24 March 2015

Verrry EEEnteresting!

Do you remember who made that phrase famous? Ain't gonna tell ya.

What I am gonna ask is a simple question. The "I'm entitled to my 10% risk-free payment on my moolah" crowd are starting to make noise again. Fisher, ex-Dallas is in the news.
With all this liquidity in the system once it gets activated into real investment and the velocity of money picks up, then what might happen? The real challenge to my successors and the FOMC (Federal Open Market Committee) is to manage that carefully, and to make sure it doesn't become inflationary fuel. It has that potential.
[Aside: my emphasis, and his admission that neither the Stimulus nor QE worked.]

The question: where does the moolah to pay the interest come from?

Since Fisher is of the 10% crowd, the sooner his cabal can get their money for nuthin' and their chicks for free, the better. What he pleasantly ignores is the simple fact that The Great Recession was caused by the over-supply of idle moolah chasing 10% risk-free income. The Giant Pool of Money is still out there, fattened up with all that added moolah sitting, idle of course, on corporate balance sheets. Trillions of dollars that the CxOs, aka Masters of the World, have no bloody idea how to invest into physical capital. To put it plainly: there's been a stark lack of demand for real investment for more than a decade, nearly two. If QE had worked, it really didn't, the moolah wouldn't be sitting on those balance sheets, but converted to physical capital. The Fed (and the ECB and Japan and ...) is pushing a string. Treasuries still get bought at cratered rates just because there's so much moolah chasing risk-free bonds; the CxOs can only counter with a 0 opportunity cost. And the US Treasury isn't the only bond going at auction for next to no interest. All that moolah chasing risk-free return. Remember your Econ 101 class, and virtually anything written by Friedman, about government debt crowding out private investment and how terribly horrible such a situation is??? Well, those Masters of the World want the Damn Gummint to pay them more than they can generate in their businesses. Just because they've accumulated all that moolah. And you and I and the rest of the 99% have provided them with that moolah. Crowding out? Not so you'd notice from them.

The real interest rate is never determined by monetary policy or gold bugs, just by increases in real productivity in real production. There has been a significant slacking off of such. Consider the "innovations" in consumer goods over the last couple of decades. How many of them had the impact on household life as did the automobile, telephone, washing machine, stove, dishwasher, vacuum cleaner, etc. The last such is likely the microwave oven. When was it invented? Depending on definition, as early as 1933, or as late as 1945. In any case, a long time ago. Over the last two decades? Mostly toys and miniaturization of existing devices. Well, and Watson and the self-parking car. But both of those are engineering exercises, not scientific discovery.

The point being: we're not in 1850 with most of physics and chemistry and biology yet to be discovered. Real return is paid for out of increased productivity. One might argue that playing games on mobile phones (i.e., not using the phone as a phone, in the first place) diminishes human productivity. Without such an increase in output, the vig has to come from delayed/foregone consumption; otherwise known as a Zero Sum Game. In other words, paying the Fat Cats their 10% comes out of the lives of the rest of society. Not a prescription for a long lived, stable society.

20 March 2015

Desperately Seeing xml

As the sub-title of this endeavor makes clear: I've no use for hierarchy. While I've long lost the cite, and many hours trying to find it again..., "there are more hierarchies in software than in the real world". Today offers up another tale of woe.
You can see from all this that linking retraction notices with the associated retracted articles is not easy. And if you want to do interesting analyses such as time to retraction - well, don't even get me started on PubMed dates...
All hierarchical datastores are limited to making one access path easy, and all others difficult or impossible. Or, to quote Talking Heads, "Same as it ever was".

19 March 2015

The Scales of Justice

A couple of decades ago I accepted the reality that my sojourn into the field of freelance photography was, in fact, merely a desert. I wouldn't be the next Ernst Haas. By a somewhat circuitous route, I ended up in the world of RS/6000, AIX, and Progress. The Progress database wasn't (still isn't near as I can tell) particularly relational or even SQL: applications were almost always run through its BASIC-ish 4GL, rather than through its primitive SQL parser. Lots of FOR loops.

I am reminded of this because of this post on simple-talk. A cautionary tale for all those devs out there who dream of Facebook size web apps.

The particular note of reminder was the architecture of Progress: it was client/server in a box. Specifically, C/S in one address space. The engine/parser had one block of memory, and each connection/client got a smallish patch, all under control of the engine. This client patch was attached to the RS-232 wire to a VT-Xxx terminal. Such a design today would be derided, of course. Of course, HTTP these days is being used as RS-232 twixt some web server and some browser over a wire a tad longer, but still just a wire. Not that the young-uns have any idea.
A system that was originally fine-tuned, compact, simple and efficient was inadvertently turned into a 'finely-tuned' system as slow and cumbersome as a tuna in the net, and as lively as tinned tuna. Beyond all the incautious design choices, and the additional mistakes made along the way, I think there's a noticeable moral in this software horror story. These days, scalability is better achieved with a super-optimized and compact single tier web application that is then deployed to some cloud infrastructure. When, and if, it faces high traffic levels, it can then be promptly fine-tuned to cope with the traffic levels it faces.

There's no place like home. Click those ruby slippers together and get the hell back there.

17 March 2015

Leisure Suit Larry to the Rescue

OK, so back in the mists of time there was a series of primitive PC games under the rubric of "Leisure Suit Larry". For a while, Ellison was given the name by those who found his arrogance irritating.

What that has to do with anything? It appears that Oracle (if not Larry directly) is adopting the orthogonality meme for java. Imagine that? A programming language which is built on the relational principle! Imagine that?
"What we want is a box of Lego parts, [which are] modular that we can assemble as needed," [Mark] Reinhold [chief architect for the Java platform group at Oracle] explained.

You can only do that if the bit and pieces are pair-wise orthogonal. Hehe.

The inherent problem with hierarchy: it works well on only one access path through its data, so
"[Classpath presents] a source of performance pain because it's a linear search mechanism," Reinhold said, and by going modular, classpath ultimately could be eliminated.

Beginning to sound familiar? Reminder to the young-uns: at one time MicroSoft was going to turn Windows into OS/400, that is, an operating system run on/by a relational database. It was called WinFS.
For those who may not know, Gates was referencing WinFS, or Windows Future Storage. The idea behind WinFS was to integrate some relational database technologies with the Windows File System. In its early (codename "Cairo") days, WinFS was key to Microsoft's plans to create a true, object-oriented file store.

Sounds like Larry's minions are sort of headed there, too.

New Gold, Part The Second

Well, that didn't take long. Time for the Second Installment. And I still Hate Neil Irwin; perhaps I should sue ESPN and Laettner for trademark infringement? It was just a few days ago that New Gold got its own serialization. Today Neil Irwin offers up some quotes that I couldn't get.

Let's start with:
In India, it is a leading electric utility, Jaiprakash Power Ventures, selling off facilities and negotiating with lenders to avoid a default, having increasing its debts thirtyfold in six years.

Before getting into the New Gold aspect of that, a quick tangent. Gentle reader may recall the observation that even the 1% will require Obamacare if they get their way in excluding a significant fraction of the 99% from healthcare. The issue, of course, is amortizing the fixed cost of healthcare. It was reported yesterday (I forget which newscast I heard it from), that electric utilities here in the USofA are banding together to penalize home solar. The argument is simple: for every house that goes off grid with solar panels, the fixed costs thus lost to price must be born by those that remain on the grid. The utility lobby is shrewd in framing the issue as, "the rich can avoid the grid, leaving higher costs to the poor on the grid". Or, as the old saying used to condemn stupid businessmen: "we lose money on each widget, but make it up on volume". In fact, that's exactly how large corporations do make money; they spread large fixed cost over large output. (This is also why obliterating the middle class is bad for capitalists, but they haven't figured that out yet.) If Rolex sold watches by the tens of millions, they'd cost not much more than a Timex. You can do the thought experiment as an exercise.

OK, back to New Gold. What Irwin, and other high priced pundits, doesn't tell you is what QE was all about. The right wingnuts in particular framed QE as "printing money" into the general economy; dropping dollars from an airplane over every Anytown, USA. "Inflation is coming. Inflation is coming." Of course, that hasn't happened, because QE was structured so it couldn't happen. QE raised the demand for bonds, thus driving up their price and driving down return (interest rate). The Fed (and ECB and Japan and ...) was pushing a string, assuming that by lowering the opportunity cost of physical investment, corporations would turn all that moolah into plant and equipment rather than yet more convoluted fiduciary instruments.

But, none of these "banks" bothered to look at the history of The Great Recession. To wit: it was caused by The Giant Pool of Money ending up in housing (by definition, a non-producing asset class) rather than physical productive investment in the first place; the lack of willingness to turn fiduciary capital into physical capital was the real cause of The Great Recession, so QE by itself didn't matter. Changing the rules to remove the obvious egregious uses helped. So, most of QE went into various fiduciary products. Stock buybacks. Sub-prime used car loans (d'oh!). And, it turns out, all those explosive emerging markets.
In effect, as Fed policy makers sit around a mahogany table in Washington to try to guide the United States economy toward prosperity, their actions are having outsize, often unpredictable impacts across the globe, owing to the dollar's central role in the global financial system. [my emphasis]

The point, of course, is that the impacts are purely predictable. The US buck is New Gold and if there isn't enough to go around, markets get screwed.
By September 2014 there were $9.2 trillion of such dollar loans outside the United States, up 50 percent since 2009, according to the Bank for International Settlements.

The cries of anguish from the likes of Apple and IBM and ... over the devaluation of their winnings in other currencies just break my heart.
Since the Federal Reserve signaled in summer 2013 that it would wind down its "quantitative easing" policy of buying billions of dollars in bonds using newly created money -- that the gusher of dollars flowing into the global financial system would come to an end, in other words -- the dollar is up 25 percent against a basket of commonly used international currencies.

Again, the mistake of assuming that US bucks are all the same. They are, of course, but not really if they remain sequestered in the banking industry. Again, the Fed didn't send out 747s dropping Franklins over the countryside; if they had we'd be closer to real full employment than we are. Businesses only expand to satisfy unmet demand; the notion that they create output just because they can is silly. The US banking system had all those trillions of bucks sitting on the balance sheet. American corporations had no use for them; they also had/have outlandish cash positions, even with the foreign devaluations. Real returns, direct real returns, come from new productive plant and equipment put to good use. Returns from fiduciary instruments aren't inherent, but depend on increased income from the holder. Which is why The Great Recession happened; houses don't produce saleable output and household incomes certainly weren't/aren't rising.

Hyun Song Shin, who heads research at the Bank for International Settlements, argues that a rising dollar has an effect of tightening the supply of money across the global economy.

As they say in Texas, "Boy, howdy!!"

16 March 2015

Urdhva Dhanurasana

As time goes on, one finds an affinity for certain words. I'll skip the naughty ones here.

A couple of articles seen recently bring one such to mind.

First, this piece on simple-talk.
Second, this piece from Artima.

To quote Groucho, "Say the secret woid and divide $100". Today's secret word is: orthogonal.

The point of the RM, although not often stated explicitly, is that data thingees are independent of one another, and therefore can be added and subtracted without side effects. If by side effect one means breaking code not associated with the changed schema. Since the data is internally independent, changed data (structure/schema) can't break other data.

This is the essence of orthogonality. If one designs applications with independence always foremost, one can avoid all manner of LoC and errors. The NoSql folk, as their COBOL/VSAM brethren before them, seek to maximize LoC and thus errors. I swear by the Great Jehovah, most code these days is actually written in the debugger. Knuth would not be proud.

I've no recollection who to cite, but "one fact, one place, one time" is a more familiar statement of the proposition.

About the title. It is the Sanskrit for the Wheel Pose in yoga. Not, to say the least, orthogonal.

15 March 2015

Mutually Assured Destruction

There is no whining in baseball. Well, that's a paraphrase. Situationally, there is not much that financial quants can tell you worth knowing.

Yet, another story.
Look more closely at those gaudy returns, however, and you may see something startling. The truth is that very few professional investors have actually managed to outperform the rising market consistently over those years.

It's not a complete condemnation, though,
The data in the study didn't prove that the mutual fund managers lacked talent or that you couldn't beat the market. But, as Keith Loggie, the senior director of global research and design at S.&P. Dow Jones Indices, said in an interview last week, the evidence certainly didn't bolster the case for investing with active fund managers.

All those thick books on financial engineering and academic papers? There are better ways to exercise your quant muscles.