Tuesday, December 30, 2008

Last post for 2008

Another year has passed with changes happening (probably more idiotic than not) far beyond what we thought last December.

In terms of finance, many knew that things were going downward. Yet, as failures occurred (Bear Stearns, et al), some kept thinking that we will go up from here. All the way to September, when we finally knew that the Wall Street (including the golden boys) of the casino capitalism, and of the huge payouts to their supposedly best and brightest, was no more. The bill that the taxpayer will end up with is still unknown (will it ever be figured?); the truth is that no claw-back has attempted to get back the 100s of millions paid out over the years to these smarties.

In terms of engineering, at the same time a year ago, we were waiting for 1st quarter reports and schedule changes to determine EIS for the 787. That timeframe changed a few times to the currently held view of 2010 as an appropriate (looking-forward) guess.

So, we had a couple of questions in works about finance before the side-bar of who might be to blame for the mess. And, we were going to ask some about engineering. As, there are parallels that are really strong (highly correlative relationship).

The thing about engineering is how to keep 'Murphy' away and, especially, to avoid the 'perfect storm' situation. Well, one thing might be to avoid hubris which ought to be easier for engineering than for finance. The former needs to test in the real world using certifiable measures; the latter mainly games and then privatizes profit and socializes loss as the means to get back into balance.

So, the questions on the engineering side would include things like determining earned value, how to know a contractor's status, what indicators would 'measure' leverage in outsourcing, when is computer modeling pushed too far (cannot proxy nature, except within limits), and much more. The seeds will be updated with some of these and, perhaps, will be rewritten in another format.


08/01/2013 -- Ben cannot unwind or taper downhe has too many Doves. We'll have to get back to the king thing (yes, the divine rights of the CEO, new royalty, in other words) and dampening of these types by a new outlook (Magna-Carta'ísh).

12/29/2012 -- Summary - 2012.

01/01/2011 -- We have four last posts of December under our belt.

05/18/2009 -- Testing in flight is within sight.

01/22/2009 -- Now a new day and way to consider these matters.

Modified: 08/01/2013

Wednesday, December 17, 2008

Who's to blame for the economy?

This question titles a USA Today (12/17/2008) editorial in which various culprits are identified and discussed. This blog did a little of that earlier, motivated by a WSJ op-ed. It is nice to see this type of analysis continuing as it will for some time, no doubt.

But, here is the USA Today list.
  • Investment bankers - one example is Fuld of Lehman Bros who took in $480M while helping to drive his bank, and the economy, into the ground. There are many others, see the list below beginning with Grasso.
  • Alan Greenspan - he spiked the bowl, plus his take on derivatives is very troublesome.
  • Rating agencies - yes, drank the "Kool-Aid" and led us to perdition.
  • Predatory lenders - the lack of oversight is abhorrent, yet how much of this was out and out malfeasance?
  • Clueless borrowers - the American dream in action.
  • Congress - allowed Freddie and Fannie to err big time and the big guys to pad their enormous pockets.
  • George W. Bush - ...
  • Bill Clinton - took away the Glass-Steagall Act, ...
  • Regulators - asleep at the wheel, in short.
One can easily add a few more to the list, such as Grasso, Weill, Bernanke, ..., which would be an interminable list, almost.

Too, how many made-offs are there yet to uncover?


04/01/2011 -- The last man wants the old days back.

11/04/2010 -- Big Ben is still putting us at risk and trashing the savers.

08/21/2010 -- Those at fault (we don't hear about this anymore), were they just claiming their 'royal' rights?

09/15/2009 -- Lessons, one year after Lehman. Also, Time on culprits.

09/09/2009 -- Alan's reign will be looked at, in time.

08/18/2009 -- As promised, FEDaerated is here.

08/17/2009 -- Books on the credit crunch. This crunch involved "macroeconomic imbalances, greedy and incompetent bankers, and fraudulent American homebuyers."

07/31/2009 -- Let's see, 5,000 got over $1M for services rendered. Well, that's probably a sign of being a best-and-brightest, at least to certain eyes; it's called rolling-in-the-dough.

Now, this can be used to illustrate how the game it to fill the pockets of a small set to an exorbitant amount. Does the game need to be that way? Hell no. We'll look at that some more.

03/25/2009 -- Rhetoric can be fun, but we have to get into these issues with depth and technicalities.

03/11/2009 -- We need to look at accounting's role messing up affairs.

01/17/2009 -- Lessons to be learned (as opposed to learnt) needs attention.

12/30/2008 -- Let's add to the list: hedge funds with the opaque nature that hides essential ponzi/madeoff characteristics (there is a return level that is only attained through suspicious means), administrators (such as those heading pension funds) who think that they need the hedge funds in order to get their returns (under estimates of assets the key problem - wanting something for nothing), anyone who thinks that money isn't moved from one pocket to another (okay, there are legit reasons for such movements - except the hapless continue to always get screwed - probably by definition), ...

12/18/2008 -- As well as people, we can list ideas that are bogus. But, any of these, such as leveraging, in and of itself, is not bad. But, fairy dusting is, by its nature, problematic.

Modified: 04/01/2011

Tuesday, December 16, 2008

A couple of questions

Actually, there are more than two questions.

Today, there was another shoe drop related to sacking the savers. Yep, the Fed put their rate to 0.25%. Just a year ago, it was over 5.0%. So, what is the person who has savings to do? Put it into the equities market (where securities are toxic by definition due to the gaming basis)? For what, to give it up.

Oh, we know. Consumer spending is a large part of the economy, of late. Must it be do? Let's talk about that and some other things. We know that spending, as non-saving, is necessary; but, need it enslave the populace, via unlimited debt, for the next few generations. Spending requires some type of basis; do we just give people the funds to spend? Oh, we just did that with the fat cat bankers, did we not?

Leveraging allowed many to balloon their pocket contents. For awhile, that is. It can only work for the populace, folks, in fairy dust land. But, an issue comes up; where can savings go to be safe from the idiots? We'll look at that.

Next up will be questions in regard to engineering.


01/03/2011 -- Ah yes, now there are demands. The question remains: what growth other than the pockets of these types?

09/26/2009 -- Lots of opinion and uncertainty.

08/20/2009 -- Consumers need income. Savers need other than to just be sacked.

12/18/2008 -- Leveraging, in and of itself, is not bad.

Modified: 01/03/2011

Monday, December 15, 2008

By necessity, Ponzi

We've seen it before; Minsky suggested it as so. Financial gaming is always ponzi-like with the inevitable suckers.

The question is how to control this. Well, there are several ways, but they require some toning down of the aura of money and related luxury. That is, are the richest the smartest?

Gains in equity are not 'real' profit, even though the government likes to tax these supposed gains. Or, it used to tax them more; lately, the tax takings have been reduced. No, the supposed gains in equity are nothing than more money coming into a game, not unlike what Madoff was doing, except it's a little more subtle and considered smart.

Is there not a major industry set up just to handle money going in and out of the equity market? And, is there not a whole lot of technology devoted to tracking this money and to allowing almost infinite gaming on slight differences (derivatives)? Yes, the whole industry is suspect from its very foundation.

But, 'real' profit determination would require putting money on something other than a gab standard, plus a few other things. That implies people doing things other than just moving around virtual bucks, such things as making food or being involved with other essentials.

So, to get it right will require some hard choices.


08/01/2013 -- Ben cannot unwind or taper downhe has too many Doves. We'll have to get back to the king thing (yes, the divine rights of the CEO, new royalty, in other words) and dampening of these types by a new outlook (Magna-Carta'ísh).

08/27/2009 -- Madoff exemplifies (albeit somewhat indirectly) systemic risk.

04/17/2009 -- Minsky and the facts of ephemeral value are a couple of topics on the list.

01/26/2009 -- We need to consider 'derivatives' in various connotations.

12/17/2008 -- We'll use made-off in lieu of ponzi, henceforth.

12/16/2008 -- Shoes continue to drop, but they are of several types.

Modified: 08/01/2013

Saturday, December 13, 2008

Crooked games

Well, it has been said here that there's not too fine of a line between finance and fiction. Usually, that was meant in the context of stupidity as manifested in leveraging or in computing idiocy.

Well, folks, there is a mathematical view that uses fiction in a serious manner. All of our views of life and things rest upon a perceptual and conceptual foundation. Whose nose really knows?

So, now we have this guy, on the Street for years, saying that he's pulled a ponzi. Now, his ponzi is not the hapless type that Minsky talked about: to wit, hedging leads to speculation leads to 'ponzi' almost by necessity.

No, the recent revelation showed a game that was out and out fraud (see "Is the Madoff Scandal the Story of the Year?"). Notice that many financial types thought that there was some sort of illicit stuff going on, yet they did not look into it or they invested (well, what are spoils for if not for the taking?).

So, we have to ask: how much of the market structure is now fraudulent or what other shoes will drop? Well, we asked before, but initiatives like SOX were supposed to help matters.

By the way, up close and personal, the blogger's friend, this year, showed a bank that their 'finger on the scale' calculations resulted in underpaying customers (this has been going on for a couple of years). The bank threw the blogger's friend out the door (Madoff threw out those who questioned his returns), granted with checks covering all his accounts but some of the instruments had not matured.

Appeal to the governments (state and national, oh yes, the OCC - see regulators in the USA Today list) showed that the regulatory agencies are essentially complicit with perpetrators, basically through not following up. Of course, they do have an excuse of having been decimated over the years. Too, the current administration carried on the theme of screwing the public so that the fat cats' pockets can balloon without bounds.

Finance, as a metaphor, is like the circulation system where it moves monetary value (the blood). Yet, we have allowed it in the western world to be the playground of those who cannot keep their fingers out of the pot.

Let's automate the thing and have oversight from everyone. Technology can allow this; truth engineering would be one facilitator of scrutiny. How else to remove the crooked games?

So, we'll have to list things: opaque wishes (like the hedge funds), elitism (as shown by Madoff's crowd of pushers), derivatives (using calculus to show the silliness), ...


05/17/2011 -- Hedge funds need some of our attention.

08/27/2009 -- Madoff exemplifies (albeit somewhat indirectly) systemic risk.

08/24/2009 -- Last year, Ben blinked and panicked. He frantically pulled out all stops as if with no thought for tomorrow. Now, he has no use for 'mea culpa' big daddy that he is. Ben, start to unwind now. The Vienna School's view that these things are undecidable (which is a computational issue) is right on.

04/17/2009 -- Minsky and the facts of ephemeral value are a couple of topics on the list.

03/11/2009 -- We also need to look at accounting's role messing up affairs.

01/26/2009 -- We need to ask, why finance?

12/17/2008 -- We'll use made-off in lieu of ponzi, henceforth.

12/16/2008 -- Shoes continue to drop, but they are of several types.

Modified: 05/17/2011

Saturday, December 6, 2008

Very big oops

One big problem is that the US has spawned several types of attitudes that do not bode well for itself or humanity. One operative question would deal with why which will be, in part, related to truth engineering. For starters, lets just keep adding to the list.
  • In the December, 2008 Atlantic, James Fallows interviews a Chinese banker who worked here in the US after college. The article is titled "Be Nice to the Countries That Lend You Money." Gao Xiqing, the banker, has it right about derivatives using the example of a mirror. And, to think that the best-and-brightest here have played a type of shell game thinking that the rest of the world consists of a bunch of idiots. Needless to say, Gao suggests that stopping this gaming would hurt, especially CBOE.
  • The December 5, 2008 WSJ has an article about Japan's use of 'temp' workers which is something that they learned from us ("Japan's Recession Hits 'Temps'"). There is a lost generation, essentially, who never got any economic traction.

12/18/2008 -- We can identify players, games, etc.

Modified: 12/18/2008

Friday, December 5, 2008

Sides of the story

Earlier, there was some talk about culprits. We can take that a little further and put a face on positions that will be cursory, for now, with more to come. Sort of like looking at sides of a story.
  • - We have to start with Grasso whose tenure at the Street got him some $140M and more. He did not work any harder than many, in the same period, who were paid essentially nothing in comparison to Grasso's take.
  • - Weill, of Citi, got things started in the sense, as the King of Capital. His efforts to heat up things really got the fictitious capital urn to bubble.
  • - Rubin, of Citi, was an absent overseer. Thomas Friedman had a piece in the New York Times in November (2008) that discussed how Rubin's role, or his gig on the booard, got in some $115M or so. Also, see WSJ Editorial, December 3, 2008. The WSJ asks, what did Rubin do for his pay? Both Rubin and Weill pushed Citi toward its disastrous dealings.
  • - Silverman of Cendant. See Roben Farzad's article in the Business Week of December 8, 2008, titled "Heads They Win, Tails You Lose," in which we see investors' red ink provide a take out of $100Ms for Silverman's pocket.
  • - Ben's, he of the blink, role was covered by John Cassidy, in the New Yorker, December 1, 2008, "Anatomy of a Meltdown," where Ben is depicted as persisting in not wanting to call a bubble a bubble. No, we have to deal with poop oops, he says.
  • - Owner of Chrysler who jointly was owner of Mervyn's who recently declared bankruptcy and destroyed the lives (and fortunes) of oodles of workers while the private equity investors got their large mint.

04/03/2011 -- Need to look at some background. Too, tranche and trash.

09/15/2009 -- Lessons, one year after Lehman. Also, Time on culprits.

06/17/2009 -- Notice the absence of Milken.

12/17/2008 -- USA Today had their list of culprits.

12/06/2008 -- So, as well as players, we can list things to discuss further.

Modified: 04/03/2011

Wednesday, December 3, 2008

Other side of the pond

The engineering oops focus to date has dealt with this side of the pond, for the most part. Today, we get motivation from over there. Flightblogger released an analysis done by Airbus on the problems of the 787.

Well, we all knew that there were problems ever since the rollout of the 'Potemkin Dreamliner' on 07/08/07 in which an empty shell was glorified as if it were ready to fly. Leelaw wrote (9/4/07 12:06 PM): It's beginning to look like the potential negative legal, financial, and PR consequences resulting from the unfolding "Tale of the Potemkin Dreamliner," could make the process of recovering from the "Defense Procurement Scandal of '03" and/or the "Industrialisation Meltdown of '97-98" seem like relative cakewalks.

As of today, we do not have a date for first flight which is probably good if it reflects that Boeing is being more thorough in collecting the information required to firm up the plan.

Given the list of issues in the above report, it may be awhile before there is more firm information. The last poll here suggested that 2010 was the likely deliver date which would could happen with a first flight anytime in mid-2009.

The following was not invented here (seen in a flightblogger comment):
What will happen first? The first pitch at the new Yankee Stadium or 787 first flight?


09/02/2009 -- Lets face it, folks, undecidability needs to be discussed and adopted in any complex situational setting, especially if computers are involved. Only hubris pushes us to make loud exclamations about what we're going to do in the future.

07/14/2009 -- Nope, confounding continues.

05/18/2009 -- Testing in flight is within sight.

12/12/2008 -- 787 delays continue.

Modified: 09/02/2009