Is Artificial Intelligence Possible?

May 4, 2014 in Science, Technology

illustration of a robotic cat playing with a computer mouse - by artymind.com

Robopuss – artymind.com

AI researchers have been busy building simple gadgets like clumsy robots and chess-playing computers for, what? 60 years or so? But where is the long-promised truly intelligent machine? Basically, nowhere in sight.

And there’s another confusing element to this: consciousness. People tend to conflate the two, but awareness is quite a different thing from intelligence: the ability to compute does not equate to the awareness of computing, or the experience of computing. My view is we may well be able to build semi-intelligent limited-area-of-expertise machines in the not-too-distant future (20-50 years, maybe), but truly autonomous, thinking, feeling, spiritual machines are not so likely. Indeed, they may require some new physics.

Strange and beautiful lady surrounded by wires - by artymind.com

Robotic Lady – artymind.com


By that I mean that at the moment, most of our AI technology is based upon the physics of electromagnetism, with a little quantum mechanics to make some of the circuitry actually work (e.g., Zener diodes and other such tunnelling devices). But does our brain use only these limited natural forces? There are others, and there are quantum properties that practical technology hasn’t even touched yet: quark, strangeness and charm to name but three. Gravitons could be involved but at the time of writing they haven’t even been detected, let alone put to practical use. Dark matter and dark energy could be involved, and more: there is a whole zoo of particles and forces out there that our technology doesn’t even touch yet, so there’s no knowing at this stage whether any of it would have an impact on how consciousness actually works.

Robot with a Heart - by artymind.com

Robot with a Heart – artymind.com

Clearly it has something to do with our brains, but what, exactly, isn’t at all clear. A complex machine mimicing the brain may not be conscious no matter how smart it is. The same goes for neural networks: just because they can copy some functions doesn’t make them conscious. Some philosophers, like Daniel Dennett, might argue that we aren’t really conscious either, although I’m not sure what sense that makes, since we clearly are something… or I am, anyway! I can’t speak for you, of course, but I at a minimum have an illusion of being aware of what I’m doing and of being autonomous in some ill-defined way.

Here are two sets of videos about the whole idea – for, and against. They have their own arguments, different from mine (above), so see what you think! The first set is by Rob Ager, who thinks AI is not going to happen any time soon.

Rob Ager’s Androids & Artificial Intelligence: A Modern Myth [Playlist, 1h 21m]

Rob Ager’s video channel can be found on YouTube.

Next we have a film suggesting, to the contrary, that we might get some pretty capable machines, very soon indeed.

In Its Image [Playlist, 30m]

The website for the above project is initsimage.org.

So, what do you think? Intelligent machines? Conscious machines? If not, why not, and if so, how quickly?

Independent Media?

October 12, 2013 in Conspiracy

Daily Mirror Headline: Gassing Syrian Children

Daily Mirror Headline: Gassing Syrian Children


Propaganda and Syria

A few weeks ago, it became clear that the governments of the West had decided they were going to attack Syria after years of delay. Unfortunately, the Western public were not keen on the idea, and were particularly sceptical of their governments after the lies that had been told in order to start the Iraq and Afghanistan wars. Later, the governments changed their minds again, and decided that a political ‘solution’ was a better bet.

What interests me about this is what happened in the so-called “independent” media – here in the UK, the BBC and Channel 4 as I watch them the most, although the same was going on on Sky and the other channels too (I watched them too occasionally).

When William Hague, the Foreign Secretary, announced that Syria had suddenly gone too far with its (probable) use of chemical weapons, and (coincidentally? I think not) President Obama announced the same thing at much the same time in the USA, it was obvious that the general public were dead against any more foreign interventions.

So what happened? Almost immediately, we started seeing stories in the “news” programmes such as Channel 4 News, Sky News, and on the BBC, at least, about poor Syrian child refugees suffering and homeless, running from bombs and planes. Day after day we had more and more reports about the poor Syrian children, and it was both implied and occasionally clearly stated that they would continue to suffer if we didn’t intervene to prevent it.

The Western public, for a change, didn’t instantly change their minds in response to the propaganda – not because they’re suddenly developing a moral spine or anything, I think, but partly because the Western governments are becoming less and less credible generally, and partly because the propaganda stopped suddenly when the Russians came forward with a reasonable political compromise: Syria would join the UN convention on chemical weapons.

And what happened? The stories about the poor suffering Syrian children all but instantly vanished from our screens.

Independent media? I don’t think so.

And the Syrian children? Apparently nobody cares about them any more.

Open House Day London

September 21, 2013 in Opinion

Or, How to Waste Your Time

Each year, London boasts ‘Open House Day’ in which various public and private buildings open their doors for the general public to go in and have a look around. The ‘Day’ is in fact normally two or three days long, after the sunshine and the peak of the tourist season has finished for the year, in September.

The website sells a brochure (yes, you have to pay: never mind that we pay taxes here, and the extortionate London rents, and that many of the buildings are publicly owned: this is still Rip-Off Britain) detailing the 800 or so places you can get into, ranging from St Paul’s Cathedral, No. 10 Downing Street, the Gherkin (Tower 42), to individual people’s homes of architectural interest.

The Dome of St Paul's Cathedral, London

The Dome of St Paul’s Cathedral, London

So, we thought we’d start out today with a visit to St Paul’s Cathedral and maybe visit one or two other places nearby afterwards as well. While it is possible to go any day, on a normal day you have to pay to enter the house of God (except, presumably, to worship, though I expect they still hand round the collection plate so the priest can buy new socks or a Jacuzzi and save the fabulously wealthy Church of England a few pennies). The prices are currently lower than I remember them, but anything over £5 I think of as exploitative and won’t pay. Especially for a publicly subsidized building which is in part supported by my taxes without my consent anyway.

We headed out early but arrived after 10 am because of ‘scheduled engineering works’ on the tube which we’d forgotten about, and saw a long queue of people outside the cathedral. My wife wanted to join the queue right away but I wanted to go around the front of the cathedral first to see what the queue was for… Big mistake. I saw that the queue was called ‘Open House Day Registration,’ whatever that was all about, and so we went back to join it. By now another dozen or so people had joined it in front of us.

So… we queued for nearly an hour, and with just three people left in the queue in front of us, they closed the registrations for the day. Even though St Paul’s is huge, they won’t just let people in to look around: they were letting people in in groups of 15, to be shepherded around on a guided tour (which we didn’t even want), every 15 minutes.

Of course, we could have let them gouge us for the normal entrance fee, which is probably the whole point of this rationing system, but as I’ve mentioned, I find it exploitative and won’t cooperate with that.

I’m sure the poor staff running the system were trying to do their honest best in their bumbling British way, but really this is no way to run a busy operation. They may argue that it is necessary to devise some system to control the numbers, but I don’t think this system is the right one. A simple queue, with, say, 50 people being let in every 15 minutes, would surely work adequately. There is, after all, no rationing for the paying visitors (except by varying the price from time-to-time). There seems to me to be no need to pre-register for a tour which I don’t want anyway, however nice and interesting it may be. Why not have a simple queue to get in, with an optional tour for an extra… £5? People can be held in the queue or allowed in depending simply on how busy it is inside. Plus, inside, they can sell us some holy coffee and Jesus cheesecake and make some cash on the side for the sake of it anyway. After hanging around outside in the freezing Autumn weather, I would have been – well, not exactly happy – but willing, to pay modest prices for some snacks and souvenirs. Maybe – a big bonus for them – I might even have been converted to their stupid religion! Who knows?

Instead, after being turned away we went to the nearby Bank of England. Unfortunately there was an even longer queue here – easily an hour long – so, cold, annoyed and getting hungry, we went home.

Film Review: Elysium

August 25, 2013 in Film

Elysium Space Station

Elysium Space Station

Elysium is a sci-fi action adventure movie starring Matt Damon as Max, our hero, Jodie Foster as Delacourt, evil baddie, and Sharlto Copley (of District 9 – one of the best sci-fi movies ever in my opinion) as Kruger, psychopathic hit man of the baddies. It is set about 150 years in the future when the Earth is an over-exploited, over-populated, ruined slum, and the wealthy ruling elite have hied themselves off to a vast luxury space habitat called ‘Elysium’ – named after the ancient Greek conception of heaven, reserved for gods and heroes.

Inside Elysium

Inside Elysium

And that, in a nutshell, sums up the message of this movie. If we see the slum-ridden Earth as the over-exploited, crime-ridden, poisoned shitholes of today such as Mexico and South Africa (Neill Blomkamp is director also of District 9), and Elysium as, say, the wealthy USA – or even better, Monaco, reserved for the wealthy and corrupt super-rich elite who (one presumes) see themselves as gods and heroes (or perhaps we do), then our metaphor is more or less complete. The poor people risking their lives to fly to Elysium are like the poor Mexicans taking huge risks with their lives, paying gangsters to smuggle them across the US border.
Jodie Foster as Delacourt in Elysium

Christine Lagarde

Christine Lagarde

Jodie Foster ;)

The people of the slums speak Spanish much of the time, which can be no accident. The elite are the Hamptonite politicians of the USA and other connected super-rich elites. Jodie Foster is made up to look remarkably like scandal suspect and French politician Christine Lagarde, and even speaks the historic language of the elite, French, but only to her friends and equals: to workers, even on Elysium, it is English all the way. This too, can be no accident: the use of French is entirely unnecessary otherwise.

Sharlto Copley as Kruger in Elysium

Sharlto Copley as Kruger in Elysium

So what is this metaphor saying? Well, maybe it’s becoming a bit of a cliche, but obviously it is reminding us once again that we, the ordinary people, are being ruled by a corrupt and evil elite. It is reminding us, with the frequent use of violence in the film (such as police robots breaking Matt Damon’s arm while they search his bag), and with the total neglect of the well-being of the poor population of Earth, that our great and good leaders rule us by force, and not by the ‘consent’ that they so often claim. Jean-Jacques Rousseau’s ‘Social Contract’ is a moral fraud because one cannot be party to contract that one has neither seen nor signed nor has no possibility of cancelling nor re-negotiating. The movie is saying that we the people are simply being farmed like slaves to keep the elite in their Summer homes and expensive suits. Usually in movies the bad guys are corporate bosses, but here the finger is perhaps pointing more accurately at the top aristocrats of our societies, and at their pet politicians too.

Elysium Movie Poster Matt Damon

Elysium Movie Poster Matt Damon

Whether and to what degree you accept that message, is of course up to you, but there it is. Social philosophers such as Noam Chomsky and Stefan Molyneux might be of interest to you if you want to investigate these matters more.

Does the movie work? Well, I certainly enjoyed it, I enjoyed the acting. Sharlto Copley, as seems to be usual with him, was particularly good, and Matt Damon and Jodie Foster were keeping to their consistently good standards. The special effects were very nice – as a sci-fi fan, I certainly loved the design and look of the space station and hope that many of these will be built, and soon.

 
 

Doctor Who Smilers

Doctor Who Smilers

Elysium Parole Officer

Elysium Parole Officer

Max’s parole officer was a rather strange character – an ancient-looking dummy. And didn’t I see such a character, a ‘Smiler,’ in an episode of Dr Who a couple of years back? The Smilers of Dr Who had a similar role to the Parole Officer of Elysium: they managed the punishment of miscreants such as Max.

Elysium Chemtrail Gun

Elysium Chemrail Gun

I also wondered why one of the guns Max uses was labelled ‘Chemrail.’ Does Neill Blomkamp believe the chemtrail conspiracy theories about us being quietly poisoned from the skies? And what is the meaning of the four Cyrillic letters ‘Dest’ on the back of Max’s exoskeleton headset (see the poster showing the back of his head)? A phonetic reference to District 9 perhaps?

Elysium Poster Matt Damon 02

Elysium Poster Matt Damon 02

There are of course, many implausibilities, or inconsistencies, in the story. It seems nearly impossible not to have a blockbuster without them. In this case, I didn’t find them fatal to my enjoyment of the movie, but they are worth pointing out. The worst, for me, were (spoilers ahead) to do with the computer data at the centre of the plot. After receiving a lethal dose of radiation, Max has to get to Elysium or die, so he goes to his gangland people-smuggling ‘friend’ Spider (Wagner Moura) and gets the job of using some gadget to steal passwords and other such data from the brain of one of the elite and boss of the factory where he got his overdose, John Carlyle (William Fichter). This is OK, as we are shown that Carlyle is a scumbag like the rest of the elite and cares nothing for his workers. As it happens, Carlyle has been secretly commissioned by Delacourt to write a program to reboot the software of Elysium so she can stage a coup, designating herself as President. Carlyle quicly writes the program, encrypts it and loads it into his brain along with a defence mechanism: downloading it from his brain without inputting the correct codes will be fatal for him.

Elysium Billionaire Homes

Elysium Billionaire Homes

Or so it seems. Because Max downloads it without killing him (a stray bullet does that instead). But the data is scrambled and Damon can’t tell what it is. Well, maybe that’s the encryption? But no, because when he takes it to Spider, he downloads it from Max’s brain (without killing him) and can read it with no problem, and can immediately see that it is a reboot program for Elysium. Hmm. Later, at the end of the film, downloading it into Elysium’s computer system is indeed fatal for Max. Well, it seems to me that’s not much of a defence mechanism if this encrypted code can be read by anybody anyway. Spider could have rewritten it himself in 5 minutes and saved Max the trouble of dying. Mind you, how Max managed to fight and survive multiple beatings and stabbings from Kruger while suffering from fatal radiation poisoning is pretty miraculous anyway, despite his exo-skeleton fighting frame.

Elysium Slums

Elysium Slums

Another issue is the happy ending (apart from Max’s death: he will probably be made a saint in due course). Spider sets the reboot so that everybody on Earth becomes a legal citizen of Elysium and so entitled to free medical healthcare – and the medical shuttles immediately begin zooming down to Earth to heal the sick. It made me feel good, but it is of course over-Utopian, and some would say, Socialist (shock horror). Personally, I don’t think the Socialist/Capitalist argument is to the point anyway: they are both just methods various elites use to control the rest of us and are equally propped up by the non-consensual use of force. The point is to stop them using force. In the film, Max and Spider’s methods could arguably be seen as a form of self defence, and so moral. But arguably it still amounts to a further use of force, and it is therefore inevitable that a new elite, with Spider in charge, will soon be telling people what to do: despite his good intentions, it’s all he knows. So despite what the film tries to tell us, the problems of an immoral society are unlikely to be solved at all if we use the elite’s own methods to get rid of them. On the other hand, maybe it worked: at the end a robot refuses to arrest Spider, saying, “I cannot arrest this citizen of Elysium.” As everybody is now a citizen, the elite will have to resort to using armed humans to bully their former slaves. Not that that would take them long, of course. Room for a sequel here?

None of these objections to the movie are that serious, however. As blockbusters go, this one is reasonably consistent, has a clear message, and states it plainly enough that most of the audience will be able to spot it if they spend a few seconds thinking about it as cynically as I did. Director Neill Blomkamp might perhaps consider hiding his messages a little more deeply, as Stanley Kubrick apparently felt necessary, in case the elite get too antsy with him. Or, maybe, times are different now and the elite are standing on shaky ground. Who knows? So: what’s the overall score? I give this movie a pretty solid 8 out of 10. Entertaining and well worth watching, and thinking about.

Make Money Part 6: The Stock Market

August 4, 2013 in Making Money

Investment ‘Advice’

I’ll probably be much criticized for giving investment “advice” here that doesn’t correspond exactly to the conventional guidance that you can read elsewhere, but the fact is that the usual advice you will find assumes you have a decent amount of money to invest, like say, £5,000 or more. But what if you only have, say, £200, or maybe even a tiny amounts, like £60? What then? Can you still make money on the stock market? And lose it?

Well, of course you can! I’ll show you how in this article. But note strongly: this article does not consist of any sort of official investment advice: it is purely my opinion. I am not a licensed trader or financial adviser of any sort. I am not out to take money off you for myself, as they are. I am not an officially recognized financial ‘expert’. I take care of my own money, badly or well, as the case may be, and am responsible for my own outcomes, as are you with yours.

The Biggest Dangers When Investing

I take it I am not talking to children who need their hands holding with patronizing warnings about the dangers of unskilled investing, but still a few words need to be said that, for the most part, you won’t find elsewhere.

Wall St Lays An Egg

Headline from Variety, October 30th, 1929

Many people consider stock market and other such investments to be a form of gambling and so steer well clear of it. While there is a significant germ of truth in that idea, the fear of it may also prevent people from making any real money: they stick with a tiny percentage of interest in a bank somewhere and hope for the best, forgetting that in the long run, the stock market returns an average of 8% a year – and you can do much better than that. Plus, people’s pensions and life plans are invested in the stock market anyway, whether they like it or not. Why? Because that’s where the real money comes from in our screwy capitalist system. The stock market represents the fruits of other people’s labours, ultimately. It represents the net wealth of almost our entire business system. When the system is getting richer, or bigger, the stock market tends to go up. That’s basically why it is so much higher now than it was, say, two centuries ago. Business has expanded and speeded up enormously since then.

It is also worth adding that there is no way not to gamble with your money. If you stuff it under a mattress in your house, you are gambling that it won’t be stolen, or lost in a fire. If you leave it in a bank, you are gambling that it won’t be embezzled, or the bank fail. If you are relying on government promises to protect your savings, you are gambling that when a big crisis hits, the government will keep its word (historically, governments do not keep their word in a crisis. For a recent example consider that in the EU, Cyprus investors have lost 47% of their savings despite government guarantees). In fact, I wouldn’t trust a government promise as far as I can spit. The historical evidence of their dishonesty, stupidity and spinelessness is overwhelming.

Of course, the stock market is probably more volatile than simpler kinds of investments. The market can crash at any time; individual companies, even gigantic ones, can unexpectedly collapse overnight. It happens all the time. Recent examples of company failures from Britain and the USA include Enron, RBS, City Bank, CF Bancorp, Jessops, Comet, JJB Sports, Woolworths, Allied Carpets… the list goes on, and on. These were big household names in their day, but now they are gone, along with most if not all of the money invested in them. The key is not to avoid gambling – you cannot – the key is to gamble intelligently, and as safely as you can.

Diversify!

Certainly if you have £5,000 or more, you can afford to diversify your investments: with such amounts, you should never have all your money in one company’s shares – always try and split it between different companies, in case one crashes out unexpectedly. This happens all the time in the stock market, so you need to accept the reality of it and plan accordingly. With £5,000 you might well have £1,000 in each of 5 different companies in different market sectors, for example.

If that is all of your money though, you are still taking too many chances.

Rule No. 1 of Stock Market Investment

Never invest money you cannot afford to lose.

That is a simple rule, isn’t it? Take it to heart. If you will suffer material hardship now or in the future from losing some money, you must not take undue risks with it. Preserve your money first, invest second.

To do this, you must diversify both inside and outside the stock market (and other markets like bond markets, government savings schemes, and so on). What is strongly recommended, by myself and others, is when you can, to have a cash reserve set aside. These days, you have to be relatively well-off to have even a months’ living expenses set aside, but you should be aiming at having at least 3 months’ living expenses set aside eventually. Start from where you are, of course, but keep your eye on that goal. If you have no cash reserves, you will be forced to sell your investments every time some unexpected expense crops up (sickness, car problems, tax bills, and so on), and that will cost you money. Or, you might be forced into debt.

Most people don’t track their ‘emergency’ expenditure, but if you do, you will find that little ‘emergencies’ crop up just about every month. Keep them covered with easily accessible cash! It may be frustrating to be not investing this money, but believe me, it is better than sliding further and further into debt with each unexpected expense that crops up. I would further add that you should try to avoid taking out a loan to cover emergencies. You may not be able to stick with that, but at least, don’t go to expensive specialist loan companies like the payday lenders, credit card companies and other loan sharks that have cropped up like a rash before and after the latest recession, or you risk being mired in debt for the rest of your life. Go somewhere cheap like relatives, friends, and credit unions if you can join any near you.

Most advisors recommend not investing until you have your emergency fund in place, but I don’t go for that myself. If you only have a tiny amount of money you can afford to lose (£60 say, which was all I had), then I personally would prefer to get started. As bits of money come in, keep some in simple savings to build up the reserve, and invest something when you can – maybe every couple of months. Another reason to have a bit of cash handy is to use in case some good investment opportunity appears. As I’ll mention later, it is pretty-much true in the stock market (and to some extent elsewhere), that:

Rule No. 2 of Stock Market Investment

The opportunity of a lifetime comes along every couple of weeks.

So don’t worry if you miss one, but have some cash available to grab another when you can.

If you are in debt and paying interest, pay down the debt after saving some cash, but before investing. Interest rates are so high that beating that with investment profits, while possible, is very risky. If you are not paying interest, still try and get rid of the debts, but maybe save and invest too, if your creditors don’t mind (or aren’t aware of it). If you are in trouble with debts, read my debt management page and download the free e-book.

To summarize the above, your priorities should probably be like this, in this order:

  1. Get a cash reserve built up as rapidly as you can (1 month’s total living expenses, or more – ultimately at least 3 months’, including rent/housing costs);
  2. Keep your cash reserve but use any further surpluses to pay down interest-bearing debts and debts to friends and relatives;
  3. Invest!
  4. Pay down non-interest-bearing debts.

A minimally diversified portfolio may include a selection of each of the following, I suggest.

  • Cash in an immediate access savings account;
  • Cash in some tax-savings scheme like an ISA (in the UK), etc;
  • Shares in a number of companies in different sectors;
  • Government bonds (in the US, US Savings Bonds);
  • Silver coins (if the currency collapses, use these to buy food);
  • Gold coins (if everything collapses, use these to store/hide wealth for the recovery, or for your escape).

You might think the last one is a little drastic, but think about this: In the 20th century, only 5 countries in the whole world managed to avoid violent change of government from war, revolution or other violence. The economies of all countries went into deep crisis several times over this period as well. The world is not a safe place. Invest accordingly. And, I would suggest, ignore any laws that make it illegal to own gold and silver. Theft is not a morally acceptable law. But keep your mouth shut, too.

The above minimal diversification is not counting pension schemes (401K in the USA). Many people can’t afford these at the moment, or are too old to even think about beginning, so if that’s you, well, all you can do is shrug your shoulders and try to make your own pension from your investments. If you can afford a pension scheme and are young enough for it to be worthwhile, by all means go for it if you think the brokers can invest better than you, and if you think they won’t rip you off for investment fees. Or anyway, as a bit of insurance against your own efforts which might not, after all, turn out so well. That is the essence of diversification. If you can’t afford all this, then for now, at an absolute minimum, get some cash set aside for emergencies and stick a tiny amount in one stock. You have to start somewhere, after all.

Later, when you have some decent amounts of money available to risk losing, you can look at investing in:

  • real estate ownership and buy-to-let;
  • small businesses.

But for now, let’s not get ahead of ourselves. You have, say £60 to invest. What to do? Well first, you have to make yourself aware of this:

Rule No. 3 of Stock Market Investing

If your decisions are influenced by fear or greed, they are probably wrong.

We’ve all seen it in the news. The stock market crashes and everybody is selling out like crazy, panicking. Their behaviour is driven by fear. Are they wrong to sell out in a crash? Well… probably. While each person’s position will be different, in general it is a mistake to panic. Sometimes on the other hand, it is right to cut your losses and get out. Sometimes, it is a mistake because in a year or two the market will recover anyway. Mostly the market recovers from a crash in a couple of years. If your strategy is Buy & Hold, there’s no reason to sell. Then again, in 1929 it took about 25 years to recover. If we’re heading into a depression now, it is anybody’s guess how long a recovery might take. You never know. Mostly though, selling in a panic is a mistake.

Then people make another mistake. They grit their teeth and hang on through the panic, hoping the market will turn around in a week or two. The market turns up… then it turns down again… then up… then down… and so on: it is a full-on bear market (a market that is trending downwards). It never moves in a straight line, but overall the direction is downwards. Still they hang on, and hang on… and eventually they can take it no longer and sell out. Right at the bottom of the market. Now that all the weak holders have been squeezed out, the next bull market begins (a market that is trending upwards) but these ex-investors have lost most of their money and have to start from scratch. Most such investors just give up. What they should have done is simply stay in the market. Don’t sell. Wait a couple of years, or maybe five, for the recovery. In the long run, despite the disasters along the way, the market has always moved upwards. As long as civilization itself doesn’t collapse, and as long as business keeps improving methods and profitability, and as long as capitalism is the preferred system, that trend will continue. However long you have to wait, you can wait. If civilization does collapse, well, you’ll have other worries. Hide or dig out your gold coins, as appropriate.

In general, whatever the herd is doing, especially during the heady greedy days at the top of a boom or in the fearful days of a crisis, will be wrong. If what you’re contemplating is making you sweat, either with fear or greed, don’t do it: the odds are, it’s a mistake.

So, to minimize the influence of fear and greed, you must be objective. You must:

    a) measure your profits and losses accurately (use something like this Investment spreadsheet of mine in Excel 2010 or Open Document format);
    b) decide how you will react to market highs and emergency collapses in advance;
    c) when the SHTF, grit your teeth and stick to your plan;
    d) actively think about the results and make a better plan next time;
    e) whenever you find you’re fearful or hostile towards hearing the truth – listen carefully!

The spreadsheet is my attempt to keep a basic record of gains and losses – you might prefer to devise your own. I made this after I realized that online methods were not showing me my losses properly. At the bottom is a tab called ‘Example’ where you can see a sample filled in – purchases on the left, sales on the right, net totals calculated at the top right. The cells have formulas in them to do the calculations so you only fill in the dates, names, prices and costs and leave the rest up to the spreadsheet itself. You don’t have to buy and sell on the same row: they are organized by date not by stock name. If you’re buying, leave the selling columns empty, and vice-versa. Note when buying and selling to get the currency right. $1 is entered as 1, but 15c is entered as 0.15, and so on. And if you buy some as $, some £, some € then you’ll need to convert them all to the same format. Ideally your stock trading company will let you view statements in your own currency.

Strategy, or Why To Invest in a Particular Way

There are probably as many strategies as there are people and companies, but I personally like the three listed below. But first:

Rule No. 4 of Stock Market Investing

There is no perfect strategy.

If there were a perfect stock market strategy, everyone would use it and it would cease to work. When you make money on the stock market, someone has to pay you that money. Your aim, unfortunately, is to take money from people who are less careful, less professional, or less lucky than you are. While there is real growth in the markets too, you can’t get away from the basic way the capitalist system works: it transfers money from the financially unwashed to the financially savvy; and from the poor to the rich. Capitalism also penalises the stupid, and fast. You must make sure, especially when you are poor and ignorant, that you take measures to ensure you stay on the right side of that equation as much as possible.

You do that by staying very conscious of what you are doing, and why, and what your plans are, exactly. And by not being swayed by greed or fear, because your plans allow for them too. Plus, make sure you listen carefully to news you don’t want to hear. You will not always be right.

Is it immoral to take money from other people in the stock market? Well, it is a bit of a mixed bag. You can’t do much good in this world without money, for a start. You can do a little, but with money, you can do more (ask Bill Gates). Secondly, other investors are in the market knowingly too, like you. Even pension fund holders. The risks they take are up to them. Thirdly, the system allows business to get much-needed capital from shareholders, allowing those businesses to invest in greater profitability at relatively low risk (for them). Without the stock market, we’d still be living in a basically agrarian 17th Century society, with hardly any decent medicines, labour-saving gadgets, communications technologies or much else besides. So, yes, the system isn’t perfect, but it does work… kind of. You can’t fix the system, but you can put yourself on the receiving end of some of its benefits, if you’re careful, and you can do some good with that money if you want to, once you have some of it.

The same rationale applies to investing in questionable companies like, say, tobacco companies. If people insist on setting fire to their money, well, doesn’t it make sense that they give some of it to you first? The addiction is terrible, but you’re not going to cure it by doing nothing. It is up to them, and society at large, to find ways out of their problems. It is up to you to sort your own life out, and taking money from people who are wasting it is as good a way as any to get started, it seems to me.

Having said that, I’m uncomfortable with investing in weapons companies, where the aim, after all, is directly to kill people. These products are sold to warmongering politicians who shouldn’t be allowed to run our countries or to start wars, but we routinely let them do so. Ultimately the same logic applies but personally I don’t accept that it should be applied to the point of risking the destruction of my life, civilization and even the world itself at the hands of psychopathic loons, thank you very much.

Strategy No. 1: Buy & Hold

Aim: Dividend Income

The Strategy: Buy shares in good solid companies that you believe are going to be around for the long haul. If you want dividend income, pick companies that pay good dividends. Don’t sell them unless the situation changes significantly.

Many consider that the Buy & Hold strategy would probably have been the most profitable strategy for the past 100 years and more, if you had picked good companies in the first place, of course.

For this strategy, you are looking for companies that are providing essentials that people are going to need or be addicted to for a long time to come: food, washing materials, fuel, utilities, caffeine, expensive credit, and so on. These companies are often boring household names that you know from your own high street, so you can see how well they’re run by how well they run their businesses in your area, and how many customers seem to like or need them.

If you find a shop on your street that is a big name, but you don’t like shopping there, or they don’t seem to have much that you need, then you know that their days are probably numbered. Sure, they may hang on for another decade or so, but in the end, if they don’t refocus their business, they are doomed, and no good for this strategy. Woolworths in the UK was a good example of such a company. Their demise was obvious from more than a decade prior to their eventual closure.

Sometimes these companies will be little-known to the general public, but if you look on the backs of the plastic bottles of liquid detergents and cleaning fluids and other essentials that you’ve been using for years (for example), you will see who they are. Similarly if you work in some particular field of business and know of big suppliers of essentials for manufacture or distribution, such companies may be right for this strategy.

You can go deeper into this strategy and find ways of assessing companies based on ‘fundamentals’ like their profitability, dividend yield and so on, but at first you can start simply with big names that you know, and that you can see are doing well, and where people are going to continue to need their products for a long time to come.

What you get out of this strategy is two things:

Dividends – the companies pay a portion of their profits to shareholders. Ideally you will reinvest this automatically to get the benefits of compound interest over time.
Growth in their share price over time – if this happens it is a bonus. Over the years it is likely to happen even so, as the economy is based on the (seemingly crazy) idea of perpetual growth. As long as this works, you can profit when you eventually sell the shares.
Shares you hold count as assets and can be used as security for business loans, for example – so rather than selling them, you might borrow against them at a lowish interest rate to set up a business. That is a risky strategy for when you are a wealthier, more advanced investor, of course.

Although Buy & Hold is good, personally, I would still be tempted to sell if I could figure out where the bull market tops are, and buy back in at the bottom of bear markets. Of course, timing the markets as accurately as that is impossible, but when you can see that prices are generally insanely high, everybody is euphoric and promoting stupid investment schemes or the latest hot investment craze and maybe you are beginning to lose sleep over your portfolio, it might be sensible to examine your holdings and convert at least some of it into cash for a while, and see how it goes. The late investment guru Bob Beckman used to say that whenever you lose sleep over your portfolio, sell 10% of it. You’ll probably be out of the market before it finally falls over, but if not, at least some of your cash may be protected.

I have since found that my suspicions about Buy & Hold are actually sensible. There is good evidence that ignoring the stock prices or values is nonsense. It may be that Buy & Hold is a bad strategy. One author suggests an alternative, Value-Informed Indexing. It is similar to Buy & Hold except you re-jig your holdings about once every 10 years – I haven’t read the details yet but presumably you ditch the ones that are overpriced and get some cheap alternatives in. You might want to read up on it, but in terms of getting long-term dividend income, Buy & Hold seems to me to be a good place to start – but with underpriced shares where you can find them. Share valuation is measured by the P/E ratio (Price to Earnings ratio). 0-17 is considered cheap to fair, above that and the shares start to look too pricey (according to this theory).

Strategy No. 2: Opportunity Picking

Aim: Short-term profit.

The Strategy: Look for big-name companies going through a temporary severe crisis, and buy in while their shares are cheap. Sell when they recover to their pre-crisis values (or some other target).

Because people panic when they hear bad news, they sell shares irrationally. When a big company like BP goes and spills a load of oil in the Gulf of Mexico and gets sued by the US government, or when Thomas Cook gets into too much debt due to overexpansion, and it is all over the mass-media, people sell those shares.

But you know that in most (but not all) cases, those companies are going to recover. They are big, solid companies and they are not going anywhere. Thomas Cook, for example, fell from a price of 200p per share in 2011 to a low of just 10p later that year. Now, they are back to 161p and still rising. Now if you had bought say, £100 at 10p, that would be 1,000 shares. Now at 161p each, your £100 would be worth £1,610 (less dealing charges of about £10). Where else will you make that kind of money for nothing?

When BP spilled a load of oil in the Gulf of Mexico in the Deepwater Horizon disaster (April 2010), their shares fell from about 650p to a low of about 305p, but the price was almost up to 500p by the end of the year. Currently they are around 470p. £100 invested at the low would now be worth about £154. Not so great, but not to be sniffed at, either. You won’t get 54% interest in any savings account around here, let’s face it. And since BP came down from 650p in the first place, maybe there’s still some mileage in those shares even now.

Sometimes, of course, it goes horribly wrong. The company will actually fail. In this case, you’ve lost your £100 or so. But of course, you’re not investing anything you cannot afford to lose, are you? Because sometimes, you will lose, and your nerve will be tested.

Strategy No. 3: Channelling

Aim: Repeated short-term profits.

The Strategy: Some shares drift up and down by a few percentage points pretty regularly: every month or two, or a couple of times a year, maybe, for a few years if you’re lucky. Buy low, sell high. Rinse and repeat.

If you are only able to invest small amounts, remember when using this strategy in particular to allow for your dealing costs. If you are charged £10 on each buy and sell, for example, and you invest £100, then remember that you have to gain £20 (20%) just to break even. Any stock that grows by less than this will lose you money. This is true of the other strategies too: the bigger the sum you invest, the less growth you have to achieve before you are showing a profit.

Finding stocks that ‘channel’ – that go up and down pretty regularly between more-or-less the same highs and lows – can be a bit difficult and tiresome. There are sites and charting software online that purport to help, but I’ve not found them much use. The only real method is to trawl through the thousands of stocks yourself, looking at the charts, and see if you can spot any. Low-priced, so-called ‘penny shares’ that have prices below £1 or $1, seem to be the best bet, in general. Fewer people are interested in them and the news affects them less (unless it concerns them or their field of operations directly).

Of course, you probably shouldn’t expect to be able buy exactly at the low and sell exactly at the high, but you can try and get in near there. Of course, expect that as soon as you start investing in them, the pattern will change a bit: that’s life. But when it works, with simple patience, it is free, regular money. And what’s wrong with that?

This strategy cries out for the more advanced technique of using put options as well, so you can profit on the price falls too, but for beginners, I would forget all that and just stick to the simpler stuff. That is quite tough enough to get right.

There are many, many other strategies: The Dogs of the Dow or Dogs of the Footsie is one that comes to mind. You might think up your own, after getting a bit of experience perhaps.

How to Get Started: Get an Online Account

Really, that’s it. Find an online trading site that will allow you to trade in the kinds of shares and markets you are looking at, send them any necessary documentation, fund the account and get started. Over time, you will learn the strengths and weaknesses of this particular site and after a while you might move to one more suited to your needs. But first, get started!

Stop Loss

If your trading system allows you, and it suits your strategy, set stop-losses for your stocks. Stop-losses are prices the computer will try to sell at automatically. So, if a stock you have purchased is sliding slowly but inexorably downwards, you have set an objective minimum at which you don’t want to hang on to it any more. In a crash, a stop-loss will sell too, and not necessarily right on time, and maybe way below the price you set, many hours later when the trading system has caught up with the backlog of trades. In a crash, a stop-loss might, or might not, suit your plans, depending on whether you plan to sell out in a crash, as I have discussed earlier.

A stop-loss can also be used to lock in gains. As a stock rises, you can set a stop-loss some way below the peak so if it slides down but is still above the price you purchased it at, you sell out but still have some gains locked in.

A Final Word About The Media

Let other people take the media seriously. You only listen to it to see what stories might be scaring people or encouraging their greed, and which stocks that will affect. Even the financial press, for the most part, print rubbish most of the time. Why? Because they have pages to fill, so they have to print something. That results in stories full of speculation, or back-fitting explanations to the facts (the market/your favourite share went up/down yesterday because of X). Remember that in science and when practising rigorous thinking, what you have to do is predict what will happen based on your best theory, not explain it afterwards. If your prediction is right, your theory may be right. If your prediction is wrong, your theory is wrong. Back-fitting the explanation to the facts is sheer balderdash almost all the time.

Dilbert Warns on Stock Market Investing

Dilbert Warns on Stock Market Investing

Honestly, about the only paper I can think of that tells the truth most of the time is the Financial Times of London and there’s far too much information in there for anyone to realistically absorb. The rest really are largely full of hot air designed simply to fill space and sell advertising. They are good, though, for considering what will be influencing other people. This includes papers like The Wall Street Journal, and Barron’s weekly magazine. My personal view is that there is little need to read any of these papers closely. By all means, keep an eye on them, but if anything important happens that is relevant to you, you’ll hear about it anyway. The rest is just meaningless random noise about this or that crisis, argument, government bullshit, booming markets, criminal scandals and other such nonsense. They, or the advertisers, just want your money. If you watch the papers you will see how the mood varies up and down from one day or week to the next with no rhyme or reason; they are just messing with your brain. Don’t take those idiots seriously, please.

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