Moral: Wherein we slip in a look at investors before taking on additions to
Financial Engineering I.
Aside: Still can't get over the temerity behind naming the discipline "engineering" when it deals with
chimeras, a lot (money, as an illusion). Too, we'll be back to explaining chimera further.
So, what is an investor? Well, one who invests. Now, before going further, let's talk a little motivation. Everyday, business day, that is, there are talking heads, and charts and graphs (in fancy colors and fonts) galore, hyping what is seen as the core of busyness (or the economy, even). And, they're always talking that the investors did this or did that.
Now, if you put these peoples' feet to the fire, they could not pinpoint an investor by definition. They would probably punt to
Investopedia (nice little site). Or, waffle while trying to find some expert (read, consultant) to answer the question.
But, really, who are investors and why do we care about those who are inflating the DOW (actually, Ben's little, actually big, largess is a major factor)?
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Actually, there is another motivation. Yesterday, I ran across this little bit on the
DOW 36,000 thinking. You see, twice within recent memory of most beyond 25 years of age have been events where mania looked upward to the sky while the ground beneath those ones was falling. Evidently, their senses were out of whack, as some denied the fall until they hit (including our wonderful guy, Ben).
But, there is a little different tone to this article. The thing is that the returns that are expected (something that investors desire, namely some gain) requires, over the long haul, that the DOW inflate grandly. We'll get back to that, as gains can be
ill-begotten (note, please, that this is three-years old and will be updated), are beyond the normal view (say, you investing in your kids' future - note, please, did not say "for" - rather this is a "being" issue - hint, more than just being a parent, okay?), and more.
Aside: Gain from others lining up with their money (Ponzi, or Made-off, comes to mind)? You know, this paper-gain hysteria is as non-being as one could get. Of course, some get rich (some;
most cannot - thinking that everyone gains is delusional). Folks, let's get the discussion back to real gains and the necessity thereof.
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Actually, Wikipedia does a nice little job; their article lists some
types of investors. However, their list is not complete: where is the labor of the farmer? the daily upkeep of a child? ... Those are not investments? Why not? ... Hey, what about shoring up infrastructure (we have let this slide far too long - by using the Harvard- driven, short-term view that glorifies the idiots with high IQs (yes, savants, in a real sense) who have no morals and rape the world and all of us for their pleasure (want me to name some names?)?
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It's probably fortunate that MIT took the financial engineering route as that view can help balance out the
misshaped views that resulted from the indoctrination fostered by their Cambridge mates. You could say that the quants provided by MIT (yes, those who run the technology that allows the
giant sucking daily) enable, via these platforms, the grandiosity of the worldviews that rape and take (as in, auto engineers versus drivers). Yes, building market systems is part of computational finance which is one of the aspects of financial engineering.
Aside: Some things to look at thoroughly are those that lead to (or reinforce the notion of) the ca-pital-sino.
High-frequency trading has some much stench attached to it that I can smell it from where I am now, long way from the markets. The whole idea of what might be called fishing is atrocious. Silly, really. What is that? Essentially, fictitious (ah, Karl would love that) trades to test the waters (rather, to lure dumb asses into a position of losing their shirts, okay?). Futures, anyone? Part of the problem accelerated when these were enabled with advanced computing. Just because they can is no reason to let loose things like this. That is, futures, themselves, are not a bad idea. It's the morphed processing (and worldviews) that are troublesome. But, market ideology, and big money, make a good case (actually, snow job); why else are they allowed such shenanigans (greasing politicos' palms?)?
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| Allah Moolah |
One missing aspect, though I saw it mentioned in one MIT article, is what gets labelled "ethics" (but, is actually much more); a closer tie between Harvard Divinity and Business might be an interesting notion to discuss.
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The MIT site had a couple of articles with nice leanings:
curing cancer support,
large-scale biomedical funding. These discuss how innovative means could improve on-going fiscal concerns. That type of thing is what we really want to see.
As opposed to what? Say, consider the mere gaming thrust supported by the current markets. The current bubbles (there even if Ben cannot see them) are of this type. We can't blame the guy; where is the sound worldview that ought to have a solid research basis and lead to stability (away from the perdition-laden path that seems to be so normal)?
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Investopedia's look stresses capital and trading thereof. One would expect that. Wikipedia has more variety. For instance, they mention sweat equity which would cover the above farmer (say, small, private owner-operator). So, investing is what we all do when we get out of the bed each morning. Those who look ahead invest prior to retiring for the day. Lives well spent invest and enjoy results during the whole span.
Then, we get all sorts of examples. Most recent? Detroit? Prior to that, companies that rooked workers out of their pensions (no repercussion to the business - brief headline flash, then it's forgotten; except, those who lost their future -- actually, Ben has slapped savers silly and wants to continue to do so).
One expectation from wise investment would be
future payout. As well, no one raking off the top is another. Yet, these issues are buried beneath the hyperbola related to the daily show (S&P 1700, for instance).
We'll get back to FE. How could it be used to establish a better notion of investor and risk management (remember how there could not be another downturn -- about six years ago -- according to the experts?)? These are not rhetorical questions; rather, the urgency needs to be lifted to awareness (daily and more).
Remarks:
08/15/2013 --
Nice viewpoint. Farce, indeed (
chimera).
08/13/2013 -- Yesterday, we mentioned that President Obama wants to change the
mortgage arena.This seems like a good opportunity to start a look back. One would hope that those who are in charge of the changes know the intricacies of why we have idiots running things now. If not, we'll attempt such an analysis here. Idiots? Yes, such inconsistencies of tying up money for 30 years, at a low interest (without acknowledging that taxpayers allowed this to occur in the first place, early on for veterans coming back from WWII). There are others things like this that seem so like chasing after the
perpetual-motion machine. Finance, built upon bogus money, has no way to ground itself, essentially. So, let's start with
Investors II.
08/12/2013 -- The President of the US is talking about changing the mortgage game. For one, Fannie and Freddie would change dramatically. The WSJ reported that these ones are making oodles of money (if so, it's due to Ben's free money). We'll have to weigh in here, at our speed, of course. For one, we'll lay out the progression that got us to use of the
CDO in the mortgage context. Fancy, creative finance is what drove these things. Too, we'll consider what ought things look like (look, there have been many changes for the past 100 years or so; a look at these issues from a temporally unbiased manner is imperative.
08/08/2013 -- Obama is talking inconsistency (but, perhaps, Emerson applies). He cannot have 30 year mortgages, with low interest, and expect there to be loads of housing. Fannie and Freddie had a purpose (by the way, Obama ought to have someone explain to him that these two were right there with the phony finance - yes, they were heavy players in the structured game -- and, some of their people made oodles -- oh, perhaps not to the level of private equity -- yet, F&F, with a proper bit of ethics and such, would be the way to go). They did not have to become pushers to the addicts (see prior parens). I guess the suited thing (dealing with the Wall Street types rubbed off). We need more practical minds that will withstand the sirens (the WSJ has it wrong -- it's not the sell-off siren that is the problem; it's the one that leads to greed and perdition -- those of the expensive suits are not heroes -- never have been). ... What really needs to be looked at is the morphing to gaming of all of these markets (it's a shame -- no where to go to really have a capitalistic experience -- was there ever? or is it that Adam had a fantasy?).
08/08/2013 -- We'll be doing another Investor post (probably a series). This one had a limited view, mainly equities. Let's forget the DOW (and its ilk, which are stacked games in place to fleece investors) and look at where the money is (private equity, hedge funds, etc.). Take private equity. The WSJ recently reported that many of these are pushing out bonds (another post needs to look at this option) for the sole purpose of paying themselves, and their like, huge dividends. Mind you. By doing this, they're loading their companies with debt. Guess who pays? You see, these bonds are supposed to pay huge interest (7.5%). Of course, with the big guys taking their cut (an analyst of a large fund says that this is like taking a huge home equity loan and going on vacation - recall, if you would, that we saw this with some home owners prior to the downturn -- then, some of these owners just walked away from their debt), the workers will have to make up to pay interest (recall, Hawker, which came from Raytheon's push out of Beech (highly indebted); Hawker could not service their huge debt, went bankrupt, thousands out of work, ...). Now, those buying the bonds know that the ratings are low, the risks are high, but Ben set this stage. The bond buyers may lose their money; but, they can also hope for an IPO that would bail them out (in this inflated market?). Recall, Spr, too. Same players as with Hawker, They got a partial IPO, yet those who bought were under water for a long time (some still are). Long time means years. ... You see, finance is creative when it ought to be utilitarian, many times. Ben is playing a losing game; but, he knew that (the siren's lure - face blasted everywhere - must have been too strong; King Alan morphed to Bennie -- poor guy).
08/07/2013 --
Investors? After the last
taper talk (more than a month ago), things jiggled a bit. Some lost money. Some gnashed their teeth (but, for someone, like my ilk, who has been slapped silly for several years now, what comfort ought we give to those who don't know how to wean themselves from their addiction? --- in the meantime, Ben, we, the
savers (saviors?), continue to be good citizens despite the Fed's attempt to trample us under the dirt). At that time, Ben had his
Doves talk goo-goo. So, the mania began again. Yesterday, there was a slight downturn supposedly as some Hawk (or two) said, perhaps, next month there might be some fiddling with the
taper (the talk wasn't that the investor would get reamed - forgive me, I was in the U.S.Army at 17 and learned some good lessons -- also, I was a medic so I know of orifices, to boot). Ben's problem is that he's in a fog (who isn't?). Yet, he runs around with the elite like an oracle (he ought to consider some of the Prophets about which he knows, perhaps), strokes the addicts, bends in to the money'd, and more. And, he looks for signs (omen analyzer -- ah, age-old behavior). And, he misses the obvious. For instance, what they're calling jobs (related to his triggers) are really just glorified indentured servancy roles. In fact, these things are to drive a consumer-oriented economy? ...
08/05/2013 -- The comment at the Motley Fool (by the way, congrats on your anniversary) noted that all couldn't sell out at the high mark. The corollary: some point (price) determines losers (in fact, the loser set is of larger cardinality in terms of membership), by necessity. In fact, the way the game is run now (assisted by
financial engineering), the markets will die. ... Now, there is a way that all could sell out at a price. Government, meaning taxpayers, as buyer of last resort. To whom would the government sell? Well, what Ben has been doing is a type of last-resort buyer. Of course, he's working in the bond area, yet the money that he is freeing up has to go somewhere. It's not going into creating an economy, with good jobs, that we need for the future. Actually, he's been quoted as wanting people to go after risk. Right now, that games seems to lead to the equity side of things. Hence, we see a big bubble. What is the real basis upon which this bubble (multiply faceted) is building?
08/03/2013 -- The Motley Fool asks
how high can the DOW go. The comment from Nitty Gritty Truth is mine.
08/03/2013 -- Forgot to point to (or use) the early notion of
doers vs speculators. All sorts of things are awry with respect to this problem. For one, even having those who have never performed a particular driving those who do have to perform through models and other computational assists (classic split of white/blue). Boeing merged all sorts into teams; think of them as design-build, in focus. There can be this idiocy where the white side makes decisions about what the colored (blue) side is doing. Design example? Having something in the plans that is not realizable (do not laugh; this can be a major problem). For another, we see that the capital/labor split allow those who held the former to exploit the latter (continues to be assumed as proper). Actually, labor is capital in the sense of the one providing the labor. So, that capital needs its rewards, to boot (what I find funny is how these upper crusts talk about their efforts and how hard they work; crap, with capitals; let me take those arses down to real jobs (the blogger has had oodles - far beyond normal - perhaps, I need to document the variety) and put them through the paces (now, I'm 70+, but I could still outwork some of those arses that I read about -- would have, easily, in my younger days). ... This is not complete; we'll do a post to bring the thinking up to date.
08/02/2013 -- The Atlantic had a recent
opinion piece that deserves attention. Did that focus on fat-cat shareholders coincide with the drop in corporate liability (remember? when plane makers, for instance, got off the hook for accidental liability -- buyer beware, in other words?). If corporations are persons, how do they get jailed (put into solitary)? 40 lashes, anyone?
Modified: 08/15/2013
One thing would be to have a populace that knows code. Too, kudos cannot be exclaimed enough for the freebie folks. You know who they are, the Open Source, etc. Not so much for the advertisers who are entrappers by nature, though they do have some use (yes, my profile does not subsume by being, not even by a fraction - rather, it's an irritant - ah, hence the pearl?).
10/27/2013 --Ben has sacked the savers for years now, slapping them silly. Why? A WSJ article looked at high-class pawnshops a couple of days ago. These fill the need for people who need money but cannot get it from the banks (stupidity there, too). So, they use collateral for a loan and pay high interest. How high? Some pay over 200%, per year. What is Ben paying or having banks pay their savers (customers)? Way less than 1%. That is the best example of being out of whack with economic realities that one could ask for. Yet, does the Fed see? Why is the interest low? To push savers toward higher risk? To appease the gaming crowd (most likely this, as these are big-pocketed folks)? To help people afford housing (on someone else's back?)? ... Janet's take on this is unknown, but she has to know that they're looking like idiots. You know what? Most of those loans are paid, even with the high interest. And, still, Ben slaps the savers (King Alan mentioned saving, of late). We ought to ask the Fed, what happened to prudence or does it like to reward profligacy?
Aside: the image shows the table with results from the WSJ study.
Now, this last image shows the whole scenario. Every time the little engine, that could (it was a train, remember?), started to run out of steam, Ben gave it a boost. At the same time, he was slapping the savers silly. So, he gave his love to the marketeers and big pockets, and he kept his poor savers hungry.
