Modern finance

As things unwind, there has been a lot of analysis appearing. Some of it is right on; some ought to be foundational. Recently, the Economist (Oct 19, 2008 - Greed is gone) mentioned that "Wall Street's finest have been humbled as never before" as they went from master to minion is a matter of a year. Actually, the flip-flop was going on longer; the decline was offset by the Fed meddling in order to keep the game going (Savers sacked).

In the same publication, we find a short history of modern finance, detailing what led to the current mess. CBOE's role in the foreign exchange aspect can be traced to 1972, according to the article; of course, CBOE has a much deeper gaming influence.

Recently, we saw the Naked Economist claim that we're in a twilight of "free-market ideology" and describes some of the beliefs that being shown to be myths. Yes, is there such a thing as a free-market or free anything, for that matter? Well, the whole notion depends on several things.

But, essentially, nothing happens that does not expend energy. We'll need to show that the market is near-zero sum (almost always and everywhere) in response to the common belief being touted by those economists who want gaming as the ontological basis.

Remarks:

05/25/2011 -- Lemons problem, dark pools, ... Oh, so much to look at!

10/11/2009 -- Discussion has gone over to FED-aerated. Note the 10/11/2009 Remarks about the Business Week article on India's progress' inhibitors. 'Near zero' recognizes that some always suffer more than others, especially in win-win situations, as the whole notion of characterization minimizes visceral reactions by diminishing the real in favor of the abstracted (ah, the modern world, you say?).

09/12/2009 -- Sandbox was used without definition. Let's discuss that concept.

03/30/2009 -- The WSJ today looks at the Future of Finance. The idea is that finance is like the cardiovascular system. Okay. So leeches are a good metaphor for the sucking out that we see. Like the AIG guy who was central to the losses that we the taxpayers are paying and who left with $300M. We'll be referring back to this discussion.

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

01/18/2009 - We even need to look at why we need finance.

12/01/2008 -- We need to learn what we might be taught about money by Islamic Finance.

10/30/2008 -- Yes, many people see the misuse of mathematics. But, how could the financial people not see the fiduciary (which seems to get lost in gaming) and public trusts that are associated with their work? How did the notion arise that these guys can just play with people's money, in their giant sandbox, where outcomes are secondary to winning little games and lining ones pockets?

Modified: 05/25/2011

Constructive quants

As we see, many 'quant' views can lead to messes, due to the fairy dust nature of magical means (to boot, the whole dynamics of ponzi/made-off, by necessity).

We'll get technical after some jaw-boning. To date, the evaluation schemes seem to have been mostly measuring of pocket-books. That is, the richest are the best and brightest according to this view. We'll have to address that once more and in a better fashion.

Too, flim-flam of bad theoretics (game and otherwise), plus notions that stochastic applied to fundamentals like calculus adds in a metaphysical aura, and just bad ontology, all contribute to the confusion.

As in a lot of bubbles, the young 'uns were allowed to run around without supervision as most oldies could not handle the necessary details. Well, one lesson we might learn is that those who can are still able to process and understand mathematics after the age of 25. That is, understand with the qualifications put by old John von Neuman himself, namely we just get used to it.

Also, computations applied by quants need to be sensitive to the lessons of Chaitin's views on topsy-turviness in the modern age.

Ah, this will be so much fun!!!

Remarks:

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

05/25/2011 -- Lemons problem, dark pools, ... Oh, so much to look at!

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

11/21/2010 -- Three years ago, it was said: Computational foci raise miraculous need. Still applies.

09/09/09 -- We'll need to look at UUUN, as a framework, for controlling quants.

08/31/2009 -- Go to FEDaerated to see Quant series that will expand to cover topics both theoretical and technical.

05/27/2009 -- Topsy-turvy will be addressed more fully in both an epistemologic and an operational sense.

03/25/2009 -- Rhetoric can be fun, but we have to get into these issues with depth and technicalities.

12/18/2008 -- Well, things really fell apart in the 3rd Quarter of 2008. Of course, the tranche was only one factor. Others include the players and the games. Now, games include using mathematics erroneously, as in getting an aura from the use of derivatives (to be discussed further). We'll have to re-address the map/territory issue.

Modified: 01/14/2015

Endless insanity

One might blame recent actions (of the Fed and Treasury) on the fact that this is an election year whose resolution is quickly approaching. Why the use of insanity?

Well, the real-time experimentation (by the Fed and Treasury) continues based upon a gab-standard. Those who got us in this mess like to use 'financial engineering' as their chief flag to salute. Hah!

Well, we do know better than that. That so much has been spent in bolstering up the infrastructure for the gaming and in putting our taxpayers money in the game could be seen as really troublesome. But, it's only money; yet, the lives of real people are impacted by the decisions of the few.

Has it ever been different? Well, no. But, the problem now is that technology exacerbates the effect; too, the gaming ontology is technologically based and unstable.

It really can only provide fraud power to the new colonialists through more types of fairy dusting.

Where is the science? Ben Stein reminds us that Paulson pushed junk bonds, making oodles doing so, to boot.

Remarks:

07/31/2013 -- Ben cannot unwind or taper down; he has too many Doves.

08/04/2012  -- Over five years, we had a lot of side trips. We'll try to focus more. BTW, Rumsfeld has recently had his say.

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

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

08/27/2009 -- Madoff exemplifies (albeit somewhat indirectly) systemic risk.

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?

12/17/2008 -- Too, many factors lead to things like made-offing and other schemes.

Modified: 07/31/2013

Easy steps

There are a few easy lessons to obtain from the recent mess.

-- get physical with money, remove the gab standard (forget gold, there are many ways to do this)
-- reward the savers (monotonically - even if small)
-- remove the gamers and derivatives (use a sandbox - CBOE for one)
-- have a goal orientation other than gross accumulation
-- wize up to the motivations for pseudo-globalization (currently, just colonialism - for people like Jim M)
-- respect for workers, those who touch matter (rather than exaltation of the financial gamers)
-- realize that we can judge worth (there are many ways to do this intrinsically - of course, physically-based money would be a start) and know bubbles (and other idiocies - see below Remarks on poopy diapers)
-- alter the basis for 'quants' approaches, using quasi-empicially motivated insights
-- learn the lessons recently grasped by Alan (capitalistic endeavors need oversight, derivatives are deadly if left to toxic means, identify and handle bubbles early on, ...)
-- consider other issues, such as what we can learn from Islamic finance
-- ...

This list relates to many other lists (fraud power, culprits).

Remarks:

12/03/2015 -- Still true, albeit the phrasing might be improved. Modern context: Are derivatives evil?

11/05/2010 -- Big Ben is still putting us at risk and trashing the savers. There has been a lot of water under the bridge. Sure enough, Ben was out of bullets early. Now, he's starting to tear into the structure in order to have something to throw at the target.

09/12/2009 -- Sandbox was used without definition. Let's discuss that concept.

01/18/2009 - We even need to look at why we need finance.

01/11/2009 -- Perhaps, 'easy' is not appropriate. That we can learn needs to be established first.

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

12/02/2008 -- The main topics include financial engineering, globalization as colonialism, panaceas such as outsourcing, and much more. See New Yorker article on Ben (Anatomy of a Meltdown). Okay, we cannot keep the baby from pooping and from dealing with messy diapers. But, these are grown people we're dealing with here that keep putting all of our's economic health at stake. They can mature. We CAN identify bubbles. See Minsky.

Modified: 12/03/2015

Culprits all around

This latest post-mania dump is very interesting. The WSJ has a whole section devoted to the subject, including discussions about the bailout. So, let's name a few of the culprits who caused the problem that we, the taxpayers, are going to have to pay to resolve.

- Government, believe it or not. Several initiatives oriented toward extending home-ownership to the less well-to-do are related to the mess. Freddie and Fannie went haywire, to boot, using the goodwill extended by their special status. Even, old Sallie was troublesome (pity the poor students; pox to those who lined their pockets). The main issue here is that the pseudo-capitalists running those quasi-shows really lined their pockets (without an payback being deemed necessary).
- Gamers, namely those who helped build and use the 'gambling' palaces of Wall Street and Chicago. One technique took things that were worse than junk (think, sub-prime) and layered on them some glorious thought related to value. As if the AAA rating comes out of nothing.
- Regulators, not doing their job, as they were given to believe that it was no longer necessary or that they could not make judgments (thanks to Alan and Ben, et al). Oh yes, says Alan, we clean up the poop afterward. Ah, like a baby's diaper?
- The less than well-off who bought the dream of the house that always increases in value. Of course, that such increases lined a few pockets does indicate that some type of appreciation can happen; that 'capital' theory looks elsewhere is the story to tell.
- Those smart cats who thought that mathematics and computing would tie up the world's messiness, especially those from engineering and science who may have gone to help make that whole gaming ontology more unstable.
- CEOs and others who think that the world is their big oyster to eat by divine right, usually to the detriment of the doers.
- Workers who laze on the job and don't work (this added to be fair to all sides).
- Investors who look for the quick buck (albeit, some of the super rich did just that - the near-zero aspect of the game would point to any outsized reward as not moral or ethical, and perhaps, not legal.
- ...

This can be a long list. What will be the next mania? Is is already started?

There is a better way.

Remarks:

09/19/2013 -- To some, evidently, grabbing oodles of money, without due consideration of ramifications to others or to the common weal, is the smartest thing; but, we do know that virtue is smart, to boot. Even the secularists are trying hard to show how their worldview can lead to right living (as in, they do not need God to have a conscience). And, what virtue might be prime important to this discussion? Prudence (see Remarks, this day).

05/09/2011 -- Doers, reconsidered.

10/11/2009 -- Discussion has gone over to FED-aerated. Note the 10/11/2009 Remarks about the Business Week article on India's progress' inhibitors. 'Near zero' recognizes that some always suffer more than others, especially in win-win situations, as the whole notion of characterization minimizes visceral reactions by diminishing the real in favor of the abstracted (ah, the modern world, you say?).

12/17/2008 -- USA Today had their list of culprits.

10/29/2008 -- Things to look at further will be financial engineering, gaming, and leverage, plus how we get fairy dusting involved.

Modified: 09/19/2013