On Sat, 08 Dec 2007 20:14:33 -0600, Vic Smith
wrote:

On Sun, 09 Dec 2007 01:36:36 GMT, Short Wave Sportfishing
wrote:

On Sat, 8 Dec 2007 19:06:07 -0500, "Eisboch"
wrote:

Here's the "what comes first, the chicken or the egg" question though:

Does the technology produce the vulnerability or does the ever expanding
services made available by the technology make themselves vulnerable?

In my view it's the technology itself that produces the vulnerability.
Complexity follows the rules of unintended consequences - for every
intended expansion or result, you get four unintended consequences.

The problem is that you can't define what those unintended results
will be and that's where the exploitation or fault exists.

I don't think that's true on the unintended results. Not to say
snowballs don't happen, but most complex systems are well thought out.
Malicious exploitation is another matter entirely.

I respect your opinion, but even well thought out systems can fail
spectacularly and often for the simplest reasons.

January 28, 1986 - Shuttle Challenger blew up when an O ring failed in
the rocket booster igniting the liquid hydrogen.

February 1, 2003 - Shuttle Columbia disintegrated on reentry after a
piece of foam broke off the hydrogen tank striking the left leading
wing edge.

I'm sure we can agree that space shuttles are very complex systems
with triple and even quadruple system redundancies. Yet, even with
the redundancies, both were laid low by simple mechanical failure.

I don't think you can reign in technology or it's application. We may be
required to rethink what and how much of what we want to make dependent on
it.

That's a good point and something that I think is missing from the
equation of technological advance.

Access to information is instant. There isn't time to absorb and
process the information - to think and/or ask questions. Last week,
for example, there was a pipeline fire in Michigan which was reported
as "major" - the implication was that all four of the lines from
Canada were involved - the price of oil jumped $3 bucks and change in
seconds. Couple of hours later it was only two involved and finally,
one and it turned out not to be "major" at all - the line was down for
a day. Prices returned down, but the settlement for the day was about
.80¢ higher - restablishing an up trend instead of the prior down
trend based on lack of news.

Back when, it would have taken time to react. Questions would have
been asked, calls made, etc. The event wouldn't have impacted because
time would have been taken to find out what happened. That has
completely changed and is one unintended consequence of instant access
which speculators can exploit to their advantage.

That kind of crap happened on trading board floors since people
started yakking and learned the power of rumor. It's simple
irresponsibility and greed, not technology.

Really? Well, allow me to introduce you to something called
programmed trading and specifically October 19, 1987.

While there is still some debate over the exact causes, the most
respected reports on Black Monday (the 1987 one) "Brady Report" by
Nicholas Brady and Mark Carlson's "A Brief History of the 1987 Stock
Market Crash..." state without reservation that programmed trading at
the minimum was responsible for 50% of the total decline and
introduced the negative psychology inherent in any stock/market
fluctuation. Other factors were portfolio insurance selling, the
arbitrage potential between commodity markets and stocks and a flaw in
the European Bourses because of a major weather event.

As you are a "what if" guy and knowledgeable on the subject, I'm sure
you can recognize it as classic cascade failure.

Since then, limits have been placed on programmed trading to limit the
type of cascade failure seen on October 19,1987. but there are still
flaws in the system - fortunately, humans now have the ability to
intervene. Instead of mindless trading, human perspective is brought
into the trading equation.

Tying the 80 cent gain to that BS is a stretch too. If you listen to
the myriad "reasons" that "analysts" give to any market gains or
losses, it never makes much sense unless it is tied to real
fundamentals. The pipeline didn't even qualify to move the market.
Yak yak yak. Greed, greed, greed.

No it's not just greed. It's a case of resetting expectations and
market psychology.

It's instant information that makes the scenario plausible and instant
reaction causes the rise and fall.

And, for the record, yes - rumors have been and continue to be an
important part of any trading cycle - that's a given - can't argue
that.

But, and this is very important, under the old system, it took time to
develop and rationalize a rumor which would affect market movement or
even any particular stock movement - it was "soft" information -
ethereal if you will - that was always suspect. With instant,
theoretically "hard" information, the reactions are also instant and
without buffering. That will establish a higher floor, in particular
in commodities, if only because of the inherent psychology of limiting
losses - a group think gestalt would be another way to put it.

On the flip side, real info gets to real people, not just insiders,
quickly.

Which does what? Think about what you said - real people get "real"
info - or is it "real"? Was that Michigan information that moved the
market "real"? If you are a casual day trader and heard that, what
would be your reaction? Be honest - you are trading commodities and
hear that half of the Midwest's oil supply has blown up - what do you
do?0

Those of us that are getting long in the tooth will be satisfied with
less, but imagine explaining to a 16 year old that they really don't need a
cell phone.

Agreed.

Which, I guess, is exactly what your point is.

I doesn't matter though. The genie is out of the lamp and there's no
turning back.

I agree with that, but you still have to at least try to anticipate
the results if the Endless Knot we have created dissolves or breaks in
multiple places.

When you consider current complexities and that things aren't breaking
down left and right, it's clear that contingency planning and backup
strategies are well established for most infrastructures.

Contingency plans are exactly that - contingencies that we can think
of.

In any complex system, it isn't what you plan for that fails - it's
always the one thing you didn't plan for but in hindsight, was the
most obvious and glaring defect.

It's human nature.

I know "what ifs" were always a significant part of my job.
It's always going to get down to having thoughtful people in the right
spots. But sometimes the **** will hit the fan anyway.

Well, we will probably continue to agree to disagree. :)