Fraud Power II

Over three years ago, Sept 2008, we first wrote about the Fraud Power that is inherent in finance due to its acceptance of gaming as its basis. At that time, the focus of the blog was slowly shifting to be looking at both engineering and finance.

The original focus was 'oops (and related) as we see happen with creative efforts and the drive for new products of quality that provide value. That is, if you try to do something, you stand a chance to fail. For some, such expectations can lead to doing nothing. However, most reasonable people take actions with the hope for success. And, engineers learn the ways.

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There was (and still is) a whole lot to discuss on that subject from the engineering view. However, engineers go up against nature and can converge to good solutions over time when using the proper resources. In a sense, engineers work on real things (stuff, if you would). Generally, it is management that screws up engineering by bringing in factors that are not real, in many senses. Oh yes, accounting might try to put numbers in order, yet has it not become well-known that many try to book cook (despite regulations, auditing, etc. -- by the way, the main issue is determining value)

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So, as a way to go forward a little, let's re-look at some of the bullets of that older post and update the information with what we have learned.

• * Fraud power -- Finance does not work with real things. Do you think that you could go to the Fed's vaults and actually get your hand on something tangible? Oh, I know, we pass around paper and coin. You do know that such is a small part of the total under the control of the Fed (too, Ben has diluted the value quite a bit the past few years, sacking the saver, using his buddies like Jamie). Now, if finance was directed (first and second derivative) to only doing something real, some of the problems would disappear. Minsky's arguments were along that line. Speculation, in essence, is not needed, in many cases.
• Yet, finance has gone after this type of thing as if it were necessary. In short, finance for the sake of finance, as if we could eat money, wear it, sleep on it, etc. Get the drift? Unfortunately, there is no easy answer. The troubles in Europe may bring forth some insight, as we are in much bigger debt than we think (we sit fat due to the dollar being the prime means of establishing value). 
• Over the past three years, there have emerged new laws; the OWS came about and is letting us know that people can make their displeasure known; in fact, three years ago, it was as if the fat cats ruled (next bullet). Yet, people like Jamie argue for us to get back to their insane leveraging (which led to silly games). 
• So, are we any better off? No, the chimera runs every business day. Oodles continue to be raked off. At least, some are talking about how extraction is on the fat cat side (nope, has nothing to do with the 'entitlement' issues that the libertarians like to bring up). There has been a lot of talk; the questions related to actually cleaning things up lag severely. 

• *  Captains of industry -- The new kings reign over virtual realms that have no solid basis within any geographic, or political, sense. How do we change that? Well, a Magna Charta for these ones which will be enforceable (actually, these folks are worse than old King John). Much to look at here, in time. And, it would be different for the finance, versus those dealing with real stuff, industry. 

• *  Best and brightest -- If one goes back to the mid-90s, one would see that computer science had an upswing in interest. However, that was before the more mature web, so things must have seemed very boring in compsci. So, the flux went toward finance. I wondered about the motivations, from time to time, until the crap hit the fan. Then, I wondered how was the idiocy left go on for so long. With the downturn, many in the finance world lost jobs. Now, many of those still in the game are making more than they ought. Too, we're hearing complaints about constraints on bonuses, from time to time. 

• Just lately, there was a report that compsci is of interest again. Why? Those with that type of mindset, and knowledge set, are being offered jobs. Of course, my wonder now is what we'll see in 10 years that is completely messed up. Oh, could the web be any more screwed up? Well, yes (a whole other subject to address, at some point). 
• One thing that we know is that there is a shortage of jobs. In some cases, they've been pushed off shore. Why? It's easier to screw someone who is distant than the guy down the street. Too, some things, in this country, are still bound with moral characteristics. Elsewhere, not so much. We all know that training is key, in many senses. But, too, that labor is of value and needs respect has to get some consideration. Yes, those who are numerant have overlaid upon the rest of the populace a smelly cloud (noxious to it core). Why? We'll get more into that, but it has to do with misuse of technology. 

Now, the blog deals with oops. As discussions progress in the other blogs, there will be posts here when necessary (as in, it's pertinent, there is a need to look at the oops issues). 

Remarks:

01/15/2012 --  

Modified: 01/15/2012

Posts of interest - 2011

As a means (an attempt) to freeze a point in time (which we know is not possible), the last post of 2011 will list the top four posts in terms of having been read (well, views, anyway). Perhaps, this will be a yearly event.

Aside: As said in Mission and Method, posts are to contribute to a theme, though there may be divergent ones from time to time. Blogs allow categories, but these are problematic since they collect and present in a time order. From time to time, there ought to be a super-post that gives a more coherent view (here is an example - Truth, Fiction, and Finance). Perhaps, that type of thing will be done more often in the coming year.

Posts of interest, as of today:

• -- Wing and body -- This is from mid-2009; at the time, a lot was unknown by the lookers. Of course, the Company did make the right decisions to work things as needed, because the test period continued. Too, there have been deliveries. Now, the issue is production. But, the topic of this post was proven by tests. Will we know the lessons learned? I just hope that one of them is to not 'believe' computational modeling, by itself despite what has seemed to be sufficient evidence that we can do so. As an aside, a whole lot of testing has been pushed out to the users, in a seemingly production environment. Even, with cars we find this. Usually, this failure has little consequences beyond grief. As we saw with the airplane, the rigors cannot be avoided.   

• -- Confoundedness -- Again, mid-2009. One player is gone. In the look backs, what will be seen as lessons learned? It remains the case that measured steps from a known position is the right thing to do in many cases. However, there are many other times when going further is warranted. Again, this is a balance that we need to learn more about. 

• -- Truth,fiction and finance -- From 2008, this post pulls together somethings about the idiots of finance. Why do I say that they're idiots? They 'believe' too much in computation; the main issue is that this belief was reinforced due to machinations that allowed big paybacks (without clawbacks). The real issue is that these are not trivial things that are easily resolved. And, the current state of evolution in these matters is so apparent in its unfolding over the past years; yet, forces whose sole purpose is obfuscation seem to have the ear of the politicos. Oh yes, money is what drives that whole thing. 

• -- Cramming for the exam -- From 2007, the thing was motivated by a CEO's off-handed remarks that must have made engineers cringe. Yet, his was the mouth that perturbed the airways. As the first bullet says, from two years later, the proof is in the pudding. So, there was eventual performance. But, that came about from applying expertise, money, and thoughtful reviews and not from hubris associated with word play. 

Remarks:

12/31/2011 --  

Modified: 12/31/2011

December, 2007

The blog started with a project management focus. By the end of 2007 and the next year, it seemed that finance had really gone down the drain. Why? Too much gaming and misuse of mathematics (all because of an environment that relaxed oversight and that allowed young ones to play games without constraint as long as it filled the pockets of those who were funding the game -- at the same time, the real engineers had followed their improvements with an increasing amount of power at a reduced cost).

We had people thinking that trashy stuff, like the tranche, was high-powered finance. Wishful thinking, in some cases. Definitely, unrealistic in scope (there is no perpetual motion machine (something from nothing -- Ben, Ben, you can't just keep printing money -- oh, you're developing an economy to be like a game board -- funny money), yet there are many ways for people to gather more than they deserve).

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Then, there was this role that had been created in which a wizard had a couple of buttons to control the economy via monetary schemes. Back in 2007, we had not realized how far he could take it in applying changes, and schemes, without any real data with which to know the impacts.

So far, does he look like gold? We don't have the final accounting; in other words, it's too early.

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We jawboned a lot about moral hazards. It seemed that the FED was rewarding this a lot in its prancing upon the world's stage. Is that not still the case? Later, it was obvious that Ben liked to dance around strewing his fairy dust.

Too, the FED made happy talk.

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The whole structure was shaky due to an overabundance of leverage. This was one consequence of the bastardized mathematics mentioned earlier. In fact, much of the machinations of financial engineering would not have been possible without the advances in computational modeling (this I know about deeply).

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So, it's been four years of major oops, with all sorts of people suffering. Of course, the system risk is still there and understated. We can look back and try to see what happened. That will happen in the academic environment.

In the meantime, people are trying to move forward. As the OWS shows, we cannot sustain ourselves using the methods that led to the failure. What would help improve things? Do we not need to reconsider the deleterious effects of colonization and exploitation, for one thing?

Remarks:

12/07/2011 -- Jim Rogers sees saver sacking, too.

12/06/2011 -- Congress wants to clean up its act.

Modified: 12/07/2011

Sealy finale

A Thanksgiving theme, in part. We can be thankful that some retail establishments stand up to their role in offering quality products over time. Defective products can reflect upon their reputation; sometimes, one might think that they're caught between two immovable forces: shoddy production and design practices on the one side, discriminating consumer on the other.

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A bedroom stands empty since the retailer removed the mattress and refunded the purchase price. The consumer is now venturing, again, upon a quest for a good mattress; perhaps, the events described below will allow for a more informed decision.

Too, additional information, such as that provided by sleeplikethedead will be part of the decision process. It is interesting that the particular manufacturer rates low in customer satisfaction.

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So, what happened with this consumer? Firstly, a mattress set was delivered in June, 2010 (yes). As the delivery folks were setting up the bed, the lift strap broke. That is, the mechanism provided to allow one to move the mattress failed. Ought the consumer have accepted this set?

A few weeks later, the second set was delivered which then allowed the consumer to become acquainted with the bed set. Ah, what was a firm mattress had obvious soft spots. How could that be?

These earlier posts depict what occurred as the consumer tried to find out what was what. Is firm 'firm' in the modern parlance?

• - Sealy snafu (Feb 8, 2011) -- It took from July 2010 until February 2011 to get Sealy to send out someone to look at the mattress. This was after several go-arounds with their filtering process (is this to weed out those who don't follow through?). And, the first complaint was registered within five days of starting to use the mattress.
• - Sealy saga (Feb 15, 2011) -- Sealy went from a point test to one that averages across a fairly large expanse, perhaps due to an excessive amount of returns. The averaging test made rejection a whole lot harder for the consumer. However, using weights in a consistent fashion allowed the problems to come to fore in a measurable, repeatable fashion.
• - Sealy shimming (Feb 26, 2011) -- The net result was that there had to be shims put on the mattress in order to prevent sinking into the soft spots. That is, in order to provide a sleeping platform, the mattress had to be reinforced in several areas.
• - In April, the retailer (not Sealy) honored the consumer's analysis (described in the above posts) and decided to replace the mattress. When it arrived, the consumer accepted the mattress with only a casual review. However, before use, the consumer did have a closer scrutiny, and the mattress was found to be full of flaws. It had soft spots, even without use. It had mangled sewing (even Sealy admitted this). However, they had to send out the guy, again, before doing anything. That whole process took some time.
• - So, this time, Sealy said that they would replace the mattress (before, it had been the retailer who stepped up). In the meantime, a shimmed Sealy (Stearns and Foster) was in use by the consumer. The replacement mattress, this time provided by Sealy, was scrutinized before the consumer would accept it. Why? Sealy's policy makes it obvious that the only way to reject is to scrutinize for flaws prior to signing. Was the mattress acceptable? No. Hence, the mattress went back.
• - At that point, we were talking four flawed mattresses (the user satisfaction rating is low, the consumer found out). Why are so many flaws overlooked? You see, it's hard to do the proper lookover while crew is awaiting one's decision. Besides, there is the social pressure to not make waves. And, some of these things are not easily seen. Where is the quality control inspection at the plant that ought to be looking for these obvious shortcomings?
• - Since the time of that latest delivery attempt, early summer of 2011, the consumer has been in discussion with the retailer. They do offer the brand and have to give their stamp of quality. It was obvious that four strikes ought not to be ignored.
• - So, the decision, finally, was for the consumer to return the thing and get refunded.

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That event puts the consumer at square one, again. Frustrated, of course, in having to go through this whole thing, again. The final choice from the upcoming decision process will be reported once it has been made. In fact, there may be a post or two during the interim.

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You see, this is under 'oops' since there are several involved. On the consumer's part, one big 'oops' was thinking that brand reputation held up in the modern day. Will we ever get back to how it was before? Too, brand loyalty (the consumer has used Sealy for years) is not the way to go either, evidently.

What 'oops' there are on the manufacturers side we'll not go into, though we could. That is their issue.

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What ought Sealy do? Well, pressure test, for one thing. We hear that they spend oodles on research and development. What amount of this effort goes into testing? Of course, if they're doing 'lean' they ought to be making (the building process) their product so as to not have to test (ah, that is the ideal; can it apply in a case like this?).

Sealy, perhaps, is learning something. They are offering 'core support' which looks like an engineering improvement. It would be interesting to find out when this was first offered. As well, there are other modern offerings that indicate some thoughtful design.

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Why did the National Sleep Foundation pick Serta? Does that mean anything?

Remarks:

11/23/2011 --

Modified: 11/24/2011

There yet?

There was a 'not back' series that kept confirming that we were still looking at the idiocies of the finance world while letting engineers do their thing, such as deliver the 787. Of course, we know that there are engineering marvels all around and coming about every day.

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This marvel of finance exploiting computing is not what it appears to be. In fact, the reality stinks; we'll somehow have to constrain the thing with regulations and moral imperatives. We don't have to count the ways these things can go wrong, as the stench as drifted even up to the heavens.

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So, we're start another discourse that is more amenable to discussion and test. The automobile's expected life-cycle, for short. Ignoring, for now, issues of planning for obsolescence and other optimization schemes that increase the profit while reducing the utility and issues related todrive-by-wire (et al), let's just look at one vehicle.

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Now, the make and model will be ignored, for now, to protect the not so guilty. The thing is of 2004 vintage and has 163K miles on it without any major breakdowns. It's companion, a little older, has over 149K miles on it.

The drift of the post ought to be apparent now. Yes, why ought we not think that a purchase of a new vehicle is a transaction that allows us to get something that will work for as many years as we want it to? Who can tell us what the life expectancy might be?

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Insurance companies do this for people. They even put their money up front on betting that they can do the modelling correctly (however, things like the dead peasant must really throw them a curve ball -- who would think that bankers would stoop this low?).

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Here are a few particulars, to support the query about how far this thing can go:

• -- The miles have been mostly road miles (up to 80+ is common, where it can be driven like that legally and safely); the mechanic says that the brakes are just over 1/4 worn.
• -- For driving habits, all starts are gradual; there is almost nil quick breaking (if it's necessary, it's usually due to some unexpected move by another car); for disclosure, usually the car has out-raced others in seeing who gets to the top of the mountain first (yet, the tach seldom goes above 2500).
• -- It's on its 3rd set of tires. Judicious care about rotation, pressure care, etc. allowed maximal use to within 5/32nds of wear. Since I got a nail in the tire early, I used the spare for a pair. So, then the issue was managing the change over of pairs. A recent change of all four tires now has offered 10/32nds to play with.
• -- Oil changes were kept, for the most part, around 3000 miles. The air filter was changed, at least, yearly but sooner if dirty (you would be amazed at how eight hours driving in rain on an Interstate can trash the filter). Since manufacturers claim that the oil monitoring is a great system, I've giving this a try (but, the mechanics say that they've had to fix many cars that pushed too far without an oil change).
• -- The first major preventive work was changing the transmission fluid around 100K miles. This unit is one of the workhorses in mostly continual use.
• -- The plugs were not changed until 134K miles. They didn't look too badly. A performance change, though, could be seen in acceleration and mileage.
• -- The belt wasn't changed until 154K miles. It had no cracking. There was some stretching in certain load conditions.
• -- Problems: the instrument panel went (could not see speed, drove awhile with a stop watch and eyeballing mileage markers - that only worked out in the country) and took $.5K for fixing. A sensor went but hasn't been changed (it's been out for two years, another story that will be written) since it only applies to startup conditions.
• -- Oh yes, the windshield. It has about 20 dings, one starting to crack slightly. Insurance will change that; already has done this once. Needless to say, the wipers have been changed (but, they're kept clean).
• -- Light bulbs have been pretty good. One headlamp and one taillight, so far.
• -- Body work, interior -- only one ding that happened in a parking lot with a cart (intentional?); of course, trying to remove bug juice can be an issue; the interior doesn't have any real problems after 7 years. The thing still looks good when cleaned and shined up a little (never have added wax -- mostly hand washing).
• -- Warranty work: there was one little recall item early on. Did not buy the extended warranty this time with the thought that I would self-ensure. Turns out that I saved the money. The manufacturer (or its representative) is still trying to get me to buy this type of insurance at 163K miles.
• ...

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There may be more to add to the list. Right now, we can ask two questions. Can this vehicle go to 200K miles without any major work? If so, what about 300K? One mechanic told me that he had just done the first brake job on a pickup with over 300K miles on it.

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Now, as we know, the answer would depend upon several things which we'll get into. One thing is that all of the subsystems have some life expectancy. What are those? Where do you go to find these?

You see, people ask these questions all the time. No one seems to want to answer. Why? I can go to the web and find expected life of household items. Why not for auto systems?

I can tell you a lot about tires. The major worry there, for me, was tread and handling since I'm doing year around driving (only got stuck once in the snow -- the better tread was on the front tires at the time -- the thought, at the time, was safety over traction). The casing can have a very long life (hence, re-rubbering as we see with trucks) if cared for properly.

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If there are places where this data is available, I, and others, would sure like to know. If it is there, how do we make it more than anecdotal?

Remarks:

10/23/2011 --

Modified: 10/23/2011

OWS

There have been several developments the past few weeks. One of the major events relates to the Title, which is not expanded for a reason (see below).

• 1% versus 99% -- the latter is finding a voice and a presence - finally, one might say. Tech Ticker has a good overview of the basic issues.
• best-and-brightests' lack of sense versus the public's heart -- again, it's good to see that there is still something afloat (the suppression of the past decade was extreme).
• own Wall Street versus occupy Wall Street -- of course, those running the game think that they own the street; actually, we could do a better job with a bunch of smart monks.

All of this is too new to see what's going to be the end results. However, the blogger is happy to see the unfolding, almost deja vu (so many ways, to boot).

Remarks

12/13/2011 -- McKinsey report shows that households hold over 40% of the world's wealth. Hence, the consumer as the major influence on the economy. Now, consider that the household wealth collection (using income in the U.S. as a proxy) is skewed to a very small bunch.

10/18/2011 -- Hopefully, the OWS will bring this type of thing to public awareness.

10/15/2011 -- The recognition goes global. Banking ought to be handled by those whose greed is close to nil.

10/14/2011 -- One thing that has always concerned the blogger was the trickery that finance did with student loans which ought to be as straightforward as mortgages. Yet, some play games with those needing the support and, in doing so, made oodles (atrocious, in essence). Some of have this in mind as they join in the protest. Yes, it was turned over to bankers of whom there are many types; and, do not bankers exist for the purpose of filling their pockets?

10/13/2011 -- Cain, the candidate, has a 9-9-9 tax plan. Of course, those at the top would pay less, fattening their pockets more. Those at the bottom would be bled. What is interesting is that he wants to remove any capital gains tax. Guess what? That would put even more money, and silliness, into the gaming that we're now all paying for. Actually, the short-term profits (milking the system, actually) and speculative gains ought to be taxed higher than anything. The consequence of these things -- though, the aura is hyped daily by pundits, tv, and more? Moving money to the bigger pockets (small set) from myriads (very, very large set) of the hapless.

Too, Cain, of the boot-strap thinking, worked for the government (Department of Navy -- not in uniform, mind you) for his starter work. And, in a well-paid position with all sorts of benefits. Yet, he wants the young people (it seems) to create a position for themselves out of thin air (we'll have to re-address the whole perpetual motion issue -- no, we're not talking the mouth motion of people like Cain -- it has to do with accumulation expectations that are unrealistically founded and are not sustainable (except by chewing up the hapless)).

Where is the worker's equivalent of the 13th amendment? Workers, in many cases, are indentured servants (ah, we can easily explain this). We want them to enlarge their debt in order to keep the controls in place (shackles). Remember the Irish and the IPhone suicides (as if those using these things care about that sort of thing -- sort of like us not being mindful of the mistreatment of farm workers as we belly up to the tables of bounty).

Modified: 12/13/2011

CEO MVP

As in, the 'most valuable' of the CEOs. I first saw this in Fortune (May issue). That Jamie is foremost on the list got my attention.

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Will need to find out what were the results of the poll.

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The whole notion reeks of the claim here that what are roles has turned into a 'cult of personality' sort of thing. And, the importance of the role is not in question. Rather, that this type of top-down person can rake off so much is a very big issue (see Wealth).

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So, there will be much to talk about in this regard. But, first, let's just go down the line of the qualities (see article) needed by this new type of king (whose wings have not been clipped yet by the proper Magna Carta).

• understand global business in their bones -- or, 'true citizens' of the world (come on, Fortune, I thought you were better than this). Exploiting workers, and other resources while building up a framework that is beyond the reach of law, and more? I have no problem with applying the 'bones' (intuition, folks) as those at the lowly side of things do that, to boot. Those with their hands in the dirt. Yes, indeed.

• change strategies and business models more than before -- innovate at a deep level? does that not imply that there are those AT THAT LEVEL who can, and are allowed to, innovate? Let me remind you all, after the innervation! Besides, how can this sit with the ego-maniacal boss at the top (as in, from whence will we see self-adapting organisms, with autonomous parts, congealing to an effective entity? -- what? yes, the real indicator of a mature humanity!)?

• skillfully manage relationships with governments -- ah, a tight-rope walk here, do you not think? smooze, do you say? The balance that will be required for the political (used in a universal sense) and the business and the social (used as the closure - hence, fairly broad) realms is very important indeed. Is this then the place for the swash-buckler?

• identify and manage risk before they become disasters -- crap, have we not heard that before? In fact, just a few years ago, were not risk's uncertainties forever put to bed since it was being so well managed (as in, pushed under the cover or out to the hapless)? Are we to forget that Jamie and his kind are at the core of the troubles?

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No doubt, these four items cover a lot of territory. Anyone who can handle them all has a lot of talent. Yet, Jamie does what exactly for his company? I never see him when I go talk to a banker (yes, I see that he doesn't want, or has been allowed, to not pay me and my kind -- oh, wait, it's Big Ben who is behind that).

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So, let's see who Fortune crowned as MVP.

In the meantime, is it okay if I go barf?

Remarks:

10/12/2011 -- CEOs could look to Paul.

10/09/2011 -- Kings have sovereignty over their dominion however large it may be. There, currently, is no king of the world of this type. CEOs have sovereignty over their companies. Now, many of these have domains that are larger (measured many ways) than geographical types of kingdoms. BUT, each has sovereignty over themselves (or ought to), ideally (constitutionally, if you're in the U.S.A.).

Now, being able to exhibit sovereignty requires talent of various sorts. Throughout history, those who ruled others may or may not have had this talent. From all of the turmoil over the millenia, one has to just marvel at the stupidity of these types, exhibited, in the modern age, by the CEO MVPs.

Our task is to foster that which enhances one's self-sovereignty and diminishes others' influence on oneself. Oh wait. The social media seem to be antithetical to this notion. Also, all of those issues related to mature interactions (of a peaceful manner) must be resolved (philosophers have long been involved with that dilemma).

It is this type of notions that are behind a lot of what motivates the current protests. Those who could (LT 1%) have exploited (and have been allowed to exploit) the rest (GT 99%).

10/07/2011 -- Magna Carta, the celebration thereof.

Modified: 10/12/2011

OFFME

OFFME stands for The Order of the First Families of Maine. It is a historic and genealogic organization, many of which came to be in the past century.

The OFFME ancestor list consists of people who were early into Maine. ‘Early’ is considered to be from 1604 to 1652 which makes them prior to the Virginia and Plymouth settlement efforts. The purpose of the group, which started in 2003, is supposed to be, in part, “to honor those hard and enterprising early ancestors who concentrated their efforts, labor, and skills in building the enduring greatness of the State of Maine.”

Other goals are to “educate, preserve and increase of the history of Maine” and more.

From OFFME’s website, it’s hard to see how these goals are being accomplished. There seems to be a select few who are officers who seem to rotate between several organizations of the same nature. Do these organizations make membership discriminatory for their own benefit?

There has been one incidence that I’m aware of in which OFFME took the lifetime dues from a new member and did not send the membership certificate for many months (still pending, after six months). And, the new member has not received communications about activities that would support the goals of the group. From a certain perspective, it seems as if the new member is being ignored.

From where I sit, some of these organizations, in particular this one, have an indirect goal of providing leadership opportunities for a select few who want to collect credits like a scout collects merit badges.

Too, one cannot help but think that some are glorifying an aristocratic spirit from which most of our ancestors fled. Does that prevent the organization from being effective?

One might also ask: why join this organization if it does not live up to its goals? how many other OFFME members have experienced this same type of treatment?

Remarks:

08/13/2011 --

Modified: 08/13/2011

Accounting's failure

As we watch the markets bounce (volatility is up) around, some might think that it's possible to get a handle on this thing. Why?

Well, there are long periods with little volatility in which the trend has usually been up. Yet, not always, as we can have sideways movement. The chart covers 70 years of the DOW.

The blue line is the overall trend line from 1939 to yesterday. As such, it has little variability due to assumptions (note, accounting is full of special rules and assumptions that then imply choices -- it's not mathematics, folks), since it is a mere straight-line fit (however, all the largess of late is very visible).

Now, those with a certain view like this line. In fact, viewpoints that talk a 30K DOW use this line as their basis for argument. This viewpoint might argue that it has a lot of history behind it, but, as well, we need to consider what has happened the past 30 years that has influenced the rise (inflation, general economic growth, foreign investors, ..., largess).

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In fact, we have a whole generation or two of financial planners who believe this line. Look at the FED's goals. They love equity, even though their moves sack the savers and those who are retired (QEs, low rate, other bits of largess - will they ever end?).

Now, consider the green line. It is as if weighting out extraneous issues, such as those related to the recent bubbles, would allow for a better fit. What it shows is that we ought to be hovering around 9K or so. How could that be?

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One fact is that it would not be easy to see this happen given all of the loose money floating around. Or, to where would the money go?

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One means for control is suspect from the beginning. Remember all of the arguments about accounting and special rules that you heard a couple of years ago? One of the more controversial (but correct) rules was relaxed, by order of Congress; hence, the surge of the DOW the past couple of years. Add to that the largess of the FED as a big factor.

Well, a recent report talks about an even worse problem (Pentagon can't put their thumb on trillions). The truth is that no one can do an accurate accounting (to be discussed) of any of these financial things in our modern, complex economic world. It's about time that we recognized that and took the proper action.

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There are several things involved. Just like some European countries are restricting use of 'short' positions, we need to put a damper on derivatives, except for a playground where we can let these 'children' play to their hearts content.

Warren may call these things WMD, but he's making money on them, too. Warren, my challenge to you would be to put you money where your mouth is. Help me show how this whole bunch of supposed advanced techniques are bad, will always be, and need serious control. Too, take the vow of no derivatives (or only those of a type that can be shown to have necessity).

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Analog: taking the vow of not being an idiot and texting (or anything of that ilk) while driving.

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Secondly, we need to stop the markets every day and take an accounting. How would this look? Well, anyone know? I propose that we look at it seriously. You know, it'll go against the grain as the big money wants their 'black pools' and other questionable tools.

Thirdly, we will tame the stochastic beasts rather than en-flame them in an attempt for non-chaotic progress.

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The goal is a sustainable economy. Too, moderation of the ca-pital-sino. All of this bears, and will get, more attention.

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Finally, why pick on accounting as this problem is larger than that discipline? Well, you guys and gals, have you not been implicated in every bit of mischief that has come down the pike? Or, at least, has not one of your kind been involved?

Has there been a successful establishment of ethical practices? If so, let me know where I can see this. From where I sit, computation has just increased the avenues toward perdition. This is outside of your domain? True. Hey, IEs! What are you doing in this regard?

Remarks:

08/15/2011 -- Let's give Warren some credit.

Modified: 08/24/2011