27 July 2016

Rules!? We Don't Need No Stinkin Rules

These endeavors have been 99.44% about those events and topics which are interesting to those of us who indulge in relational database and quant activities. Unlike many such blatherings, they are not about demonstrating technique which is readily available to read in texts, both dead trees and on the innterTubes. The macro concerns, in a nutshell.

One of those concerns, which pops up Whack-a-Mole style where one might not expect, is The Tragedy of the Commons. As capital continues to overwhelm labor in production, the greater the proportion of production depends on mass consumption, if capital is to earn a return. That problem, starkly put, is why corporations are sitting on trillions of idle dollars, which dollars are auctioned into "risk-free" Treasuries. The result is cratered interest rates. The result is further concentration of income and wealth. The result is slower (or, negative) growth in aggregate demand. As to this last, one need only search the innterTubes to find weeping and wailing by capitalists that there just isn't demand anymore, "and we just don't know why!!". My my.

So, today's news brings us the the story of California and solar. Rather than offer quote after quote, just go read it.

The main point of the article is simple: social/public goods are difficult to provide. Allow unfettered private monopoly, one gets little to no growth and wide-spread hardship. Install either direct government provision or regulated private monopoly, and one has to juggle and balance the need to provide some level of monetary return on the capital infrastructure against tech innovation and consumer protection. This former, inevitably, means supporting inefficiency of production for what might be far longer than the technical worth of said infrastructure. It was this friction which led to the breakup of Ma Bell; the idea/theory was that competition would drive up innovation and down costs. What actually happened is we got effectively private unregulated monopoly. Now, one might argue that Ma Bell would never have implemented cell phones. Yet nearly every other country has public telecom and iPhones, so I doubt that.

Why this is relevant to the quant cabal:
But some ratepayer advocates say that linking solar bill credits to retail rates is the wrong strategy.

"The changes are so significant and unknowable that right now it's impossible for a solar customer to look at that equation and have any sense of what they're likely to save on their bill over time," said Matthew Freedman, a lawyer at the Utility Reform Network, which works on behalf of California residential customers.

Mr. Holtmann said he felt misled.

He installed his panels "with the understanding that the rules were going to be the rules," he said. "And then they changed the rules."
[my emphasis]

If you're in the business of modelling electric use, infrastructure, innovation, and so on, you're just as hobbled as Mr. Holtman. Unless, of course, you're the one who can change the rules to your benefit.

26 July 2016

Dude! What's Your Problem??

The preamble to this endeavor was recently updated, with regard to "standard" memories on Intel sanctioned motherboards. Half a terabyte is well within the budget of even SMB installations. Now, we have 2TB PCIe SSD. Get with it folks: 5NF transactional RDBMS will fit in a 1U chassis. With storage and cycles to spare.

20 July 2016

Thought For The Day - 20 July 2016

If one drop of blood means you're just Black, and Melania's speech is 7% Michelle, does that make Melania Blacker than many Hi Yellas?

15 July 2016

He's Got It!!

... By Jove, he's got it!! Krugman, and very nearly. May be 99.44%. Here's today's column.

Continuing in the vein of events driving data.

But polling suggests that a majority of self-identified Republicans still haven't noticed that surge, and believe that stocks have gone down in the Obama era.
Blind stupidity meets blind greed.

So, here is where he makes the next long stride:
Second, they [stock prices] also reflect the availability of other investment opportunities -- or the lack thereof.

A reading of these endeavors over the last bit, or Gordon's book, will lead to the inevitable answer as to why this is so. Krugman doesn't address the "why" only the "what", but that is progress. We've hit the asymptote of low hanging tech fruit. Much of "tech" over the last couple of decades is implementations of infotainment and such. The holders of all that moolah expect the Damn Gummint to pay them 10% per annum on their hoard. Bah.

But, there is the clear implication for the future of the financial quant: it's not pretty.
But why are long-term interest rates so low? As I argued in my last column, the answer is basically weakness in investment spending, despite low short-term interest rates, which suggests that those rates will have to stay low for a long time.

In other words: Bernanke/Yellen/Obama have engaged in trickle-down economics, aka, pushing a string. Granted, the Right Wingnut Congress left no other option. And, of course, those same Right Wingnuts complain about "asset bubbles", all the while reaping unto themselves the cap gains of said bubble.
Instead, profits come from some kind of market power -- brand position, the advantages of an established network, or good old-fashioned monopoly. And companies making profits from such power can simultaneously have high stock prices and little reason to spend.

Remember a few essays past, about the result of "investing" SSA monies in the private sector? Fascism in flight. The enabling just mentioned is only a hair's width removed. If there's no 21st century steamboat to invest in, sitting on the moolah is rational. The question which then arises: do we accept a Permanent Dark Age of castes in tech stasis? Or do we grow through distribution? After all, if most folks have most of the moolah, there's more folks to buy marginally different widgets.

So, why is the likely unfolding future bad for the financial quant and financial engineering? Reading past data to predict future data only works when the rules of the game are stable and not manipulable. Thus, physics and math and real engineering work all the time in all places. When any of them appears to fail, it's the result of we humans not having fully grokked God's laws, not because the rules have changed. When some players can change the rules as the game goes on, as we've seen with The Great Recession, LIBOR fiddling, and the London Whale past data doesn't mean anything. It's all "once in a lifetime" anomalies. They just keep happening. Better to read the NYT business pages to see who's got his fingers on the scales, and react accordingly.

08 July 2016

Event Driven Data

It's become a standing meme in these endeavors: events drive data, not the other way round. In some realms, notably the physical sciences, the rules of the game are God's and mostly known, so there are fewer events of the asteriod mass extinction type. Had some very future generation of humans been around at the time, one which had orders of magnitude of more computing power now available, detecting and diverting should such a bad boy come cruising by, is likely. In such realms, time-series and quant modeling generally can prove useful predictively. The National Weather Service, with its massive supercomputers, is one example.

When it comes to financial engineering, and other human driven venues, not so much. The catastrophes over the last four or five decades have gone unpredicted just because the models assumed stable context, while the bad actors were behind the curtain pulling levers and pushing buttons that they shouldn't have. They even went so far as to re-wire the controls. Didn't tell anyone, pocketed the moolah, and, on the whole, got away without a scratch.

So, where, if any, do the two venues overlap? One I'd offer up is biotech/pharma. Most of pharma these days is re-patenting compounds and patenting reformulations of mixtures old drugs. Not much to that.

But there is time and money being spent on pushing back the frontier. Oncology gets the prize for greatest effort. This week one of those pushs, Juno, blew up, big time. Adam Feuerstein's Twitter feed has some interesting postings. Since it's a continuing feed, depending on how soon you go explore, you may have to go looking. The thing about really new drug development is that the scientists are never really sure about how a drug works: the MoA or mechanism of action. Thus clinical trials are used to test, empirically, what really happens. If the understanding of the science is spot-on, clear sailing. On the other hand, what looks like a winner in early, small trials more often than not proves no better than saline in larger ones.

The big dipper is killing patients, and that's what happened to Juno as discussed in AF's Twitter feed. Doesn't happen often, but when it does the specter of guilt rises. Was the fatal effect predicted? Was it predictable? Did it result from previously unknown interactions?

Events drive the data, so Juno's (and others pursuing the same type of compound) share price has taken a crash that wasn't predicted by the financial engineers.

My two faves from the feed, so far:
1-
I love the "grade 5 toxicity" euphemism. I'm hearing more and more about CNS AEs for CAR-Ts. A bit scary sounding.
-- Ozgur Ogut/3 May 2015

2-
Essentially, the heavy Flu/Cy may well be driving the bulk of the apparent CAR-T efficacy
-- Vikram/29 March 2016

In sum, then: even in science, which obey's God's rules, predicting the future based on past data is fraught with danger.

06 July 2016

Mea Culpa

Those that took, and remember, Freshman English Composition also likely remember the First Rule: Never, ever, begin an essay with "I".

I was wrong. And, it turns out, that's a Good Thing, by some small measure. Not being of Europe, I follow USofA news sources, and until the Brexit mess, coverage of the EU dealt with it as a monetary union, and even implied that it was such only. Some may recall musing in these endeavors that such a single-sided union, with Germans calling the tune for the other 27, was destined to fail. Just as the USofA ships moolah from rich corners to poor corners through fiscal policy, a German controlled solely monetary union benefits Germany and subjugates 27.

Or so I thought. Turns out, with some on-the-ground reporting from USofA news, that the EU does ship moolah from rich corners to poor corners.

Quoting as much of the article in order to bolster my earlier musing, would mean putting nearly all of it here. Just go read it. The unambiguous point: the ingrate poor corners have cut off their noses to spite their faces. Stupid redneck Brits are just as easily gulled as the USofA variety.
But many of the poorer places in Britain that receive the most aid from Europe also voted decisively to leave. Promises were made by the leaders of the so-called Leave campaign that exiting the European Union would lead to a bonanza of money no longer being sent to Brussels, the seat of the European government. After the vote, they almost immediately retreated from those promises, leaving the future of aid programs funded by Europe in peril.

And, just as USofA rednecks believe, Muslims were the problem.

At the end of the day, we're an island. We can take only so much population.
Of course, all nations are islands. Some are hemmed in by water, and some by surveyors' chains. The USofA Right Wingnuts still view this land as virgin territory to be taken from heathen red people. Most of what isn't populated can't ever be. And a lot of what is shouldn't be. The largest share of USofA electricity goes to air conditioning. None of that, and no Atlanta or all of Texas. Most of the southwest is desert. With golf courses.

Social Insecurity

Every now and again, there's a report that Social Security is dying, "dying I say; we must stop squandering moolah on unproductive oldsters!!!" Well, the Trumpian versions aren't quite as authentic, of course. Trumpian versions are various sorts of lies.

Then again, some business reporter does the homework, and debunks the lies. Most often, such reporting occurs obscurely. The main takeaway from the piece is one that these endeavors have spoken to ofttimes: money into Social Security is "invested" in Damn Gummint fiduciary instruments. It isn't invested in private physical investment (or public infrastucture investment, either). This "investing" merely moves moolah from one of Uncle Sugar's pockets to another, with an added bit.

While that arrangement seems silly, as I've written before, the alternatives are worse. The piece has a trenchant rundown. I like it.
If the Social Security trust fund invested in something other than U.S. bonds, what would it invest in and where would the money go? A review of the list of possible investments shows serious challenges with any one of them:
If the Social Security trust fund invested in U.S. corporate stocks or bonds, or bonds of state and local governments, the money would get spent, as noted above. And if the fund owned too large a slice of U.S. corporations' stocks and bonds, or state and local bonds, you might call it socialism or communism.

Bank CDs? Current CD interest rates are lower than the rates the fund currently earns.

The trust fund could buy commercial or residential real estate, but that would put it in the business of selecting and managing these real estate investments -- once again, raising concerns about socialism or communism.

There's always international stocks and bonds, but you can imagine the outcry if the trust fund bought European or Chinese stocks or bonds?

I'd call it fascism, but that's because the Damn Gummint would be required, as an investor, to support all manner of questionable activity. What if Social Security had been a major investor in Enron or CountryWide? Think about that.