Gongol.com Archives: August 2012
Brian Gongol

August 4, 2012

Business and Finance Stock-trading company causes its own miniature "flash crash"
One can see exactly how we got ourselves into the situation we're in today -- where a handful of companies with privilege and access are able to use computers to conduct instantaneous automated stock trades. And though none of the individual steps seems to have been wrong, the result is a real mess. And it's one in which those privileged firms try to convince themselves and the world that they're doing something of value by making stock markets more liquid. But liquidity itself isn't necessarily a good thing. If a plane crashed on a deserted island with 100 survivors, would anyone think it would serve any useful purpose to have ten of those survivors spend all day running back and forth, trading coconuts for seashells in order to ensure a "liquid market" for each? ■ The whole notion of high-frequency trading is based upon the notion of making lots of money by trading huge volumes of stock shares for very small profits. Hence algorithmic trading accounts for more than 60% of stock-market activity. But the whole notion is a total fallacy. Warren Buffett didn't get wealthy by swapping shares of stock all day for pennies a share. Real investing calls for discovering the real value (the so-called "intrinsic value") of a company, in terms of what it possesses and what it has the potential to create, and then acquiring a portion of ownership in that company when someone else is willing to sell it for a price below that intrinsic value. And because intrinsic value can only be estimated in very rough figures -- particularly because it involves making estimates ten years into the future -- one can only do it right by being extremely conservative and taking action only when the gap between the intrinsic value and the market price is big. It's practically the polar opposite of high-frequency trading.

Computers and the Internet How could Apple use its $117 billion in cash?
New York Times business reporter Andrew Ross Sorkin suggests acquisitions from Nuance (makers of voice-recognition software) to Twitter to RIM to Sprint. There's no doubt the company is on a profitable roll right now -- bringing in $9 billion from the start of April to the end of June. Interestingly, with $112 billion in shareholders' equity, the company already has $89 billion in "long-term marketable securities". In other words, Apple is behaving like a gigantic mutual fund that happens to have a $3-billion-a-month inflow. (Sorkin's $117 billion figure is the sum of the company's cash, short-term marketable securities, and long-term marketable securities.)

Computers and the Internet Senate takes summer break without approving cybersecurity bill
That may be a good thing -- the Federal government has already made it clear it demands broad powers in case of a meaningful cyber-attack, and there are reasonable concerns that the bill as proposed would violate our expectations of privacy. The bill, called the Cybersecurity Act of 2012, does address an important matter -- cyber-attacks could be dreadful if carried out by an effective and motivated party. But we're talking about the same Federal government that failed to anticipate the means and methods of the 9/11 attacks, and couldn't respond quickly enough on that day to scramble armed fighters to protect the White House. In other words, their ability to anticipate threats and prepare appropriately is doubtful. Considering the speed at which Internet technologies change and evolve, it's hard to believe that a great deal of codification will make us safer. What might, on the other hand, is if insurance carriers were to start imposing real dollars-and-cents costs on companies that need coverage but that haven't initiated adequate cybersecurity protections.

Business and Finance We need a word other than "rich"
A Tumblr account re-posts pictures posted on Instagram of young people flaunting their spending. The name of the blog is "Rich Kids of Instagram", and that's probably the name most people would give it anyway. But there's something a little wrong about that title. "Rich" is one thing..."spoiled" is another. But then again, there are children in families with little or no money that are still spoiled rotten. "Overprivileged" just sounds whiny, but "wealthy" isn't the right word, either -- especially because the people who really get and stay rich from generation to generation aren't out blowing money on Ferraris for their children or $14,000 bar tabs. And they definitely aren't bragging about it on Twitter and Instagram. That's just short-term conspicuous consumption.

Health New evidence: Some cancers may come from rogue stem cells
That's as opposed to the theory that they come from mutations to already-differentiated cells.

Computers and the Internet New Illinois law says companies can't ask for employee passwords on social-networking sites

Science and Technology Is sports photography a dying art?
Great photos will continue to be produced, no doubt. But one has to wonder whether there will long be a point to having photographers even bother to try capturing still images. As HD video recording becomes easier to perform with ever-smaller cameras, won't we likely reach a point -- soon -- when someone can simply carry a camera, set it to snap pictures at a rate approaching that of video, and simply go back and take still frames from the video? Naturally, there will be matters of exposure time and shutter time to adjust and tweak, but photographers already routinely set their cameras to take multiple shots in a "machine-gun"/continuous/burst mode. Aren't we getting quite close to the time when that burst mode becomes virtually continuous...all the time? The point here being that perhaps in the next era, what matters won't be the ability to take the perfect action shot, so much as to be able to pick it out.

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