Misconception or misperception about risk

Discussion in 'Psychology' started by harrytrader, Jul 1, 2003.

  1. When talking about risk one commonly associates it with volatility and even makes somehow the two equivalent. Whatever measure of volatility is used, it is not my subject here, what I want to say is that risk is not equivalent to volatility. In quality statistical control one says that a system is in the state of control when volatility is stable that means it doesn't present any risk. It is the uninstability part that constitutes the risk. But even that part can only be due to ignorance. For example I already mentioned the example of Uncertainty Heisenberg Principle that everybody learned at college level, and unhappily teachers make you believe that it is a fundamental uncertainty that really exists whereas it can just be an antropomorphic point of view that is to say it is subjective and a limitation of our actual knowledge - there is even a school called the bayasian school which asserts that in general for all probability. As for stock market, since I have a model the uncertainty part is due mainly to the officials that maintain an orthodox postulate that market is unpredictable because if not so they couldn't sell their supposed anti-risk products at their highest prices hee hee ! This is inflation provoked by the financial "industries" which is rather retarded compared to real industries and that inflation consumes the money of the real world economy. We aliment this beast in fear of a fictitious risk in detriment of real economy and some industrial firms have actually just blowed off with these supposed anti-risk produts or lost money because they tried to edge for example against the dollar rise thinking there was a risk whereas it was fictitious. These products are more dynamites than real assurance against risk :D. Moreover the whole real industries have been substituing real products margin with financial margin and that at term is very risky for the world economy.
  2. You are a one man truth peddling operation.
    Continue the good work.
  3. "We aliment this beast in fear of a fictitious risk in detriment of real economy...."

    That's surrealist poetry right there.
  4. Banjo


    Harry, I always enjoy your post, I'm beginning to think you're as big a cynic as I am.

  5. i like that ! wonder if he really wrote it or it is just plagiarized from some anti-capitalist handbook ??


  6. I am capitalist and against communism but I am not a believer so I just don't believe those who wants to make me believe only on appearance on stock market efficiency and capitalism whereas they are preparing socialism: when capital is in the hand of the equivalent of aparatchiks of communist countries capital is wasted. Privilege from those who control the Central Banks allow them to allocate any amount of capital that is to say capital is no more capital and unit of money is more and more worthless with time. At the end they will declare that capitalism is a fake whereas it has derived from true capitalism to true socialism. At the moment people won't believe it they will believe it only when it will be achieved but then it will be too late. Central bank idea is in fact one the 10 principal points of Marxism just read Karl Max once.


  7. understood, harry. although i don't agree with you, your view is a unique interpretation of capitalism--thank you.
  8. Banjo


    It is always and forever about control, being at the top of the heap with a portion of everything below flowing your way. It will eventually require that accumulated capital to maintain control.
  9. Actually I think Harry has made some very good points here. The market is littered with companies that blew up from so-called dynamic hedging operations. And they add unknown systemic risk, as it is difficult to account for them on a meaningfuk basis. What is an OTC hedge in a thin market worth? Who knows? FNM and FRE have recently run into this.

    Volatility as a measure of risk has always confused me. Is a stcok or portfolio extra risky because it went up more than the market? Only if you assume that everyone is ultimately a loser.

    Harry also makes a good point about who is a capitalist. Are the corporate princes who gorge on options and obscene comp packages truly capitalists or do they more resemble corrupt socialist dictators surrounded by thugish lackeys? They certainly have no compunctions about running to the government every time they have a problem or are faced with competition.
  10. Capitalism for we
    Socialism for 'they'

    The wise understand.
    #10     Jul 1, 2003