Happy Birthday, in advance

No idea when your birthday is, but let me give you your birthday gift right now.  It is possibly the greatest source of mental adventures I've found on the internet, so far, by far.  And not one session has left me with anything less than the awe one feels when standing next to the ocean pondering how immense and varied life is.

Please subscribe to the podcast on itunes, and/or watch the videos on the site.

Enjoy!    http://www.ted.com/


Some of my favorites from the site:

http://www.ted.com/index.php/talks/jill_bolte_taylor_s_powerful_stroke_of_insight.html
http://www.ted.com/index.php/talks/tony_robbins_asks_why_we_do_what_we_do.html
http://www.ted.com/index.php/talks/dan_gilbert_asks_why_are_we_happy.html
http://www.ted.com/index.php/talks/richard_dawkins_on_our_queer_universe.html
http://www.ted.com/index.php/talks/freeman_dyson_says_let_s_look_for_life_in_the_outer_solar_system.html
http://www.ted.com/index.php/talks/brian_greene_on_string_theory.html
http://www.ted.com/index.php/talks/vilayanur_ramachandran_on_your_mind.html

And I have many, many more that I haven't watched yet, but will soon. 
Please share some of your favorites.  Thanks.

Why Indians (and other frugal types) love the environmental -anti global warming - energy conservation movement

Because it's finally made being a cheap-o a good thing!

We can now drive small cheap cars, keep our A/C's and heaters turned low, buy less stuff and leave our lawns on the edge of anarchy, all in the name of the environment when all along we've been doing it to save money!

Just kidding. Kind of.

Tail, meet Dog

Funny headline on Bloomberg this morning:

Paulson & Co. Plans Fund to Provide Capital to Banks
(Article:  http://bloomberg.com/apps/news?pid=20601110&sid=aANbt26C4Kuk)

So, hedge funds, traditionally borrowers from banks, in the form of leverage as well as loans, are now turning the tables and providing capital!
Amazing world we live in.

Should You Judge Performance on Alpha or Sharpe?

People often say they are focused on obtaining the highest risk adjusted return.  I would suggest the highest goal is return, with an eye towards containing risk.  There's a vast difference in the two approaches.

Primarily, we're trying to maximize the mean periodic return of our investments and minimize the variance of those returns.  If we had an unlimited bankroll, minimizing those variances wouldn't matter because the risk of catastrophic loss, defined in this case as the risk of not being able to continue, wouldn't exist (unlimited bankroll, remember).  We would simply shoot for the biggest returns, acting rationally.  But since we have a limit to the losses that can be sustained, we have to constrain our pursuit of return in this way.

Where people often trip up is in thinking that a given investment with an expected return and beta is better than another investment of the same expected return and higher beta.  Not necessarily, because beta is a backward looking and inherently fuzzy measure.  Even when evaluating a stream of observed returns, the observed volatility is not the same as risk.  Its is the portion of risk that is realized, with possibly much more risk that wasn't observed but still existent.  Just because risk didn't rear its ugly head doesn't mean it wasn't there.

So when someone says they have a sharpe ratio of this or that, consider their alpha as the more important measure.  Higher sharpe may or may not be better, whereas higher alpha is always better.  It's the one that is accurate to the penny, whereas all other measures are fuzzy.  You can't feed your family on sharpe!

'Free', 'clean' energy - yeah, right!

Increasingly, there are articles all over the popular press about generating power from the sun, wind, and waves.  Like this one : http://hardware.slashdot.org/article.pl?sid=08/07/07/0024204&from=rss.

I'm sure to the average American (and world citizen, for that matter) these seem like great ideas to tap inexhaustible sources of power with no effect on the environment.  It makes me cringe - people's naivete! 

The same people that believe that putting gases into the clouds and thereby changing the rate of absorption of solar energy by our atmosphere, feel that there will be no effect of intercepting solar energy before it hits bio-mass and the ground. 

The same people that believe that global temperatures warming causes massive polar ice melting, which is bad because it disrupts ocean currents feel that there will be no effect of taking energy out of those very same currents via turbines and other wave-energy capturing devices. 

The same people that believe that global temperature rises are causing wind patterns to change and thereby ravaging some areas with floods and others with drought, feel that changing wind patterns by putting up wind turbine farms and thereby taking energy from wind currents isn't going to have any effect on weather patterns.

Is the glaring hypocrisy visible only to me??  I suppose it's too much to expect many people to understand the complex interrelationships that occur in nature and science and the intricate linkages between cause and effect in such a massively emergent system - but then why are many of these same people so vocal about what they think is happening and the 'solutions' to them??


Now, I'll admit I don't understand these issues completely (who in their right mind thinks they really do?) and I too am talking out of my rear about much of this, but the point I'm making is that nothing is free and completely 'clean' in these sense that it has no effect on the environment.  Taking energy from any large system, be it from burning fossil fuels or taking it from the sun, wind or water, is going to have some consequence.  The main difference is that these other systems are more directly connected to our weather and much, much less understood.  Going from the kettle to the fire, in my humble opinion.

The only source of energy that I can think of that possibly has no side effect on our massively complex system, and is inexhaustible, is gravity - and the power that is generated from capturing it's energy in the form of waterfalls and streams - though I'm sure if you look hard enough you'll see some effect there too.