Tuesday, March 22, 2011

Is the stock market efficient?

I believe in weak stock market efficiency. I believe that the market does a good job of factoring in news and conditions but that the "wisdom of crowds" is far from perfect. There are plenty of valuing weaknesses that can lead to inefficient pricing and opportunities for gain. The simplest of those are spotted and then adopted by enough money that they become efficient and don't allow significant gains.

And a big problem for investors is that while I think there are plenty of inefficiencies to take advantage of finding them and investing successfully is quite hard. And so most that try do not succeed (do not get a return that justifies their time and risk - overall trying to take advantage of inefficiencies is likely to be more risky). Some Inefficiencies however seem to persist and allow low risk gains - such as investing in boring undervalued stocks. Read Ben Graham's books for great investing ideas.

Related: Market Inefficiencies and Efficient Market Theory - Lazy Portfolios Seven-year Winning Streak - investing in stocks

Tuesday, March 15, 2011

Productivity Growth and Government Debt

Who reaps the rewards of productivity?

Productivity matters for the prosperity of children because it measures the amount that an average worker produces in an hour of work. If productivity rises by 10% over three years, that means that we can produce 10% more output with the same amount of work than we could three years ago. The size of the economy was roughly $14tn three years. A 10% rise in productivity means that we can produce approximately $1.4tn more this year with the same amount of work. This would come to an additional $18,000 a year for an average family of four.

Alternatively, a 10% rise in productivity would mean that we could produce the same amount of output as we did three years ago, while working 10% less time.
At this point, the politicians start screaming about the debt bankrupting our kids. The problem with this claim is that our kids will own the debt. At some point, all of us will be dead, meaning that the people who hold the bonds that constitute the debt will be our children and grandchildren.

How can holding government bonds make our children bankrupt?

The author dismisses the problem of foreign ownership of government debt erroneously. The problem is if you have to pay foreigners the interest that is essentially a tax on current production to pay for past overspending.

Japan has far more government debt than other countries. http://investing.curiouscatblog.net/2010/10/18/government-debt-as-percentage-of-gdp-1990-2009-usa-japan-germany-china%E2%80%A6/ Yet that is not as big a problem as it seems as they owe most of it to themselves. That is still not a great condition to be in but it means you will just have to pay a portion of yearly production to pay off a segment of society that owns that debt (it stays within your country).

Now all of this gets much more messy nowadays as the borders are much more transparent and movement is much easier...

I agree that productivity improvements are great and will help with the problem. But you have to understand that productivity measurements are extremely unreliable. All economic data has issues (see all the consternation over unemployment and inflation data) but productivity measures may well be the most problematic. They rely on significant guesses about what is really going on and have issues with short term unsustainable 'gains' often due to layoff, cutting maintenance... (things that get better productivity numbers but may well just be measurement issues not sustainable productivity improvements).

The author does correctly point out the problem of foreign ownership of debt is due to us living beyond our means (not in those words though) and borrowing from foreigners to sustain this level of comfort (just like the government is doing itself).

Related: The USA Economy Needs to Reduce Personal and Government Debt - Government Debt, Greece is a Very Small Part of the Problem - Dollar Decline Due to Government Debt or Total Debt? - Economic Measurement Issues Arising from Globalization

Saturday, March 12, 2011

Google Rank Patent for Delegation Authority Factors

Delegated authority evaluation system (patent application)

The evaluation system is managed by a primary authority that designates one or more contributing authorities by delegating to each a specific quantity of authority.
Each contributing authority, and optionally the primary authority itself, may evaluate one or more portions of content by associating a rating with each evaluated portion of content. A composite rating for a particular portion of content may then be determined based upon the ratings associated with the portion of content. Preferably, the ratings are combined in a manner that affords a higher priority to the ratings provided by contributing authorities to which a greater quantity of authority was delegated.

The Evolution of Google Ratings (Experts Delegating Authority)?

The important part of the patent is that this rating system involves experts on specific topics, who might delegate some of their authority to others when providing ratings.
Maybe elements of this rating system might be incorporated into the social network that Google is said to be launching sometime next year.

Couldn't they also just tweak the pagerank passed to be somewhat more user-definable. I could to pass 40% of the pagerank to x link and split up the rest to all links. And adding it to be specifically targeted to keywords wouldn't be that hard. The bigger problem, I would think, is getting people to spend their time doing that. So somehow meta tools would be needed to make this practical. I am not sure how they would work but I could imagine some such system working pretty well.

There would obviously be all sorts of gaming risks that would have to be dealt with somehow.

Google does now provide search results enhanced by your social network (showing links they tweeted...). My guess is Google increases the rank of those pages - though maybe they leave the rank the same and just add a little note for you to see.

Thursday, March 10, 2011

6 years Later Goolge Acts To Let Me Block Sites I don't want to see

A bit over 6 years ago I suggested a few things to improve Google search results (Jan 2005) they have finally adopted the feature:

Ability to restrict sites from the search results in my preferences (Google doesn't seem to be able to restrict certain obvious spam names databases from results, so let me do so myself. It would be best if there could be filter lists that are maintained by various communities that I could choose to apply. I can imagine there are technical hurdles to overcome to make this a reality).

Then I posted about how Google should improve, again a year later

Let me remove web sites from my default searches. I would imagine this could even be used to help Google’s normal search results by getting a sense of sites huge numbers of people “block” The same spam sites show up for searches and I would rather block them if Google can’t figure out how to do so.

Hide sites to find more of what you want

We’re adding this feature because we believe giving you control over the results you find will provide an even more personalized and enjoyable experience on Google. In addition, while we’re not currently using the domains people block as a signal in ranking, we’ll look at the data and see whether it would be useful as we continue to evaluate and improve our search results in the future.

Better later than never. But 6 internet years is a long time to wait.

Related: Google Social Circle Results - Search Share Data, Checking the ACSI - find management content online

Saturday, March 05, 2011

Education, Training and Employment

Education and employment

we ought to have... far more widespread, transparent and effective systems for labour market matching between job-seekers and openings, taking into account what really makes the difference between "just a job" and genuine employee engagement, satisfaction and development.

I agree with this sentiment to some extent. I also didn't expect much of any direct connection when I was a student. I like studying economics but I really don't see the value in many economics students actually being practicing economists. I figured I was getting a education that would allow me to learn and adapt throughout my life - the old fashioned idea of liberal arts education. I think that is great for many people.

But more people seem to want to finish school with skills (using college as a technical school but that they can see as superior to technical schools). And I think the market for these types of customer/students probably exceeds that wanting to be educated in a broad, and not necessarily directly applicable sense.

I also believe that even with a liberal arts education it makes sense to make it relevant. To participate in modern society without an understanding of science and technology is very limiting.

Related: A Theory of a System for Educators and Managers - Applying Lean Management Tools to University Courses - Innovative Science and Engineering Higher Education - The Future is Engineering