Tuesday, December 15, 2009
FINANCIAL INDEPENDENCE
I have set an ultimate goal for myself. My net worth must reach 100k by the time I graduate. It's a must. I have got ample time now and I even rank it above getting cum laude for my degree. It is imperative for me to achieve it. 100k, here I come!
Tuesday, October 13, 2009
Lee Kuan Yew's article in Straits times
I would like to refer to the article written by our minister mentor in Straits Times.
In the article, he mentioned about the need for the Chinese to change their thrifty habits. In their culture, they are encouraged to save their money for 'rainy days'. Why do I make this claim? In the Chinese history, during times of disasters, the civilians often find themselves being alienated by the government for it is extremely difficult to obtain financial backing from the central government. Ergo, it is imperative for the people to stash away some of their money, and not spend all their money on material needs instead. However, change they must, since the global economy depends substantially on the rising dragon to drag the world out of the economic slump. If the world economy were to start functioning again, China would certainly serve as one of the most important catalysts.
But, when all is said and done, even though China might be one of the important players for the decoupling effect, America must also do their part for they are still biggest consumer on the earth judging by GDP alone.
In the article, he mentioned about the need for the Chinese to change their thrifty habits. In their culture, they are encouraged to save their money for 'rainy days'. Why do I make this claim? In the Chinese history, during times of disasters, the civilians often find themselves being alienated by the government for it is extremely difficult to obtain financial backing from the central government. Ergo, it is imperative for the people to stash away some of their money, and not spend all their money on material needs instead. However, change they must, since the global economy depends substantially on the rising dragon to drag the world out of the economic slump. If the world economy were to start functioning again, China would certainly serve as one of the most important catalysts.
But, when all is said and done, even though China might be one of the important players for the decoupling effect, America must also do their part for they are still biggest consumer on the earth judging by GDP alone.
Monday, October 12, 2009
Immanuel Kant VS Utiliarianism
Today, I'm going to express my view on these 2 terms again. Just now, I chanced upon an intriguing article in my AS textbook- A terrorist plants an atomic bomb in a place that is unknown to anyone. And this bomb is going to explode in a few days' time.In addition, this explosion would most certainly claim the lives of millions of people.
After days of intensive search for the terrorist, he is finally caught. One worrying thing to note- notwithstanding pleading with him repeatedly to disclose the whereabouts of the bomb, he simply refused to bulge on his position.
My question to you is, will you approve the use of torture which could potentially salvage the lives of millions of people? On the one hand, torturing has always been perceived as an act that is distasteful and inhumane, but on the other hand, it could be use in this case to save millions of lives. I would like to propose to you on the tools for managing this problem- analysis by implementing both categorical imperative and utilitarianism concepts.
After days of intensive search for the terrorist, he is finally caught. One worrying thing to note- notwithstanding pleading with him repeatedly to disclose the whereabouts of the bomb, he simply refused to bulge on his position.
My question to you is, will you approve the use of torture which could potentially salvage the lives of millions of people? On the one hand, torturing has always been perceived as an act that is distasteful and inhumane, but on the other hand, it could be use in this case to save millions of lives. I would like to propose to you on the tools for managing this problem- analysis by implementing both categorical imperative and utilitarianism concepts.
Saturday, September 26, 2009
Ethics of technology
I find this area of ethics particularly interesting. In fact, I published this on my TWC forum.
To first determine whether our ethics have been corroded by technology, it is important to first define the scope of ethics. Generally, there are two approaches towards moral issues- utilitarianism and categorical imperative. I will further elaborate these two points with regards to certain technological issues in the later part of my post.
Utilitarianism is the notion that the right action is understood entirely in terms of the consequences involved. Thus, this means that moral worth of an action is determined solely by its contribution to overall utility of the society.
On the other hand, categorical imperative implies that the action is only ‘right’ when it is morally sound. This can be illustrated from the quote by Immanuel Kant, the forefather of the concept ‘categorical imperative’, ‘Act only according to that maxim whereby you can at the same time will that it should become a universal law.’ This concept tends to rely more on our moral intuitions (feelings) rather than our rational powers. Although ‘categorical imperative’ relies on intuitions, there are certain yardsticks that one could use to gauge whether the action is right such as religion and the legal system. This point to the fact that the ‘consequentialism’ concept embraced by the utilitarians would be disregarded since a follower of Kant would prefer to dwell more on the moral issue of an action rather than what the action will bring to a society.
Let me use these two very different school of thoughts and apply it to an ethical dilemma concerning technology- A man is very sick and he needs to have a liver transplant within two months or he will die. His situation is complicated by the fact that he has a very rare blood type and it is extremely hard to find a suitable donor. Time is running out and he desperately needs a liver transplant if he wants to live beyond two months! One day, he stumbles upon the fact that there is a stem cell research scientist who is able to harness a liver that would be compatible with any blood type. However, there is one issue here – his religion forbids anything to do with stem cell research. This brings me to the point on whether one should act base on utilitarianism or categorical imperative? If the man were to base his action on the former, he would accept the liver. On the other hand, if the man accepts the latter, he would reject the liver that could ultimately save his life.
Let me apply these two concepts to the hypothetical situation where genetic engineering has progressed so far that it is possible to ‘design’ a baby. Designing a baby in this context means that one can determine the fate of the baby by deciding the attributes such as mathematical aptitude and musical ability. If the government were to take a stand on this issue, what will their choice be?
A government that adopts the utilitarian approach would probably pass the bill to make it legal because it would definitely bring net benefit to the nation. Why do I say so? This would definitely raise the standard of living of the nation, not only economically but also in the social cultural aspect. For instance, the people would be better off and they would probably appreciate arts more.
On the one hand, a utilitarian government would welcome this idea, but on the other hand, a government that is leaning towards Kant’s ideology would probably reject it. They might argue based on religious reason as they feel that this whole idea is morally unsound and it is preposterous to play ‘god’ for this instance.
In short, it is very hard to determine whether one’s action is right or wrong, especially in an area such as technology that is filled with countless controversies. If one were to base all their actions on any ideology, he would commit ‘man with the hammer’ syndrome where ever problem will appear to be a nail. This analogy means that one would follow a system blindly without considering the alternatives and this might lead to the situation where the best solution is overlooked. Hence, I propose that in the areas of the ethics of technology, everything should be looked upon in a case by case basis, using both the utilitarianism and categorical imperative approaches.
To first determine whether our ethics have been corroded by technology, it is important to first define the scope of ethics. Generally, there are two approaches towards moral issues- utilitarianism and categorical imperative. I will further elaborate these two points with regards to certain technological issues in the later part of my post.
Utilitarianism is the notion that the right action is understood entirely in terms of the consequences involved. Thus, this means that moral worth of an action is determined solely by its contribution to overall utility of the society.
On the other hand, categorical imperative implies that the action is only ‘right’ when it is morally sound. This can be illustrated from the quote by Immanuel Kant, the forefather of the concept ‘categorical imperative’, ‘Act only according to that maxim whereby you can at the same time will that it should become a universal law.’ This concept tends to rely more on our moral intuitions (feelings) rather than our rational powers. Although ‘categorical imperative’ relies on intuitions, there are certain yardsticks that one could use to gauge whether the action is right such as religion and the legal system. This point to the fact that the ‘consequentialism’ concept embraced by the utilitarians would be disregarded since a follower of Kant would prefer to dwell more on the moral issue of an action rather than what the action will bring to a society.
Let me use these two very different school of thoughts and apply it to an ethical dilemma concerning technology- A man is very sick and he needs to have a liver transplant within two months or he will die. His situation is complicated by the fact that he has a very rare blood type and it is extremely hard to find a suitable donor. Time is running out and he desperately needs a liver transplant if he wants to live beyond two months! One day, he stumbles upon the fact that there is a stem cell research scientist who is able to harness a liver that would be compatible with any blood type. However, there is one issue here – his religion forbids anything to do with stem cell research. This brings me to the point on whether one should act base on utilitarianism or categorical imperative? If the man were to base his action on the former, he would accept the liver. On the other hand, if the man accepts the latter, he would reject the liver that could ultimately save his life.
Let me apply these two concepts to the hypothetical situation where genetic engineering has progressed so far that it is possible to ‘design’ a baby. Designing a baby in this context means that one can determine the fate of the baby by deciding the attributes such as mathematical aptitude and musical ability. If the government were to take a stand on this issue, what will their choice be?
A government that adopts the utilitarian approach would probably pass the bill to make it legal because it would definitely bring net benefit to the nation. Why do I say so? This would definitely raise the standard of living of the nation, not only economically but also in the social cultural aspect. For instance, the people would be better off and they would probably appreciate arts more.
On the one hand, a utilitarian government would welcome this idea, but on the other hand, a government that is leaning towards Kant’s ideology would probably reject it. They might argue based on religious reason as they feel that this whole idea is morally unsound and it is preposterous to play ‘god’ for this instance.
In short, it is very hard to determine whether one’s action is right or wrong, especially in an area such as technology that is filled with countless controversies. If one were to base all their actions on any ideology, he would commit ‘man with the hammer’ syndrome where ever problem will appear to be a nail. This analogy means that one would follow a system blindly without considering the alternatives and this might lead to the situation where the best solution is overlooked. Hence, I propose that in the areas of the ethics of technology, everything should be looked upon in a case by case basis, using both the utilitarianism and categorical imperative approaches.
Thursday, September 24, 2009
Analytical skills
This is one of the situations that my AS professor has given me. The story goes like this- You are currently a SMU student( which I am currently) and you are very interested in writing mystery novels. You are so interested that your dream is to be a mystery novel writer. You have sent drafts after drafts of your work to many publication houses but all you got are rejections, so you feel that this might be the end of your dream of showing the world of your work.
During one faithful day, one of the publishers that rejected your works called and told you that they are willing to accept your work. However, there is one condition- your work will be published under someone else's name. You asked why, and the publisher said that one of their authors have run out of ideas and the author's bank( unpublished finished works) can only last for five more years. They feel that your works are very similar to the best selling author, so similar that it seems like the works are written by identical twins. Hence, they feel that it is a good idea to publish your works under his name as it is almost similar to a franchising strategy where one can use the 'brand' to market their work. Also, you will receive $500,000 for your first work and 50% of the subsequent proceeds from the books that you are penning in the future. This is a very attractive deal considering your current status as a SMU student. However, there is one dangerous cache- if you were to publish any of your mystery novel works under your own name someday, you will be killed by assassins.
The question is- will you accept or reject the deal?
During one faithful day, one of the publishers that rejected your works called and told you that they are willing to accept your work. However, there is one condition- your work will be published under someone else's name. You asked why, and the publisher said that one of their authors have run out of ideas and the author's bank( unpublished finished works) can only last for five more years. They feel that your works are very similar to the best selling author, so similar that it seems like the works are written by identical twins. Hence, they feel that it is a good idea to publish your works under his name as it is almost similar to a franchising strategy where one can use the 'brand' to market their work. Also, you will receive $500,000 for your first work and 50% of the subsequent proceeds from the books that you are penning in the future. This is a very attractive deal considering your current status as a SMU student. However, there is one dangerous cache- if you were to publish any of your mystery novel works under your own name someday, you will be killed by assassins.
The question is- will you accept or reject the deal?
Aung San Suu Kyi
I have recently come across an article regarding Myamar. I was deeply disturbed when I read that Aung San Suu Kyi, one of the leaders of the opposition party is kept under house arrest by the Burma's government in Burma, known as Myanmar today. How could one be kept under house arrest in the present world just because of conflicting ideologies? This is certainly one of the most disgusting things that I have ever heard of in my life. Also, I feel deeply ashamed to find myself of not knowing this all my life. If there is only one thing that is unjustified in the world, this could be the one!
Saturday, July 25, 2009
Monday, May 18, 2009
OIL!!!
Oil consumption has fallen by less than 10%. However, the price of oil has fallen off the cliff from US$150 to US$38. This represents a fall of around 70%. This tremendous fall is attributed to the fact that hedge funds pump in a lot of money to affect the prices.
However, this might also happen because of the fact that supply curve of oil is very price inelastic where a small fall in demand will result in a very huge fall in the price of oil.
However, this might also happen because of the fact that supply curve of oil is very price inelastic where a small fall in demand will result in a very huge fall in the price of oil.
Sunday, March 29, 2009
US dollars as a denomination!
During these few years, fears on the depreciation US dollars haven arisen. The depreciation of the dollars has mainly occured due to the staggering trade deficit. So, why the depreciation of the US dollars has created such a big commotion. This is because of the fact that many of the commodities and investment related products are denominated in US dollars. Hence, the depreciation of the dollars will result in a fall in value of the commodities (for eg. oil). Moreover, the huge spending by the US authorities will bound to result in inflation in the US. This will result in a fall in value of the US dollars as lesser things can be bought with the same amount of money. Thus, people who hold their investments in US dollars will slowly see it fall in value.
Wednesday, March 25, 2009
Pscycology of persuasion
Few months ago, I completed a book recommended by charlie munger- PSYCHOLOGY OF PERSUASION. As mentioned by the title, it is a book that described the factors that influenced one's decision. This book is like a spear and a shield in one. Why do I say so? You can actually use the factors in the book to influence someone to follow your will and use it to defend against weasels who might use it to harm you.
The factors are as listed
1. Scarcity
2. Liking
3. Reciprocation
4. Authority
5. Social proof
6. Commitment and consistency
Suffice to say, these factors can affect your decisions substantially. Hence, you must always be aware of these factors that may affect your decision.
The factors are as listed
1. Scarcity
2. Liking
3. Reciprocation
4. Authority
5. Social proof
6. Commitment and consistency
Suffice to say, these factors can affect your decisions substantially. Hence, you must always be aware of these factors that may affect your decision.
Friday, March 20, 2009
ALL THE CASH IS MADE IN THE WAITING
The problem of not getting the right opportunites stems from the fact that people are not accustomed to wait!!!!!!!!!!
Tuesday, February 24, 2009
Wednesday, February 18, 2009
OIL PRICE
Oil price is nearing $US 30/ barrel. This is actually one of the so called 'safety' limit price for me. So watch out for oil prices!!!!!!!!!
Friday, January 30, 2009
Benjamin franklin
A penny saved is a penny earned! Maybe not just a penny because it might be up to 10 pennies if you invest in the right way
Thursday, January 29, 2009
Nobody rings a bell
Yup! Nobody rings a bell at the bottom of the bear market. That's why one must look at indicators such as the market p/e to allocate their capital.
Wednesday, January 28, 2009
THINKING
Soros mentioned in the book 'alchemy of finance' that thinking is a process of making a decision based on the situation or the events that are happening. However, the decision made base on the thinking process will affect the situation and events that are happening. As you can see, this process is like a recursive function where the first factor will affect the second factor, and the second factor will in turn affect the first. This process is known as 'reflexivity', a term coined up by Soros.
Sunday, January 25, 2009
Alchemy of finance
Recently, I read an e book called 'Alchemy of Finance'. This is a book written by George Soros, a famous trader/investor( btw his net worth is $9 billion). One of the concepts he heavily emphasised is 'Reflexivity'. Reflexivity is a concept in which the prices of something( be it houses, stocks or currency) affect the fundamentals of it. This is a different school of thought as compared to the one that warren buffet has been advocating. Maybe, both school of thoughts are interrelated because when buffet buy things he always introduce 'margin of safety' as he feared that the prices might affect the fundamentals.
And most importantly----------------------ORD LOH!!!!!!!!!!!!!!!!!!!!!
And most importantly----------------------ORD LOH!!!!!!!!!!!!!!!!!!!!!
Thursday, January 1, 2009
Kelly optimization formula
Today, I went to the times bookstore and picked up the book WARREN BUFFET PORFOLIO, THE POWER OF FOCUS INVESTING and I discovered something interesing. The book mentioned about the kelly optimiztion formula. The below article describes what is actually the formula about. Have fun reading!
A useful mathematical formula, taken from work on probability theory applied to gambling is the Kelly Optimisation Model. Investing is not the same as gambling, you make your own odds by doing research and exploiting the very inefficient market, however money management is helpful in both fields.
A useful mathematical formula, taken from work on probability theory applied to gambling is the Kelly Optimisation Model. Investing is not the same as gambling, you make your own odds by doing research and exploiting the very inefficient market, however money management is helpful in both fields.
Warren Buffett, the famous American stock market investor who has amassed a fortune of many billions knows all about putting maximum money into high probability events. Peter Lynch also believes in this, and refers to the practice of buying big in the best stocks as "backing up the truck"
Without going into probability analysis, this might be a good place to introduce Kelly's formula. J.L. Kelly was a mathematician who studied the works of other mathematicians working on abstract problems in probability theory, Kelly realised that this work could have practical benefits at the blackjack table. It relates the maximum bet size that a gambler should make given the odds of success, this formula is most commonly used by professional gamblers.
The formula is 2p - 1 = x
Where p is the probability of success, x is the portion of your bankroll (or portfolio) that should be allocated to this bet. If an event has a 40% chance of paying off, don't bet. If a bet has a 55% chance of winning, only put in 10% of your money. If the chance of winning is 95%, invest 90% of your money.
A Kelly bet is the most aggressive bet you should ever take. Bets larger than Kelly are inefficient money management and will cause you to lose your money. The Kelly bet size does not ensure the highest probability of making a gain, it ensures the highest profitability for a set of games, or trades. It is also known as "tear your hair out" trading, as in practice they are actually quite big bets for many games and your equity curve will be extremely volatile.
As an alternative, if you are unsure about the probabilities you can adopt a more conservative stance, and that is to use a half Kelly bet. Gamblers use this all the time, and while it may hurt returns a bit if you have in fact gotten the probabilities right, the returns are parabolic and hence you aren't severely penalised. A Half kelly bet is simply to bet half the amount that the Kelly model suggests. Your chances of success are higher with a half-Kelly bet, but your profits will be lower. You won't become a zillionnaire as quickly, but your chances of getting there will be much greater.
Keep Kelly's formula in mind before you "back up the truck" on another speculative mining share. Apart from the use of this formula in money management, you should never look at investment as a gamble. Investing risk is directly related to the amount of work you do. A person that does regular research will have many high probability events to invest in over a lifetime. The gambling element only kicks in for people that are too lazy to do research.
Yup, so have fun calibrating your own odds and exploiting the pari-mutel system.(this line is written by me.haha.)
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