Sunday, March 31, 2013

Shifting Of Tectonic Plates

The earth is made up of moving tectonic plates and yet we don't ever feel them moving, except when it is too late. That's when we have tsunami or earthquake and have death or destruction upon us.

Believe it or not, the tectonic plates of our finance world are moving and moving fast. Today the central bankers of the world led by Bernanke of the Fed are giving the last moment gift to the top 1% of the oligarchy. Because very soon another tsunami or earth quake will visit us soon which will make 2008-9 look like a movie trailer.

I am not a fan of Prechter or ZH and I do not like to continue spawning storing of imminent collapse. I have been long till January and have been on the sideline since. But we have not shorted the market despite various indicators saying top. Nor did I buy the theory of collapse of the world till now.

However, I see that we are reaching an important infliction point. My favourite route remains SPX reaching an important top in April, followed by a deep correction in summer. That should be followed by another sharp rally in Q3/Q4 before the onset of a deep bear market.  The exact timing of going long or short will vary and will be available to subscribers. These are general market direction but we use many parameters and price points to decide when to go long or short. The guiding principle is that the only way of wining is not losing.

For the month of Feb/March, many have paid subscription only to hear me say : wait , don't short, need confirmation of this or that before taking any action. There were no instant gratification because we are not looking to score on every 10 point turn. Rather the focus is on weekly or monthly trend and not get distracted by the news. If that is your focus as well, you are welcome to join the gang of subscribers. But if short term trading is your focus, I am not the right guy.

Hope you had a great Easter weekend and all ready for the month of April. It is going to be exciting in fits and starts and most likely will demonstrate the formation of an important top. But we are not going to front run and will wait for confirmation before taking any action.

Wish you all best of luck in your trading / investing.

Happy Easter

The real meaning of Easter has had to fight the nonsensical infiltration into the true meaning of Easter.

So here's the comeuppance for the bunny ....

Thursday, March 28, 2013

Our Next MACC Chairman

Unfortunately, his speeches are in Cantonese, but he is so hardworking, at least 20 odd ceramahs a month throughout the country. He does not mince his words, its liberal with profanities, much like me. Plus he has a Phd in History and was a senior lecturer at a top HK university. DAP Superman is Hew Kuan Yau.

He has the audacity to declare that he will contest for the same seat as Chua Soi Lek - man, will I love it when he crushes CSL. He is cool. He is very funny, cutting, incisive and makes sense... but what is over riding is his passion for a better Malaysia.

Wednesday, March 27, 2013

Fair But Not Reasonable

It used to be independent advisors can only recommend shareholders to accept or reject a deal. Accept if its fair and reasonable, reject if its not. But somehow, in recent times there is a new category of qualification for them: fair but not reasonable. To me thats a bloody cop out. A shirking of duties from all sides. 

Its like all MBA graduate employees insisting that we must do a market survey before launching a product. In reality, its not so much to gain more data on potential market - in the end its more to cover their ass ... if the product failed, they can say, "But, we did the survey before launching ....".

The "fair but not reasonable" is a bogus fortune teller kind of opinion ... "Mr. so and so, you will be rich soon, if not you might be poor ... RM500 thank you". 

Can we go back to reject or accept ... pay a few hundred thousand just to get a "Yes, but maybe not ..." view sounds like such a waste of resources. If a deal gets that opinion, and say the deal goes through, the company gets privatised ... and 6 months later the same asset get relisted somewhere else at a 40% premium to takeover price .... end result is NOBODY gets into trouble, not the SC, not the independent advisors, .... oh but minority shareholders get shafted.

Just look at the last four or five opinions from independent advisors, most have taken the safe, insured route of "fair but not reasonable" ... what you are going to get from now ON is a lot of the same fucked up "yes but no" opinions. Apa value add? What can minority shareholders do? Basically you are telling MI, well, you can sell at this shafted price valuation but don't sue me.

I am in no way implying the offer for MISC is not reasonable or that the opinion is wrong by the independent advisor. I am arguing that the opinion would be worth so much more SALT if they can only tell us to ACCEPT or REJECT. In the MISC case, what do you think they will opine if they have only 2 options and not 3???!!! 

I mean seriously, the offer for MISC is 1.1x book ... lets assume for a moment that book value is RM2bn .... hmmm why don't I fucking give Petronas RM2.2bn and they go and build another MISC from scratch??!! Can you see how ridiculous it is now ... you can cite downturns in sector but you try and build another MISC now and see how much it will cost you, not to mention the human talent, branding, goodwill attached with foreign clients, the network ...

"Absence of competing bid" ... OMG... its like advising your girlfriend to accept the marriage proposal because there seems to be no other guys wanting to propose to you.... cbmf...


Can we switch back to just reject or accept ... the current system is seemingly not fair and not that reasonable to minority shareholders.


Meanwhile back at the EPF/MISC stable ...

The Employees Provident Fund (EPF) is probing the reason for the sales of 
1.494m MISC shares, weeks after its CEO Tan Sri Azlan Zainol said Petronas 
should raise its buy-out price for the national shipping company. "The selling of the MISC shares were done by one of our external portfolio managers and was not from our internally-managed portfolio," EPF public relations general 
manager Nik Affendi Jaafar said in a statement. As such, he said the EPF is 
following up with the fund manager concerned to ascertain the reason for the 
shares were sold, adding a total of 3.99mn shares were sold between March 
12-15. (BT)

MISC's stock price, which had fallen below the RM5.30 buyout price rebounded 
yesterday to end the day at RM5.34. The concern though is that without a higher price, the deal could fall through considering the views expressed by the EPF which owns a 9.6% stake in MISC. EPF's chief executive Tan Sri Azlan Zainol has spoken out asking for a higher price than the RM5.30 per share offered which is at 1.1x MISC's book value. MISC's other big minority shareholder is Skim Amanah Saham Bumiputra with a 6.35% stake. Since the offer is conditional upon getting this 90% acceptance, the offer will lapse if Petronas does not get that level of acceptance.

The Minority Shareholder Watchdog Group has come out to say that the RM5.30 offer price by Petronas is "not compelling enough". Its chief executive, Rita Benoy Bushon said that "Petronas might do well to consider putting a larger carrot on the stick if its intention is to fully take MISC private." 

Petronas’ offer price to privatise MISC is "not fair but reasonable", said the 
independent adviser to the RM8.8bn deal. The offer allows shareholders to 
realise their investment at a premium of between 19.6% and 27.1% over MISC's five-day to three-month volume weighted average market price. Petronas owns 62.7% of MISC's total and paid-up share capital. (BT)

With the independent adviser on Petroliam Nasional Bhd's planned buyout 
of MISC Bhd recommending that shareholders accept the offer, all eyes are on 
the Employees Provident Fund (EPF). The provident fund has already said it 
viewed the offer as being too low. And it has all the right to do so. Its decision to speak out sends the right message to millions of its members. Last Friday, AmInvestment Bank Bhd, the independent adviser to the minority shareholders of MISC, said while the offer was not fair, it was reasonable. 

AmInvestment said the offer was unfair as it was priced at a significant 
discount to MISC's sum-of-parts valuation (SOPV) but considered it reasonable due to a weak shipping outlook that may persist and the absence of a competing bid. So, it recommends that minorities accept Petronas' offer.

In EPF's case, this is very pertinent, because it holds the key in the MISC 
buyout being the second largest shareholder and the largest 
non-interested shareholder with a 9.63% block worth about RM2.44bn. 
In a recent interview with Bloomberg, EPF chief executive Datuk Azlan 
Zainol said the pension fund wants a higher price and that Petronas 
should increase its RM5.30 per share offer. (StarBiz)

Tuesday, March 26, 2013

Podcast For Wednesday Morning S&M Show

If you missed it, here's the podcast on speculative stocks and highly speculative stocks ....

Must Watch Movies

Amid the tension surrounding the elections and the uncertain market conditions owing because of that, let's look at something else to take our minds to something different. For the last 3 months or so, there have not been any worthy English films to talk about, probably because the Oscar race is over and other blockbusters are awaiting the summer release. However, I have found 3 magnificent Canto/Mando films, highly entertaining to boot. Must watch.

The first is the sleeper hit from China, Lost In Thailand. Its a kind of Planes, Trains and Automobiles (Steve Martin, John Candy) meet The Hangover. It was so successful, it has grossed more than US$200m in China alone. It has also caused the number of Chinese tourists to Thailand to jump manifold. It tells of two executives from a venture capital firm seeking the signature of their boss who has gone for a sabbatical at one of the monastery in Thailand for a critical deal. Its very funny in any language.

Lost in Thailand film poster

The Cold War, brilliant in the same style as Infernal Affairs, only this time the crooks have abducted a police patrol van with the 5 police officers inside and ransoming the entire police force. Although Aaron Kwok looks a bit too young to be cast as a very very senior police officer, it was a mild thing. The story line is captivating but its the personalities in the police force that takes center stage. As the top officer is overseas, the next 2 most senior fought for the right to oversee the "rescue/ransom" - Tony Leung Kar Fai was brilliant, trying to gain control of the operations as his son is one of the 5 kidnapped officers. While Aaron is not really a detective but rose from the ranks of administration and strategy. You feel for all the main characters. Gripping stuff.


The final one has to be the bravest comedy produced from HK. Its called Vulgaria, and the entire movie is filled with profanities in Cantonese, but very funnily done. Top notch actors delivering the crudest lines with a hard to believe story line, but somehow it all works. The profanities are not deliberate because in reality its how normal HK people speak. There are too many laugh out loud scenes, most are too crude to describe here. Must be conversant in Cantonese to watch this one.

Same Old, Same Old.

It has been a while I did a post here.
Fact of the matter is, while I am super busy and all the sabaticals that I took last year is now catching up with me, there is nothing much to do but wait patiently.
Yesterday the markets had a bearish reversal day. And today it is pumping up. All to convince the sheeples that the only way to get rich is TBFD.
So what yesterday's selling was all about? Did you say Cyprus?  Oh yes. The Euro politicians have shown that in case of emergency, they will put their hands where ever they can. Earlier they would socialize the loss and privatize the profits. Now they would rob the common men to save the Banksters. Great news now that we know that no body's money is safe.
And what is today's ramp all about. It seems because home prices are now at the highest level since 2008? So the problem of Euro Zone has been solved and we have the collective memory of a gold fish.
But none of these news drive the market. Rather they drive the retail investor sentimement. And speaking of that the powers that be (TBTF Banksters) know how to manipulate that retail sentiment. Over the last few months, the bottom level is being convinced that we are at the beginning of a new bull market. Only then the retail will buy stocks and they normally buy at the peak.
However, I think we will continue to see this rollar coaster ride for the major part of April before any decent correction. So my advice to the subscribers have been to stay on the sideline and avoid all kinds of temptations. It is still not the time to short yet.
We may get occational day or two when we will have 1% sell off but again we will see markets being pumped up on low volume. Doing anything in such sitiation is bad for our financial health.
I know it is damn difficult to remain patient for month after month and do nothinig when the entire 24/7 news media is trumpeting how we are missing on the golden opportunity of getting rich and retire quickly. But that is their agenda. Our goal is to protect our savings and investments.
Just remember, what goes up, comes down. And Wall St. is not above the laws of gravity.

Monday, March 25, 2013

FORECAST: new book to be published tomorrow!

That's right, my new book, the cover of which you've seen off to the right of this blog for some time now, will FINALLY be in bookstores in the US tomorrow, March 26. Of course, it is also available at Amazon and other likely outlets on the web. Who knows when reviews and such will begin trickling in. The book was featured in Nature on Thursday in their "Books in brief" section (sorry, you'll need a subscription), but the poor writers of those reviews (I've been one) really have almost no space to say anything. The review does make very clear that the book exists and purports to have some new ideas about economics and finance, but it makes no judgement on the usefulness of the book at all.

Anyone in the US, if you happen to be in a physical bookstore in the next few days, please let me know if you 1) do find the book and 2) where it was located. I've had the unfortunate experience in the past that my books, such as Ubiquity or The Social Atom, were placed by bookstore managers near the back of the store in sections with labels like Mathematical Sociology or Perspectives in the Philosophy of History, where perhaps only 1 or 2 people venture each day, and then probably only because they got lost while looking for the rest room. If you do find the book in an obscure location, feel completely free -- there's no law against this -- to take all the copies you find and move them up to occupy prominent positions in the bestsellers' section, or next to the check out with the diet books, etc. I would be very grateful!

And I would very much like to hear what readers of this blog think about the book.

Student Loans Are Diving Underwater

The student loan market has a lot of factors that seem to say "Stay the heck away!": they're relatively easy to qualify for, college costs have increased far more rapidly than general consumer prices, we now seem to feel that EVERYONE SHOULD HAVE A COLLEGE EDUCATION. ELEVENTY!!!, and most importantly, the job outlook for many (most?) college grads is to put it mildly, pathetic.  

This graph from the Washington Post piece points out some evidence that we might be seeing the beginning of the next "bubble pop".  Although they're a fairly small part of the overall consumer loan market, student loans are more likely to be 90+ days past due than any other loan class.  And the percentage is growing pretty rapidly. 

Luckily, the Unknown Daughter gets free tuition at Unknown University.   We still have a half-dozen years until we have to shell out for college, but it'll take a lot to justify her going somewhere other than to my (fairly low-cost) school. 

Let's All Adopt This - How Car Drivers Say Thank You

There are very few cases of road rage in Japan. See how car drivers say thank you in Japan. If you let another car into your lane, the other driver will press the hazard lights and let it blink a couple of times to say thank you. So cool ... yet I think it will go a long way to de-stress those around us and lets make a step to try and change the Malaysian driving culture bit by bit.

Sunday, March 24, 2013

Important To View: Can The Pakatan Manifesto Stands The Math Test

The simplest way to attack the Pakatan Manifesto is to say that it will not work, that there is not enough money to fund all that. Tony Pua, a learned person of business and strategist, explains why the Pakatan Manifesto is not a pipe dream. Excellent presentation and convincing too.

Saturday, March 23, 2013

Only If

One of the most heart wrenching yet empathetic video ever. Life was never meant to be easy no matter how we shout phrases of positivism. While reality is never always pristine and trouble free, we cannot dwell on them. The struggles, pain and loss that happen to us, much of which we may never have total control over ... are there and will be there in our journey. Happiness, joy and contentment are fleeting and temporary. It seems we get a raw deal in every sense of the word. We soldier on because of our human spirit and the love of those around us, and the love for our own selves. We will never get to understand fully or comprehend the whys. Take care of one another, appreciate the little things in life cause the big ones don't come too often, don't dwell on disappointments for too long, heal yourself, live well, be generous where you can ... and my mantra... bloom where you are planted.

Friday, March 22, 2013

But I'm Not Dead

It's been almost a year since I last posted.  And a lot has happened at Unknown University since then.   I'm waiting to hear from the University P&T Committee and the Provost on my tenure case (I've made it past all the other hurdles - department, college peers, college P&T committee, and dean).  So I've been keeping a low profile since then regarding the blogosphere and trying to get stuff done.

Since the last post, the Unknown Baby Boy (a.k.a. KnuckleHead) has turned 4.  He is a lunatic, and a great deal of fun (despite the occasional head butt to the package).   The Unknown Daughter (a.k.a. Future Ruler of the Universe) is finishing up 6th grade.  She's planning on going to a 1-week computer camp to learn HTML this summer, so the blog might actually end up looking good.  On the down side, she just let slip that she's sweet on a young man, so it starts.  Looks like I'll have to buy a large knife to sharpen with e demented grin when he comes a-callin.
Oh, and I had a minor heart attack just before Christmas - no damage to the heart muscle, and I've been back riding since about 2 weeks after.
I'll resume regular posting once the tenure stuff is resolved.  Lots of stuff to catch up on. 

I the meanwhile, here's something completely unrelated to academia (I just found it funny).  It's John Cleese's remarks at Graham Chapman's funeral.  Now THAT is a eulogy.

Advice On Men

No, not from me, its from Oprah Winfrey. I have to agree almost 90% with what she said. Worth a million dollars if it can get you to rethink your choices in life. Of course it doesn't say anything about those who are already married ... but you should know what you should be doing then.

1. If a man wants you, nothing can keep him away. If he doesn’t want you, nothing can make him stay.
2. Stop making excuses for a man and his behavior. Allow your intuition (or spirit) to save you from heartache.
3. Stop trying to change yourself for a relationship that’s not meant to be. Slower is better.
4. Never live your life for a man before you find what makes you truly happy.
5. If a relationship ends because the man was not treating you as you deserve then heck no, you can’t “be friends”. A friend wouldn’t mistreat a friend. Don’t settle.
6. If you feel like he is stringing you along, then he probably is.
7. Don’t stay because you think “it will get better” You’ll be mad at yourself a year later for staying when things are not better.
8. The only person you can control in a relationship is you.
9. Avoid men who’ve got a bunch of children by a bunch of different women. He didn’t marry them when he got them pregnant, why would he treat you any differently?
10. Always have your own set of friends separate from his.
11. Maintain boundaries in how a guy treats you. If something bothers you, speak up.
12. Never let a man know everything. He will use it against you later.
13. You cannot change a man’s behavior. Change comes from within.
14. Don’t EVER make him feel he is more important than you are. Even if he has more education or in a better job.
15. Do not make him into a quasi-god. He is a man, nothing more nothing less.
16. Never borrow someone else’s man.
17. A man will only treat you the way you ALLOW him to treat you.
18. All men are NOT dogs.
19. You should not be the one doing all the bending. Compromise is two way street.
20. You need time to heal between relationships. There is nothing cute about baggage. Deal with your issues before pursuing a new relationship.
21. You should never look for someone to COMPLETE you. A relationship consists of two WHOLE individuals. Look for someone complementary not supplementary.
22. Make him miss you sometimes. When a man always know where you are, and you’re always readily available to him – he takes it for granted.
23. Never move into his mother’s house. Never co-sign for a man.
24. You should know that you’re the best thing that could ever happen to anyone and if a man mistreats you, he’ll miss out on a good thing. If he was attracted to you in the 1st place, just know that he’s not the only one. They’re all watching you and you want more .. so you have a lot of choices. Make the right one.
25. Ladies take care of your own hearts. Share this with other women (just so they know) You’ll make someone smile, another rethink her choices, and another woman prepare. 

Quantum Computing, Finally!! (or maybe not)

Today's New York Times has an article hailing the arrival of superfast practical quantum computers (weird thing pictured above), courtesy of Lockheed Martin who purchased one from a company called D-Wave Systems. As the article notes,
... a powerful new type of computer that is about to be commercially deployed by a major American military contractor is taking computing into the strange, subatomic realm of quantum mechanics. In that infinitesimal neighborhood, common sense logic no longer seems to apply. A one can be a one, or it can be a one and a zero and everything in between — all at the same time. ...  Lockheed Martin — which bought an early version of such a computer from the Canadian company D-Wave Systems two years ago — is confident enough in the technology to upgrade it to commercial scale, becoming the first company to use quantum computing as part of its business.
The article does mention that there are some skeptics. So beware.

Ten to fifteen years ago, I used to write frequently, mostly for New Scientist magazine, about research progress towards quantum computing. For anyone who hasn't read something about this, quantum computing would exploit the peculiar properties of quantum physics to do computation in a totally new way. It could potentially solve some problems very quickly that computers running on classical physics, as today's computers do, would never be able to solve. Without getting into any detail, the essential thing about quantum processes is their ability to explore many paths in parallel, rather than just doing one specific thing, which would give a quantum computer unprecedented processing power. Here's an article giving some basic information about the idea.

I stopped writing about quantum computing because I got bored with it, not the ideas, but the achingly slow progress in bringing the idea into reality. To make a really useful quantum computer you need to harness quantum degrees of freedom, "qubits," in single ions, photons, the spins of atoms, etc., and have the ability to carry out controlled logic operations on them. You would need lots of them, say hundreds and more, to do really valuable calculations, but to date no one has managed to create and control more than about 2 or 3. I wrote several articles a year noting major advances in quantum information storage, in error correction, in ways to transmit quantum information (which is more delicate than classical information) from one place to another and so on. Every article at some point had a weasel phrase like ".... this could be a major step towards practical quantum computing." They weren't. All of this was perfectly good, valuable physics work, but the practical computer receded into the future just as quickly as people made advances towards it. That seems to be true today.... except for one D-Wave Systems.

Around five years ago, this company started claiming that it was producing and achieving quantum computing and had built functioning devices with 128 qubits. It used superconducting technology. Everyone else in the field was aghast by such a claim, given this sudden staggering advance over what anyone else in the world had achieved. Oh, and D-Wave didn't release sufficient information for the claim to be judged. Here is the skeptical judgement of IEEE Spectrum magazine as of 2010. But more up to date, and not quite so negative, is this assessment by quantum information expert Scott Aaronson just over a year ago. The most important point he makes is about the failure of D-Wave to really demonstrate that its computer is really doing something essentially quantum, which is why it would be interesting. This would mean demonstrating so-called quantum entanglement in the machine, or really carrying out some calculation that was so vastly superior to anything achievable by classical computers that one would have to infer quantum performance. Aaronson asks the obvious question:
... rather than constantly adding more qubits and issuing more hard-to-evaluate announcements, while leaving the scientific characterization of its devices in a state of limbo, why doesn’t D-Wave just focus all its efforts on demonstrating entanglement, or otherwise getting stronger evidence for a quantum role in the apparent speedup?  When I put this question to Mohammad Amin, he said that, if D-Wave had followed my suggestion, it would have published some interesting research papers and then gone out of business—since the fundraising pressure is always for more qubits and more dramatic announcements, not for clearer understanding of its systems.  So, let me try to get a message out to the pointy-haired bosses of the world: a single qubit that you understand is better than a thousand qubits that you don’t.  There’s a reason why academic quantum computing groups focus on pushing down decoherence and demonstrating entanglement in 2, 3, or 4 qubits: because that way, at least you know that the qubits are qubits!  Once you’ve shown that the foundation is solid, then you try to scale up.   
So there's a finance and publicity angle here as well as the science. The NYT article doesn't really get into any of the specific claims of D-Wave, but I recommend Aaronson's comments as a good counterpoint to the hype.

Thursday, March 21, 2013

What Market Was That?

If we had the kind of market we had on Thursday for 3 months, watch the velocity of money rushing through the economy, the multiplier effect would be enormous. Catching everybody off guard. I mean, Muhibbah went very close to being LIMIT UP, my gosh, when did we ever hear of that phrase nowadays, so ancient.

OK, the Iskandar linked counters led the way for the last few days. Like I said before, for any kind of bull to appear, there has to be a leader. Remember this theme because after the elections we will have a genuine bull run, probably with the same actors and supporting actors.

No one could believe what was happening on Thursday because the election was supposed to be so damn close, to be called any day, and yet you seemingly have the start of the mother of all bull runs appearing. So many retail players were sidelined, but can't help it, the lure of a trend is soooooo  ... intoxicating. Your discipline is called into question and kinda gave way very quickly to the temptations of the 'flesh'. How weak we humans are ...

We can all study the best business books but the madness of crowds usually prevails. Will this run continue? Looks like it. Very hard to stop a moving train. Of course unless parliament is dissolved, that could drag things down somewhat. So its all the more exciting and unbelievable ..... its like a casino that declares that they have changed all the odds in favour of players against the bank (blackjack, banker has to draw till 18; the roulette 0 means all numbers get paid off ...) so you have this wonderful casino but management of the casino also said that there is an earthquake registering 9 on the Richter scale that is coming anytime and there is a house fire in the kitchen that could engulf the casino in a matter of hours .... and yet the punters flock in knowing full well the pending uncertainties. Wallah!

Can these kind of market days suddenly appear? NO. Is it orchestrated somewhat ... if you ask me privately, I will give you a very detailed answer. Things like this cannot happen in our markets unless you can see a confluence of economic and fundamentals and liquidity according to the textbook. You tell me, can the market move like it did with so many funds flowing in, throw in the "syndicates" (in my dictionary "syndicates" is not illegal or sinister but the gathering of two or more people agreeing to do something together). You tell me, can they all suddenly wake up and decide all at the same day to "move stocks".

Just be careful, people.

Jon Hamm's Penis Banned From Mad Men

Mad Men is a very good series, but the producers are having a hard time with Jon Hamm's little general, as men during those days wear much tighter trousers, so much so that his cowabunga had to be photoshopped out of posters..etc... What a wonderful positive PR problem to have.

When a man walks into a room, he brings his whole penis with him. A fleshy appendage, no less primitive than the prehensile tail we lost when we evolved, yet no less important than the heart that keeps us pumping. It makes a man feel whole. It drives a man. It’s the stick that chases the carrot. And when it hangs off of Jon Hamm, it causes problems simply because it stands up for itself.
Conflicts between the Mad Men crew and Jon Hamm’s increasingly demanding companion, Little Dick Whitman, have apparently become so prevalent, the show’s producers have “politely” asked the notoriously freewheeling star to stifle his penis with a layer of restrictive underwear, after Hamm’s penis became too distractingly headstrong. “This season takes place in the 1960s, where the pants are very tight and leave little to the imagination,” an insider "source" explains to the New York Daily News. And while, yes, the entire series has so far taken place in the 1960s, either the closer trouser cuts of Carnaby Street have begun to encroach upon Mad Men, or Jon Hamm’s penis has similarly begun to experiment with the styles of the era, and its insistence on copying Bob Dylan’s fly-away hair and Cuban boots have made Hamm’s penis all the more disruptive.
In addition to being banned from the set, Jon Hamm’s penis has also been Photoshopped out of promotional booklets and advertisements, with NYDN’s source laughing, “Imagine how distracting that would be on the side of a bus or building.” Hamm’s representative, however, doesn’t find anything amusing about his client’s enormous, impudent genitals being scrubbed from city buses so as not to cause traffic accidents. “It is ridiculous and not really funny at all. I’d appreciate you taking the high road and not resorting to something childish like this that’s been blogged about 1,000 times,” they said, clearly not familiar with the Internet. 
On a related note, Matthew Weiner is still allowed free rein. "Around here there can only be one Weiner in charge," he said, hopefully.

Wednesday, March 20, 2013

Third (and final) excerpt...

The third (and, you'll all be pleased to hear, final!) excerpt of my book was published in Bloomberg today. The title is "Toward a National Weather Forecaster for Finance" and explores (briefly) the topic of what might be possible in economics and finance in creating national (and international) centers devoted to data intensive risk analysis and forecasting of socioeconomic "weather."

Before anyone thinks I'm crazy, let me make very clear that I'm using the term "forecasting" in it's general sense, i.e. of making useful predictions of potential risks as they emerge in specific areas, rather than predictions such as "the stock market will collapse at noon on Thursday." I think we can all agree that the latter kind of prediction is probably impossible (although Didier Sornette wouldn't agree), and certainly would be self-defeating were it made widely known. Weather forecasters make much less specific predictions all the time, for example, of places and times where conditions will be ripe for powerful thunderstorms and tornadoes. These forecasts of potential risks are still valuable, and I see no reason similar kinds of predictions shouldn't be possible in finance and economics. Of course, people make such predictions all the time about financial events already. I'm merely suggesting that with effort and the devotion of considerable resources for collecting and sharing data, and building computational models, we could develop centers acting for the public good to make much better predictions on a more scientific basis.

As a couple of early examples, I'll point to the recent work on complex networks in finance which I've touched on here and here. These are computationally intensive studies demanding excellent data which make it possible to identify systemically important financial institutions (and links between them) more accurately than we have in the past. Much work remains to make this practically useful.

Another example is this recent and really impressive agent based model of the US housing market, which has been used as a "post mortem" experimental tool to ask all kinds of "what if?" questions about the housing bubble and its causes, helping to tease out better understanding on controversial questions. As the authors note, macroeconomists really didn't see the housing market as a likely source of large-scale macroeconomic trouble. This model has made it possible to ask and explore questions that cannot be explored with conventional economic models:
 Not only were the Macroeconomists looking at the wrong markets, they might have been looking at the wrong variables. John Geanakoplos (2003, 2010a, 2010b) has argued that leverage and collateral, not interest rates, drove the economy in the crisis of 2007-2009, pushing housing prices and mortgage securities prices up in the bubble of 2000-2006, then precipitating the crash of 2007. Geanakoplos has also argued that the best way out of the crisis is to write down principal on housing loans that are underwater (see Geanakoplos-Koniak (2008, 2009) and Geanakoplos (2010b)), on the grounds that the loans will not be repaid anyway, and that taking into account foreclosure costs, lenders could get as much or almost as much money back by forgiving part of the loans, especially if stopping foreclosures were to lead to a rebound in housing prices.

There is, however, no shortage of alternative hypotheses and views. Was the bubble caused by low interest rates, irrational exuberance, low lending standards, too much refinancing, people not imagining something, or too much leverage? Leverage is the main variable that went up and down along with housing prices. But how can one rule out the other explanations, or quantify which is more important? What effect would principal forgiveness have on housing prices? How much would that increase (or decrease) losses for investors? How does one quantify the answer to that question?

Conventional economic analysis attempts to answer these kinds of questions by building equilibrium models with a representative agent, or a very small number of representative agents. Regressions are run on aggregate data, like average interest rates or average leverage. The results so far seem mixed. Edward Glaeser, Joshua Gottlieb, and Joseph Gyourko (2010) argue that leverage did not play an important role in the run-up of housing prices from 2000-2006. John Duca, John Muellbauer, and Anthony Murphy (2011), on the other hand, argue that it did. Andrew Haughwout et al (2011) argue that leverage played a pivotal role.

In our view a definitive answer can only be given by an agent-based model, that is, a model in which we try to simulate the behavior of literally every household in the economy. The household sector consists of hundreds of millions of individuals, with tremendous heterogeneity, and a small number of transactions per month. Conventional models cannot accurately calibrate heterogeneity and the role played by the tail of the distribution. ... only after we know what the wealth and income is of each household, and how they make their housing decisions, can we be confident in answering questions like: How many people could afford one house who previously could afford none? Just how many people bought extra houses because they could leverage more easily? How many people spent more because interest rates became lower? Given transactions costs, what expectations could fuel such a demand? Once we answer questions like these, we can resolve the true cause of the housing boom and bust, and what would happen to housing prices if principal were forgiven.

... the agent-based approach brings a new kind of discipline because it uses so much more data. Aside from passing a basic plausibility test (which is crucial in any model), the agent-based approach allows for many more variables to be fit, like vacancy rates, time on market, number of renters versus owners, ownership rates by age, race, wealth, and income, as well as the average housing prices used in standard models. Most importantly, perhaps, one must be able to check that basically the same behavioral parameters work across dozens of different cities. And then at the end, one can do counterfactual reasoning: what would have happened had the Fed kept interest rates high, what would happen with this behavioral rule instead of that.

The real proof is in the doing. Agent-based models have succeeded before in simulating traffic and herding in the flight patterns of geese. But the most convincing evidence is that Wall Street has used agent-based models for over two decades to forecast prepayment rates for tens of millions of individual mortgages.
This is precisely the kind of work I think can be geared up and extended far beyond the housing market, augmented with real time data, and used to make valuable forecasting analyses. It seems to me actually to be the obvious approach.

Tuesday, March 19, 2013

Where Is Cyprus?

To most of us, we do not even know the locations of Cyprus, maybe even the fact that it was admitted into the European Union as well. How can something so small be so significant? How can it drag markets down so much? In hindsight, the weaker markets gave the lawmakers a big signal. Its not so much that they can whack the depositors in Cypriot banks, they are scared that such tough and unreasonable measures may be employed at other difficult countries such as Spain or Italy.

What is likely to happen: the Cypriot lawmakers will vote down the rule. This will anger the ECB and may pave the way for Cyprus exit. I mean, seriously, in the whole scheme of things, its only $7bn. You may actually see a minor bank run at places such as Italy and Spain as well, which may bring back the ECB, IMF and EU finance ministers to the discussion room. Likelihood, the tax will only apply to deposits above 100,000 euros ... paving the way to tax the rich but not the poorer citizens - that may be acceptable, the shortfall can easily be made up by the trioka.

Global markets were rattled slightly. However as more news on the backlash by so many parties, it is likely that the rule has to be changed significantly to gain acceptance, and more importantly restore confidence in the ECB's recovery and restoration plan. Cyprus ia small issue, no one will risk pushing the silly rule through at the risk of major fallouts in bigger EU nations. Last thing they need in Italy and Spain is a bank run.

(excerpts from Bloomberg & NYT)

A plan to rescue the tiny European country of Cyprus, assembled overnight in Brussels, has left financial regulators, German politicians, panicked Cypriot leaders and a disgruntled Kremlin with a bailout package that has outraged virtually all the parties. Russia was angry it was left out of talks to aid Cyprus, where it has billions in banks. Aha, you see, Cypriot banks was seen as a haven for a lot of riche Russians to stash their millions and billions.

As markets tumbled and the Cypriot Parliament fell into turmoil. It now looks likely that the Cypriot lawmakers will vote down the measures.

Officials scrambled to explain what went wrong and how best to control the damage of completely irrational decision to make bank depositors liable for part of the bailout. The deal flopped so badly that finance ministers who came up with it shortly before dawn on Saturday were on the phone to each other Monday night talking about ways to revise it. Whatever the outcome, the dispute is a vivid demonstration of why Europe, which until recently was congratulating itself on having weathered the worst of the financial storm, has trouble making decisions with so many different interests represented at the table.

Politics, both domestic and international, get in the way of economics and make it difficult for wealthy countries to line up behind a plan to help the smallest ones. The northern European nations have grown so weary of bailouts for their southern neighbors that they were intent on exacting a hefty contribution from their latest supplicant. Germany in particular, with parliamentary elections looming in September, was set on driving a hard bargain.

A wild card in this instance were the Russians, who have deposited billions in Cypriot banks, extended a $3.25 billion line of credit to Nicosia in 2011 and were in negotiations to help out Cyprus once again. Cypriot leaders apparently were so concerned with keeping their wealthy offshore Russian customers happy that they pushed their own citizens to pay even more than some of the lenders were demanding.

The Russians reacted angrily to a so-called stability tax on deposits in Cyprus, and at being left out of the negotiations. On Monday, Russia’s minister of finance, Anton Siluanov, warned that Russia might not extend the existing credit line because the Europeans had not consulted authorities in Moscow about the deposit levy plan. On Sunday, one Russian official was reported by the Interfax news agency as advising Russians to withdraw funds from Cyprus, saying the banking system was untrustworthy.

The all-night discussions began Friday and ran for 10 hours, ending shortly before dawn on Saturday. Cyprus needed to come up with billions of dollars to help cover the costs of the bailout of the country’s financial sector, or its European allies said they would leave it to face the prospect of collapse alone.

Each of the major stakeholders, which included the International Monetary Fund, the European Central Bank and euro zone finance ministers, entered the room with a conflicting goal. Protecting the small-time saver was at the top of no one’s list. The result was a compromise solution everyone is now unhappy with, officials say, one that stands to cost ordinary Cypriot depositors 6.75 percent of their savings.

The Germans and their northern European allies wanted to exact a maximum contribution from Cyprus to ensure the deal could pass their recalcitrant, bailout-weary parliaments at home. A confidential report by the German foreign intelligence agency, known by its German initials as the B.N.D., was making the rounds, one that painted the island as a haven for money-laundering. The stigma attached to helping the Cypriots — and the political cost in an election year — was rising rapidly.

The I.M.F. was dead set on keeping the debt at what its number-crunchers considered a sustainable level. The Cypriots, meanwhile, wanted to spread the pain around.

The European Central Bank also had reservations about levying higher taxes, but the Germans wanted $9.2 billion from depositors, officials said. That was an enormous contribution for a country the size of Cyprus.

Cypriot lawmakers is likely now to shoot down an unprecedented levy on bank deposits, risking the island’s membership in the euro. Cypriot President Nicos Anastasiades warned German Chancellor Angela Merkel in a call yesterday that he may not be able to win passage, said a Cypriot government official. 

Finance chiefs from the 17-member euro area late yesterday urged Cyprus to spare small-scale savers, while keeping unchanged the size of their demand on account holders. While Cyprus accounts for less than half a percent of the euro economy, the fight over the bank tax risks triggering new turmoil in the financial crisis that began in 2009 in Greece.

A complete rejection of the measure would forego European assistance and could lead to a sovereign default, or even an exit from the currency union. What we have seen in the last few days is a very serious blunder by European governments that essentially are blackmailing the government of Cyprus to confiscate the money that belongs rightfully to depositors.

Once banks on the island reopen, the country could see more than 7 billion euros in outflows, or about 10 percent of the total, Central Bank Governor Panicos Demetriades told a parliamentary committee.

Anastasiades was rebuffed in a call to German Chancellor Angela Merkel yesterday. Merkel told him that he can only negotiate a rescue with the so-called troika, which comprises the European Commission, the ECB and the International Monetary Fund, according to a German government official.

The bank levy and additional tax measures reduced the overall rescue package to 10 billion euros from about 17 billion euros to meet the IMF’s demand for debt sustainability and German politicians’ skepticism over financial transfers.
German Finance Minister Wolfgang Schaeuble said there was no other option if the troika wanted to keep the price tag for the bailout at 10 billion euros. Naturally, the Cypriot president tried to find a way around it, but there was none, and that the levy doesn’t violate deposit guarantees, because such protections are “only as good as a state’s solvency.

Russian President Vladimir Putin called the tax “unfair, unprofessional and dangerous,” according to a statement posted on the Kremlin website. Russian companies and individuals have $31 billion of deposits in Cyprus, according to Moody’s.

Second excerpt...

A second excerpt of my forthcoming book Forecast is now online at Bloomberg. It's a greatly condensed text assembled from various parts of the book. One interesting exchange in the comments from yesterday's excerpt:
Food For Thought commented....Before concluding that economic theory does not include analysis of unstable equilibria check out the vast published findings on unstable equilibria in the field of International Economics.  Once again we have someone touching on one tiny part of economic theory and drawing overreaching conclusions. 

I would expect a scientist would seek out more evidence before jumping to conclusions.
to which one Jack Harllee replied...
Sure, economists have studied unstable equilibria. But that's not where the profession's heart is. Krugman summarized rather nicely in 1996, and the situation hasn't changed much since then:
"Personally, I consider myself a proud neoclassicist. By this I clearly don't mean that I believe in perfect competition all the way. What I mean is that I prefer, when I can, to make sense of the world using models in which individuals maximize and the interaction of these individuals can be summarized by some concept of equilibrium. The reason I like that kind of model is not that I believe it to be literally true, but that I am intensely aware of the power of maximization-and-equilibrium to organize one's thinking - and I have seen the propensity of those who try to do economics without those organizing devices to produce sheer nonsense when they imagine they are freeing themselves from some confining orthodoxy. ...That said, there are indeed economists who regard maximization and equilibrium as more than useful fictions. They regard them either as literal truths - which I find a bit hard to understand given the reality of daily experience - or as principles so central to economics that one dare not bend them even a little, no matter how useful it might seem to do so."
This response fairly well captures my own position. I argue in the book that the economics profession has been fixated far too strongly on equilibrium models, and much of the time simply assumes the stability of such equilibria without any justification. I certainly don't claim that economists have never considered unstable equilibria (or examined models with multiple equilibria). But any examination of the stability of an equilibrium demands some analysis of dynamics of the system away from equilibrium, and this has not (to say the least) been a strong focus of economic theory.   

Monday, March 18, 2013

New territory for game theory...

This new paper in PLoS looks fascinating. I haven't had time yet to study it in detail, but it appears to make an important demonstration of how, when thinking about human behavior in strategic games, fixed point or mixed strategy Nash equilibria can be far too restrictive and misleading, ruling out much more complex dynamics, which in reality can occur even for rational people playing simple games: 


Recent theories from complexity science argue that complex dynamics are ubiquitous in social and economic systems. These claims emerge from the analysis of individually simple agents whose collective behavior is surprisingly complicated. However, economists have argued that iterated reasoning–what you think I think you think–will suppress complex dynamics by stabilizing or accelerating convergence to Nash equilibrium. We report stable and efficient periodic behavior in human groups playing the Mod Game, a multi-player game similar to Rock-Paper-Scissors. The game rewards subjects for thinking exactly one step ahead of others in their group. Groups that play this game exhibit cycles that are inconsistent with any fixed-point solution concept. These cycles are driven by a “hopping” behavior that is consistent with other accounts of iterated reasoning: agents are constrained to about two steps of iterated reasoning and learn an additional one-half step with each session. If higher-order reasoning can be complicit in complex emergent dynamics, then cyclic and chaotic patterns may be endogenous features of real-world social and economic systems.

...and from the conclusions, ...

Cycles in the belief space of learning agents have been predicted for many years, particularly in games with intransitive dominance relations, like Matching Pennies and Rock-Paper-Scissors, but experimentalists have only recently started looking to these dynamics for experimental predictions. This work should function to caution experimentalists of the dangers of treating dynamics as ephemeral deviations from a static solution concept. Periodic behavior in the Mod Game, which is stable and efficient, challenges the preconception that coordination mechanisms must converge on equilibria or other fixed-point solution concepts to be promising for social applications. This behavior also reveals that iterated reasoning and stable high-dimensional dynamics can coexist, challenging recent models whose implementation of sophisticated reasoning implies convergence to a fixed point [13]. Applied to real complex social systems, this work gives credence to recent predictions of chaos in financial market game dynamics [8]. Applied to game learning, our support for cyclic regimes vindicates the general presence of complex attractors, and should help motivate their adoption into the game theorist’s canon of solution concepts

Book excerpt...

Bloomberg is publishing a series of excerpts from my forthcoming book, Forecast, which is now due out in only a few days. The first one was published today.

21st March, Thursday @ Grand Hyatt

Secrets of Cyprus...

Just something to think about when scratching your head over the astonishing developments in Cyprus, which seem to be more or less intentionally designed to touch off bank runs in several European nations. Why? Courtesy of Zero Hedge: is now coming out that the Cyprus parliament has postponed the decision and may in fact not be able to reach agreement. They may tinker with the percentages, to penalize smaller savers less (and larger savers more). However, the damage is already done. They have hit their savers with a grievous blow, and this will do irreparable harm to trust and confidence.

As well it should! In more civilized times, there was a long established precedent regarding the capital structure of a bank. Equity holders incur the first losses as they own the upside profits and capital gains. Next come unsecured creditors who are paid a higher interest rate, followed by secured bondholders who are paid a lower interest rate. Depositors are paid the lowest interest rate of all, but are assured to be made whole, even if it means every other class in the capital structure is utterly wiped out.

As caveat to the following paragraph, I acknowledge that I have not read anything definitive yet regarding bondholders. I present my assumptions (which I think are likely correct).

As with the bankruptcy of General Motors in the US, it looks like the rule of law and common sense has been recklessly set aside. The fruit from planting these bitter seeds will be harvested for many years hence. As with GM, political expediency drives pragmatic and ill-considered actions. In Cyprus, bondholders include politically connected banks and sovereign governments.  Bureaucrats decided it would be acceptable to use depositors like sacrificial lambs. The only debate at the moment seems to be how to apportion the damage amongst “rich” and “non-rich” depositors.

Also, much more on the matter here, mostly expressing similar sentiments. And do read The War On Common Sense by Tim Duy:
This weekend, European policymakers opened up a new front in their ongoing war on common sense.  The details of the Cyprus bailout included a bail-in of bank depositors, small and large alike.  As should have been expected, chaos ensued as Cypriots rushed to ATMs in a desperate attempt to withdraw their savings, the initial stages of what is likely to become a run on the nation's banks.  Shocking, I know.  Who could have predicted that the populous would react poorly to an assault on depositors?

Everyone.  Everyone would have predicted this.  Everyone except, apparently, European policymakers....

Sunday, March 17, 2013

Self-Censorship & The Brilliant Independence of Brokers' Research

I have yet to come across a top tier broker research that truly examines ALL the potential outcomes of the upcoming election and the implications. Yes, we had the research from Bank Islam and see what happened. Nomura Research only presented 3 possible scenarios. THREE, nothing more.

Even the dumbest person in the room would know that that is not the entire scenarios available or the available outcomes. Even in my "biased piece below", at least I have the decency to look at all the possibilities.

Nomura has painted three potential election scenarios and their impacts on the economy.
The first scenario is that the ruling coalition will win a smaller majority of 120-124 seats out of 222. BN currently holds 137 seats. The second scenario is that the number of seats won by the opposition and the ruling coalition are marginally less than 120 seats, which would likely be an accelerated ousting of the prime minister. Nomura said within this 20% probability, there is a small chance of the election leading to a hung parliament. The final scenario is that the ruling coalition winning around 125 to 130 seats. But Nomura said this outcome looks unlikely unless there is an unexpected fall in support for the opposition.

Three fucking scenarios ONLY??? Its a fucking coin toss, the last elections popular vote is like 49-51, and you fucking give only 3 scenarios??? Why don't you just say it out loud ... that you cannot make any comment on the other 2 possibilities, no matter HOW REMOTE they may be, only then can you say it is from a fucking research house!!! (the other two possibilities: PR wins by small majority, and PR wins by more than 10 seats majority). Why the self censorship, is there something you cannot say, ... its like predicting the recent US elections and you only give Obama winning by less than 2%, 5% or 10% ... asif the Republicans never existed. I know your hands are tied and you depend on the flows of IB deals but seriously, if you cannot comment or choose not to comment on the other side of the coin .... then don't fucking print the research idiots. It makes a mockery of the so call research piece.

Another one, just received from Morgan Stanley, the big US house, from the land of the purveyor and global sheriff of the maintenance and prevalence of democracy ... they also gave 3 fucking scenarios ONLY ... sigh, long live the USA ... OR come out with a note that says that you think there is a ZERO chance of Pakatan winning the elections and see how many legs you have to stand on.

I am sure we all understand the self censorship part, I would understand but not condone it, if it came from a local house ... but from a foreign house it smacks of something smelly.


#3: Election Scenarios and macro implications 
 Scenario 1: 
BN Parliamentary seat share > 63% 
Positive surprise for investors
 Scenario 2: 
High 50% < BN Parliamentary seat share < 63%
 Scenario 3: 
BN Parliamentary seat share < mid 50% 
(To be fair to Morgan Stanley, they did a decent policy comparison between the two parties without really saying too much one way or the other. The snaps attached below are from MS).

The Edge/Sun Daily: Nomura Economics Research said the upcoming general election (GE), which is likely to be held on a weekend between April 6 and 20, 2013, could make or break its relatively positive economic outlook on Malaysia.
"Our baseline scenario is for the ruling Barisan Nasional (BN) to win, but by a smaller majority of 120-124 seats, which is lower than what we had previously penciled in, partly because recent surveys show an emboldened and well-organised opposition," said Nomura in its "Asia Special Report: Southeast Asia" dated March 6, 2013.
"This raises uncertainty over whether there would be an orderly transition of power, whether Prime Minister Datuk Seri Najib Abdul Razak remains in power and whether the much-needed economic reforms can continue," it added.
Nomura has painted three potential election scenarios and their impacts on the economy.
The first scenario is that the ruling coalition will win a smaller majority of 120-124 seats out of 222. BN currently holds 137 seats.
"Although there is scope for some relief on this baseline result because a small minority of the market sees the opposition actually winning the election, we believe this will be short-lived owing to the immediate implications of a small majority.
"A simple majority in parliament calling a no-confidence vote could emerge when parliament convenes for its first session 60 days after the election. This would raise political and economic uncertainty," said Nomura.
The second scenario is that the number of seats won by the opposition and the ruling coalition are marginally less than 120 seats, which would likely be an accelerated ousting of the prime minister.
Nomura said within this 20% probability, there is a small chance of the election leading to a hung parliament.
"The risk of such an outcome includes policy paralysis, potential protests, calls for a recount or even an annulment of the election results, which can be called within three weeks of the election announcement," said Nomura.
Risk of a no-confidence vote from the opposition on the prime minister will also be even greater, while internal party pressure could also lead to a change in Umno leadership.
"Currently, Deputy Prime Minister Tan Sri Muhyiddin Yassin is seen as a potential replacement for Najib and viewed by the market as somewhat hard-line. This change could emerge earlier than the planned October/November 2013 party elections.
"With the negative political backdrop and economic risks, as well as possible delays in investment projects, these could lead to a sovereign rating downgrade," the research firm said.

The final scenario is that the ruling coalition winning around 125 to 130 seats.
But Nomura said this outcome looks unlikely unless there is an unexpected fall in support for the opposition.
"(However, if it does happen,) the pressure on Najib to step down on this outcome would be significantly reduced and economic policy continuity will likely be maintained."
Nomura believes that increased political and economic concerns if the opposition gains power could be overstated as there may not actually be any major policy changes.
"The opposition has a common objective and is likely to initially focus on governance issues (which could lead to slower government investment), keeping key government staff in place such as the central bank governor and heads of key state companies, consolidate the civil service, before focusing on the direction of economic policy," it said.

hishamh said...

I've looked at the problem myself, and for the life of me, I can't figure out how anybody can make an objective forecast of GE13, much less tease out the probability distribution of outcomes.

We are nowhere near being able to replicate basic electoral prediction methodologies, much less aggregate them as e.g. Nate Silver did recently for the US presidential election.

Problem 1: The overall Malaysian electoral sample size (across time) is too small, both for votes and seats.

Problem 2: The sample size for the predictors normally used (opinion polls, quarterly economic data) is even smaller - small enough that a regression estimate can't be generated, which is a precondition for estimating the probability distribution of outcomes.

Problem 3: GE12 may represent a structural break from the past, but that can't be determined statistically until confirmed by results of GE13.

A time series analytical approach can handle the first two statistical issues, and predicts a BN victory with well above a two thirds majority (point estimate) but with a sample error so large as to make any forecast worthless (I suspect this is due to problem 3).

I don't understand how Nomura or MS or BIMB can predict such tight probability outcomes given these constraints. There's nothing in the scenario analysis methodology that allows you to estimate the probability distribution. Scenario analysis is more of an ...if...then... decision tool, not a forecasting methodology per se.

In short, i don't think self censorship has much to do with this, rather everyone's just pissing in the dark. You're absolutely right - nobody should be publishing research on this, because its too damaging to their credibility.