2016-08-05

Comparing Trump and Mussolini



Hitler and Mussolini 
Photo credit: http://benitomussoliniitaly.weebly.com/relationships-with-foreign-leaders.html
If you visit YouTube, you can type “Mussolini” in the search bar, then in the Filters menu, choose Playlist. Or click here. (Ignore Alessandra Mussolini, Benito's granddaughter who made a living taking her clothes off before running for public office.) You will find dozens of old biographies of Benito Mussolini, Il Duce, the authoritarian head of state in Italy in World War 2.

Some friends had said things like “Donald Trump is like Mussolini,” and “Donald Trump is like Hitler”. If there is some politician you don’t like, you can say he is “just like Hitler” or some such, and it’s probably somewhat true. Everybody has at least something in common with Hitler. Because such phrases are ad hominem slurs on the subject, I like to think I don’t give them much credence.

We see in these historical extraordinary figures (and some others such as Napoleon, Stalin, Mao, Leopold II of Belgium) a close association with events we don’t want our society to repeat. We shiver a bit and think “What if [contemporary politician] is just like Mussolini?” We answer our own question with the implication that, by agreeing with [contemporary politician], we would advocate dictatorship.

I spent a Sunday afternoon watching Mussolini biographies on YouTube. Some characteristics shared by Benito Mussolini and Donald Trump are these:

Charm. Mussolini began his career as an editor for socialist newspapers. His readership loved his work, and with time, he was highly regarded. In later life as a political leader, he gave stirring speeches that excited the crowds. Trump gives a speech, and the crowd goes wild.

Loose with the Truth. The professional fact-checkers catalog the numerous major inaccuracies of Trump’s public statements. He isn’t the first politician to tell a lie, but he tells whoppers, and relatively many of them. Mussolini said that he could often easily convince people of falsehoods. With the general public’s quickly forgetting what happened not long ago, he could even contradict his earlier statements.

Cultivation of Personal Story. Both Mussolini and Trump worked public relations to portray themselves in the grandest and most flattering light.

Ambiguity in Political Affiliation. Although he had made his mark as a widely respected socialist, when Mussolini seized totalitarian power, communists and socialists in the national parliament opposed him, so he arrested many of them, and he remains suspected of killing some. Trump changed his allegiance among political parties several times.

Ethnic Cleansing. Trump has advocated expelling millions of Mexicans from the USA for their alleged criminality, and creating special conditions on the travels of Muslims due to their alleged terrorism. Mussolini asserted a “natural law” requiring Italians to dominate the Slavs of the Balkans.

Human Rights. Mussolini removed constitutional provisions protecting free speech, multiple political parties, and removed various constraints on government power. Trump advocates for violations of the Geneva Conventions  such as torture and collective punishments. He also advocates for “opening” libel laws, making libel suits easier when a publication has been “unfair” or “incorrect” or “false”.
 
The Only One. Trump said in his speech accepting the nomination of the Republican Party for President that he is “Nobody knows the system better than me. Which is why I alone can fix it.” Mussolini said that he was the only one who could make Italy great again.

For us, one important difference is that Donald Trump has not yet ascended to executive power, whereas Mussolini did have and use executive power to express his will. Just because Trump shares some traits with Mussolini, we can’t logically infer Trump’s election will have outcomes similar to Mussolini’s rule in Italy.

Full Disclosure: I find most objectionable Donald Trump’s promises to abridge the laws of war, and to practice religious and ethnic discrimination. I also object to other policies he has advocated, such as nuclear proliferation, hesitant response to a call from NATO, high tariffs, expanded military spending with reduced taxes, reduced taxation relatively beneficial to the wealthy, and ending universal health care with a return to private health insurance plans. He doesn’t attempt to explain himself logically, but by ad hominem comments and inexcusable discourtesy. I find Donald Trump categorically unsuitable for President. Despite her faults, I will vote for Hillary Clinton.

2016-07-04

Does ETF Dividend Growth Predict Market Price Performance?




An investor may profit by buying an index ETF with a high rate of growth in payout of dividends.

I’m interested to know of other studies that may confirm or deny these findings.

We took a casual sample of 31 index-based ETFs at March 31, 2016. We measured the annual rate of growth in dividends by an exponential least-squares fitting of the dividends over the latest 20 calendar quarters. We found a relatively high positive correlation (R^2=0.20, P=0.01) for the dividend growth rate with subsequent price performance for the three months from March 31 to June 30, 2016.

An earlier sample of 11 index-based ETFs at December 31, 2015 showed similar results over the six months from December 31 to June 30, 2016.

Both samples contained real estate ETFs and broad-market ETFs. When we separated out the real estate ETFs, we found the correlations much stronger for both subsets, as might be expected.

Weaknesses of this little study include little care taken to construct randomized samples, samples of small size, short time spans for price performance measurement, and cursory prior search of the literature.




2016-05-24

Finding the Cure - Thought Experiment - Part 3 of 3

Part 3

The two situations, as described in Parts 1 & 2, are identical.

Were your choices consistent? If you chose A in part 1 and A' in part 2, then your choices were consistent. The Part 1 decision and the Part 2 decision are identical, just worded differently.


Most of the human race would choose inconsistently. Don't be surprised if you are among them.

The expected number of survivors in A and A', B and B' is also the same: 200, and the expected number of deaths is 400 in each case.

A and A' have one possible outcome: 200 live and 400 die. B and B' present two probabilistic outcomes: there is some chance that all of them will live, and a larger chance that all of them will die.

If you chose A and A', then, in effect, you chose for 200 people to live and 400 to die, with certainty.

According to Kahneman "Thinking Fast and Slow" , this is an example of the effect of "framing". Presented with Part 1, which presents in the frame of surviving (surviving is "good"), most people will choose A. The same people, then presented with Part 2, which presents in the frame of dying (dying is "bad"), will choose B' and take the long odds of saving everybody. This tendency holds true for public-health officers, MBA students, cab drivers, everybody. (The response also holds true when separate samples of respondents are asked to decide on Parts 1 and 2.)

Kahneman's explanation is that our minds resolve decisions "between gambles and sure things differently, depending on whether the outcomes are good or bad. Decision makers tend to prefer the sure thing over the gamble (they are risk averse) when the outcomes are good. They tend to reject the sure thing and accept the gamble (they are risk seeking) when both outcomes are negative.

This dismays us. How could people who make even the most important decisions be swayed by such a superficial manipulation? But this is how human minds work. 


Our best strategy: remain aware of and accept and cope with this human inconsistency.

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Looking for Part 2? Click Here.
Looking for Part 1? Click Here.

References:
Daniel Kahneman presented this thought experiment in his book "Thinking, Fast and Slow" http://smile.amazon.com/dp/0374533555
Photo: San Francisco Department of Public Health http://www.sfcdcp.org

2016-05-10

Finding the Cure - Thought Experiment - Part 2 of 3

Part 2

A different situation...
Imagine that the United States is preparing for the outbreak of an unusual disease which has already claimed many victims in Asia, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume the the exact scientific estimates of the consequences of the programs are as follows:

If program A' is adopted, 400 people will die. If program B' is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die.

You are the surgeon general, and the decision is yours. Do you choose program A' or program B'?

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Looking for Part 1? Click Here.
Looking for Part 3? Click Here.

References:
Daniel Kahneman presented this thought experiment in his book "Thinking, Fast and Slow" http://smile.amazon.com/dp/0374533555
Photo: San Francisco Department of Public Health http://www.sfcdcp.org

2016-04-25

Finding the Cure - Thought Experiment - Part 1 of 3

Part 1

Imagine that the United States is preparing for the outbreak of an unusual disease which has already claimed many victims in Asia, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume the the exact scientific estimates of the consequences of the programs are as follows:

If program A is adopted, 200 people will be saved. If program B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.

You are the surgeon general, and the decision is yours. Do you choose program A or program B?

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Looking for Part 2? Click Here.
Looking for Part 3? Click Here.

References:
Daniel Kahneman presented this thought experiment in his book "Thinking, Fast and Slow" http://smile.amazon.com/dp/0374533555
Photo: San Francisco Department of Public Health http://www.sfcdcp.org

2012-11-19

Is this stock worth looking at?

Paige Compositor - source:Wikipedia.org
L, 

You asked me "Is BioTime worth looking at? Is Star Scientific worth looking at?"

This article will tell you how to answer this question for any company.

Here's how I look at it ...

The NYSE New York Stock Exchange has been the venue for every kind of business activity, both laudable and unscrupulous. One of the NYSE's finest contributions to our society has been the qualifications it requires of listed companies. To acquire and maintain a NYSE listing, a company must meet and maintain some measurable standards of disclosure and behavior. These standards don't guarantee the company is a good investment, but if a company doesn't meet the standards, then one should exercise some initial prudent caution until good information warrants confidence.

Among the NYSE qualifications is the rule disqualifying most penny stocks. To maintain listing, a company's shares must trade for not less than $4/share (or various other capitalization minima) for extended periods of time. Companies that trade for less than $5/share are called "penny stocks", and it is these about which you will hear the wildest get-rich-quick stories.

Your communicant says BioTime trades for about $3/share, so make a note to investigate this one with perhaps more care than you would, say, AT&T.

I read the article your communicant provided. It says Dr. Michael West bought the stem-cell patents which he developed at Geron, the company he founded. The author seems to think this means the patents are valuable, because no one knows them better than Dr. Michael West. I don't think so. Inventors can be in love with their inventions and hence make unwise judgements about them. (http://bit.ly/Nv2KjO ) Also, if the owner of patents has infelicitous business judgment, he can block the commercial development. ("The capital required was, however, large and the reason the Paige compositor was never manufactured was due to the fact that at this time Paige, who controlled the patents, refused to part with a sufficient interest to induce other capitalists to invest the large amount required to conduct the business successfully, and was not attributable to any mechanical failure or defect in the machine."  http://bit.ly/U8Fc7c ) 

That's two notes of caution.

Next stop -- Google Finance http://google.com/finance . We search on BioTime, and find ticker NYSEAMEX:BTX . This is what used to be the ASE American Stock Exchange, which began as an exchange for stocks not sufficiently well qualified for trade on the NYSE, which began as what was called informally the "Curb Exchange", where a bunch of traders would buy and sell stocks outdoors on the street. ( http://bit.ly/dQO6E7) They wore colorful hats so the clerks hanging from the windows of the buildings above could recognize their traders and take orders by hand signals for completion by the clerks in the back rooms. NYSE acquired ASE early in the 3rd millenium.

Taking a closer look at BTX... First, we check the financials... This is one of the easiest things to check on. At the upper left of the page, we see the Google logo, dropping straight down we see the word "Finance". Straight down from there is the heading "Company", under which are several subheadings, among which is "Financials", and we click on "Financials". We are looking for "Net Income". Most companies in Google Finance have a chart in the upper left quadrant of the page that shows net income graphically. I see there the orange bars for "Net Income" dipping as low as -$8m. The negative numbers show accounting losses in both of the most recent 2 quarters. For me, this means the company is not an investment, unless I have very good information to explain a contrary view.

So: BTX is a speculation, not an investment. For all we know, this company could easily drop in value to 10 cents a share during the next month. The future is dicey for BTX

Suppose, for the sake of the example, that the most recent quarter and maybe some others in the history showed positive "Net Income", instead of negative. Then, would look at the annual figures. Directly above the chart is the link "Annual Data". Click on it. This reveals another chart showing the "Net Income" in each of the last 5 years. We see BTX posting losses (negative numbers) in at least one of the last five years, with a loss of ~$15m in 2011, the most recent year. For me, this means the company is not an investment, unless I have very good information to explain a contrary view. 

Note: Google Finance usually shows financial companies and utilities without charts. For these companies, we must (and for any company, we may) scroll half way down the page to find "Income Available to Common Incl. Extra Items" ("Extra" is an abbreviation for "Extraordinary", even though "extraordinary" items on an accounting statement often aren't all that extraordinary, in the ordinary meaning of the word) which is the version of "Net Income" that really counts. Beware of analyses that cite EBITA "Earnings before Interest, Taxes and Amortization", or EBITDA, or Operating Income, or some similar pretense of "Net Income". For BTX, we see negative numbers. If I see any negative numbers on this line, it tells me the stock isn't an investment, but a speculation, unless I have very good information to explain a contrary view.

Let's suppose, for the sake of example, and quite hypothetically, that BTX looks like an ok investment from our check of the "Net income" history. Now we want to find out about their "franchise"... We click on the link for subheading "Summary", under "Company" in the upper left of the page. We scroll down the page to the description of the company. We are looking for "franchise", some kind of product ( or service)  where 
a. the company has an advantage on their competition, and 
b. we must have some kind of understanding of the product, and 
c. the product is a good and useful product (whatever that means to you), and 
d. customers prefer the product to near-competitors enough that the customers are willing to pay a higher (even if only a little higher) price than for the nearest competitor's offering.

We see that BTX is into "regenerative" medicine which seems like a good thing (one of the franchise criteria). BTX has acquired a bunch of other companies about which we know little to nothing, and we see nothing else about franchise. On the right-hand column of the page, in a section called "Website links", we find the URL for  BTX's website, and we click on it. Here we explore around. Under "Products" we see embryonic stem cells and other kinds of cells for sale, and some "Chick Embryo Extracts" (better than eggs from the grocery store, we may suppose), and we just click the boxes and buttons to drop them in our virtual cart, and we can charge a few thousand dollars, plus tax, to our VISA card and soon receive delivery of a few milliliters of cells and stuff. These products aren't household names. 

Can we find anything about share-of-market and size-of-market? Back on the main page, we find a link "Investors". Often a link like this is buried under a link named "About" or "Company" or "Corporate", and sometimes it's on the main page, as here. We click. Exploring this area (it varies for every company), we find the  "2011 Annual Report" which can often give much useful information.  We click. We wait a long time. Good, we get the Form 10-K version of the annual report, typically long on black and white detail and short on diverting photographs and other charming entertainments.

From the 10-K we see the company is located in Alameda. We scroll down. Discussion of the business begins on page 3. Financial stuff begins on page 51 (can be useful when we can find what we seek nowhere else). We scan the business discussion, looking for info on franchise. The first paragraph usually summarizes the whole shebang. For BTX: "We are ... focused on ... regenerative medicine. Our core technologies center on stem cells capable of becoming all of the cell types in the human body, a property called pluripotency...." As we scan on, there's a lot of stuff we don't understand very well, and much language about drugs and microbiology and research, but we are picking up bits of information mosaic that may give us a feel for this thing. Subsidiaries doing research in Singapore and Israel. Proprietary animal preclinical data. Cartilage. Reduction of pain and inflammation. Cell therapies for retinal and neural degenerative diseases. Contract with Teva. Contract with Hadasit. Cardiovascular and cerebrovascular diseases. Trophic factors. Cornell University. Licensing of cell lines. Products licensed for distribution in Japan, China and Taiwan. It goes on and on... Royalty and license fees of about $1m per year. BTX depends heavily on patents. 

One section I always like to find is "Competition", and there's something like this in every 10-K. and you always find some introductory wording like "The company faces substantial competition in all our product areas and business segments," which just covers them legally against lawsuits that might claim the company didn't disclose that they face competition. We see that BTX faces competition from a British company named Advanced Cell Technology, Inc. Plasma expander products compete with Sanofi-Aventis, B.Braun, Baxter International, Alpha Therapeutics and Hospira .

If you have never read the section on Risk Factors in a 10-K, it's worth doing at least once.  Companies list everything that could possibly go wrong and impair the money invested in them, up to and sometimes including nuclear war and collisions with asteroids. BTX goes on for 10 or 12 pages of Risks (not unusual in quantity).

What can we summarize about BTX at this point?
1. BTX is a speculation, not an investment. If you are betting on BTX to make money, then you are betting on them to do something they haven't done before. Net Income:
1a. losses in each of the last two quarters
1b. losses in one or more of the last five years.
2. Franchise criteria:
2a.  advantage on competition: Yes, patents on cell lines
2b. we understand: More than we used to, but no, not really.
2c. good, useful product: Yes, probably.
2d. customers are willing to pay a little more: Yes - with the patents, they can't legally get this stuff from anyone else. Anything selling for $1,000/ml probably sells for a premium price.
3. market for product:
3a. Share-of Market: Can't tell. Probably narrow, but monopolized with patents. 
3b. Size-of-Market: How big a market is there for proprietary cell lines? Will they be able to enforce patents on products on which people's lives depend? Worldwide? How successful has Monsanto been with plant genomes?


Your and your communicant also mention Star Scientific.
First stop: Google Finance.
Star Scientific NASDAQ:STSI closed at $1.76/share on Friday.
Net Income:
Quarterly: Made money (positive "Net Income") in 2012Q3 after a string of losing quarters.
Annually: Losses every year 2007-2011.
Franchise: Cancer-free tobacco is the product. Is it a franchise?
Judgement: A speculation, not an investment.


Is BTX worth looking at?
Is STSI worth looking at?
You decide.



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