December 31, 2009

New Year's Resolutions

Here is my list of new year's resolution. I definitely have some areas in which to improve in the coming year and some goals to meet. What are your new year's resolutions?

  1. I will plan lessons at least one week in advance.
  2. I will watch my diet, reducing both total calories and fat/cholesterol.
  3. I will exercise, at least some, each night.
  4. I will get outside more often (especially on the weekends).
  5. I will finish these numerous books I have started to read.

All quite standard really. A few will make huge differences in my life though, such as planning lesson further in advance and watching my diet better. I hope that I will have more stability and peace of mind before this time next year, but that depends on my work situation and my finances, for the most part. Time will tell. The year 2010 is only a few hours away...

December 30, 2009

Cultural Trends and Commentary

Another year is coming to a close. I would like to write something more personal now. Some ideas that are on my mind now are, New Year's resolutions, plans for 2010, a retrospective of how 2009 was for me. But I won't do any of that. The previous entry here was more personal than was my intention for this "blog". Instead of writing narrowly about personal hopes, dreams, aspirations or disappoints, I will broaden my topic somewhat and not confine myself to 2009 or 2010 tonight. Maybe I can break the rules tomorrow.

Human progress is the other topic on my mind. Progress and, thought of more broadly, how we have changed or are changing over the past two thousand or so years. First, class structure has changed but is far from gone. The noble classes of the past were joined by a wealthy merchant class and in the present day there are capitalists, celebrities, and politicians to add to that list (among others). The urban poor now stand in contrast to the rural poor and the timeless poverty trap that impedes social mobility is still in effect. The rich can afford the best schools, have the connections and money to provide for an upper class lifestyle for their progeny. The poor, when not lacking basic necessities are often surrounded by a culture that prevents them from advancing. I have seen it too many times already.

Second, the media is a common whipping boy but I don't think that most of the criticisms strike deeply enough. The media, both mainstream and otherwise, is a major factor is the dumbing down of culture, our skewed value system, our ignorance of world events, and why democracy is failing to govern effectively in the United States. Let me explain what I mean now, with a focus to news-giving(ignoring entertainment media for now). First, the major television news programs prefer hype over fact and sensationalism over journalism. We were forced to endure countless thousands of hours of Michael Jackson coverage while hundreds of real news stories went untold. A tear jerking "human interest" story about a young boy's battle with cancer will garner national media attention while true, useful, pertinent news stories, major political and/or historic events will be ignored. Celebrities are the focus now and they are celebrities most often for inane and meaningless reasons dreamed up by marketing specialists. Television viewers, magazine readers, and newspaper readers are fed a constant diet of "celebrity gossip" in place of "news".

For verification of this, pick up an issue of The Economist. It comes out weekly, so it will be up to date. Read it. Each issue contains hundreds of well written articles about important global trends, history making events, key players on the world stage, and thoughtful commentary. And curiously, almost none of it will ever appear on television. FOX News has its "60 seconds around the world" (or 85 seconds? I don't recall) segment that illustrates this point perfectly. They spend 23 hours and 59 minutes each day yammering about celebrities, bickering about domestic politics, and sensationalizing inconsequential rubbish, but they devote 1 minute to letting us see a quick montage of the outside world. Why is this? The media outlets (doesn't that term tell you something?) are doing what sells in a market economy and this mindless blather is what sells. But at the same time, the choice is removed, value is removed, and expectations are permanently lowered.

Yes, we do have the internet now (some of us) but it too is dominated by the same trends and the same power-players. At a time when it is so easy to disseminate information our culture is being deprived of it and is growing accustomed to this deprivation. Ignorance is a tool of control for those in power, and it always has been. Propaganda can be used to mobilize a country for war or to placate a people into an easy, stupefying slumber. I don't know that we need to speculate on a super secret cabal of elites that covertly want to keep us ignorant and craving more Britney Spears/Michael Jackson, but it serves the interest of those in power to not understand what is happening, to slurp up whatever nonsense they want us to consume, and to value celebrities more than our safety, security, financial stability or humanity.

Third, the shift to referring to people as "consumers" is disturbing to me every time I hear it. Though it may be honest now, it is vulgar nonetheless. To view our role as one of simply consumption and not creators, as persons, as individuals with complex ideas, hopes, and dreams, is to me demeaning. We have become consumers: pigs at the trough. Where does this notion come from? How did this enter our lexicon? The language betrays the common attitude and it isn't just crass materialism but even deeper, it is the idea that our function in this world is to suck up resources and thereby feed a capitalist system with our consumption. Shaping this wave of desire to consume has become both an art and a science and the herd mentality has never been stronger. Is it ironic that "consumption" used to refer to a disease and now it refers to man? Have we become the disease? Perhaps so.

Fourth, because I cannot continue in such a depressing way, I must mention that the notion of scientific progress is alive as ever and that people are more connected than ever (and at the same time, alienated from one another in new and frightening ways). I am confident that by the time I am old man, medical science will have made many more great advances and my quality of life will be improved (if I have the money to pay for it). I am confident that computers will continue to speed up, that games will be more realistic, that technology will be cheaper and more accessible to all segments of the population, and that each year our understanding of the universe will be enlarged. This leaves me with a general feeling of human progress that likely has not always been felt and which stands in contrast to the social critiques I expressed earlier. The sum total of human knowledge will continue to increase despite our tendencies toward nationalism, religious superstition, racism, and other social ills. This is good.

Fifth, the mounting problem of debt troubles me. Though the problem is epidemic in the United States, the US is far from alone. Most European nations and Japan are deeply in debt as nations and debt is way of life for both individual people and corporations. Our modern world system, built on a debt generated fiat money system, is a precarious house of cards waiting to topple. The attitudes that govern this confidence game are both short term and destructive and I cannot imagine still what will happen when it all comes crashing down. We may have come close in 2008 and 2009, but even that cliff is less scary than the destruction of the entire debt based system upon which all modern financial systems, nation states, corporations and most households are based. The film "Money as Debt" will explain the problem in greater detail and demonstrate how this system is ultimately unsustainable. Does this gnaw at the back of your psyche as well?

Now for a short, personal note. I will sleep now because I have a lot of work tomorrow. Papers to check, lessons to plan, workouts to do, birthday parties to attend. I need to get an early start and some caffeine may be needed. As a closing note, in the face of all the uncertainty, fear and inadequacy, I want to feel that I have improved the world we live in, even if by only a little. Do you feel the same? Have you succeeded?

December 27, 2009

How I Came to the Study of Economics

I began to become interested in economics, finance, and investing in January of 2008. I read here and there on the stock market, index funds, fundamental analysis of securities, technical analysis of price charts, the foreign exchange markets, and later options trading. I read on websites and web forums and when I encountered a term that was new to me, I searched for it elsewhere, defined it, found it in common usage and attempted to understand the concept that it represented. I used a stock screener to identify a few companies to begin to research, then I read everything I could find on the internet about those half dozen or so companies and their stock. I poured over their charts, analyst opinions, earnings reports, their industries as a whole and their competitors. Then I made predictions of their price movements in the market and began to track my predictions and adjust. That was my way of teaching myself learning how to play the market.

I found the FOREX market more difficult to apply this method to, even after coming to understand how the market itself operates (no small feat when considering the complexities of 100:1 leverage, fiat currencies, and such things as carry trades) so I stayed with the stock market, only branching out to options earlier this year. I have only ventured into the selling of covered call options, a very conservative and safe strategy that has netted me significant profits this year, and I have yet to buy and sell options for pure speculation. I will soon though, but I don't have the time now to master time-decay, delta, beta and the numerous other arcane technical aspects of options price fluctuations.

I have made several very costly (over $500 each) blunders in my learning process, but I was able to recover from each of them within several weeks. Looking back at this year, I could have done a lot better if I had taken more risk, if I had been able to see the future, or if I had done a myriad other simple things that were impossible to see at the time. Even so, my account has grown considerably this year, this year of financial hardship. I didn't see the 40% drawdown in my account that others did, that destroyed so many retirement accounts. Looking back over my performance, I achieved approximately 35% or so gain, but it isn't fair to calculate it all from the beginning, because I began with only $600 and most of the money that I put in, went in this year. In short, the actual percentage gain is over 35% (and is pulled down by over $1,200 in losses from two bad trades that ate into my profits).

Why the interest in economics? At first, it was the realization that I had very little money and a lot of debt in a world where money matters. But then I quickly came to the realization that economics is far more than just the naked lust for money. Economics describes the behavior of humans as they interact in a productive manner. Economics describes, models, and directs human energy in all its forms. We can have theories of economics without recourse to money of any sort. But money is the currency (words begin to fail me a this point) or the medium of exchange, the fluid by which the energy of human endeavor is transmitted, stored, and distributed. Economics, I realized, underlies in a very basic way what life is all about, just as physics and chemistry lie beneath the natural world. We still look to biology and sociology to model plant, animal and human behaviors and societies, but on a some level, economics explains their fundamental interactions in a very important way. Sure, we could speak of the economics or a termite mound, but here I deviate from my point. Economics is the study of human production and the currents of human energy in its many forms.

My interest in economics naturally corresponds to my desire to understand the world (and to exert some amount of control over that world as well). Additionally, I have always been attracted to the notion that by dint of mental processes alone I could solve some problem or vanquish some foe (the game or chess and the tying of unbreakable knots are my two favorite analogies in this arena) and when faced with the modern iteration of the stock market, I suspected that I found just such a challenge. With the caveat that, due to insufficient data, there is an unavoidable random factor involved, I have found the stock market to be just the intellectual challenge I had hoped it would be. Through my trading--reading charts, following news, interpreting economic indicators, following sectors--I can grow a small amount of money into a considerable sum. This has often seemed more like a game than an investment, but as long as I take the "game" seriously enough and continue to see regular and significant gains, I can accept that.

I don't pretend to any great erudition in either investing or economics. I am fascinated by it and I continue to teach myself and learn all that I can. I use it and I profit from it, both intellectually (I understand the world so much more now) and financially. It is hard for me to imagine how little of the operation of world affairs I understood before and even more difficult to fathom how little I still grasp with my limited education and experience. There are thousands of blogs in cyberspace now that have great wisdom and insight about economics and finance (Deep Capture is one I just discovered last week) and this cannot be one of them. But in the future, I will share a few small scraps of knowledge that I have come to possess in the hope that I may both educate and inspire any readers that I have.

A Meditation of Marcus Aurelius

"Words in common use long ago are obsolete now. So too the names of those once famed are in a sense obsolete -- Camillus, Caeso, Volesus, Dentatus; a little later Scipio and Cato, then Augustus too, then Hadrian and Antoninus. All things fade and quickly turn to myth: quickly too utter oblivion drowns them. And I am talking of those who shone with some wonderful brilliance: the rest, once they have breathed their last, are immediately 'beyond sight, beyond knowledge'. But what in any case is everlasting memory? Utter emptiness.

So where should a man direct his endeavor? Here only -- a right mind, action for the common good, speech incapable of lies, a disposition to welcome all that happens as necessary, intelligible, flowing from an equally intelligible spring of origin."

The preceding quotation is taken from Book Four of the collection that has come to be known as the Meditations, written by the Roman emperor Marcus Aurelius. Emperor Aurelius never intended these collections of private writings to be published, much less read by millions of readers over two thousand years in the future, but the world is fortunately enriched to have the such ageless wisdom. These are not just the musings of a very wise man of antiquity, but also those of the most powerful man in the world at the time. Ruling a large, regional empire and millions of subjects, a Roman Emperor wielded immense personal and political power. Yet it is in the face of this vast power that Emperor Aurelius is confronted with his mortality, his frailty, and the ultimate question of meaning in life. The passage I have chosen here is representative of a major theme in his Meditations: all that we have and can aspire to be is ephemeral and the accumulation of power is meaningless as an end in itself.

The historical figures that Emperor Aurelius lists as being then obsolete are far more so to us, now nearly in 2010. I am not a dedicated scholar of Roman history (I have read general world histories, works historical fiction, and seen a few television documentaries) I confess that I do not recognize any of the first names he lists. And of the second list--Scipio, Cato, Augustus, Hadrian, and Antoninus--I know the name Scipio but cannot match it with his significance. I know Cato and Augustus and Hadrian, of course, but the name Antoninus means nothing to me. I dare say that the average man or woman would fare no better than myself and quite likely may not know any of these great names of Roman history. This serves to illustrate the point all too well, as these seemingly unforgettable giants of human history have faded from our collective memory.

The advice given here, from a man who has attained the most any human could hope to achieve in that period, is to live a good life, a righteous life, and to strive toward the "common good". This has been in my own thoughts, again, recently. Specifically with regards to a certain other person I know. The choices I make, the choices we make--do we make them for self gratification, for the accumulation of power, or for a higher purpose. Neither you nor I will have the power of a Roman emperor, but we can follow his advice to have a right mind, direct our action for the common good, and live a life that truly matters.