Global Reset

As we are in the heart of the holiday season, people start to think about the new year and the potential it could bring. This blog tends to be technical ideals for the layperson, but this post is on a something that influences everyone, the economy. My wishes may seem demented initially. Think it through, they make rational sense. My wish is for our economic institutions to face their bankrupt reality and begin defaulting on their debt. This will force leaders everywhere to make decisions that are significant and lasting.

We are in economic trouble because of excessive debt levels at all levels of society. The main debt sources are mortgages, credit card debt and auto loans. Compounding this fact is in the US (all Western societies) we no longer manufacture many items. In essence, we consume more than we produce. Since the initial stages of the crisis appearing in July 2007 (two Bear Sterns MBS hedge funds collapsed), almost all policy has been kick-the-can-down-the-road type ignoring reality. The US federal government backed by the Federal Reserve and the banking industry backed our financial industry in the depths of the 2008-2009 financial crisis. The result was more debt was accumulated on the books of government agencies. US federal government debt stands at $13.8 trillion or ~90% GDP and is quickly rising. Our deficits are unsustainable and will make this debt burden impossible to pay in the next few years. If this was a US problem alone, rest of the world would continue on while we solve our problems. Unfortunately, this is a world wide problem with Europe and Japan in even worst conditions. There is more debt than the ability to pay, thus, it will not be paid. I predict by the next presidential election, much of the debt will be defaulted upon.

The defaulted debt will cause a Great Reset. If our leaders want a society worth living in, they will be forced to make hard decisions about a variety of topics including economics, government spending and social order. Why do I want this to occur? As the way thing are, the debt load is consuming available capital into useless support of an over sized financial industry along with other less productive pursuits like the war-machine and etc. Good portions of this capital could be put to more productive uses like dealing with replacing declining Crude Oil stocks are our main transportation source. Many other good social/economic forces could also be financed. One positive result would lead to the eventual reduction in unemployment since more people would be allowed to work. The other reason is it could bring about the next big thing in technology. The way it is now, future technologies are not emerging due to a lack of will from funding sources. I would like to join the next big thing, but it requires funding and societal support.

This is my wish. It would result in a beautiful renewal or rebirth. Happy holidays everyone!

Spenditis the Disease

Today folks, I am going to talk about a disease that seems to permeate our society, Spenditis. You may ask what is Spenditis? To put it simply as spending every penny one makes plus future earnings through taking on mountains of unnecessary debt. It amazes me how many people I know buy an over sized (too expensive) house, several luxury vehicles, have several maxed out credit cards and a student loan (or loans if married) to boot. Folks, you are never going to pay this back. The problems will begin when economic trouble hits, i.e. job loss, sudden illness. At that point, you fall behind on payments and it will all vanish in a heartbeat.

I am not arguing against buying things that pertain to hobbies, travel or other nice items as long as it is within your economic means. We have our interests and that is one thing employment supports. Our interests should not enslave us though.

What is the cause of Spenditis? I am not sure. Things that contribute to this misdiagnosed malady are feelings of entitlement, narcissism, keeping up with the Joneses and our consumer culture. Personally, one factor that contributes heavily to those want-to-be high rollers is the inability to distinguish between a want and a need. Needs are the basics like food, clothing, shelter, medical care and other society factors like education. In most cases, if an item is a luxury purchase it fits into a want. The best want example is Imelda Marcos' 2700 pairs of shoes. For the 99 % of people who are not extraordinarily wealthy, this would bankrupt them. To her, being president of the Philippines, the want did not permanently damage her economic standing.

Please avoid Spenditis. You will appreciate it when the hard times come, and they will come. The best analogy is The Ant and Grasshopper fable from ancient times.

Next generation space flight takes orbit

I made a previous post on the topic about how dangerous the retiring Space Shuttle is to those who fly the craft. In that same post I mention about the military's potential future workhorse, the X-37, an unmanned orbiter that is launched by a traditional rocket and lands through gliding back in the Earth's atmosphere touching down on a runway just like the space shuttle. If I am correct, this is the idea behind the original Space Shuttle back in the 1970's before NASA's bureaucracy took over and made it the expensive, dangerous, manned orbiter. Good ideas are generally recycled in history, and this is another example.

The Associated Press reports that the X-37 recently took a flight starting in April 2010,

The U.S. Air Force's secrecy-shrouded X-37B unmanned spaceplane returned to Earth early Friday after more than seven months in orbit on a classified mission, officials said.

The winged craft autonomously landed at Vandenberg Air Force Base on the California coast 130 miles northwest of Los Angeles, base spokesman Jeremy Eggers said.

"It's very exciting," Eggers said of the 1:16 a.m. PST landing.

The X-37B was launched by an Atlas 5 rocket from Cape Canaveral, Fla., on April 22, 2010, with a maximum mission duration of 270 days.

That is what makes this technology advantageous over the shuttle and traditional rockets. It is launched cheaply (like a rocket), but has the capability of the shuttle in flexibility while in orbit. No need to worry about anyone getting injured or killed during operation either. The X-37 excels in the fact it can remain in orbit for long periods of time. This is a capability neither the rocket or shuttle possess.

Research and development of the system has not been cheap or quick,

The voyage culminated the project's long and expensive journey from NASA to the Pentagon's research and development arm and then on to the secretive Air Force Rapid Capabilities Office. Hundreds of millions of dollars have been spent on the X-37 program, but the current total hasn't been released.

Compare the hundreds of millions of dollars spent on the X-37 to the $500 million per Space Shuttle launch, it justifies the capital spent. To be fair, anything hi-tech, new and revolutionary like this craft will be expensive to get from idea to final, successful product. Personally, this is a concept many business and government leaders are missing by not funding significant research and development in our society today.

Moving mutants

I am just getting over a common cold today. Surprisingly, it was my first in about three years. Being scientifically trained, it makes me ponder how do they find a cure for the common cold through its spread.

The common cold is caused by a virus. Viruses routinely mutate when jumping host to host. This is why people need new flu shots each year because a new genetic variation of the virus is spreading among the population. Not being medically trained, the mighty Wikipedia saved the day giving a description of the many viruses that cause colds (links in quotes do not work)

The common cold is a viral infection of the upper respiratory tract. The most commonly implicated virus is a rhinovirus (30–50%), a type of picornavirus with 99 known serotypes.^[5][14][15] Others include: coronavirus (10–15%), influenza^[5] human parainfluenza viruses, human respiratory syncytial virus, adenoviruses, enteroviruses, and metapneumovirus.^[10] In total over 200 serologically different viral types cause colds.^[5] Coronaviruses are particularly implicated in adult colds. Of over 30 coronaviruses, 3 or 4 cause infections in humans, but they are difficult to grow in the laboratory and their significance is thus less well-understood.^[10] (5–15%),

I knew there were multiple "cold" viral strains out there, but I never realized there were several distinguishable viruses causing illness. The inability to grow with ease in a laboratory answers the question why have we not made little progress on a cure. The other main reason why we can not find a cure

Due to the many different types of viruses and their tendency for continuous mutation, it is impossible to gain complete immunity to the common cold.

How does one track this mutation? When does a virus become genetically variable to reinfect a healthy host? When is a virus a completely new strain? How many hosts are required for each step is the key factor.

My guess will be the use of laboratory animals since it would be impossible to track human to human transmission. Species that are helpful would need to resemble humans, i.e. rats, mice, pigs or primates. Once a host is infected, isolate the animal and allow only one other host to have contact limiting the infection's spread. This would be a long term research project. I am not necessarily sure that big pharmaceuticals are up to the expensive task.

Sun blows against reality

I am a proponent of most alternative energies on the grounds of replacing limited fossil fuel sources and alternative energy's lower environmental impact. My global opinion on the subject can be read here. One issue that restricts alternative energy's growth is cost. These technologies are not cheap to implement. In an effort to offset the high cost, government subsidies are often given to wind and solar companies. This may seem fine, but when the political winds change, these mostly startup operations run into serious cash flow issues from the simple fact that they can not turn a profit on their high investments into equipment and talent.

This CNNMoney.com article warns of the expiring subsidies the US federal government has been giving to both wind and solar companies.

After years of rapid growth and darling status among many in Washington, the future of the American renewable energy industry is uncertain. That's because the government cash it has come to rely on may dry up on Dec. 31.

Before the Great Recession, renewable energy developments were helped by a tax credit, worth generally 30% of the cost of the project. When the recession hit, the stimulus package replaced those tax credits with direct cash grants of similar value.

Cash is considered more beneficial than credit to the industry.

So far, the government has handed out about $5.4 billion, according to the Energy Department.

Congress could vote to extend the grants, but that's highly unlikely.

$5.4 billion is a lot of money to be spending on technologies that may be abandoned from lack of interest. Those companies most likely will not survive without the stimulus money. Money thrown down a hole. What saddens me further is this is a repeat of the solar boom/bust that occurred in the 1970's. This is a demonstration of why socialism does not work on a large scale, the government's central planning is not efficient and is often driven by politics, not market reality. Do we ever learn?

What to do? The stark reality is these alternative energy technologies are not yet ready for prime time in the capitalist market place. Reality trumps a naive, orthodox environmental ideology. This should not be an excuse to fully abandon them though. As a supporter of these alternative energies, I believe we need to spend more money (government and private) on research and development (R&D) of these technologies. Develop them to the point where they can compete with the more traditional fossil fuel and companies will be able to turn a profit. The secondary benefit would be a revitalization of US R&D and industry.

This lesson should not be forgotten when the true energy crisis strikes, the exhaustion of crude oil.

After the ballots were cast

Little less than a week ago the US had their midterm elections. The majority of candidates for positions in the federal government were for the House of Representatives and the Senate. The post is going to explore one way to reduce a common thread that has been evolving in our electorate, extreme partisan candidates on both sides of the aisle. Two simple changes in the way congress worked would reduce this problem without major changes in the constitution. It also would lead to both major parties working together better and independents would have a greater voice.

What I propose is the elimination of current seniority rules in both houses of congress. Specifically, the way committee members are selected. These vital positions are automatically given to the most senior party members from the majority party without any input from rest of congress. This gives quite a bit of power to ranking majority members over very important issues like military, social spending and law writing. Bills that were good for the US often died in these committees before making it to the main floor where it may have passed.

Why is this a problem? It has to do with how the most senior members being reelected year after year. In the case of the House, the jurisdictions are picked by a state's government. If a state leans towards one ideological direction, i.e. Texas to Republican or California to Democrat, the districts are setup so the majority of Representatives will come from the stat's dominant party. This is often referred to gerrymandering if blatant or is against Civil Rights laws. It occurs regularly even with the laws and I do not know of a way to eliminate the issue. The Senate has less of this issue due to the fact the entire state elects the position, but it is still a problem. The result is certain districts will elect a member from the same party over and over again. This is further exacerbated by reelecting incumbents since they become more senior in their own party and have greater ability to bring home pork spending projects to their home state. The voters know this instinctively. Vote for the incumbent because they will bring home the bacon. It is in the voter's favor to do so. The candidates also know this. Candidates respond by following the party line and not putting forth any ideas that may hurt their chance for reelection. This is another disincentive for congress members to break party line for the benefit our country. The final result is often political polarization.

Proposal #1: Bring committee members to full chamber majority vote

Instead of allowing the majority party full control over vital committee members, the rules should be changed to reflect the Speaker of the House. The Speaker of the House is nominated by the majority party and is picked through an election of the full House chamber. The elections often filter out the extreme members to a limited degree unless the chamber has a vast majority. To further filter out partisan hacks, I suggest all leadership positions (including the Speaker) and committee members come to full chamber vote and each member requires a 2/3 majority to be seated. This results in two outcomes. First, even if a party wins the majority it forces them to make some concessions when congress convenes. It forces a limited bipartisanship immediately. Second, it will prevent the extreme elements of a party from dominating the committees. Voters would also be less inclined to rubber stamp the incumbents if bringing home the bacon is a little more difficult. Congress members would have to work a little harder for their reelections.

Proposal #2: Eliminate congressional primary elections

Primary elections developed out of the 1960's as a more populist way to pick candidates. The daunting problem is the low key elections bring out the most fired up voters which are often the most partisan in nature. This leads to the most partisan and extreme candidates running later in November. The other problem is the extra money required to run in the early election. This forces a candidate to either be rich or depend heavily on wealthy contributions. This could potentially lead to elections being bought. We can return to the system in place before the 1960's, let the local parties directly pick their candidates for the election without opening the polls.

Psychic octopus passes on.....

This summer, I blogged (here and here) about Paul the Octopus who predicted Spain to win the 2010 World Cup. He passed away in his German tank at age two last night. The aquarium's manager claimed Paul died of natural causes. Mmmmm, I am suspicious of fanatical German soccer fans.

Let this be a lesson, it is dangerous to speak certain truths.

Computers do not have psychology

In previous posts, I discuss equities investing or stocks using technical analysis (TA) to guess the market (see here, here, here and here). One common form of TA is known as Elliot Wave Principle (EWP) which depends on the collective psychology of investors charting price patterns over time into 5 distinctive waves. Over the last couple of years as I have dabbled in stock investing I have attempted to use EWP unsuccessfully with the New York Stock Exchange indexes. EWP came to my attention in the 2007-2009 crash as the price action followed the 5 waves. If it was true then, it must be true just a few months later? I have come to the conclusion that TA including EWP is not very effective at the current time in US stock markets because of how the market's composition has changed even in a brief period. It has to do with investor psychology (or lack of) and other outside influences.

I will give a brief history of how the US stock market changed over the last couple of decades. In 2001, markets began to trade stock in $0.01 increments in a process known as decimalization. Prior to this, all stocks were traded in fractions of (n/16) fractions of dollars. One advantage of fractions was the fact stock brokers with ask and bid prices at the increments. The slight (n/16) difference between the bid and ask price was the amount a stock broker could make buying and selling blocks of stocks for customers. The second innovation was the market switched to partially computerized operations in NYSE operations and is fully computerized in the NASDAQ market. In a nutshell, the pits with traders buying and selling stock are gone. The price action mostly occurs within a giant computer.

This "modernization" of the markets led to new kind of investment strategy, computerized trading at a quick speed. Basically, picture supercomputers directly connected to the exchange computers through a high speed Internet connection. Why would anyone do that? It is capitalizing on the same trade strategy as day traders. Buy and sell millions of stock simultaneously of just a few pennies of profit and the pennies turn into hundreds of thousands of dollars quickly. Add in the ability to trade put in quotes and cancel transactions before they are processed, one has quite a money making strategy. This process is known as high-frequency trading (HFT).

How does this influence TA? As stated before, TA is based upon investor psychology and the desire to hold stock over various lengths of time from hours up to years. Traders make buys and sells in a response to price movement creating the distinctive TA patterns. HFTs buy and sell stock within a matter of seconds. HFTs can even move millions of stocks down to milliseconds time frames! The HFT responds in a near instantaneous, mechanized manner to stock movement. The resulting trade psychology does not appear on the stock price charts. If HFTs were a small minority in the stock community, it would not directly influence TA. This was partially the case during the 2007-2009 crash with HFTs being ~40 % of the market's participants. EWP traced out the 5 distinctive waves. Currently, HFT represents ~60 % of all trades made on the US exchanges and can account for ~70 % on light trading days. Since this represent the majority of trades, the price action is not driven fully by investor psychology making TA less effective. I believe TA is useless over short periods of time.

One other factor distorting the markets are US government authorities. The government's stimulus and various Federal Reserve programs (TARP, TALF, POMO and etc) are putting money into investors hands in indiscriminate, unequal ways. The "free" money ends up being investing in the market in unorthodoxy manners.

The aha moment I had last night was using TA to avoid these unwanted outside influences into the markets. The only market to my knowledge that is too large ($100s billions per day) for authorities to significantly manipulate are foreign exchange markets (FX). These markets are based upon converting money into different currencies worldwide and HFTs would also have no interest in these markets. What FX markets can follow using TA are carry trades and whether investors are seeking risk or are seeking a safe haven for their investing.

Baseball lumberjack

This Yahoo! article reveals a very talented pro baseball player, Mariano Rivera currently of the New York Yankees, and his ability to break wooden bats with pitches. (Links do not work in quotes)

The best pitch ever notched four more kill shots Wednesday night. Mariano Rivera(notes) throws a cut fastball that at its 55th foot takes a hairpin turn into the fists of left-handed batters, and their feeble attempts to hit it end up reinforcing a long-held certitude: The only thing more dangerous to lumber than wood-boring beetles is the New York Yankees’ closer.

The impressiveness of Rivera’s four-out, four-broken-bat save during the Yankees’ thievery of home-field advantage from the Minnesota Twins in a 6-4 victory in Game 1 of the American League Division Series wasn’t because he set some record. He once cracked five bats in an outing. Nor did he earn extra credit for turning baseballs into buzzsaws. An out is an out, shrapnel or not.

This is a significant amount of force to shatter bats. Broken bats are caused by fast balls at either the bat's end or near a player's hand during a jamb. I am guessing Rivera is the master of the jamb against left handed hitters. In this article, the majority of bats that shatter are actually made of maple wood and not the more traditional ash which just cracks. Maple bats have physical properties that encourage shattering in comparison to ash.

What is interesting about Rivera, is his single minded approach to pitching. He has one pitch, a cutter fast ball. To top it off, he has been doing this for 13 years now and is still effective at past 40.

What’s mystifying – what has mystified for more than a decade now and will continue to mystify until Rivera retires, which, even after his 40th birthday, remains a long way off – is that he throws a single pitch, a dirty bomb of a pitch, yes, but just one nonetheless. Not only can hitters damn near never make solid contact, they fare so poorly that the lone weapon at their disposal often turns into a useless recyclable.

This is a demonstration of someone capitalizing a particular talent. Most pro pitchers can throw pitches that hard. It is just a handful who can routinely dominate batters.

As for the future of baseball, you think that getting away from wood might be in the works. There is something about hearing the crack of a wooden bat though to stir excitement into a fan's soul.

Next week is my honeymoon, thus, it will be two weeks before my next post. Cheers!

Wedding in the air

This Saturday I am going to marry the love of my life, Joy. I am too busy for a serious post, but I shall return next week with some inquiry into an intellectual topic.

Tweeting trouble

New forms of web sites are arising on the internet daily. One popular site is Twitter, a site where users "Tweet" short messages 140 characters or less. It is microblogging or blogging simple statements. I am assuming a large portion of this blog's readers are avid users. Yahoo! reports that a 17 year old Australian teenager caused a storm on Twitter recently with a short, malicious Javascript code that was spread using Tweets.

Pearce Delphin, whose Twitter name is @zzap, admitted exposing a security flaw which was then pounced upon by hackers, affecting thousands of users and causing havoc on the microblogging site for about five hours.

Delphin, who lives with his parents in Melbourne, said he tweeted a piece of "mouseover" JavaScript code which brings up a pop-up window when the user hovers their cursor over the message.

As is often found with computers, cutting edge things are performed by students messing around with simple computer code. I had a lot of computer scientist major friends in college that did similar things. This is an example where education enriches a person's life, but demonstrates that creativity is within. The young man was only in high school.

What is interesting about the incident is the extent which the code caused Twitter interruptions world wide. Once the genie escaped from the bottle, it was not returning. It eventually came back to haunt the code's creator.

Twitter apologised to its millions of users after the "mouseover bug" raged through the site, opening pop-up windows in Web browsers and automatically generating tweets from other accounts.

White House press secretary Robert Gibbs and Sarah Brown, wife of Britain's former prime minister Gordon Brown, were among those hit by the bug before engineers patched it up.

The "Netcraft" security website traced the malicious code back to Delphin, who said he got the idea from another user who employed a similar code to make his profile and tweets rainbow-coloured.

"After that, it seems like some of my followers realised the power of this vulnerability, and within a matter of minutes scripts had taken over my timeline," Delphin said.

It appears that the code was not used for malicious intent when hackers got a hold of the script. What is appropriate though is hackers used the script for one of the internet's biggest money generators, porn.

But the idea was soon taken up by hackers who tweaked the code to redirect users to pornographic sites and create "worm" tweets that replicated every time they were read.

I think too often these kind of accidental discoveries are not utilized enough in our society. People have to have proper education and proper titles to have their ideas or products spread. This incident is proof creative tinkering requires no titles and limited education.

Cause of Great Recession?

This post is the second of a series covering an event that is going to strike the world economy over the next year or so. Inflation and deflation was the first posting in this series giving a definition of several economic terms for readers. Now, I am going to discuss what is the root cause of our current economic issues often referred to as the Great Recession. The link gives the Wikipedia explanation to our protracted downturn, but, I would not put too much faith in the details. The basic reason why our economy is having problems comes from excessive amounts of debt.

Debt is the result of credit. It is the lifeblood of an economy. Businesses are able to open and expand quickly with access to capital through credit. Consumers can purchase big ticket items such as homes or cars. These two examples would take years for most people to save enough money to execute these tasks without credit. In most cases, it would never be done. Credit expansion is good as long as it is limited to the point debtors can pay back their creditors. It becomes a problem when the debts are NOT paid back. We all know of the family who buys an enormous house, several vehicles and other items they can not afford. We never talk about the creditors taking back possessions.

Reading over several sources, the accumulated private and public debt of the USA is on the order of $54 to $59 trillion. Yes, that is a "t". In comparison, the gross domestic product (annual economic output) of the US is on the order of $14.5 trillion. We may ask, in what forms are the debt? I do not have an exact breakdown, but the main sources are:

• Federal, state and local government
• Housing
• Automobile
• Corporations
• Student loans
• Credit card.

This list is not exhaustive, but covers the biggest categories. Most are familiar with mortgages, auto loans, student loans and credit cards. The debt not familiar to most people are bonds. BondsIOUs issued by either governments or corporations to borrow money.

The government accumulation of debt is obvious. Taxes were cut over the last couple of decades as no one wants to pay while politicians refused to cut spending. Governments issued massive amounts of bonds to keep the social spending going. Debt was accumulated to keep people happy. The amount of debt issued by governments before 2007 was not that significant though. It does contribute to the overall problem now as the amount grows quickly. We will discuss this in the next installment why.

Large amounts of private debt is much more a problem. If everyone (businesses included) spend a significant amount of their earnings on repaying debt, there is not much left over to purchase new items or the demand within an economy decreases. In effect, the money was already spent on items consumer already own or past events. It becomes an even bigger issue if consumers can not keep up payments and default on the debt. This would limit the ability of an economy to grow. The US economy is based upon ~70 % consumer spending by the simple fact that we are not longer a major manufacturer. If consumer spending decreases, the economy contracts and the result is a recession. During normal economic cycles, this occurs every ~8.5 years or so which can be expected. Normal recessions last 6 to 9 months typically with a turn around caused by credit/economic growth.

The Great Recession is different. The number of jobs have not returned with the official unemployment rate U3 at ~9.6 % and true unemployment U6 is at 16.5 %. In a nut shell, U6 is all of the people who want to work but cannot find full time employment. 1 in 6 currently fit into this category folks! This is not your daddy's recession. It all comes back to excessive amounts of debt.

How did we accumulate this amount of debt? It has to due with a new financial innovation that began to appear in the '90s known as securitization. I will simplify this complex phenomenon for laymen. Securitization is the process in which banks take loans on their balance sheets and place them into new structured securities. These new securities are then sold to other investors who make money off of the payments from within the investment vehicles. Banks then remove the loans and risk from their balance sheets. The risk is passed onto the investors within the securities. The result is banks passed on loan default risk to others while in the past banks held onto the loan portfolio (risk). Final results of these new instruments were a credit explosion since the banks had greater incentives to make risky loans. Too much debt was then accumulated over a small time frame outpacing the economic realities underlying the loans.

Next post we will talk about where this is going to lead us.

Inflation and deflation

One of my side interests is in economics. I am not formally trained in this field, but due to my engineering mathematical background, understanding the concepts are simple. There are many schools of thought on economics including the Chicago, Keynesian, and Neoclassical. I tend to lean towards the Austrian school of thought. This post provides background to a key topic among those interested in this field, specifically what is inflation and deflation. This post will later be followed up with a hotly debated topic, will the US face inflation or deflation over the next few years.

First, we are going to define what is the basis of economics, currency (money) and credit. Currency is a barter exchange medium within a state. It allows individuals to purchase items without the requirement of a specific barter item a retailer may desire. It is much easier to fill a cash register than to have stores of bulky commodities like grain for each transaction. Modern fiat money has not intrinsic value except what is backed by the government of issue. Fiat money in circulation is measured in many ways as M0, M1, and M2. Since M0 is the representation of physical, printed currency and is a small percentage of money available, the majority of existing money is nothing more than 1s and 0s on a bank's computer.

Credit is a loan from a banking entity (creditor) to a debtor. It is an IOU that is paid back to the creditor plus interest over a specified period of time. Credit behaves in a similar manner within the economy as actual money.

The amount of effective money (EM) flowing within an economy depends on the monetary base (MC) in circulation and credit (CR):
EM = MC + CR.

Second, in modern economies central banks (CB) control the EM through many means. The central bank for the USA is known as the Federal Reserve. They can create money out of thin air or withdraw money from the system. It is fiat money so they do not have to back it with solid assets, just the promise of the backing government. The most common means for CBs to manipulate the EM is through monetary creation (printing money) and interest rates. Interest rate increases discourages credit and decreasing interest rates increases credit availability. One other factor to note is it has been demonstrated that often commercial banks lend to customers before CBs create money. The CBs will increase the amount of currency accordingly later.

Third, I am going to define inflation and deflation. Most people have experience with inflation. We all hear stories of our parents buying nickel cokes and gas a quarter per gallon. Inflation has increased the value of these items. You dollar buys less, thus, inflation means the currency is losing relative value. The exact opposite is deflation with the currency gaining relative value. There are many causes of inflation and deflation. The issue I am going to tackle here has to do with effective money moving through the economy. If the supply of EM increases significantly, it has less value and inflation is the result. If EM contracts significantly, deflation occurs.

This has been an introduction to inflation/deflation. As early stated, the next post will cover the predicament the US will face over the next few years.

Burning sports car

The old adage goes, "You often get what you pay for." In some cases, this is not true. This post covers a slight design flaw found in a very high end Ferarri 458 Italia supercar. In the CNN/Money website article, it details how the house priced car ($230,000) suddenly bursts into flames without warning.

"In rare instances the heat shield could become deformed, bringing it too close to the exhaust system and igniting," a Ferrari spokesperson said.

Ferrari is recalling all its 458 Italia vehicles after five fires were reported in California, Switzerland, China and France.

I find this interesting. If you pay a mint for this little car, the design flaws of this sort should be worked out by delivery. What are you paying for? One brief, expensive fireworks show? Specifications on this car are obscene,

It has a 4.5-liter 8-cylinder engine, 7-speed automatic transmission, 570 horsepower and has a base price around $230,000.

Most of us rarely see such a piece of engineering on the road unless visiting the ritzy part of town. My advice is not to worry about this incindiary vehicle visiting a road near you,

The NHTSA statement said 303 vehicles are being recalled, and owners could be eligible for reimbursement for if they spent money on repairs related to the problem before the recall was announced.

If you are going to build it, build it right. Reputation is precious.

Keys to success

I have been busy with work, moving and a future wedding, so no postings recently. This post is an idea rolling in my head about people who succeed in a grand manner in life. It is often said hard work and luck create success. I made an earlier posting, Luck or Skill?, about how luck is a requirement towards opportunity. This being said, assume from hereon in this post an individual had the correct doors opened to him/her. Looking around at people I know who do well in life, sometimes it is not apparent they have any great talent or skill. Here is my theory on why this may be the case as I explain the two roads to success.

In any case, a successful person is going to require a baseline competency in a field. Whether that be art, science, athleticism or business. Second, the person is going to have to work (yes, that four letter word appears). Here are the two proper mixes.

Type 1:
Someone who has a tremendous amount of talent and puts it to proper use. They work as needed, but their inherent talent makes required tasks resulting in a simpler overall trip. This is what we typically think of as a successful person. They are really talented and bright. Their superstar abilities are focused in a proper manner resulting in success.

Type 2:
Someone who is competent, but is not highly talented. They are the B students. Each is capable, but does not excel with their talent alone. This is compensated through hard work. We are talking workaholic types here. Along the journey many mistakes are made, but they are minimal in damage because they work their way out of the holes they have dug. I think many business tycoons are of this breed for the sheer fact that business is tough and mistakes are made. It may also explain why some billionaires are ADD or dyslexic.

Beware of the unicorns

This blog mainly covers technology issues and various science. Being trained as a scientist, the world is an immensely complex place with interconnections between various forces in ways within and even beyond human understanding. Our understanding of science and the world is ever evolving. I often see an over simplified line of thinking that appears in religion, philosophy and politics that runs against the concept of complexity and that events are a culmination of many small factors. Even more disturbing, it sometimes appears in various lines of academic thought.



The construct of this over simplification depends on having one entity to blame a multitude of events upon. This powerful entity, whether is be a political or religious group, is often the rival to the organization a member who expresses this line of thought belongs. The mock example below demonstrates how this line of thinking works. I am going to use will use the most dangerous of all creatures, the flatulent unicorn or unicorns for short. The following part of this post will give a problem facing society and how this line of thought works in response.



Cause 1:

Everywhere you look there are too many rainbow colored items and it drives me crazy!

Solution 1:

The unicorns encourage such colorful mythological images from antiquity.



Problem 2:

Many people have their heads in the clouds thinking about fictitious ideas and stories.

Cause 2:

Unicorns are a source of escapism into an ideal world.



Problem 3:

Americans spent too much money accumulating massive amounts of debt they can never pay off.

Cause 3:

Unicorns encourage this through construction of an idealistic world which is accessible to everyone. Spend the money you don't have so you can live in this fantasy world! It is okay.



Problem 4:

People don't spend enough time being productive.

Cause 4:

The unicorns demonstrate the world is a great place without need for hard work. Go ahead and slack off.



Cause 5:

People don't believe in the one true religion any more.

Cause 5:

The mythological world of the unicorn is corrupting people's minds through false religious imagery.



Problem 6:

People are not active in the correct political party any more.

Cause 6:

Unicorn stories demonstrate that things always work out for the best and no action is required. Wish for good things and they will occur!

The solution for problems 1-6, kill the unicorns and eliminate all references!

The list goes on and on and on. Don't get fooled for this line of thinking. It demonstrates a lack of critical thinking about issues. Extremist groups dwell on this kind of thinking blaming one group for all of the world's ills.

Volt full of trouble

In a prior post, The Inconvenient Electric Car, I discuss the limitations battery powered electric cars face as the only replacement for gasoline and diesel powered vehicles. In a nutshell, electric cars lack range obtained from the battery charge and are not capable of moving heavy loads. This post is going to cover General Motor's Chevrolet Volt, a vehicle going into production this year.

First of all, I can remember the media touting the Volt as a revolutionary all electric car. It is not an electric car in the purist sense. The Nissan Leaf being released in December of 2010 is a true all electric car. The Volt really is a hybrid with plug-in capability similar to the Toyota Prius. Toyota began delivering a plug-in Prius version December 2009 according to Wikipedia. Once again, American car makers are behind the Japanese. This is nothing new.

Second, the main focus of this post is cost. Last week, Yahoo! reported that the Volt was going to be sold at a MSRP of $41,000. This is a typical price for a luxury American car. Compare this to the Leaf's $32,800 and the Prius' $22,400 sticker prices and one wonders, "Why would I buy a Volt?" I believe most people are going to answer this with a resounding "no".

The basic business lesson here is simple. If a product is to be successful, make the price competative and do not misrepresent the facts. It seems as if Chevy is intentionally making a product flop.

Paul the oracle octopus update

In my last blog posting, Paul the oracle octopus in western Germany was mentioned for accurately predicting 2010 World Cup soccer games. The post was before the tournament's final and semifinal games. Well, Paul proved his psychic prowess by accurately picking Spain as champion and Germany as 3rd place. Paul was 100 % accurate in German team World Cup predictions. This article gives further information that Paul is going to retire. No more Paul in the limelight. He is going back to entertaining children as a day job.

I am guessing what you are not seeing behind the scenes is Paul is really being squidnapped by powerful authorities during aquarium off hours to predict other big sporting events. They will then bet big in Las Vegas and make millions. This octopus is worth big money!! Well, there is my half-baked conspiracy theory. Please take it with a grain of salt.

It is time to go visit my folks in Washington State next week, so it will be a while before any more posts.

Octopus oracle

Usually, I post about science or other serious topics. Today concerns an octopus in Germany who had accurately picks soccer match winners up to this point. Paul, the psychic soccer octopus (picture above) lives in the Oberhausen Sea Life aquarium in the western German city of Oberhausen.

According to the Yahoo! article, the octopus has been accurate in picking winners of the FIFA 2010 World Cup tournament up to this point.

Paul correctly predicted Germany’s wins over Argentina, England, Australia and Ghana and the country’s loss to Spain and Serbia.

This mollusk had a small, cult following in the past beginning in 2008.

Paul first developed his abilities during the 2008 European Championship in which he predicted five out of six games involving Germany correctly. But while he had only a community of local fans two years ago, his World Cup prognostications have brought him international stardom.

It looks like the aquarium put 8 legged prediction maker on the spot by having Paul predict a German game. Not being human, Paul had a politically incorrect answer for a German defeat against Spain in the semifinals. The knives and grills came out after Paul's correct choice leading towards an international political incident.

Spain’s defeat of Germany in the semifinals as predicted by Paul prompted many Germans to wonder about how he would taste grilled for dinner. Spanish Prime Minister Jose Luis Rodriguez Zapatero fretted about the safety of “El Pulpo Paul,” as he’s known in Spain, and offered Paul protection.

“I am concerned about the octopus,” Zapatero said. “I’m thinking about sending in a team to protect the octopus because obviously it was very spectacular that he should get Spain’s victory right from there.”

In response to hundreds of angry e-mails from disappointed German football fans who sent in recipe suggestions for the 2 1/2 year-old floppy mollusk, the aquarium actually did take extra precautions, Porwoll said.

“I even told our guards and people at the entrance to keep a close look at possible for football fans coming after Paul for revenge,” Porwoll said. He added, however, that the number of love declarations the aquarium is receiving from Paul’s fans far outweighed the hate mail.

Paul most likely taught us a good lesson, people hear what they want to hear and not the truth. This even pertains to an oracle octopus.

If I could find a small aquarium creature with clairvoyant powers like Paul, Vegas watch out!

The stock market casino

One institution that has significant amounts of mythology and lore surrounding it operation is the US stock market. Wall Street has made many a man wealthy. These wealth generating stories are legends. What no one really talks about is about those who lose money and are often bankrupted by the same institution. In a prior post, Baseball cards as equities, I give a brief analogy describing stock trading as an ongoing auction. What is important is stocks have no value except what an individual is willing to pay and in the end, it is a zero-sum game.

As the market has been plunging over the last week and a half, it caught me by surprise on Tuesday with a sudden drop. That is the nature of the casino. I am guessing most stock owners are in a bloodbath at the moment. This gives me a chance to outline three kinds of investors on Wall Street.

Investor #1, The Insider
The insiders are professionals who either play stocks/bonds as a profession or are extremely wealthy individuals who have the inside track to corporate America. This group is the smallest consisting (guessing here) of at 0.1 % or 1 in 1000 investors. I guess they own 15-20 % of all stocks and bonds though. This group will always make money in the end because they have the knowledge and power to manipulate individual stocks. Insiders know when a big time news event is going to happen even before a public announcement. One fictional character who fits this category is Gordon Gecko in the 1987 movie Wall Street. The majority of all profits reside in this elite group. We define this group as those who know what is occurring.

Investor #2, Experienced, Successful Traders
This group of traders do not have the inside track as The Insiders do, but they have an idea of how Wall Street works. This group consists of smart hedge funds, individual traders and those at big bank trading groups. They consist of about 10 % of all investors. They probably have 15-20 % share in total assets. This group makes money most of the time. Since they lack advanced insider knowledge, they also lose on many trades. One subcategory of this group are high frequency traders (HFT). This subgroup uses high speed supercomputers to beat the market. What is even more interesting, HFT represent ~80 % of all trades made on the New York Stock Exchange. HFT are what control the majority of stock movement in modern stock exchanges. We define this group as those who know that they do know what is occurring.

The initial two groups outlined above are known as the smart money. They make money off of stocks and bonds. Who do they make money from? The following group, the dumb money.

Investor #3 Retail Investors and Inexperienced Traders
This group of traders represents the majority of investors. It includes all of those who put money into mutual funds, 401ks, IRAs, day traders (yes, day traders) and the majority of part time traders. This largest group of investors is fed the normal "fundamentals" and "over the long run stocks are the best investment" advice. Unfortunately, this is not the case because the stock market does crash. Crashes wipe out a significant amount invested in this group. As I previously stated, stocks are worth only what someone is willing to pay and they do not have an intrinsic value. The "fundamentals" advice is just smoke and mirrors to convince the average Joe to invest. Smart money knows these stock truths and avoid crashes. The lost dumb money proceeds ends up going to the smart money. We define this clueless group as those who don't know that they don't know.

You must be this size to ride......

The title of this blog usually refers to roller coaster rides and riders having a minimum height requirement. Recently, this has been taken to the next level at the new Universal Studios' Harry Potter themed park in Orlando, FL. Potential riders were turned away from the 'Wizarding World's' ride because their girth was too much for the safety restraints to secure them. This Yahoo! post exclaims the predicament.

Most people remember the feeling of not being tall enough to ride an amusement park ride, but some would-be riders of the signature attraction at Universal Studios' new "Wizarding World of Harry Potter" theme park in Orlando are being turned away because of their girth. The ride, "Harry Potter and the Forbidden Journey," employs individual restraints to keep each guest tucked in to his or her seat, but the restraints aren't large enough to accommodate heavier riders.

The article goes on to state a growing problem in the US, people are becoming significantly overweight (quote link does not work).

That's all fine and good, but considering the average weight of an American man is 191 pounds (and rising: in 1960 it was 166 pounds), "Harry Potter and the Forbidden Journey" could be turning away quite a few potential revelers.

I am not going to make an outright political statement here, but I am going to make a cultural critique. This effect is not limited to the US anymore just to point out the problem's extent. Everyone argues why the world is getting larger, I have a theory below.

We as Americans are getting larger due to two main reasons, lack of exercise and diet. The lack of exercise makes a person unhealthy. Before the exercise craze of the 1980's, most adult Americans did not exercise significantly. In the past average Americans were not the healthiest around, but at least the majority were not overweight. This leaves one last culprit, poor diet. I truly believe what is packing on the pounds is an overload of sugars in the diet. The easiest sugar sources to remove would be soft drinks and snacks. Even if one accomplishes that goal, the amount of sugar found in food sources such as cereals and other processed foods are enormous. Go to a supermarket and look at the amount of sugar in "healthy" cereals? Most tend to have a minimum of 19 grams per cup and the second ingredient on the box is sugar!! Multiply this amount through most of the foods we eat. Sugar has little nutritional value and creates body fat if a significant amount is consumed. Excessive amounts of consumed sugar is the problem.

The international sport

Beginning about a week and a half ago, one of the world's largest sporting events kicked off in South Africa, the 2010 FIFA World Cup. Soccer (football in most of the world) is the most played sport in the world. Personally, I do not like to watch it or play it. Not being a fan makes me wonder why is soccer universally loved? This post is dedicated to a theory on why soccer is the international sport.


Issue #1: Entertainment

For people to play a sport and continue a sporting tradition, the sport has to be entertaining. No one is going to play a boring sport. No one is going to watch a boring sport. What may be fun for one person, may be drudgery for another. This is universal to all competition. What is required in a sport's continuation generation to generation is mass entertainment appeal for both participants and those watching a sporting event.



Issue #2: Cultural adoption

Adopting a sport requires the game not to offend the native culture or religion. Another point that would make a sport's rejection would be the sport reminds a group of a rival, conquering tribe/nation.



Issue #3: Nonviolent action

It can be said that violent sports permeate the world. Their appeal tends to be limited though due to the destructive nature on participants. It is much preferable to play a sport that allows one to live a long, healthy life and even participate in one's later years in comparison to a senior broken body.



Issue #4: Accessibility for the masses

The majority of professional athletes in the major sports do not come from wealthy families. It is difficult to gather enough athletes for a successful league using only well-to-do athletes. Wealthy classes do not push chidren towards professional sports. Building a large fan base would also be difficult without the majority of average citizens. The classic sport that fits this category is skiing. The game has to be simple and be accessible to even the poorest children to be universally adopted.

Looking at the major sports limited to a few countries, here is where they fail to meet the criteria above.

Archery and shooting sports - Not entertaining, lacks accessibility since bows/arrows and firearms cost quite a bit.

Baseball - Need a glove, bat and ball to play. Baseball requires significant sized field. Inaccessible to the poor. Of the major American sports, this is the most international.

Cricket - Same as baseball except British. It has the further disadvantage of being complex.

American football - Violent

Running - Not entertaining for the masses

Golf - Extremely expensive sport requiring a course, thus, inaccessible to the poor.

Tennis - Tennis is similar to golf.

Basketball - The only disadvantage basketball has is the requirement of a hoop on a court. It has the potential to become universal sport over time.

Soccer fits all of the criteria above. Soccer only requires a ball and very little space to play. The rules are extremely simple. It also had the further advantage of being spread through the late British empire at the end of the 19th Century.

Vader in psychotherapy

This Yahoo! posting is funny. Darth Vader was analyzed for psychological disorders by a group of French researchers. This strikes me as being strange, because are we American's culturally inferior (according to the French) to Europeans? It appears they respect good American movies though. Moving on to subject at hand.

After analysis of Lord Vader's behavior in the six Star Wars episodes, their conclusion was Vader has borderline personality disorder (BPD). Their diagnosis of the Sith,

His enemies and underlings are painfully aware that Darth Vader is highly irritable and prone to bursts of anger. But until now, we don't think anybody knew that the Dark Lord of the Sith may have suffered from borderline personality disorder.

According to a popular blog over at CNN, French researchers have concluded that Mr. Vader (aka Anakin Skywalker) has, at various times, exhibited six of the nine criteria for borderline personality disorder. To be diagnosed with BPD, you need only showcase five of the behaviors.

They go onto address his unstable relationships with his son, wife and other family members. One may ask, what is BPD? Wikipedia defines it as in the link above (links do not work in quote below),

Borderline personality disorder (BPD) is a personality disorder defined in DSM-IV and described as a prolonged disturbance of personality function in a person (generally over the age of eighteen years, although it is also found in adolescents), characterized by depth and variability of moods.^[1] The disorder typically involves unusual levels of instability in mood; black and white thinking, or splitting; chaotic and unstable interpersonal relationships, self-image, identity, and behavior; as well as a disturbance in the individual's sense of self. In extreme cases, this disturbance in the sense of self can lead to periods of dissociation.^[2]

I am glad the French are doing cutting edge research. At least, it is entertaining.

The wave of pain

In previous posts, I gave a brief outline of Elliot Wave principle and how it pertains to investor psychology in stock markets (click here and here for the postings). I also spoke about the sovereign debt crisis in Greece along with the problems of the PIIGS. This post will bring together these two concepts and what is currently happening on the US stock exchanges.

Today was a massacre. The three major indexes (Dow, NASDAQ and S&P 500) all fell more than 3%. One major factor roiling the market is the continued debt crisis in Europe. Even after ~$1 trillion USD bail out a few weeks ago from the European Central Bank (ECB) and the International Monetary Fund (IMF), the European Union (EU) is still not economically stable. More debt does not solve Europe's fundemental marcroeconomic issues. The country that is the focus of attention is Hungary. Hungary is not part of the EU, but the former communist block country received significant amounts of loans from EU based banks. Hungary is threatening to default and the potential massive losses to those EU banks are both enormous and destablizing. The jobs report for May also came out worst than expected. These events contribute to the main stream media's story to why the market sell off occured.

Was this sell off predictable? It is impossible to determine the exact movement or level of the stock market on any given day. Anyone who says they can is a liar or an insider. Insiders can only predict with a certain stock for limited amounts of time (insider trading is illegal). For us average folk, it is possible to approximate the direction and pattern a market may take using Elliot Wave principle (EW) which is a technical analysis method based on the Dow Theory. EW prescribes potential outcomes. The EW community tends to believe we are in Primary wave 3 of a secular bear market. We are a heavily indebted society with a debt bubble that needs bursting. Accordingly, I believe we are at this stage in the bear market as of today:

Cycle 3 of 5 (Primary wave 3)
Intermediate 1 of 5
Minor 3 of 5
Minute 3 of 5

Remember, each wave is further divided into 5 subwaves in the repetitious fractal form. The minor 3 of 5 represents the largest 3rd wave of a fractal. I was skeptical about any waves smaller than the minors, but the last couple of weeks made me a believer. The 3rd wave is also the most violent in action. The sell off today represents the sudden movement expected in this bear market stage.

The answer for the predictability question is yes. The massive sell off was predictable being limited to approximate dates and amplitudes. I was prepared by going long on inverse ETFs or funds that respond in an inverse manner to the market movement (represented stocks go down, fund goes up). This current downturn should continue on for a least a few more trading days.

Firearms failure

Today is Memorial Day, a day to remember those who gave everything for our country. This post covers a topic that upsets me quickly. Our standard issue rifle in the military is the M4, a shorten version of the M16A2. It uses the standard NATO 5.56x45 mm ammunition or .223 Remington. This rifle is controversial for several reasons.

1. The lack of kill force from the smaller .22 bullet is a problem if the bullet travels at subsonic velocities.
2. Smaller mechanical components often fail to move causing the rifle to jam during combat in dirty conditions
3. Direct-impingement gas operation causes premature aging of the rifle's mechanical components due to excessive heat and fouling from direct exposure to the barrel.

When the initial M16s were given to soldiers in Vietnam, the weapons were a disaster. The inherent flaws mentioned above made the initial design useless to a soldier as they constantly jammed in the hot, humid jungles. After significant redesign (and change in powder), the rifle then became somewhat useful. Fast forward to the 1980's and beyond with the newer updated versions of the M16XX, the A2, A3 and A4. The newer incarnations limited the issues listed above through engineering improvements, but still it is a flawed design in nature. No other current assault rifle uses the direct-impingement system. It is a failed design and should be replaced with a short stroke or long stroke gas operating system. The internal moving parts also should have greater clearances preventing the rifle from jamming due to contamination.

The longer 20 inch barrel makes the NATO 5.56x45 mm ammo useful on the battlefield, but to what degree is still a topic of hot debate. Other countries use this round for their troops, thus it has validity as a reliable munition. Decreasing the barrel to 14.5 inches as in the M4, the velocity decreases to the point it is ineffective. This article reveals the inadequacies of the M4 in our current Afghanistan conflict. The Army even admits at long range,

But a U.S. Army study found that the 5.56 mm bullets fired from M-4s don't retain enough velocity at distances greater than 1,000 feet (300 meters) to kill an adversary. In hilly regions of Afghanistan, NATO and insurgent forces are often 2,000 to 2,500 feet (600-800 meters) apart.

At the end of the article, the expert's opinion rings true,

Martin Fackler, a ballistics expert, also defended the 5.56 mm round, blaming the M-4s inadequate performance on its short barrel, which makes it easier for soldiers to scramble out of modern armored vehicles.

"Unfortunately weapon engineers shortened the M-16's barrel to irrational lengths," Fackler said. "It was meant for a 20-inch barrel. What they've done by cutting the barrel to 14.5 inches is that they've lost a lot of velocity."

When a soldier's rifle fails, he is defenseless. Not only does he become an easy target, others in his company are easier targets for the enemy. This is a serious problem.

There is an easy, intermediate solution. Immediately replace the issued M4 with the M16A4 and it would not cause a large ordinance supply problem. It seems politics rule the day and our soldiers are paying with their lives. Since the M16 was not replaced years ago, it demonstrates who dominates our modern military, the military industrial complex.

Glass of wine for the brain?

Health studies are constantly being completed. The results are sometimes even surprising. This Spanish study links a delay in Alzheimer's disease to moderate drinking in women. The study took into lifestyle considerations while performing the research. Results were conclusive with the alcohol consumption benefiting nonsmoker women the most.

"Our results suggest a protective effect of alcohol consumption, mostly in non-smokers, and the need to consider interactions between tobacco and alcohol consumption, as well as interactions with gender, when assessing the effects of smoking and/or drinking on the risk of Alzheimer's disease," the study's lead author, Ana M. Garcia, from the University of Valencia's department of preventive medicine and public health, said in a news release.

This seems odd when initially thinking about the issue, but not really. Drinking effects the brain's function (ever had a conversation with a rational drunk?) and specially the chemistry. The study's authors point this out.

"Interactive effects of smoking and drinking are supported by the fact that both alcohol and tobacco affect brain neuronal receptors," Garcia explained.

The take home message from this study is scientists may know quite a few things about the human body, but a significant amount of study could still be completed on the things we don't know. The medical field has much to learn and research should be heavily funded.

Good upbringing is warm as apple pie

I occasionally cover health topics on this blog. This study that was recently published supports the nurture side of the nurture versus nature argument. The study examined the blood of 53 individuals from lower socioeconomics status (SES) and examined for genetic markers of inflammation. In layman's terms, they are trying to track potential, chronic illness later in life and correlate it with the factor how close an individual is to their mother. Apparently, chronic illness and inflammation are correlated. Correlations do not mean guarantees, but are higher probabilities. The article puts it simply.

Chronic inflammation is linked to a number of conditions, including cardiovascular disease, diabetes, depression and cancer. Cole compared inflammation to a "fertilizer" that feeds disease. For example, in women who have been successfully treated for breast cancer, those who show high levels of inflammation have twice the risk of a recurrence of the cancer, research has shown.

This study found that having a harsh life when young does lead to a greater number of inflammation markers. The environment is activating certain genes. The article states.

Early life experiences can lead to the release of hormones that channel the body into being more or less prone to chronic inflammation, Cole said.

Harsh family life

In another recent study, published online April 29 in Psychological Science, researchers found that adolescent girls who reported having harsh family lives growing up - abusive, neglectful or violent - had increasing markers of inflammation during the 18-month study period compared with girls who came from more stable homes.

Neither an abusive home nor a cool relationship with mom automatically translates into disease later on in life, however. Cole said early family experiences are one factor that shapes the way the body responds to stress. From his research, Cole hopes to develop a checklist of risk factors, including family upbringing, that can guide treatment decisions.

Being a good loving family not only spiritually encourages people, it physically helps. The article gives hope by also stating that coming from a low SES is not a cause for the markers if the family is loving and caring. This gives further hope for those who come from disadvantaged backgrounds.