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 down; he 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).

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

Hawker spooked

Note: 02/06/2024  -- The below was written in Sept of 2008 and modified a few times with commentary related to the theme. My interest? This was the same approach that created Newco (in 2005) which became Spirit. I retired from Boeing and did not take the offer that was given. It was generous but there were many reasons for my choice. This blog and Truth Engineering were started in 2007. There were others. Nothing that I wrote was specific to Boeing's divestiture of Wichita's plant. But, it is now 19 years and time to analyze that event plus what has happened to the U.S. and world since then with regard to technology. My role was advanced computing, for years. 

Caveat: Some links in the older posts (like this one) are stale. But, the text of the URL indicate, many times, the targeted site and information. Over time, these bad links will be corrected. 

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Ah, talk about oops.

Hawker is an aircraft firm that was owned by Raytheon (RTN) until a little bit ago. Hawker's sales are in the low billions. Recently, the downturn has made an impact. First, there were the issues related to exorbitant energy costs. Then, the credit crunch's changes to the face of the luxury market are problematic.

Hawker is interesting as in the same town there is a sister firm (SPR out of BA) who had a little better timing. But, one might say that the Hawker deal was influenced by the ease with which the sister firm enriched a small set of peoples (we need to count those impoverished by the deal, though).

Both of these were entities taken from a larger firm via a buyout which was led by a private equity company (OCX.TO) that had partners who were golden (GS, MS, et al) in the age just past. In fact, these golden firms have already changed its stripes (got a handout, to boot). Yet, the effect from the two buyouts linger in Wichita (not all these effects are listed here).

For SPR, those who bought into the IPO are holding stock that is, at least, half of what they paid. In many cases, the loss is much more. An IPO is how debt is spread. Oh, didn't we hear recently that some techniques for spreading risk didn't pan out as expected?

Hawker didn't get their IPO opportunity as the credit crunch came along and changed the context of the economy. What does Hawker have instead? Over $2B in debt that would take them years to pay even with the most austere of budgeting. So, this firm is not unlike someone with a mortgage that is too much for them to handle.

Why even mention Hawker along with oops? Well, they have had their recent talks with the press. Therefore, it's public knowledge that they owe big time and really have to strive to maintain the debt. Too, and more importantly, these two firms, in Wichita, can be juxtaposed for analysis.

There is a lot of overlap in their characteristics; it could be that the differences as far as the buyouts may be of more interest. These differences can be used to tell the tale of what went wrong with Wall Street, and others, between the tech bust and the current downturn.

Of course, the intent would be mainly to elucidate the issues such that reasonable discussion about fixes could help us to do better in the future. That is, some do want change that is an improvement such that they can live their working years, and retire, with a little grace. For the others, we need to somehow limit the effect of their gaming.

Remarks:

02/06/2044 -- Added note, at top, with respect to the status of this blog's themes. 

06/08/2015 -- Continuation of the theme. Yes, Hawker ought to have been spooked. But, management was trying to pay a ton load of debt by scraping pennies from the workers (penny wise, pound foolish goes the saying). But, by then, the interlopers had already gotten their jollies.

06/08/2014 -- Does time tell?

09/16/2013 -- This was written in 2008. Turns out that they ought to have been spooked. Why could not some of the brains have had better foresight?

09/16/2013 -- So, the five year retrospective time. Business week devotes a whole issue. It will be interesting to read all of the perspectives, WSJ, FT, etc. We will have to say some things about Raytheon's push out of Hawker and its subsequent bankruptcy. Like Spirit's split from Boeing, wishful thinking on the part of management and the company led to problematic results (for a lot of people).

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

03/15/2013 -- Some controversy in the way SPR fired some people. See Weagle.

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

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

12/23/2010 -- Do oops continue to emerge? What might be considered not unlike 'blackmail' we see Kansas bellying up to the bar (millions in incentives) to save only 2/3rds of the jobs. Way to go!

01/27/2009 -- Lessons to be learned (as opposed to having been learnt) needs attention.

Modified: 02/06/2024

Leveraging and more

Yes, as we did with fiction and finance, we can also look at the oops related to leveraging. At one time, leveraging was consider not smart. Think of it, would you offer a large loan without any collateral (that you could verify in value) for some hair-brained scheme (how do you know how to evaluate the scheme? well, this is where skeptical thinking and experience come in).

So, in trying to catch up with the madness (having left school 30+ years ago and frankly not paying attention to the activities of idiots with money), reading like mad, watching results being analyzed (usually, the analysis was trifling and without substance), and considering how all this madness got started (related to age old issue, I know), on several occasions it was necessary to look at what it means to pile up debt.

As an aside, in Wichita, Hawker Beechcraft is loaded with debt from their split from Raytheon. The step of going IPO in order to spread the hurt, in little pieces, to others has not happened, yet. That whole game needs to be looked at, too. Hawker has a maintenance cost of 0.2B yearly; that must smart. No amount of belt-tightening or smart maneuvers can retire that level of debt. No, it requires the facilities of a market (who would want to buy?).

Leverage and truth -- March 25 . Looked at the underlying theoretics, which are usually fairly dismal in economics (the name fits perfectly). Ah, reinsurance is mentioned. Yes, didn't everyone think that risk was spread ad infinitum (Berkeley would love it!). And, then we have AIG, do we not?

Leverage and truth II -- March 31. Ah yes, the market dogma. It is touted by those whose pockets get lined immensely. Then, we have those who argue not zero-sum (hah!). What we'll have to do here is show that the best that we can do is near zero-sum.

Leverage and truth III -- May 19. Even by this time, I wasn't ready to accept all the idiotic changes to lessons from the 30s. We need to somehow make it clear that the CitiBank guy was wrong (Weill - well, he has his money) - Marx actually has a better take. Oh well.

Leveraging and oops -- May 19. So, we know that the financial community went out on the limb with leveraging. Do we not know that outsourcing (of certain varieties) is a type of leveraging? One problem with the engineering outsource is that of keeping it real (oops of this nature were coincidental to the start of this blog) and avoiding happy thinking. (Note 11/01/2008 - Well, now, Boeing is claiming insights about the possible banes of outsourcing.)

To the hilt -- August 19. Yes, like any addiction, the thing of going out on a limb grabs and does not allow one to let go. Evidently, to look at how smart people start to look like idiots. Of course, we really need to look at some physical binding (not gabbing) for money, that is other than a precious metal.

The idea here is to not just gab (that is the current basis) but to get technical and specific. After all, engineering computing handles similar issues, including the need to resolve several types of issues related to modeling, verification, and validation.

Oh, yes, the economy seems to be run like a real-time game. How do we get some notion of rigor applied? Well, it's not by chasing money.

Remarks:

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

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

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

03/17/2011 -- Politicos might actually be compounding the issues.

12/23/2010 -- Do oops continue to emerge?

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

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

Modified: 05/30/2012

Oops examples

We can find many examples of oops in a lot of places, as we know that we cannot have 'oops and loops without oops. Perhaps, we'll use enumeration of types via examples as a theme for awhile, rather than just beat on the engineering and finance themes.

For starters and nodding to the fact that this week is the third year anniversary of an event that had oops all around, let's use examples from a divestiture (big word for split) of a division out of a company.

How to start? Well, let's just look at a few potential types; we'll continue the theme for awhile until exhaustion, both of the subject and the blog writer.

In terms of the third-year re-look, let's do it from perspectives of various players.

• -- Manager (spawning company) who started all this - oops, or is it oh-oh?
• -- Worker who could have transferred but did not for whatever reason - oops, I don't have as good insurance and pension benefits as before
• -- Managers (who spawned off and lined pockets) - oops, I should have waited a little before dumping stock as it did bubble there momentarily (ah, but now it's down again)
• -- Worker who raised ethical concerns - oops, no one cared as the managers running the split were allowed two-tongued stances for many weeks
• -- Management chain - oops, look at what those above me got
• -- The general employee who got mail - oops, where is my piece of the pie?
• -- The rejected who got DHL - oops, what happened?
• -- Union worker - oops, what?
• -- Worker who didn't accept offer - oops, ouch!! (thrown out by the ear with a swift kick from a black-booted thug)

Of course, there are the antitheses of the oops, non-oops if you would.

• -- Financial-ers - oh, what wonder color Wichita money has!! Let's get more, ah Hawker!!
• -- Retiree/double dippers - oh, great retiree insurance! two paychecks!! (Who cares that the majority is scraping by with less after this event's take-aways.)
• -- Worker who did transfer and retired later - oh, isn't it great!!
• -- Managers who didn't suck up and were pushed out -- oh, it's nice to have a conscience

Naturally, there are many more. Care to add some?

Or, leave stories in the comments or e-mail them: Shattered dreams, That stinks.

Remarks:

03/15/2013 -- Some controversy in the way SPR fired some people. See Weagle.

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

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

12/23/2010 -- Do oops continue to emerge?

11/20/2008 -- Boon and bust, the way of fairy dust.

06/18/2008 -- Not to be confused with American Dreaming.

Modified: 03/15/2013