MMXV1-ALPHA POSSIBILITY OF SUPER BLACK SWAN X PROBABILITY

[bimetalaupt]

Looking interesting as Russia is buying gold and selling oil to fill China's oil reserve from 8 days to 30 days.

Russia-China gas deal could ignite a shift in global trading

Russia is increasingly looking east to China as a trading partner — and that could mean an end to the dollar’s dominance as a petrocurrency

'The unipolar model of the world is over,” declared Vladimir Putin last week.


“The global picture has completely changed”.


The St Petersburg International Economic Forum was less well-attended than usual. During previous visits to this annual “Russian Davos”, now in its 18th year, I’ve regularly been mown down by American and West European CEOs, as they’ve purposefully stomped down carpet-tiled corridors, their retinue of aides and cameras in tow.


This year, while plenty of Western executives did make the annual trek to Russia’s beautiful second city, keen to sell more cars, soap powder and financial services in Europe’s most valuable consumer market, the corridors were safer. Many of the top names stayed away.


The sanctions imposed on Russia in response to events in Ukraine put Western business leaders under pressure. Fearing unsavoury headlines, and often responding to specific government requests, some of our best-known corporate pole-climbers gave “Putin’s vanity summit” a miss.

[bimetalaupt]

cont

Such absences, along with the UK’s local and European election shenanigans, meant the St Petersburg Forum generated less comment than usual. Yet I’d say this year’s event provided confirmation of one of the most important pieces of news to emerge from Russia since the Soviet Union was dissolved a quarter of a century ago.

I’m referring to the $400bn (£237bn) deal struck between Moscow and Beijing, under which Russia will supply 38bn cubic metres (bcm) of gas to China over 30 years from 2018. Before that happens, the two sides are to share the estimated $77bn cost of building the new “Power of Siberia” pipeline, stretching from Eastern Siberia to China’s populous north-east.

While that will already amount to the world’s biggest construction project, this joint initiative could yet see a second pipeline built to the Western Provinces of the People’s Republic, expanding Russia’s annual Chinese gas sale to 61bcm.

This deal has been a long time coming. Last spring, after a decade of negotiation, state-run energy giants Gazprom and CNPC signed a memorandum of understanding regarding the initial pipeline route. Putin’s visit to China last week, followed by events in St Petersburg, cemented the high politics of the tie-up.

Some say the Ukrainian crisis has forced an “isolated” Russia to do this China deal now, in a scramble for allies. Others judge that Beijing, showing its disapproval of Western adventurism and lingering Cold War attitudes, is deliberately standing next to Moscow in a joint display of strength. Whichever way you spin it, the outcome is the same. Russia, source of a third of all natural gas used in Western Europe, will soon have a major alternative market for its vast exports. And that can only put upward pressure on both wholesale and retail gas prices.

Enemies for much of the Cold War, Russia and China are now building serious commercial ties across their 2,700-mile border. Under-reported in the West, this fast-strengthening relationship will do much to shape the world economy in the years and decades to come.

As recently as 2003, cross-border trade between Russia and China amounted to just $12bn. Over the last decade, that’s expanded more than seven-fold, reaching $90bn last year. Both sides recognise the synergies between the world’s largest energy exporter and the world’s most populous nation and biggest manufacturer.

In 2009, Russia’s oil giant Rosneft secured a $25bn oil swap contract with China. Last year, that relationship deepened, after Rosneft agreed to double oil supplies to China in a deal valued at a colossal $270bn. This reflected Russia’s plan to shift its focus away from saturated and crisis-ridden European energy markets and towards Asia — a plan well in train years before recent events in Ukraine.

Under the latest oil agreement, Russia pumps an extra 300,000 barrels to China daily for the next 25 years, doubling the crude it already sells to the energy-hungry People’s Republic. The speed of change in the direction of Russia’s oil exports has been stark. Russia now sends about 750,000 barrels a day to Asia, a fifth of the oil it sells abroad, helped by the East Siberia Pacific Ocean crude pipeline, linking Russia to China, which opened in 2010.

This new gas announcement is a logical next step. Russia continues its diversification away from Europe while China gets to temper its nagging energy paranoia. The world’s second-largest economy is dangerously dependent on dirty coal-fired power and oil and liquefied natural gas (LNG) shipped through the Malacca Strait and across the South and East China seas. In the event of a bust-up with America, China’s navy can’t guarantee to keep these vital sea lanes open.

The precise gas price agreed between Beijing and Moscow is currently secret. Well-informed insiders, examining the scale of the promised exports, and the headline size of the deal, suggest a range of $350-$370 per thousand cubic meters. If true, this works well for both sides. Russia sells gas to Belarus for about $180 while Ukraine, until recently, was paying $268. So $350, while less than most West European countries pay, isn’t bad from a Russian perspective. Yet it’s still less than it costs China to import LNG from Qatar and elsewhere — and with much less geo-strategic risk.

While this agreement will increase Russia’s price leverage, I don’t think it threatens Western energy security. Over the past four years, Russia has exported an annual average of no less than 160bcm to Europe, more than two and a half times what will go to China, even under the enhanced double-pipeline version of this last Sino-Russia gas deal. Russia needs the European gas market — and that should be borne in mind, whatever is said by sabre-rattling Western politicians and domestic fracking lobbyists.

The geographic reality is that existing and future gas supplies from western Siberia and the Yamal peninsula only make commercial sense if they travel west to Europe. Getting them to China would involve a pipeline so long and complex as to be prohibitively expensive. Eastern Siberian gas, similarly, is only viable if it goes east. The two distinct areas of Russian gas production are each located for their respective markets. It makes perfect sense for Moscow to pursue and maintain good export relationships with both Western Europe and China.

The real danger, in my view, is rather more abstract — but deadly important nevertheless. If Russia’s “pivot to Asia” results in Moscow and Beijing trading oil between them in a currency other than the dollar, that will represent a major change in how the global economy operates and a marked loss of power for the US and its allies.

With the dollar as the world’s petrocurrency, it also remains the reserve currency of choice for central banks globally. As such, the US is currently able to borrow with “exorbitant privilege”, as it has for decades, simply printing money to pay off foreign creditors.

With China now the world’s biggest oil importer and the US increasingly stressing domestic production, the days of dollar-priced energy, and therefore dollar-dominance, look numbered. Beijing has recently struck numerous agreements with major trading partners such as Brazil that bypass the dollar. Moscow and Beijing have also set up rouble-yuan swap facilities that push the greenback out of the picture.

If Russia and China now decide to drop dollar energy pricing totally, America’s reserve currency status could unravel fast, seriously undermining the US Treasury market and causing a world of pain for the West. This won’t happen tomorrow or next year. It’s unlikely even by 2020. But by announcing this deal, Russia and China turned the screw half a twist more.

www.telegraph.co.uk/finance/comment/liamhalligan/10854595/Russia-China-gas-deal-could-ignite-a-shift-in-global-trading.html

[Aman A.K.A. Ahamburger]

Great point! Yes China is using this opportunity to expand into Russia's oil reserves...

Enemies for much of the Cold War

They also fought a war. Where as the Allied forces broke Japans hold on the main land. I would also bet that China is liking that Putin is brining on the fall of the Russian federation. This is why I believe 300 million troops are going to be needed. It's not just the Mid east.. It's the East.

God bless,

[bimetalaupt]

Nov 22, 2014 10:59:34 GMT -5 Aman A.K.A. Ahamburger said:

Great point! Yes China is using this opportunity to expand into Russia's oil reserves...

Enemies for much of the Cold War

They also fought a war. Where as the Allied forces broke Japans hold on the main land. I would also bet that China is liking that Putin is brining on the fall of the Russian federation. This is why I believe 300 million troops are going to be needed. It's not just the Mid east.. It's the East.

God bless,

A++++,

It is looking like the economic war is shifting to Russia: why do we buy from China to help Russia?

Just a thought,

BiMetalAuPt

Russia and China have signed two large natural gas deals in the last six months as Russia turns its attention eastward in reaction to sanctions and souring relations with Europe, currently Russia's largest energy export market.

But the move has implications beyond Europe. In the department of everything is connected, U.S. natural gas producers may be seeing their dream of substantial liquefied natural gas (LNG) exports suffer fatal injury because of Russian exports to the Chinese market, a market that was expected to be the largest and most profitable for LNG exporters. Petroleum geologist and consultant Art Berman--who has been consistently skeptical of the viability of U.S. LNG exports--communicated in an email that Russian supply will force the price of LNG delivered to Asia down to between $10 and $11, too low for American LNG exports to be profitable.Related: APEC 2014: Russia Tries To Leave Europe Behind

The problem has been that overproduction and low prices--now only a fraction of the $13 per thousand cubic feet (mcf) at the peak in 2008--have undermined the financial stability of the natural gas drillers. Here's why: Natural gas from shale, referred to as shale gas, is generally more expensive to produce than conventional natural gas and will require that natural gas prices go much higher than they are today--from around $4 per mcf almost certainly to over $6 per mcf and perhaps more to pay the costs of bringing that gas out profitably.

But at that price, U.S. LNG is no longer competitive in Europe. And now, because of the Russian-Chinese natural gas pipeline deals, it may no longer be competitive in Asia. Those are the two largest markets for LNG. Without them it is doubtful that the United States will be exporting much LNG--except perhaps at a loss.

Here's the problem: To convert U.S. natural gas to liquefied natural gas, put it on specially built tankers and ship it to Europe or Asia will cost about $6 per mcf. If the price of U.S. natural gas averages around $6 per mcf, the total landed cost of U.S. LNG will be the cost of the gas plus the cost of converting it and shipping it, that is, around $12 per mcf.

oilprice.com/Energy/Natural-Gas/Russia-China-Deal-Could-Kill-U.S.-LNG-Exports.html

[bimetalaupt]

China is getting a cheap price for oil and gas from Russia:

GENEVA Nov 18 (Reuters) - The European Union has told Russia that its system of oil export duties breaks World Trade Organization rules by discriminating in favour of China and against European buyers, diplomats with knowledge of the situation said on Tuesday.

The EU's longstanding concerns over Russia's oil duties, raised at a WTO committee meeting on Monday, could be the subject of a legal challenge at the WTO, one trade official said.

The EU objects to Russia setting different export duties as it looks to develop certain oil fields in East Siberia that supply the ESPO pipeline to China and the Pacific coast.

Russia aims to bolster oil and natural gas exports to China and other Asian markets to offset increasing efforts by the European Union to wean itself off of Russian energy imports.

It says the differential rate is based on the different quality of crude oil produced by different fields, but the EU regards it as "all one product", and has encouraged Russia to replace the export duties with an extraction tax, the official said.

Other concerns raised at the meeting included restrictions on farm produce, high tariffs on televisions and fridges, subsidies for carmakers and protective tariffs to shield agricultural machinery producers, according to an official who was present at the meeting.

Five complaints about Russia have already gone to the WTO's dispute settlement body.

Russia's representative told the meeting that Russia was serious about its WTO commitments and it was always ready to engage in constructive dialogue, and pointed out that it had reduced some tariffs in September.

He said suspensions of trade with Ukraine were due to inconsistencies on the Ukrainian side, and the need to prevent deceptive trade practices and protect consumer rights.

[Aman A.K.A. Ahamburger]

Flip that around for a second. Russia has to sell cheap oil and gas to China because Putin is trying to keep his plans for world domination alive. China reaps the benefits of lower energy cost which staves off the economy collapsing - for a bit.

China and the USA have been building military ties in the shadows for years now and Putin has thrown a wrench into the plot. China suffers from glass house syndrome. But ask yourself - is China happy that central Asia is becoming more destabilized due to Putin's world domination plans?

The gas may stay in the ground for now, or we may continue to use it for the manufacturing Renaissance that is going on. Like you said, why ship it when we can use it? Either way it will be needed at some point, and the longer we manage our reserves the more we have for the long term.

The confrontation between Russia and China during the cold war was because the USSR wanted to expand into China's land. You know China is looking at Putin and saying; "I'll bet you want to be friends. That's probably why you're conducting military exercises in Sibera, right?"

Richmond BC is about 70% Chinese..

God bless,

[bimetalaupt]

Nov 25, 2014 0:55:13 GMT -5 Aman A.K.A. Ahamburger said:

Flip that around for a second. Russia has to sell cheap oil and gas to China because Putin is trying to keep his plans for world domination alive. China reaps the benefits of lower energy cost which staves off the economy collapsing - for a bit.

China and the USA have been building military ties in the shadows for years now and Putin has thrown a wrench into the plot. China suffers from glass house syndrome. But ask yourself - is China happy that central Asia is becoming more destabilized due to Putin's world domination plans?

The gas may stay in the ground for now, or we may continue to use it for the manufacturing Renaissance that is going on. Like you said, why ship it when we can use it? Either way it will be needed at some point, and the longer we manage our reserves the more we have for the long term.

The confrontation between Russia and China during the cold war was because the USSR wanted to expand into China's land. You know China is looking at Putin and saying; "I'll bet you want to be friends. That's probably why you're conducting military exercises in Sibera, right?"

Richmond BC is about 70% Chinese..

God bless,

A++++,
Gold in those hills!!!  sSSSell those Cats D10 and Russian Heavy duty trucks for Putin.

China has the $$$$ to buy anything it wants: Working class are a class of $avers!!!!!
Just a thought,GOD BLESS YOU AND YOURS ALSO.
BiMetalAuPt
DEER HUNTING THIS WEEKEND. 

[Aman A.K.A. Ahamburger]

That's exactly it! Make money off Putin's craziness, he's a legend in his own mind. Will go down as the man who brought the destabilization that caused his own end. China has reserves to spend, and yes the people have more money than the seriously indebted CPC.. Looks like it will end up the People's Republic after all..

One thing that Chinese money can't buy - illusions for their neighbours.. Xi Risks Silk Road Backlash to Reclaim China as Center of World

Have a good time hunting.. C14 Timberwolf?

God bless,

[Aman A.K.A. Ahamburger]

Busy weekend around here...

While the bond and oil market signal depression, Fresh signs of global slump pose challenge to U.S... Evidence of which is reflected in Eurozone's manufacturing growth grinds to a halt.

When you think about it - since only the gullible think the Saudis aren't funding the Islamic State - what better way to ensure the funds keep flowing than to take out the competition? By killing off US oil production early, when China and Europe go off the rails the Saudis ensure they are still the worlds oil supply.

Stay

[Aman A.K.A. Ahamburger]

Ah ha!

China: Fear of a deflationary spiral

But as the holiday season approaches, Guo Wei, factory manager at China Zhongsheng Crafts Co, which makes plastic Christmas trees for export to the US, the UK, Australia and Japan, is struggling to cope. For some products, the company is even selling below cost.

“Sales revenue is holding up OK, but when it comes to prices, customers want them lower and lower. They all say the economy isn’t good,” said Ms Guo. “Some of our own products aren’t profitable any more but we still make them to keep our customers happy.”

Cheaper Christmas trees may sound like good news for western consumers. But falling prices in China pose a rising threat to economies across the globe, many of which are grappling with their own issues of weak demand and troublingly low inflation.

After a decade in which rapid growth and investment gobbled up China’s enormous output, many of its factories – like those in Yiwu – are finding it difficult to shift stock. Demand at home and abroad has been stalling, leaving many industries with chronic overcapacity, especially in basic commodities like steel, glass and cement. For many, the only answer is to keep cuttiinflation.

The result is reflected in China’s official statistics, which show that so-called producer prices have been in outright deflation for nearly three years. Perhaps even more worrying, consumer prices have dropped to a near five-year low of 1.6 per cent on an annual basis in October. “You think there’s a problem in the eurozone? There’s a far bigger problem in China,” says Albert Edwards, strategist at Société Générale.

China is the world’s top exporting nation, and the main trading partner with dozens of countries. As its manufacturers drop prices to increase sales, the impact is being felt across the world, from the factory floor to the shop shelf. With policy makers in many economies – Europe and Japan especially – worried about falling prices, China’s own ability to boost inflation is becoming a key part of the puzzle. As George Magnus, an economic adviser to UBS, puts it: “The rest of us need Chinese deflationary pressures like a hole in the head.”

.......

in a possible sign of rising concerns about disinflation, the People’s Bank of China cut interest rates in November for the first time since 2012.
“It’s a clear indication of how heavy deflationary pressure in China can be these days,” said François Perrin, head of China equities at BNP Paribas Investment Partners.

For over a decade, China has faced accusations of exporting deflation. In 2002, Haruhiko Kuroda – then a Japanese finance ministry official, now head of the Bank of Japan – warned in the Financial Times that China’s entry into the World Trade Organisation would add a “powerful deflationary force” to the global economy.

Just over a year later, the US Federal Reserve published a discussion paper entitled: “Is China exporting deflation?”, but it concluded that the Chinese economy was “too small” to have an impact. A decade on, China’s place in the global economy has been transformed, both as a supplier of goods and a source of demand for raw materials. The Chinese slowdown has been a key factor in falling commodity prices, such as oil, which sank to a four-year low last week.

The drop in global energy costs is feeding through to weaker inflation
everywhere, but many see China’s current bout of disinflation as a symptom of deeper problems that are unique to the world’s second-largest economy: chronic overcapacity, insufficient demand and faltering growth. All are side effects of a top-down system where cosseted state enterprises are reluctant to retrench and local governments are engorged with easy credit.

[bimetalaupt]

GOOD NEWS ON THE DJIA: LESS RISK

STRESS TEST STUDY
RIDK....................... 5361.7425
15 MONTH DJIA....... 20521.8128164717
UPSIDE................... 3396.80281647173
DJIA UPSIDE/RISK..... 63.3525913725%
djia risk/return......... 1.5784673970476
Highest risk DJIA......15160.0703164717
PROF/LOSS PER$1.00 -$0.36647

[bimetalaupt]

REVIEW OF BLACK SWANS EVENT. WHE I FIRST STARTED TALKING ABOUT THE THIRD DERIVATIVE OF POSITION STUDY I USED THE AMERICAN STATISTITON NAME FOR THAT EVENT AND WAS TOLD NOT TO CALL IT A J..... AS SOMEONE MIGHT TAKE THAT PERSONALLY. THE WORD BLACK SWAN WAS USED INSTEAD. SOME THOUGHT ON THAT THEORY.

The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.( IE 3rd derivative of position)

The theory was developed by Nassim Nicholas Taleb to explain:
1.The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.
2.The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).
3.The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs.

Unlike the earlier philosophical "black swan problem", the "black swan theory" refers only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences.[1] More technically, in the scientific monograph Lectures on Probability and Risk in the Real World: Fat Tails (Volume 1), Taleb mathematically defines the black swan problem as "stemming from the use of degenerate metaprobability".[2

Background[edit]

Black swan events were introduced by Nassim Nicholas Taleb in his 2001 book Fooled By Randomness, which concerned financial events. His 2007 book The Black Swan extended the metaphor to events outside of financial markets. Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as "black swans"—undirected and unpredicted. He gives the rise of the Internet, the personal computer, World War I, dissolution of the Soviet Union, and the September 2001 attacks as examples of black swan events.[3]

The phrase "black swan" derives from a Latin expression; its oldest known occurrence is the poet Juvenal's characterization of something being "rara avis in terris nigroque simillima cygno" ("a rare bird in the lands and very much like a black swan"; 6.165).[4] In English, when the phrase was coined, the black swan was presumed not to exist. The importance of the metaphor lies in its analogy to the fragility of any system of thought. A set of conclusions is potentially undone once any of its fundamental postulates is disproved. In this case, the observation of a single black swan would be the undoing of the logic of any system of thought, as well as any reasoning that followed from that underlying logic.

Juvenal's phrase was a common expression in 16th century London as a statement of impossibility. The London expression derives from the Old World presumption that all swans must be white because all historical records of swans reported that they had white feathers.[5] In that context, a black swan was impossible or at least nonexistent. After Dutch explorer Willem de Vlamingh discovered black swans in Western Australia in 1697,[6] the term metamorphosed to connote that a perceived impossibility might later be disproven. Taleb notes that in the 19th century John Stuart Mill used the black swan logical fallacy as a new term to identify falsification.[7]

Taleb asserts:[8]


What we call here a Black Swan (and capitalize it) is an event with the following three attributes.

First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme 'impact'. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

I stop and summarize the triplet: rarity, extreme 'impact', and retrospective (though not prospective) predictability. A small number of Black Swans explains almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives.

Identifying a black swan event[edit]

Based on the author's criteria:
1.The event is a surprise (to the observer).
2.The event has a major effect.
3.After the first recorded instance of the event, it is rationalized by hindsight, as if it could have been expected; that is, the relevant data were available but unaccounted for in risk mitigation programs. The same is true for the personal perception by individuals.

Coping with black swan events[edit]

The main idea in Taleb's book is not to attempt to predict black swan events, but to build robustness against negative ones that occur and be able to exploit positive ones. Taleb contends that banks and trading firms are very vulnerable to hazardous black swan events and are exposed to unpredictable losses. On the subject of business in particular, Taleb is highly critical of the widespread use of the normal distribution model as the basis for calculating risk. For example, a paper produced by academics from Oxford University and based on data from 1,471 IT projects showed that although the average cost overrun was only 27%, one in six of the projects had a cost overrun of 200% and a schedule overrun of almost 70%.[9]

In the second edition of The Black Swan, Taleb provides "Ten Principles for a Black-Swan-Robust Society".[10]

Taleb states that a black swan event depends on the observer. For example, what may be a black swan surprise for a turkey is not a black swan surprise to its butcher; hence the objective should be to "avoid being the turkey" by identifying areas of vulnerability in order to "turn the Black Swans white".[11]

Epistemological approach[edit]

Taleb's black swan is different from the earlier philosophical versions of the problem, specifically in epistemology, as it concerns a phenomenon with specific empirical and statistical properties which he calls, "the fourth quadrant".[12]

Taleb's problem is about epistemic limitations in some parts of the areas covered in decision making. These limitations are twofold: philosophical (mathematical) and empirical (human known epistemic biases). The philosophical problem is about the decrease in knowledge when it comes to rare events as these are not visible in past samples and therefore require a strong a priori, or an extrapolating theory; accordingly predictions of events depend more and more on theories when their probability is small. In the fourth quadrant, knowledge is uncertain and consequences are large, requiring more robustness.[citation needed]

According to Taleb,[13] thinkers who came before him who dealt with the notion of the improbable, such as Hume, Mill, and Popper focused on the problem of induction in logic, specifically, that of drawing general conclusions from specific observations. The central and unique attribute of Taleb's black swan event is high profile. His claim is that almost all consequential events in history come from the unexpected — yet humans later convince themselves that these events are explainable in hindsight.

One problem, labeled the ludic fallacy by Taleb, is the belief that the unstructured randomness found in life resembles the structured randomness found in games. This stems from the assumption that the unexpected may be predicted by extrapolating from variations in statistics based on past observations, especially when these statistics are presumed to represent samples from a normal distribution. These concerns often are highly relevant in financial markets, where major players sometimes assume normal distributions when using value at risk models, although market returns typically have fat tail distributions.[citation needed]

Taleb said "I don't particularly care about the usual. If you want to get an idea of a friend's temperament, ethics, and personal elegance, you need to look at him under the tests of severe circumstances, not under the regular rosy glow of daily life. Can you assess the danger a criminal poses by examining only what he does on an ordinary day? Can we understand health without considering wild diseases and epidemics? Indeed the normal is often irrelevant. Almost everything in social life is produced by rare but consequential shocks and jumps; all the while almost everything studied about social life focuses on the "normal," particularly with "bell curve" methods of inference that tell you close to nothing. Why? Because the bell curve ignores large deviations, cannot handle them, yet makes us confident that we have tamed uncertainty. Its nickname in this book is GIF, Great Intellectual Fraud."

More generally, decision theory, based on a fixed universe or a model of possible outcomes, ignores and minimizes the effect of events that are "outside model". For instance, a simple model of daily stock market returns may include extreme moves such as Black Monday (1987), but might not model the breakdown of markets following the 9/11 attacks. A fixed model considers the "known unknowns", but ignores the "unknown unknowns" (Donald Rumsfeld).[14]

Taleb notes that other distributions are not usable with precision, but often are more descriptive, such as the fractal, power law, or scalable distributions and that awareness of these might help to temper expectations.[15]

Beyond this, he emphasizes that many events simply are without precedent, undercutting the basis of this type of reasoning altogether.

Taleb also argues for the use of counterfactual reasoning when considering risk.[

I HAVE BEEN THINKING ALONG WITH A++++  ( AHAMBURGER) ABOUT THE EVENTS OF THE EAST.  WE ARE AGAIN IN THE RED ZONE OF WORLD HUNGER AND FEAR.  911 WAS SUCH A TIME.

God bless you all and please prey for peace,

BiMetalAuPt

[Aman A.K.A. Ahamburger]

Jerk..

Great call on the 16th, !

I will post a couple of articles later, but yes China is already keeping Russia afloat - nothing like keeping his delusions of grandeur alive so they can have the natural resources.. Russian sanctions hurting the EU more than Russia means Putin's open door has started to show. Seen what happened in France over the last few days? Sweeden? Did you hear that the guy who shot down those NYPD officers was trying to strike fear in the heart of Islam's enemies?

Through tribulations comes the messianic age.. Peace be with you this holiday season!

God bless,

[bimetalaupt]

HIGHER THE DJIA THE > THE RIDK......

STRESS TEST STUDY
RIDK ...............................................6204.705
15 MONTH DJIA PROJECTION........... 21788.7488210283
UPSIDE.......................................... 3764.57882102832
DJIA UPSIDE/RISK............................. 60.6729702867%
djia risk/return.................................... 1.6481803928082
Highest risk DJIA .............................15584.0438210283
PROF/LOSS PER$1.00........................... -$0.39327

[Aman A.K.A. Ahamburger]

The crisis that starts in the east...

ROSENBERG: There's A 'Black Swan' Stewing In China

One looming "black swan" is the Chinese housing markets, which is providing to be a key source of pressure on the economy (notwithstanding last year's upward GDP revision which merely reflected a different accounting procedure) and creating financial strains along the way — all 70 mainland cities are now experiencing YoY home price declines of between 1 and 9%.

Friday's NYT cited reports of major apartment complexes now are only between one-third and one-half unoccupied, and that many projects are halfway through construction and the cranes are now idled.

This is a crucial overhang for a sector that directly accounts for 13% of the economy and indirectly (via the impact on ancillary sectors) that number is closer to 33%.

Even with the builders cutting their housing start production by 34% in November from year-earlier levels, demand has weakened to such an extent (because affordability has become extremely stretched to the point that in the big cities an apartment costs 20 years' worth of wages for college grads), unsold inventory in the large cities ranges between 12 and 18 months of supply — that is huge and explain why average prices have fallen 7.4% since April alone.

We all now how real estate deflations end ... not well.

Paging Keri Russell: Russia, Cuba and the truth about Putin the U.S. media doesn’t want you to know

As it happens, a growing number of Europeans now count among what Germans call Putin Versteher, “Putin understanders.” A Financial Times columnist explains the phenomenon here, though about as well as BusinessWeek explained Putin’s presser last week. Gerhard Schröder, the Social Democratic chancellor from 1998 to 2005, is a noted understander. So are a lot of left parliamentarians, a lot of German business executives, and a lot of Europeans other than Germans. Very mixed bag.

The simplest way to explain the understanders’ view is to say these are people with a grasp of history—recent history, Cold War history, and, the best of them, history going back to the West’s response to the 1917 revolution. When Putin asserts that Russia’s sovereignty and “right to exist” are at stake, they are capable of acknowledging what he means.

A grasp of history and, in the case of the business people, a queasy-making grasp of just how destructive sanctions—as they are, never mind new ones—are already beginning to prove outside of Russia as well as in it. Europe today has little of the stamina it had in 2008 to withstand financial and economic contagion. And here comes the contagion, like a westward wind off the Russian steppes.

Currency markets in Russia’s neighbors are already in chaos. Every day you read—not in the American press, of course—of devaluations against the euro, new foreign exchange controls, forex markets closing altogether. Here is a telling detail: Last week the Swiss cut interest rates to less than zero—you pay to deposit funds—so as to head off a rush of weak-currency holders into the franc.

Mayhem in the making, and eerily like the Asian financial crisis of 1997-98, as mentioned in this space a couple of weeks back.

Yes, exactly, the Asian crisis - like the the biggest real estate bubble in history. To verify another part of the article above, more to read: Europeans Face Export Losses as Sanctions bite. Let's not forget the facts. The industrial recession in Europe has surpassed that of the great depression... Yes, those are factual numbers from the entire eastern half of the world, not random thoughts - for the record.

[bimetalaupt]

ROSENBERG: There's A 'Black Swan' Stewing In China

One looming "black swan" is the Chinese housing markets, which is providing to be a key source of pressure on the economy (notwithstanding last year's upward GDP revision which merely reflected a different accounting procedure) and creating financial strains along the way — all 70 mainland cities are now experiencing YoY home price declines of between 1 and 9%.

Friday's NYT cited reports of major apartment complexes now are only between one-third and one-half unoccupied, and that many projects are halfway through construction and the cranes are now idled.

This is a crucial overhang for a sector that directly accounts for 13% of the economy and indirectly (via the impact on ancillary sectors) that number is closer to 33%.

Even with the builders cutting their housing start production by 34% in November from year-earlier levels, demand has weakened to such an extent (because affordability has become extremely stretched to the point that in the big cities an apartment costs 20 years' worth of wages for college grads), unsold inventory in the large cities ranges between 12 and 18 months of supply — that is huge and explain why average prices have fallen 7.4% since April alone.

We all now how real estate deflations end ... not well

A++++,

I RECALL TALKING TO MY BANKER GF ABOUT NEW YORK IN 1932 WHERE PRICE OF LAND UNDER THE LARGE BUILDINGS WERE QUOTED AT PRICES EQUALY TO 10-20% OF THE 1928 PRICES.  NO ONE WAS BUYING DO TO LACK OF MONEY: THE FEDERAL RESERVE DID NOT REPLACE M2 AS THE BANKS WERE CLOSED AND DEPOSITORS LOST EVERYTHING.  IF THIS PROCESS IS REPEATED IN CHINA MANY HARD WORKING LABOR WORKER WILL LOSE YEARS OF SAVINGS THERE ALSO. 

IT DOES  LOOK LIKE THE ECONOMIC WAR IN THE OIL PATCH IS SHIFTING TO THE RUSSIAN SIDE AS THE COST FOR OIL PRODUCTION IN RUSSIA IS IN A MONEY THAT IS DECLINING FASTER THEN OIL PRICES.  COST IN USD IS ABOUT $10.00 PER BARRELL ( VARABLE).  THIS SHOULD HELP THE MAJOR PRODUCERS OF WHEAT IN RUSSIA ALSO LOWER THE COST OF PRODUCTION AS WELL A LOWER COST OF LABOR.  I RECALL HOW THE " LONG DEPRESSION"   MADE GERMANY A DOMINATE PRODUCER OF HEAVY INDUSTRY IN THE 1890"S DUE IN PART TO THE LOW COST OF HIGHLY SKILL MACHINEST. 

IT WILL BE A WAR OF THE BANKS AND RUSSIA IS BACKSTOPPING BANKING.

Just a thought,

BiMetalAuPt

[Aman A.K.A. Ahamburger]

Bruce! That is precisely what is happening in China right now:
-China’s Industrial Profits Drop Most in Two Years Amid Slowdown
-China December Factory Gauge Falls in Sign Growth Support Needed
-China's house prices keep falling

That's the whole problem, everyone keeps looking at the USA thinking the global economic issues are going to start here again. There is this "ignorance' about how massive the property bubble in China truly is - how the newly wealthy and the new middle class's fortunes are tied to real estate.

I hear you about the damage that will truly be sustained to Russia and how they have more than enough in reserves to stabilize things. Especially when you consider the amount of deals they signed with China and India over the last 6-7 months, and how China is taking the train to the rest of Asia.

In other words, it's more than just war at the central banks. Check out the mid east thread...

Have a great 2015, God Bless,

[Aman A.K.A. Ahamburger]

I knew there was something else I was going to post (didn't realize how long it's been since I really answered emails.)

About that land... You were talking about this?? Or is this almost a bit more unsettling because the state is the only real economy

Chinese property downturn hitting land-dependent local governments hard

For the past decade, land has functioned as a giant piggy bank for China's cash-starved local governments. Whenever they ran short of funds to pay for anything, from pensions for retired steelworkers to eye exams, there was usually a piece of land ready to put on the market. Unfortunately, the piggy bank is running on empty.

In 100 Chinese cities tracked by the research institute China Real Estate Information, the volume of land sold fell 47 per cent for the third quarter this year. Revenue dropped a shocking 75 per cent, with prices down 52 per cent. For the first time in years, when they put up land for auction, local governments suddenly found themselves with unsold parcels. In the past six months, almost 20 per cent of land for sale failed to find a buyer...
...

The main cause of the decline is reluctance by property developers to pay the high prices requested by the local governments. There is a "cat and mouse" game going on between governments and developers. The local governments are hoping for a second fiscal stimulus to prop up prices, while the developers are waiting for the governments to acknowledge that China's housing boom is coming to an end and they need to lower the offering price.

The data on land sales suggests the downturn is going to be a lot worse than anyone had expected. Worse yet, land is a fundamental part of China's economy, and the collapse of land sales is going to have a knock-on effect throughout the country.

First, China's overall gross domestic product has been driven a good deal by the property sector. Estimates vary, but according to research from Nomura, last year property accounted for 16 per cent of GDP, 33 per cent of fixed asset investment, 20 per cent of outstanding loans, 26 per cent of new loans, and 39 per cent of government revenues. The mild slowdown in the property sector looks like it will be much worse in the future once the chain of construction, starting with land sales, filters through the economy.

But the bigger problem is likely to be felt by local governments. Until 1994, local governments kept the bulk of tax revenue collected from businesses and residents. That year, though, then premier Zhu Rongji struck a deal to centralise tax receipts back to Beijing with an agreement to remit funds to the local governments. However, with the gradual collapse of state firms, who had been providing social services to their workers, along with rising promises by Beijing to its citizens, local governments faced a growing gap between revenue and expenditure.

Recently, local governments have relied on land sales for as much as 60 per cent of their total revenue, up from only 10 per cent 15 years ago. According to a report by the International Monetary Fund, between 1998 and 2011, the gap between local government fiscal revenue and expenditure was 18 trillion yuan (HK$23 trillion). Land sales provided 13 trillion yuan, or nearly three-quarters of that gap. That money is rapidly disappearing.

[bimetalaupt]

A++++;

T-BONDS ARE WILD TODAY, eu IS GOING WILD WITH GREEK WATCHING ON DEPRESSION WARNINGS AND THE PITS EURO CRASHING IE EURO/ $$$$$= 1.190000 BUT RISK FOR THE DJIA DOWN.

Just a thought,

BiMetalAuPt

STRESS TEST STUDY............................. 2:45 Pm EST
RIDK............................................... 5319.433125
15 MONTH DJIA PROJECTION............ 21374.6962825258
UPSIDE............................................. 3958.90628252576
DJIA UPSIDE/RISK.................................. 74.4234618520%
djia risk/return......................................... 1.3436623009945
Highest risk DJIA...................................... 16055.2631575258
PROF/LOSS PER$1.00.................................... -$0.25577

[Aman A.K.A. Ahamburger]

10% reduction in risk! From the looks of Europe and futures you called the bottom, again. Great call!

What pisses me off is that China is going to break the system and yet all the news stories are about how the EU is going into a depression or how Putin is brining on Russia's collapse. It's like, ya we know, and I have been talking about these problems since April 2014 - at least. How about defaulting developers in China? Land sales drying up the states funds? Ah well, being contrary to the mainstream usually does ok.

Later,

[bimetalaupt]

alpha Black Swan event study
STRESS TEST STUDY 01/09/15
RIDK.................................................. 5620.914375
15 MONTH DJIA PROJECTION.................. 21820.8016474721
UPSIDE............................................... 4083.43164747208
DJIA UPSIDE/RISK..................................... 72.6471064145%
djia risk/return ...........................................1.3765173168699
Highest risk DJIA...................................... 16199.887272472
PROF/LOSS PER$1.00.................................. -$0.27353

The new option & futures version of MMXVI-Alpha is in study: we hope to a study time test Alpha using QQQ and  10 year t-notes rewrite by May 27, 2015...

[Aman A.K.A. Ahamburger]

That was from this morning? Increased risk, red ink looking to retrace half the losses...

What ETF for the 10yr? What about ZDY instead of QQQ

[bimetalaupt]

Jan 9, 2015 21:34:35 GMT -5 Aman A.K.A. Ahamburger said:

That was from this morning? Increased risk, red ink looking to retrace half the losses...

What ETF for the 10yr? What about ZDY instead of QQQ

A++++,
ZDY is not in our data bank: QQQ is on Super Iron from 2001. The correlation of M3 to QQQ from 2001 to 1/9/2015 was 85.1891011855839000%. On the other hand correction of M3 to DJIA was 93.7758164782%
from 2008 to 1/9/2015.

Just a thought,
BiMetalAuPt
PS: correlation of DJIA to M3 for DJIA from 2001 to 1/9/2015 was 78.9017671286301000%

[Aman A.K.A. Ahamburger]

, 85% only leaves a 4 or 5 day margin.. Not bad.. Is there a fund that tracks the DJIA? Since MM is only off by 2 or 3 days at most..

So one that runs QQQ and one that runs interest and price on 10 years?

[bimetalaupt]

Jan 10, 2015 11:38:44 GMT -5 Aman A.K.A. Ahamburger said:

, 85% only leaves a 4 or 5 day margin.. Not bad.. Is there a fund that tracks the DJIA? Since MM is only off by 2 or 3 days at most..

So one that runs QQQ and one that runs interest and price on 10 years?

A++++,
I THINK YOU ARE TALKING ABOUT QQQX.
Nuveen Nasdaq 100 Dynamic Overwrite Fund is a close ended equity mutual fund launched by Nuveen Investments, Inc. The fund is co-managed by Nuveen Asset Management, LLC and Nuveen Fund Advisors LLC. It invests in the public equity markets of the United States. The fund invests in stocks of companies operating across diversified sectors. It benchmarks the performance of its portfolio against the NASDAQ 100 Index. The fund was previously known as NASDAQ Premium Income & Growth Fund Inc. Nuveen Nasdaq 100 Dynamic Overwrite Fund was formed on January 30, 2007 and is domiciled in the United States.

......
Nuveen Equity Option Closed-End Funds Declare Post-Restructuring Distributions
Nuveen Investments, a leading global provider of investment services to institutions as well as individual investors, today announced that Nuveen S&P 500 BuyWrite Income Fund (BXMX), Nuveen S&P 500 Dynamic Overwrite Fund (SPXX), Nuveen Dow 30SM Dynamic Overwrite Fund (DIAX), and Nuveen Nasdaq 100 Dynamic Overwrite Fund (QQQX) have declared post-restructuring distributions. These distributions follow the recently announced restructuring, which was successfully completed before the market open Monday, December 22, 2014.
finance.yahoo.com/news/nuveen-equity-option-closed-end-215300581.html

[Aman A.K.A. Ahamburger]

,

My bad. I was busy. I was thinking about the correlation between your math model reading M3 and M3 to DJIA. If there was a fund that better matched the DJIA, your trading system would match better, non?

Also, I was asking if you're trading QQQ and the 10yr in one "fund", or if you were going to run two separate funds. One trading QQQ long and short, and one trading the 10 yr - price and rate ETFs.

God bless,

[bimetalaupt]

Jan 11, 2015 23:06:43 GMT -5 Aman A.K.A. Ahamburger said:

,

My bad. I was busy. I was thinking about the correlation between your math model reading M3 and M3 to DJIA. If there was a fund that better matched the DJIA, your trading system would match better, non?

Also, I was asking if you're trading QQQ and the 10yr in one "fund", or if you were going to run two separate funds. One trading QQQ long and short, and one trading the 10 yr - price and rate ETFs.

God bless,

A++++,
Sorry, this has been a wild week-end.  My only "Openoffice" family fund AKA Expert 50/50 has only one ETF(IYZ). We sold QQQ in 2007.  Most of the holdings are Dow 65 shares and 30 Year T-Bonds.  My new MMXVI-Alpha est 2%yield on the 30 year( if and only if) will produce an Index value of 19345.7973739676 with an correlation of -82.258892251974%.  This is without added Black Swan Events.  

Just a thought,
BiMetalAuPt

[Aman A.K.A. Ahamburger]

Jan 11, 2015 23:48:48 GMT -5 bimetalaupt said:

Jan 11, 2015 23:06:43 GMT -5 Aman A.K.A. Ahamburger said:

,

My bad. I was busy. I was thinking about the correlation between your math model reading M3 and M3 to DJIA. If there was a fund that better matched the DJIA, your trading system would match better, non?

Also, I was asking if you're trading QQQ and the 10yr in one "fund", or if you were going to run two separate funds. One trading QQQ long and short, and one trading the 10 yr - price and rate ETFs.

God bless,

A++++,
Sorry, this has been a wild week-end.  My only "Openoffice" family fund AKA Expert 50/50 has only one ETF(IYZ). We sold QQQ in 2007.  Most of the holdings are Dow 65 shares and 30 Year T-Bonds.  My new MMXVI-Alpha est 2%yield on the 30 year( if and only if) will produce an Index value of 19345.7973739676 with an correlation of -82.258892251974%.  This is without added Black Swan Events.  

Just a thought,
BiMetalAuPt

I hear you about wild weekends! Sorry, I should have used the word study, not funds. I was just wondering about variation.

Later,

[bimetalaupt]

RIDK   RISKL  +

alpha Black Swan event study
STRESS TEST STUDY 02/23/15
RIDK 5976.6675
15 MONTH DJIA PROJECTION 22352.4216082364
UPSIDE 4235.58160823642
DJIA UPSIDE/RISK 70.8686171388%
djia risk/return 1.4110618216818
Highest risk DJIA 16375.7541082364
PROF/LOSS PER$1.00 -$0.29131

when piggs fly!!!!!!! we will be eating false pasta and GREEK bonds!!    With Our leader asking out congress to do something: we may just now get a real increase in GDP!!How about added oil to our reserves! How about making more tanks to increase reserves!!!!!!!!!!

Just a thought,
BiMetalAuPt

With Phillip Goods re-re-re-arranging m3 and djia new correlation is 0.9981858292001!  DELTA for this is down for 3rd derivative of postion: correct on the 15 month study is almost 30%.

[bimetalaupt]

With cash dependent market value: we have worked hard to produce a closer Black Swan negative vector evaluation but please understand these numbers are relative for the Black Swan study.  With A++++ valuable input the Russian negative vector is less due to the previous action of the market.  When you look at the numbers it is hard to find a real number for Ukraine due to years of poor asset management and weak energy supplies from out side Russian reduced cost they learned to depend on.   

France is the largest Black Swan event potential the I can not get a handle!  So why does French wine demand a higher cost then Texas.  Cost to produce and market? Well France now uses mostly the best clones: Texas planted them to start with and our Merlot 181 is some of the best and produces alcohol content of 14.5% with fantastic flavor concentration.  Compare Becker's Montage to  LA Tour's Lefty Bank Boudreaux? 

How Texas Saved the French Wine Industry
june/july 1999
In 1880, the vineyards of France were on the verge of destruction, courtesy of the phylloxera root louse. This grapevine plague was spread throughout France, and in the Charante Region (Cognac) in particular. With their very economy at risk, France selected French scientist Pierre Viala to find a cure for the plague. Viala's search lead him to Denison, Texas and scientist Thomas Volney Munson. Seeking a solution, Viala and Munson studied the native grapes of Texas. Because the soils of the Charante and Denison are very similar, and Munson knew the Texas rootstocks were resistant to phylloxera, Munson suggested that the only way to save the French vineyards was to graft the Texas rootstocks with the French vines. Viala agreed and thousands of bundles of Texas rootstocks were shipped to France to be grafted with the French vineyards. The grafting continues to this day.

France awarded Munson the Chevalier du Merite Agricule, the highest award that could be given to a foreign civilian. In 1888, Munson was inducted into the Legion of Honor and, to commemorate the award, a Centennial Celebration was held in Cognac and Denison 100 years later.

Thanks to Thomas Volney Munson, there's a taste of Texas in every glass of French wine. To learn more about this remarkable man, visit the website for The T.V. Munson Memorial Vineyard & Viticulture ~ Enology Center by clicking here: www.texoma.com/personal/twining/viticult/muncen.htm  Just think what France would be today without Munson and the Lenoir grape.  Also France allows Lenoir grapes in Bordeaux WineClarence from Domaine Clarence Dillon SAS is a French company that owns three Bordeaux wine estates, Château Haut-Brion, Château La Mission Haut-Brion and Château Quintus, as well as Clarence Dillon Wines, a Bordeaux fine wine merchant. It was first founded on June 1, 1935. The company was named after the American financier [1] Clarence Dillon, who bought Château Haut-Brion in 1935.[2] From 1935 to 1975, Seymour Weller, nephew of Clarence Dillon, managed the company.  The wine is 100% Lenoir and improves vastly with aging and O2.  Sells for about $150 per 750 ml. 

www.freerepublic.com/focus/news/861474/posts

last run of the MMXVI-Alpha : Black Swan test MATH MODEL: FEB 27,2014..

JUST A THOUGHT,  

BiMetalAuPt

alpha Black Swan event study
STRESS TEST STUDY 02/27/15
RIDK.............................................. 5991.53625
15 MONTH DJIA PROJECTION............. 22374.7635501103
UPSIDE............................................. 4242.06355011034
DJIA UPSIDE/RISK................................ 70.8009327342%
djia risk/return..................................... 1.4124107711315
Highest risk DJIA............................... 16383.2273001103
PROF/LOSS PER$1.00............................ -$0.29199