Re: [asa] Trees don't lie

From: Glenn Morton <glennmorton@entouch.net>
Date: Sun Mar 22 2009 - 20:43:57 EDT

> Hi, Glenn, glad to hear from you again.
>
> It looks to me as though you are lumping disparate matters together.

Hi Dave.

Of course I am dealing in disparate matters. That is what I have done for
an entire career, finding oil where 1000 others couldn't find it because
they didn't connect disparate matters together. It is also what I do in
investing (and I have been a relatively successful investor). I tell my
children there are two things needed to succeed spectacularly in investing.
KNOW the logical chain of implications. That is, KNOW "If this, then that"
and if that, then the other; and if the other, then the next" That allows
you to get ahead of the curve and allowed me to invest in oil prior to its
rise in 2004. My 2000 ASA article was the basis of a pretty good investment
strategy (and y'all thought it was mere science).

Secondly, you have to see the connections before others do. That means you
have to be willing to be told, as you are right now, that you are jumping to
conclusions, or that you are lumping disparate matters together. This is
part of the problem I see, and have always seen throughout my career.
People don't think like a chess player and think 10 moves ahead (if this,
then that, then that then that then that....)

finally, I tell my children that they need to understand the feedback loops.
If oil price goes up, airline profits go down. If oil becomes scares and
costs go up, then people can't afford fertilizer--then the crop yields will
drop. Then someone, somewhere, must go on a diet or starve. This will most
likely lead to political instability in poorer countries--therefore, don't
invest in companies which have vital interests in such countries. Those
countries will probably have trouble getting their product to market in the
unrest.

Another example. If Israel attacks Iran trying to stop the nukes (if anyone
does it), Iran has promised to shut in the Strait of Hormuz. If they do
that, then 24% of the world's oil will not move to market. That will mean
severe problems for all energy intensive industries (like the making of
solar cells and airlines)

so, now to the point of your critique.

> Climate involves different sets of conditions. Daily to weekly weather
> reports involve a different set of equations than the seasonal
> predictions. These latter involve the el nino/la nina oceanic
> circulation. They've been fairly good, but can't be used day to day.
> Longer term predictions involve a different set of factors, some of which
> we're only beginning to understand. Measurement of some of the factors
> have been too recent to be entered into predictions, except perhaps
> tentatively. Taking a general look at the situation, we have problems
> relating to scale.

What you are talking about with el nino is a statistical prediction, which
is the only kind of prediction one can make with thermodynamic systems like
the atmosphere. But they may miss so badly at any given spot that you can't
hope to predict whether drought will again come to the mid continent of the
US as it did in the 1300s. In western Nebraska, near my former
sister-in-law's farm, there is a region called the sand hills. In the 1300s,
I believe, they were migrating sand dunes. If we were to repeat that today
we would blame it on global warming when it is nothing more than a natural
cycle of unknown periodicity. I predict that sometime in the future the
upper Midcontinent will go through a horrible drought and the dunes will
migrate again. But it has nothing to do with global warming.

Now, I will absolutely stand by the tree ring width as a measure of the
Siberian temperature, which doesn't match the thermometer record.
Similarly, I will stand by the Vostok deuterium and O18 curves, both of
which show that the world is cooler now than 6000 years ago. Yes, these are
disparate things, but science advances by making such connections.
Philosophy on the other hand, doesn't, advance by any methodology. It just
changes. :-)

>
> All situations are complicated when human beings are involved. One of the
> recent matters that apply has to do with economics, including the stock
> market. The traditional assumption has been that the market is rational,

I certainly never thought the market was rational? Indeed most good
investors don't think it is rational at all. It was John Maynard Keynes who
said, "The market can stay irrational longer than you can stay solvent."
Keynes said this in 1951.

> but I think a chap recently got the Nobel by showing that it wasn't.
> There is no way to get predictions right on the basis of erroneous
> assumptions. Add in cherry picking and one can get any desired
> conclusion.
> Dave (ASA)

That guy should have read Keynes; or the Nobel committee is horribly
ignorant of economics.

----- Original Message -----
From: "D. F. Siemens, Jr." <dfsiemensjr@juno.com>
To: <glennmorton@entouch.net>
Cc: <GMURPHY10@neo.rr.com>; <asa@calvin.edu>
Sent: Saturday, March 21, 2009 10:31 PM
Subject: Re: [asa] Trees don't lie

>
> On Sat, 21 Mar 2009 21:42:02 -0500 "Glenn Morton"
> <glennmorton@entouch.net> writes:
>> I would say that the climate, the weather, political systems,,
>> economics,
>> the oil markets etc, are all highly nonlinear. Tell me if it is
>> going to be
>> raining where you are 33 days from now. Tell me what the price of
>> the stock
>> market will close at on Monday. Tell me what the price of oil will
>> be April
>> 23. Tell me what country will be our biggest problem in 2010. All
>> of these
>> things involve nonlinearities.
>>
>> And I disagree that if one cant predict from them they won't be
>> studied.
>> They will be studied because they are the real equations that govern
>> this
>> universe and curiousity and hope that we can predict something will
>> ensure
>> their study
>>
>> ----- Original Message -----
>> From: "George Murphy" <GMURPHY10@neo.rr.com>
>> To: "Glenn Morton" <glennmorton@entouch.net>; "William Hamilton"
>> <willeugenehamilton@gmail.com>; <mrb22667@kansas.net>
>> Cc: "asa" <asa@calvin.edu>
>> Sent: Saturday, March 21, 2009 7:34 PM
>> Subject: Re: [asa] Trees don't lie
>>
>>
>> > For a chaotic system one can't predict the future state of the
>> system in
>> > detail for any length of time. But you can often make (a)
>> statistical
>> > predictions & (b) thermodynamic predictions about the overall
>> state of the
>> > system. Of course these are related. If all nonlinear dynamics
>> could do
>> > was to say that we can't predict anything then people wouldn't
>> publish
>> > books &c on nonlinear dynamics.
>> >
>> > Shalom
>> > George
>> > http://home.roadrunner.com/~scitheologyglm
>> >
>> >
>> > ----- Original Message -----
>> > From: "Glenn Morton" <glennmorton@entouch.net>
>> > To: "George Murphy" <GMURPHY10@neo.rr.com>; "William Hamilton"
>> > <willeugenehamilton@gmail.com>; <mrb22667@kansas.net>
>> > Cc: "asa" <asa@calvin.edu>
>> > Sent: Saturday, March 21, 2009 3:05 PM
>> > Subject: Re: [asa] Trees don't lie
>> >
>> >
>> >> George wrote Saturday, March 21, 2009 10:11 AM
>> >>
>> >>> I agree that in some fields "expertise" is overrated. It's
>> pretty
>> >>> funny, in a gallow humors way, to hear the argument that
>> financial firms
>> >>> have to pay big bonuses in order to hold on to the people whose
>>
>> >>> "expertise" has driven the company, & maybe the country, into
>> the
>> >>> ground. OTOH there's a populist temptation to debunk the idea
>> of
>> >>> expertise because then "we're just as good as they are." & it's
>> not
>> >>> clear that being able to predict the future is always the best
>> >>> criterion.
>> >>
>> >>
>> >> There is no doubt that a physicist knows the equations and where
>> it comes
>> >> to deterministic systems, the physicist will do way better than
>> anyone
>> >> else. But, most systems we humans deal with are decidedly NOT
>> linear or
>> >> deterministic. They are non-linear. And one thing that should
>> have been
>> >> learned, but apparently hasn't been by many in the field of
>> science, NO
>> >> ONE can predict the state of a nonlinear system after a certain
>> period of
>> >> time. The physicist is as helpless as the plumber or homeless
>> person and
>> >> thus, all guesses will have the equivalent chance of success.
>> >>
>> >> that is why experts differ on what the stock market will do, what
>> the
>> >> weather will be like next week etc. And when it comes to global
>>
>> >> warming, everyone is absolutely sure that they know what this
>> grand
>> >> nonlinear system we call climate will do. They are acting as if
>> it is a
>> >> linear system when it is decidedly nonlinear.
>> >>
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Received on Sun Mar 22 20:44:01 2009

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