Tuesday, March 17, 2015

Beyond your wildest dreams

Moral: Wherein we look at the simple example which shows motivations for machinations and do a few permutations which lead to insights about things which need to be more commonly known.

What do we see? Look below. But, you will see why we used the title for the post. Not only is the multiplier magical, it's the work of leprechauns (definitely, pot-o-gold'ísh, so to speak).

We step through 4 cases, here. The following does a little describing of the change and the results.

Cheshire meanderings
  1. This is the simple example, as it goes through t=4 (formerly, t=3; we started at one this time and went one step further). There are only 20 stock with 2 being sold each time. The mcap (formerly, basis) accumulates. The "Cheshire" is the percentage increase that the lift (formerly, bulge) is over the mcap (dlt mcap - formerly, increment). Note, please, that Cheshire is in the hundreds. The lift% shows the percent that the lift is of the growing total. 
  2. Same case and prices, but with a large increase of the number of stock (to 100,000) and in the number of stock sold. Too, a little variability of #sold is introduced. Note, the "Cheshire" is still tame, comparatively. 
  3. So, let's keep decrease the number of stock to 100. And, starting with a price of 5, increase by 5, then increase by a fraction. Too, vary the number sold. Notice that the ""Cheshire" is still tame. This is still a very small example in number of stock (see below). 
  4. Now, blow up the number of stock and stock sold. Too, we'll keep the price reasonable, in the range of one actual case that we watched closely from IPO (interested observers - say, anthropologists, not investors). Notice the wild "Cheshire" ratings. Too, you get that even with the lift being a small percentage of the total. What? Ripe cherries for picking?    
Reminder: See last's post example of the dark pool motivation. By the way, we have a whole slew of permutations on that theme which make the case stronger. 

Note: The lift accumulates (along with the mcap) and is not adjusted (this is a future post). Why? To continue with the extreme case upon which we will put the proper modeling of the natural dampers, etc. We will want to compare this extreme case with various dampening techniques (for Janet's crowd -- you see, the markets and their whole bailiwick - capitalistic arguments - are from olden times (way back); the computer came and was basically exploited by the greedy ones; it is time to rectify this through all sorts of improvements --- look, that computational power now being spent on gaming the system ought to be put to use in providing better accounting (regrouping) and auditing schemes (of course, truth engineering, see below) -- do you not think?). 

We saw, recently, a reminder that Warren (you all know who he is) has one rule of thumb, namely the ratio of the market cap to GNP, that applies here (there are many more of his rules to consider - but, Warren, you waffled on derivatives - we would like to know why? -- BTW, derivatives, and their ilk, play the lift - there is a whole lot of room for maneuvering). This ratio has been tracked historically. Too, we will have to be cognizant of the ratio of outstanding and actively traded. 

We will use several examples, like BAC (customer of their's - the original one of SF (not the interloper) - since the 60s), to wit: 63m of 10b traded (that's like 4% - wait, almost like the ratio we see with the voting populace?). 

BAC on a recent day
Also, in the spirit of openness, let's say that our thrust is to argue "lift" (formerly, bulge) and related themes (with a computational basis) as a necessary means to recognize the mania'd state (under the auspices of Truth Engineering where we first awoke, as old Rip - six years ago, imagine that, and saw the havoc wrecked by the baby boomers - ah, guys and dolls). 

Note: With all of that lift'ing going on, no wonder the eyes of the guys like those at golden sacks bug out (the mere thought gets the salivation activated -- reminder - you will see that we have argued that the financial pipes would be handled by plumbers, et al, as those of the greedy ilk are not required - needed for liquidity? give us a break). 

Remarks:  Modified: 03/23/2015

03/17/2015 -- Changed terminology to reflect that used commonly: basis to mcap, bulge to lift. For each of these, we have a delta. Then, mcap accumulates each step; this change will help facilitate the analysis needed for the adjustments which will reflect the true mcap (coming). In this extreme case, the mcap is understated as lift has not been adjusted as it ought (we have two lifts: the mcap itself and that which comes along for the ride - see the simple example of the rise of two stocks "lift"ing the value of eighteen others).

03/18/2015 -- Today was a good example of lift. Take the DOW. It hovered in the upper 17k region, until Janet spoke. Then, there was a swing of 400 upward. You know, on the downside, there are stoppers which keep things from going as they ought. Earlier, I would have said that coo-coo (goo-goo, whatever) was talked to the addicts. But, now, I want to be technical, in a normative sense.

03/22/2015 -- Jealous? No way, Jose. FED gives Wall Street what it wishes.

03/23/2015 -- Pew Research's reports will be useful: Only upper-income families have made wealth gains in recent decades. In some of the responses to comments, one author expresses disbelief in the Fed's influence. Well, we can work on helping clarify that (by more than griping about the addicts). Our research deals, in part, with how many simple folk get to experience, and enjoy, the book-based wealth that their financial reports offer them. That is, that which is beyond Social Security (but, being sensitive to take-backs as we see, recently, happening with retirees being informed that their pension is being cut). From my experience, it is a small percentage (comparatively). The one fact of the upper crust? They have more protection which we can enumerate and illustrate.

Monday, March 16, 2015

Let them eat cake

Moral: Wherein we look at machination motivations which arise from the attitude behind the statement whether it was, or not, expressed by the Queen.

There are many cousins of her's still around and about (as well, as a whole multitude of wannabes); that lordship-ness role - wild dreams - appeals, without end.

---

So, last time, we described a little example using a small number of stock with a price that was large enough to show effects. Of course, the whole notion was about the magical multiplier (which is in effect today - essentially, a prime the pump day). In that post, we said that it was to be used for an example of things that border on misuse (inequitable, for one thing).

This graphic shows the original state which is the final one of the prior. 

Aside: We can thank Andrey for helping us to realize that, in many cases, we do not care about why we are where we are. No, the thing is to know your choices. But, this whole thing has been twisted, unnecessarily, as we have seen time and again. 

Examples of orientation: market or machination


So, we start where we left off. We have 20 stock. 6 of these have been sold. So, the total value has gone up as did the bulge. Now, supposing that one of the holders of stock (we picked #8) needs to sell as that is the only way to get some cash (forced sell situation which can be of many ilk). Then, there are many ways that this can be done. 

But, the two here juxtapose a market approach (all sorts of positive qualities) and a machination type of thing (of which the dark pool is by definition). 

Aside: We could have picked any of these. If we had picked one that had been bought early, then the loss related to #8 and #13 would have been the classic case of the late comers being the sacrificial sheep. 

Now, a sale, in the market sense, below the current price would result in a general loss. In the machination case, all sorts of activity could be done without anyone being the wiser. 

Aside: We will need to look at the end result of machinations, of these types, as they move value to the pockets of a few leaving the rest settled in the bulge (yes, Janet, your continuation of Ben's approach has caused "inflation" in the bulge, in more ways than one -- the number of hapless, sacrificial, lambs has exploded). 

Remarks:  Modified: 03/23/2015

03/16/2015 -- One criticism of this little example could be that who would sell stock to get 4 bucks. Do I need to tell you of a 300K house being sold for 6 bucks (by some stupid public employees who were trying to collect unpaid taxes -- idiocies of this nature are rampant)? This little example is to set the stage. Next up is increasing the number of stock and adjusting the price. From this, we can start to see the factors involved so as to notice what conditions are good for those who benefit from running the system.

03/17/2015 -- Dogs of the Dow: Market Cap table, Most active. Beyond the wildest dream. How truth engineering comes into play.

03/22/2015 -- Jealous? No way, Jose. FED gives Wall Street what it wishes.

03/23/2015 -- Pew Research's reports will be useful: Only upper-income families have made wealth gains in recent decades. In some of the responses to comments, one author expresses disbelief in the Fed's influence. Well, we can work on helping clarify that (by more than griping about the addicts). Our research deals, in part, with how many simple folk get to experience, and enjoy, the book-based wealth that their financial reports offer them. That is, that which is beyond Social Security (but, being sensitive to take-backs as we see, recently, happening with retirees being informed that their pension is being cut). From my experience, it is a small percentage (comparatively). The one fact of the upper crust? They have more protection which we can enumerate and illustrate.



Sunday, March 15, 2015

Magical multiplier

Moral: Wherein we get out of the pause mode and start the long trek to founding a better normative view of economics.

Yes, and we will be mathematical (in our own time and by our own means). First, though, we have to establish the basics of the discourse.

So, these three images start to tell the story at its inception. Which is? How the heck does this magical multiple (cheshire state - wild dreams) come about? Why is it allowed? Then, many questions arise.

But, to address the last question, first, we only have to say that the history of markets (and the capitalistic devolution of such - as in, if you have to ask, ca-pital-sino) is an age-old thing (for now, search results on markets, this blog). And, we will cover that topic at the necessary lengths.

Now, about the multiples that occur in finance and economics, they all relate to near zero (see it in this and the associated blogs) and to the emergence of the chimera (ah, that which sucks values from the pockets of the hapless to those who have been able to fleece the public (by shell games, for one) for millennia).

Of course, we have to weigh in real soon on dark pools (especially, their motivations). See if you can guess how we are going to explain these machinations (yes, implicitly there, in the following images).
First, we need some overview and discussion
of the elements being used.

Now, let's consider a real simple case to see the effect.
(Hint: on the bottom right, note the predominance of the brownish)

Then, consider one permutation of many. 

There is more on the topic on the way, including an essay (PDF) that will pull the fundamental aspects together. From that, we will cover a few of the variants.

Then (at some future point after a proper unfolding of the theme), we will start to describe how to make the problems (ah, so many of these problems are, folks, due the brains that been allowed to proliferate schemes - made-off was a crook - there are so many unfounded (unrecognized) ploys of this nature that it could be truly disheartening if the nature of these were not so obvious -- let's shed a little light and see what we can do) amenable to being understood. Perhaps, then, we could talk possibilities of choice and such.

Remarks:  Modified: 03/23/2015

03/15/2015 -- We have to start this way since the infatuation with STEMish thoughts runs deep (without the proper foundation, folks - albeit, that operationally that thrust looks to be sound). Too, the computer's (cloud'd or otherwise) appeal is part of the package, as it ought to be. However, the present state has many troublesome aspects. Now, for the Piketty picker-oners, what I am alluding to here is what he ought to have used -- we'll get there -- Minsky, and many others, hinted at things about which we ought to have more concern. ... My bailiwick is computational (the gamut) -- we need not fear technology, any more than we may have had concerns about our bros - all the way back to Cain and Abel and before.

03/16/2015 -- Updated the images. Let them eat cake.

03/17/2015 -- Dogs of the Dow: Market Cap table, Most activeBeyond the wildest dream.

03/23/2015 -- Pew Research's reports will be useful: Only upper-income families have made wealth gains in recent decades. In some of the responses to comments, one author expresses disbelief in the Fed's influence. Well, we can work on helping clarify that (by more than griping about the addicts). Our research deals, in part, with how many simple folk get to experience, and enjoy, the book-based wealth that their financial reports offer them. That is, that which is beyond Social Security (but, being sensitive to take-backs as we see, recently, happening with retirees being informed that their pension is being cut). From my experience, it is a small percentage (comparatively). The one fact of the upper crust? They have more protection which we can enumerate and illustrate.



Tuesday, March 10, 2015

Markets, arbitrage, etc.

Moral: Wherein we are still in a pause, but events continue to roll along.

On Monday, 03/09/2015, there were several articles in the WSJ which had the typical flavor, being reflective (Friday was over and done with; there was time to look at what happened during the week; such times can offer to those who are thoughtful some slack time with which to get it right). This post at 7oops7 briefly describes three of these. Actually, the three require a lot more attention than being given now, but these posts (see link) are a reminder.

In this post, we are looking at the Bull and Bear charting for the past several decades. The graphic comes from one of the articles (How to Survive a Bear Market).


My time is from the 1970s and onward. In fact, in the mid-80s, I had the opportunity to see up close the floor and back office computational methods (Wall Street). That, coupled with my academic studies and general knowledge of the human economic experience, is the basis from which I will (continue to) argue the points. Much of what has been written, here, from the beginning is still apropos.

Note please, that the line is flat-ish from the 60s to the 80s. We can point to all sorts of influences, but I will argue strictly from the enabling influences of technology. The whole psychology has changed; too, you have the "brains" running amok with their mathematical prowess (when characterized properly, it's obvious). The resulting cloaking effect covers a whole lot of mischief.

Ah, Janet, you are talking ethics and the Wall Street in the same breath?

---

So, we need to look at the progress over that period since the early 80s. But, we really need to go back to the beginning and see how the floor and the back office adopted automation, as well.

Other changes, such as pricing methods, etc., came about, too. The effect of these will be duly noted.

---

We have looked, albeit cursorily, at markets. Arbitrage was mentioned a time or two. This was all a rage when I was a graduate student, but it did not interest me as much as it did others. You might say, my reaction was the same as with "financial engineering" (what a misnomer).

We will be getting back to arbitrage. These three papers are offered, for now.
  • Too good to be true? - Somehow, we need to get the proper perspective back to fore. 
  • Historical perspective - People have studied the evolution of markets and arbitrage. Why is no one, beside me, looking at the computational aspect (especially, those that are obvious - to most except the STEMers)? 
  • Ancient roots - Indeed. Note, one example of an approach was to circumvent the strictures on usury. Yes, financial innovation is not new. 
Remarks:  Modified: 03/22/2015

03/10/2015 -- The one constant, as many say, is human greed. Too, the gradation of humans in all sorts of ways is age old. The current state seems to be especially attuned to the success of a small percentage (congratulations, guys and gals, for getting things to go your way). However, the problems that arise (imbalances) do not look favorably for sustainability of the mismatch. ... My experience leads to proper discussion (see Grind's little thing of remembering 5% -- yes, that and a lot more is my response).

03/15/2015 -- Finally, getting around to the pending business.

03/17/2015 -- Dogs of the Dow: Market Cap table, Most activeBeyond the wildest dream.

03/22/2015 -- Jealous? No way, Jose. FED gives Wall Street what it wishes.


Sunday, March 1, 2015

A pause

Moral: Wherein we let ourselves step back and survey the madness.

Madness? Yes, Yellen flaying the savers and talking abstracted views. But, Ben is the culprit.

We'll get back to the whole thing, technically and otherwise.

---

Yellen might need to think of the Fed as rusting the economy. The Fed as a corrosive agent? How's that? She, and they, play into the pockets of the big guys. Who are? Those who take from the economy, essentially, without giving proper attention to infrastructure. Ah, arguable points there?

See this article at The Atlantic: Rust never sleeps. We all know that the infrastructure is failing (near-zero, folks - of course, I'll need to get back to that). From the investor side, all they want is their return irregardless of the side-effects (why let this stupidity continue?). Then, we have the looker-forwards (ala the computationally-enhanced maniacs) who expect to be carried by those not of their ilk. Ah, it's cool to be STEM, computer-literate, numerically fluent, etc. But, at the same time, that view forgets the reality that requires attention, care, manual effort, etc. by those who have the wherewithal to do the dirty work (when it could, the social used slaves -- indebted living, with no limit to the indebtedness, is not far above slavery).

---

Elsewhere, I mentioned that returning the draft would be a good thing (see Epstein in The Atlantic, January, 2015). Not to collect warriors. No, let's have KP and latrine and other duties in the mix. Especially, the favored (coddled) need to have some experience (notion) of where their crap goes once they flush (ah, how did such a class come to be? wait, they have always been here - well, revenge of the nerds has been fun to watch, but it has limits that need to be considered).

---

Yes, we are prepared to follow up with the proper framework and discussion. How long will this take? We are not on anyone's schedule nor do we accept anyone's deadline. However, motivation is sufficient to bring the new view to light, albeit a little step at a time.

Yellen deals with oodles of bucks and has no regard for those of the little bucks. But, then, who actually cares for other than the 1% (or even a smaller set)? Obama's jaw-boning about financial types having no ethics is one clue of the present situation and what we need to consider (too, see recent article on the five ways that financial types can ruin your retirement - not this guy, except the idiots did spill some trash my way - and I mean idiots of the worse variety).

Did Obama really use the golden rule? We know that on the Wall Street, the thing that is golden is the sacks (as in, golden sacks).

Remarks:  Modified: 03/17/2015

03/01/2015 -- Let's say this: the next downturn will bring back to focus the things that are (and have been) under discussion here. When will that be? Well, the longer it takes, the more we will see the hapless, and those who cannot afford to lose their means, pulled into a no-win state (since Yellen (and her ilk) wants people's money thrown into risky approaches).

03/05/2015 -- Cuban talking lack of liquidity (2000 like). See Remarks 03/05/2015.

03/17/2015 -- Dogs of the Dow: Market Cap table, Most activeBeyond the wildest dream.


Wednesday, February 18, 2015

Illusion of liquidity

Moral: Wherein we let ourselves use some of the jargon though we wish to appeal to the general intelligence of those who are affected (namely, all good people).

El-Erian talks the illusion of liquidity. Is that not of the same issues as addressed by the Cheshire multiple?
    Related topics: Dark pools (allows manipulative trades in order to circumvent effects), HFT (adds to the illusion), ...
The plot will thicken as we go along. 

Remarks:  Modified: 03/15/2015

02/18/2015 -- The term "Cheshire multiple" was coined by Marilyn vos Savant during the last downturn  (time frame was 2009). 

03/05/2015 -- Cuban talking lack of liquidity (2000 like). See Remarks 03/05/2015.

03/09/2015 -- Cuban also brings in another dimension related to web/cloud efforts at funding. This, of course, can take money away from the traditional markets which have evolved to be giant siphons of value (we'll get back to this). Actually, a luddite recoil from computation ought not be considered as the theme here; on the contrary, the view is the epitome of human/computing interchanges (spiritually found, at the basis - hence, no room for the greedy mindset that looks to exploit things in their favor - which type of behavior was nicely exhibited (is now manifested) by the Lords of the earth - many of whom are the best and brightest). Earlier, FB was said to be a metaphor (did not go into how it is so), but that conceptual framework is being applied here (to be explained, where necessary -- actually, the God-give intuition ought to (will) come to fore if it were to be given a chance -- G*d, of course, as other than delusion, ...).

03/10/2015 -- Today is a slump day (1% as of noon) which does not mean much, as each lower sale brings down the total level. On the upswing, it looks like magic to have "value" appear out of nowhere. On the downturn, it's like a bug being squashed under a car tire. Yesterday was a seeding day. These have been more prevalent than the other for the past few years with the FED supporting the manipulation, albeit indirectly, albeit through various means. Ever notice how the seeding takes longer to recoup from a loss? You see, real money is put in to create the lure (trolling the waters) so that the suckers fall into the trap and bring in their money. Then, as each little bit comes in, the whole thing rises (as, if only nature worked that way - fortunately, it does not, otherwise life would not be sustainable) due to the magical multiple. ---- Now, the question is: do we have a better way?

03/15/2015 -- Finally, getting around to the pending business.


Wednesday, February 11, 2015

Zero interest rate policy

Moral: Wherein we let Wikipedia do the talking (we have talked enough about flaying) after last time looking at a market manipulation stance.

Sufficient is this cutout from a page: Zero interest rate policy

Zero interest rate policy
courtesy of Wikipedia
Notice the warning sticker about the tone. Per usual, the drive-by sticking had no justification. People raising issues need to explain themselves or their views on the Talk page.

Any action by the Fed to unwind this thing is way overdue.

Remarks:  Modified: 02/11/2015

02/11/2015 -- Source for the list that is on Wikipedia: Barry Ritholtz. See the discussion. One asks why the consumer is leveraged. Oh, really, now. It is because that is the only way to survive, the system allowed such, entrapment that is perpetual is attractive to who want to fleece (move monies from the pockets of the hapless to that of the elite), etc.