When Fair Value Isn't...

I've posted on IFRS and fair value before.

Today's FT - link here - has an article by three rather senior accountants that is spot-on.


The current world financial woes have been made worse by what is called "fair-market" valuation of assets, as opposed to purchased value or book value (i.e. depreciated). This "fair-market" valuation is pro-cyclical, increasing volatility, and is anything but fair: many, if not most, accountants have failed to understand what fair-market valuation is really all about.

First of all, it's not about assigning a value to an asset based on what that asset would currently bring in the market today. That is what many think it means, but that's a mistake: fair value is, instead, the value of an asset when that asset is purchased at a price that can be financed out of the cash flow of the asset. I worked for a while assessing the fair value of radio and TV stations, and while it is a simple concept, it's not one that can be simply assigned to various kinds of assets held by companies.

What the accountants wrote in the article I link to call for is, quasi, a mechanism where a sharp rise in the risk and discount rates would lead to a change in the way assets were valued.

While the idea has some merit, it ignores the fundamental fact that IFRS and the fair value concept ignores a fundamental concept of accounting: that the company for which the books are being prepared is an ongoing company and is not being liquidated. Fair value assumes the exact opposite, and remains a really bad idea.

For all the warts and bumps and problems that it has, the standard valuations of the past have one truly positive aspect: they don't force companies to write off billions in assets because there is a market downturn.


But the inmates appear to be firmly in control of the asylum, and it will take a monumental effort to break them. Shame that it will cost the world economy so much to do so.

Idiots.
 

Well, Isn't That Special II

Sigh.

Let's see: you go to one of the absolute top religious sites of the world to pay your respects and get some footage for a campaign spot (well, they call it the news, but we know better...).

So what do you do to ensure that no one misses who you are?

Right: plaster the place with campaign posters.


What idiot thought up that one? Putting up campaign posters on police barricades?

The only thing that Obama and his people - or should I say Soros and the other plutocrats, who are financing this newest attempt at stealing an election - are interested in is being elected. Nothing else matters.


Nothing like piety for the sacred. Heck, screw that, put up a campaign poster instead!


And no, it's not traditional to do so.



You know, I think that Obama and his people are giving new meaning to the phrase "Ugly American".

Well Isn't That Special...

This an aside during from Spiegel's sycophantic fawning over Obama:

1:42 p.m.: SPIEGEL ONLINE has learned that Obama has cancelled a planned short visit to the Rammstein and Landstuhl US military bases in the southwest German state of Rhineland-Palatinate. The visits were planned for Friday. "Barack Obama will not be coming to us," a spokesperson for the US military hospital in Landstuhl announced. "I don't know why." Shortly before the same spokeswoman had announced a planned visit by Obama.

Add to that the fact that Obama snubbed the troops in Afghanistan, ignoring those who waited to see him - who deserve the utmost respect - and I think a certain pattern is emerging...


That Obama really doesn't give a shit about the troops. Duh. They're not his electorate.


But to deliberately snub them is just plain rude. Probably plays well in the Kos Universe and makes George Soros feel all warm and mushy inside.



Despicable.

Oh, and that Maliki interview with Spiegel that had him supporting Obama? Interesting, that one...

Poorly translated and completely re-written to make it what Spiegel wanted him to say, rather than what he actually said.

But about par for the course. The Big Lie lives...

This Is Getting Tedious...

The film reviewer of the FT, Nigel Andrews, hasn't always been the best reviewer, allowing his politics to sharply taint his reviews.


Well, he's done it again.

This is by far the silliest review I have ever read, and I've read quite a few.

Here it is, in all of its ... glory.

"Landlord of England art thou now, not king," said John of Gaunt to Richard II, in the words of William Shakespeare. What does The Dark Knight say to those ruling the US? It surely says, as foreign interests and investments creep across the land from Hollywood to New York: "Tenants of America are ye now, not owners."

A greater ignorance of American history, both political and economic, cannot be shown from these three sentences.

First: the US has been, historically, a land which doesn't merely provide a safe haven for foreign investors, but also greater opportunities than they are allowed at home: the US rail system was built with European money, which those investors largely then lost because they had been sold a bill of goods that did not deliver (each railroad was a whopping success as long as no others were built, but this success meant that others would be built, reducing profits and creating competition).

Second: when foreign investors buy land and companies in the US, they can't simply take it with them. Sure, an investor could, theoretically, pack up plant and equipment and move to East Anglia or, more profitably, Outer Mongolia, but they can't force the workforce there, and that is what makes the US interesting for foreign investors: high labor productivity.

Third: no one "rules" the US: at best, and scarcely at that, the US is governed. But a Brit simply wouldn't be able to comprehend that, now, would he?

Sadly, the ideological bias and the sheer ignorance of the reviewer does not cease there...

This must be why the new Batman epic is the biggest opener in US filmgoing history. The blast of truth, giddied up with fun and fantasy, has a morbid irresistibility. The Dark Knight is about America losing America. Its narrative starting point is a Hong Kong mastermind's scheme to hijack Gotham City's business empire, with help from a teeming Slavic and European Mafia.

Um, perhaps the reason that the Batman film has done so well is that it is, quite simply, a smashingly good film?Much like the season's earlier Iron Man?

The puerile fantasy of Andrews gets seriously in the way of reporting: a "blast of truth"? The Dark Knight has nothing to do with "America losing America": this is where Andrews truly fails to understand the country that he is lambasting. The US specializes in one thing particularly: re-inventing itself. How can you "lose" yourself when you are really in the process of changing the way the country works? The US has gone through periods of economic change and re-orientation that would have gutted and deranged a lesser nation: the collapse of the South after the Civil War; the collapse of old, heavy industry in the 1970s; the financial difficulties of the 2000s. The key to understanding the US is the unrelenting willingness to change and adapt: of course, a Brit would have trouble understanding that.

And the villains of the film? Rather simple: they are real and already out there. Here film, the pioneer of fake reality, borrows heavily from reality, the reality of Chinese Triads, the oldest organized crime gangs, and of the brutality of Eastern European organized crime. Here Hollywood needed no help: these are villains. But rather than complaining about stereotypes out of some sort of embarassment that the oh-so-civilized Europeans cannot deal with - and the continues expansion of organized crime, of forced prostitution and drugs - Andrews instead indulges in his fantasy world, a world that itself has bright colors and marquees, but one that only exists outside of reality.

We already know the real, pre-movie facts about the US. China owns the mortgage on its economy. Militant Islam holds to ransom its security. And Britain has a controlling share in its popular culture, or at least its big-money movie fare (Rowling, C.S. Lewis, Tolkien, Pullman, Fleming). Now, even in the US-originated Batman franchise, the UK rules. The Dark Knight writer-director is a Limey, Christopher Nolan. Three main actors are British: Christian Bale, Gary Oldman, Michael Caine. Even the Joker is a Commonwealth interloper, one Heath Ledger, a deceased Australian managing to outact the living Americans.

Sigh. Ask any banker: they are dependent on mortgagees, and not the other way around. Of course, that takes some actual knowledge of finances to understand. Security ransomed to militant Islam? Quite the other way around, Nigel: not a penny, thank you very much, that's been a constant of US foreign policy since 1780 or so. Britain a controlling share of popular culture?

Excuse me, I had to stop at that one because it simply so funny.

And it seems to me that Andrews really, really doesn't understand what is going on here, and actually really doesn't understand the film industry much at all.

What the makers of Batman did was to get the best talent for the movie. Those folks were chosen for their talent, nothing less, nothing more. They've been paid, as hired help, by the people who are making, apparently, a huge amount of money from the hired help, thank you very much.

Of course, Andrews, once again in one of his rather pathetic anti-US modes, fails to understand what makes the US work so well: the ability to take the best of everywhere else ... and make it better.

And I find it rather appealing appalling that someone with such an obvious leftist slant, such an obviously oh-so-chic anti-American slant, is really criticizing the film based on something like ... nationalism? That the Dark Knight film isn't all that good because Americans didn't make it? Now that's ironic, don't you think?

A nation in panic? Quite possibly. Like lambs going to a preview of their slaughter, America paid $155m for an opening weekend's peep. The film – let us be honest – is less interesting than the resonances of its doomsaying. It bangs about for two and a half hours in shades of black, smashing cars, torching buildings, hurtling from high roofs, cackling, chasing, and getting in your face with sudden, perspective-changing, histrionic close-ups.

It goes on from there, but I shan't bore you with the rest. Simply not worth it.

Nigel, this is one of the more ... interesting slants on the film: if it weren't simply so blitherlingly wrong...

Iran, the Soviets and Rationality...

Gideon Rachman of the FT is, sorry to say, rather consistently either terribly misinformed or cannot see his biases and confuses wishful thinking for consistent argument.

If you read here you can see what I mean.

Here are the key words:

The US has already had to learn to live with nuclear weapons in the hands of countries that are far more oppressive and irrational than Iran: North Korea, Mao's China, the Soviet Union.

One of the great lessons of international relations since 1945 is that nuclear deterrence has worked. Mr Obama respects that lesson. Mr McCain does not.

This is where Gideon is completely incorrect, terribly misinformed and blind to his own bias.

Iran's record as a country of oppression is very close to that of Mao's China and the Soviet Union: the structure of the Iranian state resembles both of these states fairly closely, characterized by multiple security systems that watch each other. Iran, however lacks the bloodthirstiness of internal repression that both China and Mao and the Soviets under Stalin had: while women and minorities are suppressed and sanctions against key behavior remain in effect (clothing, sexual orientation), more often than not with deadly effect, Iran has yet to undergo the same kind of blood-letting that both China and the Soviet Union went through.

So I'll be happy to agree with Gideon that Iran isn't as oppressive as those other countries.


But neither Korea, China or the Soviets were anywhere near irrational when it came to nuclear weapons. Iran is, and to deny that is an indication of lack of understanding.


Korea's acquisition of nuclear weapons were nothing more than a political bargaining chip. They knew that the weapons alone weren't enough, and hence acquired delivery systems that were theoretically capable of threatening their neighbors: the US reaction to the Korean tests was muted, as the US knew that Korea couldn't actually deliver. There is a huge, huge difference between making a nuclear weapon and making one that fits on top of a missile, especially the type of missiles that Korea builds and exports (which have a very, very limited warhead capacity.

To repeat: building a nuclear weapon and testing it is different from making one that fits on the top of a missile. The first is basic physics, which is nowadays extremely well known, coupled with the kind of engineering abilities that even a Third-World country, given some imported technology, can manage, albeit with difficulties (like losing your mechanics to plutonium poisoning and production that is rather inefficient).

Korea built a working nuclear weapon to get attention, to have it taken seriously. It lacks, almost literally, everything else. The North Korean state is a shambles, the economy, such as it is, moribund and inefficient at best. Political and economic isolation was working and had contained North Korea, but largely because North Korea itself wanted to be contained: the entire philosophy of North Korea is based on preventing foreign influences to set any challenge to the State.

Hence Korea was rational in acquiring the bomb: the US and its partners knew that as well.

Both the Chinese and the Soviets were eminently rational when it came to nuclear weapons: they knew their political usage, but also that the failure of deterrence - in whatever form - meant the destruction of their ways of life, the destruction of everything that they had murdered so many tens and hundreds of millions for, the Destruction of History, as it were. Nuclear war was never an option for the Soviets or the Chinese under Mao: they knew that they had far too much to lose.

Not so Iran.

Iran has clearly and repeatedly demonstrated its intention in acquiring one: it is the destruction of Israel.

That is irrational: the Iranians, as does the rest of the Middle East, must know that if Israel is attacked with nuclear weapons, or indeed any weapons of mass destruction, will lead to a massive retaliation, be it Israeli or US. The estimates of the number of Israeli nuclear weapons range from a few dozen to over 200. If Israel were to be attacked in such a way that it would be destroyed, retaliation would see the destruction of cities and infrastructure that would destroy any and most likely all aggressors (and aggressors they are).

That makes no difference to the chiliastic state religion of Iran: it is, after all, God's will if such were to happen.

That is where Rachman is plain and simple wrong: nuclear deterrence has worked for rational actors. Iran is not a rational actor: it rejects, as Rachman also notes, the idea that it shouldn't destabilize it neighbors, that it should respect borders. Iran, as a rational actor, should make peace with its neighbors and work on improving the lot of its people: instead, it actively destabilizes them and has abysmally failed to improve the lot of its people. The mullahs in Iran may be theological geniuses within Islam, but are secular fools and idiots, making decisions based on complete ignorance of international relations, the international community and the international economy. They are in that sense irrational: rationality has little to do with Islam, which has everything to do with belief, unwavering belief and fanaticism in its service.

Iran broke with the rest of the world when it occupied the US embassy and kept diplomats as hostages: that was a crime against the international order that Iran has not only consistently failed to acknowledge, but rather trumpets as one of its finest hours. It wants the US to acknowledge its failings, but absolutely and steadfastly refuses to see the beam in their own eye. That is irrational: they could have so much if they weren't so absolutely set on being so self-destructive, so set in their beliefs that the world works in a way that it patently does not.

Iran is an irrational state, full of contradictions that will indeed bring about its collapse. For that reason specifically the worst thing that the world can expect is a nuclear-armed Iran: the Iranians have a long and well-documented history of choosing to be irrational when it fitted their own purposes.

To deny that is worse than folly, worse than misunderstanding Iran's intentions: it is a mistake with the most horrendous consequences for Middle East peace.

Hence I must say, in the starkest contrast to Gideon Rachman: Obama would not make the better commander-in-chief. If elected, his administration would be that of Carter II, full of idealists whose introduction to reality would be just as painful now as it was back then.

And The Physicists Disagree With The Climatologists...

Go and pop the popcorn.

This is the shot across the bows of the anthropogenic global warming industry.

In extremely stark contrast to the AGW folks, who we have seen have refused many times to release their data and models, the APS article linked to shows the math and defines the models and methodologies: they take the scientific method seriously, it seems.

Here is where it gets interesting:

The fingerprint of anthropogenic greenhouse-gas forcing is a distinctive "hot-spot" in the tropical mid-troposphere.

This is the claim of the AGW community.

The APS query points out this:

...the projected fingerprint of anthropogenic greenhouse-gas warming in the tropical mid-troposphere is not observed in reality.

In other words, the models do not fit reality. Really? Which reality?

None of the temperature datasets for the tropical surface and mid-troposphere shows the strong differential warming rate predicted by the IPCC's models. Thorne et al. (2007) suggested that the absence of the mid-tropospheric warming might be attributable to uncertainties in the observed record: however, Douglass et al. (2007) responded with a detailed statistical analysis demonstrating that the absence of the projected degree of warming is significant in all observational datasets.

That reality. Absence is significant in ALL observational datasets. All of them.

What went wrong?

There are two principal reasons why the models appear to be misrepresenting the tropical atmosphere so starkly. First, the concentration of water vapor in the tropical lower troposphere is already so great that there is little scope for additional greenhouse-gas forcing. Secondly, though the models assume that the concentration of water vapor will increase in the tropical mid-troposphere as the space occupied by the atmosphere warms, advection transports much of the additional water vapor poleward from the tropics at that altitude.

In other words, the models were designed to double-count, counting on a infinite scaling in a saturated environment, which, of course, is a serious error.

Serious error can be forgiven: contradicting the laws of thermodynamics is not something that can be forgiven:

With these assumptions, κ is shown to be less, and perhaps considerably less, than the value implicit in IPCC (2007). The method of finding κ shown in Eqn. (24), which yields a value very close to that of IPCC (2007), is such that progressively smaller forcing increments would deliver progressively larger temperature increases at all levels of the atmosphere, contrary to the laws of thermodynamics and to the Stefan-Boltzmann radiative-transfer equation (Eqn. 18), which mandate the opposite.

In other words, the models were designed in such a way that they could only function by contradicting the laws of thermodynamics. As inputs increased slightly, temperatures increased at a greater rate of increase: entropy reversed. That only occurs in living organisms and over a very moderate time period: entropy cannot be reversed otherwise.

In other words, the AGW climatologists did not do their physics homework.

What does this mean?

The IPCC's methodology relies unduly � indeed, almost exclusively � upon numerical analysis, even where the outputs of the models upon which it so heavily relies are manifestly and significantly at variance with theory or observation or both. Modeled projections such as those upon which the IPCC's entire case rests have long been proven impossible when applied to mathematically-chaotic objects, such as the climate, whose initial state can never be determined to a sufficient precision. For a similar reason, those of the IPCC's conclusions that are founded on probability distributions in the chaotic climate object are unsafe.

Not merely inaccurate: unsafe.

And I will close with this:

In short, we must get the science right, or we shall get the policy wrong.

Nothing more needs to be said: the policy to curb AGW is clearly wrong.

This is how science is done: see if you can poke holes in methodology, poke holes in the data, and poke holes in the logic that glues it all together.

Consider those holes poked.


Post-edit:

After perusing the edition of Physics and Society, where the article I just linked to was posted, I see that it is a scientific article, but not the position of the APS as such: in the interest of clarity, let that be established. There is another article in that same journal that discusses the physics behind warming, but that article is not a redress or rebuttal to the one I linked to, but should be seen as a useful article that lays out the equations.

But doesn't change the fundamental discussion presented here.

A "Scientific" Consensus...

Those enamored of global warming - who have spent some $50 bn of our tax monies world-wide to try to prove that it is indeed happening - have some explaining to do.

This is the problem.

But it doesn't stop there.

The link above connects to an article written by someone who spent 6 years working on Carbon Accounting, working out the detailed effects of the carbon chain backwards and forwards.

According to him - and you can't discount the man, he did the work - he started out on the precautionary principle, i.e. the evidence was enough for him to start working on identifying the effects.

His problem today?


Simple.

Very simple.

There are no effects.

No hot spot in the troposphere at 10km height. If CO2 were heating things up, that is where it would appear. There is zilch, none, nada: if there is no effect, there is no cause.

Models are that: models. They are what the modeler makes them: an honest modeler does the hard work: the statistical analysis of empirical data; the correlations that lead to causality tests; the reproduction of historical effects from the empirically derived causal relationships; the approximate construction of causal effects for the future; the back-testing; the testing with pseudo-noise to eliminate model bias. This is hard and at many times very, very tedious work.

There are the modelers who know their field so well and who work with inherently poor data to construct models that make the best out of a bad thing, models which can be extremely accurate, but are based on expert knowledge, rather than purely on empirical evidence.

Then the are the dishonest modelers, who construct models to prove a point. If you put deterministic equations into your models, you will always get the results you want. If you are really determined to get the results you have decided on, construct the model such that it makes no difference what data is put in: you end up with Mann's Hockey Stick model, which at this point should serve as the prime example of what not to do (in his model, you got very similar results simply by feeding in pink or white noise: the model always gave you similar results).

The global warming alarmists want to spend, literally, hundreds of billions of dollars and want to force radical changes in human behavior.


But it doesn't stop there.

What if you were to approach those who are making the claims of global disaster and ask to see their work? What if the answer was "Why should I make the data available to you, when your aim is to try and find something wrong with it?"

I'd call for that person to be stripped of their title as scientist. Hasn't happened, of course: he is too well protected, politically, for him to suffer any consequences.

Think that this doesn't happen? See this here. You have to scroll down a bit to see that quote.

It makes no difference if someone has worked 25 or 125 years on the subject: the scientific method is one of testing hypotheses to find if they work: scientists should aim to try and find something wrong with the work.

Unless, of course, "science" here is meant to be dogma. Dogma can't be challenged: it is a belief.

The Hockey Stick is dead, dead, dead, and anyone who worked on that should be drummed out of the academic world. They used methods that led to fundamentally the same results - within a 99% confidence realm - when fed with random numbers.

I guess I'm flogging a dead horse. There is significant evidence that the "science" of global warming is nothing less than a fraud, despite billions having been spent: if anything, spending that money has created a Global Warming Industry that claims consensus by ignoring scientific methods and by condoning outright fraud: if the same group of "scientists" peer-review each others' papers in the journals that they themselves run, how can dissent make its voice heard if ears are plugged?

And this is the basis on which governments, in massively misplaced trust, plan to spend hundreds of billions of your dollars.

Misperception and War...

One of the reasons that wars happen is misperceptions of intents and capabilities. The Korean War started because the North believed that the US had effectively abandoned South Korea because it forgot to list it in some protocols, and they misjudged the ability of the US to get fighting troops to the front in time. Misjudgments of intents and capabilities.

The same was true in Iraq's attack on Kuwait: a certain State Department employee delivered what she thought was a non-committal message, diplomatically stated, that problems between Iraq and Kuwait should be solved between these two countries; what Saddam Hussein understood was that the US didn't care about how those two resolved conflicts, do what you please. The Iraqis didn't believe that the US could get fighting troops to the front in time. Misjudgment of intents and capabilities.

Now, how does one end up misjudging, of having faulty perception?

By listening to what you want to hear, rather than finding out the truth.


Like listening to someone like Gore Vidal rant and rave about how the US has been turned into a fascist state by the Bush family.

Read what Vidal says:

We are no longer a country we are a framework for crooks to go in and steal money. Knowing that they'll never be caught and they'll be admired for it. Americans always take everybody on his own evaluation. You say I'm a state and they say "oh, yeah yeah yeah, he's a state, isn't that great." And you accuse the other people of your crimes before you commit them. It's an old trick which was known to Machiavelli who wrote about it in his handbook, the Prince.

What is fascinating is that this may well be what Tehran wants to see: a mirror image of themselves. If anything, this description fits Teheran, rather than Washington, but if it is an accurate reading of what Tehran wants to see, i.e. that the US government is nothing more than a mirror image of themselves, then war is probably inevitable.

What people like Gore Vidal don't realize - or perhaps they do, but simply couldn't be bothered to care - is that their statements read vastly different outside of the US than for their intended audience. In the US, I can see people nodding their head in ditto unison, following the party line on "How Horrible Things Are Under The Bushies", but in Tehran (and elsewhere) this changes and warps perceptions of the US from reality.

Such perceptions lead to miscalculations. Such fundamental mistakes lead to war.

But Vidal and similar sycophants don't really care that they are part of the problem...not of the solution.