Truth, fiction, and finance III

Engineering has science as its basis. Science can learn from engineering experience. These two have played together well over the years.

Finance has what? Gaming? That's it, folks. The modern mind has brought that ontology forward as the main coherency for our future selves, culminating, one might say, in 'fairy dusting quant' applications.

Well, it stinks even though millions play the game daily, and all sorts of technology has been developed to make the game interesting.

At the end of the day, people lose. Big time. Those who gain change our norms (or try to) into accepting greed, huge payouts, large expenditures, and overall troubles.

So, can we do it better? Well, yes. The world needs it. That will be discussed.

Remarks:

01/14/2015 -- Chimera and charade? One example.

04/19/2011 -- We have to get back to the basics.

01/29/2009 -- Earlier, there were some words put here about Truth, Fiction, and Finance. Well, pick up the 1/28/09 Wall Street Journal and look at an article about a 'proliferation' of ponzi schemes. We all know about Madoff as he mis-handled a lot of moeney over a long period of time. But, a lot of states are finding that they have a madeoff/ponzi going on within their borders. How much of finance is a sham?

The WSJ mentions that the hedge funds' claims to high returns is one possible cause as people try to duplicate that. Sort of a Jones' keep up thing, we can suppose. Well, a reading of hedge fund tacits raises all sorts of suspicions to the rational mind. Just how legit are these things and why are they even allowed? Are we that much into some mass insanity?

10/21/2008 -- Yes, it's time to re-look at this theme.

07/31/2008 -- It's not enough to rant and spout off. So, let's start something constructive by looking at money and what it is.

Modified: 01/14/2015

Estate and truth

Yesterday, E_S_T_A_T_E was used within the context of 7oops7 and the financial musings, especially of the personal issues. ‘S’ is for saving which is what experts say that we ought to do first, namely pay yourself. So, let’s go through these in a little more detail which can be expanded upon through time.

By the way, this is a linear stream, for the most part, though various combinations, and even permutations, would be very interesting to think about. For now, think of moving left to right from E to E.

Too, most like to think that their Earnings are theirs to keep. Well, we would all like that. Given the inevitability of the extractions, how do we make the best of the situation is one question to ponder.

So, here we go.

• E – Earn, however one wants that is legitimately pursued. So, what that entails is (and has been) subject to a whole lot of discussion. Let’s put it this way; there are moral/ethical issues, to boot.

• S – Save, and doing so in a pre-tax method is one benefit that the IRS (and Congress) has given us in the USA. That is, maximizing the tax-deferred helps make this equation work. So, savings are the first extraction.

• T – Tithe, and benefit. Well, for those who wonder about this, you can join T and A together under Alms, if you like. That is, consider what outside of yourself is important that you would like to fund, such as giving to the skeptical societies, et al. Otherwise, there are all sorts of theological and philosophical discussion that has been related to this that could occupy us for a long time. Just consider that the ‘T’ has tax implications, too, within a limit.

• A – Alms, which can be several things, such as helping the lesser fortunate. Again, all sorts of sides can be taken here. The emphasis that we see in business and society about contributing via some type of service comes into play here; it’s easier sometimes to just write the check.

• T – Tax, pay it and relax. You see, the infrastructure comes about via this, plus much more. Again, much to discuss; we’ll pay only slight attention to the IRS tax code which is always interesting to read.

• E – Enjoy what is left. Now, the wise actually will only spend part of what is left assuming that such is possible. Well, again much needs to be discussed, however any accumulation of debt would really be negative Savings. As well, notice that the Tithe comes after the Save which implies that debt management is paramount for the individual. Actually, be debt free, except for certain crucial types, is not an unworthy goal.

So, there you have it. These may apply, as well, to business, perhaps arguably to the smaller types. Yet, the shenanigans that have emerged with the unloosening of moral and other cloths is problematic, in the least, and downright stupid, quite frankly.

Elsewhere, quasi-empiricism is mentioned as being apropos here. Think of this little E_S_T_A_T_E chain as being one basis that might be considered a necessity, of many, for proper economy and thought.

Modified: 05/26/2008

Leverage and truth III

A recent post on 7oops7 was motivated by finding a blog related to finance. That the topic is leverage tells a lot. Two earlier posts on Truth Engineering looked at this method and how it has become a central idea (Leverage and truth, Leverage and truth II).

You see, leverage (other people's money, in short) can produce wild returns. At the same time, it can kill everyone. That gaming has been accepted at the core of finance is something to ponder and to argue about. Hopefully, a more true economy can emerge.

This reliance upon wild risks would not have even come about without advances in mathematics, modeling, and computation. All of these, and related themes, are what this blog is about. The above-mentioned blog struck a chord; for one thing, the blog author is retired and not in the game; for another, the roles played by that author were business focused.

See Remarks below for some info about the Truth Engineering motivation. This will be incorporated, at some point, back into the Mission and method. In the beginning of this blog, there was no 7oops7 or WhoseNoseKnows; these developed as a means to cover the necessary bases.

Remarks:

04/03/2011 -- Tis tranche and trash.

11/22/2010 -- Tranching, under the guise of securitization? Silly games.

11/02/2010 -- Two years later, the message is the same, except some changes have occurred. Of real note is that the jobless rate is high; out-housing really set up for that. Also, we need to re-look at that learned from the 'vons' guys, Ludwig and Friedrich. See Near Zero.

07/23/2009 -- After the bust and the rebound, toxic assets are still a problem due to tranche realities.

12/18/2008 -- Leveraging, in and of itself, is not bad.

10/26/2008 -- Yes, things fell apart for several reasons: fiction, leverage, and more.

05/31/2008 -- Let's suppose that a blogging viewpoint can be based upon advanced educational efforts from 30+ years ago, where there was continuing education over the years in terms of specifics of modeling improvements and of the basis for mathematical advancements.

If we go back 30+ years, the 'gaming' metaphor was not so prominent, except in theory. Also, finance was the game of the few who were on the floor of the Street and at auxiliary sites, though this is not to imply that only a small set was involved.

Crashes were still possible, as history shows. However, things were different.

How different? Here is one example. In the beginning of the 401K times, companies had experts involved with the management of the assets. And, they predicted that the rewards of participation would be nice - not stating, of course, that there was a growing use of risky methods.

So, how was this handled? Well, it was in the mid-1990s when companies started to remove themselves from responsibility of handling these bucks and threw those in the plans to the wolves. So, one cannot argue that everyone ought not to know about their monies; yet, opening up a game that is not a level playing field has an impact just like we have seen evolve (growing inequity in wealth - wolves and sharks win).

Too, leverage was more verboten than not; evidently, it came back into a much greater play than was allowed after the big Crash. Betting with other people's money has always had some moral smell; how did it get to be thought of as a nice scent? By the way, that the higher-educational institutes (who are of superior membership) play the game is by no means any moral support.

Now, supposing the above-mentioned educational foci were economics and related modeling as well as the necessary mathematical frameworks. That experience, including PhD level work in Economics, involved computation (albeit, of that time) and culminated in a Master's. So that, right there, provides a comparative basis that will be explored.

Let's say the work since then of the blogger had an increasing focus on computation as it provides the basis for management decision, for science, and for engineering that operated on all platforms to within the past three years and that covered over 40 languages and related environments. As well, let's say that there was involvement in the whole notion related to artificial means for doing the above which is at the center of issues to explore.

Given the particular demands of the work, the drive over time would be oriented toward empirical prowess, with finance playing a minor role.

So, would not one with such a world view say "what the heck happened?" upon reviewing recent problems (tranching and trenching, for one) and would attempt a quick re-education especially in those realms that have been active since Chicago opened up the door to the over-the-counter madness.

So, what do we see? A scheme has emerged where brilliant moves that are lucky make oodles of money, while, at the same time, brilliant moves that are not so lucky (and this may be a factor of timing, for instance) kill the hopes of literally millions.

Considering the first, well, perhaps we ought to give those people a playpen where they can exalt in their big pockets. Considering the second, well, we cannot build the sustainable world (as we see with problems on every front) that we humans need with such techniques.

So, that brings us to the current situation where we see people making decisions that impact everyone yet they are mostly shots-in-the-dark, it would seem to some views.

That is, economics (and finance) are both dismal sciences, though some have tried to apply physical insights to these two.

But, guess what? Even the exalted realms of physics and engineering have their problems. The basis for these can be understood partly by knowing about quasi-empirical issues.

We'll be looking further at that. Too, we'll bounce around the ideas, hopefully retaining some coherence.

Modified: 04/03/2011

Cyberethics

We're only 10 months into blogging, but it might be a good time to review the posts and to form some cohesive viewpoint.

One of the things to look at would be Cyberethics which was mentioned in Mission and Methods. Too, a re-look at motivations will be in order.

Remarks:

05/08/08

As indicated by the labels, there have been several themes that have developed through the posts. The initial motivation was an attempt to show the potential problems that can arise with advancing computation especially as it is increasingly associated with communications.

That is, it's one thing to know when an algorithm is to be trusted. It's another problem entirely to know what to trust on the web which is not a naive wish; think business-to-business practices that require known parameters to prevent errors whether accidental or fraudulent.

There is no doubt that we're seeing civilizational evolution, however that one which is of the 'cloud' (not necessarily bad, yet rife with issues of undecidability) has leap-frogged forward into an essential role. This is our focus.

Modified: 05/08/2008