tag:blogger.com,1999:blog-34323687.post472637932279770150..comments2024-03-28T12:22:11.704+00:00Comments on Macro Man: Friction, BabyMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger40125tag:blogger.com,1999:blog-34323687.post-32811787729368009742010-01-15T02:53:11.247+00:002010-01-15T02:53:11.247+00:00I really enjoy reading your blog. I start my day w...I really enjoy reading your blog. I start my day with it and the FT. Thanks for taking the time to write it. Also appreciate the lack of advertising.<br /><br />Wanted to agree with you on your China exchange rate call. This week's tightening was the first test of Chinese policy now that China's recovery is solidifying.<br /><br />The authorities had a clear choice -- a once off revaluation, or a return to the sterilisation policy. Both would reduce inflationary pressure, but the authorities chose the latter. It seems that the objective of policy is to maintain the real exchange rate (along with the consequences).torrens humenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-19508060042374738502010-01-14T16:15:50.498+00:002010-01-14T16:15:50.498+00:00Anon 3:23 ... the coca cola / malaria scare WAS hy...Anon 3:23 ... the coca cola / malaria scare WAS hysteria and had absolutely no basis what so ever.<br /><br />Coke did change their "secret" formula, but that happened years earlier. Coke originally contained small amounts of cocaine, which the government required them to remove. That was 2-3 decades before the malaria nonsense<br /><br />Malaria is carried mostly by mosquitos, not coca cola. Pretty sad that there are still such uneducated people in the world -- and not only do they walk among us, they have internet connections!<br /><br />In spite of what bank CEOs are doing, I really hope intelligence / merit eventually triumphs over ignorance and cronyismGregnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-27982655000844969062010-01-14T08:22:57.087+00:002010-01-14T08:22:57.087+00:00Yeah, problem is that some punters (ahem, includin...Yeah, problem is that some punters (ahem, including yours truly) have trouble trading ETS (let along Nemo's single name CDS), and are forced to trade futures instead.Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-901212511617465652010-01-14T08:16:23.082+00:002010-01-14T08:16:23.082+00:002823 HK is a relativelt liquid proxy for SHCOMP. ...2823 HK is a relativelt liquid proxy for SHCOMP. Citi is the market maker.Rossconoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-73519205825551529952010-01-14T03:23:07.766+00:002010-01-14T03:23:07.766+00:00Coming late again and was surprised to see the lab...Coming late again and was surprised to see the labeling of the malaria/coke thing as hysteria.<br />Actually, it was for real, forcing the Co to change the secret ingredients. The same goes with the birth rate and kelps/chimneys... (:Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-33973800256553882852010-01-13T23:58:40.685+00:002010-01-13T23:58:40.685+00:00Well, i guess Leftback should see the global warmi...Well, i guess Leftback should see the global warming/frosting from the bigger perspective:<br /><br />http://wattsupwiththat.com/2009/12/12/historical-video-perspective-our-current-unprecedented-global-warming-in-the-context-of-scale/ESnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-70562311035350962752010-01-13T23:09:39.616+00:002010-01-13T23:09:39.616+00:00RB -- apologies if I was not clear. I said you ke...RB -- apologies if I was not clear. I said you keep arguing politics, not science.<br /><br />Anyway, the blog is supposed to be about macro economicsGregnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-48829814547673166762010-01-13T23:01:17.549+00:002010-01-13T23:01:17.549+00:00Yes, it's a hoax. I said it. Now I feel much b...Yes, it's a hoax. I said it. Now I feel much better. You keep saying it's all politics, politics, and then you turn around and say I inserted the politics. You are a piece of work, Greg. Goodbye!RBnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-85193200350417537362010-01-13T22:57:07.049+00:002010-01-13T22:57:07.049+00:00RB -- your political / lawyer tactics continue...
...RB -- your political / lawyer tactics continue...<br /><br />There are Republicans who don't like oil companies. There are Democrats who do like oil companies. Most voters have some views that lean left and some views that lean right.<br /><br />Only a political "analyst" would claim the party box checked on the voter registration card explains every opinion a voter has.<br /><br />Your continued use of political tactics is further proof that the climate hoax is about politics, not science.<br /><br />But this blog is about macro economics / investing -- and my point was and remains that the same statistical tricks and common usage errors used in the climate hoax are the same tricks used by Wall Street to separate clients from their money.<br /><br />Where are all the customer's yachts? Well, the customers slept through statistics class. They were easily confused by lawyer tactics and biased "expert" opinions.<br /><br />They believed one could linearly interpolate the past few years price history indefinitely.<br /><br />They believed price = value (measurement error = zero?). <br /><br />They believed pro-forma earnings (much like the data in the recently disclosed climate e-mails). <br /><br />They believed the ratings agency models (climate models) were infallible.<br /><br />They never doubted that the brokers (socialists) had a conflict of interest.<br /><br />Its the same hoax, different wrapper.Gregnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-59144311462646138212010-01-13T22:37:25.944+00:002010-01-13T22:37:25.944+00:00Greg, Climate scientist political ideology is all ...Greg, Climate scientist political ideology is all over the map with Republican believers and Democratic skeptics - check with Judith Curry of Georgia Tech if you wish. I'd rather not get into the science here, but you are badly mistaken in calling it a fraud.RBnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-53646073602342010922010-01-13T22:30:45.796+00:002010-01-13T22:30:45.796+00:00RB -- I never said anyone should give up TRYING to...RB -- I never said anyone should give up <i>TRYING</i> to estimate / forecast the weather.<br /><br />I said the climate debate is 100% politics, 0% science. The data is sketchy (digital thermometers were not available except the last decade or two). The models are nothing more than overfit junk based on the historical flawed data. There is no control case -- making it impossible to assign causality even if the model had validity.<br /><br />Forecasting tomorrow's weather is an educated guess (yes GUESS) based mostly on looking what weather patterns are "up wind" of your location. That tactic generally gives you a good guess of tomorrow's weather, but push it out more than 2-3 days and the accuracy falls to what you would expect from rolling a dice.<br /><br />Forecasting the weather over a more extended period is what many fields call GIGO -- garbage in, garbage out. Incomplete data plugged into flawed overfit models yields nothing that can be called science.<br /><br />Leftback's comment further illustrates the ignorance of people who perpetuate this "science" nonsense. Viewing a thermometer in the ocean is not straight forward as taking your child's temperature.<br /><br />The buoy's used to measure ocean temperatures move around -- you aren't measuring the same space over time. Even if the buoys had GPS (and away from the US coastline, most still do not have GPS) ... ocean currents are moving the water in which the buoy is floating.<br /><br />If the temperature changes, it could mean the water is warming. It could mean ocean currents have changed. It could mean salinity levels have changed. It could mean a large fish just urinated next to the thermometer.<br /><br />If you compare this temp reading to an analog thermometer reading taken decades ago -- the error term on the analog thermometer is +/- 4 degrees. And that's before you consider the ships back then did not have GPS and the readings were taken at "approximate" depths as measured from a pitching deck.<br /><br />You can't compare those two numbers and derive anything "scientific". Its garbage in, garbage out.<br /><br />If we had comparable data (digital thermometer readings at constant depths / locations) from decades / centuries past -- then we might be able to infer that the oceans were warming.<br /><br />But that still would not establish causality.<br /><br />Before Leftback mentions the melting polar caps, he should read a few history books. The northwest passage (the waters north of Canada, south of the polar cap) were open when European explorers charted them several centuries ago. When vikings landed on what is now Greenland, they called it "GREEN" land because it wasn't covered in ice like it has been in recent decades. Iceland was covered in ice back then (and isn't right now) -- hence the vikings confusion.<br /><br />The global climate naturally changes. It always has and we have no reason to believe the global climate will suddenly reach a stable state just because politically motivated people who hate oil companies pass the Kyoto Accord or Copenhagen debacle.<br /><br />If the Earth really is getting warmer (compared to what "base year"?), we still don't know if that warming is part of the natural cycle or if it is caused by some action of man.<br /><br />Claiming there is any scientific basis to this argument is fraud. Sighting the opinions of academics who are well documented as very left wing politically does not make their opinions anything more than opinions. That several of these academics were willing to cut corners and corrupt data just proves the total lack of science in the debate.<br /><br />Its about politics. It always was. And most of the statistical tricks / common errors made in the climate hoax are the same ones used to separate investors from their money year in and year outGregnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-59570929344632424352010-01-13T22:01:16.603+00:002010-01-13T22:01:16.603+00:00Greg,
Sorry if I offended you with my analogy - I...Greg,<br /> Sorry if I offended you with my analogy - I used it to cite another case where there is no control or detailed history possible. Still, my point was that in a closed system, you could say that ultimately you will reach State B based on physics but decadal predictions may not be very accurate based on existing knowledge but that is also no excuse for giving up and trying not to estimate. Heck, what do I know - I just want to steal somebody else's money.RBnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-56653126353670085472010-01-13T21:58:07.338+00:002010-01-13T21:58:07.338+00:00"If you're liberal you think the world is..."If you're liberal you think the world is warming, if you're conservative you don't."<br /><br />This is absurd. The oceans ARE undoubtedly warmer (you are surely not denying the measurements?), I mean it's a bloody thermometer, it's not rocket science. So since it is warmer, does that mean that everyone is liberal?<br /><br />Come on people, get a grip and stay rational. Noisy series, underlying trends, recency bias, cognitive dissonance, for goodness sake use a little bit more of your cortical connectivity. Next thing you'll be telling me that the Earth is flat and lies at the center of the universe and that you're going to elect President Palin because you heard it all on FOX.leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-19098833849361176432010-01-13T21:50:01.047+00:002010-01-13T21:50:01.047+00:00RB -- you are either a shrewd politician or a lawy...RB -- you are either a shrewd politician or a lawyer (same thing really).<br /><br />None of my arguments had ANYTHING to do with evolution - intelligent design. Your argument is an old court room trick used by slime ball lawyers to confuse juries.<br /><br />Of course one can make "statements" that the S&P will reach whatever level with a 95% confidence level -- sell side analysts do so all the time. That doesn't mean there is even a shred of validity to the forecasts -- and it doesn't make the forecast into science<br /><br />Goldman Sach's Abby Cohen has been forecasting S&P 1700 now for decades. That book "Dow 30,000" was very popular. Neither forecast was science<br /><br />The earth is warmer than it was 500 years ago. Its colder than it was 1000 years ago. Neither statement proves any trend -- and neither statement proves or disproves any influence by man's activities.<br /><br />The very fact that you are arguing your pro-global warming view using political / lawyer tactics is just further proof that science has nothing to do with the debate.<br /><br />Its politics. You hate oil companies and want to tax / nationalize them. Great. You are entitled to your opinion as much as anyone else<br /><br />But don't commit fraud and mislabel label your political opinion as science.Gregnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-53611144079156212712010-01-13T21:32:15.351+00:002010-01-13T21:32:15.351+00:00Greg, you can still make statements about 10-year ...Greg, you can still make statements about 10-year returns with 95% confidence interval bounds (such as S&P will yield (3% +/- 3%) annualized real returns from today over the next ten years). Such a wide variance does not make it a useful projection. Similarly temperature increases currently forecast have a high variance, but some of the objections raised here are similar to that raised in the evolution-intelligent design debate and speak to the impossibility of science, not the science itself. Specifically with regards to your comment about weather forecast, I have here a paper from which I quote:<br />-----begin quote<br />Projections of how anticipated changes in greenhouse<br />gases and aerosols will influence climate over<br />time scales of several decades to centuries (dec–cen)<br />can be considered primarily as “boundary condition<br />problems” (Fig. 2). Such model-based projections seek<br />to describe climate trends, not the details of individual<br />days, seasons, or years.In contrast, daily weather<br />forecasts and shorter-term SI climate predictions [e.g.,<br />El Niño–Southern Oscillation (ENSO) forecasts] can<br />be thought of as “initial value problems,” for which<br />detailed knowledge of the observed current conditions<br />are crucially needed to define the starting point<br />(the initial conditions). Lorenz (1963) demonstrated<br />how, even if one possessed a hypothetically perfect<br />numerical model representing all of the physical<br />processes completely and without error, unavoidable<br />uncertainties in the initial conditions will invariably<br />grow and contaminate the numerical simulation of<br />transient weather systems. This sensitivity to initial<br />conditions (sometimes referred to as the “butterfly<br />effect”) limits to about 2 weeks the time period<br />over which even a perfect model could yield skillful<br />weather forecasts. When considering El Niño, a quasioscillatory<br />phenomenon that evolves more slowly than<br />synoptic weather systems, skillful numerical forecasts<br />of monthly mean or seasonal mean conditions (Shukla<br />1984) can be made with a lead time of 6–12 months<br />(Kirtman et al. 2002).<br />-- end quote<br />Authors: Meehl et al. Oct. 2009RBnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-68951973037119289012010-01-13T20:57:12.696+00:002010-01-13T20:57:12.696+00:00Every commenter on this blog has had a snake oil s...Every commenter on this blog has had a snake oil salesman try to sell a trading system / pricing model that predicts the S&P, FTSE, EURUSD rate, etc with an R2 of 99 and if you act right now I'll throw in an indicator that forecasts USDJPY for free!<br /><br />This gave rise to all the questions on the CFA exam (and others) about overfitting data, insufficient sample size, correlation does not equal causality, etc.<br /><br />And many statistics classes cite the example of Coca-Cola "causing" malaria in the 1950s. Sounds crazy now, but LOTS of people believed it back when. Turns out, sunny / hot weather causes people to be thirsty, and also causes more mosquitos to breed.<br /><br />In the end, climate change is no more "science" than the coca-cola hysteria. The models are no different than the overfit trading models hawked on late night TV.<br /><br />If human kind had a good understanding of weather patterns, why can't we forecast the weather around NYC or London a month in advance? How foolish and hysterical does one have to believe that a snake oil salesman can forecast global weather 50 or 100 **years** from now?<br /><br />The leaked e-mails from England prove the scientific process is not being followed, and data is being carefully selected to reach a pre-determined "conclusion".<br /><br />Its not science -- its politics. The same people who have always hated oil companies also support global warming.<br /><br />People in finance should have seen this climate hoax for what it was. Instead, we were too busy deluding ourselves about the infinite accuracy of our own VaR models-- thus justifying our leveraging up 30-1 or more. The risk is under control! we assured ourselves with our quack risk scienceGregnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-73914784479310118672010-01-13T20:26:59.789+00:002010-01-13T20:26:59.789+00:00"the significant distinction is that with cli..."the significant distinction is that with climate change there are scientists debating not economists"<br /><br />I'd go one further - you do not have to assume rational man in your complex systems analysis. Geophysics is more appropriate.RBnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82486668344384646922010-01-13T20:20:43.495+00:002010-01-13T20:20:43.495+00:00What kills me is how political climate change is. ...What kills me is how political climate change is. If you're liberal you think the world is warming, if you're conservative you don't.<br /><br />I agree that there COULD be SOME manmade effect, but it's probably dwarfed by the sun and the oceans, and why we would want to spend trillions on something as nebulous as that--especially now--is beyond me.Stevenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-60819142905462305452010-01-13T19:53:20.013+00:002010-01-13T19:53:20.013+00:00I think the climate debate is actually a good meta...I think the climate debate is actually a good metaphor of what is wrong with markets.<br /><br />Any true scientific "fact" needs to be verified versus a control -- usually a neutral "do nothing" case. Name the planet exactly like earth in every way that is being used to show what temperature(s) the earth would be experiencing without fossil fuels / man's existence?<br /><br />Its quack science, no matter how many PhDs get involved.<br /><br />In the markets, we have all been indoctrinated with Black Scholes, VaR, regression models and other "science" that relies on normal distributions -- even though that distribution clearly does not describe what actually happens. <br /><br />Decades of people talking about fat tails and skew does nothing to disuade the smart @ss academic types from shoving their models on us.<br /><br />Lets assume there are no commissions, no bid/ask spread, and no taxes -- and see what our academic models predict!<br /><br />And the grand daddy of them all: rational markets. Love, war, genocide, humanitarian aid, charity, greed, fear, lust, etc, etc -- but somehow humans become infinitely rational when they trade securities.<br /><br />True science can benefit humankind, but the stuff that passes for science today lacks rigor and process, and is too often perverted for political endsGregnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-44505897522360966772010-01-13T19:50:00.773+00:002010-01-13T19:50:00.773+00:00Macroman, when looking at fx do you guys run your ...Macroman, when looking at fx do you guys run your own FEER estimates or do you get them somewhere else?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-48847654103651859352010-01-13T16:41:00.671+00:002010-01-13T16:41:00.671+00:00Great inro - trains - friction geniusGreat inro - trains - friction geniusAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-20135649721529147182010-01-13T16:37:33.168+00:002010-01-13T16:37:33.168+00:00Macro Man, while I can appreciate the comparison w...Macro Man, while I can appreciate the comparison with the inflation/deflation debate at a superficial level the significant distinction is that with climate change there are scientists debating not economists. And that difference is chalk and cheese when it comes to substance.<br /><br />LFYAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-38820708624572401932010-01-13T16:16:55.907+00:002010-01-13T16:16:55.907+00:00On China + commods: yes, their spec trading + stoc...On China + commods: yes, their spec trading + stocks + profit taking is major driver in copper. Don't see the same in crude. What China buys daily plus their annual demand growth is pretty much in the price. They do build strategic stock (on- shore tanks) but that extra demand is also in the price. CL1 still more driven by US stocks,demand,outlook,products in contango storage,us$ value,index funds,mrkt makers,options,etc..<br />The wti/us$ correl also seems to have come off a bit recently from its high levels.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-50790426615726285452010-01-13T16:00:00.792+00:002010-01-13T16:00:00.792+00:00Seems as though the gradual moves by China to tigh...Seems as though the gradual moves by China to tighten policy, the evidence of considerable supply and the prospect of a modestly firmer dollar on even slightly improving US employment numbers do indeed pose multiple and growing risk for many commodities and the associated currencies and carry trades. As usual, the only unknown is WHEN?leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-56128873303904505622010-01-13T15:54:16.527+00:002010-01-13T15:54:16.527+00:00Ian,
yes, downside risk is there with Cu at 7500 e...Ian,<br />yes, downside risk is there with Cu at 7500 earlier this week and a 82 in CL1,now < 80 on the stock data. It all feels a bit vulnerable up here. Having said that, I'm not sure the bears are gonna take over the bulls in flooring the commods. Too much money chasing low(er) levels to jump on board again.Anonymousnoreply@blogger.com