Moral: Wherein we look at
Ben's largess (or his Put following
Alan, of course) and at how it relates to the
chimera.
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Ben's Put
Seeking Alpha image via Bing |
We have been doing a lot of reading lately and have collected notes (
later post) without feeling any urge to expound, as of yet. But, today, though, we ran across this commentary (
Bernanke Put to Expire Worthless in March - Yahoo link that will decay) on Seeking Alpha which motivated a response, or the start of one. Seeking Alpha has an interesting viewpoint as it comes from a quantitative focus about which we have waxed several times (
quants). The image is from the commentary and is discussed below.
In essence, John Early tries to show that there is little relationship between Ben's efforts and the bulging markets. That, of course, goes against the grain. True, his analysis might show this. But, arguing from a more multidisciplinary approach, one can state that there is a very strong functional relationship. We all are trying to discover what this might be, exactly. Ben ought to know. Perhaps, the financial community will allow us some visibility to their thinking on this matter (that is, going beyond statistics and its specious appeal).
--- My response, put here since to do so at the Seeking Alpha site requires me to join (which I might do) ---
- This analysis misses the mark a whole lot perhaps due to the simple-minded approach. The pattern in the first chart would come out with the proper view. What is that view? Since I can only comment, for now, let me use English to describe what is there.
First, though, if Ben were to take away his put (let him, please, raise the interest rate and do a very large reduction of his balance sheet), we would see a serious reaction (highly correlated) come to fore. Essentially, a drop of major magnitude. What we don't know is how long of a lag there would be nor do we know where the floor (which would come about several ways) might come into play.
Too, the following in no ways argues causality; however, it does suggest that a means to do this analysis is extant and ought to be put into place.
Let's start with the giant red jump. It occurred in the midst of a drop in the black. Now, of course, after the large red jump, the red would start to rise more slowly. The black essentially caught this life line thrown by the red, bounced a little, and started up. Even with the comment related to uncertainties about the data being acknowledged, these two relate strongly with a twist (this is a hint) after that.
Of course, the black curve leads at times. Enthusiasm bounds off until control get reestablished. Ben put the damper on, so to speak, many times (albeit, just a little). Hence, the red line went down (followed by the black).
In these black turnarounds, the reality of Ben's aeration came back into focus with its pause almost by necessity. Somehow, the glee (on the upside) of the black rise seems to make the unrealistic notions multiply, to boot (hence, Alan's use of irrational).
Ben kept his little feet to the pedal (yes, gassing us all) this whole time so as to lift the expectations. And, eventually, the black curve came roaring back in response after every little downturn. Pedal (you push it down, the fuel increases, and, hopefully, you go faster - but, not fast enough to get a speeding ticket)? Yes, there are links (multivariate spaces) that we can establish that would show what might be thought of as a "cause-effect" (albeit, some of it may be more wishful thinking that not -- dismal science, remember?) relationship (albeit with some transitivity, just like the pedal which isn't the reason that the fuel increases - it's rather an action (command) whose intent is to increase velocity -- lots happens before the fuel actually increases).
Hey, we have been watching this little bit of playing around for the past few years. To argue that there is not a relationship that we ought to understand better is not what I expected at the Alpha Seeking site. Ben has been experimenting real time on us and our lives without the proper framework. Why is he allowed to do this? Politics, of course.
Ben got his wish. He has aerated things (and the bubbles have started - are we going to see them this time around?). Now, the problem is that people are going to flock back into this chimera which is bolstered with his inflationary put; they will lose again. Oh well, many financial types will benefit, immensely in many case.
But, isn't that the point? Finance's utilitarian role could be done with a mere 1/2, probably less, of the resources devoted to it.
Of course, we all know that statistics, when used correctly, don't lie. Yet, we know, too, that data can be used to show all sides of an argument. The whole notion that Ben's influence will expire, and without pain, is to ignore all of those negative effects from his deeds of the past few years.
Unwinding will be problematic and full of angst for many. Many reasonable minds will attest to that. Some will not suffer, though, to whom Ben pays more attention, evidently. Who are those some? Comparatively, a small set who will not endure the reality of the pain. We will, of course, go on about that.
Remarks:
12/05/2013 -- If only Ben would put a
shot across the bow.
05/09/2013 -- Ben needs to take off the training wheels and let the markets go where they may (falling mode, most likely) and let the seniors have a little stability (
Slapped silly, again, yesterday).
03/05/2013 -- Ben reigns, but the
savers' faces are bruised from his slapping.
03/05/2013 -- Ben's QE Infinity is paying off. Too, like we saw last week, Ben's words pushed the buy button. From the
panicked start to now, he has wanted to bolster finance, though his argument is that he's trying to lower unemployment. Of course, the finance that he wants booming doesn't mean much to the saver types. Now that the game is getting hot, can we really get an accounting? From whence all of this money? For that matter, what motivates the selling? Ought we care? Ben said that he doesn't see anyone taking risks. Does that sound like Alan's plea back when? The student loans industry, the privatized part (albeit, that is small compared to Federally-funded loans), is playing silly games. They have many buyers lining up for the tranches that will be the first to fail. That is, those with the higher rates and risk. Anecdotal stories abound: one with student loan debt is paying his loans but is funding his living with high credit card debt (how long can this go on?); another says that he'll never be able to pay back his loan (he's an accountant) given his current situation. These are the basis to support the financial instruments that seem to be so desirable. Sounds almost like gold-plated crap, to be crude. Wait, hasn't there already been a society that honored such?
02/27/2013 -- Joined Seeking Alpha: Aroound the Bloock (oo? with our prowess being rewarded (why is this? hint: effectiveness of mathematics), we see objects/operators coming to fore as a prime way to model - note
Rick's post).
02/26/2013 -- Yesterday, there was a 200+ drop in the DOW. The talking heads used Italy for their explanations. Today, Ben talks his deal to Congress and justifies his viewpoint. Now, realize that "justifies" means that he uses the forum to try to explain the why and wherefore of his actions to those there and the rest of us but that we aren't claiming he was successful in his explanation. Except, those who play the money game pushed more money into the DOW which went up 120+. One would say silly, but for the fact that some make oodles off the game yet its negative consequences are never tallied (
near zero).
Modified: 12/05/2013
