Pick 55 - Spurious Correlations

This Sunday the two best teams in the National Football League  face off in New Orleans for Super Bowl XLVII. In addition to bragging rights for the winner, there may be some hidden value in the outcome.  Back in the late 1960's a group of geeky data analysts started tracking the correlation between the winner of the Super Bowl and the fate of the Stock Market for the rest of the year. (I told you they were a bit geeky) Perhaps after one too many beers they predicted that the outcome of the Super Bowl could forecast  what was going to happen to the U.S. stock market over the next 12 months. So they began accumulating the data each year thereafter and, by golly, there was a clear correlation.

The so-called  Super Bowl Stock Market Predictor claims that if an original NFC team wins the prize, the stock market will end the year up, but if an original AFC team wins, the market will end the year down. 

This seems like a ridiculous correlation, but from 1967 to 1988 the indicator was right 90.9 percent of the time - 20 out of those 22 years. Since then the accuracy has decreased, but it still hovers at around 76.7 percent - a predictor. When was the last time the advice from your Broker hit the mark 8 out of 10 times? 

In geek terms this is called a spurious correlation because the rationale for the correlation is totally off the wall.  Yet its track record is as solid as the gold in Fort Knox. Maybe more so because few, if any, investors have seen the gold in Fort Knox. Many who have followed this Predictor have seen their portfolio turn to gold in a couple of years.

The Super Bowl Stock Market Predictor is not the only spurious correlation with hidden value. Has anyone noticed that when the DJIA goes positive on a Friday, the price of gas usually increases a few cents on Monday. The opposite is also true. Use this hidden value to decide whether to fill er up on Friday or Monday and you will be ahead of the game most of the time.

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Pick 54 - Fake Girlfriend

Even if I had thought of this when I was in my youth, it would not have been technically feasible. Yes. I could have conjured up an imaginary girlfriend...many of us had them in high school. But the geeks of that era were always at the bottom of the popularity totem pole so we had to rely on our imagination to assuage our deflated egos. Yet time was on our side. It was not the popular high school jocks who went on to earn six figure salaries, but those awkward geeks that could get us to the moon and back, design awesome muscle cars, and put a personal computer on the desk of everyone that was intrigued with video games or tracking their finances on a spreadsheet.

Of course, things have changed since those days and it seems the jocks are back at the top of the totem pole--at lest those who really are good enough to become stars in college and draft picks for Pro Teams. So it did not surprise me when a certain college football star was apparently duped into a relationship with a fake girlfriend. That was sheer geekery! And I don't think we have seen the last of it.

I just came across this in one of my on-line news letter feeds:

If your Facebook profile is feeling lonesome, or nobody really believes that your unseen Canadian partner actually has the flu (a nod to Broadway’s Avenue Q), a Brazilian service will conjure up a fake girlfriend to round out your virtual identity.
NamoroFake.com will create the appearance of a love interest on Facebook for US$40, or offer up an ex-lover for $19.00 if your deception should be both dishonest and frugal. 
Namoro makes the lie convincing through matching you up with your “girfriend’s” fake profile, complete with 30 days of comments and the quintessential relationship status change. Everybody knows that it’s not ‘official’ if your status doesn’t say so. That’s today’s youth’s version of a “promise ring.”

I am not trying to say that there is some hidden value in having a fake girlfriend. We surely have enough true lies to contend with in our current times. Just sayin...geeks may not be popular but they can be very clever--especially when technology is on the playing field.

ez does it!
 

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Pick 53 - The FED

For nearly eighty years after the charter for the Second Bank of the United States was allowed to expire, America was without a Central Bank controlled by the Federal Government. After various financial panics, particularly a severe one in 1907, many Americans, especially Farmers and owners of small businesses, lobbied Congress for banking and currency reform.  They wanted a ready reserve of liquid assets that could be used to expand and contract currency and credit seasonally within the U.S. economy.

In response to this lobby, the Aldrich–Vreeland Act was passed in 1908. The direct result of this act was the establishment of the National Monetary Commission in 1909. Over the next four years, the Commission prepared and proposed major changes in U.S. banking and currency laws. The final report was submitted to Congress on January 9, 1912.  Its recommendations  ran 59 sections--most of them very controversial in those times. The proposed legislation was known as the Aldrich Plan, named after the chairman of the Commission, Republican Senator Nelson W. Aldrich of Rhode Island.

The Plan called for the establishment of a National Reserve Association with 15 regional district branches and 46 geographically dispersed directors primarily from the banking profession. The Reserve Association would make emergency loans to member banks, print money, and act as the fiscal agent for the U.S. government. State and nationally chartered banks would have the option of subscribing to specified stock in their local association branch.

Since the Aldrich Plan essentially gave full control of this system to private bankers, there was strong opposition to it from rural and western states because of fears that it would become a tool of certain rich and powerful financiers in New York City, referred to as the "Money Trust".

From May 1912 through January 1913 the Pujo Committee, a subcommittee of the House Committee on Banking and Currency, held investigative hearings on the alleged Money Trust and its interlocking directorates. These hearings were chaired by Rep. Arsene Pujo, a Democratic representative from Louisiana^.

In the election of 1912, the Democratic Party won control of the White House and both chambers of Congress. The party's platform stated strong opposition "to the so called Aldrich bill for the establishment of a central bank." However, the platform also called for a systematic revision of banking laws in ways that would provide relief from financial panics, unemployment and business depression, and would protect the public from the "domination by what is known as the Money Trust."

Now, a full 100 years later, we are still searching for the same relief from the same financial woes. Both political parties appear to have retained their policy positions regarding how to solve these woes, but no one seems to be asking the key question: Is there some hidden value in the function of the Federal Reserve that we have overlooked. The FED has served our financial interests well for most of the hundred years it has been in operation. Why is it failing us now? 

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Pick 52 - Character

Back in my school days traits like persistence, curiosity, self-control, conscientiousness, grit and self-confidence were actually taught in school and at home. There were no tests to determine how much character training we had absorbed each month. No text books or other training devices were used to instill these traits but, somehow both our parents and our teachers knew if we were making progress or not.

Looking back, I suspect our parents measured our progress against their own. Like that old saying: "the apple does not fall far from the tree." If our father lacked persistence, he expected us to pick up the slack and finish what we had started. If our mother lacked self-confidence, we were expected to overflow with it. No. There were never any direct scoldings or pressure about persistence and self-confidence. It was more like nurturing; that subtle smile when you finished a difficult task, the words of encouragement whenever you tried out for the team or a part in the school play. They were little character building exercises taught using the activities of daily life.

Our teachers used a different yardstick. They measured us against our classmates and in many cases against the results they had attained with students who had gone before us. These days we consider it unfair and even prejudicial for teachers to make comparisons like that. But we need to remember that in those days incidents such as Columbine and Sandy Hook were unthinkable.  And therein may be the hidden value in ad hoc character building lessons. They not only taught us about the importance of  character, they taught us how to nourish it in ourselves and in others.

It is too bad that guns are so much easier to obtain than good character.  

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