29 March 2012

Water, Water Everywhere

Nor any drop to drink. Remember that sentence? "Rime of the Ancient Mariner" by Coleridge, opium fiend. Today, the overriding meme is Big Data, as if all analyses have to shift through the entire population of interest every time for every question. Yet, there isn't always the data one needs to answer a question.

For example, I'm told that all humans dream and that some remember these dreams clearly, while others (including humble self) remember them vaguely or not at all. Sometime before dawn, the dogs invaded the bed and woke me in dreamus interruptus. The narrative of the dream was clear for a few moments, I remember that I'd remembered if you get my drift, but now it's much less clear. The dream involved Joanie and an off-hand remark she made about minor surgery. In some way, the question I became concerned with involves Joanie, who left me for her husband lo those many years ago. Ah, to be told that Dante, her son, was looking forward to me being "Dad". Didn't work out that way.

But, here's the question. As she and I were preparing to do the deed for the first time (and not on our first date, either), she says, "I hope you don't need a tight [euphemism of choice, she used the one woman abhor]". (To quote the late Lou Gottlieb, "Here comes the smut Martha! No indeed. Fortunately, it's a subject which can be handled delicately".) Never having spent time with a MILF before, or even considered it, I hadn't any thoughts on the subject. Turned out not to disappoint, since I was stark raving IN LOVE, although the experience is different.

Which leads to my data problem. How many women, either by country, economic stratum, religion, whatever; choose C-section in order to preserve that mechanical superiority (I can now admit, sorry Joanie, that tighter is better)? How many? Is the documented rise in C-sections ( this article doesn't list this motivation) due in some part to try to Keep Daddy Home? I quick review (on Amazon; I don't own it) of the "Freakonomics" index offers no C-section section. How could they miss this topic?

There is a downside to each choice. Go for down the chute, and you give up any chance of comparisons to a vacuum cleaner. Go for the C-section, and you have a scar. The latter choice is less intrusive than in decades past, due to smaller transverse incision which is below all but a Paris Hilton bikini. The WikiPedia article includes this aside: "The women in these studies have indicated that their preference for Caesarean section is more likely to be partly due to considerations of pain and vaginal tone." Hmmm. I may be on to something, after all.

Would Mom admit the motivation to her Ob/Gyn? Replaying some conversations with Joanie dredged up a memory of her talking about the birth of Dante (around the same time??), and mentioning "Father's Knot". Well, that gets some response from Google. A rather long discussion; and frank too. Alas, no data. I need data. I want to make graphs and regressions!!! Come on ladies, give it up.

27 March 2012


One of the major, if not most major, themes of this endeavor is externalities. Microeconomists, the Rand-ians to make a label, studiously ignore the issue, since it messes up their "freedom" meme. But, the fact remains, that the more laissez faire the government, the easier it is for actors to avoid paying for their evil.

In economists' jargon, an externality is a cost (though, rarely, a benefit) imposed on others for one's decisions. Class action lawsuits are one mechanism most often cited as a barrier to unrepentant externalities. Air and water pollution are likely the best known externalities, although most mainstream press doesn't often get that explicit.

So, Yahoo! News offered up this morsel today. The people of Florida have been paying, in many ways, for the evil shit who (intentionally?) loosed these critters. That's a real externality.

The same can be said of Obamacare. Huh? It works this way. Insurance, as defined in the economics profession, is shared risk. Insurance companies have been subverting that for decades, being permitted to segregate identifiable groups with differing premiums. Pre-existing conditions is one such. By doing so, coverage is no longer insurance, but pre-paid consumption. The externality here is that, without a mandate to cover, people will not buy until they think they'll get sick. Thus, to the extent America bothers to do so, more people get "coverage" through minimalist government programs, while the 1% pay little for Cadillac health care. Those who need coverage can no longer afford the distorted premium, since all the healthy folks have opted out or been pooled into a tightly moated group.

The 1% really are evil.

23 March 2012

A Confidence Man

The new home sales report for March was just released. The "takeaway" number was a bit below February, a bit below expectations, at 313,000. You can find it here.

Now, here's the kicker.

The headline:
"Sales of new single-family houses in February 2012 were at a seasonally adjusted annual rate of 313,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development."

Which is followed by (and won't likely ever be printed in mainstream press reports):
"This is 1.6 percent (±23.9%)* below the revised January rate of 318,000, but is 11.4 percent (±17.8%)* above the February 2011 estimate of 281,000."

So, what do the asterisks mean? Here's the footnote they tie to:
"* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero."

In other words, these "estimates" are wildly, I say WILDLY unreliable. The CIs are huge, and they're only 90% intervals! Common practice is 95% intervals (by definition, they're bigger, by how much depends on the sample data). Too bad Census didn't post those numbers.

In other words smores, there's no statistical (these are sample derived, recall) evidence that new home sales have improved over the last month, AND YEAR. So take that.

08 March 2012

Is The Soup Seasoned to Your Taste?

Turns out, there are professional economists (technically, I'm not one at the moment, since no one pays me to compose these missives) out there who question the impact of seasonal adjustment on the rosier than expected numbers for December to February (technically, meteorological winter).

07 March 2012

Left Wing Preverts!

"You prevert!" Thus spake the redneck. Sometimes unintended consequences are also perverse. That's the topic.

The EU is all aflutter, and took 200 points off the Dow yesterday, although as I type pre-market open is up. We'll see. The Prosperity Through Austerity folks have been getting (nay, generating) some Bad News of late. Country by country, austerity is causing contraction, not the Visit of the Confidence Fairy that the Austrians have always fantasized. Growth requires $$$ in the hands of consumer, period. There is no supply side stimulus. Give lots o money to a cabal of that already has lots o money, and what happens?

Aye, laddy, thar's the rub. In some WWII movie, a captain says, paraphrasing from dim memory, "an officer has to lead from the front. You can't push a string." Which is the folly of supply side zealotry. Businesses only expand when demand for product exceeds their ability to fulfill it *for some time*. What this has to do with the various QE ships sailing out of Port Fed for the last few years is this: The Fed is setting the rest of us up for complete collapse.

Here's the logic (I really can't find a way around it). By doing two things, 1) driving down interest rates and thus devaluing retail savings and 2) flooding finance with cash, The Fed makes it ever more palatable for those with these soaring cash hoards to seek deflation. The reason is simple: a little bit of deflation increases the value of such cash hoards even more than "safe" Treasuries. Since those who live off interest are slothful by definition, and treat currency as commodity, they seek to increase the value (without providing any economic good, of course) of their holdings at any cost to others. In fact, to do so must, by definition, everyone else loses.

So, the perversion of unintended consequences here is that the bad guys weren't punished, in fact, they've been bolstered in their life-long effort of those vampire squids to suck the rest of the planet dry. The only saving grace, which neither I nor anyone else will get to see, is the Final Death Match twixt the Kochs on one side and little Mikey Bloomberg on the other.

06 March 2012

Death by Triage

It's been recently reported that the Obama money won't be finding its way to Congressional contests. Given that money is the lifeblood of politics, Obama is putting a fork in Democracy. It didn't have to be this way. By ignoring the 2010 election, he gave the Right Wingnuts all the opening they needed. I guess it's just pure ego.

I'm of two minds about how this affects a Triage system. On the one hand, with less money, and no co-ordination among the White House, DNC and congressional election committees, Triage might not be worth the effort. On the other hand, with less money, but with willing co-operation among DNC and all others but the WH, Triage may be more important than ever.

Sigh. I do wish they'd call.

05 March 2012

Quant on Quant Violence

It's not been too frequent, even in the wake of quants taking down the world's economy, to read a quant who has the temerity (and, possibly, gonads) to say that which must be silent. But now it has.

One quote from the interview (then I'll expect you to go off and read it):

Q: What's the biggest change you feel the credit crisis has brought to the development of quantitative finance?

A: One change is that it has pushed quants away from the illusion that their models are true. That's a good thing, but unfortunately probably temporary. People will be lulled into complacency once their models have worked well for a while. The other major change I see is that it has prompted more thought on hard but important problems. I'm thinking of things like understanding herding risk, and the real dynamics of markets.

This is a closer understanding of what went wrong, but still doesn't deal with the core issue: the data needed to identify the disconnect was readily available, but went ignored by quants. Mea culpa is always painful.

Galbraith got it right, and no one has demonstrated anything smarter: "Financial genius is a rising market". Or, as I'll be musing about anon, all the swans are black.

03 March 2012

When Ponzi is Normal

The subtitle of this endeavor tells us that the distribution of income is the prime, if not sole, determinant of economic and social stability. The Great Recession was caused by the massive shift of income from the many to the few, guised in investment in one's housing. A fool's enterprise.

To make the point, I sent along the Viagra curve some months ago. Note my surprise when, in today's Times, Floyd Norris quotes a banker thus: "'Prices peaked in Seattle after the rest of the United States, so Seattle is a little bit behind in the correction that will bring prices back in line with income levels,' said David L. Stiff, chief economist of Fiserv, which collects the data and calculates the Case-Shiller indexes."

"... will bring prices back in line with income levels"

So, why didn't these high priced analysts not see the divergence before it got out of hand? Another quote, from Upton Sinclair, "It's hard to make a man understand something when his livelihood depends on him not understanding it." And thus we have A Great Recession.