Wednesday, January 28, 2009

Why finance? II

Finance and economics go hand in hand. Both are respectable fields of study and are commendable disciplines, though the latter is a dismal science. The former was spiffed up by mathematics and the computer, according to a special report in The Economist.

Yes, the confounding from modernism adds interesting twists requiring advanced concepts and methods to protect the innocent. Too, we see poster boys emerge, such as Thain, which could provide a focus for delimiting what is wrong and what might be done. Of course, the Fed is experimenting like mad and further exacerbating the problems.

Oh, that we could have some analog of the Hippocratic Oath for these money, and economy, guys; oh, wait, hasn't medicine run after the buck, to boot? Or, could business schools, in their lecturing on busy-ness, consider ethics as fundamental (actually, foundational)?

What about a vow of poverty? Yes, let the monks handle the money. Ah, I can hear the clamor now. What? Richness is the motivation?

Let me remind you folks of the myriad of people who labor and do not put their hands in the till. Where did finance learn that the leech is their ideal animal spirit (ah, yes, we need to bring up that notion of Keynes')? Bulls and bears are merely chimera.

We could find many with the right attitude (probably there are some even in finance). There are professors in these two disciplines who have not raked in oodles of money. Despite the set of those who have exploited the opportunities, many apply principles of science and engineering to the disciplines, dismal though their efforts may be.

So, the computer did not cause the malfeasance in finance, though it definitely adds new dynamics. In short, a whole new arena of study and of operational prowess is going to emerge and evolve. One example is being discussed.

So, as said before, we can do better.

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).

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

01/31/ 2011 -- Referenced from 4th January. And, the chimera shines.

11/06/2009 -- There ain't no train, just like there ain't no free lunch (TANSTAAFL).

08/02/2009 -- Wait! More exposures: "computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else's expense." To anyone who isn't at Goldman Sachs or the like, does that appeal to you as the way that we ought to be handling our beans?

So, is this what financial engineering is all about? Sounds more like leeching.

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.

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.

01/29/2009 -- Earlier, there were some words put here about Truth, Fiction, and Finance. Well, pick up the 1/28/09 Wall Street Journal and look at an article about a 'proliferation' of ponzi schemes. We all know about Madoff as he mis-handled a lot of moeney over a long period of time. But, a lot of states are finding that they have a madeoff/ponzi going on within their borders. How much of finance is a sham?

The WSJ mentions that the hedge funds' claims to high returns is one possible cause as people try to duplicate that. Sort of a Jones' keep up thing, we can suppose. Well, a reading of hedge fund tacits raises all sorts of suspicions to the rational mind. Just how legit are these things and why are they even allowed? Are we that much into some mass insanity?

Modified: 08/01/2013

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