like I've touched a "raw nerve or two" with you in my last post? You never answered the key point there of USA sending a parcel to Austria??? You should also read my posts more carefully and not come to incorrect conclusions? Now to Deutsche Post.(D.P.) If you go online and pull up D.P.there is plenty of information on this company. Wikipedia has a useful summary on D.P. Some relevant points are: Up until 1995(14 years ago) D.P. was previously the German Mail Authority,it then privatised to become Deutsche Post. In 2001(8 years ago) D.P. acquired DHL through a majority share interest. It then became Deutsche Post DHL. For many years D.P.has had an almost monopolistic hold on mail deliveries in Europe.In later years they have continued to expand by taking over other leading parcel & mail delivery companies eg U.K. Deutsche Post DHL is now the worlds largest logistic & mail company with 470,000 employees in more than 220 countries. As to your other comments yes I am Aussie and proud of it. Only one language, yes English. Even if someone could speak 10 languages,the true facts are the true facts. It is obvious that you are sensitive to critical examination, so I look forward to 2 apologies coming through from you soon. One to Al & the other to me. Dictionary, Re: "Dopey person" = Someone stupid,uninformed. As they say in court,"I REST MY CASE". |
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By: h.diew
22/11/2009
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| Think what you wish. I happen to live in Hamburg which happens to be in Germany. I also happen to have been born in Attersee which is in Austria. Deutsche (the correct spelling, not deutche as was in the orignal post) Post is the main "player" in central Europe? Where do you get your vast storehouse of European postal knowledge from??? Merger??? Between Deutsche Post and whom may I ask? To my knowledge there hasn't been any merger, unless of course the German government has merged with a corporation. Deutsche Post, my ignorant friend, happens to be a government bureauracry. But of course, you didn't know that... In schoolboy fashion, you belligerently used the adjective "dopey" to describe me???? Well, I wonder who the dopey one is? I'm being generous about your intelligence and manners polite when I say that you appear to be just another internet ignoramus. Incidentally, as an Australian (presuming you are Australian, and your lack of manners reflect that you are) you probably only have English as a first and only language. If that is the case and you have no other language in which to communicate, you really need to concentrate a little more on grammar, spelling and vocabulary. |
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By: bias0007
22/11/2009
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"Stay tuned for Westpacs AGM this year its going to be interesting."
Beware the new "Kelly" gang (from S/Africa) |
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By: hdmausguy
22/11/2009
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| diew - The bottom line with this parcel thing is that the item was processed in the USA by American workers at a USA distribution depot. If the parcel was addressed to Australia and expected to travel as air freight and it gets sent to Austria by sea freight then that is just dopey incompetance.If your defending that then your just as dopey as they are? Deutsche Post(D.P.) operate internationally and are the main "player" in Central Europe. D.P. were operating depots in Australia a few years ago. More recently I have'nt seen their vans on the road. However I have seen D.P. signage on DHL vehicles. A reasonable conclusion is some sort of business merger,at least here in Australia? Often for efficiencies these large global parcel delivery companies(such as FED Ex,UPS,DHL)will use parallel providers in some geographic areas.eg In Australia AAE = Aust.Air Express(a joint venture between Qantas & Aust.Post)Having their own freight air fleet delivering Aust.wide will see these other global companies using their services. In Central Europe D.P.would probably provide a similar service? Me thinks an apology to al by you should be made. |
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By: almurrie1@y7mail.com
22/11/2009
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Yes I did wonder about why it was not Osterreichische Post AG, but UPS does have a branch there. All I could think that it was cheaper for them to UPS van it across to Bundesrepublik Deutschland to sea mail to Australia. The tracking number did find it in Austria. And it was sent back sea mail so landlocked Austria would have found that hard to do!
Al |
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By: firefly_au
22/11/2009
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| Yep - that parcel sure got around on its world tour - did it have an Icelandic or Greenland post mark Al he he :) |
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By: h.diew
22/11/2009
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| Yeah al, before you get too carried away mocking the yanks for their lack of geographic knowledge, you'd better have another look at those stickers on your parcel. You said they were "Deutsche Post"? That's the German post office, not the Austrian post office. Osterrich Post is the Austrian post office. Last time I looked, Austria and Germany were two different countries. What was that you were saying about US postal workers thinking that Australia and Austria are the same place?? |
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By: almurrie1@y7mail.com
21/11/2009
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Yep UPS, their tracking number enquiry eventually found where it had gone to, and usually like you said they are reliable. Just US postal workers think Austria and Australia are the same. Probably why Arnie got elected, he must be an OK guy if he comes from Crocodile Dundee country!!
Al Smile |
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