Wednesday, September 28, 2011
Monday, September 05, 2011
Financial Distotion - A Ticking Time Bomb
Markets have lost their purpose
Anthony Hilton
14 Jun 2011
Twenty years ago, it used to be the case that only in the foreign exchange
market was the underlying business activity dwarfed by speculation -
meaning that the foreign currency needed for the buying and selling of
imports and exports was well under 10% of the global daily volume.
Today, similar conditions have an impact on all manner of markets which are
simply not structured to cope with such waves of speculation.
We are now in a position where flows of hot money drive prices, not the
fundamentals of supply and demand. And because other markets lack the scale
and resilience of forex, the results are less benign.
The belief that markets know best rests on a couple of important factors.
First, there have to be a lot of participants in the market so that no one
can influence more than 5% of either supply or demand, which in turn means
no group is in a position to use its buying clout or monopoly power to
influence price or supply.
Second, it is important that people are principals, either acting in their
own name or for a company which is either supplier or end user. When these
conditions exist, it is reasonable to assume that price signals from the
market are fairly accurate reflections of genuine supply and demand.
This begins to break down when buyers and sellers are in a position to use
other people's money - thereby acting as agents rather than principals.
It is often - though not always - the case that this coincides with their
being interested in speculating on price movements rather than the buying
or selling of the physical goods for some business purpose.
There are two reasons things have gone wrong in financial markets.
In recent times - since technology advanced enough to allow capital to be
moved in seconds into or out of any market in the world - the ebbs and
flows of speculative money have increased massively.
Capital is now mobilised on a global scale and directed anywhere in the
world at the touch of a button. It dwarfs the resources of the original
market participants.
At the same time, with a growing emphasis on trading profits and short-term
time horizons, money managers have embraced momentum - buying not on
fundamentals but simply because everyone else seems to be buying, or
selling because they all seem to be selling. They assume they will be able
to ride the price movement and then use instant-dealing technology to leap
off and take their profits just as the price is turning.
This has increased massively the amount of money swamping a market when it
is in fashion. It has also multiplied the power and influence of those who
are seen to have an edge in a market - the established traders or
investment banks - because where they lead others follow (or risk being
wiped out). The interaction of their expertise and third-party money gives
a few speculators disproportionate influence. These lead speculators now
have the power of the herd behind them. They have enough monopoly power to
distort prices.
Financial markets such as the oil market, the metals markets, the grain
markets or the sovereign debt market were created for actual users, not
speculators, but they are now so dominated by hot money that the sounds
from the original users are no longer audible. As a result, these markets
and their prices indicate what the speculative money believes at any one
time, and this is not necessarily what is happening in the real economy. It
also adds an overwhelmingly short-term perspective and huge layers of
volatility.
We all pay a high price for this because the real economy is then forced to
adjust. In rich countries, oil consumption and economic activity get cut as
oil becomes too expensive. In poor countries, they have riots and
governments fall as food becomes too expensive.
In all countries, governments have to produce policies that put the whims
of the markets before the needs of their citizens - witness the way
policies across Europe are tailored to appease bondholders and debt
markets.
A letter to the Financial Times yesterday pointed out what are only the
most recent examples of how the financial market tail wags the dog.
In oil, pricing is based on two sources of supply: the North Sea's Brent
crude and West Texas intermediate. For years, the price difference between
them has remained between two and three dollars to reflect the oil quality
and its distance from market.
At present, however, the price gap is more than $17. Similarly, it has long
been a feature of metals markets that when stocks rise, the price falls.
But not since 2008. Today, stocks at the London Metal Exchange are high and
rising, but so are metal prices. In both these cases - as well as with
grain and foodstuffs - the new factor in recent years is that these markets
have become fashionable for financial speculators.
To sum up, we have financial institutions that have power without
responsibility. They are dedicated to using that power to make profits for
themselves. They now know they can drive markets in one direction or
another for most, if not all, of the time. The distorted signals these
markets then deliver hold governments and the world's citizens to ransom.
From being the servant of the world economy, the financial markets are
becoming its master.
This is not how the system was meant to work. This is not what a belief in
markets was meant to deliver. It is impossible to know how it will end but
it is surely unsustainable.
Anthony Hilton
14 Jun 2011
Twenty years ago, it used to be the case that only in the foreign exchange
market was the underlying business activity dwarfed by speculation -
meaning that the foreign currency needed for the buying and selling of
imports and exports was well under 10% of the global daily volume.
Today, similar conditions have an impact on all manner of markets which are
simply not structured to cope with such waves of speculation.
We are now in a position where flows of hot money drive prices, not the
fundamentals of supply and demand. And because other markets lack the scale
and resilience of forex, the results are less benign.
The belief that markets know best rests on a couple of important factors.
First, there have to be a lot of participants in the market so that no one
can influence more than 5% of either supply or demand, which in turn means
no group is in a position to use its buying clout or monopoly power to
influence price or supply.
Second, it is important that people are principals, either acting in their
own name or for a company which is either supplier or end user. When these
conditions exist, it is reasonable to assume that price signals from the
market are fairly accurate reflections of genuine supply and demand.
This begins to break down when buyers and sellers are in a position to use
other people's money - thereby acting as agents rather than principals.
It is often - though not always - the case that this coincides with their
being interested in speculating on price movements rather than the buying
or selling of the physical goods for some business purpose.
There are two reasons things have gone wrong in financial markets.
In recent times - since technology advanced enough to allow capital to be
moved in seconds into or out of any market in the world - the ebbs and
flows of speculative money have increased massively.
Capital is now mobilised on a global scale and directed anywhere in the
world at the touch of a button. It dwarfs the resources of the original
market participants.
At the same time, with a growing emphasis on trading profits and short-term
time horizons, money managers have embraced momentum - buying not on
fundamentals but simply because everyone else seems to be buying, or
selling because they all seem to be selling. They assume they will be able
to ride the price movement and then use instant-dealing technology to leap
off and take their profits just as the price is turning.
This has increased massively the amount of money swamping a market when it
is in fashion. It has also multiplied the power and influence of those who
are seen to have an edge in a market - the established traders or
investment banks - because where they lead others follow (or risk being
wiped out). The interaction of their expertise and third-party money gives
a few speculators disproportionate influence. These lead speculators now
have the power of the herd behind them. They have enough monopoly power to
distort prices.
Financial markets such as the oil market, the metals markets, the grain
markets or the sovereign debt market were created for actual users, not
speculators, but they are now so dominated by hot money that the sounds
from the original users are no longer audible. As a result, these markets
and their prices indicate what the speculative money believes at any one
time, and this is not necessarily what is happening in the real economy. It
also adds an overwhelmingly short-term perspective and huge layers of
volatility.
We all pay a high price for this because the real economy is then forced to
adjust. In rich countries, oil consumption and economic activity get cut as
oil becomes too expensive. In poor countries, they have riots and
governments fall as food becomes too expensive.
In all countries, governments have to produce policies that put the whims
of the markets before the needs of their citizens - witness the way
policies across Europe are tailored to appease bondholders and debt
markets.
A letter to the Financial Times yesterday pointed out what are only the
most recent examples of how the financial market tail wags the dog.
In oil, pricing is based on two sources of supply: the North Sea's Brent
crude and West Texas intermediate. For years, the price difference between
them has remained between two and three dollars to reflect the oil quality
and its distance from market.
At present, however, the price gap is more than $17. Similarly, it has long
been a feature of metals markets that when stocks rise, the price falls.
But not since 2008. Today, stocks at the London Metal Exchange are high and
rising, but so are metal prices. In both these cases - as well as with
grain and foodstuffs - the new factor in recent years is that these markets
have become fashionable for financial speculators.
To sum up, we have financial institutions that have power without
responsibility. They are dedicated to using that power to make profits for
themselves. They now know they can drive markets in one direction or
another for most, if not all, of the time. The distorted signals these
markets then deliver hold governments and the world's citizens to ransom.
From being the servant of the world economy, the financial markets are
becoming its master.
This is not how the system was meant to work. This is not what a belief in
markets was meant to deliver. It is impossible to know how it will end but
it is surely unsustainable.
Wednesday, August 24, 2011
Higg's Bosun - what is it?
How Particles Acquire Mass
By Mary and Ian Butterworth, Imperial College London, and Doris and Vigdor Teplitz, Southern Methodist University, Dallas, Texas, USA.
The Higgs boson is a hypothesised particle which, if it exists, would give the mechanism by which particles acquire mass.
Matter is made of molecules; molecules of atoms; atoms of a cloud of electrons about one-hundred-millionth of a centimetre and a nucleus about one-hundred-thousandth the size of the electron cloud. The nucleus is made of protons and neutrons. Each proton (or neutron) has about two thousand times the mass of an electron. We know a good deal about why the nucleus is so small. We do not know, however, how the particles get their masses. Why are the masses what they are? Why are the ratios of masses what they are? We can't be said to understand the constituents of matter if we don't have a satisfactory answer to this question.
Peter Higgs has a model in which particle masses arise in a beautiful, but complex, progression. He starts with a particle that has only mass, and no other characteristics, such as charge, that distinguish particles from empty space. We can call his particle H. H interacts with other particles; for example if H is near an electron, there is a force between the two. H is of a class of particles called "bosons". We first attempt a more precise, but non-mathematical statement of the point of the model; then we give explanatory pictures.
In the mathematics of quantum mechanics describing creation and annihilation of elementary particles, as observed at accelerators, particles at particular points arise from "fields" spread over space and time. Higgs found that parameters in the equations for the field associated with the particle H can be chosen in such a way that the lowest energy state of that field (empty space) is one with the field not zero. It is surprising that the field is not zero in empty space, but the result, not an obvious one, is: all particles that can interact with H gain mass from the interaction.
Thus mathematics links the existence of H to a contribution to the mass of all particles with which H interacts. A picture that corresponds to the mathematics is of the lowest energy state, "empty" space, having a crown of H particles with no energy of their own. Other particles get their masses by interacting with this collection of zero-energy H particles. The mass (or inertia or resistance to change in motion) of a particle comes from its being "grabbed at" by Higgs particles when we try and move it.
If particles no get their masses from interacting with the empty space Higgs field, then the Higgs particle must exist; but we can't be certain without finding the Higgs. We have other hints about the Higgs; for example, if it exists, it plays a role in "unifying" different forces. However, we believe that nature could contrive to get the results that would flow from the Higgs in other ways. In fact, proving the Higgs particle does not exist would be scientifically every bit as valuable as proving it does.
These questions, the mechanisms by which particles get their masses, and the relationship amongs different forces of nature, are major ones and so basic to having an understanding of the constituents of matter and the forces among them, that it is hard to see how we can make significant progress in our understanding of the stuff of which the earth is made without answering them.
By Mary and Ian Butterworth, Imperial College London, and Doris and Vigdor Teplitz, Southern Methodist University, Dallas, Texas, USA.
The Higgs boson is a hypothesised particle which, if it exists, would give the mechanism by which particles acquire mass.
Matter is made of molecules; molecules of atoms; atoms of a cloud of electrons about one-hundred-millionth of a centimetre and a nucleus about one-hundred-thousandth the size of the electron cloud. The nucleus is made of protons and neutrons. Each proton (or neutron) has about two thousand times the mass of an electron. We know a good deal about why the nucleus is so small. We do not know, however, how the particles get their masses. Why are the masses what they are? Why are the ratios of masses what they are? We can't be said to understand the constituents of matter if we don't have a satisfactory answer to this question.
Peter Higgs has a model in which particle masses arise in a beautiful, but complex, progression. He starts with a particle that has only mass, and no other characteristics, such as charge, that distinguish particles from empty space. We can call his particle H. H interacts with other particles; for example if H is near an electron, there is a force between the two. H is of a class of particles called "bosons". We first attempt a more precise, but non-mathematical statement of the point of the model; then we give explanatory pictures.
In the mathematics of quantum mechanics describing creation and annihilation of elementary particles, as observed at accelerators, particles at particular points arise from "fields" spread over space and time. Higgs found that parameters in the equations for the field associated with the particle H can be chosen in such a way that the lowest energy state of that field (empty space) is one with the field not zero. It is surprising that the field is not zero in empty space, but the result, not an obvious one, is: all particles that can interact with H gain mass from the interaction.
Thus mathematics links the existence of H to a contribution to the mass of all particles with which H interacts. A picture that corresponds to the mathematics is of the lowest energy state, "empty" space, having a crown of H particles with no energy of their own. Other particles get their masses by interacting with this collection of zero-energy H particles. The mass (or inertia or resistance to change in motion) of a particle comes from its being "grabbed at" by Higgs particles when we try and move it.
If particles no get their masses from interacting with the empty space Higgs field, then the Higgs particle must exist; but we can't be certain without finding the Higgs. We have other hints about the Higgs; for example, if it exists, it plays a role in "unifying" different forces. However, we believe that nature could contrive to get the results that would flow from the Higgs in other ways. In fact, proving the Higgs particle does not exist would be scientifically every bit as valuable as proving it does.
These questions, the mechanisms by which particles get their masses, and the relationship amongs different forces of nature, are major ones and so basic to having an understanding of the constituents of matter and the forces among them, that it is hard to see how we can make significant progress in our understanding of the stuff of which the earth is made without answering them.
Wednesday, August 10, 2011
The broken society
Over the last ten years I have had many conversations with people about the parlous state of our country. Many were unable to comprehend how we came to sink so low on so many levels. All without exception blamed soft headed thinking at the highest and lowest levels of national and local government which has led to a rapid degredation of morality, parental control, discipline as well as alienation from the political process.
The majority of people in this country have known what is wrong with this country for years but have been unable to convey their fears and concerns to unlistening representatives, more concerned with the perks of political power than the interests of the country. Politicians of all parties have been only too willing to sell sound principles down the drain, if it means winning votes to either hold on to or gain power.
The constant drip drip effect of years of political expediency has led to a gradual weakening of the solid foundations that gave order, principle and stability to our society. We no longer value the cornerstone of any society, the family unit, as we used to do. The media has done its damndest to focus our attention on meaningless drivel, celebrity and youth culture, giving both a superficial gravitas they do not merit.
Instead, the wisdom of the elderly has been devalued to such an extent that the elderly are more or less seen as an inconvenience to be ignored, a class of people with no value and yet it was they who fought for the freedom of those that followed. We have broken our society or rather those that serve us have failed us lamentably and still they will not recognise it.
We the people know what has gone wrong and we know how to fix it but are prevented from doing so by those who legislate, not in the interests of the country but the pursuit of their own political agenda and the ultimate reward of power. If there is a vote in it, they will do it, regardless of the long term effects.
Poor foundations can only make for an unstable building.
It must stop. We must re-build the foundations and construct a sustainable society in which we can all play a part and take pride. That is the task for which we elect leaders. That is the challenge before them.
The majority of people in this country have known what is wrong with this country for years but have been unable to convey their fears and concerns to unlistening representatives, more concerned with the perks of political power than the interests of the country. Politicians of all parties have been only too willing to sell sound principles down the drain, if it means winning votes to either hold on to or gain power.
The constant drip drip effect of years of political expediency has led to a gradual weakening of the solid foundations that gave order, principle and stability to our society. We no longer value the cornerstone of any society, the family unit, as we used to do. The media has done its damndest to focus our attention on meaningless drivel, celebrity and youth culture, giving both a superficial gravitas they do not merit.
Instead, the wisdom of the elderly has been devalued to such an extent that the elderly are more or less seen as an inconvenience to be ignored, a class of people with no value and yet it was they who fought for the freedom of those that followed. We have broken our society or rather those that serve us have failed us lamentably and still they will not recognise it.
We the people know what has gone wrong and we know how to fix it but are prevented from doing so by those who legislate, not in the interests of the country but the pursuit of their own political agenda and the ultimate reward of power. If there is a vote in it, they will do it, regardless of the long term effects.
Poor foundations can only make for an unstable building.
It must stop. We must re-build the foundations and construct a sustainable society in which we can all play a part and take pride. That is the task for which we elect leaders. That is the challenge before them.
Tuesday, August 09, 2011
Complex protoplasm.
Most complex mass of protoplasm on Earth or maybe in our galaxy! Make of it what you will.
Friday, July 22, 2011
Oldest mass of water ever detected in Universe
Astronomers have discovered the largest and oldest mass of water ever detected in the universe — a gigantic, 12-billion-year-old cloud harboring 140 trillion times more water than all of Earth's oceans combined.
The cloud of water vapor surrounds a supermassive black hole called a quasar located 12 billion light-years from Earth. The discovery shows that water has been prevalent in the universe for nearly its entire existence, researchers said.
"Because the light we are seeing left this quasar more than 12 billion years ago, we are seeing water that was present only some 1.6 billion years after the beginning of the universe," said study co-author Alberto Bolatto, of the University of Maryland, in a statement. "This discovery pushes the detection of water one billion years closer to the Big Bang than any previous find."
The cloud of water vapor surrounds a supermassive black hole called a quasar located 12 billion light-years from Earth. The discovery shows that water has been prevalent in the universe for nearly its entire existence, researchers said.
"Because the light we are seeing left this quasar more than 12 billion years ago, we are seeing water that was present only some 1.6 billion years after the beginning of the universe," said study co-author Alberto Bolatto, of the University of Maryland, in a statement. "This discovery pushes the detection of water one billion years closer to the Big Bang than any previous find."
Tuesday, July 05, 2011
God
If there is no #God, life and death are meaningless as they are without purpose or consequence. The how and the why are worthless pursuits.
It is impossible to accept this synopsis because to do so would mean that everything (the universe and all that it is) is for nothing. To believe that it evolved by mere chance, came from nothing, means nothing and is of no consequence, is too stretch logic to breaking point.
Everything that happens everywhere, whether it be the birth and destruction of stars or galaxies, or the way we and all living things live and die has purpose and meaning. To suggest then that the Cosmos from which life evolved is not imbued with the same meaning and purpose that is demonstrated in everything we see is to admit that logic itself is meaningless.
That makes even less sense than believing in God. If science is based on logic then science has nowhere to go since the Universe itself is apparently without logic.
It is impossible to accept this synopsis because to do so would mean that everything (the universe and all that it is) is for nothing. To believe that it evolved by mere chance, came from nothing, means nothing and is of no consequence, is too stretch logic to breaking point.
Everything that happens everywhere, whether it be the birth and destruction of stars or galaxies, or the way we and all living things live and die has purpose and meaning. To suggest then that the Cosmos from which life evolved is not imbued with the same meaning and purpose that is demonstrated in everything we see is to admit that logic itself is meaningless.
That makes even less sense than believing in God. If science is based on logic then science has nowhere to go since the Universe itself is apparently without logic.
Thursday, May 26, 2011
A Pittance
Nothing worth a pittance will ever come from a philosophy, of spin, half truths and outright deceit
Political hypocricy
Political hypocricy and double standards will never engender anything but a loss of respect for its practitioners
Tuesday, May 03, 2011
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