The stock market dives. Woe! Woe! Woe!

The news this week appears to be focused on the stock markets around the world seemingly going into a dive. One of the things that puzzles me is why this is regarded as such a disaster. I accept that if some investor actually badly needs money and has to sell, this is not good news, but apart from that, and apart from speculators getting it wrong (and here I have little sympathy) what is the problem? If the number of people employed stays the same, the amount produced stays the same, the wages and salaries stay the same, what is important stays the same. What matters in a business is cash flow. If raw materials are available, if costs are stable, if interest rates are low, and if sales are constant, variations in stock prices seem to me to be irrelevant.

Maybe we are all a bunch of wailers! Recall that as oil prices kept rising, there was a general wailing that energy costs would stifle the market. Well, now oil prices seem to be as low as ever, thanks to fracking, and there is general wailing, seemingly because the oil merchants are no longer able to extort such high profits from everyone. (Although, from the price of petrol locally, I rather fancy oil companies are doing rather well out of this too. Prices go up very quickly, and down rather slowly.) It seems to me quite probable that if oil prices stayed the same, there would also be general wailing.

In the alleged “bad news” column, growth in China is falling. The most pessimistic prediction I have seen is that it will fall to (horrors) 5 % this year. So, there may be problems. Thus the Australian mining sector will suffer because construction in China is slowing to a more sustainable level. So? Who else is growing at 5%? If growth were universally zero, would not things be the same as last year? Was last year that bad?

So the European economies are falling backwards. The Greek financial mess is at least partly the fault of the rest of Europe. The huge number of asylum-seekers from the muslim regions also hardly helps, but surely that is a problem Europe has to face. The sanctions against Russia is self-imposed. Cutting off your biggest markets carries a price, and politicians should have made preparations for those consequences, but they did not. The inability to make good predictions and then act on them was also a failure. Consider the dairy industry. A year or so ago there were very high prices. However, the sanctions against Russia removed one of the bigger consumers, and worse, only too many farmers thought the dairy prices were so high they had to get into it. A major reduction in the market size, and a major increase in production meant that prices would collapse. All the money you pay in taxes and that leads to information gathering might have been analysed and appropriate advice given. Of course this presupposes governments are interested in their citizens.

I suspect reality has little to do with the collapse. Quantitative easing pushed too much money into the system for too long. Low interest rates have forced people to invest in stocks because they are one of the few assets that would normally give much better returns in period of low interest. There was too much cash chasing too few stocks, and the prices rose to ridiculous levels. The price to earnings ratios of many mature shares exceeded 17, and that was in a period of high earnings. Those who know would have decided this could be the time to liquidate. The problem is, once some start selling, everyone wants to sell and the stock prices tank, an issue compounded by computerized trading.

Is this all that bad? If you are a long term investor, or a value investor, this is good, because as the prices tumble, there are bargains out there if you know what you are doing. Those that get hurt are the greedy ones who do not know what they are doing, and surely there is some justice in that.

Remote control – the digital virus

I rather think that sometimes governments do some stupid things, usually while patting themselves on the back as a reward for their supreme cleverness. As an example, have you ever heard of Stuxnet? This was some sort of digital virus allegedly designed by the US and Israeli governments and targeted at Iranian nuclear enrichment equipment. What it did was to embed itself in the Iranian computers that were controlling the enrichment, and essentially stop them working properly. As far as we know, nobody got hurt, and as far as we know, it delayed Iranian uranium enrichment long enough that now negotiations have persuaded Iran not to make the bomb. (No discussion will be entered into as to whether they were going to, or whether they will anyway.)

So, why do I think this was a prime example of stupidity? The problem is, once the virus is embedded, the code is available at the other end. What you have done is to show the guys you are trying to hurt, and who want to hurt you back, how to do it, and to give them example code to take bits from to build up their retaliation.

There was an interesting article in the August, 2015, edition of Chemistry World. According to it, cybercrime is estimated to cost the UK £27 billion every year. My guess is, it will be worse in the US, if for no other reason both the population and the economy are bigger. But that is just ordinary crime; what Stuxnet opened the door to was cyber terrorism. The same article noted that the US had 41 cyber attacks on industrial installations in 2010, and 245 in 2014. So far, these attacks have been largely criminal in nature, and as such, reasonably harmless to everyone not directly involved. Criminals want money, so they steal.

Terrorists are a different problem. Now, in many companies, this will not matter. If a mechanical assembly plant goes wrong, it is a nuisance. You may even injure the odd worker, but consider what happens in a chemical plant. These are very sophisticated, and they often operate at either high pressure or higher temperatures, and control is exercised by ensuring that the feed is at exactly the correct rate to maintain the reaction conditions and to control the heat. If the heat is not controlled properly, reactions accelerate, and in some cases, could explode, or cause a major fire. The recent accident in China is probably at the very largest scale of what could go wrong, but even if an oil refinery caught fire and did not explode, it would be virtually impossible to put out and evacuation of nearby people would be the best thing to do. If a major chemical plant does explode, the damage could be quite horrendous and there will be no time to evacuate.

How hard would it be? Well, every major chemical plant (or nuclear power station) will have computer control, and invariably they will be hooked up to the web so that the conditions can be accessed remotely. An important problem is the controlling system will be intended to operate for well over a decade, and since the process is continuous, it is very difficult to update software. It may take up to a week to turn off a chemical plant, to let it cool down in a controlled fashion (and the same to get it started again). If the temperature changes are not carefully controlled, the equipment may be damaged irreversibly. Carelessness at the control panel can do what ordinary terrorists never could. Look at Fukushima. And even if you get it right, there will probably be a huge mess to clean up. Now, imagine what deliberate loss of control could do.

So now, what do you think of driverless cars? The terrorists’ prime piece of equipment. No need to even persuade the driver to commit suicide! I started my novel Puppeteer with the premise that in the future, terrorists could hack into the controls of cruise missiles and turn them around to serve their purposes. At the time I thought it would take to 2030 to learn to do that. I suspect the time required may have been grossly underestimated.

Now, a couple of personal things. I did another interview toexplain myself, and it can be found at:

Finally, starting August 20, I am having a Kindle Countdown discount on my novel A Face On Cydonia. This is the first of a trilogy, and I shall discount the other two volumes in sequence. A Face On Cydonia gives an account of a quest to make contact with aliens, and to show why aliens would not want to contact us, even if they knew about us, but that is only part of the purpose of the trilogy. The trilogy is really about how a young man who has ambition far in excess of his ability can slide into evil, and how combating evil takes much more than the desire to do good. It is also shows a proposed new form of government that superficially seems so desirable, but ends up deeply flawed because the people who gain power through it are deeply flawed.

The Fermi paradox.

The paradox, which is not really a paradox, and which was stated by Enrico Fermi, the famous physicist, goes like this: There are an enormous number of stars in the Universe, and we can assume many of them have planets, which means there must be an enormous number of civilizations out there. The question is, where are they? Why haven’t we seen any sign of them? There are all sorts of answers to this, and if you think about it, the real question is, why would we expect to see them?

One answer to the “paradox” is, we have: they are called UFOs. And here we reach the first example of faulty logic that pervades this sort of discussion. A logical argument starts with a premise, and in this case it might be:
UFOs are alien space vessels,
Hold the howls of laughter, please. This is patently nonsense, but it also an extremely bad premise, and the easiest way to see this is to think of the opposite statement:
UFOs are not alien space vessels.
Can you say with absolute certainty that there has never been an alien space vessel? The short answer is, no. The fact that almost all UFO sightings are simply natural phenomena is beside the point, after all everyone has seen flying objects, and sooner or later, one will be unidentified by someone. A statement usually needs qualifiers, thus if we rearrange our second statement to
No UFO is an alien space vessel,
we see at once the problem, and we stop the discussion right there. So, when making statements, we should all make sure we qualify our terms so we say exactly what we mean, and not bend to stupid exaggeration. As an aside, if we did that, an awful lot of silly political posturing would have to cease.

The second option is that stars are too far apart, and the distance is an inhibition to interstellar travel. After all, why invest a huge amount of money to build a starship when those building it will never get any information or benefit from it (because they will all be dead long before it reaches its target.)? Further, if you cannot get to relativistic velocities, so will the crew. A further problem might be that unless you know the destination is going to be useful, who wants to go? They might have come here once before, gone home and filed the information. Why come again?

A third reason is the age difference between stars, and this also applies to SETI, and may be a reason why that hears nothing. Suppose those sending a signal wish to minimize expense? If so, to keep the signal strength to a detectable level over the very long distances they would target their signal. Now, suppose citizens of Kepler452b reached our level of civilization at about the same time, and decided to transmit and aimed at us, because we are around a G2 star. They would have to keep at it for 1.5 billion years or so before we could conceivably detect it. Of course they might now seek out stars of an equal age, but now they are starting to make things difficult because they may have to go quite enormous distances to find the right star. But even more problematical, consider the issue from military strategy. When you send, you identify yourself, but since you send because you cannot go, any alien that picks up the signal and comes to visit will be extremely more advanced technically than you are, and if they are warlike, you lose.

Finally, there is the option I opted for in my “First Contact” SF trilogy: when humans managed to find a way of contacting a highly moral alien race, they were told that while what they had done was clever, it was unfortunately premature, and humans were simply not ready for contact with such aliens. One particular problem was that they had to stop fighting amongst themselves, the argument being, if you hate each other this much, how could you be let loose on aliens? Even though the example ism fiction, why would an alien race want to have fundamentalist terrorists on the loose? Then, if they are moral, they would not wish to contact us because such contact would severely damage us. Moral aliens will not give us technology. If you want to know what happens when a more advanced race meets a lesser one, look no further that what happened to the indigenous people of America.

Finally, or those interested in seeing more of the arguments in this last paragraph, the first book in this trilogy, A Face on Cydonia will be on a discount for a few days, starting on August 20.

Economics and self-interest

A significant part of my science fiction writing involves matters of economics, and one of the things that often annoy me on many discussions of economics, and the positions people take, the advocates do not take themselves out of the picture. In short, their positions tend to be in their own self-interest. Ha! you say, what is so different about me? The simplest answer is that in my novels, I am not advocating the answer, but rather I am pointing out some things that can go wrong. One obvious source of fraud is when there is shortage of accurate information. Fraud thrives when the real situation is difficult to uncover. The most obvious source is obfuscation.

Stock fraud is often accompanied by a plethora of different companies, but deep down, they are essentially the same, and only there to confuse. This situation is difficult to pin down early because there are often good reasons during the start of a venture for a number of companies. During the initial period entrepreneurs may not know where they are going, and may want to plant different assets in different companies to protect themselves, and this is quite legitimate. Another good reason can come from international trading. As an example, I am associated with a company that makes skin gel products. They started out under the name “Sports Essentials Ltd”, but now they are “Nemidon Ltd.” The reason – the first name had been taken by another company in part of the US, so we needed another name for the same organization, and not to sell in the US makes little sense.

When writing a novel, of course, the author tries to accentuate the points he is trying to make. Thus in my Red Gold, which was about the colonization of Mars, a basic problem arose because one of the characters was involved in floating stock relating to new Martian ventures on the Earth stock exchange, and he had the basic problem that he did not have anything that was particularly legitimate. The problem I was showing was the effects of the lack of proper information. On Mars, of course, verification of anything from Earth was very nearly impossible, so the door was open for fraud, and if anything has been shown relating to money, if there is an opportunity for fraud, there will be fraud.

Just recently in Britain, a trader, Tom Hayes, has been convicted of manipulating the Libor (London interbank offered rate, which determines interest rates on interbank lending) so that he could manipulate trades and make quite a bit of money while doing so based on his manipulations. One way the rates can be manipulated comes from the way the Libor is calculated, which involves banks estimating what they would pay to borrow currencies. Because the rates are then calculated and do not involve actual transactions, faulty information alters the rate, and it is alleged that a number of banks conspired to submit false rates, and then take advantage of the result. This type of fraud is simply a consequence of the financial system finding an easy way to operate, and thus giving a limited few a remarkable advantage in transactions. A handful of people in a special position in a bank and operating for themselves could generate the opportunities to make millions. Wherever there is such advantage, people will take it.

Another thing that annoys me is the hypocrisy of the privileged. The following link contains an example:
The basic point was that when it suited it, FirstEnergy Corp., an Ohio-based utility, was strong advocate of deregulation and the free market. As it got what it wanted, it made big bets on coal and nuclear, as these were sources of electricity with stable prices. However, since then, in part due to fracking, which it did not foresee, gas prices have plunged. It bet heavily and lost so what does it do now? It wants ratepayers to cover the full costs from some of its biggest generating plants, even if other sources of electricity would be cheaper for consumers. Apparently FirstEnergy has also lobbied strongly to slow the adoption of energy efficiency technology and to stop implementation of renewable energy requirements. In other words, such advocates of the free market want the market to be free while they are raking in the cash, and to have rescue packages imposed on all and sundry when they are not.

This is not a one-off event. Now that President Obama has signaled the requirement for the reduction of carbon dioxide emissions, we see the coal industry lobbying strongly to overturn this advance. This is an overall problem for governance, and now, confession time, everything I have advocated in my books relating to economics has been the subject of the plot in which every good system I can come up with ends up subverted subverted. And that, I suspect, is the real message from economics: no system will work better than its participants will let it, and where money is involved, letting it work is not a priority for some. Not a pleasant thought.