Posts filed under “Mathematics”

10 Habits of Mind for Investors

This comes from a math blog by a teacher called WITHOUT GEOMETRY, LIFE IS POINTLESS (get it?).

There is a recent post I wanted to reference — Habits of Mind — that was originally written for math students. With a few small changes, it can be readily adapted to thinking about markets, risk, investing, etc.

Have a go at it:

Habits of mind

1. Pattern Sniff
. . .A. On the lookout for patterns
. . .B. On the lookout for shortcuts

2. Experiment, Guess and Conjecture
. . .A. Can begin to work on a problem independently
. . .B. Estimates
. . .C. Conjectures
. . .D. Healthy skepticism of experimental results
. . .E. Determines lower and upper bounds
. . .F. Looks at small or large cases to find and test conjectures
. . .G. Is thoughtful and purposeful about which case(s) to explore
. . .H. Keeps all but one variable fixed
. . .I. Varies parameters in regular and useful ways
. . .J. Works backwards (guesses at a solution and see if it makes sense)

3. Organize and Simplify
. . .A. Records results in a useful way
. . .B. Process, solutions and answers are detailed and easy to follow
. . .C. Looks at information about the problem or solution in different ways
. . .D. Determine whether the problem can be broken up into simpler pieces
. . .E. Considers the form of data (deciding when, e.g., 1+2 is more helpful than 3)
. . .F. Uses parity and other methods to simplify and classify cases

4. Describe
. . .A. Verbal/visual articulation of thoughts, results, conjectures, arguments, etc.
. . .B. Written articulation of arguments, process, proofs, questions, opinions, etc.
. . .C. Can explain both how and why
. . .D. Creates precise problems
. . .E. Invents notation and language when helpful
. . .F. Ensures that this invented notation and language is precise

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Category: Apprenticed Investor, Investing, Mathematics, Psychology, Rules

Reports of the death of mean reversion are premature

James Montier is a member of GMO’s asset allocation team. Prior to joining GMO in 2009, he was co-head of Global Strategy at Société Générale. Mr. Montier is the author of several books including Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance; as well as Value Investing: Tools and Techniques for Intelligent Investment; and…Read More

Category: Investing, Mathematics, Valuation

Tax Cut Changes

chart courtesy of CNN/Money > This chart is pretty stark in terms of who gets hit the hardest in the expiration of the Bush Tax cuts. But this comparisons isn’t all that informative — how many of each of these taxpayers are there? What is the total amount of tax dollars collected in each grouping?…Read More

Category: Mathematics, Taxes and Policy

Mandelbox Zoom

This will blow your minds Mandelbox Zoom from hömpörgő on Vimeo music: Dajuin Yao -­ Satisfactio­n of Oscilla­tion hat tip boingboing

Category: Mathematics, Weekend

Skill vs Luck

Legg Mason’s Michael Maubossin looks at the difficulties in untangling outcomes that are based on skill or luck or both as applied to the universe of investing. His conclusions? • The outcomes for most activities combine skill and luck. • Separating skill and luck encourages better thinking about outcomes and allows for sharply improved decision…Read More

Category: Investing, Mathematics

Presidential Stock Picks

There is a BusinessWeek article that notes “Shares of companies whose CEOs dine with Obama outdo the S&P.” I have a quote in that I would like to clarify: “Just a coincidence? Only partly, says Barry Ritholtz, CEO of equity research firm Fusion IQ. Losers don’t get asked to hang out with the President, he…Read More

Category: Mathematics, Really, really bad calls, Trading

“Saving” Social Security

“There is no trick. We can’t promise to work less, raise pensions and erase deficits.” -French Labor Minister Eric Woerth > The issue of government debt seems to be coming up a lot news lately. Courtesy of the credit collapse and economic recession, Deficits are front page news. Classic balance budget advocates are reiterating their…Read More

Category: Mathematics, Politics, Taxes and Policy

Mathematicians – Not Economists – Should Run the Fed

“A number of folks are expressing growing concern about potential overbuilding and worrisome speculation in the real estate markets, especially in Florida . . . Entire condo projects and upscale residential lots are being pre-sold before any construction, with buyers freely admitting that they have no intention of occupying the units or building on the…Read More

Category: Federal Reserve, Mathematics

Tax Burden on Various Americans

David Leonhardt has two good tax related pieces (an article, and a blog post) that shed some light on who pays how much taxes in the US. The full article, Yes, 47% of Households Owe No Taxes. Look Closer., is noteworthy for this truism about the tax burden.  It is rather informative: “There is no…Read More

Category: Mathematics, Taxes and Policy

Government’s Share of Economy, 1950 to 2075

Peter Boockvar dug up these fascinating charts from this CBO report from 2002.

What really surprised me is how consistent the US economy has been for most the latter half of the 20th century: About 20% of GDP. It starts about 19%, peaks at about 23% then falls back to about 18 and a half%.

Note that this data is before the Bush’s Prescription Drug Act or Obama’s Health Care bill.

Federal Outlays, 1962 to 2001

(As a percentage of GDP)


Charts via CBO, Perot Charts

More charts after the jump . . .

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Category: Economy, Mathematics