Archive for the ‘Learning’ Category

Internet Nuke Bomb Ready To Blow (Update)

In Financial Engeneering, Financial Markets, Health and Environment, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Quantitative Finance, Technology, Trading software, Uncategorized, Views, commentaries and opinions on 16.01.11 at 20:29

The Swapper have been warning about this since last summer when the mysterious Stuxnet worm was discovered at several critical energy and water supply facilities around the world. However, research by Symantec have later reveled that 60% of the infections are found inside Iranian borders. The threat from cyber space has risen to the top of the list over potential global risks in 2011, alongside pandemic diseases and terrorism. The internet, once seen as the solution to all of mans problems, have instead become one of the most severe threats to all of us.

“The primary involvement of states in cyber security, as both protagonists and principal targets, fundamentally changes the nature of the risk.”

Eurasia Group

By the end of 2010 McAfee Security counted 60.000 new pieces of malicious software being released on the internet every day, the hacker attacks on Java platforms (used in practically every security system, including online banks and the Pentagon) rose by 1.200% last year, and for the first time ever the value of theft of digital assets exceeded the theft of physical assets. And for Stuxnet; that’s only the beginning.

More than 100 foreign intelligence organizations are trying to break into US networks, Deputy Defense Secretary William Lynn wrote in the September/October issue of the journal Foreign Affairs. Some already have the capacity to disrupt U.S. information infrastructure, he says.

The US government’s main code-making and code-cracking agency now works on the assumption that foes may have pierced even the most sensitive national security computer networks under its guard, Reuters reports.

“There’s no such thing as ‘secure’ any more,” Debora Plunkett of the National Security Agency said last month, amid US anger and embarrassment over disclosure of sensitive diplomatic cables by the web site WikiLeaks.

“The most sophisticated adversaries are going to go unnoticed on our networks,” she said.

Plunkett heads the NSA’s Information Assurance Directorate, which is responsible for protecting national security information and networks from the foxhole to the White House.

“We have to build our systems on the assumption that adversaries will get in,” she told a cyber security forum sponsored by the Atlantic and Government Executive media organizations.

The United States can’t put its trust “in different components of the system that might have already been violated,” Plunkett added in a rare public airing of NSA’s view on the issue.

“We have to, again, assume that all the components of our system are not safe, and make sure we’re adjusting accordingly.”

The NSA must constantly fine tune its approach, she said, adding that there was no such thing as a “static state of security.”

And the US is not the only nation struggling to keep its sensitive data safe.

According to Iain Lobban, head of GCHQ, the UK’s core infrastructure is under constant attack. He says thousands of targeted emails are hitting the systems every month, planting worms that cause “significant disruptions.”

Mr. Lobban’s claims are supported in a national security report, naming cyber attacks as a top threat to the UK, alongside pandemic diseases and terrorism, according to the PC Pro Magazine.

A Global Threat

“Cyberspace is contested every day, every hour, every minute and every second,” the British security expert says.

The international risk analysis company Eurasia Group put cyber security at number 3 amongst the top 10 risks of 2011.

“For the past decade, increasingly technologically capable hackers and organized crime organizations have elevated cyber security as a business risk, but not as a political risk. The centralization of data networks, both in energy distribution (the move to the smart grid) and information technology more broadly (the shift to cloud computing) are now metastasizing the cyber risk, and governments are becoming more directly and actively involved in playing both offense and defense in cyberspace. The primary involvement of states in cyber security, as both protagonists and principal targets, fundamentally changes the nature of the risk. The new roles of governments and their antagonists bring geopolitics and cyber security together in three different ways,” Eurasia writes.

(Link to full report below).

Java Systems Under Heavy Fire

One of the main components in practically every security system today is the Java platform, produced by Oracle.

So it’s no wonder that attacks on the Java system increased by more than thousand percent in 2010.

“The number of attacks against flaws in Java has jumped by 1.000% – even outstripping attacks against vulnerabilities in Adobe PDF’s,” Microsoft says.

The attacks against Java code – not the Java script – rose from 500.000 at the beginning of last year to about 6 million in the last quarter of 2010.

Even if Oracle have manged to patch the vulnerabilities in Java, the have the same problem as Adobe – people forget to update their software.

And on top of that; Java is a piece of software that’s used in almost everything, it runs in the background, making more visible components work, PC Pro Magazine points out.

“How do you know if you have Java installed, or if it is running?” researcher at Microsoft Malware Protection, Holly Stewart rightfully asks.

(If you want to know more about Java, click the link below.)

1 in 3 Companies Exposed To Data Theft

According to the latest issue of Kroll Annual Global Fraud Report, suggest that the theft of digital assets has overtaken that of physical stock for the first time ever in 2010.

A Survey, conducted in cooperation with the Economist Intelligence Unit, indicates that the numbers of companies reporting theft of information has risen sharply – from 18% to 27,3% – in 2010.

“There’s a growing awareness among thieves of the intrinsic value of intellectual property,” Kroll vice president, Robert Brenner explains.

The survey also suggest that 88% of the  participating companies had been victim of some kind of fraud over the past year, nearly half of them are now fearful of expanding globally because of the cyber threat.

The experts emphasize that the numbers probably not are 100% accurate.

However, the message is pretty clear.

(Download the report below)

The Most Scary Thing

I guess most of you have heard about the Stuxnet worm/virus/malware in the news by now, and are familiar with the speculations that the extremely sophisticated malware might be some kind of cyber weapon, developed by government related scientists somewhere.

I sounds like a plot in James Bond movie – but the truth might be even more vicious.

Davey Winder

According to experts is not unlikely to be a prototype of the first ever cyber-weapon-of-mass-destruction.

Davey Winder, award-winning journalist, business consultant and security expert, explains:

“So what do we know about Stuxnet and the SCADA (Supervisory Control and Data Acquisition) systems?  Well, we know that Stuxnet is designed to be disseminated via USB sticks, and that it was developed to exploit specific zero-day vulnerabilities in the Windows operating system. To expand on that a little, Stuxnet actually exploits no fewer than four zero-day Windows vulnerabilities, a statement that alone should set the hair on the back of any security analyst’s neck prickling. Zero-day vulnerabilities are extremely valuable to the shady world of both hackers – where a zero-day is a kudos-generating device – and to criminals where zero-day equals pay-day. It’s relatively rare to see a single exploit being used in a piece of malware, and totally unheard of to see four expended in such a way.”

“Ask yourself, why would anyone waste three highly valuable zero-day exploits in a single piece of code when one would most likely do the job? Security experts recognize that this isn’t the modus operandi of the average hacker, nor the average criminal,” Winder writes in a recent article.

Personally, I believe that Stuxnet 2.0 is already out there – it just hasn’t been discovered yet.

The Internet Nuke Bomb

According to trend analyst, Gerald Celente, CEO and founder of Trends Research Institute, will cyber wars cause stir and come to fore in 2011.

And. as Eurasia, he is concerned about the government’s involvement.


Here are some of the other highlights in Mr. Celente’s predictions for the year to come:

  • Every citizen in 2011 will realize that we are in the “greatest depression”
  • In 2011, the game’s gonna run out
  • Digital money, not worth the paper it’s not printed on
  • The youth of the world has mountains of debt to climb, and no way to get to the top
  • The greatest fear that governments have is freedom of speech
  • Your growth industries are the gangs
  • Crackdown on crime will lead to crackdown on liberties
  • Drones flying over your city looking in windows
  • The more government loses control, the harder they crack down

You may not take all of Gerald Celente’s forecasts equally serious, but many of the situations he describes is. in fact, common human behavior, observed in times of crisis since the collapse of the Roman empire thousands of years ago and up to our time.

At the latest count by McAfee Security Lab, about 60.000 pieces of malicious software is released on the internet every day.

And here’s how the last six months of 2010 looked like from the security software producer Kaspersky‘s point of view:


Perhaps it’s time to upgrade?


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So, You Think You Can Blog? (Econotwist’s Greatest Hits 2010)

In Financial Engeneering, Financial Markets, Health and Environment, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Natural science, Philosophy, Quantitative Finance, Technology, Trading software, Views, commentaries and opinions on 09.01.11 at 20:40

Every serious blog is presenting their top lists for 2010 these days, so I better get my lists out there too. Frankly, I’m quite surprised by the response I’ve got. After all this was my first year as a full-time blogger. By summer last year, the econotwist’s blogs – mainly The Swapper and The Econotwist’s – reached 20.000 unique visitors per month. Some articles was also republished by other blogs, or featured on the publishing sites like Scribd. I estimate the top articles of Econotwist’s in 2010 was read by at least 200.000 people. And as usual I managed, completely unintended, to make some people a little bit angry.

“That article is about as credible as me writing about nuclear technology. Off-balance sheet transactions? SPEs? Interest Rate and Currency Swaps? Has that idiot even looked at an Annual report for BP?”

Reader’s response

The quote above was in response to the July 2 post – “So, You Thought BP Was An OIL Company?” I haven’t got that much pepper since I described DnB NOR‘s subsidiary in the Baltic region as at “financial lab rat”. Anyway, I see all feedback, good or bad, as extremely valuable. I have not been able to reply to all comments or requests. For that I apologize, and promise I’ll spend more time on your responses in 2011. As for themes I will be focusing on the technological side of the financial markets in addition to my other specialties – the relations between economy and ecology.

And I will have a couple of new prominent contributors joining in, as well as some other surprises…

But right now I want to give my sincere thanks to all of you who’s been cheering me on this year, making my first year as a blogger a definitive success.

To quote one of my favorite artists, (Keith Richards): GOLD RINGS TO YOU ALL !

And here is a summary of the most popular posts and publications by The Econotwist’s Blogs in 2010.



  1. So, You Thought BP Was An OIL Company?
  2. Mother Earth On Crack
  3. Volcano Ash Can Send The Earth Into “Deep Freeze”
  4. The Worlds Most Contagious Countries – Here’s The List
  5. Cyber Criminals Attack Critical Water, Oil and Gas Systems
  6. More Mysterious “Monster Fish” Comes To Surface
  7. The Ultimate Trading Weapon
  8. Norwegian Day Traders Convicted Of Market Manipulation
  9. Goldman Sachs: “Damn American Bastards!”
  10. Flight to Mystery
  11. The Sun Is Speaking!
  12. Here’s The REAL Norwegian PIIGS Exposure



  1. Goldman Sachs: Global Economics Weekly. June 2010.
  2. Non Performing Loans, Europe June 2010. PriceWaterhouseCoopers
  3. Letter From Geithner
  4. SULTANS OF SWAP: BP Potentially More Devastating than Lehman!
  5. Speech by Mr Ben S Bernanke, Chairman of the Board of Governors of the US Federal Reserve System, at Princeton. 09242010.
  6. Goldman Sachs: “On The Eve of The Bank StressTests”
  7. Tudor Investments Letter October 2010
  8. Saxo Bank. Quarterly Outlook. Q3 2010.
  9. BP Annual Report and Accounts 2009
  10. Bank of International Settlement. Quarterly Report. June 2010
  11. Oslo District Court. Final Verdict In The Case of Market Manipulation by Day Traders. 10122010.
  12. Fitch. Special Report. “CDS Spreads and Default Risk – Interpreting the Signals”- October 2010.


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The Greatest Conspiracy


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#1. “Nobody Lnpws The Bubbles I’ve Seen” (By


#2. “It’s Beginning To Look A Lot More RiskLess” (By



No matter what happens in 2011 – don’t forget to have some fun!

All The Best

Mystery of Mass Animal Death Deepens

In Health and Environment, International Econnomic Politics, Learning, Natural science, Trading software, Views, commentaries and opinions on 08.01.11 at 01:35

The mystery of mass animal death epidemic deepens after 8.000 turtle doves fall dead in Italy with strange blue stain on their beaks. The blue stains are believed to be sign of poisoning or hypoxia – lack of oxygen. Hypoxia, a lack of oxygen, is known to cause confusion and illness in animals. It is also a common precursor to altitude sickness. Experts said results from tests on the doves will not be available for at least a week.

“We have no idea why this happened all of a sudden.The doves just started falling one-by-one then in groups of 10’s and 20’s.”


Residents in Faenza described the birds falling to the ground like “little Christmas balls” with strange blue stains on their beaks. Thousands of dead turtle doves rained down on roofs and cars in an Italian town in the latest in a growing spate of mass animal deaths across the globe.

Initial tests on up to 8,000 of the doves indicated that the blue stain could have been caused by poisoning or hypoxia, the UK Daily Mail reports.

A witness told “We have no idea why this happened all of a sudden. The doves just started falling one-by-one then in groups of 10’s and 20’s.”

Hypoxia, a lack of oxygen, is known to cause confusion and illness in animals. It is also a common precursor to altitude sickness.

Experts says results from tests on the doves will not be available for at least a week.

They say that cold weather could have caused the birds’ deaths as the flock was swept into a high-altitude wind storm before falling to the earth.

It comes after two million dead fish were found to have washed up on shores in Chesapeake Bay, Maryland.

The alarming find is being blamed by authorities in Maryland on the stress caused by unusually cold water and over breeding among spot fish.

That investigation comes just days after the deaths of an estimated 100.000 fish in northwest Arkansas, which is being blamed on disease.

A statement by the Maryland Department of the Environment says: “Natural causes appear to be the reason. Cold water stress exacerbated by a large population of the affected species (juvenile spot fish) appears to be the cause of the kill.”

Preliminary tests of the water in Chesapeake Bay have showed the quality was “acceptable,” officials says.

The statement adds: ‘The affected fish are almost exclusively juvenile spot fish, three to six inches in length. A recent survey showed a very strong population of spot in the bay this year. An increased juvenile population and limited deep water habitat would likely compound the effects of cold water stress.”

Mass winter deaths among spot fish have occurred twice before in the Maryland area – in 1976 and 1980.

CNN reports:

Vodpod videos no longer available.


Here’s some of the latest news stories:

  • Blue stain believed to be sign of poisoning or hypoxia – lack of oxygen that is precursor to altitude sickness
  • Cold weather and over breeding blamed for deaths of two 2million fish in Chesapeake Bay
  • Disease behind deaths of 100,000 fish in Arkansas River
  • At least nine incidents of mass animal deaths across the globe
  • Hundreds of confused birds plummeted to their deaths in multiple locations in the U.S.
  • Rapid movement of Magnetic North Pole towards Russia may have caused bird deaths.
  • .

    And here’s some of stories that have made headlines over the last two weeks:

    • 450 red-winged blackbirds, brown-headed cowbirds, grackles and starlings found littering a highway in Baton Rouge, Louisiana
    • 3,000 blackbirds on roofs and roads in the small town of Beebe, Arkansas
    • Thousands of ‘devil crabs’ washed up along the Kent coast near Thanet
    • Thousands of drum fish washed along a 20-mile stretch of the Arkansas River
    • Two million small fish in Chesapeake Bay, Maryland
    • Thousands of dead fish found floating in warm Florida creek
    • Hundreds of snapper fish found dead in New Zealand
    • Scores of American Coots found dead on Texas highway bridge


    Not The End of Nature

    Experts have speculated that New Year fireworks, thunderstorms, cold weather, parasites and even poisoning may be behind the deaths.

    But conspiracy theorists have also speculated on the internet that secret government experiments could be behind them, with some even claiming it was a sign of a looming Armageddon at the end of the Mayan calendar next year.

    Another theory is that the rapid movement of the Magnetic North Pole towards Russia may have affected the birds’ innate navigation systems.

    However – wildlife health experts  says that these mortality events happen every year but we are just beginning to notice them now, ThaiIndian News writes on their website.

    “This is really not the unusual thing that people are trying to make it into,” Robert Meese, ecologist at the University of California, Davis, says in an interview with Discovery News. “A lot of this stuff happens without anyone documenting it.”

    Meese adds that there are many reasons for such massive die-offs – bad weather, migratory birds accidentally ingesting pesticides or even poisons or birds losing their way due to disorientation by fog or storms.

    Records kept by the United States Geological Survey list at least 16 die-offs of more than 1.000 blackbirds or starlings over the past 30 years, according to Marisa Lubeck, spokesperson for the USGS in Denver.

    But group deaths among animals have been going on for a lot longer than that. In one case, an estimated 1.5 million Lapland Longspurs died during a March 1904 storm in Minnesota and Iowa.

    And such phenomena occur amongst fish, whales, seals and even turtles

    “I think people are very often surprised that this kind of phenomenon happens, that wildlife are susceptible to disease and that there are large outbreaks in the wild, because they often go unseen,” says Paul Slota, spokesperson for the USGS National Wildlife Health Center in Madisonn.

    “I think people should be aware that mortality events in wildlife are normal. They are a fact of life.”

    Related by The Swapper:

    Who Killed The Blackbirds? The Aliens or Al Qaeda?

    Low-Oxygen Zones In Oceans Worry Scientists

    More Mysterious “Monster Fish” Comes To Surface

    Norway: Police To Investigate “Monster Fish”

    Coldest Winter In 1000 Years; Start Of New Ice Age?

    Who Killed The Blackbirds? The Aliens or Al Qaeda?

    In Health and Environment, International Econnomic Politics, Learning, Natural science, Philosophy, Technology, Views, commentaries and opinions on 06.01.11 at 19:17

    Over the last weeks, there have been reports from. at least, three different parts of the world about hundreds and thousands of dead black birds falling from the sky. In the US authorities blame it on the fireworks, in Australia its said to be some kind of poison and in Sweden a truck drivers has admitted to rolling over a flock of birds sitting in the middle of the road in the middle of the night. The preliminary findings shows that the birds have internal damage. However, the truth is still out there, and other explanations are far more entertaining.

    “I asked these guys who are out here picking them up and they don’t seem to know anything, nobody seems to know anything. It just kind of freaked everybody out.”

    US Citizen of Arkansas

    The reports on birds dropping dead from the sky is not the only strange phenomena observed in Arkansas recently:  Last Thursday, a day before New Years Eve and the dead-bird-rain, a tug boat operator on a 20-mile stretch of the Arkansas River discovered  over 100.000 dead drum fish, washed up on the river banks.

    The drum fish were discovered near Ozark by a tug boat operator on Thursday – a day before thousands of blackbirds fell from the sky only 125 miles away – in Little Rock, the UK Daily Mail reports.

    David Price, who spotted the fish from his parents’ Roseville house, located on the banks of the river, pointed and says: “Over from down here at the bottom of the rocks, out maybe 40 or 50 feet, there were just thousands of fish along the shore-banks all the way around the river here.”

    ‘This is kind of amazing because the fish were about a pound and a half a piece,’ Price says.

    Travis Harmon of the Department of Environmental Quality says: ‘Barges reported passing up river and churning up dead fish from the bottom of the river. A single species is killed, and we don’t know the cause. If it was toxic, other species would be affected.”

    Toxic, What Toxic?

    Fisheries officials collected some of the dying animals near Roseville to conduct tests.

    People have been warned about eating the fish.

    Keith Stephens of the Arkansas Game and Fish Commission says that a mass fish kill happens from time to time, but this case is particularly unusual.

    “The fish kill only affected one species of fish,” he points out.

    ‘If it was from a pollutant, it would have affected all of the fish, not just drum fish.”

    Ozark, where the fish was found  is about 125 miles west of the town of Beebe, where authorities still are trying to find out why about 5.000 red-winged blackbirds and starlings fell from the sky just before midnight New Year‘s Eve.

    Biologists believe the bird deaths were stress-related from either fireworks or weather and are unrelated to the fish kill near Ozark, according to Mr Stephens.

    Although the two incident occurred one after the other, Mr Stephens says he believe that they are unrelated.

    At the moment biologists are investigating the possibility of a new type of bird flu.
    A Global Mystery

    I can see why the scientists think its hard to say if the cases of dead birds and fish are related or not.
    At the moment, the following stories are being reported by the news media:
    • Thousands of fish found floating in Florida after cold snap
    • 200 birds found dead on highway bridge in Texas
    • 50 dead jackdaws found on city street in Sweden
    • 100 tons of sardines, croaker and catfish wash up dead on Brazilian coast
    • Hundreds of fish dead in New Zealand
    • In Britain, 40,000 devil crabs join list of casualties


    click to enlarge

    Internal Bleeding

    More and more animals are being found dead as the mysterious spate of mass bird and fish deaths has turned into a global phenomenon.

    The latest two separate incidents saw thousands of fish found floating in a creek in Florida and 200 birds found dead on a highway bridge in Texas.

    Experts were yesterday carrying out tests on around 50 jackdaws found dead in a street in Falkoping, Sweden, that appear to have suffered the same fate as thousands of their cousins who fell from the sky in separate incidents in the US.

    The Swedish newspaper “Expressen” reports today that the preliminary findings shows that the birds have internal damage. According to Swedish zoologist Marianne Elvander there is no sign of decreases or infections. 

    A Swedish truck driver have admitted to the police that he probably drove through a huge flock of birds sitting in the middle of the road on Monday night.

    “He ran over some of them, and did not think there was anything strange until he saw the enormous media attention the dead birds has received,” says Christer Olofsson with the Swedish rescue service to the newspaper Aftonbladet.
    Anyway – the case is still a mystery.
    And of course the speculations are flying high on the internet right now.
    Among the more exotic explanations is that the animal killing is caused by aliens from another planet, or that is another plot organized by Al Qaeda.
    However, regular readers of The Swapper/Econotwist’s will know that this is not the first case of strange phenomenons involving animals we’ve experienced over the last two years, at the same time the earthquake frequency have increased by 133% as more and more extreme weather are swiping over the planet’s surface.
    According to the scientists and the official expert nothing is related…..
    Well, I want to know WFT is going on!
    Related by The Swapper:

    Bloomberg See Latvian Sex Industry As Economic Indicator

    In Financial Markets, Health and Environment, International Econnomic Politics, Learning, Philosophy, Views, commentaries and opinions on 05.12.10 at 22:46

    Signs pointing to an end to the global recession are few. if any, as the latest US labor market figures is yet another slap in the face for the Obama-administration,while the real estate market and the consumers hardly show signs of life. The stock market, who is supposed to reflect the health of the economy seems to be totally lost in space, without any connection to the fundamentals. For the last couple of years, I’ve suggested that maybe  traditional economic theories and methods are outdated, and should be replaced. Well, the news agency Bloomberg have found a unique index which is said to be a much better barometer – the sex industry.

    “It can change by the hour, by the day. It tells you very, very quickly what the state of demand is.”

    Matthew Lynn

    Matthew Lynn from the Bloomberg news agency believes that in hard times, traditional indicators are useless, (and I agree on that one). However,  he suggests alternative benchmarks such as the price of prostitutes. The economist claims the Latvian sex market is the most precise indicator of the health of global trade.

    So far it’s been a wild ride for Latvia, once the fastest growing economy in the EU, sliding to the bottom of the list in. just six months.

    It has the second highest unemployment rate in Europe (after Spain), and its GDP have dropped almost 20%, comparable to that of America during the Great Depression.

    While the country is battling with recession, observers outside Latvia are scanning its shattered economy for some hint of when the global crisis will end.

    Matthew Lynn from the Bloomberg agency believes that in hard times, traditional indicators are useless. He suggests alternative benchmarks such as the price of prostitutes.

    The economist claims the Latvian sex market is the most precise indicator of the health of global trade.

    “It’s very flexible. There’s no barrier for people coming here and the price is very flexible. It can change by the hour, by the day. It tells you very, very quickly what the state of demand is. There’s not much money flowing around the system. There’s not much cash there. And that means the economy is getting into trouble,” Matthew Lynn says.

    Matthew Lynn’s main argument is that since the price for sex services has collapsed by about two-thirds since the start of the crisis, the global economy is still in big trouble.

    Once the cost of illicit comforts goes up, the world will start recovering, according to Lynn’s theory.

    That may be true, and I suppose Bloomberg and Matthew Lynn has done the necessary research to support it.

    But some are still skeptical.

    “I wouldn’t say that for any economy that will suit, simply because there’re many countries in the world where prostitutes are not legal and businesses are not transparent at all and then you will never get a valid indicator monitoring their prices even if you manage to,” financial analyst Evgeny Nadorshin says.

    Russia Today reports that many Latvians are not too keen on their country being portrayed as “the red light district of Europe.”

    More on the subject:

    Night club closed because of sex party and fire extinguishers

    “We are looking forward to recovery” – Latvian president

    Desert sex amidst financial storm

    Sexual discrimination victim receives compensation – in coins

    Related by The Swapper:

    Nassim Taleb And The Violation of Reality

    In Health and Environment, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Philosophy, Views, commentaries and opinions on 05.12.10 at 01:30

    This week famous author, philosopher and fund manager, Nassim Nicholas Taleb, release his new book; “The Bed of Procrusters.” It’s a story about the ancient Greek and the so-called “Procusters.” According to Nassim Taleb the story is a metaphor of our modern life, and the way we try to force our lives into something it’s not. Professor Taleb is one greatest thinkers of our time, and (unfortunately) one of the few who dare to investigate the true mysteries of our time.

    Pharmaceutical companies are better at inventing diseases that match existing drugs, rather than inventing drugs to match existing diseases.”

    Nassim Nicholas Taleb

    Montage by WilliamBanzai7

    I guess most of you connect Professor Taleb with his bestselling book,” The Black Swan” and perhaps his first, “Fooled by Randomness.” In the new book Taleb goes deeper, explaining who the Greek Procrustes was, how the story is a metaphor for our modern age, and why he decided to write the book in the way he did. However, it’s still revolving around his basic ideas on how we deal, and should deal, with what we don’t know.

    “The Bed of Procrustes” is a collection of “philosophical and practical aphorisms,” according to the author.

    The story is a metaphor for our modern age, he says, and explain:

    Procrustes, in Greek mythology, was the cruel owner of a small estate in Corydalus in Attica on the way between Athens and Eleusis, where the mystery rites were performed.

    Procrustes had a peculiar sense of hospitality; he abducted travelers, provided them with a generous dinner, then invited them to spend the night in a rather special bed. He wanted the bed to fit the traveler to perfection.

    Those who were too tall had their legs chopped off with a sharp hatchet; those who were too short were stretched  – his name was said to be Damastes, or Polypemon, but he was nicknamed Procrustes, which meant “the stretcher.”

    In the purest of poetic justice, Procrustes was hoisted by his own petard. One of the travelers happened to be the fearless Theseus who slayed the Minotaur later on in his heroic career. After the customary dinner, Theseus made Procrustes lie in his own bed. Then, to make him fit in it to the customary perfection, he decapitated him. Theseus thus followed Hercules’ method of paying back in kind.

    In more sinister versions, such as the one in Pseudo-Apollodorus’ Bibliotheca, Procrustes owned two beds; one small, one large; he made short victims lie in the large bed, and the tall victims in the short one.

    Nassim Nicholas Taleb

    “Every aphorism here is about a Procrustean bed of sorts—we humans, facing limits of knowledge, and things we do not observe, the unseen and the unknown, resolve the tension by squeezing life and the world into crisp commoditized ideas, reductive categories, specific vocabularies, and prepackaged narratives, which, on the occasion, has explosive consequences,” professor Taleb says.

    “Further, we seem unaware of this backward fitting, much like tailors who take great pride in delivering the perfectly fitting suit—but do so by surgically altering the limbs of their customers.”

    “For instance few realize that we are changing the brains of schoolchildren through medication in order to make them adjust to the curriculum, rather than the reverse,” Taleb states.

    “Since aphorisms lose their charm whenever explained, I only hint for now the central theme. I relegate further discussions to the postface.”

    The new book by Nassim Taleb is full of quotes and anecdotes that really gives you something to think about.

    Here’s some of them:

    The person you are the most afraid to contradict is yourself.

    An idea starts to be interesting when you get scared of taking it to its logical conclusion.

    Pharmaceutical companies are better at inventing diseases that match existing drugs, rather than inventing drugs to match existing diseases.


    To understand the liberating effect of asceticism, consider that losing all your fortune is much less painful than losing only half of it.


    To bankrupt a fool, give him information.


    Academia is to knowledge what prostitution is to love; close enough on the surface but, to the nonsucker, not exactly the same thing.


    In science you need to understand the world; in business you need others to misunderstand it.


    I suspect that they put Socrates to death because there is something terribly unattractive, alienating, and nonhuman in thinking with too much clarity.


    Education makes the wise slightly wiser; but it makes the fool vastly more dangerous.


    The test of originality for an idea is not the absence of one single predecessor, but the presence of multiple but incompatible ones.


    Modernity’s double punishment is to make us both age prematurely and live longer.


    An erudite is someone who displays less than he knows; a journalist and consultant, the opposite; most others fall somewhere in between.


    Your brain is most intelligent when you don’t instruct it on what to do—something people who take showers discover on occasion.


    If your anger decreases with time, you did injustice; if it increases, you suffered injustice.


    I wonder if those who advocate generosity for its rewards notice the inconsistency, or if what they call generosity is an attractive investment strategy.


    Those who think religion is about “belief” don’t understand religion, and don’t understand belief.


    Work destroys your soul by stealthily invading your brain during the hours not officially spent working; be selective about professions.


    In nature we never repeat the same motion. In captivity (office, gym, commute, sports), life is just repetitive stress injury. No randomness.


    Using, as excuse, others’ failure of common sense is in itself a failure of common sense.


    Compliance with the straightjacket of narrow (Aristotelian) logic and avoidance of fatal inconsistencies are not the same thing.


    Economics cannot digest the idea that the collective (and the aggregate) are disproportionately less predictable than individuals.


    Don’t talk about “progress” in terms of longevity, safety, or comfort before comparing zoo animals to those in the wilderness.


    If you know, in the morning, what your day looks like with any precision, you are a little bit dead—the more precision, the more dead you are.


    There is no intermediate state between ice and water but there is one between life and death: employment.


    You have a calibrated life when most of what you fear has the titillating prospect of adventure.


    Nobody wants to be perfectly transparent; not to others, certainly not to himself.


    The last one is definitely one of my personal favorite quotes.

    Regular visitors of the econotwist’s sites also know my own humble contribution to the Black Swan Theory – “The Brown Horse – The Impact of the Highly Impossible.”

    There is no such thing as a failed experiment - only experiments with unexpected outcome.

    Related by The Swapper:

    Here’s What You Get For Blogging About Chinese Banks

    In Health and Environment, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, Technology, Views, commentaries and opinions on 03.12.10 at 20:44

    I can’t say I’m very surprised as I’ve  been quite busy lately blocking Chinese IP‘s from accessing my computer.

    But when I tried to log on to The Swapper just a few minutes ago, I got this:



    Well, I must admire their tireless efforts to plant all kinds of bugs in my system.

    However, I really can’t see why?

    There must be thousands of bloggers and websites who publish a lot more critical stuff about The Great Red than I do.

    So, I suppose I should take it as a compliment…..

    Professional hackers know that Chinese and Korean computers are notorious exploiting bad security on many fronts.

    This makes other people experimenting with hacking and exploiting prime targets.

    However, it can get cumbersome trying to manually find IP’s of computers in these countries.

    Here are the ranges of IP’s used in these countries. (Note, not all the IP’s are assigned. Use lower values for more likely hits.) –  China –  Korea –  China –  Korea –  Korea –  China –  China –  China –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Chinese Unv of Hong Kong –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  China –  Korea –  China –  China –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  Korea –  China –  Korea –  China –  Korea –  Korea –  Korea –  Korea –  Korea –  China –  Korea –  Korea –  Korea –  Korea –  Korea –  China –  Korea –  Korea –  China –  Korea –  Korea –  China –  Korea –  Korea –  Korea –  Korea –  China –  China –  Korea –  China –  China –  China –  China –  Korea –  China –  Korea –  Korea –  China –  Korea –  Korea –  Korea –  China –  Korea –  Korea –  China –  Korea –        China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –        China –  China –  China –  China –  China –  China –  China –  China –  China –  Korea –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  China –  Korea –  China –  China –  China –  China –  China –  China –  China –  China –  China –  Korea –  China –  Korea –  Korea –  China –  Korea –  China –  Korea –  Korea –  China –  China –  Korea –  China –  Korea –  China –  Korea –  Korea –  China –  China –  Korea –  China –  Korea –  China –  China –  China –  China –  China –  China –  Korea –  China –  Korea –  Korea –  China –  China

    And here’s a list of my recent Chinese coverage (and let’s se how long it’ll take them to crash this site again):


    Select Your Language:

    English * Arabic * Chinese * Danish * French * German * Hebrew * Italian * Japanese * Norwegian * Portuguese * Russian * Spanish * Swedish * Turkish

    The Pros & Cons of Credit Default Swaps

    In Financial Engeneering, Financial Markets, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Quantitative Finance on 02.12.10 at 02:51

    The CDS market, currently perceived as the most toxic market of all, has existed for nearly 20 years. But most people have only just begun to understand what all the fuzz is about. Said as simple as possible; a CDS is a kind of  insurance a lender buys to secure oneself against a possible default by the borrower. These insurance contracts usually has a maturity period between 1 to 10 years, and usually prized as a percentage of every 10 million units (dollars, euro, yen). A new research paper shred a little more light on this rather unknown market.

    “In general, CDS trading has lowered the cost of issuing bonds and enhanced the liquidity in the bond market. Nevertheless, CDS trading has also introduced a new source of risk.”

    Ilhyock Shimy/Haibin Zhu

    According to the two researchers employed by the Monetary and Economic Department of the Bank for International Settlements, CDS trading has lowered the cost of issuing bonds and enhanced the liquidity in the bond market. The positive impact is stronger for smaller firms, non-…nancial …rms and those fi…rms with higher liquidity in the CDS market, while the negative is that companies included in CDS indices must face higher bond yield spreads than those not included.

    The rise and fall of the credit derivatives market is considered the single most important event in the global credit market in the past decade.

    Even thou it has existed for nearly 20 years, no one has paid much attention to it.

    Until it blew up like an Icelandic volcano in 2008 and covered the whole world with a black cloud of hidden financial risks, that is.

    By then the credit derivative market had swollen up to a huge, unmeasurable, uncontrollable market, with an estimated value of more than 60 trillion dollar. Credit-default swaps is one of the most traded credit derivatives, making up almost 90% of the totals.

    According to the new research, the notional value of this market have been cut in half since the peak in 2008.

    A Short Lesson

    By the way – to compare a CDS with a credit insurances is not quite accurate:

    A (CDS) is a swap contract and agreement in which the protection buyer of the CDS makes a series of payments (referred to as the spread) to the protection seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) experiences a credit event. In fact, it’s a form of reverse trading.

    The simplest credit-default swap is a bilateral contract between the buyer and seller of protection. The CDS will refer to a “reference entity” or “reference obligor”, usually a corporation or government.

    The reference entity is not a party to the contract. The protection buyer makes quarterly premium payments—the spread —to the protection seller.

    If the reference entity defaults, the protection seller pays the buyer the par value of the bond in exchange for physical delivery of the bond, although settlement may also be by cash or auction.

    A default is referred to as a “credit event” and include such events as failure to pay, restructuring and bankruptcy.

    So, with that out-of-the-way, I’ll go on.

    A Double-Edge Sword


    The CDS contracts have been perceived as the main root of all evil in the credit market because of its complex distribution of risk.

    The new research paper by Ilhyock Shimy and Haibin Zhu do not confirm, nor dismiss the allegation.

    They point, however, to the fact that the CDS market have both positive and negative impact on the financial markets in general.

    This is their main findings:

    “First, we …find strong evidence that CDS trading is associated with lower cost and higher liquidity for new bond issuance in Asia. This is consistent with the hypothesis that CDS trading helps create new hedging opportunities and improve information transparency for investors. Noticeably, this result is contrary to similar studies based on US data. This contrast provides supporting evidence for our conjecture on the jump-start e¤ect in Asia.

    “Second, we …find that the positive impact of CDS trading on the bond market tends to be more remarkable for smaller fi…rms and non-f…nancial …firms. In addition, those …rms with higher liquidity in the CDS market bene…t more in the primary bond market in terms of cost and liquidity.”
    “Last, we also …nd that the impact of CDS trading on the bond market is di¤erent during the crisis period. The global …nancial crisis that occurred during the sample period o¤ers a good case study to examine the behaviour of the CDS and bond markets under distress and their linkages. Our analysis shows that, at the peak of the global …nancial crisis, those firms included in CDS indices had to face higher spreads than those not included in CDS indices, above and beyond the general increase in credit spreads observed in the bond market during this period. This suggests that CDS trading could be a double-edged sword: it also introduces new sources of shocks to the bond market.”

    Here’s a copy of the full report.

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