Saturday, June 14, 2008

Money and truth

This topic will be regularly addressed as we go along. As we have already seen, these financial things always move through some progression that includes hedging, speculation, and ponzi-ness (Minsky's model). It's inevitable, even if some arrangement fills a set of pockets with oodles of money. As, those oodles are from the pockets of the hapless.

As an example, let's listen to an expert in these matters talk about evaluating a set of tranches (find the source for this) to some financing manager. So, here is what the expert said: "well, sir, we can tell you the value of bottom level and the top level, but anything in-between would be very difficult."

Yes, that is being honest, but it didn't go far enough. Any managers, and investors, ought to know that the bottom is where those things are that support this house-of-cards (the method probably has a reasonable motivation, yet it's operational aspects can stink - as we've seen recently - if only due to the effect that the method was said to essentially eliminate risk) are. Unfortunately, in many cases, they are junk, yet they could very well be okay if used in their own right.

And, the top-level is some estimate of what just might be attained out of the junk. It's like, everything has some beauty it. But, in a better sense, think of the junk's value as having a range from low to high. The idea is to allow that high aspect to be exploited for marketing which, if it's done correctly, will cover up the junkiness.

But, putting it another way, the bottom is what we can actually count (perhaps not, if the underlying foundation is itself suspect - so, we should say, ought to be countable). The top-level is a goal which, in this case, is illusory (even though, when these things work - as said before - some pockets bulge). And, as we all know, going from now to some goal is not a given (we can look at recent projects for examples- they abound).

Yes, the middle is problematic. With programs, middle-out may be a preferred view to control design and build issues. How would that happen with the tranche?

Well, the types of games, as we see with the tranche and more, result from a lack of reality that can be traced back to money decisions. It is probably unfortunate that 'gold' played this role. There has to be a basis; that ideal of the market (what the wisdom of crowds?) has its own operational issues.

Nature, in which we live and work, is the best source for this basis, not mathematics (which, in this case, would only be the tool and not the truth). Now, how is all this to be done?


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

11/04/2010 -- Big Ben is still putting us at risk and trashing the savers.

02/18/2009 -- We can look at why securities become toxic, almost by necessity.

12/17/2008 -- We'll use made-off in lieu of ponzi, henceforth.

10/26/2008 --

That the gaming is insane goes without mention, except many expect otherwise (old Marx had it somewhat right, fictitious capital). So, not only is there the Minsky issue, we have abuse of mathematics. Very interesting, indeed.

08/01/2008 --

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

Modified: 04/03/2011

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