This guy proposes the use of a 2x leveraged market ETF to “beat” the market in the long term, assuming the market goes up in the long term (that is, the value of the mean path at a much later time is higher, or, perhaps just the marginal expected value is higher at a much later time).

It seems like a nice idea, but something is off. Firstly, these are leveraged portfolios with forced daily rebalancing, so depending on the amount of daily price variability, there is a non-trivial loss of several percent a year on top of costs. If a long-term leveraged position is wanted, one may as well buy the appropriate derivatives that underlie these ETFs, if that can be done.

Secondly, leverage is not free. This WSJ article nails the fixation on returns …

Until recently, public companies, mutual funds and pension funds generally steered clear of such risks. But the lines between risk takers and mainstream investors are blurring. In part, that’s because stock-market returns aren’t what they were a few years back. Between 2000 and 2006, the average annual return on the S&P 500 stock index was 2.5%, down from 28.7% between 1995 and 1999. Using derivatives and borrowed money is one way to try to boost returns.

… but although the return is better, the risk-adjusted return is more useful to look at. With true 2x leverage, only the risk premium is doubled at best, not the total return. On the other hand, if true 2x total return is supplied as they say, the implied leverage, and hence risk, has to be much higher than 2x. That’s something to look out for. Granted, the amount of leverage can be adjusted by weighting with the 1x portfolio.

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“Researchers find way to steal encrypted data,” screams this article in the New York Times.

Oh do they? But come… on…, what is this ridiculous demonstration? Okay, okay, it’s the IT Policy School over there, let’s cut them some slack. What they’ve come up with is a way to read seated DRAM under OS lock without specialized hardware, and if they said that, it would be fine.
(Read the article)

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Reuters likes to stick their three-chord jingle at the beginning and end of every one of their video clips on the net. It actually sounds a bit more interesting than the simple three-note jingles of major US TV networks like NBC. So I parsed it. Reuters jingle.

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A problem described here

what do you expect to happen if you had 2 urns with a ball in each one…. and you placed balls in them…. choosing an urn with a probability proportional to the number of balls in each urn…..

intuitively, you’d expect a rich getting richer kind of thing….. or those with more balls getting even ballsier…. [see extreme sports.... those ppl are crazy... and get crazier] but the amazing thing is that you get a uniform distribution….. it’s not even a distribution that peaks at the two ends where there’s 1 ball and n-1 balls in the other….

Well, it’s not that counter-intuitive. Certainly, if you begin with exactly 1 ball in each urn, you end up with a uniform distribution on all outcomes, but the uniformity is kind of an artifact. In fact, the proportion of total balls in one designated urn is a martingale process, which means the proportion of balls at any number of times steps later is expected to be the same as the starting proportion. So, if you do not start with an equal number of balls in the two urns, there is no way that the long-run outcome will be uniformly distributed across the possibilities because that would give a mean proportion value of 1/2.

Furthermore, this means that indeed there is a rich getting richer “kind of thing” going on, if you deviate from equal proportion by chance. This is a weak effect that happens when the balls are few, but it doesn’t mean that the half-half case is somehow a counter-intuitive stable system. The paths that deviate early will indeed tend to go to the rails. It’s just that there are so many central paths that you aren’t likely to deviate proportionally unless it happens early.

What’s more interesting is that there are so many central paths. If you began with 2 and 2 balls, or 10 and 10 balls, you don’t get uniform outcomes, but a centrally peaked distribution around equal proportions. Indeed, if the number of balls is large, then addition of balls to urns one at a time doesn’t even move the drawing probabilities given by existing balls, and so it is reasonable to expect something like the central limit theorem to kick in.

So this is a case of deviation instability fighting with central tendencies of large numbers. To see this, keep the total number of balls the same, and move balls from the urn not chosen to the urn chosen, instead of adding balls to the urn chosen (and hence remove the latter cause from the “fight”), then it will clearly go to the rails.

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What exactly makes “scary” sound effects “scary”? By that I mean, what characteristics do they possess? A typical one is a high pitched, reverberated dissonant chord played on strings in certain films. Dissonance is a given, being in opposition to consonance that is often characterized as “pleasing.” But not all dissonant sounds are scary. Most are merely unpleasant, and one may even learn to enjoy them. It isn’t mental association, either, since certain sounds are intrinsically “scary,” without having been heard before. So what is it?

My best guess is, these sounds may recall the vocalization of some kind of open-range nocturnal predator of humankind’s ancestor, something one is innately equipped to recognize and fear.

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mitocondrial DNA from one egg, and a nucleus from another fertilized egg.

That’s going to screw up genetic testing and genealogical studies, for sure.

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A lot of people seem to write about that, claiming procedural error. That’s not what I care about, actually.

I am interested to know why people in the late 19th century clamored for an income tax. It seems strange. It looks like the farm lobby in the West at that time wanted a graduated tax to redistribute income, so I can understand some states being for an income tax, but three-quarters of the states? It seems difficult even to raise tax rates today, so where were the “tax protestors” back then?

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(…continued from this post)

Which brings up the question of, what if the Federal Reserve runs out of money (i.e. has negative equity, or if that’s not convincing enough then the absolute worst case when all the assets it holds on its balance sheet become worthless)? Is that the bankruptcy event that needs the “full faith and credit of the US Government” to bail out? And if the US Government (which is in debt itself) had spent all current revenue, would not or could not issue more debt to raise more money, and had no federal assets to sell? At that time, there would be few choices for the US Government, some seemingly more palatable than others but really all the same:

• it could seize private property, otherwise known as raising taxes;
• it could renege on obligations, otherwise known as defaulting on outstanding bonds or cutting programs like Social Security;
• or it could inflate by directing the Federal Reserve to create the needed money in its account outright (might be just what is needed if there is insufficient debt creation) — this is most like printing money and the accounting trick is simply for the Federal Reserve to “agree” to “buy” worthless assets like new government bonds that nobody else wants and for the government to turn right around to “fund” the Federal Reserve with the new money it got.

And that brings the final question: Is the United States bankrupt?
(Read the article)

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Postal Service to Netflix: redesign your mailers or face fees

The USPS is complaining that the Netflix mailer costs too much to process because it is, in practice, non-machinable, even though it qualifies for a machinable discount; and, its reply rate is too close to 100% for the discounted business reply mail to be profitable. Sounds to me like broken cost modeling by the USPS.
(Read the article)

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Kind of a bizarre self-quizzing format, but informative:

Who is the Federal Reserve, who owns the Federal Reserve

and this,

Where does the Federal Reserve get the money to fund its operations?
(Read the article)

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