Saturday, March 28, 2009

More on culprits

Earlier post identified poster boys and other culprits who might be behind the toxicity of our beans. Well, the former probably thought that they would put Obama in his place ; but everyone made nice at the meeting. We still don't know if they learned any lessons. The latter (those responsible) consists of a long list that will be reviewed from time to time. Everyone seems to have forgotten Grasso who is a poster boy for lots of that era just past.

Another issue relates to value assessment, especially the imposition of mark-to-market rules. We'll be looking at that in an economic/engineering framework since the tie has been tightened twixt technology and finance.

For now, let's look at the Fed of he who blinked. The WSJ published an opinion by Greenspan (former head) in which he tried to show that he was not at fault for the housing bubble. You see, plenty have him on the culprit list as the sub-prime thing showed the first quaking which brought down the house of cards.

Yesterday, there were replies to Greenspan's argument. All are insightful. Shelton's ("Loose Money and the Derivative Bubble") take is right on as the gab standard is of prime importance here. Shelton talks about derivatives and their influence. Well, as 7oops7 has argued, this whole discipline has a basis of faulty mathematics. We'll be looking more at that.

Remarks:

11/29/2011 -- Ah, Big Ben helped his friends more than he said, at the time.

02/01/2011 -- The chimera shines.

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

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

03/30/2009 -- Philip Greenspun reviews Greenspan's The age of Turbulence and references Alan's March 11, 2009 article in the WSJ. Greenspun has a proposed economic recovery plan that we'll discuss at some point.

Modified: 11/29/2011

Wednesday, March 25, 2009

Toxic assets

A WSJ opinion, titled "Toxic Assets Were Hidden Assets" by Hernando de Soto, covers some of the issues related to the financial mess. We can rant about the culprits (who are many), opine on causes, belittle the greedy, and such. We can harp at those who are trying to fix things up.

But, the core issue is securitization gone wild. As said before, in this blog, the problem stems from the misuse of modern methods, the lack of appreciation of quasi-empiricism's message, and from outright exploitation of (and profiteering on) the confusions caused by the insertion, into finance, of unsuitable methods.

de Soto mentions that many things were largely off-the-books which breaks trust. Too, as said here, the argument from CBOE'ers and hedge fund'ers was that they required opacity to cover their strategies (ah, the best-and-brightest knew that they could more easily pilfer with the lesser scrutiny). And, the risk people thought that they had a stable grasp of things. Hah!

Well, it's time to get past the rhetoric and to get back to talking turkey. Hence, future posts will get more serious, except an occasional poke at the madness cannot be denied.

Remarks:

08/01/2013 -- We're relook at this as we consider the good side (as if there is one) of financial engineering.

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

02/01/2011 -- The chimera shines, though the toxic still underlie Big Ben's balance sheet.

11/02/2010 -- Over a year later, the message is the same, except some changes have occurred. But Big Ben continues in his ways. Of real note is that the jobless rate is high; out-housing really set up for that. Also, we need to re-look at that learned from the 'vons' guys, Ludwig and Friedrich. See Near Zero.

11/08/2009 -- The gigantic chimera needs proper attention.

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

08/17/2009 -- As promised, FEDaerated is here.

06/17/2009 -- Michael Milken says that structure counts (see WSJ article). Remember, the theme here is that a lot of securitization is bunk, many times. Sheesh, talk about a perpetual motion machine, always moving monies from the pockets of the hapless to that of the fat cats.

Modified: 08/01/2013

Tuesday, March 24, 2009

Predicting idiocy

We may not know what is smart, but we can identify idiocy by its pain, especially that imposed upon the hapless.

So, we have 2 trillion (bucks) of toxic waste (so-called assets) from the latest idiocy which was brought on us by the best-and-brightest. This was predictable. How?

Well, a few years ago, congruent in time with the tech bubble, the smart kids were going into computing. What happened there where a new world was supposedly being put into place (web-oriented, for those who don't recall)? Bust city.

Then, people wondered why the exflux (opposite of influx) of people out of computing (note that we can enumerate the associated academic disciplines). The kids were going into finance. What? That's a silly discipline. Oh wait, the bonuses were beyond anyone's imagination. And, as we see, especially with AIG, very addictive to those who get on that teat.

And, what happened with finance and fiction? Bust city.

So, a survey of the academic disciplines will help pinpoint the next boom and bust. You see, we can go back in time and, generation by generation, identify idiocy in action. And, the older folk just get out of the way; Hawker has put an old guy in charge now (isn't that apropos?). Some of this is not unlike cleaning up messy diapers from those who never grew up, perhaps like those in the rogue gallery.

What is the new intellectual fad to watch?

Remarks:

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'√≠sh).

05/07/2013 Case of the sucking of life out of a firm?

05/30/2012 -- As covered by flightblogger.

05/04/2012 -- A recent filing relates to this theme.

05/17/2011 -- Golden sacks (leftmost mug), by Rolling Stone and Daily Ticker.

09/02/2009 -- The supposedly best-and-brightest have led us on a perdition-directed path through mis-using mathematics and computation.

07/17/2009 -- China has eaten our lunch (and dinner). Shows how silly our games are. Yet, finance can be run by people who can be non-profit in scope and who have an impeccable (oh, what quaintness!) un-interest in money.

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

03/30/2009 -- Renewable energy is getting a lot of interest. Let's hope that more young people being involved there will get us some more progress and increase potentials for careers.

03/25/2009 -- All the involved generations are culpable here. We'll get into that with depth, including technicalities, as we go along here.

Modified: 08/01/2013

Wednesday, March 18, 2009

Silly games

Earlier, crooked games was used for the thing called finance and business. What you have are the Madoffs and others who pilfer outside of legal boundaries; then, there is a larger amount of effort going into keeping the game going so that legal pilfering can occur.

Say, like we see with the AIG bonuses (except, multiplied countless times) which don't make sense since the company could have been bankrupt without taxpayer help. From whence, then, would have come the payout.

Then, you got those arguing for unregulated manipulations via derivatives and other types of mechanics. That is, their casino capitalism is in favor of their pocket bulging extracts. Give us a break.

That is, there are many players, some are on the floors of all those market sites, such as The Street, CBOE, and the like. Too many, don't you think?

But, the silliness goes further.

Ben talks; Pandit talks; someone else talks; what do we get? Little blips in the indexes, and people go crazy. Money pours into the game. Ah, the poor retiree; what gives with all these financially errant fund managers?

We're in the situation where the loss is 10-12 years deep. Many have had their lives ruined.

Yet, the gaming continues. The headline says that Obama wants more control over fianance. Well, kudos to him if he can get it. Some feel that we can't regulate the best-and-brightest. No, let's just let all of us reasonable people go down with the ship because of their failings.

But, why the use of 'silly' in the title? Well, certain illegal activities require real brain power. We all appreciate that, yet what a waste. Being led around zombie-like by the comings and goings of the financial market is just that, silly.

The fact that we'll have to address? It's near-zero sum, folks. Any who makes some gain takes it from others. And, as we have seen many times, the few take from the many.

Does it have to be that way? No.

Remarks:

05/28/2015 -- Perhaps, we'll get back to this (does it or doesn't it?) before the downturn comes about. Too, near zero needs attention.

01/15/2015 -- One of the most-read, of late, as things do look unsettling. Did we learn anything?

10/16/2014 -- We are now five-plus years past the time of this posts. A lot has changed; more has not (will it ever?). We are now to the point where the years of largess, and seat-of-the-pants flying by the Fed, will come home to roost. Now, just because there have been a string of down days does not mean that we have hit the point where descent trumps ascent (in other words, no timing of the market can be implied here). But, the WSJ has an article about one high frequency group. They talk their benefits provided, namely, liquidity, efficiency, etc. However, the whole bit behind the ca-pital-sino needs serious examination. And, silliness keeps coming to mind. ... And, we are not being anti-computation. However, if we are going to use advanced computing, let's do something real: like, track all sales (daily and longitudinally) - yes, openness. Why? Remove the cheshire multiple, for one. Remove the cream scrapers and pocket pickers from the game. ...  So much to discuss.

08/01/2013 -- We're relook at this as we consider the good side (as if there is one) of financial engineering.

02/05/2012 -- Time to update the theme of the best and brightest.

10/13/2011 -- This needs to be updated due to an emerging phenomenon: OWS.

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

03/15/2011 -- The M & Ms are apropos.

11/02/2010 -- Two years later, the message is the same, except some changes have occurred. Of real note is that the jobless rate is high; out-housing really set up for that. Also, we need to re-look at that learned from the 'vons' guys, Ludwig and Friedrich. See Near Zero.

01/27/2010 -- It's really ca-pital-sino.

10/11/2009 -- Discussion has gone over to FED-aerated. Note the 10/11/2009 Remarks about the Business Week article on India's progress' inhibitors. 'Near zero' recognizes that some always suffer more than others, especially in win-win situations, as the whole notion of characterization minimizes visceral reactions by diminishing the real in favor of the abstracted (ah, the modern world, you say?).

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.

08/10/2009 -- As promised, FEDaerated is here.

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.

07/23/2009 -- After the bust and the rebound, toxic assets are still a problem due to tranche realities.

07/17/2009 -- China has eaten our lunch (and dinner). Shows how silly our games are. Yet, finance can be run by people who can be non-profit in scope and who have an impeccable (oh, what quaintness!) un-interest in money.

06/17/2009 -- A fresh look will be needed.

05/18/2009 -- Oh yes, got us in a mess and still wants the bonus.

03/30/2009 -- Near-zero will be looked at more closely.

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

Modified: 05/18/2015

Wednesday, March 11, 2009

Our beans

Madoff confessed. Consider how long it may have taken to catch him otherwise. Then, he's been living in luxury as some people scramble to see what is what and as others suffer the consequences. It's been awhile, and he is still not charged. Why?

Oh, is it a reward for fessin' up?

Well, these things can get complicated. There is a reason that the world of business requires trust. Some, perhaps many, take advantage of the situation (below). So, consider that the whole business game has evolved into a stinky mess. We do need more insightful oversight which we'll define.

But, first, quoting Morrill Goddard (an editor of a rag) from 1935 (see Note 1): The truth, which the public has never been told, is that no practical institution can be thoroughly checked so that every transaction is verified, except at prohibitive time and cost.

That quote was found in a 1967 book on Cost Accounting (Chapter on Internal Control). What is the modern view?

Well, we have SOX. What did that do for the current bubble? And, now we hear that there will be a regulatory overhaul. That is good; yet, what chance is there of getting it right?

This is an interesting subject that will be to the forefront for awhile due to its importance. The solution lies with truth engines; as well, techniques like an analog of random drug testing will be required.

Now, Goddard used 'prohibitive' which we all know is relative to many things. Granted, some of these problems will be intractable. But, assessing the market is not such. Rather, it is a matter of choices; of these, one approach would put ethics on a higher plane of relevance.

Yes, the old hat of greed and the other supposed traits of the best-and-brightest do not cut it.

---

Note 1: Goddard, Morrill. What Interests People and Why NY, Published Privately, 1935, 1st Edition, Hardcover. 6.75"X 9.5", 179pp, Fine. Full leather cover with bright gilt design and lettering, top edge gilt. No jacket as issued. Six addresses by the former. editor of the American Weekly, revealing the workings of his editorial formula and technique that built the greatest circulation in the world. Clean, crisp pages, bright and tight. Excellent condition! Journalism, Psychology, Human Interest (#004456).

Remarks:

01/19/2011 -- The quirks of capitalism are rank, not by necessity.

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

07/17/2009 -- China has eaten our lunch (and dinner). Shows how silly our games are. Yet, finance can be run by people who can be non-profit in scope and who have an impeccable (oh, what quaintness!) un-interest in money.

06/17/2009 -- Michael Milken says that structure counts (see WSJ article). Remember, the theme here is that a lot of securitization is bunk, many times. Sheesh, talk about a perpetual motion machine, always moving monies from the pockets of the hapless to that of the fat cats.

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

03/30/2009 -- The WSJ today looks at the Future of Finance. The idea is that finance is like the cardiovascular system. Okay. So leeches are a good metaphor for the sucking out that we see. Like the AIG guy who was central to the losses that we the taxpayers are paying and who left with $300M. We'll be referring back to this discussion.

03/19/2009 -- How do we get the silliness out of the disciplines?

03/12/2009 -- Of course, Madoff finally went to jail today. Also, USA Today said it right in an editorial today. The SEC went from a watchdog to a lapdog. When a watchdog, accumulation of wealth would tip off the SEC of a need for an audit. One can make a claim, which we'll attempt here soon, that too much building of the pocket contents is a characteristic of fraud. As a lapdog, the SEC seemed to salivate and wag its tail at mass accumulators.

Modified: 04/03/2011