30 August 2016

From Russia, With Love

While the right wing continues to bray about in-person voter fraud, which has never been documented above single digits anywhere, we get news that Russia (most likely) has been hacking away. Who would fund such an effort? Why, don't things go better with Koch? Of course they do. Security researchers have been warning us that the real threat of voter fraud lies in these automated systems, whose code is secret and security never independently vetted.

This is not new.
In January and February 2004, a whistleblower named Stephen Heller brought to light memos from Jones Day, Diebold's attorneys, informing Diebold that they were in breach of California law by continuing to use illegal and uncertified software in California voting machines.

This is Schneier's take
But while computer security experts like me have sounded the alarm for many years, states have largely ignored the threat, and the machine manufacturers have thrown up enough obfuscating babble that election officials are largely mollified.

If ever there were a computer/data/quant problem worth spending energy on, this is it.

As I said, things do go better with Koch.

29 August 2016

Thought For the Day - 29 August 2016

Yet more yakking from the Mainstream Pundit Class this morning that Yellen is about to "raise" interest rates. To be clear, the Fed has no absolute (fiat) control over any interest rate. Not even the Fed Funds rate, which is the one it's assumed to control directly. And that's the overnight inter-bank transfer rate. About as short term as one can get. It's "changed" by the Fed "suggestion" of some new higher/lower rate. Given the structure, banks comply.

Now, if the long term rate on corporate and Treasuries is determined by the internal rate of return on physical capital in the private sector, and it is albeit at some arm's length, then should the Fed/Yellen decide to push up Fed funds, one gets into a rate inversion. One caused by fiat, as it happens, not economic reality. The theory (almost entirely right wing, Greenspanian) is that raising Fed funds will filter out to Treasuries and corporate bonds. But how? The fact is, long term rates are in the crapper just because capitalists have run out of ideas. They're sitting on TRILLIONS of idle $$$, which they can't find useful ways to invest in their businesses. All these TRILLIONS have been chasing Treasuries for years, pushing down yields. The CxO class would rather get 10% (they hope, but so much moolah chasing Treasuries gets them 1/10th that) from Uncle Sugar fur shur, than build out new plant and equipment. Raising Fed funds rate isn't going to cause Gyro Gearloose light bulbs to start flashing over the heads of said CxO class members. They'll still be just as clueless as they are today. They still won't have any more idea how to generate 10% internal rate of return than they do today. All we'll get is an acceleration in wealth transfer from the many to the few.

So they demand that Uncle Sugar pay them 10% or so on Treasuries so that the CxO and hedge fund classes don't have to work for a living. Why should Uncle Sugar, i.e. the little people who pay taxes, agree to such a transfer of wealth from the 99% to the 1%? Where's the free market in all that?

Being a financial engineer in the next few years is an occupation which will keep the gastroenterolgists very, very busy. "Ulcers hab been berry, berry goo to me!!"

26 August 2016

Game Over

Courtesy of AnandTech:
This means a system with 256GB of DRAM and a 768GB Optane drive can essentially act like a system with '1TB' of DRAM space to fill with a database. The abstraction layer in the software/hypervisor is aimed at brokering the actual interface between DRAM and Optane, but it should be transparent to software. This would enable some database applications to move from 'partial DRAM and SSD scratch space' into a full 'DRAM' environment, making it easier for programming. Of course, the performance compared to an all-DRAM database is lower, but the point of this is to move databases out of the SSD/HDD environment by making the DRAM space larger.

So, what are we waiting for kiddies? 5NF is like falling off a log from now on. You can ignore the bitching in the comments, of course.

Robber Barons

I'm not a twit, but some who are post read access to their feeds. Adam Feuerstein, enfant terrible of Big Pharma and Fake Pharma (those many nano- and micro-cap companies that only take money and deliver nothing), does so.

He's been talking about Mylan/EpiPen and some related topics in the last couple of days. It's a hoot.

Have a gander.

24 August 2016

Out of the Mouths of Bastards

Regular reader may recall earlier musings where I put words in the mouths of Pharma CEOs with regard to monopoly pricing granted by FDA in the form exclusivity for some drugs for some period of time: "here's a life saving drug; so give me all your future life's earnings". Hyperbole, a bit.

Well, here comes Shkreli, again, weighing in on the EpiPen situation:
"Mylan sort of found themselves in my shoes in the sense that they bought a company, that company had a lot of old medicines, a lot of those old medicines had old prices that weren't reflective of modern prices," Shkreli said. "Three hundred dollars, they've been raising it slowly about 15 percent every six months which is relatively slowly -- not as fast as what I did. My guess is Mylan probably thinks that they could sell this thing for $1,000 a syringe. And with, now with these news reports, they probably won't."

Mylan paid a stupid price for the rights to EpiPen, and the rest of us get to pay a stupid price. They didn't invent the device or the drug that's dispensed, they just bought in both. And, by the way, the CxO crowd at Mylan have done rather well.
Proxy filings show that from 2007 to 2015, Mylan CEO Heather Bresch's total compensation went from $2,453,456 to $18,931,068, a 671 percent increase. During the same period, the company raised EpiPen prices, with the average wholesale price going from $56.64 to $317.82, a 461 percent increase, according to data provided by Connecture.

Vote for The Donald. He'll fix the problem, since it's the fault of all those Mexican rapists Obama has let in.

23 August 2016

I Have a Warrant For Your Arrest

A, allegedly large, subset of mainstream pundits muse that Joe Sixpack hasn't been active in the stock market since The Great Recession. Among the reasons given is that Joe figures the game is rigged against him, so why bother? To some extent Joe's right. One of the ways that rigging happens (mostly in small cap companies, to be fair to Big Capital) is how secondary offerings are structured. Among other things, they typically price from a bit to a lot below the current share price, and there's always the suspicion that the buyers knew enough ahead of time to short the stock and use the secondary shares to cover. Pure profit for a couple of days holding. Tough to prove, of course, but if it looks like a flock of ducks, it likely is a flock of ducks.

Another way is through attaching warrants to the secondary. Warrants, for those not in the know, are options to buy shares at a specified price for some term in the future. Often, but not always, the warrants are immediately effective. The trick to warrants: the specified price isn't carved in stone. The company can amend the deal any time it sees fit.

Here's an excellent example.

Original price: $2.25 to $6.00 per share
Today's price: $.35 and replacements at $.41

Such a deal. Of course, the share price of the company has been down below $.50 for some time.

21 August 2016

The Truth, The Whole Truth

Once again, into the breach. R is a fantastic stat command language, i.e. SAS/SPSS/etc. on the cheap. And, as mentioned many times here, a lot of R-bloggers aggregation consists of armchair London Whales seeking riches from quantitative investing. And, again, events drive data and not the other way around. But who am I to cavil?

How about a mainstream pundit?
As high returns on capital are likely to be present in every high-quality business, the quantitative system will likely conclude that every business that earns excess returns on capital is a high-quality business. This argument is not very different from saying that because I play using Wilson racquets, I am Roger Federer!

Or this assessment:
It is widely believed that the primary reason quant funds stumbled badly beginning in mid-2007 was correlation between managers, compounded by leverage. Common metrics of value and momentum, the argument goes, led quants to hold similar stocks. Then, when stocks began to sell off, many quant managers found themselves racing for the exits at the same time. Leverage employed by some players only compounded the problem.

AKA, lemmings galore. They all look at the same numbers, generate the same output, buy the same assets, and attempt to exit with their winnings at the same time. Not to ignore "Viagra at Home" messing with the quants' heads. 2008. Events drive the data.

HFT, on the other hand, is sorta kinda quant investing. Really, just lots of capital trying to be the first front runner, but it is sorta kinda computer based trading. Right.