I have no crystal ball with which to predict the Future, a confession that comes as a surprise to some journalists who interview me. Still less do I think I have the ability to out-predict markets. On every occasion when I've considered betting against a prediction market - most recently, betting against Barack Obama as President - I've been glad that I didn't. I admit that I was concerned in advance about the recent complexity crash, but then I've been concerned about it since 1994, which isn't very good market timing.I say all this so that no one panics when I ask:Suppose that the whole global economy goes the way of Japan (which, by the Nikkei 225, has now lost two decades).Suppose the global economy is still in the Long Slump in 2039.Most market participants seem to think this scenario is extremely implausible. Is there a simple way to bet on it at a very low price?If most traders act as if this scenario has a probability of 1%, is there a simple bet, executable using an ordinary brokerage account, that pays off 100 to 1?Why do I ask? Well... in general, it seems to me that other people are not pessimistic enough; they prefer not to stare overlong or overhard into the dark; and they attach too little probability to things operating in a mode outside their past experience.But in this particular case, the question is motivated by my thinking, "Conditioning on the proposition that the Earth as we know it is still here in 2040, what might have happened during the preceding thirty years?" There are many possible answers to this question, but one answer might take the form of significantly diminished investment in research and development, which in turn might result from a Long Slump.So - given the way in which the question arises - I know nothing about this hypothetical Long Slump, except that it diminished investment in R&D in general, and computing hardware and computer science in particular.The Long Slump might happen for roughly Japanese reasons. It might happen because the global financial sector stays screwed up forever. It might happen due to a gentle version of Peak Oil (a total crash would require a rather different "investment strategy"). It might happen due to deglobalization. Given the way in which the question arises, the only thing I want to assume is global stagnation for thirty years, saying nothing burdensome about the particular causes.What would be the most efficient way to bet on that, requiring the least initial investment for the highest and earliest payoff under the broadest Slump conditions?
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Posted to google.com
Investing for the Long Slump
http://www.overcomingbias.com/2009/01/the-long-slump.html
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- Current Affairs
- Future
- Disaster
- Finance
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Posted to google.com
Set Obama's Bar
http://www.overcomingbias.com/2009/01/set-obamas-bar.html
We've heard a lot of hyperbole about how Bush was the "Worst. President. Ever." and Obama's inauguration is the most exciting in a half century. So to avoid future bias, this is a good time to ask yourself: where do you set Obama's bar? That is, what does Obama have to do for you to consider him a "good" president, or even better than Bush? It is enough for you that he is (part) black and a Democrat? Or does he actually have to do something? Or are those already insurmountable barriers to you? For most any president today, odds are that we'd: be mostly out of our moderately deep recession in four years, add some symbolic financial rules that mostly lets old games continue, mostly watch as Israel, Russia, and China throw more weight around, mismanage another Katrina because governments are just bad at that, go deeper in debt "stimulating" and "bailing" because politicians love to spend, not much relax homeland security or immigration because we're still scared of terrorists, mildly pull out of Iraq since the war has been going well lately but we don't like to look weak, do little on carbon emissions or the coming Medicare train wreck as those are very expensive, and not reform medicine or education or welfare more than Bush's Medicare drug benefit and "no child left behind," or Clinton's welfare reform, as those were unusually big changes.
So will Obama be great (or terrible) if he just follows this least-resistence path and adds a few cheap symbolic moves on stem cell research funding, gay marriage, torture definitions, wiretap limitations, or foreign abortion funding? And would that be enough for a non-black or non-Democrat?
- Tags:
- politics
- Current Affairs
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