Most cannot and never have been able to

Moral: Wherein we state the obvious: most (way above 50%) cannot (and never will) get their monies out of the ca-pital-sino due to many reasons which we will enumerate (ad infinitum).

Give us time. Essentially, the equity propaganda is based upon faulty models. The whole framework looks at the winners (one side of near-zero). In actuality, that very much larger set of non-winners (no, not losers - it is not a closed situation) is more important on the whole.

---

In essence, someone of Janet's ilk needs to realize the importance of a reasonable interest rate applied to instruments that are safe and sound (in so far as is humanly possible to attain). To bring that about will require a re-look at the current basis of belief (of course, the accouterments that accompany the big pockets and "winners" in the current system make it difficult to get the conversation going in a proper manner - worse than a catch-22, if you would).

---

Now, to be technical, for a moment, there are all sorts of analyses going on everyday. Much of this it yapped about ceaselessly all day (Lord, deliver us - yes, Cramer, you, too).

One that came to mind was Tobin's q (he is the Nobel winner). Skirting for the moment all of the questions of defining, and determining, value (about which we have been writing: 7oops7, Tru'eng, FEDareated), Tobin would have us relate the total sum of assets to the current market value. If the ratio is above 1, then things are (may be) puffy (as we see now, where bubble is more appropriate).

But, you know, the magical multiplier would have to be collapsed in order to get the proper market value. And, that, then, would settle the issue.

Tobin's q and
Market Cap / GDP

And, too, the whole notion of most not getting their claim comes from that little sleight of hand that has been accepted as the only way to do things (complete misuse of Adam).

---

The VectorGrader site provides a graph of Tobin's q since 1950. But, notice all of the other valuation charts that are offered, like Market Capital to GDP which looks similar. For each, there is a brief description of how the chart is calculated.

Also, dshort.com provides a nice summary and discussion.

---

So, let's back up. The motivation for this was a BloombergBusiness report about Tobin: Nobel Winner's Math is Showing S&P 500 Unhinged From Reality. The report discusses the case that the markets may be frothy. In doing so, it covers the following topics:

• Dissenting Views - one of these says that worrying about the "q" would have kept one out of this market. Oh yes, that is the point being made here (if you got in, you have accumulated ill-begotten gains (enjoy them, quiet (if you can) your conscience) - not available to everyone).
• Slow Spending - and we know about this; cutting costs (removing workers - working the remaining to an inch of their health) and hoarding money (also, buying your own stock to keep the price up) and ... What is equity for, anyway? The basis for gaming (financial manipulations) or a means to support real economic decisions?
• Mean Reversion - Ah, investors? What about the people being screwed who are those with their hands in the dirt, who are keeping things afloat for the fat cats (riders of the system's magic carpet - coddled to the max), ...?
• Bond Yields - oh yes, no where else to go but equity markets? Not. Somehow, a real economic view needs to be expressed here (Janet, et al, are too much of the game as defined to try to grasp the issues - Ben could not see the last downturn when it was starting to happen right under his nose -- but, he showed us that he had not run out of bullets - did we really say that?). 

All in all, it was a nice article, however it does not address the real issue. For that matter, who does (except for this blogger)?

---

Too, we need to look at whether markets can be fair or not. Oh, sure. that argument reverts back to the fantasy of "efficient" market. While people argue and nitpick about that, others slave away or starve.

Remarks:  Modified: 06/18/2015

06/18/2015 -- We have to see how this insanity got its start. Then, we'll see why most do not get their money (the value is strained out daily by those who run the game). Everyone, it seems, has bought into the game (but, we're not tilting either at an illusion - despite having used chimera).

Tide that floats us

Moral: Wherein we look for motivations for dark pools (ah, invisible hand, indeed) and other charades. Oh yes, "motivations" means more than just rooking the system.

Essentially, we want to show that the markets are not fair and why this is so. Now, don't go on about life not being fair. This is different; it's basically an issue of the higher class (because they can and are given the right) running a sham under several auspices. You would think that the U.S. would take the high road and show the world how markets ought to be done. We cannot get there until the real story is known and told.

Too, we are talking from a normative position not unlike that of the U.S. Constitution writers. Let us start real simple and go over the ground work. 

As one watches the markets (yesterday - decline; day before - up then down) gyrate, there are lots of things to ponder and questions to ask. Sometimes, it looks as if something is trying to prime the pump (seeding the chimera, if you would). Say what? Yes, something buys in order to get things up; this would be an attempt to lure in suckers (we'll go into this further).

---

So, to a basic view of how we get the Cheshire multiple whose reversal throws so many into the quagmire of losing it all. Built on top of this faulty frame are the management strategies and gaming activities that spawn our chimera.

Essence of the Cheshire multiple

The graphic relates to a scenario that is quite common. The approach is fairly simplified but does cover the essential points. The context is equity, for now, however it applies to all markets in some way or other. Yes, as capitalists like to argue, markets are the key/core item for their economy.

You know what? We have never seen such. Rather, playing around, as shown in the graphic, is the reality.

So, we have four states read as normally with English. We start with the upper left which is the starting state. Then, we have three events. Each one of these is some transaction or collection of such.

Let's look at a few details for each of these states. We are assuming that there are 10 stocks; the number of buyers is not important (assume that the number is more than five, though - we'll get to the block dealers soon - as in, one or two buyers, 10 stock).

• 1 - pre-IPO. I used this term since we see IPOs regularly. Someone floats stock whose value has been determined by various means. Either the stock goes beyond the initial price (how this price is determined is ignored here, for now) or falls. In the first case, we have "winners" which everyone loves. 
• 2 - All sold. So, we'll assume that the 10 stock got sold for $5 (I'm putting the dollar sign to denote some type of value). We then have a total value of $50, and everyone is happy (if the original price was $4 or lower - keep this in mind as it'll come up in a later post). 
• 3 - One sold at an increase. Now, everyone is happy as their stock is worth $2.5 more without them doing anything (this is how the Mr. Wonderful's of the world like to dream of making money while they sleep - and actually do). The total value now is $75. Only $2.5 was introduced. How did we get the additional $22.5? Ah, that is the crux (multiply this by billions across the board, and the gist of the problem shows up - those running the game do not want this known - raking off the top is their bailiwick). 
• 4 - Two sold at an increase. Now, everyone is exhibiting (ir)rational exhuberance. The total value is now up to $100. Yet, we have only seen another $5 introduced. Adding that to the last event's amount, and we have $7.5 introduced. Yet, the overall value has doubled (for those who did not sell). 

Now, of course, when anyone sells out after this point, their gain (considering tax, for instance) will be based upon what they paid when they bought.

To summarize:

• Holdings: 7 at $5, 1 at $7.5, 2 at $10
• Gains, if sold at $10: $35 (7), $2.5 (1), $0 (2).
  

The example does not have a sell example. Too, whole lots of attention goes into this market paradigm daily. Some of the talking heads are trying to be helpful; others seem to be mainly self-serving.

But, looking from a distance, that the game is rigged is obvious. The last author who tried to show this caught a lot of grief. Adam Smith is rolling over in his grave at the thought of what is done under his name.

---

Finally, one ought not criticize without having something constructive to offer. Do I? You ought to know better than ask. The problem is that we have this to contend with: centuries of practice (not as many as you might think), vested interests to ferret out (they have been at the teat for a long while), convoluted contrivances to counter (theoretics, mathematics, and computing), talking heads densely everywhere muddying the waters (ever think about the amount of money that goes into tracking and telling us about this crooked game?), and more. Hence, we [will] begin with the foundational start which has actually been going on since the beginning of the blog and before.

Remarks:  Modified: 11/11/2018

01/15/2015 -- It is nice to see, today, that the most-read post this week are from years ago. Yes. In particular, the following are in order by read count: Systemic risk (Aug 2009), Why not? (Aug 2009), Von Mises and friends ( Sep 2010), Economic sandbox (Sep 2009), Bean and accounting, thereof (Aug 2009), Value, faired or earned (Sep 2009).

01/16/2015 -- Simple start, but at the core are issues of quasi-empiricism and more. Our approach will stress a re-look at normative mathematics (yes, all connotations apply) in order to regain what we lost with the thrust (modernism et al) which had led us to the state of data-driven purgatory and other ailments (which we have imposed upon ourselves).

03/05/2015 -- First, we had El-Erian saying that people's hope of liquidity had no basis. Now, Cuban is saying the same thing. ... What I was starting here was an explanation. You see, the cheshire multiple provides the supposed equity (illusory in many senses). Then, the dark pool (and similar) activities by those who run the game siphon off the real value (skim the cream). What is left is residue (yes, mere fractions of what was put in - by those who are the guaranteed losers). ... I will start over and make the fictional part more prevalent. ..., Too, the graphic will be more extreme so as to let the message come out (after all, we can use the "thought" experiment approach in order to lay out the framework with which to take the analysis further - for many, it is just incredulity that strikes - how can such crap be? well, it's due to the intellectual/mathematical/computational cloaks that are put out - and, it's pure crap, people). ...

03/14/2015 -- We are talking market capitalization and how modern means allow this to be concept to be mis-used. We are reworking the example to be more extreme. For now, why is not market cap based upon a more sophisticated notion (rather than being a gross estimate)?

03/15/2015 -- Finally, getting around to the pending business.

03/17/2015 -- Dogs of the Dow: Market Cap table, Most active. Beyond the wildest dream.

03/22/2015 -- Jealous? No way, Jose. FED gives Wall Street what it wishes.

Dark pools and other things

Moral: Wherein we look at a few recent articles and at what these might mean.

The WSJ always has interesting news. When there are some that relate, we need to pay attention.

Note: As said earlier, this opinion comes from a normatively-oriented view.  

• The head of one of the large exchanges asked the Fed to not pull the spiked punch bowl. One of his arguments is that money is flowing in. Yes, this late accumulation is from those who are guaranteed losers. By this time, those who know ought to be dampening the fever; are they? No, they are stoking the fire. But, this happens, time after time. Do we ever learn? 
• This same exchange is also wanting to handle stuff being done by dark pools which are suspect to any discerning mind from the get go. You see, consider that these things cloak trades. At the same time, those involved talk "open" and such as the means for better markets. One thing that a dark pool can do is allow unloading of a huge holding without price depreciation kicking in. That is only one of several things that smell. ... At some point, things being done in this cloaked manner will have to unwind; who will be dragged into the resulting quagmire? Earlier, we said that charades lead to the chimera (see Remarks 01/10/2015)- this is not the only path but is one example of an intentional type; however, this type of activity results (can result) in lots of ramifications. But, the players, by the time the stuff hits the fan, have their pockets filled. So, who cares?
• Then, we see it touted that the Fed has paid the Treasury $98.7 billion. Think of what this would be if the interest rate was up where it belonged. Oh, so the Fed is that giant board upon which the economic decisions are made? Does this not sound similar to that old thing of the input-output model that (some) western minds deride and castigate? So, it's okay if phrased in terms of the wizards of D.C.?  
• ...
• Why not have a "global managed exchange rate regime" to help forestall the coming disorder? Again, input-output planning to the max (who won the Cold War?).  

Of course, the WSJ has to fill its columns. Too, the Street needs it playground, albeit a sandbox sounds very good now and then. That last column does bring in another focus that needs its day. 

BTW, arbitrage (misuse of, especially given the "smarts" of computing) is one culprit (remember the Nobel winner needing to be bailed out by the Fed and us - sheesh); as in, too many creating these moments (of liquidity need) just to allow their thrashing? How did this come to be? 

Remarks:  Modified: 03/17/2015

01/14/2015 -- See what Investopedia says about dark pools which are used to cloak. In other words, large block sales can happen without depressing prices. So? Someone down the road eats it. The "pedia" does have a pro/con section, however this "pedia"writeup is from the viewpoint of these types of markets. The blogger sees this as silly gaming and not of necessity. Of course, it's his duty to show why these approaches are bogus (at their core).

01/15/2015 -- At last, a series that will establish the basis and extensions, as required. We are going to go back to some simple and come forward to the modern, complicated economy. Why? My long chain of ancestors (inherited via Prof. Lucio Arteaga) is one motivation.

01/15/2015 -- It is nice to see, today, that the most-read post this week are from years ago. Yes. In particular, the following are in order by read count: Systemic risk (Aug 2009), Why not? (Aug 2009), Von Mises and friends ( Sep 2010), Economic sandbox (Sep 2009), Bean and accounting, thereof (Aug 2009), Value, faired or earned (Sep 2009).

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.

02/11/2015 -- Wikipedia: Zero interest rate policy.

02/18/2015 -- One way to explain the motivation is ensuring liquidity (thereby, adding to the illusion, thanks, El-Erian).

03/05/2015 -- Cuban talking lack of liquidity (2000 like). See Remarks 03/05/2015.

03/15/2015 -- Finally, getting around to the pending business.

03/17/2015 -- Dogs of the Dow: Market Cap table, Most active. Beyond the wildest dream.

Fiat money

Moral: Wherein we look at "fiat" money, again, plus the cheshire multiple.

We have not had a post on this topic, for a while, but a recent WSJ article (How the 'Reserve' Dollar Harms America, Nov. 21, 2014) prompted such. So, back to the old themes.

This topic has been touched upon in all three blogs:

• FEDaerated (see fiat, gab-standard, coo-coo, and goo-goo) 
• Truth Engineering (see fiat and gab-standard)  
• 7oops7 (see fiat and gab-standard) 

Call it funny money or what you may, the whole process depends upon wizards to control the process which easily veers out of control, as we have seen time and again. That the U.S. must lead the way is obvious to many; 'how is this to be?' is less so. 

Along with consideration of 'fiat' and 'gab-standard' having some focus, there ought to be, as well, some sensitivity to Minsky's thinking.

---

How high can it go? Well, the DOW is close to 18K today (12/3/14). There is a run-up going which we will watch. There are two caveats that need repeating.

• This is funny money, folks, except for those who are in the position to exploit the situation: those who run the game, those with the wherewithal (the Buffets and more) to rake in gains (ill-begotten), and such. The fact: this group is a minority (very small in cardinality even if their pockets balloon immensely). 
• Those who buy in now are lining up to be sacrificial lambs. Ah, the humanity. The fact: losers outweigh the winners by far. Even if we graduate the amount of winnings (ignoring near zero, for now) from reasonable to extremely greedy, the winner set would be small (far less than 10%, if that).  

Reminder: In the context of these discussions, 401K eyeballers are not "winners" (grieves me to even use the concept since the reality is so putrid - when the kimono is lifted) until they have cash in hand.

Now, having said that, what is needed? Rather than the headline says, Apple drops 22B in a day, we ought to think about another accounting approach where buyers/sellers bounce against an entity with a history (to be discussed). Yes, the peanut buttering of gains and losses across a whole population is stupid (always has been). 

When computers came along, were they applied to beefing up the accounting? No, they were turned into gamers to extract even more from a silly system. How has this gone on so long? 

The vested interests benefit, essentially. We do not have to rise to the level of ethics to bring the problems to public viewing. No, all that is necessary is to lay out the scheme's basis and how the ca-pital-sino is a type of "shell game." 

---

We were on this theme six years ago (Crooked games) and will go back to the earlier thoughts. The FED has changed the character of the game, delayed the consequences, muddied the water (really), and set us up for some interesting failings (will be worse than the last time - as many say). 

Remarks:  Modified: 12/06/2014

12/06/2014 -- Put here as placeholder: Capitalism's gravediggers.

America and its roles

Moral: Wherein we start anew, with a fresh slate, and cover the bases (congrats, SF) after admitting that there is no jealousy.

Harvard is mentioned several times in this blog (22 posts). Too, though, there have been references to related themes (Harvard, supposed spawning point for world leaders) of American history (14 times - as well, use of "America" is not chauvinism - we're talking way before 1770s) and of civilized notions (20 times - albeit, Brit, as in Magna Charta). You see, the manias related to the chimera (in all of its variations) are very much counter to proper thinking.

So, since we can leave things in the capable hands of Janet and crew, we will be able to get back to considering the issues, as necessary.

--

Now, before we go further, let me make something clear. Look around now at the turmoil. For the most part, we see that youngsters are the ones who are providing the energetics. What has been interesting of late is how many places on the planet are seeing this phenomenon. Say, use the past 10 years to make the count. Astounding.

Over the past few decades, we have seen this time and again. And, the first occurrence, here, can be placed in the 60s. Having started, there were all types (which are well known) that followed over the years. Actually, we could put Berkeley first. But, coincident would be the activities related to Civil Rights.

We are talking more than civil disobedience, in a sense. We have to talk about conventions and such. Yes, it relates to business (in oh so many ways). For one, the bifurcation, so well documented as being so extreme, comes about from the human dynamics that we will explore (essentially, feudal lords ruling over their abstract'd entities seemingly without any constraints - not even from their stockholders).

And, the lord/serf theme is recurrent, to boot (40 times). The modern work environment is so much worse than what our remote ancestors faced (how do we get those supposed smart folk to wise up to the fact? -- let's take them down to the trenches so that they can see/smell the reality).

---

Right now, we will talk about the beginnings of Harvard. There are plenty of stories that tie into the event. Then, there is the long history. For now, we will only be looking at that early point.

It is said that the students rule there. Now, let's see. If that were true, then, it would have been the first occurrence of such a thing. Anywhere. Is that our legacy? Are we now paying the price in terms of the interminable power grabs of the best and brightest? Does thinking about this help us see why the stalemate continues at the top (supposed top - it was to be a government of the people, etc. -- remember?).

And, recall, too, that we started off talking about the youngsters being behind the revolutions. That was not true for the Spirit of 1776. No, it was not.

Old and young (just look at the wide range of ages in the large collection of patriots in the Massachusetts) cast in their lot. Female and male. All the race/cultural types were represented. Except, for the jolly old English (called royalists).

Disclosure: As we go through the analysis/discussion, there is a personal note in the sense of familial relationship with the players of the early days. Foremost, though, is the first instructor: Nathaniel Eaton. But, there are ties, too, with the whole lot of the players: motivators, payers, students, ... Hence, we can make that the central focus (where did we go wrong?).

--

We are doing this exercise for several reasons. Firstly, things are awry. One reason is mathematics being misused (a little knowledge is dangerous - albeit, we have supreme modes of abstracted nonsense nowadays). What has helped make this worse is computation with its inevitable culmination in big data. Secondly, we just had the 200th in a gaga mode. But, look around. Do you really see an American spirit anywhere? How did this happen? Of note, next year is the 800th of King John's first coerced signing (sealing) of the Magna Charta. This whole thing is seminal and will be more so (until the energy peters out - let's hope that it does not).

Thirdly, how did we get so bound into the chimera (personally, I like to keep my distance)? It entraps (the whole game and the potential payoffs - silly for mature thinkers, really). Too, though, go back to the first reason. We are overlaying ourselves (allowing ourselves to be entrapped) in a very strong web - let's wake up and smell the roses now - it's the right of the people). The proper view is not tightly considerate of what Janet (before her Ben and so forth) is doing. And, bemoaning the abstract'd views ought not be misconstrued. We need mathematics. ... But, consider that the metaphor of plumbing and plumbers is more strong for money/finance than the current set of brainy types will allow (add to those, the greedy, etc.). Fourthly, we have been at this for awhile and got off the track. But, not really, Janet and the Fed have put us in an unknown situation. We have been experimented on real time. By cowboys and cowgirls. Why did this happen? Because they could. Yet, Janet is talking data as if that is some silver bullet. The real deal is that the oracle could be more in tune with what is needed if the views were lifted. Harvard is not a lifter (is that the implication?)? We shall see. As we get back on track and start anew.

Finally (not), things will crash. We want to be able to explain the cheshire multiple in terms that are understandable. For now, everyone, please, know that markets (the chimera-typical thing currently in vogue) are set up to guarantee losers. What is annoying is that the loser set is more than 50%. Yes, our task? Describe this and make it clear. After that reality sinks in, then we can start to talk about better ways and means (also, enjoying old Marx's comments about fictitious capital).

Remarks:  Modified: 01/15/2015

12/30/2014 -- Working on using pages to organize the material - as in, the message depends upon the medium.

01/15/2015 -- At last, a series that will establish the basis and extensions, as required. We are going to go back to some simple and come forward to the modern, complicated economy. Why? My long chain of ancestors (inherited via Prof. Lucio Arteaga) is one motivation.

Where are we?

Moral: Wherein we weigh in with a reminder that the story of Main Street's lingering effects from having to change the diapers of the gamesters (yes, the ilk of Wall, etc.) still needs to be told.

So, one chapter closed with the meeting of the Fed. According to the WSJ headline: benefit of bond-buying experiment remains unclear as central bank's focus returns to interest rates.

The graphic of the Fed's balancing act is a nice touch as it splits out their holdings by type. Note the amount of mortgage-backed securities. Some of these were from the toxic era. What would closer analysis show? All sorts of economic positions are being argued now.

One fact is clear. Yellen is focal and expected to remain as such. After that, all things are fuzzy. But, let me make two comments here that are very much apropos.

• The downturn, if you remember, was caused by financial gaming, especially that of the financial engineering type. What has changed there? Banking froze as none of the players knew who they could trust. Has that changed (as in, with the spiked punch bowl, who of that crowd cared?)? Has the coddling quit entirely? No, of course, not. Savers are not part of the equation. In fact, it's the opposite. The thrust is to load people up with debt (ah, dire straits to be expected when the rates do arise - like the burden the US will face with its debt). For the poor, it's an abyss of no end. For the smarties? You see, they are still leveraging with cheap (Yellen's) money. The ca-pital-sino soars, however the reality of most not getting money from that is ignored. What that means is not related to those who chose to not be in the casino. That most are losers, by definition - can be explained, is hard to see when you get the Zucks (and others) rolling in the dough. At some point, perhaps, we can describe this a little better (where is that pivotal point?) such that those who are now lost in the mania (of the media) can see these things from a more reasonable stance. 

• Prior to the downturn, and to the present, the blogger has had a mortgage that was taken on only after the banker assured the borrower that they, the bankers, were not selling their mortgages. Now, the same banking company still handles the payments, and such. Except, the downturn time saw the banker (meaning the company, of course, with the head guy's face as the representative icon) buy into a high-flyer (who crashed). The banker thought that they were getting a deal (and were very much surprised). So, what that means is that the bought company is the new mortgage department. I'm watching to see how this impacts things, as I can get out at any time. Too, the banker has received oodles of interest payments during this time (hey, someone has to bear the brunt - and, we pay taxes, too -- will expound, ad infinitum, about this to those who might want to learn about the real economy - meaning sustainable). Yes, the mortgage was 30-year, fixed rate. No complaint, but for this. Has there been any thank you from the banker? Sheesh, no. The banker has been paying fines (related to their, supposed, wind-fall) and licking their wounds. Oh, what a tale to tell (will be told, along with the tale of being thrown out of a bank for having the gall to point out a process that was bordering on illegal -- the Fed's response? oh, banking customer, you sue them - we see the merit of your claim but do not care). ... On the other side of the coin, the Fed then pushed obligations (interest paid, rather than fat skimmed) of bankers for their customers to near zero (aside, when I talk near-zero, it has to do with the fact of the ca-pital-sino not being zero-sum (which, then, allows those pushing it to talk as if they're saintly), but it is close (when one does the proper accounting - as in, not buy into the spiked-punch-bowl-colored  world view). ... 

Stopping now. The tales, to be told, are not, as of yet, touched any more than barely. How many more points to cover? Well, consider this. The view? Economics trained, econometrics focused, computer modeled facilitated, essentially scientifically predisposed, intuitively oriented (as necessary), and more. ... The whole caboodle needs a look (is time infinite?). 

Remarks:  Modified: 10/30/2014

10/30/2014 -- Pause would have a great influence on our models. Now, how to do this? For one, let's get back to the sandbox necessity. 

Startling news?

Moral: Wherein we commiserate with Ben that he is not at the Fed desk as the results of his largess come to fore. Well, Janet can claim some credit; too, she'll have to handle the downside that is coming.

What results? Well, the DOW running sky high.

The headline says it all: Dow flirts with 17,000, but most people missed the ride. (emphasis mine)

It ought to read: Dow flirts, but most people cannot ride. (why not? to where does an illusion take one?)

---- This was brought from a Facebook post, dated 7/2/2014 ----

Most people missed the ride? Even those who got on that "train" will lose out. That is by definition how the system works. Its main purpose is to lure the hapless. 

Even under the best of situations, the "most" cannot get out of this type of market what they have put in. That message is never given. Rather, the talking heads say that people did not get on and missed the "train." It would be comical if it were not so sad. Ah, let's count our hypothetical wealth (and, arguing that the cash equivalents are as flaky is not proper - to be discussed).

Again, all of those on the train cannot get their booty (the Zucks of the world have and will). Why? The cheshire multiple, the chimera, and such.

Early sellers get the goodies. At some point, which is a lot closer to the top than you might expect, the majority of the rest become losers since they must sell below their cost. Oh, wait it out, is the adage? Not if you need your money (and a whole lot of other reasoned responses - these issues have always been known, but the gaming fills the pockets of those who run the system).

http://finance.yahoo.com/news/dow-flirts-with-17-000--but-most-people-missed-the-ride-202459906.html

So, one big disservice, of many, of the FED, of late, has been not allowing a rationally sufficient return to those who want to preserve principal. No, they would rather push gaming (as if that is the proper mindset for a sustainable economy - to be discussed). 

Remarks:  Modified: 07/03/2014

07/01/2014 -- Euphoric territory? How do images and illusions attract so strongly?

Sucker money

Moral: Wherein we consider how the Fed is setting up for losses by those who cannot afford such.

In other words, sucker money will (may) be flowing in. May? Perhaps, people are smarter this time around. The "sucker" post was from 2010. That was before Ben did some of his trickery.

In the meantime, savers were flayed to within an inch of their lives. Perhaps, they'll be like cats and have nine of these to give up.

You see, several things needs to be explained. We'll get to that. In the meantime, it will be interesting to watch how all of this unfolds. Except, the victims will be those who were pulled late due to all of the hype that has inflated as much as have the markets.

Those late buyers will buy from the early entrants (or even those who stayed in last time, getting what they expected Ben to do (and now Yellen), in hopes that the punch bowl would be kept full) who will have massive gains. Then, as things tumble, those late buyers are guaranteed losers (assuming they sell, if they do not sell, what type of trickery will be required for the next load of dope for the addicts?).

Minsky's notions, of course, will come into play as we look at this matter, again.

---

But, we can talk moral hazard, too. Lots to talk about there.

Then, we will look at how savers have been hurt, using numbers. Perhaps, it's time to re-evaluate the model that has consumer spending weighted so heavily. Near-zero's reality is lurking.

You see, our infrastructure is decaying all around us. The fat cats don't usually bother with such things (as we will show). Why? Their position (as in, they're the best, deserve everything they can obtain via exploitation, and a whole litany) leads them to believe in perpetual motion (we'll do a post on this - something from nothing, if you must ask - as we see with the chimera). Yes, idiotic, isn't it?

Remarks:  Modified: 06/20/2014

06/20/2014 -- Last fall, there was a flurry of activity, looking at Yellen's approach. Two examples: Folly of the Fed, P/E Multiples. That was last fall, who is looking now? Well, Smithers is still at it. Also, quote from the Economist (May 10, 2014) -- emphasis mine: Janet Yellen, the Fed’s head, rather bizarrely used the prospective price-earnings ratio, one of the weakest of all measures, to justify a statement that Wall Street was not overvalued. (This was doubly strange since her husband, George Akerlof, co-wrote a book with Robert Shiller, who has championed a much better measure, the cyclically adjusted price-earnings ratio.). ... From my analysis, we'll see something else: the earnings are less than expected just by definition (such that allows book cooking in order to reduce the influence of costs - see infrastructure allusion earlier). 

Cheshire multiple

Moral: Wherein we re-look at a very old issue: only a few get it (many senses, but the dough, as in payout of note) - the most? losers (almost by definition).

A long while ago, I read Marilyn's and Investopedia's explanation of what happens when markets fall like they do (and will). Where did all of that money go? It just vanished, the presses reported. That question was back in 2009, when Ben was still feeling his way through the mess.

I railed then, and have since, about the "stupid" gaming (see chimera). Why is it stupid? Well, about now, when things have inflated (you see, Janet, look at how the financial assets have inflation - sheesh, also we have some costs of our living rising - her little chart is way off base), moms and pops are buying into the game. They are guaranteed losers (the late buyers). Then, we hear that people are borrowing to buy stock.

So, we have to revisit this again. An alternative? Yes, more stable approaches do exist.

One motivation for the revisit is looking at Dalio's take. He shows financial assets in his little model as something that money (and credit) can buy. And, he shows how financial assets can diminish in value. Also, leveraging came up in the video. But. the whole issue of why we have done it this way is ignored. You see, the game, as is, seems to provide a perpetual machine (which we know does not exist) that "feeds the multitude" but actually pays into the pockets of a few (most of them the game owners and controllers). Too, we have led other societies and countries into the same silliness.

---

Now, the title of the post comes from Marilyn's remark. What I have done is put the two responses side by side (Marilyn at Parade, Investopedia staff). Let's look at them and comment below.

You see, Marilyn says that the money disappears. Too, she says that only "a small percentage" can sell to get what they expect (my words, but not arguable except for angel counting). Yet, we have people putting their life's savings, and their retirement plans, upon such a stupid (there I go, again, and I would ask Marilyn, do you think this is how it ought to be?) system. Investopedia says "disappeared into thin air" without an adequate explanation. Yes, financial community, explain yourself, please?

Those who are takers always gloat (ala the 99% and such {explanation 02/18/15 - 99%? yes, as in, those of the 1% who are sitting over the rest - as in, over the 99% in the graphed density function}). Those not taking (but, being took) are multitude, who are mostly enslaved to care for, etc. the gloaters (those who are slowly enmeshing/entrapping reality and us, insidiously - we, the users, need our modernization of the Magna Charta - we'll get back to that).

Anyone care about sustainability into the future? Anyone care that we have indebted future generations?

---

All I can see is that these financial schemes expect an endless line of suckers. The past year or so has given us, once again, bubbles upon bubbles. Some, like the mortgage expert - what's his name? - who said the word but didn't go further. Janet seems to not notice, given her lessons from Alan and Ben.

Remarks:  Modified: 06/01/2015

03/07/2014 -- Not arguing that equity ownership is not necessary. Rather, it is the financial market's current state of evolution (madness, really) that is suspect; especially, the use of algorithms to game the system has no basis beyond merely mercenary motivations (resulting in useless churn accompanied by endless pilfering). ... One thing to notice is that these financial dealings have little to do with the operation of a business. And, as we will show, the modern configuration of these is very much like a casino (general adoption of gaming as the basis for ontology -- sheesh, I agree with my friend, Albert, on this - we'll get to that , too). ... We intend to get back to cosmology. And, the Wilshire 5000 looks like a better Index to use for our purposes. So, we will use it.   

10/16/2014 -- After a very lllooooonnnggggg upswing, we have seen six days of downward-ness. And, the falls are quick. Cheshire multiple goes both ways. But, we see, now, the coo-cooing of the Fed. Too, golden sacks is being a front man for the panhandlers that are the financial types. My query is who is priming the pump on these bottoms which funds the upswing. You see, that pulls in the hapless who feel as if they have lost out and want in. In reality: lambs being led to the slaughter. And, by the way, there is a better way to handle the whole affair. Let the ca-pital-sino folks play in a sandbox.

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?).

02/16/2015 -- We are elevating the discussion: see Wikipedia's Efficient-market hypothesis.(see the Talk page section on Cheshire multiple). The framework will use Minsky's thought. However, the importance goes broader and deeper. We will have to start from the beginning. The computer's value will (ought to) be a proper financial analysis (an analog of the old back office work, daily) that every day tells us the real value (to be defined).

02/18/2015 -- Same as illusion of liquidity (see Mohamed El-Erian's recent comment). ... With spring break coming up, here is a comment at another blog that used that occasion for a metaphor: June 9, 2014.

06/01/2015 -- A little late: Magical multiplier, Let them eat cake, Beyond your wildest dream.

Parting shots

Moral: Wherein we review Ben's put given his imminent departure.

What parting shots will we see in the next two meetings? More slapping silly of the savers? What will Janet do?

It's obvious that Ben's view is tuned more to the fat cat bankers than to the economy as a whole. You see, he may say that he's playing with his knobs in order to get employment up. But, in reality, what we see directly follows his decisions and actions. And, his disinterest in how things are different now, than in the '30s (his bailiwick), can be troublesome.

All he has to do is look at how computation has changed in the past decade and how it influences (actually, drives -- yes, Ben, DRIVES). Given that look (assuming that he sees), he would say, wait a minute. But, we can't just stop the wheels. You see, the stuff stinks (to high heaven - unethical to the core).

Well, we could have in the 2007/8 time frame. I would bet that things would not be any worse off than they are now had banks been nationalized. In fact, things may have been better. But, that wasn't to be since there is this strong belief in the invisible hand (oh yes, Ben's was more visible than was Alan's) plus the fetish that came from kissing up to Friedman (several senses: this one plus the notion of the FED pushing string as being analogous to applying control).

---

Now, the image shows things from early to now. That is, from the 2008 focus, and panic (when some thought that Ben has shot his wad), to the heady days of an inflated (granted, overall, there is an inflation gradient that is less than desired - however, with equities having the attention, these markets have been able to shift money from savers to gamblers) market (yes, Ben showed how clever he could be in his manipulation of what is the public's trust). Yet, the Bens and the Janets of the world see no issue (oh yes, the guy who looks at houses - big name - says that he sees no bubble, but there is froth - what the heck is froth? is it not mostly air?) with that (slapped silly for five years with no end in sight - torture?). Ben talks a little taper; the addicts go insane; Ben, then, talks goo-goo to calm them down. Savers (besides the usual set, there are those who have to plan future payout using minuscule returns - a whole set that includes pensions, insurance companies, and such)? Well, savers are being trampled by those who are lining up for almost ad infinitum easy money. Of course, that money is not free; at some future point, there will be cries of anguish as debt load becomes intolerable.

Aside: Let me tell you about one saver. Not only has there been nothing earned for his little accumulation, but he has a  mortgage that he has kept up payments on. By the way, there has been no thank you from anyone in that regard - namely, five years of on-time mortgage payment plus paying the banker a little over 5.0% on the principle owed. For the accounts that the same bank has of the guy's money (as in, being on the credit and not debit side), there has been payout less than 0.5%. Yet, the guy endures since he believes in supporting the economy, even when those like Jamie get the attention (oh wait, some of his gold has lost its luster, of late). Yes, none of the bailout initiatives are of use. The thing isn't under water (good planning on the saver's side - except for not thinking about the likes of Ben). Too, except for paying off the mortgage, there is no other gain (why entrench into another yoke?) that can be done. From time to time, the saver has heard of people having their mortgages just waived away. Then, the likes of Summers talks about having negative interest (the saver has already seen that with savings bonds where supposed payout by Uncle Sam has diminished to insult level).

Now, back to savers versus gamblers. Without a stable value concept, savers cannot expect to have their future payout. It's easy to understand this. But, those who want to play games in order to rake in ill-begotten gains have perturb'd the issue. But, too, the reality is that the gamers get people to put their money into the system so as to take profits off the top. As sellers outweigh buyers (during the time when people want to profit), the water level goes down such that there are guaranteed losers (of a very large cardinality - plus, the magnitude of the losses for this large set is tremendous - but, such suckers (like cannon fodder) are given to the fat-cats/gamers as gifts to exploit). All the talk of equities lifting things is not true. It's a chimera. Were the real reports allowed to be shown daily, this would be obvious (oh, will accounting own up to this?). Real? Yes, those that account for near zero.

Remarks:  Modified: 12/19/2013

12/05/2013 -- If only Ben would put a shot across the bow.

12/09/2013 -- Back in the time of the turmoil, when Ben was thinking of his easing (which ended up as QE infinity), he talked about getting the green shoots some attention. As in, help the economy grow. Well, he has done that. That trouble is that he hasn't applied his weed whacker. We now have a raging jungle where a nice garden would be more appropriate. Well, history will tell us how good of a gardener Ben has turned out to be.

12/19/2013 -- Ben did his parting shot (whimper that it was); they're going to taper slowly, less than a 1/8th on the bond buy, starting next month. And, he's going to torture savers for another year or so. We'll have to see how the pieces fall. The markets got heavily seeded today in hopes of luring in the idiots and moms/pops (who cannot afford the pending losses). So, it's pop, fizz, ..., again. Too, we'll see more goo-goo talk to the immature markets and the addicted investors thereof. One of many technical issues that we'll have to get into: Nanex's view. Ben does get his print space.

Stable value I

Moral: Wherein we attempt a brief look at normalcy's lure.

What with twit-ville getting lots of press and money (into the pockets of the founder in a big way, then in a lessor amount - but still substantial - into the hands of some who work for the founder) plus the markets being volatile - one day down, then the next up - this past week plus continuing worries about Ben's largess coming to an end (the training wheels coming off, the teat being pulled from the lips of the brats, the narcotic being removed from the presence of the addicts, ..., what have you) plus a lot more, there is one major problem with today's world that we can correct.

Aside: About the monies flowing so greatly, these are ill-begotten and attained on the backs of workers, savers, rational folks, and more (about which we can expand as necessary).

One wag said that Ben has trashed all asset types but equities. That is not far wrong. But, it dances around the problem.

Want to know what the main issue is?

In our relativistic world (thanks Albert - of course, this guy bemoans the bastardization of what he pulled out of the unknown; yes, he did not invent; he merely described a portion of reality) - as seen by certain types of eyes and models, the economy is now such that attention goes to what is really a fool's game (sorry motley guys, you did not invite foolishness) at which we are to marvel and to whose players we are to bow as if they're the epitome of something worthwhile.

Say that again?

Allah           -              Moolah

Talk to any of the financial ilk (if you want to degrade yourself, okay?), and they'll spout off about mixes of asset holdings, principally based upon two biggies - namely, equities and bonds. Now, equities bounce up and down. They have only gone up, of late, due to Ben's largess to Wall Street and his slapping silly of the savers. At any moment, they can trash the landscape and impoverish many.

How? Look, if all holders sold, the mere fact of the sale will cause a downward motion of value. It's inevitable. The total sale cannot be instantaneously accomplished. There would be a sequence, with those in the early part of the sale getting more -- as in, much more -- then those in the trailing edge getting less and less -- this is true despite the billionaires and millionaires we see; why?; near zero - their gains are on the back of the hapless.

Aside: There is a point at which we have nothing left but losers. Of course, the vultures then come in and feed (ah, see below that this is not by necessity the way to run a modern economy - those with the power have fetishes that need to be brought out to the open).

Now, bonds? Well, as we saw this year, when the interest rate goes up, the price goes down. So, holders of these type of bonds -- said this way, as this need not be -- lose value when interest rises. The mere hint of Ben raising rates makes bond holders - of this ilk - quiver.

--

The fact of the matter is that the current model is arbitrarily defined, for the most part so as to enhance the sucking of monies from the hapless to the players. These players, then, add churn in order to keep their obvious necessity (ah so) known to the populace - and this has gone on for years.

Is there another way? Yes, always has been.

Take a "stable value" view. Yes, suppose that you could hold something that would pay you what you expect plus some increase - ignoring, for the time being, issues related to inflation. Would that not be desirable? That is, you would not have to worry about some player putting his/her hands in the till and removing what you need to feed yourself down the pike - by the way, as savers have experienced for the past few years with no end in sight for their suffering.

Oh, say the wags, you would not make enough to retire on. Not true. Stability is a boon, many different ways. There are plenty of examples for us to use.

We will go on about this. That's why the title says, Stable value I.

---

Ben does not see any use for stable value. I can understand that. But, he has to know that his slapping of the savers is not sustainable. Too, he has to know that he's aerated things in ways that are unprecedented and that recovery from which will add more pain - to the savers and Main Street . Ben is leaving, so Janet ought to know (and her ilk).

The economy needs to be based on a stable basis that allows us to have a better look at the future than the one that we have now that is (has been) beclouded - so that the odds lean in the favor of the finance community. That is the core issue.

Then, the ca-pital-sino can be allowed (in a sandbox with diapers on the players so that their crap stays in their little playground) so that those who need the titillation can find solace and comfort. The sandbox would wrap those higher-order, supposedly, instruments which have been so seductive to the players.

---

All of these themes have been addressed over the years in this blog and the related blogs -- at some point, perhaps, links will be provided; right now, this is just air clearing - Ben's been doing that enough.

Whether we address this further with "Cosmology of business" or otherwise is not certain at this time. The game gets its attention, and money, every week - Cramer gets his air aired, to boot. That the shitty nature of the current mode is felt in Main Street will not abate; yet, there is some urgency that is needed.

You see, the computer has exacerbated the problem. Not by necessity. Rather, some, who could - as in, are allowed - have exploited things willy-nilly by enshrouding things in complex ways. Sleight-of-hand, if you would. The stench is still there - the nose will be important to establishing stable processes.

Too, those, with numeracy in their pocket, have been allowed carte blanche. And, powers that be have gone along with the so-called best-and-brightest. Meanwhile, those with the proper talents are waiting in the wings. In fact, determining just what that talent might be will be on the plate.

Remarks:  Modified: 10/30/2014

11/09/2013 -- One Fed guy said that their decision about QE - Infinity and the interest rate would be driven by data. I supposed that this is to help establish an aura of scientific discipline; you see, economics being other than dismal? Isn't that a hoot? The guy (I ought to look up his name) is under the delusion that data are not suspect. Guy, whoever you are - I just saw a headline and didn't go deeper, conflict comes about from differences in interpretation of fact. Using "data" as some abstracted type of glorification of our common knowledge does not raise the issues beyond how humans deal with their world. Opinion? Obviously, the Fed is loaded with people who would rather suck up to the rich, trash the savers and the old-timers, and, generally, run amok since they have the power to do so; rather than what? Talk about Main more than the Wall (unnecessarily complicated in order to hide the extractions that occur regularly - how else the high life styles? ..., why the large bonuses that don't seem to have a reasonable basis? ...). Wait, don't they talk unemployment? Yes, that fetish of the Fed being able to push that string thereby effecting full employment. All the while jobs (never seen in the proper light) are pawned off to external regions under the guise of globalization when, in truth, it's exploitation to the extreme.

11/11/2013 -- The Fed ought to address computability issues with regard to monetary policy. Yes, the genie is out of the bottle, but we can regain some control.

11/24/2013 -- The ACM has a review article on algorithmic trading that everyone ought to read. Essentially, if we use a plane as an example (consider what Boeing has had to do to get the 787 out and about), we would say that the financial folks are putting passengers on experimental aircraft with little regard to their safety and comfort. The whole notion is atrocious. How does it happen? They've coached things in mathematics and computerese, plus they've bastardized Adam Smith's ideas. Where is our sandbox, and where is the stable economic system that we can build?

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?).

Investors I

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)?

---

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.

---

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?)?

---

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?)?  

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.

---

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)?

---

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