Category Archives: Art

Startup Theories | Big Bang Disruptions and Marketing Myopia

Marketing Myopia: Levitt’s 1960 HBR article

The point of Levitt’s article was that businesses should focus on customer needs rather than business ideas. The illusion that a firm is in a growth industry is a common one. There are no growth industries! Presumptive growth is not guaranteed. They instead need focus on the vision of customer needs. You are not in the business of a particular industry, you’re in the business of customer value creation.

People cannot accurately predict the future and therefore there is no such thing as a growth industry. Management needs to see the broader market; you need to be single minded about what the customer wants.

Self-Deceiving of Management:

  • Growth through market segment expansion
  • Too much faith in manufacturing
  • Preoccupation of careful scientific experiments;
  • Too narrow understanding of the customer / narrow industry view.

Examples, Petroleum = Energy not oil!

Corner Store = Food distribution not retail groceries!

Buggy = Transportation not horse and carriage!

Retirement Homes  = Childhood for Seniors

If the management understood that they were in the transportation industry not in the horse and carriage industry; they might well have avoid the decline of GM in the 2000s.

Big Bang Disruptions:

The idea with Big Bang Disruption is it is an article that buildings on Christensen’s Crossing the Chasm.

Key takeaways:

  • Make your exit at the right time;
  • Jump before your garbage falls on you;
  • Wrong attitude or right attitude (is this Big Bang Disruption really for MBAs and academics?)
  • They aren’t trying to disrupt you, you’re banker job is just part of the debris.

Unencumbered development: hackathon culture.

Unconstrainted growth: there are the 5 segments by Everett Rogers Crossing the Chasm, now there are trial users.

Undisciplined strategy: start life with a better performance at a lower price.  Venmo; faster cheaper. Not trying to disrupt your business, you’re business is collateral damage. Be ready for the fast escape.

  • Consult your truth tellers: candor Jack Welch.
  • Pinpoint your market entry:
  • Launch seemingly random experiments: confuse people
  • Survive catastrophic success
  • Capture winner-take-all markets
  • Create bullet time
  • Anticipate saturation
  • Shed assets before they become liabilities
  • Quit while you’re ahead
  • Escape your own black hole
  • Become someone else’s components
  • Move to a new singularity.
  • Strategic Discipline: Compete on all three disciplines at once.
  • New-Product Marketing: Market to all segments of users immediately. Be ready to scale up and exist swiftly.
  • Innovation Method: rapid-fire, low-cost experimentation on popular platforms (Reddit, Facebook, Twitter)d onto the technology needed to deliver the Model-T.

Key Takeaways from “A Random Walk Down Wall Street”

[The following should not be used as the basis for any financial transactions. But this is a synopsis of A Random Walk Down Wall Street. The book is the “cat’s meow” for understanding how Wall Street works. Malkiel’s conclusion is that it makes more sense to invest in an Index (passive investment) in the long run given the underperformance of active investors…I don’t 100% agree or disagree; I’m merely seeking to understand.]

My initial interpretation of this book is that it further strengthens what I have studied in the social sciences (political science, economics, history). The book points out that humans are un-predictable in most instances. Perhaps humans are emotional creatures who occasionally act rationally, but only when they aren’t emotionally attached to the decision. Whether it’s the Berlin Wall coming down, or the Enron financial debacle, predicting future events seems like it would be something tough to do. And of course, humans are beholden to a lot of things that we do not fully understand from blood sugar levels to our daily dosage of mainstream media propaganda. Perhaps the way to predict the markets is still elusive, despite efforts made by various people.” – Professor Nerdster

Chapter 1: The Guide and His Core Idea: Shit is Random

This chapter talks about the qualification of Professor Malkiel as a guide, as well as, about investment and meaning of Random Walk Down Wall Street.

Professor Malkiel validates his expertise based on an impressive career. His first job was as a Market Professional with one of Wall Street’s leading investment firm, then he became an Economist specializing in securities markets and investment behaviour, and lastly he became as a lifelong investor and successful participant in the market. And a Prof at Princeton in New Jersey.

Random Walk is one in which future steps or directions cannot be predicted on the basis of past actions. When you apply this to the stock market, it means that short-run changes in stock prices cannot be predicted. This splits the professionals from academics and the “pros” have created their own techniques. Market professionals have two techniques: fundamental and technical analysis, while Academics created the “new investment technology theory”. Later on, the two joined forces with the conclusion that the stock market can be predictable somewhat but there are pockets of inefficiency….

Academics today accept what Malkiel is saying in this book: “predicting the future is kinda tough, eh?” Flash back to the professor’s lounge, the top finance professor G at B-school X says  “We need jobs so let’s use complex statistical methods to map out human behaviour and stock performance because, while that only works randomly, humans are emotional after all, we need jobs and we can say ‘it’s a learning tool’ and we can then get paid!” Finance professor Y smiles, “Right, I mean we do not have much predictive power, otherwise we would be working in the industry right?” And everyone laughed because they know that even portfolio managers can’t predict the future mathematically.

Professor Malkiel explains in this chapter that this book is not a book for speculators. He even expounds the difference between investing and speculating distinguishing it from its definition. Investing is a method of purchasing assets to gain profit in the form of reasonably predictable income like dividends, interest, or rentals, and appreciation over the long term. Investing involves time period for the investment return and predictability of the returns while speculation isn’t.

This book is not promising to make you rich but will help nourish and educate you about investing. It even gives a preview of the importance of inflation and gives suggestions that even with inflation, investors should not dismiss the possibility that growth in valuation can be over stated, for example.

Investing requires a lot of work, no mistake about it. You should embrace the fact that investing is fun. It is exciting to see your investment returns and how well they do.

All investment returns are dependent. It’s a gamble, you can only know your success if you have the ability to predict the future.

For pros in the investment community, they use two approaches to asset valuation: the firm-foundation theory or the castle-in-the-air theory. Professor Malkiel explains the difference between the two in this chapter.

The firm-foundation theory argues that each investment has a firm anchor of something called intrinsic value. It means that when market prices fall down, a buying or selling opportunity arises.  He explains that with the use of The theory of Investment Value, wherein they determine the intrinsic value of stock and then use the concept of discounting in the process. Discounting basically involves looking at the income backward rather than seeing how much money you will have in the next year; you look at the money expected in the future and see how much less it is currently worth. This approached is in accordance with John B. Williams’ study. Malkiel even explicates that intrinsic value of a stock is equal to the present or discounted value of all its future dividends. This theory is respectable in academia, taught in the MBA and the CFA and is best with common stocks.

The Castle-in-the-Air Theory of investing concentrates on psychic values. According to John Maynard Keynes, professional investors prefer to devote their energies not to estimate intrinsic values, but rather analyze how the crowd of investors is likely to behave in the future and how they tend to build their dreams: on castles in the air and selling stock to the ‘greater fool’. Keynes also applied psychological principles rather than financial evaluation to study the stock market.

Chapter 2: History Gets Repeated in New Ways All the Time

Greed becomes an essential feature in human history, it’s not a bug but a feature to use computer terminology. People use money in any activity with the assumption that it can reach their dreams. Although, the castle-in-the-air theory can explain such speculative activity, outguessing the reactions of a crowd is a most dangerous game. History does teach this lesson, over and over..

Unsustainable prices may persist for years but eventually, reverse and this reversal is often very sudden. The bigger the activity, the greater the results of the fall of the so-called cloud castle. Only a few ‘builders’ can anticipate and escape without losing a great deal of a money when everything falls apart.

Example of this happening in the past. First, the Tulip-Bulb Mania which is one of the most spectacular get-rich-quick schemes in history. Dutch speculators invested in tulips, expecting to increase their wealth, even selling their personal belongings to obtain what they think/thought was a smart investment, considering offers that are hard to resist that later on lead to deflation which grows at a rapid pace. The end result is that the price of tulips was a lot of wealth.

The key is applying the greater fool principle, all you need is someone more foolish than you to buy the stock you are selling in order for you to make a profit and get out from under the cloud castle when it collapses…hard to time that of course.

In South Sea Bubble there was a lot of prosperity in Britain as they led the world in financial and accounting innovation and also were an island, that was hard to invade etc etc. As an economy improves, the citizenry tend use their money for investment. By greed, companies arise where they fight with each other to prove who is the better investment; giving offers that are hard to resist. Apparently, this lead the South Sea Company to fall like another castle in the air, making the public suffer. To protect them from further abuses, the Parliament passed the Bubble Act that forbids the issuing of stock certificates by companies.

In The Florida Real Estate Craze, Professor Malkiel discusses the US as the land of opportunity. The US continued the British emphasis on freedom and growth. The country had been experiencing incomparable prosperity. Their mood of optimistic and faith in the business led to widespread enthusiasm about real estate and the stock market. But, inevitably the boom ended in 1929. New buyers could no longer be found and prices softened and there was a down turn, suddenly a mortgage is ‘under water’ and it doesn’t look so sharp to invest in all of the sudden…

With Florida’s experience, investors should avoid a similar misadventure on Wall Street. But, Florida is the start of what comes next; stock-market became a national pastime, the market’s percentage increase and the price rises for the major industrial corporations.

Not everybody is speculating in the market, but still, the speculative spirit is as widespread as it is intense. Remember that speculating = gambling. More importantly, stock-market speculation is central to the institutionalization of gambling in Anglo-culture. Unfortunately, there are hundreds of operators glad to help the public to construct their dreams. Manipulation of the stock exchange happens. Example of which is the operation of investment pools where they appoint a pool manager that promises not to double-cross each other through private operations. There is a kick-ass book on this topic call Business Adventures which I will be writing a synopsis of in the future.

Professor Malkiel points out that a study of these events can help equip the investors for personal survival. Losers are those who are unable to resist being carried away. It is not that hard to make money in the market, what is hard is to avoid the temptation of throwing your money into any and all speculative activities. The ability to avoid such mistakes is probably the most important factor in maintaining one’s capital and allowing it to grow. According to Professor Malkiel, the lesson is so obvious and yet so easy to ignore.

Chapter 3: Stock Valuation has been Bullshit for a long time

This chapter discusses the Stock Valuation from the sixties through the nineties involving examples and explanations of certain events.

Professor Malkiel starts by relating certain peculiar events, including when General Electric announced about the diamond that was unsuitable for sale but the shares still rise. He elaborates and cites the growth in stock in the new era where investors created any new offering could increase the valuation and thus the stock price through trading. There is this hilarious pattern from 1959 to 1962 called the of the tronics boom, because the offerings include the word electronics in their title, even though have nothing to do with electronics. The name was the game. This form of manipulation highlights how few investors knew what was really going on and just picked ‘good sounding’ investments.

Synergism is the quality of having two plus two equal five. Thus, two separate companies with earning power which might produce a consolidated higher value. This profitable new creation is often called conglomerate. The merger would allow for the achieving of a greater financial strength and enhances marketing capability. Definitely can work out if executed well and the cultures are similar enough.

In light of this the commandments for Fund Managers are simple: Concentrate your holdings in a few stocks and don’t hesitate to switch the portfolio around if there is more desirable investment appearing on the horizon. Make sure that the market recognizes the beauty of your stock now-not far into the future. Hence, the birth of the so-called concept stock.

He further talks about the Nifty Fifty. This is big capitalization stocks which means that an institution could buy a good-sized position without disturbing the market. The craze ends like all others. The problem is simple, the stocks become overpriced and collapse like any other cloud castle i.e. the greater fools cannot be found.

The Roaring Eighties have its fair share of excesses, and investors paid the price for building their dreams. The decade starts with another new-issue boom.

Professor Malkiel explains the success of this high-technology new-issue, the almost perfect replica of the 1960s episode. For investors, initial public offerings are the hottest game in town. The stocks are not quite ready and needed some development. They encounter significant technological obstacles that hinder the stock’s valuation.

Concepts of Biotechnology Bubble. This technology promises to produce a group of products where the valuation levels of stocks reach previously unknown levels to investors and since biotech companies have no current earnings and little sales, new valuation methods need to be formulated.

The lessons of market history are clear, according to Professor Malkiel. Style and fashions often do play a critical role in pricing. The stock market at times adjusts well to the castle-in-the-air theory. For this reason, the game of investing can be extremely dangerous.

The Nervy Nineties

Japan’s real estate and stock markets is considered one of the most spectacular booms and busts. During their growth, firms often make more money from trading stocks than from producing goods, but the collapse destroys the myth that Japan was different and its asset prices would always rise.

The Internet Craze of the Late 1990s

Stocks for companies “on the Internet” could rise tenfold in a single year, and this fascinated investors. The industry is strongly competitive and investors did not focus on the great risks that small companies may have faced. No one can deny that the Internet is a big deal, that it will enjoy explosive growth, but in a highly competitive industry, there will be many losers and only one victor per vertical (sub-category i.e. Facebook for social media, Google for search etc). Many firms like, were too speculative about the potential of increased information access to be profitable, oh and also a bag of dog food is very expensive to mail….

As Professor Malkiel‘s final word for this chapter, it seems that markets at times can be irrational, that we should abandon the firm-foundation theory. The market eventually corrects this irrationality. It eventually sees the true value and main lessons that investors must notice.

Chapter 4: Four Determinants that Affect Share Price

In the first chapter, the firm-foundation theorists viewed the worth of any share as the present value of all dollar benefits the investor expects to be received from it. ‘Present’ means that dollars expected and those anticipated later on must be discounted. In a very real sense, time is money, because if you have the money now you could be earning interest on it.

He even further explains that many corporations preferred to institute stock buy-back programs meaning, those activites tend to increase capital gains and the growth rate of the company’s earnings and stock price. It makes options more valuable.

Professor Malkiel believes there are major four determinants that affect share value. Each determinant has its rule:

The expected growth rate: A rational investor should be willing to pay a higher price for a share, the larger the growth rate of dividends and earnings. A rational investor should be willing to pay a higher price for a share the longer an extraordinary growth rate is expected to last.

The expected dividend payout: A rational investor should be willing to pay a higher price for a share, other things being equal, the larger the proportion of a company’s earnings that is paid out in cash dividends.

The degree of risk: A rational investor should be willing to pay a higher price for a share, other things being equal, the less risky the company’s stock. Risk plays an important role in the stock market. It also affects the valuation of a stock. The more respectable a stock is the less risk it has and the higher its quality. But, Professor Malkiel states that it is impossible to measure the risk. For most investors, you value the stable returns and not speculative hopes.

The level of market interest rates: A rational investor should be willing to pay a higher price for a share, other things being equal, the lower are interest rates.

He further cites that in using and testing these rules there are two Important Caveats or warnings to consider:

Warning 1: Expectations about the future cannot be proven in the present: Predicting future earnings and dividends is dangerous. It requires not only the knowledge and skill but also the intelligence of a psychologist and persuasion sciences. It is extremely difficult to be objective. The point is, no matter what you use for predicting the future, it always rests in part on the uncertain assumption.

Warning 2: Precise figures cannot be calculated from undetermined data: The longer one projects growth, the greater the stream of future dividends. The point is that the mathematical accuracy of a formula is based on the tricky ground of forecasting the future. They are estimates what might happen in the future, and depending on that, you can convince yourself to pay any price you want for a stock.

These rules and caveats were tested where Professor Malkiel cites examples and gives a conclusion that with these, market prices seem to behave in a way,  that can lead to expectation. It is comforting to know that to this extent there is an underlying rationality to the stock market. He attaches an additional caveat: What’s growth for the goose is not always growth for the gander.

Fundamental considerations do have an influence on the market price: the price-earnings multiples are influenced by expected growth, dividend payouts, risk, and the rate of interest. Higher expectations of earnings growth and higher dividend payouts tend to increase price-earnings multiples. Higher risk and higher interest rates tend to pull them down. There is a logic to the stock market. Stock prices tied to have fundamentals but this is easily pulled up and dropped at random. It seems very sensible that both views of security pricing tell us about the actual market behavior: 1) expectations about the future cannot be proven in the present, 2) precise figures cannot be calculated from undetermined date.

Chapter 5: The Weak, Semi Strong and Strong forms of Efficiency

In this chapter, Professor Malkiel starts the discussion about the three versions of random-walk or efficient-market theory. The weak, the semi-strong, and the strong. All these three embrace the general idea that except for long-run trends, future stock prices are difficult, if not impossible, to predict. The weak, you cannot predict future stock prices on the basis of past stock prices; in the semi-strong, you cannot even utilize published information to predict future prices and; in the strong, nothing, can be of use in predicting future prices. He further states that the weak form attacks the technical analysis, and the semi-strong and strong forms argue against many of the beliefs held by those using fundamental analysis.

Technical analysis is the method of predicting the appropriate time to buy or sell a stock using essentially the making and interpreting of charts. The chartists study the past for a clue to the direction of future change. They believe that the market is only 10 percent logical and 90 percent psychological. Fundamental analysis is the technique of applying the principles of the firm-foundation theory to the selection of individual stocks. It takes the opposite of Technical as fundamentalists seek to determine an issue’s proper value.

Principles of Technical Analysis

  1. All information about earnings, dividends, and the future performance of a company is automatically reflected in the company’s past market prices.
  2. Prices tend to move in trends: A stock that is rising tends to keep on rising, whereas a stock at rest tends to remain at rest.

Why is charting supposed to work? Professor Malkiel shares an explanation of why technical analysis/charting is supposed to work: First, it has been argued that the crowd instinct of mass psychology makes it so. When investors see the price of a speculative favourite going higher and higher. Second, there may be unequal access to fundamental information about a company. When some favourable piece of news occurs, it is alleged that the insiders are the first to know and they act, buying the stock and causing its price to rise (insider trading in my opinion).

Why Might Charting Fail to Work? According to Professor Malkiel, first, it should be noted that the chartist buys in only after price trends have been established, and sells only after they have been broken. Second, such techniques must ultimately be self-defeating. As more and more people use it, the value of any technique depreciates.

Chartists now use the services of a personal computer to put their data together. They are now known as Technicians where individuals can easily access the charts for different time periods.

Professor Malkiel illustrates the difference between the technician and the fundamentalist; wherein, the technician is interested only in the records of the stock’s price, while the fundamentalist’s primary concern is with what a stock is really worth; its true value.

Why Might Fundamental Analysis Fail to Work? There are three potential flaws that the author cites: First, the information and analysis may be incorrect, Second, the security analysts’ estimate of value may be faulty and third, the market may not correct its mistake and the stock price might not converge to its estimated value.

There are rules that are developed using Fundamental and Technical Analysis Together:

  1. Buy only companies that are expected to have above average earnings growth for five or more years;
  2. Never pay more for a stock than its firm foundation of value and;
  3. Look for stocks whose stories of anticipated growth are of the kind on which investors can build castles in the air.

Chapter 6: Predicting the Future Using Charts is not too smart…

Professor Malkiel elaborates about Technical Analysis where they build their strategies upon dreams and expect their tools to tell them which castle is being built and how to get in on the ground floor. By stating some examples, Professor Malkiel comes up with two considerations:

  1. after paying transactions costs, the method does not do better than a buy-and-hold strategy for investors, and;
  2. it’s easy to pick on.

The technician believes that knowledge of a stock’s past behavior can help predict its probable future behavior. In other words, the sequence of price changes before any given day is important in predicting the price change for that day. This might be called the wallpaper principle.

Just What Exactly Is a Random Walk?

Professor Malkiel states that this topic, for many people, appears to be nonsense; that even most reader of financial pages can easily spot patterns in the market. The chart seems to display some obvious patterns. He even tries an experiment in which he asked his students to participate a pattern but then reveals that this is derived from random coin tossing. Malkiel’s class trick is to have a chart that looks like a normal stock price chart and even appears to display cycles.

The Author further discusses some tests to elaborate Technical systems more and includes in this chapter some brief details.

The Filter System

Under the popular “filter” system, a stock that has reached a low point and has moved up is said to be in an uptrend. A stock that has reached a peak and has moved down is said to be in a downtrend. This scheme is very popular with brokers, and forms of it have been recommended. This filter method is what lies behind the popular “stop-loss” order favoured by brokers.

The Dow Theory

A great tug-of-war between resistance and support. When the market tops out and moves down, that previous peak defines a resistance area, because people who missed selling at the top will be eager to do so if given another opportunity.

In the relative-strength system, an investor buys and holds those stocks that are acting well, outperforming the general market; The stocks that are poor relative to the market should be avoided or, perhaps, even sold short.

Price-volume systems suggest that when a stock rises on large or increasing volume, there is an unsatisfied excess of buying interest and the stock can be expected to continue its rise; when a stock drops in large volume, the sell signal is given. The investor following such a system is likely to be disappointed in the results.

The past history of stock prices cannot be used to predict the future in any meaningful way. Technical strategies are usually amusing, often comforting, but of no real value. This is the weak form of the random-walk theory. The most common complaint about the weakness of the random-walk theory is based on a distrust of mathematics and a misconception of what the theory means.

Another major advantage according to Professor Malkiel to a buy-and-hold strategy, is when buying and holding enable you to postpone or avoid capital gains taxes. If this buying and holding is suited to your objectives, then it will enable you to save on investment expenses, brokerage charges, and taxes, and at the same time, achieve overall performance that at least as good as that obtainable using technical methods.

Chapter 7: Fundamental Analysis is getting closer to the truth but also sucks

In this chapter, Professor Malkiel mentions how good Fundamental Analysis is through his examples and explanations. He cites two extreme views about the efficacy of fundamental analysis. The view of many is that fundamental analysis is becoming more powerful and skill-based all the time; and, an opposite-extreme view which is taken by much of the academic community that fundamental analysis gets you close to the truth but also isn’t that great either. This chapter will also recount the major battle between academics and market professionals.

Forecasting future earnings is the security analysts’ purpose. For professionals, expectation of future earnings is still the most important single factor affecting stock prices. This thinking fails in the academic world. According to them, calculations of past earnings growth are no help in predicting the future growth. If you had known the growth rates of all companies, this will not help you in predicting what growth they would achieve.

He points out that we should not take for granted the reliability and accuracy of any judge, no matter how expert they are. When one considers the low reliability of so many kinds of judgments, it does not seem too surprising that security analysts, with their particularly difficult forecasting job, should be no exception. There are four factors that Professor Malkiel mentions to help explain why security analysts have difficulty in predicting the future: The influence of random events; the creation of dubious reported earnings through creative accounting procedures; the basic incompetence of many of the analysts themselves and; the loss of the best analysts to the sales desk or to portfolio management roles.

Do Security Analysts pick winners? Professor Malkiel narrates that the real test of the analyst lies in the performance of the stocks he recommends. Analyze investment performance, not earnings forecasts.

Can any Fundamental System Pick Winners?

Research has been done on whether above-average returns can be earned by using trading systems based on press announcements of new fundamental information and the answer, according to Professor Malkiel, seems to be clearly “Nope.” Systems are the device in which a news event such as the announcement of an unexpectedly large increase in earnings or a stock split triggers a buy signal.

Many professional investors move money from cash to equities or long-term bonds based on their forecasts of fundamental economic conditions. Several institutional investors now sell their services as asset allocators or market timers. According to Professor Malkiel, trying to do market timing is likely, not only not to add value to your investment program, but to be counterproductive.

Professor Malkiel further explains in this chapter what semi-strong and strong forms of the Random-walk Theory. He says that semi-strong form says that no published information will help the analyst to select undervalued securities while strong form says that absolutely nothing that is known or even knowable about a company will benefit the fundamental analyst.

The random-walk theory does not state that stock prices move aimlessly and erratically and are insensitive to changes in fundamental information, but on the contrary, the point of it is just the opposite: The market is so efficient prices move so quickly when new information arises that no one can buy or sell quickly enough to benefit.

Chapter 8: Modern Portfolio Theory is the latest craze and does work for some

In this chapter, Professor Malkiel narrates that a new strategy is needed, that this is the part of the book that states all about the new investment technology created within the academic world. One insight he shares is the Modern Portfolio Theory (MPT) that is now widely followed on the Street since it is so basic. In this chapter, he further describes the origins and applications of Modern Portfolio theory.

Defining Risk: according to the American Heritage Dictionary, it is the possibility of suffering harm or loss. Academics have accepted the idea that risk for investors is related to the chance of disappointment in achieving expected security returns. Financial risk has generally been defined as the variance or standard deviation of returns. Professor Malkiel also specifies a simple example that will illustrate the concept of expected return and variance and how they are measured. One of the best-documented propositions in the field of finance is that, on average, investors have received higher rates of return for bearing greater risk.

Portfolio theory begins with the assumption that all investors are risk-averse. They want high returns and guaranteed outcomes. The theory tells investors how to combine stocks in their portfolios to give them the least risk possible, consistent with the return they seek. It also gives a definite mathematical justification for the investment that is a sensible strategy for individuals who like to reduce their risks.

The theory was invented in the 1950s by Harry Markowitz. He discovered that portfolios of risky stocks might be put together in such a way that the portfolio as a whole would actually be less risky than any one of the individual stocks in it. The mathematics of modern portfolio theory is challenging; it fills the journals and, incidentally, keeps a lot of academics busy.

From the example given by the author, he finds that negative correlation is not necessary to achieve the risk reduction benefits from diversification. This correlation coefficient is used to measure the extent to which different markets hit their peaks and valleys at different times. They are the key element in Markowitz’s analysis. A perfect positive correlation indicates that two markets are in lockstep, moving up and down at precisely the same time whereas a perfect negative correlation means that two markets always move in opposite direction. According to Markowitz’s great contribution to investors’ wallets is his demonstration that anything less than perfect positive correlation can potentially reduce risk.

Professor Malkiel includes some charts and figures to further explain the theory or to demonstrate the point about diversification and its benefits. He further says that movements in long-term bonds do not mirror those of other assets, and long-term bonds tend to provide relatively stable returns when held to maturity.  Moreover, exhibits shown in the book demonstrate that three-year correlations of real estate bonds with the market are sufficiently low to provide important diversification benefits and have shown no tendency to become less favourable over time. Professor Malkiel will further discuss portfolio theory to craft appropriate asset allocations in the succeeding chapters.

Chapter 9: How Modern Portfolio Theory works 

In this chapter, Professor Malkiel begins with a refinement to modern portfolio theory citing that diversification cannot eliminate all risk because all stocks tend to move up and down together. Thus, in practice, it reduces some but not all risk. The basic logic behind the capital-asset pricing model is that there is no premium for bearing risks that can be diversified away; thus, to get a higher average long-run rate of return, you need to increase the risk level that cannot be diversified away.

Systematic risk, also called market risk, captures the reaction of individual stocks to general market swings. This is part of the total risk or variability that arises from the basic variability of stock prices in general market. The remaining variability in a stock’s returns is called unsystematic risk. Some stocks and portfolios tend to be very sensitive to market movements. This relative volatility or sensitivity to market moves can be estimated on the basis of the past record, popularly known by the Greek letter beta. Beta is based on the past however….

Professor Malkiel says that what makes new investment technology different is the definition and measurement of risk. Before the capital-asset pricing model, it was believed that the return on each security was related to the total risk inherent in that security. It was believed that the return from a security varied with the instability of that security’s particular performance, with the variability or standard deviation of the returns it produced.

The basic logic behind the capital-asset pricing model states that stocks can be combined in portfolios to eliminate specific risk, only the systematic risk will command a risk premium. Investors will not get paid for bearing risks that can be diversified away. The proof of the capital-asset pricing model can be stated as follows: If investors did get an extra return for bearing unsystematic risk, it would turn out that diversified portfolios made up of stock with large amounts of unsystematic risk would give larger returns than equally risky portfolios of stocks with less unsystematic risk.

Serious cracks in the CAPM will not lead to an abandonment of mathematical tools in financial analysis and return to traditional security analysis. There are reasons to avoid a rush to judgment: First, it is important to remember that stable returns are preferable less risky than very volatile returns; Secondly, you must keep in mind that it is very difficult to measure beta with any degree of precision and; Finally, investors should be aware that even if the long-run relationship between beta and return is flat, it can still be a useful investment management tool.

If beta is badly damaged as an effective quantitative measure of risk, is there anything to take its place? Stephen Ross has developed a theory of pricing in the capital markets called arbitrage pricing theory (APT). It has a wide influence both in the academic community and in the practical world of portfolio management. To understand its logic, one must remember the correct insight underlying the CAPM.

The only risk that investors should be compensated for bearing is the risk that cannot be diversified away. Only systematic risk will command a risk premium in the market. It appears that several other systematic risk measures affect the valuation of securities.

Chapter 10: The Market is Efficient with Pockets of Inefficiency

This chapter will tackle the attempts to show that the market is not efficient and that there is no such thing as a profitable random walk through Wall Street. Professor Malkiel reviews all the recent research proclaiming the demise of the efficient-market theory; EMT after all implies that market prices are unpredictable but hyper efficient in correcting itself. He concludes that obituaries are greatly exaggerated and the extent to which the stock market is usefully predictable has been vastly overstated.

Recall that the weak form of the efficient-market hypothesis says simply that the technical analysis of past price patterns to forecast the future is useless because any information from such an analysis will already have been incorporated in current market prices.

A random walk would characterize a price series where all subsequent price changes represent random departures from previous prices. This model states that investment returns are serially independent of each-other and that their probability distributions are constant through time. More recent work, however, indicated that the random-walk model does not strictly hold. Some consistent patterns of correlations, inconsistent with the model, have been uncovered. It is less clear that violations exist of the weak form of the efficient-market hypothesis, which states only that unexploited trading opportunities should not persist in any efficient market. (1) Stocks do sometimes get on one-way streets; (2) But eventually stock prices do change direction and hence stockholder returns tend to reverse themselves; (3) Stocks are subject to seasonal moodiness, especially at the beginning of the year and the end of the week.

Academics and financial analysts in the semi-strong school of market efficiency believe that all public information about a company is always reflected in the stock’s price. They are skeptical about the ability of fundamental security analysts to pore over data concerning a company’s earnings and dividends in an effort to find undervalued stocks, which represent good value for investors. Professor Malkiel cites some qualifications of value techniques: look for securities that (1) are relatively small, smaller is often better; (2) sell at low multiples compared with their earnings; (3) have low prices relative to the value of their assets, and; (4) have high dividends compared with their market prices.

Dogs of the Dow strategy is an interesting strategy that became popular in the mid-1990s. This is to combine some of the value patterns with a general contrarian style of investing consistent with the idea that out-of-favor stocks eventually tend to reverse direction.

Concluding comment of Professor Malkiel: market valuations rest on both logical and psychological factors. The theory of valuation depends on the projection of a long-term stream of dividends whose growth rate is extraordinarily difficult to estimate. Thus, fundamental value is never a definite number. It is a band of possible values, and prices can move sharply within this band whenever there is increased uncertainty. The appropriate risk premiums for common equities are changeable and far from obvious either to investors or to economists. There is room for the hopes, fears, and favorite fashions of market participants to play a role in the valuation process.

Chapter 11: How to Walk down Wall Street now that you know it is random

Part four of the book explains how-to-do-it guide for your random walk down Wall Street. In this chapter, Professor Malkiel offers general investment advice that should be useful to all investors, even if they don’t believe that security markets are highly efficient. He also says that you can take your random walk only after you have made detailed and careful plans with regard to all your investments, including your cash reserves. Think of the advice that follows a set of warm-up exercises that will enable you to reduce your income taxes and risk, at the same time increase your returns.

Exercise 1: Cover Thyself with Protection

Patience is key element in investing; you can’t afford to pull your money out at the wrong time. You need staying power to increase your earning attractive long-run returns. That’s why it is important to have non-investment resources to draw on should any emergency strike you or your family.

Exercise 2: Know your Investment

Determining clear goals is a part of investment process with disastrous results. You must decide what degree of risk you are willing to assume and what kinds of investments are most suitable to your tax bracket.

Exercise 3: Dodge Uncle Sam Whenever You Can

One of the best ways to obtain extra investment funds is to avoid taxes legally. Professor Malkiel says that there are no income taxes on money invested in a retirement plan until you actually retire and use the money. Professor Malkiel cites some plans to give some examples.

Exercise 4: Be Competitive; Let the Yield on your Cash Reserve Keep Pace with Inflation

As Professor Malkiel mentions, some of the ready assets are necessary for pending expenses. There are four short-term investment instruments he points out that can at least help stand up to inflation. These are (1) money-market mutual funds; (2) money-market deposit accounts; (3) bank certificates; and (4) tax-exempt money-market funds.

Exercise 5: Investigate a Promenade through Bond Country

In this particular topic, Professor Malkiel mentions four kinds of bond purchases according to his view: (1) zero-coupon bonds, (2) bond mutual funds, (3) tax-exempt bonds and bond funds, and (4) U.S. Treasury inflation-protection securities.

Exercise 6: Begin Your Walk at Your Own Home; Renting Leads to Flabby Investment Muscles

The natural real estate investment for most people is the single-family home or the condominium.   They are encouraging home ownership and cites two important tax breaks: (1) Although rent is not deductible from income taxes, the two major expenses associated with homeownership-interest payments on your mortgage and property taxes are fully deductible; (2) realized gains in the value of your house that are tax exempt. In addition, ownership of a house is a good way to force yourself to save, and a house provides emotional satisfaction.

Estate agent shaking hands with customer after contract signature

Exercise 7: Beef Up with Real Estate Investment Trusts

The packaging of ownership interests in real property into trusts called Real Estate Investment. This REITs are like any other common stock and are actively traded on the major stock exchanges.

Professor Malkiel further cites additional Exercises which are: (8) Tiptoe through the investment fields of gold and collectibles; (9) Remember the investment fields of gold and collectibles; and (10) diversify your investment steps. These exercises have been subject to a final checkup that you should do.

Chapter 12: Macro-Economic considerations are important for investors

This chapter is where you will learn how to become a financial bookie, according to Professor Malkiel. This is an important chapter because the money you are betting is your own.

Very long-run returns from common stocks are driven by two critical factors: the dividend yield at the time of purchase, and the future growth rate of the dividends. In principle, for the buyer who holds his stocks forever is worth the present or discounted value of its stream of future dividends. The discounted value of the stream of dividends can be shown with a very simple formula for long-run total return for either an individual stock or the market as a whole: long-run equity return = initial dividend yield + growth rate of dividends.

There are three eras of financial market returns Professor Malkiel discusses: Era I, the age of comfort, which covers the years of growth after World War II. Stockholders made out extremely well after inflation, whereas the meager returns earned by bondholders were substantially below the average inflation rate. Era II, the Age of Angst: widespread rebellion by millions of teenagers produced during the baby boom, economic, and political instability created by the Vietnam War. No one was exempt: neither stocks nor bonds. Era III, the Age of Exuberance is when the boomers matured, peace reigned, and a non-inflationary prosperity set in. It was a golden age for stockholders and bondholders.

The Age of the Millennium

Although Professor Malkiel states that he remains convinced that no one can predict short-term movements in securities markets, he does believe it is possible to estimate the likely range of long-run rates of return investors can expect from financial assets. It seems very clear that it would be unrealistic to anticipate that the generous double-digit returns earned by stock and bond investors during the 1980s and 1990s can be expected to continue in the early decades of the twenty-first century. Looking first at the bond market, we can get a very good idea of the returns that will be gained by long-term holders. Holders of good quality corporate bonds will earn if the bonds are held to maturity. Holders of long-term zero-coupon Treasury bonds will earn until maturity and so on.

He even is skeptical that anyone can predict the course of short-term stock price movements, and perhaps better off for it. He even shares his one favorite episodes from I Love a Mystery wherein this is about a greedy stock-market investor who wished that just once he would be allowed to see the paper, with its stock price changes, twenty-four hours in advance.

We can employ the same methods used in Chapter Twelve for the market as a whole to project the long-run rates of return for individual stocks, where it is reasonable to project a modest rate of growth over an extended period. Again, he suggests to only use the first two determinants in the analysis. He estimates the rate of return on an individual stock by adding the initial dividend yield to the expected growth rate of earnings. Although P/E ratios are obviously very important in explaining returns in the short run, such valuation changes are less important over the very long run and are unpredictable in any event.

Chapter 13: You can eat well or sleep well, it’s up to you

This chapter tackles a life-cycle guide to investing. Professor Malkiel even cites that it is simple to say that a thirty-four-year-old and a sixty-four-year-old saving for retirement may cautiously use different financial instruments to accomplish their goals. The thirty-four-year-old just beginning to enter the peak years of salaried earnings that can use wages to cover any losses from increased risk and the sixty-four-year-old does not have the long-term luxury of relying on salary income and cannot afford to lose money that will be needed in the near future.

In essence, these strategic considerations have to do with a person’s capacity for risk. Most of the discussion about risk has dealt with one’s attitude toward risk. Although both of them may invest in a certificate of deposit, the younger will do so because of an attitudinal aversion to risk and the older because of the reduced capacity to accept the risk. The most important investment decision you will probably ever make concerns the balancing of asset categories at different stages of your life.

There are key principles to determine a rational basis for making asset-allocation decisions:

  1. History shows that risk and return are related.
  2. The risk of investing in common stocks and bonds depends on the length of time the investments are held. The longer an investor’s holding period, the lower the risk.
  3. Dollar-cost averaging can be a useful, though controversial, technique to reduce the risk of stock and bond investment.
  4. You must distinguish between your attitude toward and your capacity for risk.

The risks you can afford to take depend on your total financial situation, including the types and sources of your income exclusive of investment income.

In this section contains reviews of three broad guidelines that will help an investment plan to particular circumstances:

  1. Specific Needs Require Dedicated Specific Assets:

Always keep in mind – a specific need must be funded with specific assets dedicated to that need.

  1. Recognize Your Tolerance for Risk:

The biggest adjustment to the general guidelines concerns your own attitude toward risk. It is for this reason that successful financial planning is more of an art than a science. General guidelines can be extremely helpful in determining what proportion of a person’s funds should be deployed among different asset categories. Risk tolerance is an essential aspect of any financial plan and only you can evaluate your attitude toward risk.

And lastly:

  1. Persistent Savings in Regular Amounts, No Matter How Small, Pays Off.

Professor Malkiel shares an advice of Talmud Rabbi Isaac saying that one should always divide his wealth into three parts: a third in land, a third in merchandise or business, and a third ready-at-hand. Such an asset allocation is hardly unreasonable but can improve this advice because we have more refined instruments and a greater appreciation of the considerations that make different asset allocations appropriate for different people.

As investors age, they should start cutting back on riskier investments and start increasing the proportion of the portfolio committed to bonds and stocks that pay generous dividends such as REITs.

For most people, Professor Malkiel recommends funds rather than individual stocks for portfolio formation. He cites two reasons for this. First, most people do not have sufficient capital to diversify properly; and Secondly, he recognizes that most younger people will not have substantial assets and will be accumulating portfolios by monthly investments.

Chapter 14: Investing advice now that your get Malkiel’s book

This chapter offers rules for buying stocks and specific recommendations for the instruments you can use to follow the asset allocation guidelines presented in Chapter Thirteen. By now, you have made sensible decisions on taxes, housing, insurance, and how to get the most out of your cash reserves. You also have reviewed your objectives, your stage in the life cycle, and your attitude toward risk and decided how much of your assets to put into the stock market.

In the first case, you simply buy shares in various index funds designed to track the different classes of stocks that make up your portfolio. This method also has the virtue of being simple. Under the second system, you jog down Wall Street, picking your own stocks and getting in comparison with the yield obtained with index funds much higher or much lower rates of return; and third, you can sit on a curb and choose a professional investment manager to do the walking down Wall Street for you.

Index funds trade only when necessary, whereas active funds typically have a turnover rate close to 100 percent, and often even more. Index funds are also tax-friendly. It is also relatively predictable. It is fully invested. And finally, it is easier to evaluate. With index funds, you know exactly what you are getting, and investment process is made incredibly simple.

The indexing strategy is one that Professor Malkiel recommended even before index funds exist. It is clearly an idea whose time had come. Although he recommends indexing or so-called passive investing, there are valid criticisms of too narrow a definition of indexing.

One of the advantages of passive portfolio management is that such a strategy minimizes transactions costs as well as taxes. To a considerable extent, index mutual funds help solve the tax problem. The do not trade from security to security and, thus, they tend to avoid capital gains taxes.

The fund is able to defer capital gains by the following techniques: First, the portfolio is indexed to the S&P 500 so there is no active management that tends to realize gains; Second, when securities do have to be sold, the fund sells the highest-cost securities first; Third, the funds offsets unavoidable gains by judiciously selling other securities on which there is a loss. As a result, the fund may not perfectly track the benchmark index, but it should come very close.

In this chapter, Professor Malkiel further states four rules for successful stock selection:

  • Rule 1: Confine stock purchases to companies that appear able to sustain above-average earnings growth for at least five years.
  • Rule 2: Never pay more for a stock than can reasonably be justified by a firm foundation of value.
  • Rule 3: It helps to buy stocks with the kinds of stories of anticipated growth on which investors can build castles in the air.
  • Rule 4: Trade a little as possible.

Investing is a bit like lovemaking, according to Professor Malkiel. Ultimately, it is really an art requiring a certain talent and the presence of a mysterious force called luck. If you have the talent to recognize stocks that have good value, and the art to recognize a story that will catch the fancy of others, it’s a great feeling to see the market vindicate you. If you are not so lucky, limit your risks and avoid much of the pain that sometimes involved in the playing.


Tocqueville’s Democracy in America – As a Framework for The Future

It’s the most important work on American democracy and the US in the 1830s. Democracy in America is a very long book 1000 pages though. The truth is that every American and every Political Scientist should read it.

Two ways to look at it:

  1. It’s a historical artifact: it’s historical.
  2. Work of political science and sociology.

The French Revolution ruined the de Tocqueville family wealth. The author studied, Voltaire, Rouseau, Pascal. In the 1830 July Revolution , Tocqueville takes the oath for the new Burbons. Tocqueville wanted to try looking into the US for prison reform. However, he wanted to identify lessons from US democracy, it’s inclination; what should we fear or hope for in this new democratic movement emerging in the US? The Trail of Tears occurred in the 1830s….Also the Nullification Crisis. There was also slavery; bu Tocqueville observed a ‘classless’ society.  

Funny Associations:

  • The Voluntary Association / Local Sovereignty
  • American Bible Society; Temperance Society;
  • The Lady’s Association for the Benefit of Gentle Women of Good Family Reduced In Fortune Below the State of Comfort To Which They Have Been Accustomed.
  • Voluntary Associations: don’t rely on the government to solve their problems.
  • Democracy at the local level then is far more robust. Tocqueville and his co-author won a cash prize for their research.
  • The federal government was very small; voluntary association was central and patriotism is evident.

  • The Hierarchies of Power could be crushed as long as we are all being treated free and equal….and meeting up to talk about it.
  • Freedom and Equality are mutually re-inforcing. But then we asked;
  • Freedom and Equality seem to pull in different direction….
  • Locke wanted to separate powers; but it’s an institutional device.
  • How to combine popular rule with political wisdom?
  • “1835 Democracy in America”
  • America is a blank slate. Tocqueville thought that France would become like America: democracy is likely to revert back to monarchy.
  • Equality of conditions: this is the equality of conditions (equality of opportunity). It’s a gradual spread of the concept.

Features of American Democracy:

I) Local government: localism: local democracies are the cradle of civil society in townships. The institutions of putting the democracy in the reach of all the people were not that expensive to build. The people are legislating and organizing. Alexis de Tocqueville told his readers to read Rousseau every day;

The township format itself is Aristotelian. The township exists by nature. There is the old Polis character described by Aristotle which Tocqueville believes is very important for a democratic society.

II) Civil Association: these voluntary groups are immensely powerful and energizing. There is the mother science concept; uniting in associations. Trying to fix common goals; civic association.

Robert Putnam: happy for social capital. The decline in association is the Bowling Alone phenomenon. These are not natural times; It’s a learned activity; the Civic Society goes into decline as our isolation cripples our Civic Associations.

Are we in a couch potato crisis? Yes, in 2018!!

III) Spirit of Religion: America is primarily a puritan democracy; early Puritanisms. Religion will not disappear because of the decline of faith; it’s rather a shift in faith. We can’t separate faith: dignity of the individual. Tocqueville looked at religion purely for social effects.

Increase the number of factions in order to prevent anyone from being the dominant one.

The idea of democracy does claim that this idea that political correctness is a danger.

Moral of the State:

  • Compassion, restiveness,
  • Democracy has made us gentler: broadcast tv has made us indifferent to others in our group.
  • Bill Clinton “I feel your pain.”

Political Educator: – There is a divine

  • Restful. We want to ask what kind of people we create.
  • What is the democratic statecraft? A new political science; it’s based on a novel history of human agency; as any reader knows there is a power in history.
  • It’s like we are part of an immense process. 
  • Certainly the pendulum has swung away from civil society in many ways. But generally online interactions are positive.

Citizenville is Directionally Correct, the Messenger is an Old Fogie, Though

Local Government is non-ideological, because it is result oriented. Local government is the solution to the federal and provincial governments in the sense that leadership from that level of government aren’t bound by ideological restrictions. This is the first killer point from Newsom’s book Citizenville; How can we connect to the remarkable wisdom of the crowd, asks Newsom? Town-Halls do not work because there is no filter to prioritize the loudest issues and articulate the individuals positions. With some wiggle room, Newsom argues that the danger is to impose on the community the insights to win in politics. He likens politics to a vending machine, you put your money in and you get your policy out the bottom. You, as voters, don’t really contribute to that policy and that should change….

Perhaps the Government should operate like a platform, says Newsom. “We need more voices and choices.” One issue he brings up is that as Lincoln says in the 2012 film, we are all born originals but we die copies. When a politician is termed out, the politician gets destroyed by the system. We need to give way to a new governance system, say Newsom. Millenials are digital natives and babyboomers and GenXers are digital immigrants. We are still debating desks in school because voters can understand that. Newsome concludes that we should stand on our heads and go local government. Newt Gingrich agrees.

Presentation wise, Gavin has a serious problem. He is an ego-maniacal, anti-Obama Democrat. He is  a political creature having been in politics for 21 years and guess what? We can tell! He’s a total phony. Phony Gavin will be the attack line in 2020 if he runs for the Democract nomination. In this speech above, he says “I don’t memorize speeches” and then he rings off the exact same speech he did at Google…..phony. And he sounds like Joe Biden, copy-catting Joe Biden’s style and cadence. Lame, I wish him well and he will probably be governor of California. He says lines like “the most celebrated man in America today is Bill Gates, you know that.” Say what? Just a bit derivative for me…still a cool policy direction here, so I’m conflicted.

Verbatim Notes on Lament for A Nation by George Grant

Notice: These notes are sometimes verbatim even when not in quotation. All text is therefore George Grant’s; George Grant is the Guest Blogger in this post! Therefore, I don’t agree or disagree, it is what it is. 

Lament for a Nation: George Grant


• “Emancipated journalists were encouraged to express their dislike of the small-town Protestant politician, and they knew they would be well paid by the powerful for their efforts” (1)
• “It is interesting to speculate why Diefenbaker raised the concentrated wrath of the established classes” (4).
• Most of his critics claim he is egotistical.
• There must be something false or something missing in this description of his actions…to search for a consistent description is partly why I have written this book. “We are fish left on the shore of a dying lake” (5)
• Grant Laments the passing of the nation called Canada.
• TO be Canadian was to be a unique species of North American.
• Fh.H Underhill’s “Stop being British if you want to be a nationalist” seemed obviously ridiculous.
• “Lamenting for Canada is inevitably associated with the tragedy of Diefenbaker” (6). His inability to govern is linked with the inability of this country to be sovereign.
• “In the last years, many writers have described the confusions, contradictions and failures of the Diefenbaker government” (6).
• BUT Newman “rejoices{s} that we have back in office the party of the ruling class. (6). For twenty years, the Liberal Party had been pursuing policies that led inexoberably to the disappearance of Canada.
• “Its polices led the impossibility of an alternative to the American republic being built on the north held of this continent.
• King leads to Canada’s surrender. Diefenbaker knew this but the media establishment turned against him.
• “No credit is given to the desperate attempts of Diefenbaker and his colleagues to find alternative policies, both national and international, to those of their predecessors.” (6)
• “Diefenbaker’s confusions and inconsistencies are, then, to be seen as essential from which Canada will recover under the sensible rule of the established classes.” (6)
• The 1957 election was the Canadian people’s last gasp of nationalism” (7) Diefenbaker’s government was the strident swansong of that hope.
• ALTHOUGHT THE CANADIAN Nationalist may be saddened by the failures of Diefenbaker, he is sickened by the shots of sophisticated derision at his defeat.


• How did Diefenbaker conceive Canada and why did the men who run the country (ruling class) dislike him so much? The answer explains Canada’s collapse
• Diefenbaker’s’ personality is central for most journalistic analysis of Diefenbaker’s failures.
• “Influenced by Time magazine, politics is served up as gossip, and the most titillating the better.” (8)
• “Reducing issues to personalities is useful to the ruling class” (8)
• Media focused on “Diefenbaker’s indecision, arrogance, and ambition than by writing about American-Canadian relations.
• “The man had a conception of Canada that threatened the dominant class” (8).
• The ruling class control private government which co-ordinates the activates of these corporations. NA is the base of the world’s most powerful empire to data.
• Since 1960, Canada has developed into a northern extension of the continental economy. C.D. Howe and his men helped it along..
• Our ruling class mirrors that American accept that we look across the border for our political and cultural directions.
• People move in and out of corporations, civil service and politics.
• Pearson had the courage to stay away from the retreat of politics. (10)
• Diefenbaker came to power after the Conservative Toronto elite had failed to make a national party under Drew.
• Diefenbaker made it to power despite the Howe era dominant classes.
• The Liberals were arrogant: St. Laurent was defeated the regions were colonies of Montreal and Toronto.
• “Young men, ambitious for a life in politics, could not turn to the Liberal party, where the positions of power were well secured by the old pros.” (12)
• “In the Defence Crisis of 1963, his nationalism occasioned the strongest stand against satellite stats that any Canadian government ever attempted.” (12).
• He maintained his stand even when the full power of the Canadian ruling class, the American government and the military were brought against him.
• Grant sees Dief’s nationalism as misguided.
• Diefenbaker was not specific about what Canada should be. And he failed.
• There was tension between the chartered banks and Diefenbaker. Fleming’s appointment as Finance Minister was in contrast to everything hoped for.
• Nearly all the economic power deserted Diefenbaker.
• Populist democracy was a dying force in contemporary America: A Diefenbaker’s increased welfare payments and aid to ‘outlying regions” showed him turning to the people.” (14)
• Diefenbaker against old Conservative interests. Central Canada was an industrial complex and any prime minister who wanted to stay in power had to yield though their desires.
• “The Conservatives handled the machine of state capitalism less skilfully than had the Liberal smoothies.” (16)
• The northern vision was a pleasant extra, but no substitute for national survival.
• During his years in office, American control grew at a quickening rate.
• “The populate in that area was rushing toward cultural and economic integration with the US” (16)
• Diefenbaker wasn’t very close to the business elite in Ottawa.
• Diefenbaker still believes that capitalists were nationals after one term.
• He could not appraise the class structure realistically and then could not pretend to be a self-respecting nationalist
• Diefenbaker suffered from the confusion of populism, free enterprise and nationalism when dealing with Coyne.
• Diefenbaker’s free enterprise led to actions that were anti-nationalist. The Glassco Commission was appealing to an American conservative.
• The Civil service would not wear it.
• Most civil servants had too closely associated with liberal man and the liberal party.
• “No modern stat can be run without great authority in the hands of its non-elected official. In such an uncertain nation as Canada, the civil service is perhaps the essential instrument by which nationhood is preserved.” (19)
• “If diefenbklaer was to foster nations, he needed to win the respect of the civil service”
• The best civil servants were devoted to both the British account and a sovereign nation.
• “The most bewildering aspect of Diefenbaker’s nationalism was his failure to find effective French-Canadian colleagues. The keystone of a Canadian nation is the French fact; the slightest knowledge of history makes this platitudinous.” (20).
• The One United Canada appeal didn’t work for Quebecers who saw it as assimilationist dogma.
• Henri Bourassa wanted Quebec’s protection from the Saxonistes.
• “Interpretation of federalism is basically American. I could not encompass thus who were concerned with benign a nation, only those who wanted to preserve charming residual customs” (22) immigrants.
• “Canada is predicated on the rights of nations not just citizens” (22)
• “As the price of that liberty, American society has always demanded that all autonomous communities be swallowed up into the common culture.” (22)
• Diefenbaker kept nuclear arms off Canadian soil.
• “The very nature of Diefenbaker’s Protestantism made him unsympathetic to Catholic Quebec” (24)
• “Did not Diefenbaker know that the existence of Canada depended on a clear definition of conservatives?” 25)
• Diefenbaker didn’t have support from the intellectual community.


A view of the launch of a CQM-10A Bomarc target missile.

• Defence Crisis of 1962 and 1963 revealed the depth of Diefenbaker’s nationalism.
• He was a demagogue yearning for recognition. But his actions during the Defence Crisis make it clear that his nationalism was a deeply held principle for which he would light with great courage and would sacrifice political advantage.
• One comedy in these tragic events was that the intellectuals could not recognize that Diefenbaker was standing on principle.
• Diefenbaker was painted as the politician interested in succeeding at all costs. (26).
• Pearson changed his defence policies to suit the interest of the powerful. After the Cuban Crisis, Pearson acted with great political skill to unite the powerful forces of continentalism around him.
• After the missile crisis: Pearson who had previously argued that Canada should not accept nuclear arms, turned round and asserted that any government of his would promptly negotiate their acceptance.” (27)
• General Norstad made a press conference in Ottawa in which he suggested that Canada was not doing its part.
• The American State Department issued a memorandum denying the veracity of the Canadian prime Minister on the matter.
• “It took the full weight of the North-American establishment to bring him down” (28)
• Green and Diefenbaker trusted each other. They were old and trusted friends, deeply shaped by the same tradition of Canadian conservatism. Green had nominated Diefenbaker for the leadership of his party as long ago as 1948 when George Drew won the contest.
• He believed that Canada’s acquisition of nuclear arms would add to nuclear tension and diminish Canadian influence abroad.
• Green publicly admonished the Americans.
• “Can an ant be an ally with an elephant” (29)
• Diefenbaker was determined not to allow American defence policy shape his actions.
• Kennedy’s friends of Newsweek attacked Diefenbaker. A conspiracy for Liberal Victory.
• Grant says changing traditions make it difficult for Canada to build an alternative civilization. Canada is to build a civilization against the Americans.
• Diefenbaker said that acceptance of warheads was conditional. Bomarcs were useless without the warheads.
• It was event claims that he might have understood the nature of the original commitment. In refusing to make up his mind about accepting warheads, he was accused of being ‘indecisive’ and a bad ally and the man of indecision for the liberals.
• Defence technology was in constant flux and it was not longer clear that warheads were necessary. He maintained that the decision should await the NATO meetings in May of 1963.
• Two false assumptions: 1) Diefenbaker assumed the NATO was an alliance and not simply an American instrument.
• “Canada’s sovereignty entailed that our defence policy be determined in Ottawa.” (32).
• Decisiveness was aligned with Canada’s nee to have atomic arms: I don’t agree. Do we really need the nuclear weapons.
• “Can it be denied that the actions of the Kennedy Administration were directed toward removing an unreliable government in Ottawa rather than to guaranteeing a specific commitment?” (33)
• “Diefenbaker and Green must have seemed too suspicious of American motives to be allowed to remain in office” (33)
• Keened was a postmaster in the use of power for personal and imperial purposes. Historians will only be able to speculate about what Pearson and Kennedy discussed before dinner for Nobel-Prize winners at the White House in 1962.
• The British connection had been a source of Canadian nationalism. The west-east pull of trade – from the prairies across provided a counter-thrust to the pull of continentalism. (34).
• Britain became American before we stopped being the UK.
• “The role of Canada was to mediate between the United States and Western Europe, particularly Great Britain.” (36)
• The sincerity of Diefenbaker’s nationalism is established by the fact that he stood by Green, and would not accept the American demands, even when it was in his overwhelming interest to do so. (36)


• The Canadian establishment’s instrument is the Liberal Party of Canada.
• Three argument of nationalism to justify the Liberals:
• 1) the Liberals are the realistic defenders of this country, policing us through the shoals of foreign control and internal dissension that might shipwreck Canada.
• 2) it is inevitable that Canada should be swallowed up; since in 1940 this should have been obvious to any political analyst. The Liberals have taught us to accept this.
• 3) Canada’s disappearance is not only necessary but also good.
• The Liberals are the image of Canada’s unity.
• “The Liberal Party gave brilliant leadership to the development of the country; the corporations ran an economy that was blessed by a benevolent government; certain complementary needs were met by the judicious use of Crown corporations; injustices were palliated with limited social services” (38)
• Beyond economic policy, the argument continues, the Liberals alone have understood that French Canada is the keystone of Confederation.
• Cooperative federalism is the only basis on which Quebec will stay.
• “The whole argument for the Liberals as realistic nationalists breaks down with their actual achievements” (39)
• It was under Liberal leadership that our independence in defence and foreign affairs was finally broken.
• The Liberals failed to recognize that the real danger to nationalism lay in the incipient continentals of English-speaking society, rather than in any Quebec separatism.
• The society produced by such policies may reap enormous benefits, but it will not be a nation.
• “Where can people learn independent views, when newspapers and television throw at them only processed opinions?” (41)
• In society of large bureaucracies, conscious and unconscious processes legitimize power. Ontario’s centralized power in continental capitalism was also a Liberal strong hold.
• Canada has to recognize the limitations on sovereignty in a nation that lives beside the most powerful country on earth (42).
• Capitalist imperialism is harder to resist than communist imperialism.
• Intention is hard to phantom.
• The personalized political journalism, associated on this continent with TIME and exemplified in Canada by MacLean’s has done much to obscure this fundamental distinction.
• 2 part of the argument: It has been necessary to join the US. Canada has made that transition smoothly. BUT was there another way?
• Resistance to western imperialism has taken two main forms.
• 1) establish a rigorous socialist state that turns to the Community empire for support in maintain itself: CASTRO style
• 2) is to harness the nationalist spirit to technological planning and to insist internationally that there are limits to the western alliance. GAULLISM.
• Gaullism is only possible when nationalism is such a dominant motive among certain elites that they are able to control the economy so as to stop the tendency of capitalism to become international. There are no such elites in the Canada of 1965.
• MacDonald’s National Policy was Gaullist.
• Business interests are assumed to run the country. This is what sells Canada out.
• “The Liberal politicians and civil servants always acted within that assumption because they knew their limited power depended on it. No government that acted on other principles would have lasted long.” (46)
• No class in Canada more welcomed the American managers than the established wealthy of Montreal and Toronto, and who had once seen themselves the pillars of Canada. Capitalism is about profit making this is the most important activity.
• “If there had been an influence group that seriously desired the continuance of the country after 1940, it would have needed the animation of some political creed that differed from the capitalist liberalism of the US.
• The Ottawa Men rule Canada as secular priesthood (48)
• Why did the civil service elite do so little?
• External Affaires have some felling for the continuance of their nation. Yet they were the instruments of a policy that left Canada a satellite internationally.
• When they gain power they carry on with the ideas they learnt thirty years before. (50).
• “In the Defence Crisis of 1963, Green and Diefenbaker did not receive loyalty from their civil service” (51)
• International civil servants.



• Politicians, businessmen and civil servants cannot alone count for Canada’s collapse.
• The United States believed in homogenizing and universality.
• They are the progressive force in the 20th century.
• Americans spearhead progress (53)
• Where modern science has achieved its mastery, there is not place for local cultures. 53
• Canada was created in the age of progress.
• Progress is American therefore Canada is American.
• Two Groups Deny This Marxists and American ‘Conservatives’.
• Marxists contend that the US is reactionary and not progressive as they rely on a system of property relations and consequent world policies. Marxists argue that to be progressivism in Canada is nationalism. THIS IS WRONG, says Grant, because modern political theory says that man’s essence is his freedom. (54)
• Deny freedom is not his conception of the good (55)
• North American liberalism makes s more sense: Social order is a man-made convenience, and its only purpose is to increase freedom. (55)
State capitalism is a opening up of society: in the private sphere all kinds of tastes are permitted. (56)
• But “in the public sphere, such pluralism of taste is not permitted” (56)
• “Western civilization was committed in its heart to the religion of progress and the emancipated passions. Those who accepted such a doctrine found corporation capitalism was a much more suitable regime than the inhibiting polices of socialism” (58)
• Socialism is not progressive but rather a regression because it stagnates innovation.
• De Gaulle will not be able to resist in the long run. His polices will sow the seeds as the principles of American civilization. The old restraints in society.
• The PApuascy didn’t : there are no limits in the democracy it’s destructive. Church aristocracy, class and tradition.
• Literatur, musicians and a subculture that resists the American AEmpire.The New Left: Joan Bios
• Quebec was the inheritor of that tradition
• Conservatives believe that America is the defender of western civilizations. US were based on British principles mostly not Rousseau and Marx of communism.
• The appeal to English-Speaking Unity has destroyed an hope of Canadian independence. (61).
• The British supported Pearson over Diefenbaker because the rejection of American arms was an attack on English-Speaking unity.
• Grant questions whether the Loyalists actually did something meaningful by creating Canada. “If there was nothing valuable in the founders of English-Speaking Canada, what makes it valuable for Canadians to continue as a nation today?” (62)
• “Internationally, the imperial power of these corporations has destroyed indigenous cultures in every corner of the globe” (62) American capitalism dissolves indigenous cultures.
• “They are ‘conservatives’ only in terms of the short history of their country” (63)
• Local culture has a last ditch-stand “But it is doomed to disappear as much as an indigenous French Canada” (65)
• American conservatives believe in order and societal norms.


• “The Impossibility of Conservatism in our era is the impossibility of Canada” (67)
• Modern history is against Canada. (67)
• The point of Canada was not to become the Republic.
• French and English accepted the common value of preserving their integrity outside of the United States of America.
• Diefenbaker was right when he said that “the similarity between the views of the Montreal merchants in 1849 and the wealthy of Toronto and Montréal in 1963. In neither case did they care about Canada” (68).
• “Only in dominant nations is the loyalty of capitalists ensured” (68)
• Canadians have been much more willing than Americans to use governmental control over economic life to protect the public good against private freedom: Crown Corporations.
• “That we never broke with Great Britain is often said to prove that we are not a nation but a colony” (70).
• The world war ended British connection in Canada: after WWI and WWII.
• “British conservatism was already largely a spent force at the beginning of the nineteenth century when English-speaking Canadian were making a nation” (72).
• “because of the Births tradition, socialist movements have been stronger in Canada than in the United States” (73).
• We see the shift to bureaucratic state capitalism.
• To turn to the more formidable tradition, the French Canadian are determine to remain a nation (74).
• Canada intends to stay together for greater prosperity.
• “In such a scheme the continuance of Confederation is simply a question of convenience” (75)
• “If they work for continental corporations, will they not identity themselves with those corporations and vote for governments not interested in preserving national control of the economy?” (77)
• “Corporations make concessions about management personnel for the sake for better relations with the alien community” (77)
• Quebecers want a Castro-Like State in Quebec.
• Page 78 “This enormity in the break from the past will bring in intense beatness. US supports this.There beats titillate the status quo. We bureaucratize it seilf. Quebec will internalize the culture of decent. Pete Seagre Joan Beas.
• Anti-Globalization is bull-shit.
• Protest is part of the conformity. Protesters are part of the cathasis
• “Levesque appears to be aware how difficult it will be to preserve the French fact on this continent” (82)
• An Appeal for Realism in Politics: continuance of Confederation against the various parochialisms that threaten it.
• An elite will speak French but what other traditions will they uphold.
• “The belief in Canada’s continued existence has always appeal against universalism” (83)
• “If the writers are to be truly liberal, they cannot escape the fact that the goal of their political philosophy is the universal and homogenous state. If this is the noblest goal, then the idea of Canada was a temporary and misguided parochialism” (84)
• In the language of new bureaucrats, our nation was not a viable entity (85)
• “Our social and economic blending into the empire will continue apace, but political union will probably be delayed” (85)
• A branch-plant satellite.
• Quebec, there will be strong elements in the United State that will dislike their admission.


• Why fight it: America is so much more important to human development than Canada could ever hope to be.
• Those who worship evolution or history consider that what much come in the future will be higher more developed better freer than what has been in the past.
• The discussion of the goodness of Canada’s disappearance must therefore be separated from a discussion of its necessity. (87)
• “The forty-ninth parallel results in a lower standard of living for the majority to the north of it” (87)
• This book sis a celbration of a civilization and tradition.
• Sacrifice of the standardof living. 
• “The disadvantages of being a branch-plant satellite rather than in having full membership in the Republic will become obvious” (88)
• A way of life shaped by continental institutions will produce political continentalism. (88)
• Lament the loose of connection within Britain and France.
• After the horrors that nationalistic wars have inflicted on this century, how can one have any sympathy for nationalism? (89)
• “This note of comedy went further in the summer of 1963, when the CBC made misty-eyed television programs about Pearson’ return to the UN as the true Canadian internationalist, at a time when he was negotiating with the US for the spread of nuclear arms to Canada” (91)
• “If the best social order is the universal and homogenous state, then the disappearance of Canada can be understood as a step toward that order.” (94)
• Grant’s wife says he wasn’t pessimistic….
• It’s all a big draw bakl look at what happened Rome. It’s a lament: look at Rome when the republic fell apartr. As Christians: religious. All agents of a homogenized state. Technology in the Mass Age by Grant.
• Vietname is a perfect  example of US. Canada shuttle diplomacy between US and Hanoi.
• Cutlrual and sociological forces will not permit Canada’s demise. Or Quebecs demise. Institutions are perpetuated. The resistance from the New left (78)
• The Shores of Heaven where Virtue plays a great role. Grant says, I am a believer. He makes too many classical. Better hope of the underworld.
• We find conscilationas individuals: our character can’t be taken away in that fundamental sense. Even if we are shaped by the pacifiers.
• Canada is a causuality it’s institutions still persist.
• Dominion status int eh Railway Age: He’s talkn about an intellectual tradition.
• When we think of the classical ideal: we don’t think that of corporation.
• He is optimistic about Liberalism that America is winning agians thte Marxist.
• His optimism is in the supreme natural. The connection between the classical ideal which located human destiny outside of this world. There is hope and perfection are not ot be found in this life. He quotes the Anglican theologan. He invokes a classical Christian world view which is an alternative to situation we find ourselves in.
• What about the Jews or distinct minority groups?
• We are cogs in a system. 

Why Huckleberry Finn is Remarkable Literature

Adventures of Huckleberry Finn (or, in more recent editions, The Adventures of Huckleberry Finn) is a novel by Mark Twain, first published in England in December 1884 and in the United States in February 1885.

Commonly named among the Great American Novels, the work is among the first in major American literature to be written throughout in vernacular English, characterized by local color regionalism. It is told in the first person by Huckleberry “Huck” Finn, a friend of Tom Sawyer and narrator of two other Twain novels (Tom Sawyer Abroad and Tom Sawyer, Detective). It is a direct sequel to The Adventures of Tom Sawyer.

The book is noted for its colorful description of people and places along the Mississippi River. Satirizing a Southern antebellum society that had ceased to exist about twenty years before the work was published, Adventures of Huckleberry Finn is an often scathing look at entrenched attitudes, particularly racism.

Perennially popular with readers, Adventures of Huckleberry Finn has also been the continued object of study by literary critics since its publication. It was criticized upon release because of its coarse language and became even more controversial in the 20th century because of its perceived use of racial stereotypes and because of its frequent use of the racial slur “nigger”, despite strong arguments that the protagonist, and the tenor of the book, is anti-racist.…

William James “Bill” Murray (born September 21, 1950) is an American actor and comedian. He first gained exposure on Saturday Night Live in which he earned an Emmy Award and later went on to star in comedy films, including Caddyshack (1980), Ghostbusters (1984) and Groundhog Day (1993). Murray gained additional critical acclaim later in his career, starring in Lost in Translation (2003), which earned him an Academy Award for Best Actor nomination, the indie comedy-drama Broken Flowers (2005) and a series of films directed by Wes Anderson, including Rushmore (1998), The Royal Tenenbaums (2001), The Life Aquatic with Steve Zissou (2004), Fantastic Mr. Fox (2009) and Moonrise Kingdom (2012).

Samuel Langhorne Clemens (November 30, 1835 — April 21, 1910), better known by his pen name Mark Twain, was an American author and humorist. He wrote The Adventures of Tom Sawyer (1876) and its sequel, Adventures of Huckleberry Finn (1885), the latter often called “the Great American Novel.”

Twain grew up in Hannibal, Missouri, which provided the setting for Huckleberry Finn and Tom Sawyer. After an apprenticeship with a printer, he worked as a typesetter and contributed articles to his older brother Orion’s newspaper. He later became a riverboat pilot on the Mississippi River before heading west to join Orion in Nevada. He referred humorously to his singular lack of success at mining, turning to journalism for the Virginia City Territorial Enterprise. In 1865, his humorous story, “The Celebrated Jumping Frog of Calaveras County” was published, based on a story he heard at Angels Hotel in Angels Camp California where he had spent some time as a miner. The short story brought international attention, even being translated to classic Greek. His wit and satire, in prose and in speech, earned praise from critics and peers, and he was a friend to presidents, artists, industrialists, and European royalty.

Though Twain earned a great deal of money from his writings and lectures, he invested in ventures that lost a great deal of money, notably the Paige Compositor, which failed because of its complexity and imprecision. In the wake of these financial setbacks he filed for protection from his creditors via a bankruptcy filing, and with the help of Henry Huttleston Rogers eventually overcame his financial troubles. Twain chose to pay all his pre-bankruptcy creditors in full, though he had no responsibility to do this under the law.

Twain was born shortly after a visit by Halley’s Comet, and he predicted that he would “go out with it,” too. He died the day following the comet’s subsequent return. He was lauded as the “greatest American humorist of his age,” and William Faulkner called Twain “the father of American literature.”

The Future According To Jean-Marc Côté

Most creative speculation about the future is contingent on taking existing ideas and re-engineering them into a new form factor that is plausible. Take the idea of the Rolodex and the Resume; Linkedin is a logical extension of the physical realm. The internet is a reflection of the off-line. The GIF above illustrates this point further, ideas are combined in a new form factors. It’s the perfect over simplication but the point isn’t that Skype was obvious, it’s that idea combination is a common path to creative ideas.

France in the Year 2000:

Jean-Marc Côté was tasked in the 1899 to create France in the Year 2000 (The 21st Century). Originally these illustrations would compliment cigar boxes and postcards but Côté later enlisted creative artists in Paris to create apparently over 87 cards for the 1900 World Exhibition in Paris. What’s funny is that as far as these folks are concerned, people in the year 2000 will: a) travel through the air, b) automate tasks, c) host aquadic sports. Seems way off of course but you can’t deny the creative value herein.

Aerial Postman in France in the Year 2000 Air Battles in the Year 2000 Air Fire Fighters France in the Year 2000 Air Transport in France in the Year 2000 Automated Barbers in France in the Year 2000 Automated Tailors France in the Year 2000 Automates Floor Cleaning in France in the Year 2000 Breading Chicks in France in the Year 2000 Car Racing France in the Year 2000 Farming in France in the Year 2000 Flying Police in France Helicopters in France in the Year 2000 Learning France in the Year 2000 Underwater Crocket France in the Year 2000 Underwater Divers in France in the Year 2000 Underwater Racing France in the Year 2000 Whales Bus in France in the Year 2000

Ideas to Testing

The funny thing is that these creative ideas aren’t that insane. They take a modern idea and repackage them in a new way. This in effect is how innovation is developed. It’s never a straight line from idea to product, but it’s critical to start the journey to testing the viability of your ideas.

Cut Out of The Eiffel Tower (Tour Eiffel) for Crafty Minds

This Is A Cut Out Of The Eiffel Tower

Try making this really fun print-able cut out of the Eiffel Tower that kids and creative types will love no matter how young you are. Use a colour ink or jet printer at the highest quality. Print it on an A4 sized piece of paper, the thicker the better. Get some tape and scissors and you will have yourself an Eiffel Tower of your very own. It’s easy to make, use flaps to connect the pieces. To make the slits, use an exacto knife or box cutter knife.

Voila, essayez vous a construire ce vraiment amusant Tour Eiffel. Tout les enfants vont aimeront faire. Utiliser un imprimante en colour. Imprimez-le sur un morceau de papier normale. Obtenez une bande et des ciseaux et aurez une Tour Eiffel propre. It est facile a faire. Pour faire les trou, utilisez un couteax exacto.

Download Meeiffel-tower-pop-up-tour-eiffel Or print the following out>>>>

Share this Image On Your Site

After about 25 minutes of time, you’ll have built your very own Eiffel Tower. The final product should look like the following/ Voici le produit:


Bonne Chance! Good Luck!

Try a paper cut out of Big Ben.

John Cleese On Humour

John Cleese On Humour:

Humour is much more subjective. The rules of film comedy have changed because the market for films is completely shaped by the target audience NOT by the vision.  The internal logic must be maintained in any given sketch or else it doesn’t work….these are the kinds of insights you WON’T FIND in the video above;-P