27 February 2014

Bitcoin, the Supernova of Deflation

Wherein we discuss the confluence of quants, computers, macroeconomics, and SQL.

Herbalife is a ponzi scheme, although it remains legal. So is bitcoin. Whether either will survive 2014 is up for debate. For this piece, bitcoin is discussed.

For those who're lazy (or don't like my prose), here's the punch line: should bitcoin's promoters get their way, i.e. bitcoin becomes the reserve currency of record, the world will fall into a permanent deflationary spiral. The sole winners will be the early buyers (Winklevii, I'm talking to you). Just as they are in a Ponzi scheme. There is historic precedent, for those who bother to look. 19th century USofA was a morass of falling prices and wealth concentration, and for the obvious reason; gold standard currency is dependent on native lodes of the metal and appeared only a very few times. The entire amount of gold extracted from the planet for all time has been described as about enough to fill an olympic swimming pool. The Wiki says a 21 meter cube. Near enough.

Here's an academic-ish review. On balance, the 19th century was volatile to a degree no one alive today, or their grandparents, have experienced first hand. But there was more deflation and depression than the 20th by a long shot.

By now, the Mt. Gox fiasco is well known. What isn't known, as I type, is whether the entirety of deposits (said to be 750,000 bitcoin) has vanished. The metaphor for bitcoin, mining, to gold was intentional. The difference is that the amount of recoverable gold is unknown, while with bitcoin it is fixed and published: 21 million of the little boogers, 2.5/minute and soon even less. There are reported to be 12 million already mined. 9 million to go, and a long way to get there: 2140. Unlike gold, which submits to standard mining techniques (pretty much) once located and whose total is unknown, bitcoin mining is intentionally non-linear with time, number of miners, and of a single source. The notion that such a snail's pace of currency generation can support expanding global commerce is somewhere between silly and evil. Making value independent of governments, sovereignty, geology, and place of residence (e.g., external factors which individuals can't easily change) sounds like an egalitarian motive. But the implementation is decidedly autocratic. The gating factor is bitcoins/unit time; this is fixed, until it gets smaller. The reason mining has become so compute intensive is that the gating factor is a constant, irregardless of the amount of mining attempted (the machine increases difficulty as the number of attempts increases to hold static the number of bitcoins released, a pure positive feedback loop); not the move from 50 to 25 per unit time. Moreover, by making the game one of rewarding timeliness rather than actual effort, the game is perverse. Kind of like being born 7 feet tall with a deadly 18 footer; pure chance to get massive reward.

As with the archetype Ponzi, the later you join the harder it is to succeed. Herbalife, but with a much larger cost of entry.

Which all reminds me of the taunt from grad school (voiced by MBA wannabes to the rest of us): "if you're so smart, why ain't ya rich?" Well, here's the other side:
At the Tokyo office building housing Mt. Gox, bitcoin trader Kolin Burges said he had picketed outside since Feb. 14 after traveling from London in an effort to get back $320,000 he has tied up in bitcoins with Mt. Gox.

Bitcoin is a ponzi scheme, and makes little effort to hide this fact. They've just used veiled language. At the beginning, mining was easy with few computers involved, so the originators could make all they wanted. Soon enough, godzilla sized computers are needed. In short order, mining them becomes nearly impossible, on a cost/benefit basis. It's already reached the point that the cost of the electricity alone to run the required computing power exceeds the value of mined coins. The system, by design, adjusts to the amount of mining by making the mining process more difficult. Thus, early miners who were few in number got lots of bitcoin with minimal effort. Since the release rate is what's fixed, more or less, at a point in time, then the effort/reward metric skyrockets as more mining is attempted. It's as if God goes about hiding the gold as more miners enter the lode. How Darwin of him. And so Ponzi. Today's serious miners are betting that bitcoin's value will move inversely to national currency (mostly, the US buck). That deflation will occur globally, and raise the purchasing power of bitcoin. Gold bugs have the same point of view.

The SQL part? MtGox has been hacked with sql injection before. And current reporting says that the missing bitcoins dribbled out over the years, not as a single event robbery. No Ocean's 666. I certainly wouldn't bet against the possibility that the sql injection vector has been ongoing since first admitted.

As to the macroeconomic effect of bitcoin uber alles? The main two are that wealth would concentrate to a degree not seen since the pharaohs, and deflation becomes the norm. Why, one might ask? Well, for the same reason as in the 19th century: with a fixed amount of legal tender, any expansion in output has to be accommodated within that currency store. Price * output == money supply. Price, in the aggregate, has to fall. Falling prices are an incentive to hoard, and thus a disincentive to produce. Death spiral. Of course it can be argued that if output *does* increase (the necessary motive for deflation), then no harm no foul as it's just a wash. History says it's never been a wash. The Fortune X00 are hoarding trillions of $$$ as we speak, CPI/PPI flip-flop around the 0 mark, and we've not yet entered the bitcoin spiral. The issue is that deflation must, necessarily, reduce output increases due to hoarding and wealth concentration.

Since the bitcoin mining supply rule is intentionally asymptotic to 0, and is well into its declining stage due to the release criteria: every 10 minutes 25 bitcoins appear. Since this is not a reward for effort, but for timeliness, the proportional return on effort is inverse to the total amount of mining computer power employed. And, as we know, that has skyrocketed. Just as in real world gold rushes, the more the sadder; all but a handful waste not only time and energy, but funds which could have been put to productive use. One might as well spend the moolah on Powerball. Odds might even be better. In real gold rushes, those that made money were the ones who sold eggs and beer to the miners. All that gold, and only so many eggs and kegs of beer. One might see the correlation in the move from cpu to gpu to asic processing in mining: the ones making the money are the egg and beer guys.

Tulips, anyone?

26 February 2014


At various times along the way I've asserted that even the 1% need Obamacare. In general, the point is that some things are simply too expensive, even for the rich, if only the 1% can afford them. Even if marginal cost is low (a fact virtually ignored by the MBA types), the Suits won't invest in the capacity to build if the market is less than X thousand or Z million. Got to amortize that capacity somehow. Share the cost among the many. Wait!!... Still, the right wing nuts insist.

Well, it appears even Apple recognizes the issue.
The big knock on the use of sapphire in things like mass-market consumer electronics devices has always been cost. With Corning's (GLW) Gorilla Glass controlling most of the smartphone display market, the volumes have enabled the company to drive-down costs to a level that has created significant barriers-to-entry. With this new arrangement, all signals point to Apple wanting to use sapphire ... and a lot of it. Such volume could prove to be the catalyst needed to further get the material down the cost curve and into new mass-market devices.

What?? Apple, betrothed of the 10%, looking to increase volume? You betcha.

25 February 2014

Catch Me, If You Can

Yesterday, I tossed in a metaphor to the growing realization that there just might be limits to making "new" tech. Specifically, that:
May be vendors should include a phone life's supply of Prozac?

You know, with the stasis of tech, we enter a Dark Age, where little ever changes, the archetype of economic and social depression? A sarcastic metaphor?

So, what should show up in my inbox today, you may ask? This (I use Thunderbird, and only directly download headers. Cuts down on nonsense, so I'd advise you don't actually follow any links. I munged it just in case.)
Get Help for Depression SignsofDepression.z@jn.newmailonline.XXXXX

Look under the bed!!! Look under the bed!!!

24 February 2014


(Another comment, elsewhere, that gets elevated to essay. Kind of a selfie, I guess. The context: whether any of the other semiconductor companies can, or even should try to, match Intel. From the quant's point of view: what should be the measure of RoI, and how should it be measured? If tech is close to, even reached, stasis, then justification for buying more of existing producer goods rests solely on fulfilling unmet demand. With global wealth/income continuing to concentrate, is there meaningfully growing unmet demand? Has a black swan touched down in Wall Street?)

The larger issue, and certainly not imminent for the momo or day trading types, is what becomes the $$$ sink for The Giant Pool of Money? It's still out there. And now we've got more in the form of giant cash balances in the Fortune X00. The right wing Americans (mostly, financial sector with a dog in this fight) demand that we're spending too much on consumption, and not investing enough (they want those fees). Fact is, except for healthcare and semis, most "investment" is things like housing and finance and share buybacks. None of which produce anything. The Fortune X00 and the existing Giant Pool of Money are still sitting out there, looking for baksheesh. But without an avenue to buy "better" producer goods into, return on investment falls. As it has been, and without any help from the Fed. That's why the housing market was targeted by the Giant Pool of Money: seen as low risk, high payoff (relative to what real physical investment was providing); iow, low return on real investment had already happened by 2003, and is still here.

The return on physical investment is a function of technological progress; iow, there's no reason to add an open hearth steel furnace, only a better one. If there isn't....? You see where this is going? For much of the last 60 years, that's been semis. If semis also reaches a place of tech stasis, how to earn from investment? Housing pays off only if owners can earn more, since housing doesn't produce anything. Since they weren't the house of cards collapsed. If industry, too, hits a wall of stasis, what do we then?

[Looked at another way: the owners of the Giant Pool of Money seek to extort high return from Treasuries, i.e. taxpayers, rather than actually building out infrastructure. As the captains of industry seek to avoid making real investment due to perceived low real returns, then Treasuries' return must fall, too. Demanding X% from the Government when industry only returns Y% (less than X%, of course) with real investment perverts the system. Kind of moral hazard. Without expanding technology, and unmet demand, i.e. moolah in the hands of the many, capital loses value. And, no, rate of time preference is not the gating element, tech is.]

Have a nice day.

22 February 2014

Hair Brained

The 2008 FOMC transcripts are released. As you can see, they're extensive. More text than my single set of eyeballs really want to endure. Fortunately, the NYT has plenty of eyeballs, and have gone through them. And published a number of pieces.

What's missing from the writeups is any reference by those within the Fed to the disconnect between house prices and incomes as impetus to the crisis. If I survive chopping yet more ice from the driveway, I'll have a go at the transcripts and update. For now, here are my takeaways.

- Yellen is smarter than Bernanke and Paulson
- Quants are dumb as a sack of hair
- Fed members from fascist states are as fascist as one might expect

Here's the list of articles, in descending order of interest. Although I find them all interesting.

The Fed's Actions in 2008: What the Transcripts Reveal (The online version is much more extensive than the dead trees I read this AM.)

Fed Misread Crisis in 2008, Records Show

As Crisis Loomed, Yellen Made Wry and Forceful Calls for Action

Fed Fretted Over Reaction to Demise of Lehman

Reporter's short notes

Transcripts timeline:
Yellen: For example, East Bay plastic surgeons and dentists note that patients are deferring elective procedures. [Laughter] Reservations are no longer necessary at many high-end restaurants. And the Silicon Valley Country Club, with a $250,000 entrance fee and seven-to-eight-year waiting list, has seen the number of would-be new members shrink to a mere thirteen. [Laughter]
Which simply means that she looked out the window to discover that it really was raining, despite what the weathermen were saying. Anecdotal evidence is still evidence.

Yellen piece:
What the transcripts show is a woman who was constantly pushing her peers -- and also cleverly cajoling them -- to do more to help ordinary households, not just financial institutions. At the same time, she urged her colleagues to look at the flaws in the banks that caused the crisis in the first place. "I don't believe in gradualism in circumstances like these," Ms. Yellen said in March 2008, months before the situation came to a boil.

Fed Misread article:
The Fed's understanding of the crisis, however, was clouded by its reliance on indicators that tend to miss sharp changes in conditions. The government initially estimated, for example, that the economy expanded in the first half of 2008 because it basically assumed that some economic trends, like the pace of business creation, had continued apace.
The transcript for that meeting contains 129 mentions of "inflation" and five of "recession."
Some Fed officials have argued that the Fed was blind in 2008 because it relied, like everyone else, on a standard set of economic indicators.

Lehman piece:
Today, critics of the Treasury and the Fed say that the our-hands-were-tied argument may be an excuse, used after the fact, as a shield from criticism that they were negligent and miscalculated badly.

"It was a post-incident rationalization," Harvey R. Miller, a partner at Weil, Gotshal & Manges, said in an interview on Friday.
"Although Fed officials discussed and dismissed many ideas in the chaotic days leading up to the bankruptcy, the Fed did not furnish to the F.C.I.C. any written analysis to illustrate that Lehman lacked sufficient collateral to secure a loan," the [FCIC] report noted.

Reporters' Notes:
"While there are tales of woe, none of the 30 C.E.O.'s to whom I talked, outside of housing, see the economy trending into negative territory," said Richard Fisher of the Dallas Fed in January. "They see slower growth. Some of them see much slower growth. None of them at this juncture -- the cover of Newsweek notwithstanding, a great contra-indicator, which by the way shows 'the road to recession' on the issue that is about to come out -- see us going into recession."
And while the stock market might drop in the short term, [Jeffrey M. Lacker, then and now the Richmond Fed president] added, there was a "silver lining" to Lehman's collapse. "I don't want to be sanguine about it, but the silver lining to all the disruption that's ahead of us is that it will enhance the credibility of any commitment that we make in the future to be willing to let an institution fail and to risk such disruption again."
Life is so much more comfortable in that 1% bubble.

In sum then, no understanding that mortgages had and were outstripping incomes. Utter subservience to quants, who didn't have a clue. And, save Yellen, little concern except for their clients on Wall Street. Not a banner year. So far as cure, no indication that the Fed folks, as a whole, understood they were the last, but wrong, bastion against complete collapse. The correct approach, of course, was/is fiscal policy to restore demand, but the Republicans were and are steadfast against "giveaways" to the unworthy. That left the Fed, but recovery monetary policy is never any more than pushing a string, as we have seen. Generating a contraction, to kill dat ole debbel inflation, is yanking the gallows' rope. Works like a charm; Volker was a blessed savior for killing inflation caused by OPEC oil price hikes (not domestic profligacy). Even now, corporate America considers the Fed as constraining. Total ingrates.

21 February 2014


Ok, I know I should enter some blogging, commenting twelve step program, but may be tomorrow.

Anyway, one of the many postings, many places, chewing on the WhatsApp buying led me to post the following comment (it starts with a snip from a previous comment):
-- younger users will move from them extremely fast if something better comes along.

The point, of course, is that Zuck (and all the other advert shifting folks) is simply chasing the fungible whims of hormone overloaded kiddies. They don't even comprehend good, better, best; only different. And, if 55 coders could make something different that filled a whim, some other bunch of 55 coders will shortly do so, again. Flush $19 billion down the crapper. Again.

Someone(s), possibly Carr, voiced the current situation with "high tech" and "innovation" as computerized putting-out or cottage industry, which was based on a, relatively, cheap bit of technology (most often that new fangled sewing machine) dispersed in homes. The workers often got just subsistence wages, if that. All those HuffPo scribes and Seeking Alpha pundits, for example. The difference being that if fickle finger of fate dubs you, you're very rich. For creating a bit of software infotoyment. An economy and society built on sand.

20 February 2014

Viva la Difference [update]

Here's an interesting quote (from here):
Does that ring a bell? That kind of trade is similar to transactions in derivative products known as credit default swaps that played a key role in the financial crisis. Credit default swaps allowed investors to bet on the health of housing-related securities; with Bitcoin, they're betting on the health of Mt.Gox.

That's almost correct. And, of course, it was the quants that went hog wild ("But I was just following orders!") with CDSs. There is a difference: with CDSs, there's no limit on how many can bet on the underlying entity's failure. Kind of like the craps table: one shooter, but lots of bettors. The Mt. Gox situation is simply discounting the instrument, much as a stock will crater on bad news. Unless, of course, these Mt. Gox-ians are emulating "The Producers" by selling more than 100% of what they hold. Wouldn't that be fun?

"It took me less than 12 hours of programming to do this, and I didn't have to get approval from anyone," Jones said. "It's an uncertain time, and I think there's money to be made and lost."

If that sounds like financial anarchy, I'd bet you're quite correct. I wonder how many survivalists have BitCoins next to their Rands and M-16s?


Mt. Gox is officially dead: here

And in the same Top Stories box, we find that gold is (allegedly) manipulated by some London banks. "We make money the old fashioned way, we cheat."

16 February 2014

Confirmation and Contradictions for 2014-02-16

So, yesterday Nocera talked up some recent books, such as "The Second Machine Age" and "Who Owns the Future?". His column, both a confirmation and contradiction rolled in one.

Confirmation, to the extent that the effect of technology is largely as talked about in this endeavor. Contradiction, to the extent that these authors ignore the truth of this endeavor's subtitle. Nocera dances around it with remarks from Robert Gordon and Tyler Cowen.
At its peak, Kodak employed 140,000 people; Instagram had only 13 employees when it was bought by Facebook (for $1 billion!) in 2012.

And, one might add, Kodak made money for most of its existence. Instagram, not so much.

Then [Cowen] chuckled. He had recently been in a meeting with someone, explaining his views. "So what you're saying," the man concluded, "is that the pessimists are right. But it's going to be much better than they think."

The .1% are just itching for The Last Depression. Stasis is good for the moolah hoarders. A piece in progress for this endeavor's companion discusses the notion that we're near, or in, a period of technological stasis. If so, a digital takeover may be overblown:
"Rapid and accelerating digitization is likely to bring economic rather than environmental disruption, stemming from the fact that as computers get more powerful, companies have less need for some kinds of workers."

With the likelihood that Moore's Law has been repealed, further encroachment is also less likely. Further miniaturization is problematic. A 5S on your wrist isn't in the future. Without a growing middle class, Apple's not going to shift ever more 5S each quarter.

Now, for some contradiction.

Start with the notion that the US should become more like China, and vice-versa. This is an age old, mostly right wing, tune. It gleefully ignores the twin problems of diminishing returns to capital and the giant pool of money that already exists. US corporations are non-investing like there's no tomorrow (well, may be there isn't).
The root problem, Mr. Roach says repeatedly, is America's inability to save enough at home to finance its growth -- a situation that is hardly China's fault. And a day of reckoning is coming. If China devotes more of its surplus savings to funding a decent pension plan or health care for its citizens, it will spend that much less at Treasury auctions.

Two contrafactuals here: US capitalists can't even invest, in physical plant and equipment, what they've already accumulated; and Chinese government has clearly demonstrated that neither pensions nor health care is part of the plan. The Great Recession came about, if one ruminates for a nonce, just because US corporate interests preferred fiduciary "investment" over physical investment; the creation of all those high yield mortgages came into existence because of the demand for them. If US capitalists were interested in macroeconomic growth (they aren't and never have been, but we'll skip that indiscretion), they would be building it out. The "service" economy, of course, has little need for much else besides cube farms.

Finally, the self-financed investment myth gets another go round. More pundits, including your humble servant, have been making noise about the bait and switch of 401(K). It ain't, and wasn't designed to be, a replacement for pooled pensions. Yet the notion continues to be pushed by those who've got a dog in the fight: our downtrodden financial services sector.

So, we're told that if one measures a 5 year return to 2012, one is hosed, but if measured to 2013, one is rich. D'oh!!! Big fucking deal.
Why did the five-year return change so much in just one year? First and foremost, on Dec. 31, 2013, the entire ghastly year of 2008 was effectively wiped off the books, from the standpoint of the five-year return. That tally started near a market low in 2009, and the results of 2013 became part of the record, too. And 2013 was spectacular, with a gain of 29.6 percent for the S. & P. 500 without dividends, and 32.4 percent when you include them.

Sure, if you dumped a pile of money into ETFs in March, 2009; believed the stimulus would work; believed that a successor would be done; and believed the QEs would work. If you did that, which is to say, buy and hold for that *specific* period of time, you're now sitting pretty. But that's an event specific result, as they say: "past performance is no guarantee of future results". The Right Wingnuts live in this fantasy world, where the US economy of the 19th century was perfection. Long term results back then: small booms and large busts, about every decade. The only reason we made it to the 20th century: pillaging of a huge natural resource endowment unknown in 1800, and a scientific explosion of discovery. Neither such will occur in your lifetime.
In order to count on a long-term trend like this, you may need to stay in the markets for 20 years or more -- maybe for a lifetime, or even several lifetimes. That may not be easy to accept.

Well, more time meaning significantly more return depends on technological advance and resource abundance. And you still have to be lucky enough to have been born such that your retirement years coincide with one of those booms. It also helps if you don't outlive the boom.

10 February 2014

Love Actuarily

The AOL brouhaha has finally been outed. We think. The company, at least its CEO, hasn't the foggiest idea what insurance means. Hire an actuary or two. I might even volunteer; kind of like a HuffPo contributor. No, while I'm a nice guy (mostly), I'm not a Fellow.
Most large employers are self-insured for their workers' health coverage, given the savings such plans can yield over traditional group insurance. Self-funding means that an employer pays for health care rather than buying an insurance policy for their workers. Such plans now cover 60 percent of private-sector workers with health insurance--an estimated 100 million Americans.

That story doesn't cite an explicit source for the 60% number. But it does make some sense. When I was with Jack Anderson, back in the 1980s, he did just that for the staff; not that the staff numbered more than a dozen. I was only there for a short time, and not a regular staff member, but during staff meetings, Spear would tell folks that they just had to keep pestering Jack to get the money back. Apparently, staff had to pay first and get reimbursed. In the case of AOL, or any such large employer (and AOL ain't all that large, in the wider scheme of things), it appears they didn't get either any, or any accurate, advice from a health actuary.
AOL, the parent of the Huffington Post news site, is a media and Internet company with a workforce that may be younger--and healthier--than most employers'. If so, its annual claims could be even more predictable than a more age-diverse employee pool.

Ignoring the fact that mostly young folks have mostly babies. Babies are expensive, even when not at $1 million a drop. Kids, once down the chute, are too.
Per capita spending on children's health care rose to $2,123 in 2010, an 18.6 percent increase from 2007. Spending on health care for infants and toddlers was disproportionately high. Although children under 3 years comprised 17 percent of the covered child population, 31.4 percent of the total children's health care dollars was spent on them in 2010.

Having the rug rat alone costs a bunch. And, if you're a Right Wingnut of course, then there should be a birth penalty. This from the Family Values & We Don't Want No Birth Control cabal. Irony is lost on such folks.
It's a funny gripe for a number of reasons. First, as The Washington Post's Ezra Klein pointed out, high-deductible health care plans, or "health savings accounts," were a central tenet of Republican health care thinking in the days before Obamacare. The high-deductible complaint is even more hypocritical with regard to pregnant women, given that prenatal care is one of the key issues at hand in the whole Obamacare debate--and one some Republicans have consistently knocked as a stupid benefit.

Keeping 80 year olds alive sedated to Oz for another month is a valid discussion. But the younger set chews up a considerable amount of money. For the AOLs of the world, restricting employment to a class not mentioned in a long time, DINKs (Double Income, No Kids), who don't smoke or drink or do drugs (you know, Mormons that don't breed), is a way to fatten up the bottom line. Folks like me, fur instance.

09 February 2014

Confirmations and Contradiction for 2014/02/09

The first in a, likely weekly, series of recaps of silliness and succor during the previous week. Now that there's no foobawl on Sunday to distract...

Let's start with Maher, from Friday. I didn't note down the numbers, being snuggled up in bed whilst I watched, and transcripts don't appear to exist, so these are ballpark. He went off on the Generational Divide, with $3,000 going to "kids" and $25,000 going to "grandfolks", and of the latter much in the last year of life, and of that most in the last month. In other words, we're squandering lots o moolah to keep Grandma alive an extra month. And that's pretty much true. How did this come to be?

The main driver is that Medicare is bound to approve drugs that gain FDA approval. Here's a (a bit dated) review of what's been going on. On the other hand, we find a Times column which asserts that cutting back on health care spending is actually impeding the economic recovery. Appelbaum, or his editor, certainly has a sense of humor.

He ledes thus:
LOST in all the debate last week about whether or not the Affordable Care Act will hurt the economy is the fact that health care is already imposing a drag on growth.

Oh shit!!! That liberal bastion is mouthing the Right Wingnuts' chorus!!! Not so much.
The health care sector has repeatedly helped to pull the economy from recession in recent decades, but this time around it is lagging behind the recovery.
Health care spending grew more slowly than the economy in 2011 and 2012 and will probably be found to have done so again in 2013. Meanwhile, health care employment also expanded more slowly than overall employment last year -- and the government estimates that in January employment actually shrank for only the second time since 1990.

The issue, mentioned in these endeavors on occasion, is that the overall economy has shifted from manufacturing to services over that last 50 years. Now, if you're a Wall Street vampire squid, then your kind of service is vital and even underpaid. But nurses and orderlies are clearly worthless and paying them even minimum wage is squandering the nation's future. But, again, as these endeavors have pointed out from the beginning, capitalists are simply hoarding moolah, and not investing.
But in the nation's current economic malaise, idled resources are not being put to better use. Workers, companies and the federal government are all paying down debt rather than spending and investing. Fewer homes are being bought; companies are building few factories. The government has been cutting back at a pace exceeded in modern times only during the military demobilizations after the Vietnam War and the Cold War.

All the rhetoric, originally and still mostly from the Right is that ACA and healthcare for all will "bankrupt" the country. What's amusing is that the Wall Street quant types always take the view that (micro)economics is value judgment free, yet they explicitly are sanguine with condemning the only aspect of modernity that actually makes us modern!


Consider this: being able to wake up tomorrow morning to see how the story is going is the most important fact of life. More important than whether that cellphone is a smartphone, or iPhone, or even that you have a cellphone. Another amusing aspect of the manufactured controversy over universal healthcare is the question of how to deal with geriatric psycho stuff. Old people do get depressed and they do, eventually, tune out and don't care how the story goes tomorrow. That's what they're supposed to do!!! That's how you know that it's time to go. Spending moolah to stop enveloping depression in 80-somethings is downright foolish. On the other hand, whether we, as a community (not just the 1%), want to spend 1% or 50% of our wealth and income on healthcare is for us to decide. Spend it wisely, yes.

Modernity's sole difference maker to all of us is medicine. The other stuff is just toys. Yes, the medical oligarches are nearly as squid-like as the Wall Street species, but at least they provide a visible service. Wall Street squids merely suck moolah out of the stream twixt savers and borrowers.

Next up, New Gold. Remember that piece? Probably not. In any case, it tells the tale of how the Almighty Dollar came to be the currency that matters. Yet another piece from the fount of News, which discusses the Almighty Dollar.
Interest rates in the United States have been driven extraordinarily low. Ten-year Treasury yields, which move in the opposite direction as prices, have declined to 2.68 percent, from 3.03 percent on Dec. 31. Rates had been expected to rise because of the Fed's tighter monetary policies. Flight to safety investing explains at least some of this, and it has helped keep rates relatively low for several years.

The dollar remains New Gold. Unlike the Euro, which Germans refuse to allow into the fiscal policy realm, the dollar is, and in ways the Right Wingnuts choose to ignore, used to move wealth around from wealthy states to poor ones. The ACA is just the latest example of the North subsidizing the South. And they'll bitch about it all day long.

Those are some confirmations. Now for a contradiction. Two pieces in the Times, one in the paper and the other in the magazine, discuss the problem of single parent (mostly, mother) households.

One views poverty as the egg, while the other as the chicken.

Some researchers think that marriage -- or a lack thereof -- is not the real problem facing poor parents; being poor is. "It isn't that having a lasting and successful marriage is a cure for living in poverty," says Kristi Williams of Ohio State University. "Living in poverty is a barrier to having a lasting and successful marriage."

The sociologist Kathryn Edin has shown that unlike their more educated peers, these younger, low-income women tend to stop using contraception several weeks or months after starting a sexual relationship. The pregnancy -- not lasting affection and mutual decision-making -- that often follows is the impetus for announcing that they are a couple. Unsurprisingly, by the time the thrill of sleepless nights and colicky days has worn off, two relative strangers who have drifted into becoming parents together notice they're just not that into each other. Hence, the high breakup rates among low-income couples: Only a third of unmarried parents are still together by the time their children reach age 5.

For myself, having grown up (mostly) in a welfare project (in New England, so perhaps less nasty than the South), poor folks act that way because they're poor. Over the last few decades, cities have been imploding "vertical ghettos" with abandon. But they never seem to want to do that to the luxury high rises on the other side of town, which manage to house at least as many humans per building as the ones that get razed. Could it be that living in such a building can be fun and enjoyable? It ain't the building, it's the moolah.

Tilt the economic playing field enough, and anyone would conclude that fucking and fighting are all that matter. Just as it was in the First Dark Ages.

05 February 2014

Icarus Goes Upscale

There once was a movie (1965), "Boeing, Boeing", a farce (it had to be, of course) starring Tony Curtis and Jerry Lewis.
Bernard's life is turned upside down when his girlfriends' airlines begin putting new, state-of-the-art aircraft into service. These faster airplanes change all of the existing route schedules and allow the stewardesses to spend more time in Paris. Most alarming for Bernard, his three girlfriends will now all be in Paris at the same time.

Bernard is the protagonist (Curtis) and the "state-of-the-art" aircraft is the 707, which, by the way, started life as an Air Force kerosene tanker. Gummint paid all the development costs, and Boeing cashed in with a civilian plane for, basically, nada.

Fast forward to today's news. Boeing has been developing its plastic airplane, the 787 for about a decade with notable "Oopsies" along the way. What I never knew, until the news today, was that a plane built to haul 296 human/cattle could be had as a "Business Jet". Yessiree, pardner. This has a list price in the vicinity of $200 million. That's the price of the conventional plane. The "Business Jet" is delivered sans interior:
Boeing Business Jets delivers the airplanes to customers unpainted and without an interior. A completion center of the customer's choosing installs the jet's VIP interior.

I suspect the VIP interior will end up costing more than a bunch of minuscule seats.

If ever there were a "let them eat cake" gauntlet toss down by the 1% at the rest of us, that would be it.
"It's terrific to see two BBJ 787s deliver within a week," said Capt. Steve Taylor, president, Boeing Business Jets. "The BBJ 787 joins the BBJ family, a full line of the most capable airplanes in the VIP market. The 787's combination of phenomenal range, high cruise speed, low cabin altitude, big windows and ultra-quiet cabin make the 787 ideal for BBJ customers."

04 February 2014

You Get a RetroGrade of F

Today's NYT brings yet another context-free Brooks column, wherein he makes yet more claims of a rosy future. Sort of.

He starts by trashing previously gold standard smarts, then poses the rhetorical query:
But what human skills will be more valuable?

So, what are his candidates?
... people who can recognize and alertly post a message on Twitter about some interesting immediate event

Say what? This rises above understanding thermodynamics, or partial differential equations? I guess so.
Technology has rewarded graphic artists who can visualize data, but it has punished those who can't turn written reporting into video presentations.

I suppose he loves pie charts. It appears he hasn't gotten the memo, both from smart management and smart worker bees: no more PowerPoint decks. Being a total reactionary, Brooks is out of the loop.

Anyway, here's his ordered list. I won't duplicate the paragraphs devoted to each. If you've the stomach, go for it.
First, it rewards enthusiasm.
Second, the era seems to reward people with extended time horizons and strategic discipline.
Third, the age seems to reward procedural architects.
(Seems to be, fourth) So a manager who can organize a decentralized network around a clear question, without letting it dissipate or clump, will have enormous value.
Fifth, essentialists will probably be rewarded.

Mostly, you can't really be a Twitterite (under First) and have any of the other qualities. Immersed in social media is now defined as "work"? Perpetually distracted, but long term focused? The second most complete oxymoron, after happily married (OK, I know...).

If that sounds like a thumbnail sketch of Dubya; Yes, yes it does. The future belongs, and the mightiest rewards go, to content free cheerleaders? That's the future? Oh my.

For those of a certain age, or know someone of a certain age, particularly those that saved old "Popular Science" and "Popular Mechanics" issues, may remember that both magazines were known for predicting how life would be so much better in 50 years, the millennium. Automation generally, and computers specifically, would relieve *all of us* of the drudge work, leaving us to be creative and leisurely for yet longer lives. I don't have such a stash, only memories of the issues. But, here's one site with some examples.

This site is more completist.

What none of these deal with, I suppose by Utopian assumption, is that animate processes lead to concentration, not dispersion. Name any significant human problem of the day, and you're inevitably led back to the divergence of the enfranchised and the disenfranchised. Inequality is the prime result of animate progress. The problem is that, unlike lower forms of life which obey external rules of survival, some of us get to make the rules which the rest of us must endure. The dystopian wins over the utopian; the future is always darker than you can imagine.

03 February 2014

Malcolm's Fallen From the Middle

This endeavor started with a missive which asserted that the Bernanke/Obama recovery plan couldn't work
In 2009, who are the unemployed? Not, by and large, workers in factories that will make goods for American consumers. The deindustrialization of the economy, in progress since the 1970's, makes any stimulus program a low probability gamble. Will the stimulus program re-employ the leeches in the financial services industry that sent us over the edge in the first place?

It turns out, that's exactly what happened. Obambi is setting the Republican party up for permanent control. It won't be called a dictatorship of the proletariat, but will be, in fact.

Now we get reporting on a study from some Freshwater economists. (No Times showed up yesterday, but, as luck would have it, the piece went a bit viral.)
Within top consulting firms and among Wall Street analysts, the shift is being described with a frankness more often associated with left-wing academics than business experts.

Rather than frankness, I'd call it gloating: "go eat some cake, motherfuckers!!". Not that this endeavor is the least bit surprised. This piper has been calling that tune from the beginning; just read the subtitle.

Some data, quoted from the study:
In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995, the researchers found.

Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.

More broadly, about 90 percent of the overall increase in inflation-adjusted consumption between 2009 and 2012 was generated by the top 20 percent of households in terms of income...

At G.E. Appliances, for example, the fastest-growing brand is the Café line, which is aimed at the top quarter of the market, with refrigerators typically retailing for $1,700 to $3,000.

There is a downside to the euphoria, not mentioned by the reporter or by the researchers (as reported, of course): as the .1%/1%/10% suck ever more of the nation's wealth, the smaller is the cohort "aspiring" to climb the totem pole. Apple is the archetype for ignoring all but the 20% (or thereabouts). The problem has always been that the group doesn't grow in numbers as it grows in wealth/income. Quite the opposite, and a little arithmetic (left as exercise for the reader) shows why. Fancy restaurants can see a growth path; the 10% will eat there four times a week rather than one. The likes of Apple can't reasonably expect to sell more than one smartphone/human, thus it must keep devising yet new devices to part the rich from their moolah. It hasn't been very good at that since the iPhone.

02 February 2014

Frozen Orange Juice

Do you prefer your orange juice from the orange, or from the frozen can? Can is cheaper, and, if your water is decent, will taste just as good as the kind in a gallon jug. Which brings us to Humira. I'm watching a golf tournament, and there was just a commercial for Humira, an arthritis drug. The advert shows us a "day in the life" of a white, 40-ish, upper middle class Mom. I'm listening to Marty Ehrlich on the AKG's, so I didn't hear the voice over this time. No matter.

The closing text graphic is "taken by injection".

From the Wiki:
Humira costs approximately $1,662 per month, like the TNF-alpha inhibitor etanercept (Enbrel). Methotrexate costs approximately $13 to $85 per month.

In 2012 Humira drug had $4.3 billion of sales in the US, and $9.3 billion worldwide.

It's sold by AbbVie (stupid name, yes?), a spin-off from Abbott Labs. One has to wonder how long such compounds can remain in existence as the middle class, especially the upper version, disappears. Concentration makes for cheaper orange juice. Not so much for health care.

For the record, methotrexate is an ancient generic, which is why it's so cheap.
Though not everybody is responsive to treatment with methotrexate, multiple studies and reviews showed that the majority of patients receiving methotrexate for up to one year had less pain, functioned better, had fewer swollen and tender joints, and had less disease activity overall as reported by themselves and their doctors. X-rays also showed that the progress of the disease slowed or stopped in many patients receiving methotrexate.

I suspect AbbVie will line up behind Wal-Mart. First SNAP, then crackle, pop arthritis drugs.