Sunday, January 11, 2015

Normative means I

Moral: Wherein we look at normative issues as we think that Janet could (ought to) turn that way.

Normative? Yes, more wisdom, potentially, than the data-driven purgatory approach will allow. Guess what? The blogger has a lot to say about such an approach that is well thought out (and independently conveyed - no academic or other constraints on the truth).

But, first, let's look at some recent stories that apply to the theme.
  • We have talked of the slapping of the face and flaying of the skin, in a metaphoric sense. This WSJ story tells a real tale (normative taken to an extreme). 1000 lashes and 10 years? That is assuredly fatal. Why allow the sadistic executioner and judge the right to such an inhumane bit of behavior, on the part of the former, and of ill-will, on the part of the latter? 
  • So, part of that "flaying" is having no, or very little, return (in the real sense) on reasonable amounts of money (say, middle-class amounts). Yet, those playing the game (as silly as it seems, at times) have made oodles. Case in point is the government bond gaming where some gained enormously in 2014. Now, "returns" was used in the article, however, they are talking ill-begotten types. 
  • Zoellner passed on in December. He was one of the pioneers in arbitrage which  morphed into HFT (we are not done with this topic, yet). First of all, a normative look might have a say or two about arbitrage (in fact, we'll get to that this year). Zoellner's take will be central to the discussion. 
  • ...
Now, as we're describing, slowly, this viewpoint is very much supported by academic studies, real world experience, and a well-formed grasp of normative issues. Here we are talking improvements in economics and finance. Related to this will be similar thrusts in computing and related.

Remarks:  Modified: 01/23/2015

01/13/2015 -- Dark pools and other examples.

01/23/2015 -- So much fun. Now, bankers are wanting their own dark pool in order to separate themselves from the front runners (who? yes, HFT, what else?). Our next post on this will show how such dealings (block trades) pull value from the other holders of equity (or whatever else might be the focus of a market). In other words, we see, with this, the proverbial skimming the cream (leaving, over time, less fat for the rest) or the butchers thumb on the scale (I showed that type of thing to the FEDS and was told to, as an individual and an old guy who sees, sue the perpetrators). --- Lack of consideration for the normative is one concern.

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