A Tail of Two Pundits

It was the best of times; it was the worst of times. So, today the New York Times put up dueling analyses of Amazon's blitzkrieg on Hatchette publishing. Joe Nocera, staff pundit versus Bob Kohn participant in the battle.

I'll leave it to the reader to judge which is the true pundit and which the puddin' head; but I will highlight (or lowlight, depending) some key sentences.

Kohn:

The monopsony power of Amazon, which has a current market share of 65 percent of all online book units, digital and print, is not just theoretical; it's real and formidable. When Macmillan, the fifth largest book publisher, displeased Amazon in 2010 by proposing certain changes in business terms, Amazon exercised what has been described as its "nuclear option": It promptly deleted the "buy" buttons in the Amazon online store for all of Macmillan's books. In an instant, Macmillan's entire business was in jeopardy.

Nocera:

Over the years, as Amazon became increasingly powerful, publishers began whispering about how someday that power would be abused. Amazon has always pushed hard for the lowest price possible, but what would happen if it truly became a monopoly?
...
No matter what you think of Amazon's tactics, they surely don't violate any laws.

Nocera should stick to political bloviating, since he clearly doesn't understand markets (i.e., which side of the bargain is which) or data.

The Ballad of Casey Jones

Casey Jones was an engineer. A real, live train engineer, not a financial engineer. But, as they did, he crashed and burned. What seems to be the original:

'Twas around this curve he saw a passenger train;
Something happened in Casey's brain;
Fireman jumped off, but Casey stayed on,
He's a good engineer but he's dead and gone--

Too bad some banksters (who couldn't be called 'good') didn't stay on the train they sent 'round the bend. As many, including humble self, have pointed out, the purpose of the financial sector is to marry borrowers with savers, at minimum cost, and not to suck up the savings for themselves. Today we get some reporting from London. Mr. Norris devotes much of his article to the recent history of bank regulation, and lack thereof.

Ms. Lagarde added that "the true role of the financial sector is to serve, not to rule, the economy. Its real job is to benefit people, especially by financing investment and thus helping with the creation of jobs and growth."

Ms. Lagarde, of course, is now managing director of the IMF. It's been the IMF over the last few decades which has had a knee-jerk reaction to countries getting into trouble, which reaction is to punish the poor and reward the rich. The IMF did, quietly, admit it went a bit overboard. Words are nice, but actions are better. IOW, the jury is still out.

This is the end of Mr. Norris' piece:

Mr. Carney, by the way, is a Canadian who got the Bank of England job in part because of a perception that British regulators had been too trusting. The Edelman survey found that only 6 percent of people in Britain thought there was now too much regulation of financial services firms, while 64 percent thought there was too little.

High time the London Whales and other self-serving quants, banksters, hedgies, etc. were called to account.

How to Be a Weatherman

All those amateur algorithmic stock touts on R-bloggers must be experiencing sphinters tight enough to hold a fishing line with a breaching marlin at the other end. Why? Well, as your local TV weatherman puts it, every now and again, predicting the weather sometimes means just going out the door and looking at the sky.

Let me explain.

As these endeavors have argued, somewhat more frequently of late, Mr. Market isn't an example of Brownian motion or any other physical process. Mr. Market does what he's told by those who can manipulate his rules of behavior. Yes, if you're a Daddy Warbucks with access to money flow data before anybody else, you can use that information to front-run the lemming crowd. Stock returns, aka The Real Rate of Interest, are determined by the productivity of physical capital. We got The Great Recession because that Giant Pool of Money (which has grown only larger in the aftermath) couldn't find any real investment offering as much as its owners wanted. Or, to quote Dire Straits, "money for nothin' and chicks for free". Everybody wants a free lunch, but TANSTAAFL. The banksters conjured up "instruments" which offered up glorious returns, weighted by risk (as asserted by the banksters, of course), which didn't require getting one's hands dirty with physical investment. The world was wonderful, until it wasn't.

So, the rate of return on real productive investment sets the floor (or ceiling, depending on how one views the problem) for the interest rate. Without sufficient productive transformations of fiduciary capital into physical capital, the real return on said capital approaches zero. It matters not a smidgen how much the holders of moolah want to be paid for the use of their moolah. Borrowers will only borrow if they can turn around and make/buy hard assets which return more than what the moolah holders demand. Stamping their wittle fooot makes no mind.

I bring this up, because today's news brings shock and awe to the professionals. And Mrs. Peel was the talented amateur.

The yield on the 10-year Treasury note fell to its lowest point in 11 months as investors continued to put money into the bond market, extending a rally that has taken many investors and analysts by surprise. Most market participants had expected yields to climb this year, and bond prices to fall, as the Federal Reserve reduces its multibillion-dollar monthly purchases of Treasury and mortgage-backed securities, and the economy improved.

Look at the windows, fools. Corporations continue to hoard moolah unable, or unwilling, to transform it to physical investment. Now, that's relative, of course. Yes, producers' durables are being bought, and some companies are building/expanding plant. But no where enough to absorb the burgeoning Giant Pool of Money.

"In terms of safety and yield, the U.S. still is the prettiest girl at the dance," said JJ Kinahan, chief strategist at TD Ameritrade.

Ah, yes. The advantage to being the global New Gold, aka international reserve currency. The Almighty Buck is the only port in a storm. Or even a mild breeze.

Trader Joe

OK, so Seagate finally gets Sandforce (and perhaps a few other bits?). LSI paid $370 million, according to reports at the time (I've not looked in SEC filings). Now Avago unloads the flash parts of itself (again, just the Sandforce parts of LSI?) for $450 to Seagate. Methinks a bit little and a bit late.

Good Old Saint Nick

Just a reminder (it's been a while), but you should keep track of Nick Carr. I've been remiss, myself, so face-slap, too. It happens that the current post is a blurb for his next book. Good on him.

Shaken, Not Stirred

Here's something I didn't know (well, amongst a multitude):

Erlang powers things like WhatsApp and crucial parts of half the world's mobile phone networks. It's going to be great fun to see what will happen when the technology becomes less scary and the next wave of enthusiasts joins the party.

Just as Graham leveraged Lisp and a handful of folks to make a ton of money, a handful of folks leveraged Erlang to make a rather larger ton of moolah. Revenge of the iconoclasts.

The "less scary" reference is to Elixir, about which Joe is writing. I dabbled in Erlang a few years back, but it wasn't (and still isn't, near as I can tell) RDBMS friendly. Nor am I much of a fan of immutable data. The first such language I saw was GW-BASIC; you either have changeable variables (yes, a redundancy) or you copy "variables" 'til the cows come home. Too many cows for my taste.

Funny thing, though: R uses the <- assignment syntax, as does Elixir. I suspect this be not coincidence. Rstudio provides a simple macro in its editor, so using it isn't tough on the fingers. In the good ole days, APL keyboards had a single character/key for this syntax/glyph. Lineage is everything.

Early APL implementations did not have control structures (do or while loops, if-then-else), but by using array operations, use of structured programming constructs was not necessary, as an operation was carried out on all the elements of the array in a single statement.

Sounds kind of familiar, what? Iverson was a math first, as was Codd.

Time to Sacrifice a Virgin

Well, this is last thing I wanted to hear.

As one data center administrator commented: "The all-Flash array makes even badly written apps look good." They foresee a day in the not too distant future when all primary data center storage is solid state. Data center administrators who are now installing current generation all-Flash storage can now at least begin to plan for the transition to 3D. Serious investments in it, like the one just announced by SanDisk/Toshiba, are now being made by producers.

For cryin' out loud. The flat earth brigade doesn't even get a slap on the wrist. Life isn't fair, and there is no God.