Just Blame Fred

Back in 2000, I used to be a day trader full-time. Everyday I would watch the markets and attempt to capitalize on short term price movements. In order to “predict” those price movements, I would look at lots of data and news every day, and even wrote some software to analyze some of that time-series data to give me a kind of “forecast” for the trading day.

We all know about “price discovery”, being “overbought”, “oversold”, “retracements” and the like. A difference is assumed between the “investor” and the “trader”, even to the point of absolutionist morality. It is seen as a “good thing” by the general public to be an “investor”, and a “bad thing” to be a “trader”. There’s lots of misconceptions about the equities market, and a lot of those misconceptions are intentional by those who stand to gain from the general ignorance and folklore on the part of the public.

Ah yes. But if we didn’t have the “traders” in the market short-term, there would not be enough liquidity for the long-term “investors”. They need each other, it would seem.

But the real question what is really going on needs to be understood and answered to truly understand the equities market.

Firstly, one must understand the basic fundamentals of the equities market. It is a zero-sum game. Exchanges occurs between one trader and another; between one investor and another. The goal of anyone in the equities market — investor or trader — is to find a “greater fool” than oneself to buy the stock at a higher price than one’s “strike price”.

That is to say, that every dollar you make in the equities market came at the expense of someone else, and every dollar you loose in the equities market  goes in somebody’s pocket.

This is a very tough concept for some to accept, because if you listen to all the spin about the equities market, you are lead to believe that the wealth one could supposedly make happens by “magic”. It does not. It happens at the expense of other players in the market.

That reality is played out — rather painfully — by the market “crashes” such as the one we are having now,  where so many loose their “investment”. They are paying for the profit of others before them. Plain and simple. And the sad reality of this is that prices will not rise again until the greatest fools of all jump out of the market in sheer panic and terror.

Indeed, it is a requirement for this to happen. Prices must fall. The giveback must occur. The Faustian bargain must be paid in full. This is the mathematical reality of a zero-sum game.

After you understand and appreciate the inanity of this, consider it even more insane that many are encouraged to put their retirement investments in the equities market.

Why does this happen? Simple. Because the supply of fools are finite, and to carry the market higher so for the Big Players to make a profit, they must suck in legions of smaller fools who don’t know any better.

The party works for a while. The more fools you suck in, the higher the prices are driven. Until, of course, you hit a wall and are unable to suck in anymore fools. Then the prices fall mercilessly, and many see their hard-earned life’s wealth washed away into the pockets of others.

The media calls this a “loss”. It should really be called a “transfer”, because that’s exactly what it is — a transfer of wealth.

They are encouraged to “stay in so they can catch the next uptick”. The sad irony is, of course, that if they would all stay in as they are recommended to by the financial planners, the market would never rise again. It only rises when many jump out of the market, giving up their holdings at prices below their strike, to smarter fools that will simply lie in wait for the whole “Ponzi Scheme” to repeat itself.

Now, with that notion in our minds, we are now in a stronger position to understand the true psychodymanics of the equities market.

I have struggled for some time now to conceive of a good model for the stock market. My latest one goes like this: On a given day, a given stock trades in a limited range of prices, at a certain volume. That volume and price range represents new ownership of that stock at a range of strike prices for that day. Since it is not known who owns what, I turn the issue on its head, and consider each individual stock as its own owner.

Crazy, you say? Maybe. But why not? If one person bought 10,000 shares of XYZ, would not the psychology be more or less the same as though 10 people bought 1000 shares each of XYZ? Or a hundred people purchased 100 shares each?

You are starting to see the picture here. Of course, in actuality, the specific goals of 100 people will probably all be different from each other — some may be doing this in a retirement account; others may be day traders. Some may be a mutual funds management. But that’s the whole idea. If I consider each individual stock as its own owner, then I can assign “flocking behavior” to groups of XYZ that all behave the same way. it allows me to reduce the problem of ownership to its bare elements. If 10,000 shares of XYZ all behave the same way, does it really matter if it had one owner or 10,000 with the same mindset? No, it does not.

When a share is traded, it looses is past owner and has a new owner at a new strike price. So now you have two components to deal with — the strike price and the goal of each share of stock.

When a the market is trading above the strike price of a owned stock, that owner is said to be “happy”. If the market price is trading below the strike, that owner is said to be “sad”.  We can then assign some probability of “ownership flipping” to that stock based on its own goals of greed and fear and the expectation of price evolution.

We can generally state that the probability of ownership flipping increases as the market price moves away from the strike price. But the probability curve is not symmetric for “happy” stocks and “sad” stocks. The probability increases faster for “sad” stocks than it does for “happy” stocks. Also, the details of the dynamics of how the price moves away from the strike is important. Fast moves will increase the probability of a flip faster than slow moves.  Price moves in certain patterns may shift the probability faster than other patterns. External factors such as news will also have an effect on that probability of a flip. Then there are automatic trading systems and the like. The picture becomes rather complex.

Add to that the fact that a flip influences others to flip. One single flip could trigger an avalanche of flips. This is self-organized criticality speaking here.

Now, it is clear that we, for the most part, have no ready access to the ownership space and distribution of the market capitalization of an equity at any given point in time. However, we do have a print of past history of stock price ranges and volumes for fixed intervals (minutes, hours, days, weeks, months, years).

So, for any given time period p, where volume v of stock activity occurred, we know that at most v shares of stock are owned over the price range of p. We also know that at least min(t) shares are owned, t being the number of shares traded of a single tick over p. But this amount is so small in comparison that we can safely assume that w — the number of shares flipped during p — will be much larger than min(t) — that is, v >= w >> min(t).

For simplicity, we will simply ignore, for the moment, the possibility of shares flipping multiple times during p, as would be the case with day traders. We will also ignore shorting, but will treat it later.

So, given p₁, p₂, …, p_n, we have D₁, D_{лаптоп2}, …, D_n, where D_i = D(p_i), price distribution for period p_i. Of course, D shall be confined to the price range of the associated period. We also have ξ, the complete set of stock ownership for a given equity, where D_i is a subset that is dynamic on i.

Author’s note:

When I wrote this, I was particularly angry and blowing off a lot of steam at what I perceived to be a callous lot of believers, at a particularly sensitive time.  I don’t particularly feel this way most of the time, though I still remain annoyed at the callous self-exalted dogmatic attitudes that I do see in some believers.

So even this is a bit darker than normal — even for me. Don’t take it the wrong way, despite the strong language. But do take it to heart — especially if you are a believer — that some of us are tired of having beliefs we disagree with being constantly pushed in our faces!

I find that, as an Atheist in a Christian country such as the US, I am constantly bombarded by Christian messages, practices, and annoyances. Everything from the “In God We Trust” on every coin and dollar, to the “Do you swear… so help you God” swear-in in the courts.

In court, it is particularly annoying, since I am forced to reveal something of my religious orientation, or lack of the same, when I have to tell the court that I do not swear to “God”.

It’s the Religious Litmus Test that has become pervasive in our society, and it stinks. Especially in a court of law that is supposed to be blind to such things.

Well, I’ve grown up over the years and recognize that all the promises of an “equal” system of government they told us back in civics class is all a wash. You are judged by what Fantasy Sky Daddy you believe in, and you are considered “bad” if you don’t have any such fanciful notions.

Though, things are starting to change a bit. More and more people are declaring themselves as “non-religious” or Atheist around the country. This is a Good Thing.

Now, we must eliminate the institutionalization of the Christian god — and any god for that matter  – from our public offices, our courts, our politics, and everything else that is supposed to be “for the people”. I know. Fat chance of that.

But what I want to talk about here is, how does one, as a non-believer, as an Atheist, live among Christians, many who believe you will go to “hell” if you don’t believe in their brand of religion?

For being a Atheist, I have been called “In League with The Prince of Darkness” and other dark things by some Christians. I really don’t need that type of abuse, so I no longer attempt to associate with them. I am told that I should “tolerate” Christians, but I will NOT tolerate anyone who thinks I am dammed for not believing in their Sky Daddy.  And why should I, really?

Life it too short to waste time with fools.

Another touchy subject is the death of a family member, especially when your own family is Christian. I’ve experienced this twice — my father and my younger brother. Both died within two years of each other.

My Father died first, and at his very Christian funeral, the eulogy presented my father as something other than what I experienced with him growing up. They presented him as though he was some sort of devout saint. That’s now what I remember of him. He was just a man, meant well, but was full of faults. There were issues between him and I that were never resolved; I felt as though I should’ve spent more time with him after I left home.But the real issue is that there was a big chasm between him and I.  And I felt guilty because of it, but it was not my fault really.

My brother died in a horrible truck accident 2 years later, and was burned beyond recognition. It was a closed-casket funeral. There, the same problem, only worse. They presented my brother as though he was the “right-hand of God”, yet he too was just my brother, with good intent but having faults of his own. Him and I disagreed on a lot of things, and actually had a falling out during our father’s funeral, which lead to us not talking to each other for a year. We were just about to begin resolving those issues and started talking to each other when — surprise! — he was dead.

If I didn’t feel bad enough about this, one of my family members DURING MY BROTHER’S FUNERAL, a devout Christian, tried to “convert” me, using my brother’s death.

WHAT THE FUCK!!!!!! GODDAMN ALL YOU CHRISTIANS! YOU COULDN’T WAIT UNTIL I WAS OVER THE GRIEVING PROCESS BEFORE YOU DO SOMETHING SO LOW AS TO USE MY OWN BROTHER’S HORRIBLE DEATH TO “CONVERT” ME? MAY ALL YOU CHRISTIANS BURN IN YOUR OWN SELF-CREATED HELLS.

That’s the way I feel about it, and that’s that. You Christians out there have no tact, no gall; you all think your way is the ONLY WAY, and the rest of us is “hell-bound” in your myopic “holier than thou” eyes. You are the most intolerant, rancorous bunch, and your history finds you out as all the pogroms, the inquisitions, the tortures, the wars, the blood spilt as you throughout all history put down those who disagreed with you.

And damn it, you bloody Christians are still at it. Just yesterday I saw a big nasty billboard that said something like “Jesus — the ONLY way to God”.  That dogma opened up all the raw wounds for me and ruined what would have been  a great day for me.

Not to mention that you Christians want to oppress Gays and Lesbians in our country by constantly fighting their right to marry each other. Miscegenation religious style.  Fuck you all.

The concept of “live and let live” is lost on you. The fact that there are many religions in the world, many beliefs, many cultures and ways of life is also lost on you. What crass arrogance to think that the thousands of religions in the world are all “wrong” because yours is “obviously right.”

FUCK ALL YOU CHRISTIANS OUT THERE!

Now, that’s not to say that all Christians are “created equal”. However, if you call yourself a Christian, you are identifying yourself with the entire baggage that that label carries. Islam is not much better, BTW, but it has yet to become a personal thorn in my side.

Do I have my own thoughts? You betcha. Am I perfect? Not in the least. I do make mistakes. I falter. But you know what? I recognize the right of the Individual to be an Individual, and to determine his own course.  You want to be Christian? Fine. Hindu? No problem with that. Islamic? Whatever floats your boat.

But when you start beating others up about not living your way, not taking on your lifestyles, and not believing in your sky daddies, that’s where I draw the line. You become the oppressor at that point, and as everyone who knows me well, I am vehemently anti-oppression.

Some have called me “anti-government” and ‘anti’ other things, but the real issue is that I am anti-oppression. Any individual, agency, group, association, or government that routinely deals out oppression in any form for any unjustified reason I will stand firmly against.

Don’t like it? Don’t oppress.

I’ve said enough. Back to my so-called life…

Now that the election is over and Obama creamed McCain, time to get on with the real problems that beset us. Obama certainly does have his work cut out for him — “fixing” an ailed and broken system, flawed at the fundamental roots. I kinda liken Obama as a type of ‘Sheradian’ from Bablyon 5 defeating McCain, a type of ‘President Clarke’ from the same show. Actually, President Clarke is more like President Bush, but analogies only go so far.

I am a Libertarian myself, so I look at both the Democrats and Republicans with great disdain. Alas, I saw that McCain and Palin continually beating the war drum, even saber-rattling with Russia. A war with Russia would be very bad for everyone, because for the very reason that when two nuclear powers have a face-off with each attacking each other’s homelands, the loser will be extremely tempted to use the nuclear option, meaning, of course, the end of life as we know it on this planet.

So, scared out of my gourd with McCain and Palin, I got my butt out there and voted for Obama, despite the fact I don’t like his socialist leanings and his support for the very unions that is responsible for chasing manufacturing jobs out of this country, among other things. I don’t like Joe Biden’s support for the very misandrist “Violence Against Women” bill, because it ignores the violence women exact against men, which according to FBI stats, is about equal with violence women exact against men.

But I digress.

What really bothers me is how NPR has been covering this election. At every opportunity, they choose to hit up the election from the race angle, rasing questions about the “Bradley Effect”, which to my knowledge have not been scientifically confirmed, to ignoring half of Obama’s heritage by referring to him as a “Black Man”, by throwing the race question up in the face of nearly all they’ve interviewed and covered and asked opinions of.

What amuses me is that a number of people on their call-in shows asked the very questions I am asking about why NPR chooses to focus on race so much when this election is clearly NOT about race.

NPR’s response? “We have no choice.”

To which I say, hogwash!

We have seen remarkable progress in this country since the Civil Rights movements of the 60’s. We have seen the rise of a new generation that is, for the most part, unbiased on the so-called “race” issue.

The truth of the matter is that the whole “race” issue is of our parent’s and grandparent’s generation. They still live in that world, for the most part, and still think in those terms. Thankfully, though, their influence on the world is diminishing as we move forward to a bold new future.

That’s not to say that there aren’t racists in they younger generations. But it does not compare at all to what existed 50 years ago.

But I ask the question: What exactly is “racism”, anyway? What exactly is “race”? Why would it even matter to begin with?

Firstly, “race” is purely a social construct with no basis in science. This is already widely known. It makes no sense, anyway, because it does not even speak to the culture a person belongs to, but to some silly notions about humanity — notions that were created by the racists in the past to divide people for the purposes of power and control.

The truth of the matter is that there is only one ‘race’ — the human race. What most refer to as ‘racial characteristics’ are merely regional and climatic adaptations our ancestors who branched out from Africa many thousands of years ago underwent. Those who migrated to the northern regions got lighter so their skin could synthesize more of the vitamin D from the reduced sunlight. Those who migrated to the Asian continents were most likely small clans with features differences that were amplified over time to the billions that exist there today.

Genetics show no basis for “race” at all. And many of these so-called “racial characteristics” are poly-genetic in nature, meaning that many different genetic configurations produce the same phenotypic traits. Meaning, of course, nature simply found many avenues to archive the same adaptive benefits.

Well, duh.

Also, from a memetic standpoint, the ‘race’ meme is a thought contagion, meaning that it’s a meme that programs for its own retransmission, much like religion and politics does. But a deep discussion of memetics is beyond the scope of this blog. Feel free to Google the many references on the Internet for your own self-edification.

NPR’s fixation on race does us all a disservice. Personally, I find it condescending, as though “race” can tell you all you need to know about a person. Actually, it tells you nothing beyond the fading social notion and perception of that person — and it would fade far faster if NPR and other media outlets would cease giving it special attention.

Now, I otherwise like NPR, though they are not perfect, and they did knuckle under to Bush’s War Machine during the genesis of the Iraq war. At that time I was so disgusted with NPR that I stopped tuning them in, and have only recently begun picking them up again.

But with their fixation on the ‘race’ question over and beyond what it needs to be, I may indeed tune them out again. I’ll leave it up to them to see reason instead of racism.

Well, you can really blame me on this one…

Over the many years, I have spent a considerable amount of time thinking about thinking, beliefs, and the human population in general. Mass human behavior, individual human behavior, politics, wars, religion, art, science, mathematics, networks, complex dynamical systems, and thought contagions.

It occurred to me that, among many other things, that many, many people behave more like mindless automatons than thinking beings. You can see it in advertising, politics, social services, the government in general, and just your average Joe. You see it in fervent believers of religion, the Republican party, the Democratic party, sports, everywhere. You see it in parents, teachers, police, lawyers, social workers, etc.

Basically, most people never — or almost never — bother to critically examine what they believe in. They seem to just jump from one belief frame to another without much thought as to whether or not it even makes sense, let alone if the beliefs themselves are even correct. They are “programmed” by some agent, which could be parents, friends, church leaders, politicians, or the media. They also act on those beliefs, and almost never bother to think about the consequences on acting on unfounded propositions. Even though the consequences are at hand, no learning seems to ever take place to lead them to the very necessary critical analysis of half-baked notions and fuzzy impressions.

But this does not apply to everyone, of course, as there are those who do critically examine notions and assumptions before inculcating the propositions as “beliefs”.

Still others, like myself, eschew the entire mechanism of belief itself. Ask yourself the following question:

Do beliefs determine truth?

I don’t think anyone, not even the Mindless Vessels of Beliefs (MVBs) themselves, would ever answer “yes” to that basic question. And yet the MVBs will go on most likely being MVBs, even after having admitted to the most important flaw in belief systems in general. They may wonder about it a bit and “go back to sleep”. Meanwhile, those who actually DO think already know about the inherent flaws in beliefs in general.

But let’s talk about this very fundamental question. If beliefs do NOT determine truth, then that immediately leads to two more questions:

1. Just how DOES one determine truth?
2. Just what DOES one do with all of these beliefs?

I will discuss those questions in future blogs. But for now, I want to speak more on beliefs and how people in general measure up.

Sometime after I came up with the idea of MVB, it occurred to me that there are finer layers in how people and beliefs interact. Also, “Mindless Vessel of Belief” sounds kinda harsh, even though I deem 80-90% of the population are MVBs. So I came up with a more general (and gentler) classification system, which I currently call “realms”. And so let me expound on them.

Realm 1: Autonomous Belief Agents

A Mindless Vessel of Belief (MVB) is a person who tends not to question beliefs, but simply acts on them. The “belief matrix”, if you will, drives said person’s activitives from moment to moment. Little, if any, thought is ever given to the “why” behind a belief. When a new proposition is introduced to said person, the new proposition is evaluated solely on the pre-existing belief matrix with little reference to anything substantive. In short, an Autonomous Belief Agent, or MVB, is largely driven by the beliefs themselves rather than knowledge.

I estimate that 80 to 90% of the world operates in this fashion. You get a good sense of this from observing political campaigns, religious organizations, many who operate in the “public sector” for a living where no thought is required, just undue obedience. It’s the type of thing that makes witch-hunts possible, allowed the Holocaust to become a reality, and allowed the United States to “justify” the war with Iraq.

Everywhere you look, from the media to sports to law reeks of this. Any place where people routinely act without rhyme or reason, without any sensibilities, and justify said actions with the excuse of “just doing my job”, etc.

I personally find it quite disturbing and perplexing that most of the world operates in this manner. Many of the often-touted ideals are rendered moot in lieu of the Autonomous Belief Agents, including the notions of “democracy”, “justice”, and “fairness”. The money-driven media, just to stay alive, is forced to kowtow to the MVB, reducing content to the type of drivel and mediocrity that appeals to the common MVB.

Realm 2: Belief Aware

Realm 2 types are somewhat aware and mindful of the nature of beliefs and their pitfalls, but still operate in that context. They do make some efforts at verifying that many of their beliefs are actually knowledge, but still believe(!) that beliefs are either a good thing to have, or at least there’s no way for humans to get around them. They are definitely measure better than your average MVB, but still operate in the context of what they consider “humanity”. Those that fall into this category are liberal arts majors, writers, and poets. Those who are particularly creative typically fall into this realm, as well as many scientists, engineers, and philosophers.

Realm 3: Belief Rejection

Realm 3 types are difficult for me to describe in human terms. Realm 3 speaks about a complete rejection of the entire notion of belief in lieu of Logic and Reason. A Realm 3 person has the ability to “step outside” of humanity and see the human condition for what it really is. A Realm 3 type is totally aware that “beliefs” are merely the backdrop for memes, and that much of what is considered “reality” is a construct of a extremely sophisticated neural process. Even beliefs themselves are a part of that same neural complexity, and as such is suspect.

The reason this is difficult to describe in human terms is because, well, the writer as well as the readers of this article are themselves human, and thus at some level the understanding of Realm 3 become infinitely recursive. For am I not using memetic transfer to convey these concepts to belief organs (your brain) about rejecting what many consider to be the cornerstone of all human existence?

I have not identified anyone other than myself as being in the Realm 3 category. The difficulty lies in distinguishing someone between Realm 3 and Realm 2. Unless the conversation goes directly to the heart of the matter, you would not know if someone who appeared to be Realm 2 is actually Realm 3. Others who fall into this category will most likely have never thought of it in these terms and may feel extremely uncomfortable discussing it with Realm 2 types, let alone Realm 1 people! So, I can give no estimate on what percentage of the population may fall into this category, though I suspect the numbers are very small.

On reflection, I would suspect that those doing research in the field of cognitive psychology would most likely be or on the road to becoming Realm 3 without even realizing it.

Realm 4: Self Rewrite

A person who is a realized Realm 3 is still human, despite the recognition of the fact that the human belief system is itself a construct. But the realization offers the possibility of being able to manipulate one’s own construct. That is to say, you, being a Realm 3 type can now develop the faculties to manipulate your own construction directly. You can, in essence, rewrite your own “programming” This is something I aspire to personally, and have had some limited success at it. It is largely uncharted waters, with new possibilities brimming around every corner. There are also dangers as well, because what happens if you do a bad rewrite unto yourself?

Due to the way our meat brains works, auto-rewriting is very difficult to achieve. What would be ideal is transhumanist approach of replacing or at least augmenting your meat brain with some new technology — Nanotech? Photonics? Quantum Computers? — to allow a much faster means to rewrite and resculpt the self. Such fantastic technology does not exist yet, of course, but it is fun to contemplate.

Realm 5: Peer Rewrite

Realm 5 is not necessarily a “higher” realm than the others — except Realm 1, perhaps. Basically the ability of one human to rewrite another human has been with us throughout the ages.  Today, governments of the world do it through control of the school systems and also control of the media. Primal emotions are typically used as the gateways to do peer rewrites, and the primal emotion of choice, I’m afraid to say, is fear. Religious institutions use the fear entry point quite frequently, as well as law enforcement, the IRS, the war propaganda organs, and many others.

Peer Rewrite occurs at all scales of society, including families. Parents by definition (re)write be belief matrices of their offspring, and teachers by definition rewrite their students.

Is Peer Rewrite necessarily a bad thing? In and of itself, no.  However, there are a multitude of ethical concerns, as well as much power in being able to rewrite your peers. If it is for reasons of exploitation or control, especially if it is to the detriment of the rewritetee, I consider this a bad thing in general. On the other hand, if a parent is rewriting his kid with the goal in mind of that kid having a happy, healthy and successful life, I would consider that a good thing.

I would consider a rewrite of a Realm 1 (MVB) person to become Realm 2 or better to be a very good thing, as long as it is approached with caution and with recognition  that you are, in effect, altering the course of another person’s future, and there may be some unexpected downsides in doing so, if, for instance, said person is unable to handle the realities of reality.  The very reason so many may be stuck in Realm 1 in the first play may stem from their inabilities to handle the truth about truth.