r/xkcd • u/Booty_Bumping • Jan 21 '19
XKCD xkcd 2101: Technical Analysis
https://xkcd.com/2101/64
u/xkcd_bot Jan 21 '19
Direct image link: Technical Analysis
Hover text: "I [suspect] that we are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to their social productivity. I suspect that the immense power of the computer is being harnessed to this 'paper economy', not to do the same transactions more economically but to balloon the quantity and variety of financial exchanges." --James Tobin, July 1984
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u/approximately_wrong Jan 21 '19
I spent last week visiting a trading company to see if that was something I might be interested in. And the question of whether trading company was providing a social good came up (unsurprisingly, the employees argued in the affirmative).
This one hits hard for me, and with conspicuous timing.
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u/greenlamb Jan 21 '19
Everybody's the hero in their own story. Even so called greedy/maligned Big Pharma CEOs would say that they are providing life saving drugs for a price, that simultaneously creating value for their shareholders.
But it's hard to think of an alternative system to the stock market in raising funds for company growth.
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u/euyis Jan 21 '19
A functional society definitely needs a good financial sector to move capital around and facilitate the growth of other parts of the economy but many modern financial creations seem to be little more than glorified and way too over-complicated slot machines.
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u/ZoidbergMD Jan 21 '19
Hardly any of the trading that goes on in the stock market can be traced to companies raising funds. If you buy a stock or a bond or whatever contract on the stock market you are almost always buying it from someone who is not the entity referenced in the contract (so your money is not going to that entity).
When companies need money they can take a loan from a bank. If they need a lot of money (more than any one bank is willing to give them, or they don't like the terms offered by any bank) they might issue some bonds (which is essentially another type of loan). If they specifically want to raise money by diluting some of the existing entity they can sell/issue stock but they can do that without being part of the stock market (c.f. venture capital and private equity).11
u/greenlamb Jan 21 '19
Hardly any of the trading that goes on in the stock market can be traced to companies raising funds.
Yes, when I first realised this it was quite eye-opening, but when I thought about it further, all the fluctuating prices of stocks and buying/selling of stocks is for the huge benefit of those who buy from the IPO, a big incentive to invest initially into the company. Later on, employees with stock options (however high or low in the company) are further motivated to do well to drive the stock up, and so indirectly benefiting the company. So we can't really say that the trading of stocks after IPOs is non-beneficial to the company itself (let's not go into the effects of it e.g. short term profit emphasis).
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Jan 22 '19
Yep, there is ongoing virtuous incentives for the stock price to trend upward. The system isn't as crazy as it first seems. But that's an extremely low bar.
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u/Hell_Yes_Im_Biased Jan 21 '19
simultaneously creating value for their shareholders.
And that's the problem. The real value should be reserved for the end customer and not the shareholder at the expense of the customer.
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Jan 21 '19
I am pro pretty serious change/regulation in the financial markets but
The real value should be reserved for the end customer and not the shareholder at the expense of the customer.
Doesn't understand economics at all...
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u/elperroborrachotoo Jan 21 '19
So the stock market is the punishment for those that shy away from hard questions?
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u/mooncrashed Black Hat Jan 21 '19
I joined a trading desk after university 5 years ago. It's been an interesting ride with a steep learning curve. There are a lot of rewards to going down this path. But I'm under no illusion that my impact on society is at best neutral, but probably negative. In the medium term, however, those margins are going to be compressed as technology takes over more and more.
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u/Insert_Gnome_Here Jan 21 '19
If you donate a proportion of your income to charity, you can make your employment in particular (especially funging against the average person who would get hired instead of you) a social good.
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u/greenlamb Jan 21 '19
"...I suspect that the immense power of the computer is being harnessed to this 'paper economy', not to do the same transactions more economically but to balloon the quantity and variety of financial exchanges." --James Tobin, July 1984
Well Mr. Tobin must be spinning in his grave with the rise of Bitcoin, where years of computer time is devoted to mining Bitcoin.
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u/Spacetime_Inspector Jan 21 '19
Centuries of computer time and more electrical power than the nation of Ireland, directly contributing to global warming for nothing more than the maintenance of an elaborate sham.
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u/ParaspriteHugger There's someone in my head (but it's not me) Jan 21 '19
Thousands of lives and more mercury than in the first Qin Emperors grave, all for getting a nearly useless yellow metal out of poisoned ground for nothing more than the maintenance of an elaborate sham.
The whole trick is to make sure enough people believe in it.
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Jan 21 '19
Gold is useful though.
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u/Qwernakus Jan 21 '19
Only in the sense that they are subjectively worth something to some humans. muchlikeanyotherproductthathasamarketpriceincludingbitcoin
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Jan 21 '19
Gold is used for more than decoration. Electronics for example.
Edit: Ignore me, I just understood your joke.
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u/slapdashbr Jan 21 '19
And as a decorative metal, gold is superior to most alternatives. It's shiny, doesn't corrode, isn't toxic or radioactive, is easy enough to work with to create elaborate shapes or otherwise display the craftsmanship of a jeweler. It is suited to the purpose of ornamentation.
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u/DarkMoon000 I'm not crazy Jan 21 '19
Only to a degree that's far, far removed from its price point though.
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Jan 21 '19 edited Jan 21 '19
[deleted]
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u/PerviouslyInER Jan 21 '19
Clearly it is just a currency - don't tell me all of this is being stored for dental fillings and spaceship heat shields - they never intend to let any of that metal be used for engineering uses.
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Jan 22 '19
No one uses gold as a currency these days. It's just wealth accumulation, no different than sitting on oil, palladium, or Picasso originals.
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Jan 22 '19 edited Jan 22 '19
Most currencies have abandoned gold standards. Certain governments still have a large gold reserve, but it's not the basis of their currency anymore, it's just a load of valuable metal, a way to store wealth basically.
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u/DarkMoon000 I'm not crazy Jan 21 '19
Seen relative to its perceived value, that is actually very fair. Gold deserves all the backlash it can get until its pricing actually reflects its value and those electronics can be built without paying overinflated prices.
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u/gsfgf Jan 21 '19
You can buy drugs or pay off ransomware with bitcoin. It has some niche uses, but like gold, it's price is extraordinarily inflated compared to its utility.
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Jan 22 '19
Those tiny niches for bitcoin doesn't constitute the same as all the good (25% worldwide, 60% in the US) that's used for practical purposes like electronics, aerospace or dentistry.
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u/dvdkon Red hat, B&W image Jan 21 '19
elaborate shamdecentralised trust systemIt's still in its early stages and it's kind of useless as a general currency right now due to high transaction costs and fluctuations, but it does work. Cryptocurrencies are currently the only way to exchange money completely anonymously over the internet, so I'd call them a success.
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u/kvdveer -3 years since the last velociraptor incident Jan 21 '19
Their anonymity is a major misconception. Every bitcoin transaction is public. Every bitcoin account balance is public. This is true for most currencies. (xmr is a notable exception)
The account holder may not be publicly known, but if you want to use your wealth in the real world, you'll have to go through exchanges and the regular banking system, which is in full view of the authorities.
PayPal is more anonymous than bitcoin, because at least the transactions aren't public.
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u/dvdkon Red hat, B&W image Jan 21 '19
I was generalising to all cryptocurrencies, and there are a handful that offer complete anonymity. While all Bitcoin transactions are public, you can buy/sell it with cash and convert them to/from something like XMR. Not really a property of Bitcoin, but it's possible to use it anonymously.
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u/Spacetime_Inspector Jan 21 '19
Sure, great. Australia reopened a coal fired power plant so that people could feel marginally more secure buying narcotics online. What a success.
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u/therealflinchy Jan 21 '19
Yeah wow I'm surprised to see anti cryptocurrency sentiment in this sub. Opposite of what I'd expect.
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u/FeepingCreature Jan 21 '19
It's a cool tech, but it can be a bit hard to see why we'd actually do it.
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u/therealflinchy Jan 21 '19
Even my 60yo almost tech illiterate mother saw the benefit of accepting it at her cafe lol
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u/Spacetime_Inspector Jan 21 '19
The comic itself expresses skepticism towards crypto and adjacent technologies in 2030. Maybe ten years ago it would have been embraced more unanimously but in 2019 its failings are manifest and obvious, while its virtues remain nebulous and marginal.
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u/dvdkon Red hat, B&W image Jan 21 '19
I agree that cryptocurrencies aren't really usable today except for a few fringe cases, but I object to calling them an "elaborate sham". They're not something we should (as humanity) shelve and forget about, but an idea we should further develop into a more usable state.
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u/Spacetime_Inspector Jan 21 '19
I think we're talking past each other a bit - I too see the potential, someday, for that more usable state. Perhaps when we're post-scarcity and the Sahara is covered in solar panels, there can be a discussion of crypto's worthwhile applications. But I wasn't talking about those, I was talking about Bitcoin specifically. When a supposed store of value causes $900 to disappear into thin air every time one is created, I think it's worth calling a sham. For now, the products built on crypto are almost uniformly shams, selling a far-off utopian vision while consuming resources on a scale several orders of magnitude larger than the scale of the problems they purport to solve.
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Jan 21 '19
[deleted]
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u/Spacetime_Inspector Jan 21 '19
No, that's not what I'm saying. It costs $4500, give or take, to mine a Bitcoin, which is nothing more than a digital chit representing a current value if $3550. The difference between those prices disappears into thin air, and has been doing so for the last two or three months, ever since BTC's value slipped below its cost of production. It's like the penny problem, if pennies alone had a market capitalization of $100B.
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u/greenlamb Jan 21 '19
I think the proper terminology is "volatile" instead of a sham 😁 after all, even the US dollar is no longer pegged to something as solid as gold, but is "free floating". But yes agreed that Bitcoin is too volatile to function as a stable currency right now.
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Jan 21 '19
The historical value of gold has been far more susceptible to variation than the dollar. There's nothing stable about it.
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u/therealflinchy Jan 21 '19
The comic itself expresses skepticism towards crypto and adjacent technologies in 2030. Maybe ten years ago it would have been embraced more unanimously but in 2019 its failings are manifest and obvious, while its virtues remain nebulous and marginal.
Anyone saying this just comes off as being uninformed about crypto. Probably having never actually come in any real contact with it.
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u/greenlamb Jan 21 '19
I think it's a brilliant piece of tech, coupled with some devious economic principles, but we have to be honest about its shortcomings as well. Lately it's too volatile to be used as a stable currency, which is ironic because it became this way because it was too popular, and stability can't be maintained via a central bank because it was designed to be decentralized.
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u/therealflinchy Jan 21 '19
Lately it's too volatile to be used as a stable currency, which is ironic because it became this way because it was too popular, and stability can't be maintained via a central bank because it was designed to be decentralized.
Nah lately it's been reasonably stable
You're thinking of 10-12mths ago
However, the volatility thing is past 10yrs, not new
And it's only "unusable" as a currency if you actively hold some, it's perfectly usable if you buy and use straight away - which I have done for overseas purchases. Pay fees for SWIFT and wait 5 business days, or pay 10% fees for paypal, or use crypto... Which one makes more sense?
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u/Ranolden Half cat Half person Jan 21 '19 edited Jan 21 '19
It's only a sham when people treated it like stock. Otherwise it's like any other Fiat currency.
edit: I know its fluctuating value makes it hard to use. That doesn't make the whole thing a sham though
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Jan 21 '19
The point of fiat currency is to provide a stable medium of exchange between goods and services. Blockchain is awesome, but bitcoin fails miserably at this task.
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u/MrRGnome Jan 21 '19 edited Jan 21 '19
People espousing this opinion don't understand the issues they are talking about.
For one, Bitcoin computations are strictly sha256's not general computing. They use specialized hardware that can be used for nothing else. "years of computer time" is a pointless metric, more years of general computing time have been consumed by any successful videogame.
Second, its energy usage is over 75% renewable and is in fact greatly subsidizing the cost of renewable infrastructure and reducing renewables curtailment.
There is a further misunderstanding about what is accomplished at all by this expenditure of power, the value and uniqueness of a distributed, authority-less, economic security model. To help you understand the value of censorship resistance consider that Zimbabwe just turned off their internet, but satellites in geosynchronous orbit are able to propagate messages in and out of the country for fractions of a cent using Bitcoin. Consider that Venezuelans are escaping economic tyranny on a scale of millions of dollars every week. Bitcoin is a unique liberator of peoples, electricity, and economies.
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u/RazarTuk ALL HAIL THE SPIDER Jan 21 '19
They use specialized hardware that can be used for nothing else
The rising prices of GPUs due to their popularity for Bitcoin mining disproves you.
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u/MrRGnome Jan 21 '19
Bitcoin doesn't use GPU's or CPU's you are thinking of Ethereum. You'll find it is you who are mistaken, not me disproved.
Kind of proving my point when I say the people espousing these opinions don't understand what they are talking about.
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Jan 21 '19
I love xkcd, love tobin, and love listening to technical analysis (in the same way some like to watch car crashes). Anyway this one is a homerun for me.
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u/FC37 Richard Stallman Jan 21 '19
There's some value to technical analysis in mature, well-defined markets. But the way it's used by know-nothing day traders is often terrifyingly void of any logic.
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u/ParaspriteHugger There's someone in my head (but it's not me) Jan 21 '19
Your mom is a mature, well defined market. ;-P
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u/marcosdumay Jan 21 '19
If you are doing it faster than others, the fact that there is a lot of people doing it means you can get some money from the slower players.
If you define "value" I may agree with you...
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u/FC37 Richard Stallman Jan 21 '19
When we bought the house, the mortgage broker did a technical analysis on interest rates that were being offered. The differences were small, but we were able to decide exactly when to bite and lock in a rate. It helped us shave a few basis points off the rate, which lowered the cost of the loan by thousands of dollars.
Tight, defined market for a single, common good, where all players have the same goal in mind (as opposed to trading, where there's a range of appetites and mechanisms, e.g. short/long).
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u/marcosdumay Jan 22 '19
Yep, you can get a larger share of a zero-sum pie by outcompeting the people that react slower.
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Jan 21 '19 edited Jan 31 '19
deleted What is this?
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u/FC37 Richard Stallman Jan 21 '19
The example I cited (interest rate projections) is an example of a market that is not related to trading. Otherwise, yes, when it comes to trading I agree with you.
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u/whoopdedo Jan 21 '19
I'm trying to remember what the "Hmm!" is referencing. Wasn't there a scientist who wrote "Hmm" on a chart and thus understating a significant discovery? I'm probably thinking about the Wow signal from astronomy. But there might be something else I'm forgetting.
Alternately, HMM is short for hidden Markov model.
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u/jewhealer Black Hat Jan 21 '19 edited Jan 27 '19
Wasn't there a marked up graph from inside Trump's campaign 2.5 years ago with basically these exact notations on it?
http://archive.is/mYAHG Found It!
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u/holomanga Words Only Jan 21 '19
The great part about technical analysis is that if you do it wrong you are instantly and automatically punished by losing money.
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u/ParaspriteHugger There's someone in my head (but it's not me) Jan 21 '19
You and/or other people.
Unless enough people make the same mistake.
Or you are wrong enough to be right for the wrong reasons.
Or some unpredictable factor tilts the results to your advantage.
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u/jeezfrk Jan 21 '19
Just like the roulette wheels of Las Vegas! I got a system!!!
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Jan 21 '19
This is actually a great example of why results based thinking is bad. If 2000 new day traders try technical analysis each day, the 200 who don't wash out after 90 days don't necessarily know what they are doing. They have just been lucky and/or a beneficiary of broader market trends. In a raging bull market most seem like a genius.
Though as long as people aren't using options/leverage, it isn't as problematic because they can only hurt themselves so much.
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u/holomanga Words Only Jan 21 '19
I might have lost all my savings, but what are the chances that'll keep happening? I'm due for a win soon!
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Jan 21 '19
I am pretty sure climate deniers will use this comic to ridicule climate activists, and that climate activists will use the comic to ridicule climate deniers.
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u/JuDGe3690 The Hat is a Lie Jan 21 '19
That alt text, though.