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.