Awesome Forecasts and the Unknowable Future

Back in late 2013 I wrote a piece on human nature which was in part inspired by the bullish exuberance exhibited by a MarketWatch article predicting the DJIA at 20,000 in the near term future. Yesterday afternoon, a bit over three years later, that prediction actually became reality and I’m sure the author of that article as well as many other like minded traders popped some champagne in celebration of their awesome ability to predict the future.

 

A trader from the (near) future.

Image via tumblr.com

 

Now don’t get me wrong, I’m happy for those guys and for the Dow Jones. Assuming of course that everyone involved actually put their money where their mouth was back then – which ever few do. And that in essence was the underlying message of my post.

In yesterday’s update I briefly touched on hindsight bias and how we all have a knack for bending the past in our respective favor. Nobody wants to look stupid after all. And in hindsight, all of us would have liked to have bought the S&P 500 at 667 in 2008 and then traded it all the way up to just below 2300 today.

Except of course that we didn’t (please raise your hand if you did). And that is quite a humbling lesson to learn in our ongoing quest to obtain riches from market participants who happen to disagree with us. It’s not that we didn’t foresee this event, actually many people probably did.

It is about how difficult it is to actually translate such information or ideas into profits. Back in 2008, as well as in 2013, there was no way of truly knowing where the DJIA or the S&P 500 would be trading all those years later. So what makes anyone think they know what the future holds – today?

 

S&P 500 Index, monthly – from utter despondency to foaming-at-the-mouth euphoria in eight years. The performance of the index is largely an artifact of run-away monetary inflation under the modern fiat money system, which has triggered a series of boom-bust cycles of increasing amplitude. The problem is that it takes more and more money creation to sustain bubble conditions and it cannot be blithely assumed that the effects will continue to remain confined to the prices of financial assets and capital goods – click to enlarge.

 

Over the eight plus years since the launch of the Evil Speculator trading blog, we have seen markets change, regulations change, and even the way we trade change (mainly due to mobile technology). We now compete with high frequency trading robots executing dozens of trades within nanoseconds.

We even have to contend with online social media these days, which have the power to amplify a rumor into a market slide within mere minutes. If you think that predicting the level of the DJIA over the next week is difficult, then attempting to predict what may transpire several years down the line is not just foolish but borders on insanity.

 

Welcome to the Future

The other day my wife sent me an article she had gleaned from her Kurzweil mailing list. Quite frankly, it gave me the chills. Apparently our esteemed EU leaders in Brussels have decided that it would be a great idea to introduce laws specific to robots that could give them civil rights regulations of their own, and set limits on how many human jobs they would be permitted to replace.

 

EU bots, a.k.a. “electronic persons”. One wonders if there aren’t more important things for the eurocrats to worry about than the rights and obligations of machines. It sure appears though as if they have a lot of time on their hands. Then again, this urge to regulate things that don’t even exist yet, certainly tells us something about their pathological need to bring every nook and cranny of human life under bureaucratic control.

Image credit: Getty Images

 

Not only may I be out of work sometime around 2025, but slapping my toaster for burning my slice of wheat may get me into legal trouble, at least if the EU has its way. The latter is of course a completely different story, as the future of the European Union is looking dimmer by the day. So perhaps it won’t come to this after all.

Instead of hover boards and flying cars we’ll be dealing with moody entitled hyper intelligent robots who will be able to perfectly learn a language or learn a trade in 15 minutes instead of 15 years. And they may have rights on top of all the obligatory regulations. A brave new world indeed!

Maybe I can train one of them to run my blog and move my crusty butt to Aruba. Its jokes may be a bit stilted at first, but I’m sure version 2.0 will have that fixed in no time. Unless of course the damn thing is made in Germany.

But all kidding aside, have any of you considered the impact of machine learning and artificial intelligence to our own immediate reality as traders? I’m not talking in perhaps ten or twenty years from now, but perhaps in three to five. As a matter of fact, I started to dabble with various aspects of machine learning in 2014 and what I found out after expending much time and effort was that it wasn’t ready for prime time just yet.

But that can change quickly, especially if you throw advanced artificial intelligence and cloud computing into the mix. With AI we are talking about the potential of a semi-conscious intelligence which may soon not only exceed the realms of human intelligence and reasoning but keep growing from there – exponentially.

Ray Kurzweil once called that moment in time ‘the singularity’ and it appears as though it is quickly approaching. Or perhaps it already has come and gone deep down in some government sponsored AI laboratory.

 

Inventor and entrepreneur Raymond Kurzweil, who popularized the term “singularity”, which was originally used by John von Neumann in the 1950s in the context of accelerating change caused by technological progress. In 1965, I.J. Good adopted the term to specifically describe the emergence of artificial intelligence, which he believed would  immediately start improving itself and quickly become a super-intelligence, with change eventually progressing at incomprehensible rates. This is the also the sense in which Kurzweil employs the term, i.e., he holds that runaway technological progress will be triggered by the emergence of AI. The idea is essentially extrapolating from Moore’s law, which posits unceasing exponential growth in transistor density (and by implication, computing speeds). Many critics of Kurzweil’s thesis have made themselves heard over time. In our opinion, the most valid criticisms focus on the fact that an increase in processing and calculation power is not equivalent to creating human-type intelligence. It won’t magically bring about the emergence of consciousness, hence a digital “artificial intelligence” would lack motives, desires, beliefs, etc. In his 1989 book The Emperor’s New Mind, physicist Roger Penrose argues that a Turing machine (and therefore a digital computer) cannot attain consciousness, which he considers to be a non-algorithmic phenomenon. He enlarges on an argument made earlier by philosopher John R. Lucas (it has since become known as the Penrose-Lucas argument). The argument is based on Goedel’s 1931 proof of his incompleteness theorems. Goedel noted that a theory expressing elementary arithmetic cannot be both consistent and complete. Moreover, every consistent formal arithmetic theory contains an arithmetical statement that is true, but cannot be proved by the theory itself (praxeologists may be reminded of Mises’ remark that there are things beyond which we cannot inquire; praxeological reasoning is based on the action axiom, which represents this threshold – at the same time, the truth of the action axiom cannot be denied without getting entangled in insoluble contradictions). The Lucas-Penrose argument states that while a formal arithmetic system cannot demonstrate its own consistency or prove its incompleteness in line with Goedel’s theorem, human mathematicians are in fact capable of proving Goedelian results. Therefore, they cannot be described as formal proof systems, which shows that their thought is non-algorithmic. This in turn contradicts the notion that the human mind is merely a matter of computation or computational power. [Note: we are merely providing pointers for those interested in such ideas, which obviously require more in-depth study].

Photo credit: Michael Lutch

 

Conclusion – Change will Keep Accelerating

This means of course that the future not only remains absolutely unpredictable, but that the pace of change is going to keep accelerating. Mind, that doesn’t mean that technology will evolve on a linear or exponential curve. There may be setbacks triggered by wars and social chaos.

Clearly though, the only reliable feature of life in the future will continue to be change itself. Good luck trying to predict what it will look like. Or the financial markets for that matter.

This article was penned by The Mole and has originally appeared at the Evil Speculator. This version is lightly edited by PT.

 

Chart by: BigCharts

 

Chart and image captions by PT

 

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Can Germany Be Made Great Again?
      When Germany Was Great! Ever since the start of the deliberately conceived “migrant crisis,” orchestrated by NWO elites, the news out of Germany has been, to say the least, horrific. Right before the eyes of the world, a country is being demographically destroyed through a coercive plan of mass migration.  The intended consequences of this – financial strain, widespread crime and property destruction, the breakdown of German culture – will continue to worsen if things are not...
  • Yanking the Bank of Japan’s Chain
      Mathematical Certainties Based on the simple reflection that arithmetic is more than just an abstraction, we offer a modest observation.  The social safety nets of industrialized economies, including the United States, have frayed at the edges.  Soon the safety net’s fabric will snap. This recognition is not an opinion.  Rather, it’s a matter of basic arithmetic.  The economy cannot sustain the government obligations that have been piled up upon it over the last 70...
  • Prepare for Another Market Face Pounding
      “Better than Goldilocks” “Markets make opinions,” goes the old Wall Street adage.  Indeed, this sounds like a nifty thing to say.  But what does it really mean?   The bears discover Mrs. Locks in their bed and it seems they are less than happy. [PT]   Perhaps this means that after a long period of rising stocks prices otherwise intelligent people conceive of clever explanations for why the good times will carry on.  Moreover, if the market goes up for...
  • What Went Wrong With the 21st Century?
      Fools and Rascals   And it’s time, time, time And it’s time, time, time It’s time, time, time that you love And it’s time, time, time… - Tom  Waits   Tom Waits rasps about time   POITOU, FRANCE – “So how much did you make last night?” “We made about $15,000,” came the reply from our eldest son, a keen cryptocurrency investor. “Bitcoin briefly pierced the $3,500 mark – an all-time high. The market cap of the...
  • Seasonality: Will Patterns that Worked in the Past Also Work in the Future?
      Historians of the Future Every investor makes trading decisions based on what happened in the past – there is no other way. What really interests us is the future though. After all, what happens in the future ultimately determines investment success.   When in doubt, you can always try to reach the pasture...  In Human Action, Ludwig von Mises described stock market speculators as akin to “historians of the future”. This is without a doubt the most trenchant definition of...
  • Bitcoin Forked – Precious Metals Supply and Demand Report
      A Fork in the Cryptographic Road So bitcoin forked. You did not know this. Well, if you’re saving in gold perhaps not. If you’re betting in the crypto-coin casino, you knew it, bet on it, and now we assume are happily diving into your greater quantity of dollars after the fork.   Bitcoin, daily – adding the current price of BCH (the new type of Bitcoin all holders of BTC can claim at a 1:1 ratio), the gain since the “fork” amounts to roughly $1,000 at the time we...
  • Czar vs. Pope
      Vladimir the Great Sums Up Pope Francis the Fake Vladimir Putin has once again demonstrated why he is the most perceptive, farsighted, and for a politician, the most honest world leader to come around in quite a while.  If it had not been for his patient and wise statesmanship, the world may have already been embroiled in an all-encompassing global conflagration with the possibility of thermonuclear destruction.   Vladimir Putin is sizing up Pope Francis with his “good...
  • The Future of the Third World
      Decolonization The British Empire was the largest in history. At the end of World War II Britain had to start pulling out from its colonies. A major part of the reason was, ironically, the economic prosperity that had come through industrialization, massive improvements in transportation, and the advent of telecommunications, ethnic and religious respect, freedom of speech, and other liberties offered by the empire. The colors represent the colonies of various nations in 1945,...
  • Bitcoin Has No Yield, but Gold Does – Precious Metals Supply and Demand Report
      Bitcoin and Credit Transactions Last week, we said:   It is commonly accepted to say the dollar is “printed”, but we can see from this line of thinking it is really borrowed. There is a real borrower on the other side of the transaction, and that borrower has powerful motivations to keep paying to service the debt. Bitcoin has no backing. Bitcoin is created out of thin air, the way people say of the dollar. The quantity of bitcoins created may be strictly limited by...
  • Is Historically Low Volatility About to Expand?
      Suspicion Asleep You have probably noticed it already: stock market volatility has recently all but disappeared. This raises an important question for every investor: Has the market established a permanent plateau of low volatility, or is the current period of low volatility just the calm before the storm?   All quiet on the VIX front... what can possibly happen? [PT] - click to enlarge.   When such questions regarding future market trends arise, it is often...
  • Why There Will Be No 11th Hour Debt Ceiling Deal
      Milestones in the Pursuit of Insolvency A new milestone on the American populaces’ collective pursuit of insolvency was reached this week. According to a report published on Tuesday by the Federal Reserve Bank of New York, total U.S. household debt jumped to a new record high of $12.84 trillion during the second quarter. This included an increase of $552 billion from a year ago.   US consumer debt is making new all time highs – while this post GFC surge is actually...
  • Will They Haul Off Trump’s Statue, Too?
      Confused by Shadows POITOU, FRANCE – This week, we are talking about theperishable nature of gods. Yesterday, the city fathers of our hometown of Baltimore let it be known that it was time to toss out the old deities.   The Robert E. Lee and Thomas. J. “Stonewall” Jackson Monument in Baltimore, which the mayor inter alia wants to remove. Suddenly it has become fashionable to erase the memory of an important part of US history all over the country. By experience, this...

Support Acting Man

j9TJzzN

Austrian Theory and Investment

Own physical gold and silver outside a bank

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com