Quote of the Day: Protection against the tyranny of the prevailing opinion and feeling

Like other tyrannies, the tyranny of the majority was at first, and is still vulgarly, held in dread, chiefly as operating through the acts of the public authorities. But reflecting persons perceived that when society is itself the tyrant—society collectively, over the separate individuals who compose it—its means of tyrannizing are not restricted to the acts which it may do by the hands of its political functionaries. Society can and does execute its own mandates: and if it issues wrong mandates instead of right, or any mandates at all in things with which it ought not to meddle, it practises a social tyranny more formidable than many kinds of political oppression, since, though not usually upheld by such extreme penalties, it leaves fewer means of escape, penetrating much more deeply into the details of life, and enslaving the soul itself. Protection, therefore, against the tyranny of the magistrate is not enough: there needs protection also against the tyranny of the prevailing opinion and feeling; against the tendency of society to impose, by other means than civil penalties, its own ideas and practices as rules of conduct on those who dissent from them; to fetter the development, and, if possible, prevent the formation, of any individuality not in harmony with its ways, and compel all characters to fashion themselves upon the model of its own. There is a limit to the legitimate interference of collective opinion with individual independence: and to find that limit, and maintain it against encroachment, is as indispensable to a good condition of human affairs, as protection against political despotism.

(bold and italics mine)

This is from English philosopher and political economist John Stuart Mill from his essay On Liberty as published at the Bartleby.com.

Black Swan Problem: Not All Markets Are Down!

``No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion," wrote philosopher David Hume in his Treatise on Human Nature, which is a rephrase of the black swan problem posed by John Stuart Mill [Nassim Nicolas Taleb: Fooled By Randomness p.117]

When we hear experts generalize that global markets are in bearish territory as means to give emphasis to their deflationary theme, we understand this as a Black Swan Dilemma.

While it is true that MOST markets are in the red or even in bear market territory (defined as in 20% decline), it isn't true that all markets are suffering losses or even in bear markets.

This great chart from Bespoke Invest...

Quoting Bespoke Invest, ``As shown, Iceland is down the most at -89.66%, followed by Ukraine (-76%), Bulgaria (-74%), Romania (-66%), Russia (-65%), and China (-65%). Brazil is down 40% year to date and India is down 48%. Clearly, 2008 can't end quick enough for the BRIC countries. Just 3 of the 84 countries are up for the year. Ecuador is up 5.8%, Tunisia is up 17%, and Ghana is up 61%. And with a decline of 36% year to date, the US is the 33rd best performing country out of the 84 analyzed."

To add, some countries as Bostwana, Venezuela, Costa Rica, Lebanon and Morocco are down year to date but LESS than 10%-which doesn't technically bring them into bear markets.

We understand Bespoke's chart as computed based on local currency figures.

courtesy of isx-iq.com

And we would like to add Iraq's booming stock exchange, which according to Washington Post (Oct 27, 2008), is up 50% over the year.

Of course no bourse can beat Zimbabwe's turbocharged performance, from All Africa.com (all highlights mine),

``The feat continued into 2008 with industrials posting a year-to-date growth of 960 quadrillion percent, which is 4,15 billion times as much as July's annual inflation of 231 million percent.

``The resource index is up 444 quadrillion percent since January. And so, from the look of things, ZSE investors may have indeed managed to hedge their assets against the effects of high inflation but some have been at a loss in US dollar terms."

As a reminder, Zimbabwe's market has been up on local currency terms but is significantly down in US dollar terms. The seemingly fantastic rise reflects the impact of hyperinflation to its asset prices, as Zimbabweans seek shelter in the stock market from a collapsing currency.

As a final note, the Bespoke chart also shows of the massive adjustments in PE ratio on a year to date basis.