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.

Flip Your Lid

So, just a question.

If the Apple Watch proves that a teeny, tiny display is sufficient to a smartphone, does this mean that we'll see a resurgence in flip phones? You know, the kind that'll fit in a shirt pocket?

Lots of Bars

I agree, in very large measure, with Janert: the biggest bang for the quant buck is to focus on the obvious. I don't recall him being quite that blunt, but you get the point.

ASCO is this weekend, and Feuerstein tweets a link to this post. I'll not show any of it, as I really want you to see the graph he shows. I will mention that he uses my favorite word, thanks Groucho, in describing pharma investing. And, one might add, Great Recession investing: "lemming".

Not A Dry Eye in Sight

In the mid 2000's, while at CSC, there came an announcement that the internal data centers (aka, "cloud" before that meme was invented) would be consolidated in Australia. I was aghast. For those who don't follow the Science Channel and such like, the island/continent of Australia is by far and away the most arid populated place on the planet. Moving anything there is silly. Not only that, but Australia was then in the midst of an historic drought, making a dry land virtually desert.

Sound like California? Rather a bit. This piece today consolidates much of the history and response to drought in both places. Or, as I like to call it, "19th century stupidity, meet 21st century reality". Or, as it's been written here more than once, "what would the world be like if everybody behaved like you?" The USofA is no longer a place of infinite resources, to be squandered for fun.

Bill Gross Is An Idiot

Really.

He pontificates in today's NYT Magazine interview.

So what's the average person supposed to do? Save more. An investor could also take on more risk. I wouldn't recommend that, but that is something investors are doing, which suggests there's a bubble.

This from an avowed guru. The Dot Bomb happened because the Giant Pool of Money had already appeared, but unnoticed; a time of fiduciary investing (software involves nearly no physical capital and still doesn't, and thus has the pros in thrall). Coming out of the Dot Bomb, The Masters of The World still couldn't find ways to invest in real assets (plant and equipment) to generate real value and earn real interest. So they looked around for some other form of low risk (preferably risk free) instruments. They went after US residential housing, historically without risk enough to notice.

As Your Good Mother said, "what would the world be like if everybody behaved like you?" What happened was predicted, but not by the pros, since their incomes depended on continuing the merry go-round. People like Bill Gross.

Remember all that spewing: "The Damn Gummint drives out private investment"? Now, the likes of Gross want the Damn Gummint to pay them 10% for their idle moolah for nothing. Talk about perverse! There are multiple $$$ trillions sitting around idle on balance sheets and sequestered overseas in corporations alone. One might ask why The Masters of The World aren't creating new capacity to a faretheewell? Of course, there's still no increase in demand, since median income still sits in the toilet. The 1%/.1%/.01% continue to accumulate moolah, leaving yet more of it idle. The likes of Gross want a Terminal Depression, since the resulting price deflation turns into 10% or 20% increase in wealth, all for doing nothing but continuing to stuff mattresses.

The fact remains: only real investment generates real value and real earnings, thus the real interest rate. Demanding that the Damn Gummint pay higher than The Masters of The World can generate organically (i.e., not including M&A, buybacks, etc.) is evil. For some time, They haven't been smart enough to do that. Bill Gross is just Gross.

While I haven't a cite, it's clear that Bernanke figured out that The Masters of The World's refusal to make real investment was the underlying problem. QE tried to push the string by removing the spiked punch bowl. Hopefully, Yellen won't capitulate.