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Thursday, May 11, 2017

5 Universal Laws Of Human (Investment) Stupidity

In 1976, a professor of economic history at the University of California, Berkeley published an essay outlining the fundamental laws of a force he perceived as humanity’s greatest existential threat: Stupidity.
Stupid people, Carlo M. Cipolla explained, share several identifying traits:
  • they are abundant,
  • they are irrational, and;
  • they cause problems for others without apparent benefit to themselves
The result is that “stupidity” lowers society’s total well-being and there are no defenses against stupidity. According to Cipolla:
“The only way a society can avoid being crushed by the burden of its idiots is if the non-stupid work even harder to offset the losses of their stupid brethren.”
Let’s take a look at Cipolla’s five basic laws of human stupidity as they apply to investing and the markets today.

Law 1: Always and inevitably everyone underestimates the number of stupid individuals in circulation.

“No matter how many idiots you suspect yourself surrounded by you are invariably low-balling the total.”
In investing, the problem of investor “stupidity” is compounded by a variety of biased assumptions that are made.  Individuals assume that when the media publishes something, the superficial factors like the commentator’s job, education level, or other traits suggest they can’t possibly be stupid. We, therefore, attach credibility to their opinion as long as it confirms our own.
This is called “confirmation bias.”
If we believe the stock market is going to rise, then we tend to only seek out news and information that supports our view. This confirmation bias is a primary driver of the psychological investing cycle of individuals as shown below. I discussed this previously in why “Media Headlines Will Lead You To Ruin.”
As individuals, we want “affirmation” our current thought processes are correct. As human beings, we hate being told we are wrong, so we tend to seek out sources that tell us we are “right.”
This is why it is always important to consider both sides of every debate equally and analyze the data accordingly. Being right and making money are not mutually exclusive.

Law 2: The probability that a certain person be stupid is independent of any other characteristic of that person.

Cipolla posits stupidity is a variable that remains constant across all populations. Every category one can imagine—gender, race, nationality, education level, income—possesses a fixed percentage of stupid people.
When it comes to investing, ALL investors, individual and professionals, are subject to making “stupid”decisions. As I discussed recently:
“At each major market peak throughout history, there has always been something that became “the” subject of speculative investment. Rather it was railroads, real estate, emerging markets, technology stocks or tulip bulbs, the end result was always the same as the rush to get into those markets also led to the rush to get out. Today, the rush to buy “ETF’s” has clearly taken that mantle, as I discussed last week, and as shown in the chart below.”
It isn’t the surge into equity ETF’s which should give rise to concern about future outcomes, but the components of “psychology” behind it.
Though we are often unconscious of the action, humans tend to “go with the crowd.” Much of this behavior relates back to “confirmation” of our decisions but also the need for acceptance. The thought process is rooted in the belief that if “everyone else” is doing something, then if I want to be accepted, I need to do it too.
In life, “conforming” to the norm is socially accepted and in many ways expected. However, in the financial markets, the “herding” behavior is what drives market excesses during advances and declines.
As Howard Marks once stated:
“Resisting – and thereby achieving success as a contrarian – isn’t easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, since momentum invariably makes pro-cyclical actions look correct for a while. (That’s why it’s essential to remember that ‘being too far ahead of your time is indistinguishable from being wrong.’

Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it’s challenging to be a lonely contrarian.
Moving against the “herd” is where the most profits are generated by investors in the long term. The difficulty for most individuals, unfortunately, is knowing when to “bet” against those who are being “stupid.”

Law 3. A stupid person is a person who causes losses to another person or to a group of persons while himself deriving no gain and even possibly incurring losses.

Consistent stupidity is the only consistent thing about the stupid. This is what makes stupid people so dangerous. As Cipolla explains:
“Essentially stupid people are dangerous and damaging because reasonable people find it difficult to imagine and understand unreasonable behavior.
Throughout history, investors are constantly drawn into investment strategies promoted by a wide variety of “industry professionals” which ultimately leads to losses in the end. This point was clearly made in a recent article by Jason Zweig entitled: “Whatever You Do, Don’t Read This Column.”
“Investors believe the darnedest things.

In one recent survey, wealthy individuals said they expect their portfolios to earn a long-run average of 8.5% annually after inflation. With bonds yielding roughly 2.5%, a typical stock-and-bond portfolio would need stocks to grow at 12.5% annually in order to hit that overall 8.5% target. Net of fees and inflation, that would require approximately doubling the 7% annual gain stocks have produced over the long term.

Individuals aren’t the only investors who believe in the improbable. One in six institutional investors, in another survey, projected gains of more than 20% annually on their investments in venture capital — even though such funds, on average, have underperformed the stock market for much of the 2000s.

Although almost nothing is impossible in the financial markets, these expectations are so far-fetched they border on fantasy.”
He is absolutely right, and despite the historical realities of investing, both the individual and the professional will ultimately suffer losses. As shown in the chart below, there is no evidence which shows markets can compound high levels of growth rates from current valuation levels. (For more detail on forward returns read “Valuations Matter”)
There is a massive difference between AVERAGE and ACTUAL returns on invested capital. The impact of losses, in any given year, destroys the annualized “compounding” effect of money.
Individuals who experienced either one, or both, of the last two bear markets, now understand the importance of “time” relating to their investment goals. Individuals that were close to retirement in either 2000, or 2007, and failed to navigate the subsequent market draw downs have had to postpone their retirement plans, potentially indefinitely.
But yet despite the losses incurred by both professionals and individuals, just eight short years after the largest financial crisis since the “Great Depression,” individuals are piling on excessive risk once again under the guise “this time is different.” 
Talk about stupid.
Despite the mainstream media’s consistent drivel investors should just “passively index” and forget about actually managing the risk of catastrophic capital loss, the reality is that investors “buy high and sell low” for a reason.
“Greed” and “Fear” are far more powerful in driving our investment decisions versus “Logic” and “Discipline.” 
As Jason states:
“The traditional explanations for believing in an investing tooth fairy who will leave money under your pillow are optimism and overconfidence: Hope springs eternal, and each of us thinks we’re better than the other investors out there.

There’s another reason so many investors believe in magic: We can’t handle the truth.”
All of which leads us to:

Law 4: Non-stupid people always underestimate the damaging power of stupid individuals. In particular non-stupid people constantly forget that at all times and places and under any circumstances to deal and/or associate with stupid people always turns out to be a costly mistake.

Lot’s of “non-stupid people” are currently suggesting the next correctionary event will be mild, most likely no more than 20%. The idea is based upon the belief the Federal Reserve, and Central Banks globally, will quickly come to the rescue of a failing market and investors will quickly react by once again jumping back into the market.
However, as we have seen repeatedly throughout history, “stupid” people tend to do exactly the opposite during a crisis than what “non-stupid” people expect.
Then there are the “perennial bulls” who keep telling investors to “hang on, keep putting money in, you’re a long-term investor, right?” These are the ones who never see the bear market destruction until well after the fact and then simply say “well, no one could have seen that coming.” 
Non-stupid people are conservative. They analyze the risk of loss and conserve capital during declines. Make sure you are surrounding yourself with those that understand the “math of loss.” 
As Howard Marks stated above, sometimes being a contrarian is lonely.
When we underestimate the stupid, we do so at our own peril.
This brings us to the fifth and final law:

Law 5: A stupid person is the most dangerous type of person.

Following the “herd,” has always ended badly for investors. In every full-market cycle, there is an inevitable belief “this time is different” for one reason or another.
It isn’t. It has never been. And this time will not be different either.
However, what has always separated out the great investors from everyone else, is they have acted independently of the “herd.” They have a discipline, a strategy and a driving will to succeed.
They don’t “buy and hold.” They buy cheap and sell expensive. They avoid losses at all costs and they deeply understand the relationship of risk to reward.
They are the “non-stupid.”
These are the ones you want to follow.
Not the ones screaming at you on television telling you to “buy, buy, buy.”
Just remember that for every full-market cycle our job is to not only participate in the first-half of the cycle as prices rise, but to avoid the avoid the devastation during the second-half.
“Non-stupid” investors don’t spend a bulk of their time getting back to even.
That is an investing strategy better left to the “herd.”
Credit to Zero Hedge

The Reality Of Our Current CASHLESS SOCIETY.

Scientific And Religious Leaders Both Agree That Cataclysmic Disasters And Mass Death Are In Humanity’s Future

Are we on the verge of the worst times in all of human history? We live at a moment when prominent leaders in the scientific world and in the religious world are both urgently warning that humanity could soon be facing a nightmarish apocalyptic future. Weather patterns are rapidly changing, the crust of our planet is becoming increasing unstable, “superbugs” that are resistant to antibiotics threaten to completely render our best medical treatments obsolete, the number of global terror attacks continues to rise year after year, and thanks to weapons of mass destruction humanity now has the capability of completely destroying itself several times over. They often disagree about why it will happen, but an increasing number of scientific and religious leaders have come to the exact same conclusion that the future of humanity is very bleak.
Despite the fact that technology is increasing at an exponential rate, many top thinkers in the scientific community now believe that there is a very good chance that the human race will be facing extinction by the end of this century. The following comes from an outstanding Salon article
The late microbiologist Frank Fenner, for example, whose virological work helped eliminate smallpox, predicted in 2010that “humans will probably be extinct within 100 years, because of overpopulation, environmental destruction, and climate change.” Similarly, the Canadian biologist Neil Dawe reportedly“wouldn’t be surprised if the generation after him witness the extinction of humanity.” And the renowned ecologist Guy McPherson argues that humanity will follow the dodo into the evolutionary grave by 2026.
Those are some very sobering words.
Perhaps you have never heard of any of those guys before, but I know that virtually all of you have heard of Stephen Hawking. According to Hawking, we have now reached “the most dangerous moment in the development of humanity”
“Now, more than at any time in our history, our species needs to work together. We face awesome environmental challenges: climate change, food production, overpopulation, the decimation of other species, epidemic disease, acidification of the oceans. Together, they are a reminder that we are at the most dangerous moment in the development of humanity. We now have the technology to destroy the planet on which we live, but have not yet developed the ability to escape it.”
The last 100 years have been unlike any other era in human history. We have constructed towering cities all over the planet, we have developed remarkable technologies that have enabled us to make the impossible more than possible, and the population of this planet has shot up to a staggering 7 billion people.
But in order to feed our exploding population, we are going to need another miracle. According to Megan Clark, the head of Australia’s national science agency, more food will need to be produced over the next 50 years than has been produced throughout the rest of human history combined
“It is hard for me to comprehend that in the next 50 years we will need to produce as much food as has been consumed over our entire human history,” she said.
“That means in the working life of my children, more grain than ever produced since the Egyptians, more fish than eaten to date, more milk than from all the cows that have ever been milked on every frosty morning humankind has ever known.”
These are the types of things that keep scientific thinkers up late at night. At this moment, great famines are already hitting places such as Venezuela and Yemen, and this trend is only going to accelerate in the years ahead.
Hopefully mass death for the human race will be delayed for as long as possible, but one thing that is already happening is widespread species extinction among wild animals all over our planet. The following comes from one of my previous articles
It has been called “the long extinction”. Our planet is in the process of dying, and as you will see below, this process of death and destruction appears to be accelerating. According to a report that was put out by the World Wildlife Fund and the Zoological Society of London, the number of wild animals around the globe appears to be decreasing at a rate of about 2 percent a year. 2 percent may not sound like a lot to you, but over 10 years that would mean that 20 percent of all wild animals in the world would be gone. And according to that same report, it is being projected that the total loss of wildlife during the 50 year period from 1970 to 2020 will be a staggering 67 percent.
For religious leaders, the concerns are often more spiritual in nature.
Many Christians are convinced that the return of Jesus Christ is rapidly approaching, and meanwhile many Muslims are expecting a figure known as “the Mahdi” to come back soon. Here is more from the Salon article that I quoted earlier…
Returning to religion, recent polls show that a huge portion of religious people believe that the end of the world is imminent. For example, a 2010 survey found that 41 percent of Christians in the U.S. believe that Jesus will either “definitely” or “probably” return by 2050. Similarly, 83 percent of Muslims in Afghanistan and 72 percent in Iraq claim that the Mahdi, Islam’s end-of-days messianic figure, will return within their lifetimes.
As I discussed in The Rapture Verdict, I certainly believe that anyone that is able to stay alive through the cataclysms that are coming will have the opportunity to witness the return of Jesus Christ. So many ancient prophecies found in the Bible are being uniquely fulfilled in our generation, and it is truly an exciting time to be alive.
Unfortunately, many are not prepared for the great challenges that we will have to face before Jesus comes back. The following prophecy was recently given by Jeff Byerly
There are a lot of men who are taking puzzle pieces and forcing them in places they do not go and it is making the picture unclear. The end of this season will bring clarity and you will understand exactly where you are when the fiery “kickoff” event happens. The financial collapse will soon follow. Then food will be hard to come by and many will starve but my remnant will feed even greater multitudes than I did, for I have gone to the Father. The whole world shall once again go to war and over one fourth of the inhabitants of the earth shall be killed by guns and bombs, by famine, disease and the beasts of the land. There will be many martyred during this time and I will avenge their deaths when the number of them has been fulfilled.
All this will happen before the day of the LORD. The great day Our indignation, vengeance, retribution and wrath shall be poured out upon the children of disobedience. No man shall hide from Us. We shall find all those deserving just punishment. There will be a global earthquake caused by an asteroid hitting the sea. There shall be tsunamis worldwide and every mountain shall be moved and every island will be out of place. The very atmosphere will be ripped open and recede like a rolled up scroll. The sun will be black and the moon will be blood, gross darkness shall cover the people and the whole earth for three days as in the time of Exodus, but My the houses of My people shall have light and people shall become light for they will be changed and My glory shall be shown on them. My children will be shown clearly to the world who they are! 
Of course many other men and women of God have been warning about many of the exact same things, but most people are choosing not to listen.
Personally, I am entirely convinced that we are living during one of the most critical times in all of human history. The years ahead will be incredibly difficult, but for those that are part of the Remnant they will also be incredibly thrilling.
Great shaking is about to begin.
For those that know who they are, who they belong to and where they are going, that is actually very good news.
Credit to End of the American Dream

China Warns Washington Its Latest Missile Can Sink A US Aircraft Carrier

Image result for china new missile DF-26

China recently tested a new, advanced type of guided missile in the sea near the Korean peninsula, the Chinese defense ministry said Tuesday cited by the Times of India, just as South Korea concluded its presidential elections amid rising regional tensions. The test in the Bohai Sea was conducted to “raise the operational capability of the armed forces and effectively respond to threats to national security,” the ministry said in a brief statement. The statement did not say when the launch took place, only that it happened “recently”, nor did it give any details about the missile nor the type of platform from which it was launched.

The test came as China, the United States and the Koreas are locked in a diplomatic spat over Pyongyang’s missile launches and potential new nuclear tests. To deter any future launches, the US military recently deployed an anti-missile defesce system in South Korea to deter the North, which China sees as a threat to the regional security balance and its own ballistic missile capabilities. As reported previously, Washington and Seoul agreed to the Terminal High Altitude Area Defense (THAAD) battery deployment in July in the wake of North Korean missile tests, the installation of which prompted vigorous complaints by local South Koreans.

Last week, US Forces Korea said THAAD was now operational, with the ability to intercept North Korean missiles, prompting Beijing to demand the immediate suspension of the system’s deployment. A US defense official said, however, that the system had only “reached initial intercept capability”. This initial capability will be augmented later this year as additional hardware and components arrive to complete the system, officials said.

THAAD missile launcher

In any case, China's rising displeasure at the growing military ties between South Korea and the US manifested itself in the recent missile launches, because as China's Global Times stated all too clearly in an article overnight, "China’s latest missile test shows country can respond to aircraft carriers, THAAD." In other words, in addition to North Korea jawboning and threatening to blow up any strategic US asset in vicinity, as the NK ambassador told Sky News yesterday, now there's China too.

In an oped by Glbal Times' Deng Ziaoci, the author writes that China's successful test of a new type of guided missile in the Bohai Sea "killed two birds with one stone, experts told the Global Times, as the launch shows China can attack both aircraft carriers and the US Terminal High Altitude Area Defense (THAAD) missile defense system deployed in South Korea."

"To judge from the missile remains disclosed by media, it was a DF-26 that was tested recently, also known as the 'aircraft carrier killer' missile," Song Zhongping, a military expert who used to serve in the PLA Rocket Force, told the Global Times. "Considering the type of missile and the test location it is evident that we conducted a firing experiment targeting aircraft carriers, and the warhead possibly featured an electromagnetic pulse that could destroy a carrier's command system, as well as the THAAD system," Song noted.

When asked if the test's location in the Bohai Sea, close to the Korean Peninsula, could show that the test was specifically aimed at Seoul's THAAD deployment, Song said that this is unlikely as Bohai is China's usual weapons testing ground, unlike the South and East China Seas where experiments could be difficult as the waters contain various nations' Exclusive Economic Zones and international waters.

A statement from the Information Bureau of China's Ministry of National Defense on Tuesday confirmed that Chinese rocket forces tested a new type of missile in the Bohai Sea. The statement said the test was conducted in accordance with the annual training plan to "raise the operational capability of the armed forces and effectively respond to threats to national security," the statement said.

Translation: China just issued a stark warning to both the US and South Korea with one missile launch: bring your aircraft carriers too close, or launch the THAAD, and Beijing is ready.

Credit to Zero Hedge

Ancient Babylonian Tablet May Depict First-Ever Image of Biblical Tower of Babel

“And they said: ‘Come, let us build us a city, and a tower, with its top in heaven, and let us make us a name; lest we be scattered abroad upon the face of the whole earth.’” Genesis 11:4 (The Israel Bible™)

A recently deciphered tablet may reveal the first-ever image of what the Tower of Babel really looked like. (Screenshot)

An ancient tablet believed to depict the Biblical Tower of Babel has been deciphered 100 years after its discovery and may represent the first-ever image of the real Tower when it stood in Babylon during Biblical times.

The amazing tale of the tablet is told in a series produced by the Smithsonian. For scholars, the tablet offers proof that the Tower of Babel wasn’t just a work of fiction, the series argues, but “an actual building from antiquity.”

The sixth-century BCE tablet, found a century ago but, as part of a private collection, never studied or exhibited until now, depicts a Babylonian tower known as a ziggurat. After deciphering the tablet, Dr. Andrew George, an expert on ancient Babylon, became convinced it shows the true source of the famed Biblical story.
The relief carving of the tower on the tablet (Screenshot)

The amazing tale of the tablet is told in a series produced by the Smithsonian. For scholars, the tablet offers proof that the Tower of Babel wasn’t just a work of fiction, the series argues, but “an actual building from antiquity.”

In the first installment of the series, Dr. George, a professor of Babylonian at the University of London, examines the tablet, showing an image of the ziggurat, a massive stepped structure, and a figure holding a staff. The professor translates the inscription, which identifies the structure as the “Tower of Temple of Babylon”.

The inscription confirms the building was a Mesopotamian-style tower and illustrates the seven tiers of the ancient megastructure. Significantly, it also identifies the man behind it, depicted next to the tower – Mesopotamia’s most famous ruler, King Nebuchadnezzar II. Dr. George’s translation of the tablet reveals a detailed account of the tower’s construction by the Babylonian king.

The engraving of the tower and Nebuchadnezzer II (Screenshot)

“It reads, ‘from the Upper Sea, which is the Mediterranean, to the Lower Sea, which is the Persian Gulf, the far-flung lands and the teeming people of the habitations, I mobilized in order to construct this building.’”

The inscription was one of the keys to identifying the ziggurat described in the tablet as the Biblical tower. Dr. George believes that its builders, hailing from all over the region, could represent the Biblical ‘multitudes’ of languages which led to the tower’s destruction.

“The myth about the multitude of tongues comes from the context described in the stele about the multitude of peoples enlisted in the construction of the tower,” Professor George told Breaking Israel News in an interview. “There were many languages spoken on the construction site. From that it may be that the Bible got the idea of the confusion of tongues.”

Come, let us go down, and there confound their language, that they may not understand one another’s speech. Genesis 11:7

“As an Assyriologist, I don’t deal in the Bible, and I am not a religious person, but in this case, I can say there is an actual building which does seem to be the inspiration for the Biblical narrative,” Dr. George acknowledged to Breaking Israel News.

More and more, archaeologists are finding proof that Biblical stories relate to historical events. Dr. George sees no contradiction between science and the Bible. The professor described how this schism between science and religion is gradually being reconciled in his field.

“After Darwin cast a doubt on the story of a six-day creation, people began to ask what else in the Bible might not be true,” Dr. George said. “In the 19th century there was a discovery that the Assyrian kings described in the Bible were real and corroborated by archaeological evidence, making us ask now, how much more in the Bible is true?”

Archaeologists generally agree that the site of the tower is in the ancient city of Babylonia, an area known today as Al Qasr, approximately 80 miles south of Baghdad. The original city, believed to have been built in 2300 BCE, was sacked in 1595 BCE by the Hittites. In 612 BCE, Nebuchadnezzar II rebuilt the city, turning it into his capital. He constructed a large ziggurat around the original ancient tower.

Nebuchadnezzar’s ziggurat, referred to by archaeologists as the Etemenanki, is believed to have been almost 300 feet tall, with a square base measuring 300 feet on each side. It encased the earlier structure, made of sunbaked bricks, inside a 49-foot -thick wall of oven-baked brick.

Until the US incursion into Iraq in 2003, the site was neglected, due to local people stealing the ancient bricks for construction. Saddam Hussein reconstructed part of ancient Babylon in 1985, destroying sections of the ancient ruins. Hearkening back to the ancient practice, he added his own inscription, stamping into its bricks, “This was built by Saddam Hussein, son of Nebuchadnezzar, to glorify Iraq”, and installing a huge portrait of himself alongside the Biblical king.

Credit to 
Read more at https://www.breakingisraelnews.com/87748/ancient-tablet-proving-existence-tower-babel-deciphered-100-years-video/#TahdBsT1y2KD5YdB.99