[OT] Greater Fools -- was: America. The land of the not-so-free (economy)

[Fred]

On Sat, 2005-01-08 at 00:51 -0500, James A. Kuzdrall wrote:
> Some clarifications:
> 
> > >    a) How much money will you set aside for medical care?  My wife
> > > had a $300K heart valve replacement.  I had a $250K operation.  Bad
> > > luck, to be sure, but it could be yours.
> >
> > Well, I would never criticise *individuals* on their health, of
> > course, but I will speak in generalities.
> >
> > Considering the average USian diet in this country...
> 
>     Diet and good habits will not protect you.  Both my wife and I had 
> congenital defects which appeared late in life, not by-pass surgery.  
> We are both slender, eat about 2oz of meat per day, tee totalers, don't 
> own a TV.  We hike Monadnock and the White Mountains spring, summer, 
> and fall.

Granted, there are no "solid guarantees". Yes, congenital defects simply
happen, as I am painfully aware with my autistic son. (Actually not sure
it was congenital or a genetic defect, but doesn't really matter at this
stage).

As a vegetarian, I would even say that the 2oz of meat per day is way
too much -- there are lots of problems with meat, the least of which is
that it takes forever to digest since our gastrointestinal tracts are
not really geared for meat consumption. I've been a vegetarian for at
least 10 years, and I must say I simply felt better overall once I
kicked the meat habit. YMMV, etc. My 2 daughters have spent all or
nearly all of their lives as vegetarians (one is 6, the other is 12, and
the 12-year-old was veggie for 10 or her 12 years -- basically the
entire family did a switch all at once).

This is precisely why I do NOT wish to get into specific individual
issues. Individuals are *always* exceptions to the general rule. Yet,
better health *in general* can be achieved by better diet, exercise,
nutrition, etc. Does it mean I'll never get cancer being a veggie? No,
of course not. Though some results do show that, while vegetarians tend
to get cancer more than the average population, on looking at the
figures deeper, they simply lived longer and avoided dying from coronary
problems, etc. You're going to die from something, eventually. Liebig's
Law of the Minimum at work:

http://www.microsoil.com/liebigs_law_of_the_minimum.htm

> > The healthcare costs in this country are so enormously high..
> 
>     Privatizing SS will not change that.

Forget privatizing it. I'd like to see total elimination of it. Then
natural market forces will take over and *force* the prices down.

> > >    c) How long do you plan to live?  With bad luck you will live
> > > past your savings.
> >
> > The idea is to build cash flow, thus you do not deplete your savings
> > over time, but build them up. How to do this is an exercise for the
> > student. :-)
> 
>     Its tough!  With about $2M net assets, you can bring in $50K per 
> year after taxes and inflation without touching the inflation adjusted 
> principle.  About 4% of Americans have $1M in net worth, only a 
> fraction of a percent have $2M.  It doesn't look good very for a 
> national plan!  Maybe more can figure it out though, if forced.

There should be no national plans, because such are all doomed to
failure. Money, like many other things in nature and in human-created
societies, tends to distribute themselves according to power scaling
laws. Attempts to change that naturally occurring distribution,
especially in zero-sum or near-zero-sum systems, will not have the
intended effect, and will create more problems than it solves. 

This goes along with my Transfer of Misery Principle: Governments can
never eliminate misery. They merely transfer it from one place to
another, creating more along the way.

Think about that for a moment; you'll see it's true. In a zero-sum
environment, it is inescapable. Due to the complexities of governments
this fact is not readily apparent. Sometimes the misery is shifted
forward in time; other times it is transferred to other segments in
society or even other countries. Yet, it remains true.

> > Then you are down to the last few years, start sweating, and scream
> > for mommy government to come along and bail you out.
> 
>    Yes, but what will you do if it is your sister, lifelong friend, or 
> good neighbor who screwed up and is now old, sick, fragile and unable 
> to work?  Let them starve or freeze for their error?  Just as now, you 
> will find yourself sharing your good fortune with those deemed less 
> deserving.

Yes, but at least it is *my* choice to do so. What if the government
takes so much of my money that, in crunch times, I don't have enough to
care for my own? Been there, done that...

> > How do people in other countries handle this?
> 
>    Families have to take care of their own elders - a generational 
> transfer not unlike the present SS plan.

Very much unlike it. It works at the individual family level, not some
enormous national machine that is too sluggish to respond to changes in
reality; too inefficient to properly control the funds, and predicated
on principles that are simply not sustainable in the long run. It
discourages family reliance and may even be a contributor to the
breakdown of the family (don't quote me on that -- I have not had the
time to think or research that aspect yet).

> > The stock market is a zero-sum game. Unless one understands *fully*
> > what that means...
> 
>    Zero-sum, at least in the mathematical sense, means the if someone 
> gains a dollar in the stock market, someone must lose a dollar.  That 
> has not been true up to now, but it may be someday.

It is true for the stock market. Think about how it works for a moment:

When you buy 1000 shares of CSCO at $20 a share, for example, $20,000
leaves your account and enters the accounts of those you purchased CSCO
from. In exchange, you now how 1000 CSCO "tokens".

If later you were to sell CSCO at $22 a share, $22,000 must leave the
accounts of others in exchange for the 1000 tokens.

That $2000 profit came from *other people* -- it did not appear out of
thin air.

Now, if CSCO dives down to $18 a share, those who purchased the 1000
shares at $22 will now loose $4 a share, or $4000. 

What drives the price of CSCO? Nothing other than the buyers and
sellers. It's a free-running auction. Where the buyers and sellers meet
is the point CSCO sells at; it's the "price" of CSCO.

Each fool who buys CSCO is hoping for a greater fool to take CSCO off
his hands at a higher price. The greatest fool is that fool who cannot
find greater fools; he is left holding the bag in this zero-sum game.

Witness the stock market crash of 2000 -- all the greater fools dried
up. It's that simple. There simply were no greater fools to come along
to take the market even higher than the crazy levels it reached.

The media -- especially the financial media -- works very hard to
obscure this basic fact; it creates myths about the stock market, which,
unfortunately, leads many fools in to risk losing their money due to
their lack of understanding of how the stock market actually works.

>    If I pay $10 for a stock, hold it for 10 years, sell it to someone 
> for $15, they hold it for 10 years and sell it for $22.50, who lost 
> money?  The asset (company) became worth more through its own growth.  
> It did not necessarily decrease the value of any other asset.

Read above. You loose money when you run out of greater fools, and
greater fools are a finite commodity. 

The time you hold it is immaterial; your goals are always the same --
find a greater fool to take it off your hands at a higher price. 

What complicates the zero-sum game of the stock market for long-term
traders -- uh, I mean "investors" -- is that the value of money itself
changes, as well as the manipulations of the money system by the feds.

But then, those changes will occur anyway. The zero-sum stock market
will only add to that risk, not diminish it.

Supply of fools do fluctuate over time. The best thing to do in the
stock market is to buy at times of low greater fools activity, and sell
at times of high greater fools activity. The greater fools flux was in
positive swing during the 90s, as a positive runaway effect took place
-- fools attracted more fools, and all lost sight of the zero-sum nature
of the market. Ponzi scheme, only free-running.

Of course, you have to know that more greater fools are likely to flock
in later.

>     Thank you, Fred, for the "unrelated rant" that brought up this 
> issue.  I don't associate with too many computer professionals, so the 
> viewpoints and concerns are illuminating.  I was told that all 
> programmers are Libertarians.  It looks like the span is richer and 
> broader than that.

You're welcome.

I am, BTW, a staunch Libertarian, though not necessarily associated with
the Libertarian Party. I am also an autodidact in a number of areas,
such as complexity theory, biology, physics, and the stock market
(though not necessarily in that order!!!) I suppose I am an autodidact
mathematician as well. Actually, I just don't know anymore. I just AM.
It is hard to pigeonhole me, and I kinda like it that way. Hell, I've
written poetry, been (and still am) a political activist, run the
Freedom Film Festival here in Nashua, host websites, take out the
trash...

It always amuses me when someone asks me "what do you do?" or "what's
your profession?" I quite literally don't know how to answer that. There
is much more to me than what I do to make a buck to feed the kids.

I should run a whoami on myself sometime. The results would be amusing.

Well, I did that, and this big black 1:4:9 monolith appeared in my
bedroom... Gotta Go.

-Fred

-- 
Come join The Linux Cafe:
http://mailman.puissante.com/mailman/listinfo/linux-cafe
Where no topic is "OT". 
All Linux die-hards, fans, and devotees are welcome.