If a picture is worth a thousand words…

Video has been spreading quickly about a Republican campaigning for the US Senate from Virgina who called a dark-skinned man in the audience a Macaque (Old World Monkey) and asked the audience to give him a “Welcome to America and the real world, or Virginia”. This apparently was his way to warm up the audience on August 11th, just before he said “Friends, we’re in the midst of a war on terror…”

A short video of just his remarks is available here.

The story gets more strange by the minute if you read details of the controversy and Allen’s background. For example, the Wikipedia has several interesting points:

According to Allen’s sister Jennifer, their mother “prided herself for being un-American. … She was ashamed that she had given up her French citizenship to become a citizen of a country she deemed infantile.”

[…]

Sidarth says he has never received a personal apology from Senator Allen. However, according to John Reid, Allen’s communications director, “The Senator has apologized sincerely and repeatedly over the last two days to the young man and to the public in general.”

I see some tough questions of identity ahead for a man on the campaign trail. John Stewart offers his perspective here along with a report from Rob Corddry.

Speaking of Stewart, here is a fine video of President Bush throwing insults to his audience. Perhaps Allen was just trying to follow by example.

A book review on Amazon provides a prickly rebuke to Mandelbrot and Hudson’s new theories on finanical risk:

Because the two main assumptions of modern finance are flawed, all related models are flawed as they understate risk. If such models understate risk, they actually overprice stocks and underprice options, and also understate the capital financial institutions should hold to withstand market risk.

If the author had stopped there, I would have given him a 5 rating. However, such a rebuttal of finance theory would make no more than a great essay. Instead, he attempts to build an entirely different edifice of modern finance over 300 pages. And, his theoretical foundation lacks any robustness. That’s why I call it a castle of cards.

Mandelbrot builds his edifice of modern finance on two new parameters that would replace the mean return and volatility of return or standard deviation (mean and standard deviation being the parameters defining a normal distribution). His first parameter is Alpha, derived from Pareto’s Law, is an exponent that measures how wildly prices vary. It defines how fat the tails of the price change curve are. The second one, the H Coefficient, borrowed from a hydrologist named Hurst, is an exponent that measures the dependence of price changes upon past changes.

Well, what is wrong with these two measures? He confesses at the end of the book that no two individuals calculate the same Alpha and H Coefficient when using the exact same historical data! Apparently, there is no one established way to calculate these two parameters. The divergence between the various methodologies can be huge. Using one method, you could derive Alpha and H coefficients that suggest a stock is not risky, using another method you would reach the opposite conclusion. So, after reading nearly 300 pages of intense theories you get that their own foundations are at this stage nonexistent. If Alpha and H are mathematically not replicable and well defined, you can’t apply his multifractal geometry model in any meaningful way.

I haven’t read the book yet, so I’ll wait before commenting, but I thought the reviewer provided some excellent points on the inherent flaws in risk calculations, worth noting here.

I overheard someone talking about the latest “energy” drinks in Japan and their nicotine content. This sounded odd to me, so I did a little research and found that there are in fact companies putting nicotine into drinks. Here, for example, is nicotine laced fruit juice:

The delivery system should prove popular, with growth in the functional beverage market, and more accessible than over-the-counter smoking-cessation products. But nicotine-based drinks are faced with significant safety issues, as well as taste concerns.

Finished products wil need to mask the ‘pepper’ taste of nicotine yet contain enough of the ingredient to be effective.

Drinks are already considered habit-forming, so you have to wonder about the “safer than a cigarette” marketing program. Will this be an over-the-counter refreshment? I would hate to buy one on accident, which is exactly the subject of the conversation that grabbed my interest — someone did not realize that the drink they bought had nicotine and could not believe it would even be legal.