Sandbox, again

Moral: Wherein we remind ourselves that we need a sandbox to constrain risky (sandboxy) behavior and to introduce some concepts from the test engineer into the handling of our beans (and bread). Does the aura of mathematics and modelling make it less ad-hoc?

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Big Ben likes to sack savers. He has had his hand in our pockets for years now. Having fun with that, big fella?

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One of his guys, Richard Fisher, says enough coddling of the fat cats. Thanks, guy. Will Big Ben ever listen to you?

Richard says that he see evidence of speculative thinking. What? Heck, Richard, it never left, and, since we let the genie out of the bottle the past 1/2 century, it has only grown.

Hence, anyone thinking about how to get these 'gamers' into some type of corral? By the way, Warren, you could help.

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So what does all that above mean? Well, here is some metaphor-laden garble from the leading, supposed, thinkers in finance. Too, notice the use of concepts related to gambling. At the same source, we see news about Warren's recent gains (with 'bet' in the title).

Is this business or ca-pital-sino? And, we all know that gaming is zero sum, not near-zero (except for a little public good from taxing the house, perhaps).

By the way, if the casino were to be corralled into a sandbox, what would be left? We'll need to look at that type of thing further.

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Shilling: The stock market is rising because the Fed's free money policy is making the stock market rise, Shilling says. But the economic recovery is much less than meets the eye: Wall Street is doing well, while the rest of the economy suffers, and the critical housing sector is still a mess. So the stock market's run won't last forever.

Remarks:

10/30/2014 -- Where are we? For one, let's talk how most are losers, okay (due to idiotically applied multiples)? This can be ignored when their reality is pushed outside of common awareness. So, we have the top tier (0.001 or less) gaining under the present scheme (even with it being stopped, QE, that is, the latest of it). The other? Dire straits, indeed. Yet. the talking heads chase the DOW daily, as if it has meaning (ah, why this?).

03/22/2013 -- GW at ESPN (see image on right) has a nice point of view on the madness (and related comments). We ought to have something similar for the financial folks, using play money, with prizes. That's the sandbox, folks. Then, the real stuff would be handled by mature, stable adults (not the greed ridden - and similar ilks -- okay?). The madness has to do with animal spirits just like the market (ala Adam). Too bad that one loss gets one out the door. Perhaps, at the final four level, there ought to be a round robin, like college baseball. --- Now, having just written the above, this glorious bit of madness is really a sham (see comment at madness, 03/12/2012). The whole madness pits kids against each other, who are playing for naught (comparatively), being coached by millionaires, with big buck media behind the affair, and a bunch of other lucrative ploys benefiting from the labors of the few. If one looked at qualities (as in, abstract out a truthful look at this), one could find parallels (many, many) all across history (these things being not consider our best behavior). Granted some (as in, not all) of the kids go on to big bucks. Others find glory in their endeavors (what would be be without school spirit?). Yet, besides the commonality with historic events that aren't looked at as being our (humankind's) best moments, there are all sorts of analogs in business (which we've seen of late, in glorious detail, as being problematic at its core - the heart that is supposed to be related to finance). By the way, see the below comment (madness, 02/08/2013); that particular team ended up with a #1 seed.

09/14/2012 -- Ben just gave them, the runner amok'ers, the store. 

08/30/2011 -- Essentially, we have financial piracy.

04/04/2011 -- Tis tranche and trash. Need to look at some background.

03/28/2011 -- See 03/24/2011 Remarks (1/2 rant) and on March madness.

Modified 10/30/2014

Robber barons?

Moral: After looking at M & M and other things, we can start to get back on track.

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Yesterday, there were some stories that rang a bell and prompted the need for comment. Why? They are apropos to the theme here.

• First, Warren talked about derivatives. You know, those things with no basis beyond mere chicanery. Yes, this is given an aura of appropriateness by business. Warren called them WMDs. He was right; he may have backtracked, yet that does not change the reality of the situation. In his talk, Warren used an extreme leveraging example. Think of a bank which has on its books 4 trillion (yes) of this type of activity and only 0.2 trillion collateralized. Sound silly? Warren says that noone could get a grip on this mess; true enough, what accounting principles apply to this type of thing that is purely gaming in scope? Well, much to discuss here.
• Then, Prof Sachs (Columbia) talked a couple of issues. Several times, I've referenced politocos as those who salivate when a buck is placed beneath their noses (many times). The good Prof says that the new 'robber baron' is the politico who cowtows to the monied. We probably have to admit that some of these types are necessary. What percentage of the whole group have mercenary ambitions?
• As well, the Prof reminds us of the disparity and its widening gap.

...

Remarks:

03/23/2012 -- Ben is doing a series of four lectures on his, and the FED's, role.

01/27/2012 -- Ben will continue to sack the savers; he must love the ca-pital-sino.

05/09/2011 -- Savers are suckers? [but, they have their money]

05/02/2011 -- Warren, on Black-Scholes.

04/30/2011 -- Warren, I guess that if one is in the taking mode, the perception/judgment gets warped. Sort of like getting carried away in the heat of the game.

04/04/2011 -- Need to look at some background. Gross seems to know the bankers well. Note that Big Ben (from our pockets) gave them (while sacking the savers) oodles of free money.

03/22/2011 -- It's spring, and the garble uses gambling metaphors.

Modified: 03/23/2012

M&Ms

Moral: Last time we asked, do things ever change? Now, let's look at an economic M & M.

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Yes, the candies are motivation, in part. Yet, we're talking a Miller and a Modigliani.

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Just as last time, the reference time frame was the 1880s, today's is of the past, too. Yesterday, I had in my hand an issue of the Economist from the early 1990s. To put things in perspective, the cover story was titled 'Here come the Russians' or something like that. The photo? A Brit-jaded viewpoint mockingly using a refugee family who were fleeing the Germans. Of course, it was of a mama and kids. Papa was off doing some slave labor for Stalin, most likely.

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At that time, Miller was being celebrated as having won the prize of all prizes. We have already opined on how this theorem has been mis-used. To quote the Economist, the theorem has stood up even with many of its axioms being relaxed.

• FEDaerated -- Near zero, mainly.
• Truth Engineering -- People (the basis of the economy), Leveraging (what M & M brings forth from the idiots), and Leveraging (ah, the attraction of junk)
• 7oops7 -- Savers sacked (see below), What the hell ... (incredulity persists at the power obtained by those who are seriously lacking in sense), Testing finance (Timmy's game)

So, we'll not berate that theme more, at this point.

Except for this. What we can grunge about in terms of Big Ben's idiocies is that he sacked the savers in an attempt to get people to put monies into the stock casino which then aerates into bubbles, almost by necessity. Look, Ben, 'near zero' does not in any way mean punishment, by design, for those who are the mainstay of the economy. To think that we've been 3 years under this regime (and, Obama could have made a change last year -- well, we ought to have nationalized the financial idiots, to boot, when there was a chance).

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Guess what was also the reality at that time? The DOW hovering around 1,800. Yes.

It got to 14K before the recent crash. It has been flirting with 12K of late. Is there anything behind this growth of the ca-pital-sino that is sustainable in the longer run? And, I should say, beyond it's current base? What base?

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Let's talk some level of growth that might be wise. Of course, all this is debatable. At a lower growth (around 3% or so), we would be talking a DOW about 5,000. Whence the increase that is well beyond twice that amount?

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Mind you, what has also happened is an increase in the disparity between those who have taken largely and those who actually do the work.

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'Nuf for now, except for this. Bloomberg quotes one of the richest men in China (you know who you are) as saying that he lives on $20 a day. Give me a break, guy. You might have a handle, in your mind (rationalization, okay?), about the impoverished in your country. Yet, let me take you around the U.S. (the dream land) and point out to you the perils of unconstrained capitalism. You guys may be good at the game; yet, the game is not the essence (even Adam knew that). One would hope that China would lead toward better lives for the masses; is that the real intent?

Remarks:

02/12/2013 -- We ought to have nationalized these guys' playground.

05/09/2011 -- Savers are suckers

?

04/04/2011 -- 

Need to look at some background.

Gross seems to know the bankers well. Note that Big Ben (from our pockets) gave them (while sacking the savers) oodles of free money.

03/23/2011 -- The hopes spring, again, forgetting, of course, near-zero, all because of M&M. See the real story. But, Big Ben ought to know better.

03/22/2011 -- It's spring, and the garble uses gambling metaphors.

03/17/2011 -- New robber barons?

03/15/2011 -- As well, need to bring in Schervish's viewpoint.

Modified: 02/12/2013

Present condition

Moral: Do things ever change?

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While browsing recently, I ran across an essay by Edward Lunt [The present condition of economic science and the demand for a radical change in its methods (1888)] at the Internet Archive site. The title was intriguing enough to get me to look at its contents, briefly. Then, on reading, I had to laugh at how a lot of what I was reading could be put to use now.

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Aside: The site is loaded with digitalized images (use 'Read Online' for a nice presentation that is a close approximate to the real thing) of books and other printed material on a whole lot of subjects.

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The topic is of interest today. Hence, the above question. Too, the discussion's context may be somewhat different than now, yet one could almost substitute it into today's environment. In fact, many phrases throughout the book could have come from that written by modern analysts.

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There are a couple of differences. We have a lot more data now and associated experience. Is the understanding any better? Too, the 'science' has become more complicated due to the expansion of mathematical thought over the past 100+ years and to the rapid evolution of computational support for abstracted systems thinking.

Again, is the understanding any better? No, quite frankly, I can claim. But, that argument has been central for quite some time.

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Does this little essay indicate that there will continue to be a lack of progress? Not necessarily so.

Otherwise, from whence would there be motivation to look at this stuff?

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Now, let us look at a little bit from the summary that is just remarkably ageless (page 109):

• What a formidable array of problems stare our statesmen in the face! Industrial and political "deals" and "bosses" are a constant menace to law and order; inflation schemes and a false silver dollar hang over our monetary legislation ...; uniting workmen and consolidating capitalists keep the industrial world in continual ferment; paper-money and the banking questions, Chinese labor and general immigration, ..., giant monopolies, ... where will the list end?

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Of course, that Lunt's argument suggests that we lean more toward Adam's ideas shows his insight, at his time. We'll have to further consider the development of his argument at some point after taking a look at his situation.

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Here is the Table of Contents, briefly.

• General Bill of Attainder against Economics
• Present Condition of Economics Ludicrously Inharmonious
• Explanation of the Present Ill-Repute of Economics
• General Statement of the English Method
• The Negative Side of the New School
• The Positive Side of the New School
• The Results of our Study

Remarks:

09/19/2013 -- All's not lost. Some accountants see a change that is problematic. But, first, savers are more than just risk averse; they put their actions where their mouth is by being prudent. Now, that was once considered a virtue; in fact, one could argue that it was expected for fiscal responsibility. However, some claim that accounting has removed prudence in lieu of theoretical nonsense leading to annual reports that are incomprehensible. Actually, the computer can make things such, too, so the whole bit that underpins our world seems to have been given a shaky basis (on purpose, to allow rooking the people? - or, through stupidity?). Of course, the side that argues that prudence is quaint (well, it seems to be for quants) is vocal, too. But, we have China asking prudence of Ben and the Fed?

01/17/2012 -- On Steve's work. I've been slowly reading his authorized bio; at some point, more reflection will be forthcoming.

03/16/2011 -- On the rise of the professional politician (will there ever be the citizen polico? that is, those who do not salivate when a buck is passed beneath the nose) toward robber barony.

03/15/2011 -- The M & Ms are apropos. As well, need to bring in Schervish's viewpoint.

03/11/2011 -- Wired asks, ought we care? About I-Phone suicides.

03/07/2011 -- Actually, this little essay could be a milepost in an analysis that looks at the source of our current problem, from a 'meta' view which gets short shift in these days of the illusory 'Now' and immediate gratification and myopic thinking on the part of the supposed best-and-brightest and more.

Modified: 09/19/2013