Euro Mercantilism

Another phrase to call my own (I think): Euro Mercantilism. What the IMF and ECB, et al, are doing to Greece (and will next do to Portugal/Spain/Italy) is WWIII.

Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.
["Pretty Boy Floyd", Woody Guthrie]

Krugman's requiem should be read.

To understand why I say this, you need to realize that most -- not all, but most -- of what you've heard about Greek profligacy and irresponsibility is false.
...
This is, and presumably was intended to be, an offer Alexis Tsipras, the Greek prime minister, can't accept, because it would destroy his political reason for being. The purpose must therefore be to drive him from office, which will probably happen if Greek voters fear confrontation with the troika enough to vote yes next week.

The purpose of war, of course, is to force out governance of a people and replace it with the victor's. Which is what Germany has set out to do. Portugal is likely next, but in due time Italy or Spain will be attacked. May be then France and the rest of the rich North will understand the gambit. Or may be not.

Also today, a bit of data regarding the power of having one's own currency:

Greece regularly devalued its old drachma, taking it to over 300 per dollar before it was replaced by the euro in 2002, from 30 to the dollar in the 1970s.

It's just such "shocks" that the industrial North, again mostly Germans and French, saw as avoidable with the Euro. Heads they win, tails the rest lose. What if Florida, New Mexico, and Arizona had been forced to go it alone in 2009? Or the banksters? Of course not. Follow the corp quarterlies, and the whining about "currency problem" is endless.

A cross-border currency without cross-border fiscalism could never work. Not even among "near" equals. Over time, the one with the slight edge will push ever more it's advantage. American Right Wingnuts, the Leona Crew, have been at it since Alzheimer Ronnie. They're playing the Long Con, and given politics is very short-sighted, that is their advantage.

Horses and Barn Doors

Bolting the barn door after the horses have fled is a frequent American silliness. I found the latest when I went to find out about renewing my driving license. Turns out, there's now "verified" license for which one needs a boatload of documentation to get. What's the point, I asked curiously?

Well, beginning in 2017 an American won't be able to board a *domestic* flight without such an ID or valid passport. "You vill schow me you paypahs!!!!" Now, if the threat were, mostly, foreigners, then proving one's citizenship status might make some sense. Of course, the threat has always been, mostly, home grown, either Right Wingnuts (save for the Vietnam resistance era) or various religious citizen nutballs. Which we've just witnessed.

Recent data demonstrate, yet again. Politicians and corporations and ... continue to spout "data driven decision making" and such, but always revert to type: blind zealotry.

Bad Bling

Just made my not-frequently-as-I-should visit to Nick Carr's blog to find his current post of some interest. What's interesting, to me, is that this notion of segueing from the productive to the unproductive (in the digital era, of course) was first noted with GUI applications, word processing in particular. Studies (no cites off the top of my head) over the last three decades, from memory, have found ever more elaborate word processing software haven't led to some kind of productivity increase. Why spend neuron activity trying to solve hard problems and conceive appropriate text for the solutions when you can worry about which font and background color to use? Hmm?

And the reason is clear: attention is easily distracted by flashing bling. Has always been true; the digital world only makes the condition more stark. Just as in the original Dark Ages, the coming Dark Age will find intellect hidden in monasteries.

Inequality

In a piece in the Sports section, of all places, we get this:

In a 2005 academic paper on the N.F.L. draft, the economists Cade Massey and Richard Thaler concluded that lower picks were more economically valuable than higher ones, partly because of the salary difference. "In all my years of studying market efficiency," Thaler, a University of Chicago professor, wrote in his recent memoir, "Misbehaving," "this is the most blatant violation I have ever seen."

Which mostly serves to demonstrate that "analytics", especially in the sports world, is just simplistic descriptives. No GLMs or Random Forests or even simple regression. And these sports metrics guys get paid about the same as The London Whale. At least their musings, mostly, only affect gamblers.

What Roberts Did [update]

On further reflection, and realizing that leopards don't change their spots, I'm much more inclined to view Roberts' siding with the 5 as a major cynical move. Let me explain.

Roberts is just as vile as any one of the Three Stooges, but a tad slier. He knows that in order to implement the Right Wings' "only the little people pay taxes" strategy effectively, the implementers, i.e. The Supremes, must not be seen to do so obviously. This case could, and should, have been tossed on lack of standing grounds, since the complainant wasn't, and isn't, affected by the ACA. But that would have dragged things out a bit longer. Whether the Right Wing could have found a redneck with standing, is an open issue.

Once it was clear that 5 would deny, it costs him nothing to be the 6th. He gets to play grown-up amongst the juveniles. His original ruling is a bit murkier, given the vote. Nonetheless, Roberts hasn't morphed into a compassionate conservative. Reporting leading up to the decision made clear that work-arounds had already been developed to the exchange problem, anyway. Even if Roberts could have been the 5th against, it wouldn't have done the job of the Right Wing, killing ACA.

Linda Greenhouse is the NYT court reporter, and her take is worth a read. She doesn't see the cynicism as I do. One can't have everything.

But what would be truly indefensible, I believe the chief justice and Justice Kennedy came to understand, was the Supreme Court itself, if it bought a cynically manufactured and meritless argument and thus came to be perceived as a partisan tool.

Next time, subtlety.
[update]
I was off-line today until I submitted this in its various places. So the news on marriage just found me. All I can say, re:Roberts, is QED.

The Tyranny of Average Cost, Part The Second

Surprise!! Roberts didn't join with the other wingnuts. I've read through the ruling, and there are genuflections to The Tyranny, even if not acknowledged.

The combination of these three reforms--insurance market regulations, a coverage mandate, and tax credits--enabled Massachusetts to drastically reduce its uninsured rate.

The quote is from the preamble, and sets out the crux of the matter: cover everyone, and charge equally. Note that this is in contravention to the scam being played by some auto insurance companies these days, where they spy on your driving and charge differently. The notion of insurance is shared risk, and when contravened, is little other than pre-paid consumption, not insurance. The companies call it BlahBlah Rating, but is nothing more than market segmentation to accrue consumers' surplus. Not what Adam Smith (the real one) had in mind.

The combination of no tax credits and an ineffective coverage requirement could well push a State's individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner.

The Tyranny of Average Cost

When I concocted the phrase 'tyranny of average cost', I thought it was a new description. I've spent the last bit of time searching the innterTubes for that phrase, and nothing comes up. I suppose I should copyright it.

More to the point, there are a couple of pieces on Seeking Alpha, dealing with Apple. More, still, to the point, is that the argument is really about the problem of unit volume, price, and average cost. Seeking Alpha tends to have not the brightest bulbs in the candelabra. With tech and healthcare moving toward evermore capex, variable cost drops as a percent of total, and thus the vendor needs evermore volume to cover cost. Cheap Chinese hands don't mean much when the amount of labor in the widget is minuscule. As mentioned before: if only the X% can afford the Z widget, in short order, the X% won't be able to either because price rises on lowering volume. There's a reason a Chevy costs less than a Mercedes. There's also a reason so much headway has been made in medicine since the 1950s: (largely) universal employer based health coverage provided the funding, which funding didn't exist before then. The Right Wingnuts won't admit this, of course; they assert that only They deserve quality healthcare. Without widespread usage, even the X% couldn't float the boat.

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Dialing For Leprechauns

More than once in these musings, there's been talk of where The Giant Pool of Money (yet growing) goes to find above market risk-free returns. Subprime auto loans is one avenue mentioned here. Regular auto loans, now, too. But that latter is as much an effect of a whithering middle class as anything else. Most folks can no longer afford the monthly for a standard car at the (once) standard 3 year note, which is what I did with my Capri. That was some years ago, of course.

By comparison, 36-month loans were the norm in the 1970s and '80s, while more recently, five-year loans were common.

When will this blow up, too? Soon, in all likelihood. The thing about cars is that, with only a handful of exceptions and none in the near term, their value only depreciates. As the stories point out, you're underwater on the note from beginning to end with these Methuselah loans. Once again, The Giant Pool of sharks goes looking for chum, and finds it.

Here's the link to the FRED graph (click to see it all, if needed).

The Hypocritic Oath

Back when the Euro idea was floated some, not enough, including humble self asserted that it was somewhere between a certain failure and just a cynical attempt by Germany (mostly) to take Europe back to the days of Mercantilism. You can go to the Wiki for more detail, but the essence of Mercantilism is that developed countries extract resources from poor countries and export over-priced goods to these poor countries. Sound familiar?

Why were we so sure the Euro would fail (on the assumption that Mercantilism doesn't equate to success)? For the simple reason that a monetary union divorced from a fiscal union can't work for all. It can, viz. Mercantilism, work for the rich countries, but at the expense of the poor countries. The Euro gave the Germans, and the French a bit less, the ability to export into the southern poor countries and get paid in a German controlled currency. Get it? If you keep track of the quarterlies here in the US, the weeping and wailing about all those other countries to which American multi-nationals export fiddling their currencies, is a major topic. Avoidance of such reciprocal power is what the Euro gave the Northerners. And they won't stand for the Greeks crying foul. That the poor southern countries bought the bill of goods sold by the Northerners and their own stupid politicians doesn't change the calculus.

Italy, or Spain (toss a Euro), is next in Germany's cross-hairs.

Now today's reporting gives us this:

In Germany especially, the fear is that providing new loans to Greece without extracting more spending cuts represents a fateful step toward a so-called transfer union, with wealthier nations providing handouts to Greece and other weaker countries. "If a small country can blackmail the other members into a transfer union without conditions and controls, the euro cannot survive," said Adam Lerrick, a sovereign debt expert at the American Enterprise Institute, a research organization based in Washington.

Too bad the writer, or editor, didn't tell the readers that the AEI is about as right wingnut as it gets. The AEI, as Germany, stands for economic exploitation of the weak. The hypocrisy of the AEI, and American right wingnuts generally, is that they come from the southern dependent states of America. Were the US only a monetary sovereign, like the Euro, all those Red states sucking at the teat of DC would get nothing. The developed North would be grinding the poor and stupid South under its bootheel. As should have happened after the Civil War. The losers have fiddled the electoral system to take control of the money spigot in Washington, sending moolah by the freightcar load to themselves. All while keeping most of their citizens ill fed, ill educated, and ill doctored.

And propagandizing poor whites that their problems stem not from the 1% taking advantage, but from equally poor darker folks. What happened in South Carolina isn't an outlier, but the purpose.

Time to Make a New R

Time to make a new R. Binaries work if you just want to run R from the command line or RStudio, but for geeks like me, a source build is needed to enable PL/R support. I love the smell of burning cpu in a compile. Smells like victory.

Santayana, Deja Vu

Goldman Sachs is at it again. Having bled the housing market, and the rest of the economy, to a near death experience and itself out of lucrative business decides to "innovate" yet again.

"Everything Goldman has done in the last 30 to 40 years has all been focused on the commercial side, or things that abut it very closely," said Chris Kotowski, a bank analyst with Oppenheimer & Company. "I refuse to believe that hiring a couple of programmers and offering to make $15,000 loans online is a highly value-added banking strategy."
[my emphasis]

And, it gets better:

The initial financing for the loans would come from certificates of deposit, which Goldman has been amassing in recent years. As the business grows, the bank may securitize the loans -- bundle them and sell them to investors -- to reduce some of the risk that it holds on its own books.

Is that a tornado klaxon I hear?

No Trump is The Highest Suit

There is a God. Donald Trump is running for president!!! Finally, someone willing to say it like it is, to quote Leona, "We don't pay taxes. Only the little people pay taxes." If only the 1% had yet more of GDP, the 99% will be so much better off. May the banter begin.

White Lies

Matthew Herper is an interesting pundit. He writes for "Forbes", but doesn't routinely pander to corporations. Here's the first sentence from a new piece:

Seven times between August 11, 2008, and June 27, 2013, the Food and Drug Administration declined to approve a new medicine, in part, because patients were more likely to die when taking the drug than in a control group. Yet only one of those companies told investors -- and the public -- about that concern.

Mind, he didn't do much digging here. He's just reporting on a study. But, still, he could have ignored it. FDA is something of a tar baby; drug companies routinely complain that the agency impedes them from getting wonder drugs on the market, while PIRGs and doctors and patient advocates oft times complain that FDA bends over routinely. The Namenda fiasco is archetypal.

One might wonder which whiz-kid figured out that by simply changing the dosage, the company could increase profit at virtually no expense? The truth about quant.

Support Your Local Cop

For those with an interest, especially a betting one, in the NBA Finals, you should send Joey Crawford a really big fruit basket. The previous three games of the Cleveland Criminals betting the crap out of the Golden State Wimps, notably Soft Steph, came to a screeching halt. Basketball is, by definition, a non-contact sport.

Straight from the NBA site:

Hand Checking: A defender may not place and keep his hand on an opponent unless he is in the area near the basket with his back to the basket. A defender may momentarily touch an opponent with his hand anywhere on the court as long as it does not affect the opponent’s movement (speed, quickness, balance, rhythm).

Delly played bump and run about as well as Revis, BJ (Before Joey). But, he's way too small for the NFL.

Cognitive Dissonance

My colleagues in the psych- disciplines invented the term, and it appears in reality all too often. Case in point: this story on MicroSoft making touch screens in the USofA. I'll suppose that it was crafted as a feel good story.

But... there's that graph. Those on both the Left and the Right yap about No Child Left Behind and STEM. The fact is, US business runs as far away from educated workers as fast and as far as it can get. Welcome to the Robo Cop Era.

Delta Dawn

Over the past few weeks, there've been a few pissing contests, some of which experienced my participation, over the benefits and necessities of large n studies. In one case, two compounds with similar indications had n of 12 and 1,500, and the argument was over whether the 1,500 sized trial would, by size alone, produce more believeable, i.e. stat sig, results.

Naturally, I piped up with the standard, within the quant community, observation that the larger the delta between control and active, the fewer observations (n) one needs to reach stat sig. With big differences, small counts suffice.

Well, boy howdy. Today Sage releases data on its postpartum depression drug, SAGE-547. The measure used went from 26.5 (before) to 1.8 (after). The p = .001 for a paired t-test. There were 4 women in the trial. 4.

Matthew Herper has a long-ish write up, with usual caveats about the study, drug and so forth. And no arguments from me. Big delta, little trial.

On the other hand, crafty bio-pharma will fund trials with thousands of patients to generate stat sig on teeny, tiny deltas. All in hope of getting FDA to approve. When Pharma weeps that it cost $$$ to get a drug approved, remember why: large studies to demonstrate stat sig on minuscule difference eat a lot of moolah. Such a waste. With wily sales reps, these drugs might make some money. Naturally, Sage is in Cambridge (not the one in England) and run by a Harvard guy.

Potable Software

If you watch "Jeopardy!", recall that in the middle of the first game, Trebek chats with each contestant, with the current champion generally getting the most leeway. A couple of times, although many years ago, I took the test (the first when Merv had the first casino in Atlantic City used for the tryouts, a converted hotel) and passed. Never got the call. I called my sister, who lives in the San Diego area, if she could find out what the deal was. What she found was that the producers mostly took walk-ins! Oh well.

Anyway, I occasionally consider what my patter would be during that intermission. Herewith:

I'm a writer, with two projects, one on macro-economics and one on databases and quantitative analysis. The macro folks tend think about what's best for all, while the quant types focus on what's best for just their employer. These concerns sometimes converge like this. Suppose you're an almond farmer in the Central Valley today. In order to beat the other farmers, you drill a thousand foot well and have plenty of water, and get a bumper crop of almonds (they're especially thirsty bits). You get rich, while those other farmers go poor. But what happens if all the almond farmers in the Central Valley drill thousand foot wells? If the strategy works, for the season, all the farmers have bumper crops, which explodes the supply and crashes the price. They'll all be lucky to have enough to pay for the wells. Nobody gets rich. Oh, and there's no more water left in the aquifer for anybody.

Fishermen face a similar problem. Always have.

A fanciful tale, some would say. Just another example of what Your Good Mother taught you: "what would the world be like if everybody behaved like you?". Gentle reader, you've read it here many times.

Turns out, not so fanciful.

Like it or not, the 19th century is long gone; those days of infinite supply of whatever resource made money. Hell, the Dust Bowl wasn't all that long ago.

"You drill a well on your property, you draw it out, even if it means you draw from under your neighbor's property," [Jay Famiglietti, senior water scientist at the NASA Jet Propulsion Laboratory] says. "You're drawing water from every direction."
Underground water supply isn't fenced or restricted; it is moisture held in the soil, rocks and clay, and drawn through wells like soda through a straw.

Lying Figures

It's long been a premise of these endeavors that financial quants really don't do meaningful quant. Leave that to the real scientists. Financial quants dig for cracks in the regulatory environment to legally cheat the system. Sometimes, like Li, they dress up their subterfuge in a pretty pink dress, but the aim is the same: cheat one's way to wealth. It's easy to get rich if one avoids the rules. Some on the right wing bray about free markets and Adam Smith (presumably, the real one), but a level competitive landscape means that income and wealth distributions are flat, since no one has power to control markets.

So, it is with a heavy heart that I take this missive to refer gentle reader to the latest reportage of chicanery.

An analysis of results from 500 major companies by The Associated Press, based on data provided by S&P Capital IQ, a research firm, found that the gap between the "adjusted" profits that analysts cite and bottom-line earnings figures that companies are legally obliged to report, or net income, has widened dramatically over the past five years.

As has been mentioned before, if one-time charges keep showing up in each quarterly, might it be that corporation management is intent on siphoning off moolah to places it ought not be going?

Boston Scientific says the numbers allow investors to see the company "through the eyes of management" because they are the same ones its executives use in making decisions.

I wonder? Does that mean each shareholder should get the same options gifts that CxOs get? I mean, if shareholders are supposed to look at some numbers in the same way as management, shouldn't they get the same numbers in their pay envelopes? I guess not. Sheep are for shearing, not for marrying one's daughter.

Note: this bit of sleight of hand is different from the lack of new organic growth which is driving down interest rates and thus driving up asset prices. If The Masters of The World continue to refuse to make physical investment, i.e. expand real production, they earn no real return. In other words, they're creating the world of 0% interest rate. Opportunity cost is always a race to the bottom; alternatives need only be a whisker's width higher, and will keep that difference as the lowest return collapses. There's simply no reason to pay more. "You don't want my 1%? Fine, stuff your moolah in your mattress! Or find a more lucrative use of your moolah! What? You can't think of one??? Again, take it or leave it!!!"

Lemmings By The Dozen

All of the various topics of these endeavors flow from a single theme: what actions lead to the greatest good over the long term. Such a theme irritates the micro and quant crowd, since both view the world narrowly to their particular organization over, at most, a calendar quarter. It's a dog eat dog world, right now!! God damn you liberals!!!

Oh well.

One of my fave topics is that the advert driven innterTubes is not sustainable. We saw how it has killed off paper-based journalism. The twits are eagerly killing off any form of expression longer than 140 characters; which no amount of ritalin will fix. Now comes a person of importance getting a national soapbox to say so. Me First!!! Oh well.

Internet ads are basically worthless unless they are hyper-targeted based on tracking and extensive profiling of users.

Remember Target??!!?? Highly targeted, fur shur.

Do most lemmings know they're being spied on? I guess not. Or they don't care. The world of Robo Cop creeps ever nearer. Except, there won't be one to execute the venal CxOs.

Mr. Zuckerberg has reportedly spent more than $30 million to buy the homes around his in Palo Alto, Calif., and more than $100 million for a secluded parcel of land in Hawaii. He knows privacy is worth paying for. So he should let us pay a few dollars to protect ours.

There's an old saying, from whence I know not (nor does the innterTubes): We are too soon old, and too late smart.

Gentle Ben

These endeavors began in March, 2009; one in tribute to Dr. Codd and the other to Dr. Keynes. Both had figured out how to understand important vectors of human endeavor (both of which have been central to my professional life), and both have been ignored and even denigrated for voicing their wisdom. What Santayana said, in it's many variations.

I wrote thus, on 22 March 2009, my first post:

Failure is not success. In the context of a Federal government stimulus program, success means there are more wage earners earning more than they did before the stimulus. Success is *not* simply a rise in GDP/GNP; we had that during the Bush years, and we find ourselves in a bit of a mess, since the most of that growth went to a small fraction of the population. It can be argued, and I certainly would, that the Bush approach to economics is a cause of the current mess, although the approach was not original with him; he didn't have one original thought.

Ben Bernanke has left his hidey hole, and, more or less, fesses up that I was right. He also asserts that it doesn't matter. He asserts that fiscal policy should be used. He elides the salient fact: Obambi was forced to put the burden on the Fed since the right wingnuts wouldn't allow significant fiscal policy to deal with the problem. That's the last thing they want. A full blown terminal depression is so 19th century.

From the article, not a Ben quote to be clear:

The stock market has soared, and investors have prospered, even as wage growth has stagnated. Kevin Warsh, a former Fed governor, has memorably described the Fed's current role as a "reverse Robin Hood", rewarding the rich at the expense of the poor.

As to unemployment: yes, the calculated number is very much lower. But... the labor force participation rate (the denominator used to make the percent) is down nearly 5 percentage points since 2000. And much of the jobs (here) are hamburger flippers and banksters. Not that we need more of either.

As a Keynesian, Ben cannot avoid the fact of demand driven growth. There isn't, and never has been, supply driven growth. Just look at the petro sector.