Quote of the Day

I don’t think people are thinking overthrow of the government. I think the prevailing sentiment is anarchy, which coincidentally fits right in with law enforcement buying and training sprees.
 
Bubbling right below the surface, I think there’s an unspoken sense of alarm that there’s a great deal of social unrest, political outrage, economic turmoil, force-fed liberal social spending, a growing sense of cynicism about the effectiveness of our legal system, and the very likely prospect of a major terrorist attack. All managed by an out of control Congress and a dangerously ideological new president while the rest of the world’s economies circle the drain. All things considered, the future is not looking so bright.
 
In that light, stocking up on guns and ammunition sounds like a common sense act of prudence. It’s not just for right-wing, knuckle-dragging, Bible-thumping hate-filled conservatives any more.

-Commenter 10, “bobdog”, responding to this post.

Clausewitz Book V: In Support of War, Now and Then

Book five was perhaps the most difficult read for me thus far. Clausewitz appears to pause here in his flow of ideas to concentrate on the apocrypha of war. It is in these pages that he gives us his view of how the supporting operations should be conducted, as well as considerations for placement, movement, and troop strengths. Application of most of Clausewitz’ points to modern day is extremely difficult and in most cases takes a good deal of abstract thinking.

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Clever Mathematicians vs. Financial Risk

See here (via here).

This is a timeless issue. The specific risk model under discussion isn’t the central issue. It never is. The central issue is that financial-risk models whose effectiveness depends on the accuracy of their assumptions about the distribution of securities-price movements eventually blow up. This is why “portfolio insurance” failed in (helped to precipitate) the 1987 crash, why Long Term Capital Management blew up, why Fannie Mae’s risk estimates vastly understated the real risk and why countless other “value at risk” schemes cause more problems than they mitigate. In simple terms, these schemes assume that in the event of portfolio losses you will be able to sell off your portfolio incrementally without incurring further large losses. In practice, the very fact that your portfolio is experiencing an extreme decline in value means there are no buyers except at lower prices and that further losses are probably inevitable: if the life boats are all on one side of your supposedly unsinkable ship you may still capsize if the passengers move there en masse. This is human nature and can’t be hedged away by invoking clever math, though clever people keep making this mistake (and will keep making it, because human nature doesn’t change).

In the long run the only reliable way to limit the risk in your market portfolio is to structure it so that you don’t lose money if the impossible happens. But this is expensive (insurance usually is), and it’s always tempting to lower your costs, and raise your short-run returns, by assuming you don’t have to worry about 100-year floods. The problem is that 100-year floods occur in financial markets every five or 10 years.

BTW, this is also why the notion of “stress testing” banks is fatally flawed. You cannot assess the risk of loss in a financial portfolio by asking what happens under conditions of moderate, i.e., likely, financial stress. If there is a systematic fatal weakness, however improbable, in your financial system the markets will eventually find it and the system will blow up.

Federal Tax Credits For Energy Efficient HVAC Equipment

President Obama signed the “stimulus” package into law on February 17.  I prefer the term “porkulus”.

Embedded in that garbage legislation are a mind boggling array of things that really have not much of anything to do with reviving our economy.  Pretty much everybody knows that.

There is a small piece of the “porkulus” that may help you if you are needing to update the mechanical systems of your domicile.

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