Bobbing For Apple, Again

Could Apple be scraping the the bottom of the barrel? An exercise watch?? Why pay Apple prices for one, when they can be had for $14? How much more can such a watch do, that would make it worth the Apple premium? Again, form factor. Samsung's Gear isn't doing well and it is tied to the phone. Whether one can stuff enough capability into an independent device the size of a normal watch?? Not yet.

Under the micRoScope

The R community's instance on layering (for mindshare purposes) "functional" and "object oriented" tattoos on the language has always struck me as something between self-aggrandizement and self-delusion. R is FORTRAN, pure and simple; functions eating data. That the data can be given a identifier is meaningless. One of the results of R's design/heritage is that variables have somewhat squishy provenance.

Now comes another treatment of the pasta bowl via R-bloggers. The comments are a stitch.

If you want the full monty, read up on 'environments' in any R docs; "R in a Nutshell" (mine is first edition) has a chapter on it.

Here's two conjoined footnotes from the chapter (8, page 100):

- If you're familiar with other languages and language lingo, you could say that R is a lexically scoped language.

- This allows symbols to be accessed as though R were dynamically scoped.

Reminds me of that penultimate scene from "Chinatown".

One of the comments links to this post with a comment by Ross Ihaka. That post is from 2010, by the way. Not a new realization.

If you're from the world of "normal" programming languages (C family or Algol family), none of this makes sense. Pick a fork in the road, and stay there. Just because one uses the word 'function' in defining a block of code isn't sufficient to claim that the language is 'functional'. Similarly, attaching labels to data structures, and calling said structures 'objects' isn't sufficient to claim that the language is 'object oriented'.

Balloon, Meet Pin

Watching Keith Olbermann voice-over sports clips is to see an utter waste. I had no concept of Olbermann before is MSNBC stint, but I do catch bits of him whilst waiting for the local weather to come on. And thus I discovered "bye, Felicia". Who the hell is she? Near as I can tell it's a young-uns expurgated version of 'perform a non-procreative auto-intercourse'. Or thereabouts.

Apple reported earnings after Mr. Market went home yesterday (he didn't really go until 8:00 pm, but ...), and the share dropped to $500 betwixt 4 and 8. As I type it's a tad over $500 in pre-market. The pundits have already spewed much typing (to which I am adding, alas) over the meaning of it all. Tally ho!!!

This endeavor exists in multiple versions, some with a preamble of quotations appropriate to the version. This missive will appear in all, but the quote I need is this:

As mass production has to be accompanied by mass consumption; mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery.
-- Marriner Eccles

Eccles was an advisor to FDR, so the time of the quote was during the Great Depression. Recent times have delivered more than few "bye, Felicia" moments, all tied, one way or another, to Eccle's observation.

- Perkins' assertion that Progressives are Nazis.

- Data that 85 individuals hold as much wealth as the lower half the planet's population.

- Chris Christie and The Bridge.

- Revelation that all that manufacturing growth is at burger flipping wages.

- Boeing, among others, carving out subsidies orders of magnitude greater than the per capita cost of jobs "saved".

- Papa John bemoaning that ACA will make him poor.

- Evisceration of SNAP/Food stamps.

- The realization that John McCain is a liberal.

- The continued burgeoning of corporate cash piles.

- All that QE money, yet total employed hasn't moved.


In terms of Apple, and all those companies focusing on the top X% of the population, eventually there's no more growth to be had, simply because the headcount of your X% of income/wealth is stagnant, at best. Some times, and some places, concentration leads to smaller market opportunity.

In Apple's case, when we (if there is a we in the future) look back, the iTrashCan (aka, new Mac Pro) will be the inflection point; and not a good one. Apple, perhaps in a "bye, Felicia" moment of great irony, introduced the Mac with the "1984" commercial. What has gone largely unnoticed over the years is that, as a device purveyor, Apple is completely fascist in its relationship to its users: Jobs/Ive/whoever tell the user what they should do, how they should do it, and provide no way to alter the device. Contrast with the PC clone world, where customization is standard; oxymoron though that may be.

With the iTrashCan, Apple has told its diminishing professional/prosumer clients that a computer is really just a toaster, "no user serviceable parts inside".

So, tonight is the State of the Union, which will bring a multi-hundred point drop in Mr. Market. Mr. Market doesn't like to hear anything which contradicts his "I am the Job Creator" self-image. The "let them eat cake" crowd never gets that capital is worthless without consumers. They just never get it. The frog and the scorpion. The corporations, and the 85, are clearly at the limit of their tolerance. They've accumulated all that moolah, but just can't seem to find ways to get 10% per annum in free money. Consumers, damn them, just don't have the demand for goods and services they used to. There just doesn't seem to be any guaranteed source of unearned income anymore. Ingrates!!!

Balloon, meet pin. With all that moolah sitting with the 85, deflation is the only sure way to make that moolah more valuable. Unearned income on steroids. They're going to give us a Depression such that we'll never, ever, again get so uppity.

It's a Catastrophe!

How would you like to be a P/C actuary for one of the Bermuda Re-insurers these days? (In what follows, the discussion is around so called CAT bonds, which will be explained. While the events discussed were covered by regular liability insurance, such events should be covered privately, and CAT bonds are the logical vehicle. The difference isn't directly important to the argument.) Moving all that shale oil in antiquated railcars? No problem. Well, not so much it turns out. Although there hasn't been a post, that I've seen, come through R-bloggers on this specific genre, when Black Swan, outlier, events become part of the core distribution, life gets bitter.

Since March there have been no fewer than 10 large crude spills in the United States and Canada because of rail accidents. The number of gallons spilled in the United States last year, federal records show, far outpaced the total amount spilled by railroads from 1975 to 2012.

Again, just like "all those mortgages won't go underwater at once", "oil trains ran fine for all those years without a problem". Right.

... railroads and car owners can no longer ignore the liabilities associated with oil trains, which could reach $1 billion in the Quebec accident.

And, it turns out, not all the science and engineering were known beforehand (oops):

The accidents have brought another problem to light. Crude oil produced in the Bakken appears to be a lot more volatile than other grades of oil, something that could explain why the oil trains have had huge explosions.

Here too, the warnings came too late.

Federal regulators started analyzing samples from a few Bakken wells last year to test their flammability. In an alert issued on Jan. 2, P.H.M.S.A. said the crude posed a "significant fire risk" in an accident.

According to this Wall Street Journal report, the Canadian carrier had "normal" liability insurance and is already in bankruptcy. Gummint is paying for recovery. Damned socialists. Read this quote, closely:

They say initial data indicated the oil ranged from the most hazardous to some that wasn't classified at all. Truck shipping data, however, indicated all was the medium-hazardous type. In any case, when it reached the train, its classification changed to least hazardous - less prone to ignite - the Canadian investigators say in initial reports.

Sound a bit like the mortgage rating agency scam? "Do you feel lucky, punk? Well, do ya?"

One of these Bermuda companies, CatVest, according to this piece from a Bermuda industry organ indicates it is into such insuring. It's from two years ago, so might have somewhat different views today.

We analyse a whole suite of oil and gas risks, including physical damage to facilities, business interruption, third party liability and operators' extra expenses, which includes control and well issues and losses due to pollution damage. We've done hundreds of calculations over the years and act as both a calculation agent and a claims investigator for the energy and chemical sectors.

Hmm.

By the way, in this article you'll see a couple of acronyms that are likely foreign: ILS and ILW; insurance-linked securities and industry loss warranties. Again, they end up being open bets by third parties on events. Sound like a CDS to you? Does to me. As it happens, there are many esoteric swaps available. The Wiki lists, at least, some of them.

That is where the capital markets and insurance-linked securities meet, through derivative or securities markets. CAT [catastrophic event] bonds are grouped by their level of risk and sold in portfolios in security markets.

Sound even a bit familiar? The volume of ILS/ILW aren't at the level of MBSs or CDSs and the like in the run up to The Great Recession, but the quant folks involved in assessing risk must be experiencing ever tightening sphincters.

(Aside: if you follow no other link, you have to read this.

"from a legal perspective, all jolly interesting. As lawyers, we get to look at wording from ILS products, which are very often very novel, very inventive, very clever products."

)

If you want to pursue further, here's an industry newsletter. Better yet, perhaps, is this piece in 'The Economist'.

Pension funds and other institutional investors are on the hunt for assets generating decent yields, particularly if the returns are uncorrelated to stockmarkets. As recently as last year cat bonds paid up to 11 percentage points over Treasuries, for risks equivalent (at least according to the ratings agencies) to holding speculative-grade corporate debt.
...
Britain's financial regulator this week warned that the influx of new money into cat bonds could push insurers towards underwriting dicier business to keep profits up. Man-made disasters can be just as frightening as natural ones, after all.

Note the content of those parentheses. They're doing it again. By the way, if you don't read the whole thing, it was written in October, 2013, before Casselton happened. After Quebec, though.

Finally, this is an academic paper hot off the presses. Give it a scan. If nothing else, you'll see that this area of quant is ridiculously data poor.

To generate more interest in exchange-traded insurance-linked derivatives, we suggest that exchanges design their derivatives contracts in a simpler manner, by first selecting an index that is easy for market participants to grasp as a trigger for payoffs, and then settling the contracts very shortly after a catastrophe occurs...

If that doesn't sound a bit like a call for another Li's copula, you aren't paying attention. As ever, human events aren't like Brownian motion, and can be traced back to: incentive, incentive, incentive. The Times piece makes clear that those involved, oil companies, railroads, and car manufacturers, were intent (still are, I expect) in socializing cost (letting the Gummint pick up the tab) while privatizing profit. As they always do.

We All Scream For Ice Cream

All these limp wristed whiners need to shut up. Yes, it might be a tad chilly in the Meadowlands for the Super Bowl (and on Ground Hog's Day, in case you forgot; census day on Block Island, too). So what? Here's some important data.

Here's the rundown on the NFL Championship games. Almost all north of the Mason-Dixon line. At the end of December, mostly. Here's a fact from meteorology: seasons aren't determined by solstice/equinox dates, but by actual weather. So, summer is June/July/August. And winter is December/January/February. January is the coldest month. February is the end of winter, not the middle.

I suppose that most of the whiners are too young or stupid to know about The Ice Bowl (NOAA's page). Just look it up lots of places for more detail.

The 1967 NFL Championship Game between the Dallas Cowboys and the Green Bay Packers, played on December 31 at Lambeau Field, is known as the Ice Bowl, arguably one of the greatest games in NFL history.

Yes, yes it was.

Treading Water

The quant/bankster types took something of a hit during/following The Great Recession (it is over, right?) for being the enablers of The Giant Pool of Money to bubble up through the housing markets. Yes, plural; Spain and Ireland to name just two others. I've gushed untold keystrokes in these endeavors on the notion that The Giant Pool has not gone away. If anything, with corporate profits in the ionosphere and the Fed gifting cash to large holders, the Pool has gotten deeper. Anecdotally, no question.

I use NBC News as my home page since Yahoo!/Mayer screwed that pooch. Well, today brings this "news".

Insatiable demand from hedge funds, private equity investors and foreign buyers, all armed with ready cash, are elbowing first-time buyers out of the housing market.

First-time buyers tend to purchase lower-priced homes, but all-cash investors have cornered the market on those, leaving little behind. All-cash purchases accounted for 42.1 percent of all U.S. residential sales in December, up from 38.1 percent in November, and up from 18.0 percent in December 2012, according to a new report from RealtyTrac.

Well, it isn't all that new. Way back in August, this, more extensive, data were reported. The comments to this piece are refreshingly Darwinist.

The low rates promoted by the Fed were cast under the umbrella of helping out regular families but in reality, they have turned into the next hot money play for banks, hedge funds, and Wall Street. The fact that 60 percent of all purchases in 2013 are being driven by the cash crowd is crazy (a 200 percent increase from the 20 percent pre-crash levels).

At this point, it's difficult to follow a breadcrumb trail from quants to crash. This appears to be a case of what you get when you try to push a string. Greenspan did it first, beginning in late 2001, and gave us The Great Recession as his going away present. The gift that keeps on giving. But it is further evidence of the few exploiting the many. Contrary to some comments to the August piece, Joe Sixpack didn't go into Countrywide and dictate the structure of a liar loan, rather, Joe was told that such a loan was not only feasible but in his best interest. It was found that mortgage companies and banks, some more than others, steered Joe into higher profit exotics even when Joe could have gotten a conventional, but less profitable, mortgage. Incentive, incentive, incentive.

Remember: you can't push a string, and that incentives matter more than data when the two disagree.

Buffett Billions [update]

For some reason, unknown to me, Corey Chivers' (Buffett Billions) finds the following comment objectionable (as I type, at least). Check out his post, anyway, flawed though it is.

Reviewing reporting doesn't answer the important question: is the $1 billion per perfect bracket, or shared among all perfect brackets? There appear to be none reported in history, which folklore likely led to the idea. History shows that no 16 seed has won in the first round. 15/14/13 seeds not much better. Few Black Swans in the early rounds. And so on. Later rounds yield more "upsets" (lower seed winning), since the remaining teams are more evenly matched (assuming the seeding committee is smart). So that really big number doesn't really apply. Those who are college basketball junkies have a reasonable shot at getting it right.

IOW, this really isn't a prob/stat problem, but more OR based.

[update]
Some numbers that add perspective.
Some more numbers that add more perspective.