Posts filed under “Mathematics”

Don’t Play Probalities Like the Seahawks in Investing

Last week, I was in Seattle for an event sponsored by the CFA Institute. The trip was booked long before any of us knew the Seahawks were going to defend their championship title in Super Bowl XLIX. Following the Seahawks’ amazing comeback in the NFC Championship versus the Green Bay Packers on Jan. 18, the city was electric.

Given that, I rethought the presentation I was planning to make. Originally, it was named, “Valuation, Volatility, and Behavioral Factors,” but during that weekend, I retitled it: “Play Football Like the Seahawks, But Invest Like the Packers.”

The thesis was that Green Bay had a methodical statistical approach. It is a team of grinders, marching down field with two- and three-yard runs. They protect the ball, try to avoid turnovers. No razzle-dazzle, just fundamental football, blocking and tackling. In investing terms, they made high-probability trades, slowly accumulating gains, withde minimis risk of loss.

Seattle on the other hand, looked like the Harlem Globetrotters of football. Plenty of misdirection, and lots of trick plays: A touchdown on a fake field goal (credit holder Jon Ryan’s 19-yard pass to tackle Garry Gilliam). An onside-kick recovery that was bobbled by Packers tight end Brandon Bostick bounced into the hands of Seattle’s Chris Matthews (a former Foot Locker employee) at midfield. After a Marshawn Lynch 24-yard run for a touchdown, Seattle made a two-point conversion. Finally, a 48-yard Hail Mary pass from Russell Wilson to Luke Willson gave Seattle the lead. A Green Bay field goal sent the game into overtime. In OT, Seattle used just six plays to march 87 yards downfield. A 35-yard Wilson to Jermaine Kearse pass — yet another Hail Mary pass — won the game.

Lots of low probability plays that all came up roses for the defending champs allowed them a trip back to the Super Bowl. And therein lay the problem. You can sometimes be too clever, try too hard to pull a rabbit out of the hat.

 

 

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Category: Bad Math, Investing, Really, really bad calls, Sports

Job Recovery All Oil & Fracking ? Hardly

  “All of the job growth from 2007 to today can easily be attributed to the shale oil fracking situation and the oil Renaissance. If you take Texas and North Dakota out of the data series for job employment, what you see is that we haven’t added any jobs in the United States other than…Read More

Category: Bad Math, Data Analysis, Employment, Energy, Really, really bad calls

As goes early-January, so goes Nothing

Salil Mehta is a popular statistician and risk strategist, who has developed a unique method to teach quantitative techniques. He blogs at Statistical Ideas. ~~~ We’ve started the year with a sizable downward market pattern, which is making market participants think in ill-advised ways.  Eight of the first eleven trading days (S&P 500) were negative.  If…Read More

Category: Bad Math, Data Analysis, Markets

NFP, Inflation & Conspiracy Theories

    Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers — Jack Welch (@jack_welch) October 5, 2012     Today’s column is about stupidity. Perhaps that’s overstating it; to be more precise, it is about the conspiracy-theorist combination of bias, innumeracy and laziness, with a pinch of arrogance thrown in for…Read More

Category: Bad Math, Cognitive Foibles, Data Analysis, Economy, Really, really bad calls

About Those Black Friday Numbers . . .

Stories based on Black Friday consumer spending numbers are a holiday tradition. Bob talks with investor and Bloomberg View contributor Barry Ritholtz about the problems with stories based on those numbers.   NPR/WNYC: Source: On the Media

Category: Bad Math, Consumer Spending, Data Analysis, Really, really bad calls

Bad Maths

We live in an era of technological advancement. Whether it’s genomics, nanotechnology or software algorithms, the world is driven by mathematical solutions to complex problems. Yet at the same time, we are surrounded by what I like to call Bad Math. It seems as if the average person has little familiarity with the fundamental workings…Read More

Category: Bad Math, Really, really bad calls

Zombie Ideas? Blame the Billionaires…

  “We are in the business of making mistakes. The only difference between the winners and the losers is that the winners make small mistakes, while the losers make big mistakes.” -Ned Davis   I began my career in finance on a trading desk. You learn some things very early on in that sort of…Read More

Category: Bad Math, Philosophy, Politics, Really, really bad calls, Regulation

Wherein I Correct Nobel Laureate Daniel Kahneman’s Math

I am a fan of Morgan Housel, columnist at the Motley Fool. His writings evince a strong understanding of behavioral issues, and he has a gift of sifting through the nonsense to get to what really matters. Only on rare occasions do I get to disagree with him. Today is one of those times. Housel has…Read More

Category: Bad Math, Psychology

Got Math? Odds Are, You Don’t Understand Probabilities

Last week, we discussed the problems with having poor reading comprehension and the impact that has on consuming news. This week, I want to look at the lack of math skills. America seems to becoming a dangerously innumerate society. Innumeracy is incompetence with numbers rather than words. This is a worrisome issue for the future…Read More

Category: Apprenticed Investor, Bad Math, Data Analysis, Really, really bad calls

Why the American economy grows faster under Democrats

Another classic correlation versus causation issue:

Autoplay video after the jump

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Category: Bad Math, Video