Markets can be wrong, but often they know…

July 28th, 2015

Bloomberg:

Shanghai Composite Index plunged 8.5 percent to 3,725.56 at the close, with 75 stocks dropping for each one that rose. PetroChina Co., long considered a target of state-linked market support funds, tumbled by a record 9.6 percent. A measure of 30-day volatility in the Shanghai Composite jumped to its highest level since 1997, as more than 1,700 stocks fell by the daily 10 percent limit. Monday’s drop by the Shanghai Composite was the biggest since Feb. 27, 2007, when the gauge tumbled 8.8 percent as the government cracked down on the use of borrowed money to buy stocks. Prior to that, the last time the index fell so much was on Feb. 18, 1997, when the index plunged 8.9 percent amid concern about Deng Xiaoping

In itself, the Shanghai market fall is no big deal. We discussed crazy valuations almost a decade ago when that market hit 6000 for the first time. What’s different in the new panic that goes back a month or so is that the government has a deeply vested and visible interest in controlling market valuations, which of course has the opposite of the intended effect. Capitalism 101. Time to learn.

Comedy routine

July 27th, 2015

Jackie Mason:

This secretary of state negotiated with them for a year-and-a-half and accomplished nothing. He ought to give us back for all the trips he made. He cost us millions of dollars in airplane fares and he came back with nothing except a bad foot. The real agreement he made, I’m sure he said to them, Listen, could you keep the bomb quiet for a year and a half. Because if you don’t bomb us for a year and a half, I’ll be the big winner. Everyone will see I made a fantastic agreement. If you bomb us after I leave I could always say it’s the other guy’s fault. First he said we can inspect them any time, any place, whenever we please. Now it turns out ‘whenever we please’ except when they don’t allow it. If they don’t want it it’s up to them. So then we have to wait 28 days to inspect, as if to say for the 28 days we can trust them completely, because they’ll do nothing. They’ll just hold the bomb in front of us waiting for us to come so they can show it to us. That’s how stupid this negotiation is. Do you know that in the restaurants of New York, they have an inspection system. You can surprise any restaurant without notice that you can walk in and inspect them. So we are protected in this city from bad tuna fish. We’re not protected from a bomb but we’re protected from a bad quality of tuna fish

Not too funny, but then again there’s this.

Rose Bush or Thorn Bush?

July 26th, 2015

Lincoln: “We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.” The NYT has an amusing piece: The Harper Lee ‘Go Set a Watchman’ Fraud. The book is #1 fiction on the NYT list. Natch. #1 on the non-fiction list is a book by a guy who’s both #1 and very angry. Rose bush or thorn bush: your choice.

Hard to imagine all the implications

July 25th, 2015

Stratfor:

the widespread use of quantum computers in industry is likely only a decade or two away. Such devices will be far more powerful than even the most powerful supercomputers seen today, carrying significant implications for national security, cyberwarfare and intelligence operations, among many other things. Just how powerful quantum computers can be — and how their adoption could lead to another revolution in computer-related technologies — becomes clear when we consider their computing power. Using a quantum computer to solve a problem can loosely be thought of as trying all possible solutions at once, whereas using a classical solution would mean trying them in sequential order. The expansion in computing power gained by incorporating quantum mechanics principles into computing could prove to be as revolutionary to computer science as research in physics and electromagnetism has proved to modern electronics.
Quantum Mechanics: A Primer

The field of quantum mechanics arose from German physicist Max Planck’s attempts to describe the spectrum of light emitted by hot bodies. Specifically, he wondered what accounted for the shift in color from red to yellow to blue as the temperature of a flame increased. Planck devised an equation explaining what he had observed, based on the assumption that matter behaved differently at the atomic and subatomic levels.

Though even the great German physicist questioned this assumption, his research kicked off 30 years of scientific inquiry that yielded the theories and discoveries that form the basis of today’s understanding of physics and chemistry. Albert Einstein introduced one of quantum mechanics’ most famous and perplexing concepts just five years or so after Planck devised his equation, extending the latter’s assumption by asserting that a quantum of light, or a photon, behaves as both a wave and a particle. This duality, along with the many other dualities embedded in quantum mechanics, became the bedrock of the field. scientists still debate how to interpret quantum mechanics. Perhaps the most widely held approach is called the Copenhagen interpretation, which holds that every quantum particle, known as a “cat,” exists in all of its possible states at once until it is measured; only when it is observed does the particle exist in one state. This concept has become known as the principle of superposition.

The superposition principle is one of the fundamental features of “quantum bits” or “qubits,” the quantum computer’s equivalent to the bits of classical computers. Classical computing relies on data comprising numerous individual bits that can only exist in one of two states, 0 or 1. Computers process data composed of long ordered strings of 0s and 1s. Today’s computer chips are made up of millions of transistors and capacitors that can only exist as a 0 or 1; while switching these states now takes a mere fraction of a millisecond (a period that is shrinking every day), there are still natural limits to how fast data can be processed and how small transistors and capacitors can be shrunk.

A qubit has the advantage of being able to be a 0, a 1, and a superposition of both 0 and 1 — that is, it can exist in all possible states. This allows quantum computers to exist simultaneously in all possible states, whereas a classical computer could only exist in them sequentially. This means that a quantum computer can perform vast numbers of calculations at the same time, and that the power of a quantum computer increases exponentially as the number of qubits increases.

An additional boost to the potential power of quantum computers comes from the concept of “quantum entanglement,” which Einstein famously described as “spooky action at a distance.” Quantum entanglement is the principle that some quantum systems’ states cannot be described by the states of their individual elements alone because those elements may be “entangled;” in other words, different elements’ states are related to one another in some way, meaning that what happens to one will affect the other, no matter how vast the distance separating the two. Among other things, quantum entanglement can be used to create “super-dense” coding in which two classical bits can be encoded and transmitted via one qubit.

Physicists have tried to preserve qubits by supercooling their environment to temperatures just above absolute zero (-273.15 degrees Celsius) and using them in a vacuum. But for nearly all practical purposes outside of research environments and possibly a few government agencies, quantum computers would need to exist at ambient temperatures. The record for storing quantum data at room temperature, set in 2013, is a mere 39 minutes (an improvement upon the previous record of 2 seconds). Even with its prodigious computing power, a qubit needs more time than that to perform meaningful calculations. Of course, classical computers once faced similar challenges. Like today’s quantum computers, the classical computers of the 1950s filled rooms, and the idea of shrinking them down to the size of the device you are using to read this article was a distant prospect.

Quantum computing would have important implications for the development of artificial intelligence because it would expand machine-learning algorithms. Today’s algorithms rely on pattern recognition; with quantum computing, machines could adapt to anomalous situations. A highly refined machine-learning algorithm would help automated systems handle non-routine tasks, an area that has been lacking in the automation and digitization of jobs and that would improve upon the current research on autonomous cars

In the 1989 TNG episode Royale, members of the crew enter a strange world through an antique revolving door. Before doing so, they don’t send back pictures to the ship of the door or the strange, empty place they’re in. Hard to imagine that happening today, but then again, no one imagined the ubiquity, cheapness, and capabilities of an iPhone in 1989. Likewise, self-driving cars and self-directing machines will become common enough soon, but it’s hard to imagine what that world will look like.

New Silk Road

July 24th, 2015

CFR:

More than two thousand years ago, China’s Han Dynasty launched the Silk Road, a sprawling network of commerce that linked South and Central Asia with the Middle East and Europe. Today, the idea of a “New Silk Road,” an intertwined set of economic integration initiatives seeking to link East and Central Asia, has taken hold. By 2013, Chinese President Xi Jinping was assertively articulating his own vision for a China-led Silk Road that would streamline foreign trade, ensure stable energy supplies, promote Asian infrastructure development, and consolidate Beijing’s regional influence.

The original Silk Road came into being during the westward expansion of China’s Han Dynasty (206 BC–220 AD), which forged trade networks throughout what are today the Central Asian countries of Kyrgyzstan, Tajikistan, Kazakhstan, Uzbekistan, Turkmenistan, and Afghanistan, as well as modern-day Pakistan and India to the south. Those routes eventually extended over four thousand miles to Europe.

Central Asia was thus the epicenter of one of the first waves of globalization, connecting eastern and western markets, spurring immense wealth, and intermixing cultural and religious traditions. Valuable Chinese silk, spices, jade, and other goods moved west while China received gold and other precious metals, ivory, and glass products. The route peaked during the first millennium, under the leadership of first the Roman and then Byzantine Empires, and the Tang dynasty (618–907) in China.

But the Crusades, as well as advances by the Mongols in Central Asia, dampened trade. By the sixteenth century, Asian commerce with Europe had largely shifted to maritime trade routes, which were cheaper and faster. Today, Central Asian countries are economically isolated, with intra-regional trade making up just 6.2 percent of all cross-border commerce. They are also heavily dependent on Russia.

China has multiple reasons for pursuing the New Silk Road. Xi has promoted a vision of a more assertive China, while the “new normal” of slowing growth puts pressure on the country’s leadership to open new markets for its consumer goods and excess industrial capacity. Promoting economic development in the troubled western province of Xinjiang, where separatist violence has been on the upswing, is another major concern, as is securing long-term energy supplies.

China’s strategy is conceived as a two-pronged effort. The first focuses on overland infrastructure development through Central Asia—the “Silk Road Economic Belt”—while the second foresees the expansion of maritime shipping routes through the Indian Ocean and the Persian Gulf—the “Maritime Silk Road.”

In 2013, Xi told an audience in Kazakhstan that he wants to create a vast network of railways, energy pipelines, highways, and streamlined border crossings, both westward—through the mountainous former Soviet republics—and southward, toward Pakistan, India, and the rest of Southeast Asia. Such a network would also expand the international use of Chinese currency, the renminbi, in transactions throughout the region, while new infrastructure could “break the bottleneck in Asian connectivity,” according to Xi. The Asian Development Bank, highlighting the need for more such investments, estimates that the region faces a yearly infrastructure financing shortfall of nearly $800 billion. Xi subsequently announced plans for the maritime silk road

The New Silk Road Strategy should be expanded to include aviation and other supply chain innovations as well. BTW, here’s Thomas Sowell: “Freeman Dyson has called the 1433 decision of the emperor of China to discontinue his country’s exploration of the outside world the ‘worst political blunder in the history of civilization.’ The United States seems at this moment about to break the record for the worst political blunder of all time: Iran.” China is fixing its problems while the USA is making its own problems much worse, and completely unnecessarily.

Doomed 2.0 plus funny stuff

July 23rd, 2015

VDH has more on the Doom around the corner. You can kind of understand ISIS’s attitude toward the West when you read this and this and this. Amusing book review. Finally, by far the funniest thing today.

Sollozzo

July 23rd, 2015

WDRB:

the suspects charged with murdering a Canadian tourist as he returned to his hotel on Derby Day were in the middle of a violent crime spree involving Tasers and guns — all while cruising around in a luxury car. According to newly released evidence, the suspects are accused in a total of 15 violent robberies during Derby weekend. Court documents show the four suspects charged with murdering 49-year-old Scott Hunter were driving around in a Jaguar, preying on hotel guests mostly staying near the fairgrounds. Police say Tyrone Thomas, Fatima Abu Diab, Fahed Abu Diab and Tony Ha would go up to victims shock them with a Taser, or at least threaten to shock them, hold the victim at gunpoint, assault them and then rob them. Police report the suspects robbed eight victims on May 1 and 2. One victim told police “He heard a buzz and felt a shock in his abdomen” then the suspects took cash right out of his pockets. Another victim says he was on his way up to his hotel room when Fatima Abu Diab asked for his phone number and followed him to his room. When he opened his door he says the other suspects forced their way inside then robbed him and two friends punching them when they resisted. The ninth robbery victim was Hunter, who was in town from Canada to see the Derby. Court documents show Fatima Abu Diab and Fahed Abu Diab attempted to rob Hunter, but he put up a fight before Tyrone Thomas shot and killed him. “They were driving down Phillips Lane and saw the two victims walking on the side of the road, and that’s when they got out of the vehicle and approached them,” Kessinger said. “They went to rob both victims and, during the robbery, there was a struggle, at which time they fired a shot and killed the victim.” But it didn’t end there. Police say the crime spree continued after the murder and into the next day, with the suspects going on to rob six more

The evil clown in Charleston is also walking slowly through the system. We remember the scene where Sollozzo had to let Tom Hagen go. There’s no excuse for any of these people to still be inhaling oxygen.

Doomed!

July 22nd, 2015

SacBee:

“We don’t even know how far we’ve gone, or if we’ve gone over the edge,” Brown said. “There are tipping points, feedback loops. This is not some linear set of problems that we can predict. We have to take measures against an uncertain future which may well be something no one ever wants. We are talking about extinction. We are talking about climate regimes that have not been seen for tens of millions of years.” Bill de Blasio, announcing his city would reduce its emissions by 40 percent by 2030, said New York was following “the example of our colleague here today, Gov. Jerry Brown.” San Francisco Mayor Ed Lee said his city will phase out use of petroleum diesel in its municipal fleet by the end of the year. Brown and dozens of mayors signed a declaration stating that “human-induced climate change is a scientific reality, and its effective control is a moral imperative for humanity.”

Nice boondoggle, but September would have been a better month. BTW, the oceans are going to rise by 10 feet or so. Can you imagine that these horses’ patoots actually have positions of responsibility? Sigh. Oh yes, if you were questioning whether we’re doomed, get a load of the next generation.

Walk right in, sit right down

July 21st, 2015

It’s insane that so many things have sunk to micro this and micro that — things that are important to 3% of the population, when so many aggressions are taking place that will affect 97% of Americans. $18 trillion in zero interest rate debt; nuclear terrorist Iran; both college faculties and students who have become prissy ignoramuses; murderers coddled for no reason at all; you know the list. The debt bomb or the bomb bomb will go off and everything will change, but it sure will be ugly. (Hey, at least capitalist Hanoi is doing well.) So you’ll pardon us if we prefer to think about the spooky amusement park in Strangers on a Train, or how Walk Right In led by an obscure path to My Way. Much more pleasant to think about. Honestly, could you have imagined 10 years ago that we could have fallen this far this fast?

A “great movement”

July 20th, 2015

WFB:

A senior Iranian cleric delivered Friday prayers in Tehran while standing behind a podium that declared, “We Will Trample Upon America,” according to photos released by Iran’s state-controlled media. Iranian cleric Ayatollah Mohammad Ali Movahedi Kermani, who was handpicked by the Islamic Republic’s supreme leader to deliver the prayers, delivered a message of hostility toward the United States in the first official remarks since a final nuclear deal was signed between Iran and world powers in Vienna last week. A Persian-language message on the podium declared, “We will trample upon America” while the English phrase “We Defeat the United States” can be seen underneath. Friday prayers are known for being officially sanctioned by the state and a sign of the supreme leader’s thinking on various issues. “The slogans of the Iranian nation on Al-Quds Day show what its position is,” said the Middle East Media Research Institute. “The slogans ‘Death to Israel’ and ‘Death to America’ have resounded throughout the country, and are not limited to Tehran and the other large cities. The entire country is under the umbrella of this great movement

Excellent negotiators, these guys. You can get into all the details if you like, but they’re kind of beside the point. Our favorite part of this catastrophe would be if Iran goes all the way and rejects the deal (after taking the money of course).

Really strange bedfellows

July 19th, 2015

What do Bloomberg, Twitter, NYT, WSJ, and Google have in common on the web? (Not WaPo BTW.) Hey, it’s not all bad. You can still get Feldman, Marcus, Cashill and Lifson, as well as PJ. (Oops, hope we didn’t just jinx that.) One of the funniest / strangest things is that if there’s a top-of-the-hour news story on Bloomberg about you-know-who, the inept censors let it run for a second or two before switching to bicycle races or some such.

Just plain weird

July 18th, 2015

The head of Iran seems to speak rather straightforwardly. Doesn’t happen much in the US, although one guy does who has a hairdo that is almost Freudian in the message it sends. BTW, the Jehovah’s Witnesses dropped by with the Watchtower discussing the End of Days. It’s getting especially weird that they’re beginning to make more sense than what’s in the news….

Read this, then we’ll talk

July 17th, 2015

Terrible title for a book, but required reading in our view — because, unlike most of the cookie cutters that make so much politics and other stuff affreux, épouvantable, there’s a good bit of disagreement among the authors. We’ll have more to say about Guangzhou shortly; nice to have Google back, Twitter not so much. Suffice it to say for now that we have never seen so many Americans in one place adopting kids. Mixed feelings about that. Also, we’d like to be able to read a little Chinese, but it may be too late for that. Anyway, China and the Chinese have plenty of problems (and opportunities), but this is not one of the problems.

Hey thanks!

July 16th, 2015

Here’s a heartfelt note of thanks from the head of Iran. It’s actually kind of funny, and it’s sincere in its way, “Divine blessings” aside. Wretchard has a round-up of views on this agreement. Hey, what’s the problem? It’s easy to unwind if the agreement is violated, right? Oops!

That was then, this is now

July 15th, 2015

2014:

In 1998, Kas turned down an offer by Calvin Klein to raise funds for the construction of the New Acropolis Museum in lieu of showcasing the fashion house’s collection at the 2nd century AD Herod Atticus theatre beneath the Acropolis.

Greece is now required to sell $55 billion in state assets. We think the entire problem could be solved in a couple of minutes. They have all these old, run-down buildings that need fixing, right? Partha-something, acropo-whatnot. For the solution, try humming the tune to “It’s a small polis after all.”

Audrey Murphy

July 14th, 2015

DoD:

the Department of Defense has proven itself to be a learning organization. This is true in war. It is also true with respect to institutional activities, where we have learned from how we repealed “Don’t Ask, Don’t Tell,” from our efforts to eliminate sexual assault in the military, and from our work to open up ground combat positions to women. Throughout this time, transgender men and women in uniform have been there with us, even as they often had to serve in silence alongside their fellow comrades in arms.

The Defense Department’s current regulations regarding transgender service members are outdated and are causing uncertainty that distracts commanders from our core missions. our officers and enlisted personnel are faced with certain rules that tell them the opposite. Moreover, we have transgender soldiers, sailors, airmen, and Marines – real, patriotic Americans – who I know are being hurt by an outdated, confusing, inconsistent approach that’s contrary to our value of service and individual merit.

Today, I am issuing two directives to deal with this matter. First, DoD will create a working group. the working group will start with the presumption that transgender persons can serve openly without adverse impact on military effectiveness and readiness, unless and except where objective, practical impediments are identified. Second, I am directing that decision authority in all administrative discharges for those diagnosed with gender dysphoria or who identify themselves as transgender be elevated. Our military’s future strength depends on it.

Remember this and ask the Iranians and Russians, etc., to remember it too: “Ideologies are not defeated with guns but better ideas and more attracting and more compelling vision.” Okay then.

They need a sanctuary city

July 13th, 2015

Economist:

Zoey and Andria Green, who are seven and eight respectively, only look innocent. With their baby faces and cunning, they managed to lure patrons to their illicit enterprise: a lemonade stand outside their home in Overton, Texas. The girls were in business for about an hour in June, selling popcorn and lemonade to raise money for a Father’s Day gift, before local police shut the operation down. Not only were they hawking without a $150 “peddler’s permit”, but also the state requires a formal kitchen inspection and a permit to sell anything that might spoil if stored at the wrong temperature. As authorities are meant “to act to prevent an immediate and serious threat to human life or health”, the officers understandably moved swiftly in.

Overton, Texas? Texas? They need to move from a police state to a sanctuary city. Hey, it’s easy to open a lemonade stand in NYC. Good thing they didn’t try to rescue a baby animal, they might get life without parole.

Everything’s out of control, so…

July 12th, 2015

America is out of control, in case you hadn’t noticed. Our first question today is whether a man running for president can choose his hair or hairpiece as his running mate. Second, since the country is so far out of control, we want to counsel Scott Johnson that it’s finally okay to split your infinitives. (BTW, Pontifex Maximus is doing an excellent job of making the case for Max Weber.)

Just for fun, unless true

July 11th, 2015

Daily Mail:

Many solar physicists have put the cause of the solar cycle down to a dynamo caused by convecting fluid deep within the Sun. Now, Zharkova and her colleagues have found that adding a second dynamo, close to the surface, completes the picture with surprising accuracy.’We found magnetic wave components appearing in pairs, originating in two different layers in the Sun’s interior,’ she said. ‘They both have a frequency of approximately 11 years, although this frequency is slightly different, and they are offset in time. ‘Over the cycle, the waves fluctuate between the northern and southern hemispheres of the Sun. Combining both waves together and comparing to real data for the current solar cycle, we found that our predictions showed an accuracy of 97%,’ said Zharkova. Predictions from the model suggest that solar activity will fall by 60 per cent during the 2030s to conditions last seen during the ‘mini ice age’ that began in 1645

It’s the Maunder Minimum again, but with a twist this time. Enough to make you wish that the hockey stick hadn’t invalidated itself by leaving out the MWP.

Interim report

July 10th, 2015

We haven’t drawn any firm conclusions yet about the market unrest in Asia, but we draw your attention to a recent Bloomberg interview of Patrick Chovanec. We cant’t get a direct link to the interview from our location. His observations are well worth thinking about, and we’ll have more on this in a little while.