RWCG


For poll conspiracy-theorists
October 31, 2012, 5:23 pm
Filed under: Uncategorized

To follow-up my previous post on the Sonic Charmer Electoral Model™, we can now use it for something really important which is to help hone, calibrate and fine-tune your poll conspiracy theories.

As I’ve said, the quandary faced by righties is that they need to disbelieve state polls in order to think Romney isn’t a long shot. Now, there are plenty of half-assed reasons one can come up with to disbelieve state polls, and I’ve come up with some of them myself. It’s fun! I encourage it! Maybe there’s a ‘Bradley effect’. Maybe pollsters tend to be biased lefty Smart People so they fudge whatever fudge factors in whatever direction. Maybe righties Don’t Answer Their Phone As Much because they’re more likely to Have Jobs And Families. All three.

On the flip side, as you know, I think (D)s are Better At Cheating. This means they’ll outperform (accurate) polls which means that a poll that is (D)-biased, in the exact size of (D) cheating, might actually be ‘correct’.

In any event, when I mentally pull these poll biases out of my butt and add them together, I get that maybe polls are consistently underestimating (R)s by ~1.5%. And if I add that number to all the state polls, and run it through the Sonic Charmer Electoral Model™, I get that Romney has a ~55% chance of winning.

Which is good to know. But for folks playing along at home, I realized it might be helpful to know the answer to this: IF…I want to fantasize that the election probability is different from what Nate Silver says, HOW MUCH…do I have to fudge state polls?

Now that I have the Sonic Charmer Electoral Model™ at my fingertips, this is easy to do! Let’s run the model by bumping Obama’s advantage in each state by X%. Remember that for X=0% (no bump), I just come out with the ~78% Obama advantage that Nate Silver has. As stated above I have to bump Obama’s polling by -1.5% (i.e. 1.5% in favor of Romney) to make Romney the (slight) favorite.

Here’s a fuller table below, to aid you in your poll second-guessing/election fantasizing:

poll fudge (O+): Obama%
2.0% 98%
1.5% 95%
1.0% 91%
0.5% 86%
0.0% 78%
-0.5% 68%
-1.0% 57%
-1.5% 45%
-2.0% 34%

And the good news for conspiracy-theorists/poll skeptics everywhere is, the sensitivity really is pretty big. You only have to think polls are off (in Obama’s favor) by 0.5% to lower Obama’s probabilities by ~10% or so. That’s not that hard a fantasy to pull off!

So, good to know. Just another public service from the staff here at RWCG, Inc.



The 10-minute Nate Silver (or: why the right needs to find another line of attack)
October 31, 2012, 10:42 am
Filed under: Uncategorized

The righty backlash against Nate Silverization seems to have put a bee in my bonnet. I mean, how low have things sunk that I’m tempted to link to an Ezra Klein column for making good arguments against such model-skepticism? Ezra Klein, people. So I decided to devote a whopping 10 minutes or so to showing why the righty criticism of all things 538 is so silly.

To listen to the right talk, the output of Nate Silver’s “538″ (and other similar efforts) is just so counterintuitive and controversial – diagnoses often reached after looking at national popular-vote polling data (as if that means anything for a Presidential election), or thinking about aphorisms such as ‘a bad economy is bad for the incumbent!’ – that it requires either a big conspiracy theory, or (at best) illustrates that the Nate Silver Generation is totally putting themselves out on a limb and staking their somehow precarious reputations and complicated/opaque ‘models’ on the coming election, which will either confirm or (the idea/hope seems to be) decisively-refute Nate Silverness once and for all.

I disagree, and here’s why: I can basically replicate Nate Silver’s results (more or less) in 10 minutes of Excel hackery. I know because I just did.

And please keep in mind that I am a rabid, conspiratorial-minded righthy and I totally want Romney to win. There is absolutely no room for confusion here about my biases: my clear, unmistakable bias is for finding reasons to doubt, discredit, and demonize Nate Silver. I’d love that!

But here’s the thing: those reasons are just not there in widely-available public polling data. And what righties need to understand is that’s all Nate Silver is really doing: taking polling data, throwing them in a big bingo machine, and seeing whose ball comes out as the winner.

So what did I do? Here are the ultra-advanced, super-secret, oh-so-quanty steps I took. You may want to take notes because I am ‘opening the kimono’ on my proprietary ‘electoral model’, and I’m not even charging you for it!

1. Use a web-browser to go to RealClearPolitics.com. They have two basic types of data I used: (a) a tally of electors that are ‘solid’ for either candidate, and (b) for each of those that aren’t ‘solid’, an average of state polling data. So, for example, right now it says that Obama has 142 in SOLID STATES, while Romney has 127. Similarly, it says that the average of whatever Ohio state polls indicates that Obama leads Romney 49-46.6% in that state. In passing let’s note that nobody thinks this site has a lefty bias, if anything, it is righty-biased.

2. Now, when I added up electors the SOLIDS plus the toss-up/swing states didn’t add up 538. I realized that the RCP isn’t tallying South Carolina or South Dakota either as solids nor showing them in the table of state averages. They seem pretty red so I just gave them to Romney as solids. So in fact my ‘model’ assumes that the solid tally is Obama 142, Romney 140.

3. There’s some funkiness with Maine and Nebraska’s electors – it looks like they each allocate an elector by congressional district or something equivalently unAmerican and communist – anyway I just attached that ‘extra elector’ to the state overall. So in my model, Nebraska has 5 electors not 4. Whatever. Once I did this the elector tally checked out to be 538, so I had all electors accounted for. Obviously I could deal with Maine/Nebraska’s weird extra elector more carefully in future work if I felt like. Similarly, if there are states that aren’t winner-take-all (I forget), I’m pretending they are. Doesn’t seem like a huge deal though.

4. Anyway once I had the solids (142-140), and the rest of the states laid out by poll data, the rest of the exercise is just to simulate a bunch (i.e. 10,000+) of elections and see who wins. In the words of one of my favorite grad school math professors, here I did the ‘dumbest possible thing’: to account for error in all these state poll numbers, for each state I just bumped the lead by a little bell-curve. I made these bell-curves in the most inefficient, dumb way (using Excel’s normsinv(rand())). So, say Obama is leading 49-46, so the polls show Obama+3. Then I draw a Gaussian random number; say it comes out -3.5. This means (in this scenario) the ‘real’ lead is not Obama+3 it is Romney+0.5, which means Romney will win the state. I did nothing special for turnout, for dependence on the economy, or any of that.

Anyway, do the above independently for every state, add up the Obama elector tally, see if it gets to 270 (I have read that Romney wins in a 269 tie), if it does the winner is Obama, if not, Romney. Count up Obama winners vs. total simulations (each laid out as rows in a spreadsheet), and that’s an Obama victory %. SERIOUSLY, THIS IS THE DUMBEST MONTE CARLO METHOD POSSIBLE. But easy as hell. I mean, just take a gander – you could totally probably do this too:

The Sonic Charmer(tm) model

This is totally rocket-science. I should get a patent or a Field’s medal or something.

5. Some technical details: I broke out the Gaussians as a national error + a state error. [UPDATE: No actually I didn't, see ERRATA below.] I figured, there could be a ‘systematic’ error in all polling, and meanwhile, there could be (independent) errors in each of the states’ polling. The actual error in each state is the sum of the two (national/systematic + state/particular). Each type of error has its own standard deviation, which are ‘parameters’ of my ‘model’. I basically made them up, using a national standard deviation of 3% and a state deviation of 4% (so the total per-state standard deviation is sqrt(3^+4^2) = 5%). Again, this is kind of made-up but you could play around with it. More/greater volatile error in these polling numbers would increase the model’s prediction for Romney (this might be obvious, as he appears to be behind, i.e. out-of-the-money in the electoral college…). I don’t think even the most contrarian poll-doubters think the polling error is more than something like +/- 5 points though.

MY EARTH SHATTERING RESULT: According to this ‘model’, Obama has a 78.3% chance of winning. Hey let’s press F9 again to refresh those random numbers. 77.1%. Once more for good measure? 77.8%. Seems pretty replicatable; however I slice it, a reasonable, easy, dumb model – based on publicly-available state polling data – puts a chance of an Obama victory in the high 70s.

What does Nate Silver’s model say right now? 77.4%.

Well what do you know. Remind me again why we’re all supposed to be so skeptical of Nate Silver’s model? Actually, I’m asking the wrong question here: remind me why anyone’s supposed to even be impressed by it? Just freaking make your own.

The point is, the premise that Nate Silver’s output requires a bunch of skepticism and raised-eyebrows isn’t supportable at all. He is literally doing something more or less mathematically-indistinguishable from mapping state polls + poll error margins -> election outcome in the dumbest, most obvious possible way. So tell me then, why all the griping from the right? Obviously, it’s because they don’t like the output.

But that is dumb.

Now, keep in mind, I still think Romney could win. (I don’t think he will, but he totally could.) And there could certainly be something seriously wrong with all the polls. But if that’s what you think, then your gripe is with the polls, not with whatever Nate Silver’s black box is doing. Because again, whatever that black box is doing, it’s not coming out with a result markedly different from doing the most easy, obvious thing you can possibly do in 10 minutes of Excel work.

ERRATA (11/1): Actually I noticed a short-circuit in my sheet had prevented the systematic/national error bump from feeding anything. So really, in the above, the Sonic Charmer Electoral Model™ assumes no correlated error between state polls, and used a 4% per-state standard dev. This should explain, if you were wondering, and I know you were, why my model was already converging ok with 10,000 sims instead of 10,000 x 10,000 sims (which I think would break Excel if I tried it the way I’m doing). The national systematic-error/correlated component can be added in but would need more work. For future papers!



Obama dropped the ball on Sandy, refused to roll up his sleeves
October 30, 2012, 6:52 pm
Filed under: Uncategorized

When Hurricane Sandy first hit, I tweeted, importantly:

I hope we get a photo of Obama with rolled-up sleeves in some kind of Sandy control room. That’s when I’ll feel safe.

Well, I found some photos, but they’re all variations on the one seen here:

Do you see what I see? NO ROLLED-UP SLEEVES.

I mean seriously, what the hell is he wearing there, a freakin’ blazer? Also, he’s sitting up like he’s in church (instead of leaning forward), wide-eyed, almost looking scared. NO WONDER this storm was so devastating. He was OVERWHELMED.

Let’s compare to how he Managed that other (surely not coincidentally, far less devastating) storm from last year, Irene:

OH MY GOODNESS. Sleeves TOTALLY rolled up. Leaning forward. Talking into the microphone. Probably talking important stuff too. (Also notice how the same guy was on his left, but there was a WOMAN on his right back then. What, they couldn’t bring her back? For the photo at least? Surely it would have been more inclusive.)

Anyway, the point is, THAT is what screams LEADERSHIP. You could totally feel safe knowing THAT guy was in charge of the storm. Especially the sleeves part. I think I just swooned all over again. On account of the sleeves.

What happened to that guy? TAKE OFF YOUR BLAZER MR. PRESIDENT AND ROLL UP THOSE SLEEVES there was a storm that needed your MANAGING.

Sorry, but this is the last straw. I can no longer in good conscience support President Obama to be the President-guy. We need a President who is willing to roll up his sleeves for important storm-managing-control-room photographs, and apparently, that’s just not Obama anymore.



N=1
October 30, 2012, 5:58 pm
Filed under: Uncategorized

I have to say, probably the most enjoyable aspect of Sandy has been the spectacle of Smart People (who, as we know, care only about Facts And Science And Argument) taking the single data point (i.e. the fact that a big storm occurred, i.e. this one) as obvious evidence of climate change and, therefore, for their preferred purported solution to climate change.

Because of course, that’s totally scientific.



When you look at poor people and think ‘zombies’, the problem might lie with you, not Mitt Romney
October 29, 2012, 9:35 pm
Filed under: Uncategorized

I like Firefly and possibly even other stuff made by Joss “Joss” (sp?) Whedon and all – though not that one where Eliza Dushku is an induced-amnesia mind-controlled prostitute and/or robot (?) – but my first reaction to seeing this ‘funny’ video on Romney being a zombie, or something, was 100% pure unadulterated grade-A “Huh?”

I mean, what’s the thought process here? Let’s try to trace it. Fine, put myself in the shoes of a ‘liberal’ (i.e. leftist) guy like Whedon. What is the idea here?

The idea is:

Romney = on the right = bad for poor people = poor people suffer = [SCENE MISSING] = zombies.

Because, um, poor people make you think of zombies. Or, poor people are potential zombies. Or something. Anyway, the point is, if someone says ‘poor people’, all good lefties – like Joss Whedon – think immediately of zombies.

I’ll say it again: Huh?

I mean, really. Who thinks like that? Who makes the instinctive association between ‘poor people’ and ‘zombies’?

Oh wait. I know who! 4 years ago I even already wrote a blog post about it and everything. Lefties do. That’s who looks at poor people and thinks of ‘zombies’. Lefties! Lefties who see themselves in the savior/messiah role. Lefties like Joss Whedon. Lefties including Joss Whedon, writer/director of Serenity, in which we learn that the Reavers were regular people poisoned by a well-intentioned ‘liberal’ government project.

Yeah, now I remember. And I have the years-old blog post to prove it.

Thanks for reminding me of what a great blogger I am, ‘Joss’!



New blog
October 29, 2012, 9:02 pm
Filed under: Uncategorized

A provocative new blog with an interesting yet subtle point of view:

CLICK



What did Kweku Adoboli think his job was?
October 29, 2012, 4:54 pm
Filed under: Uncategorized

The excuses of the UBS trader who lost $2.3 billion are interesting, and should be required reading for anyone who subscribes to the Paul Volcker conception of trading, in which all investment bank trades are (or, are supposed to be) either perfectly-crossed client trades, or magically-perfect instantaneous hedges to (somehow) existing positions.

Obviously in reading over these testimony excerpts there is much self-serving nonsense one has to mentally factor out. His (apparent) line of defense – that he ‘wasn’t a rogue trader’, because he only positioned himself the way senior management wanted him to – is so stupid that I can’t understand how his lawyer could let him put it out there (does he even have a lawyer?). Sorry Mr. Adoboli, but when you book tens of thousands of fake trades to hide losses from your internal systems, which leads to the inevitable follow-on trading as you try to trade out of it, you’re a rogue trader. The fact that the initial trade whose losses you were covering up may have initially been at senior management’s behest doesn’t change that (unless of course you can show that senior management aided/abetted/approved of the coverup too, which he hasn’t AFAIK). ‘I would have never gotten into that position initially if I hadn’t followed the clear orders of my bosses’ doesn’t even seem like a defense against the charges against him.

But even after factoring out the nonsense, we’re still faced with quite an instructive picture of the ‘global synthetic equities business’ of which he was a part. Reading between the lines, it’s quite clear that his higher-ups at UBS approached this business as a proprietary profit center: they expected, wanted, and sought P&L not from having these guys just doing trades for clients and booking a tick in fees, but specifically from deliberate, large-sized positioning. From using risk/capital limits (‘pushing the boundaries’) so as to take risk, and maximize P&L potential. This basic picture being painted of the business is not being denied as far as I can tell.

And note, this wasn’t 2006. This was 2011.

Now I guess someone in favor of the Volcker Rule would just cite this as Exhibit A in why the Volcker Rule is needed. (In fact, I’m surprised I haven’t encountered more commentary along these lines. Do Volcker Rule fans just not realize the import of this testimony?) But what it really illustrates, to me, is that if you had taken away the positioning, there’d have been no business as such. You will note, that nowhere in any of this trader’s descriptions and notions about what he was doing is there any conception of Pure Market-Making. I am sure there were clients coming to them for synthetic equities trades, at least some, but reading between the lines, that’s not where the action was. Clearly, even now, he thinks his job was to make money by taking intelligent risk: to make good calls on positioning, to use his risk limits in intelligent ways, to manage his trading book and macro/manager’s book (the ‘umbrella’ account) in the best interest of the firm’s bottom line and revenue needs, and so forth. That’s what he thought he was getting paid to do. He thinks he only screwed up by not following his gut in positioning. He thinks if he had followed his gut, and kept on the big (opposite) position from the one he got into, all would be swell now. (And he might be right!) He also thinks he took one for the team by not releasing P&L into ‘his’ account in 2011. And so on. Every aspect of his attitude suggests someone who thought of himself as a prop trader. A bigshot who made big calls with big risk limits that made big money when they went right, and was due to get paid accordingly.

And I guess my point is that he is the norm, not the exception. For better or worse, most guys in positions like that, think that way. It’s inevitable and unavoidable. Perhaps the Volcker approach is correct in saying: ‘they shouldn’t, and so let’s erect a gigantic regulatory apparatus to discourage it’. Where they really lose me, though, is when they try to justify it by saying: ‘…because that’s a departure from what investment bank trading is all about.’

Is it really now?




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