Tuesday, January 29, 2013

Prof Blinder, Princeton


Moral: Wherein we consider the use, again, of 'chimera' when things are flying high (DOW above 13.9). More or less, Ben is getting what he wants, though many (oodles, actually) are not part of this bubble.

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There seem to be voices of reason around and about who are not going gaga over the equity climb or who are not enthralled by the computation trickery. Turns out that Princeton may have a few of these folks. We have already pointed to work related to complexity issues with financial products (Lemons, et al). Now, I see that an Economics Professor presents a message that resonates with the theme of the blog.

Let's point to four reviews and then summarize the book: USA Today, LA Times, WSJ, NYT. In the USA Today review, there were phrases dropped here and there that have appeared in this blog.
This list from a review. No doubt, I could get more from the book itself. This is sufficient, though, for now. 

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Aside: As the exchanges soar, does not "chimera" become bad usage? We looked at that (Oct 2012) a little bit ago, as one has to wonder what's behind the exuberance. Earlier, we looked at how King Alan (Sep 2009) had said that he saw an irrational type (late 1990s timeframe); some now say the thing is rational. The key to the discussion of "chimera" would look at near-zero's reality. Yes, it's a chimera no matter how large gets the fancy bubble. 

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Using, again, the USA Today review, we can list things that the Prof mentions. 
  • bankers ought not be speculative -- yes, indeed, we have said similar (Apr 2012, for one)
  • self-regulation is unworkable -- actually, ought to go without saying
  • risk managers ought to ... -- the smarties always go too far (Nov 2009, et al
  • derivatives, et al -- new fangled, indeed (allow piracy (Aug 2011), et al)
  • balance sheet -- don't allow the off-sheet (Aug 2009) stuff  
The Prof used: After the Music Stopped. Sure enough. The crooks quit since there were too many lemons; who was trustworthy, financially (Aug 2009)? Jamie (Jun 2012)?

Remarks:

07/31/2013 -- 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) and dampening of these types by a new outlook (Magna-Carta'√≠sh).

02/26/2013 -- One who structured financial instruments joked that a cow could do this and still get the AAA rating. Just cannot fathom how this type of thing became popular and was even glorified with finance (earlier, I had used fiction in my discussion of the smells out of the disciplines dealing with (our) money). Weakest link, and other, examples come to play that ought to have given pause. In some cases, those doing this idiocy had a scientific academic background. Go figure.

02/26/2013 -- What? Ben doesn't have any influence with his put?

01/29/2013 -- The WSJ review is a nice counterpoint.

Modified: 07/31/2013



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