The Winning Incentive

Today's NYT has a bumper crop of new data/facts surrounding the overarching themes of these endeavours. So, with minimal gloat, here they are.

First, there continues to be the Rightwing cabal trying to pin The Great Recession on the Dems. For the record, once again, Bush was President, Rehnquist/Roberts ran the Supremes, the House for the whole time, and the Senate save for 2 years. So, the mess is squarely Rightwing. I didn't keep a cite, but one knuckledragger asserted that The Great Recession was caused by QE. That's one deeply stupid pencil neck, or just vigorous liar.

One of the enduring myths from the Right was that the housing mess was caused by the Dems, citing the CRA quite often. What they don't admit is that the mortgage companies, CountryWide spectacularly, weren't banks and thus had no recourse to the CRA. Another myth was that the GSEs led the pack. Again, it was the privates, MGIC and the like, which led and the GSEs, seeing market share eroding, took up the sword.

What is new today, is documentation of how deeply corrupt the investment banks were in creating these loans. As asserted here, a lot, whenever the data don't make sense, follow the incentives. In the case of The Great Recession, it was the need to sop up all that idle money when American CxOs couldn't, or wouldn't, put fiduciary capital to work as physical capital.

Now, though, a trove of emails and confidential documents, filed in court, reveal the extent to which one of Wall Street's leading banks, Morgan Stanley, actively influenced New Century's push into riskier and more onerous mortgages, and brushed aside questions about the ability of homeowners to make the payments.

Who were these loans defined by and created to benefit? The answer to both isn't folks of marginal wealth and income. It's the CxOs.

But the bank remained an important backer of New Century to the bitter end. In March 2007, after other banks had withdrawn their credit lines from New Century, Morgan Stanley gave it $265 million in financing. Soon after that, Morgan Stanley withdrew the money. New Century filed for bankruptcy a few weeks later.

Should we blame all of the investment banks, commercial banks, mortgage companies, and private mortgage insurers? Getting close to, "Hell, yes".

Second, the USofA isn't the only country with a housing/investment problem. China's had one for a long time, for somewhat different reasons. It's long been the case, and known but not often mentioned in the mainstream press, that Chinese have fewer ways to get vig. Housing has been one, and by all accounts with the encouragement of Beijing. Generally, the only one. "60 Minutes" has video of ghost towns. Now, Joe Plunger (I don't know the Mandarin equivalent) can bet on stocks more easily. The inevitable result, of course, is more like a chain letter.

Although the Chinese leadership has long hoped to see a rebound in the country's stock markets, the current frenzy carries risks that could stick investors with heavy losses. Much of the trading is also being done on margin, or by using borrowed funds to buy shares. So the boom could unwind even faster if sentiment sours.

Not surprisingly, since China's capital market is largely closed, housing prices have moved in the opposite direction. It's largely the same Giant Pool of Money (again, no Mandarin), so the seesaw swings.

Third, is domestic, for now, Chinese smartphone market. Thanks to Foxconn, and the like, China is a major (if not majority) manufacturer of smartphone parts. Apple makes none of the parts in an iPhone, just so ya know. With all that capital sunk into part making, the time would come when marginal and variable cost pressures would win. Xiaomi is the result.

Xiaomi, founded in 2010, has overtaken both Samsung and Apple in China by offering inexpensive, high-quality phones through clever online marketing campaigns that appeal to China's growing ranks of young and affluent consumers. Around 500 million smartphones are expected to be sold in China in 2015, more than three times as many as will be sold in the United States, according to the research firm IDC.

Apple has always, at least since Jobs II, ignored all but the upper X% of demand. But you can't run an economy or even a sector that way. Especially in a time of out of control automation of production. Fixed costs eventually overwhelm materials and labour, so the need to shift widgets at any price rears that ugly head.

But the start-up smartphone maker's fast growth, competitive pricing and innovative marketing have struck a chord with Chinese consumers. The company hopes this approach will translate into success in overseas markets, too. Mr. Lei and his co-founders, who include the former Google executive Lin Bin, Xiaomi's president, are considering expansion into large developing markets like India and Brazil.

Correlation isn't causation, necessarily. Sometimes, but not always. For the quants, micros, and macros far less often than any of them would prefer. After all, a magic algorithm would be as valuable as Rumpelstiltskin. Data helps in predicting gross money flows, but even then, the meandering of that flow is caused by changes, generally implemented by those who stand to benefit first and most, in the rules/incentives. The only way to know you will spin straw into gold is if you know about the new incentives before anyone else. Just like the mortgage companies invented Liar Loans, and took their winnings up front, leaving the occupants and insurers up a creek without a paddle. All of those who chased the new rules were just lemmings headed off the cliff, although lemmings aren't actually that dumb. Disney made it up.

Marky Mark

No, not Wahlberg, although you should see "The Departed" if you've neglected it. No, this musing is all about real books, and how to really highlight them.

Years ago, I grew tired of the huge Marks-A-Lot type with the felt tip which broke down soon enough. I used the Pentel Data Checker for a long time, but they're harder to find in the flesh these days. I've got a supply of the yellows, if anyone's interested. I used them "upside down", using the back of the chisel to draw through the text.

I discovered that Noodlers make highlight inks (the page is for firefly yellow, which isn't called out in the swatches) for fountain pens. But two issues: only firefly is a bit fluorescent, and it fades rather quickly. The others are "just" semi-transparent inks, so far as I can see. The other thing is that the others are dark enough that the drawn line stands out enough from the page as to be distracting. I haven't found a pen/nib that I'm willing to pay for that's as wide as a traditional highlighter, so one highlights through the text, not over it. Firefly does blend well enough with white book paper that the meandering line still highlights but doesn't distract.

As to how to apply? Pelikan offers up broad nibs, but the pens are obscenely expensive, and may not ship with the broadest nib; purchase separately(!). Well, the M205 is a bit cheaper, if double broad is OK. Both way more than I wanted to spend, so I've ended up with Lamy AL-Stars with broad nib. I don't remember where I got them, but Goulet is an alternative to Amazon at about the same price.

I tired of the Noodlers firefly fading, and stumbled on Pelikan yellow. Now, that's more like it. Very bright, hasn't had a fading issue, so far.

Go read a real book. You'll feel better in the morning.

Baby You Drive My Car

Once in a while, a random comment on a random post on a random thread on a random site strikes me as worthy of a post here in these endeavors. What follows is such.

IBM's (and American corps generally) problem is that they've lost their marbles. Corps managements (the CxO class) are paid those big bucks because they are supposed to be smarter allocators of fiduciary capital into physical capital, and thus earn a real return. They've all, by and large, stopped doing that. There's a reason that up to $7 trillion is sitting in corporate coffers. Buy backs and dividends only move money from one subset of the 1% to another subset of the 1%. There's no growth, which all corps need, in the general economy. It's just circling the wagons against the 99%. A Robocop world, in fact. No idea how to generate real growth yields to accounting manipulation, aka financial engineering.

The latest scheme, not one IBM is party to that I've read, is 100+% car title loans to poor people. Such a great way to build growth into an economy.

Have a nice day.

Kicked to the Curb

In some businesses, it makes sense to kick to geezers to the curb when downsizing. Newspapers isn't one of them since it takes a bit of time listening to the liars to figure out what a lie sounds like, but they do that nevertheless. This is Floyd Norris' last piece for the NYT. You should read it.

He opens with:

What happens when you turn over regulatory responsibilities to people who think there is really no need for regulation?

Of course, the Right Wingnuts will likely dismiss, and not bother to read, what follows. They're always right, of course.

To a significant extent, derivatives enabled risk to be shifted from those who understood it to those who did not. Securities deemed risk-free by the rating agencies turned out to be worthless. Much of the financial innovation that so impressed Mr. Greenspan had been designed to let banks find ways to reduce their capital levels without the regulators noticing.

And for the quants:

Bank capital rules came to allow the banks to use their own -- presumably sophisticated -- models to calculate how much capital was needed for any asset they owned. Countries like Ireland and Iceland developed large banking systems and were hailed for finding high-paying, nonpolluting jobs.

Naturally, they ended up polluting the global economic structure. And the cleanup Superfund comes from, in the case of Ireland, almost wholly on the backs of small taxpaying citizens. Moral hazard? Of course not, from the banks' point of view.

I Loves Olive Oyl

The problem with being dependent on data to make decisions: what do you do when there is no data? Well, punt. Let's turn our attention to the oil patch. Crude is quoted at $61/barrel (and change) today, and the blue-eyed Arabs in the Red states are whining poor mouth. Already. Gad.

Here's the dirty secret about oil, or any extractive resource for that matter: marginal cost pricing doesn't work in the short to medium term. Depending on the resource, even long term. The reason is that marginal cost <> variable cost. The latter is what determines whether to power the pumps on existing wells, or not. It is just the cost to run the motors, keep them running, and so forth. Marginal cost is how much to bring *a new* well into production. It's clear that the second number is much higher than the other. And, it explains why the Saudis are willing to keep the pumps running; an existing well is profitable at a very low barrel price. Yes, the petro companies would like to fully amortize all the sunk costs on a well, but they have no control over sunk costs. They're sunk, after all. You're not getting the money back. You kissed it goodbye long ago. So long as you get more for the crude than it cost to get it to the surface, you're ahead. It's just second-grade arithmetic. You could shut the well, hoping that the price will rise soon enough, but so do all the other owners. Who'll blink first? Shut the well, and you lose the moolah, but the other owners don't.

But being this is a .44 Magnum, the most powerful handgun in the world and would blow you head clean off, you've gotta ask yourself one question: "Do I feel lucky?" Well, do ya, punk?

How low Mr. Natural? Hard to say, since nobody seems willing to divulge the number. Easy oil comes from a fresh pipe with sufficient gas pressure to lift the crude to the surface from the deposit. All those gushers from old movies. Variable cost of a barrel from such a well: $0. Nada. Zilch. And so forth.

The Wiki explains the succession of involvement to get crude to the surface. One of the reasons Peak Oil came to be a meme was that USofA production was well (pun intended) into tertiary recovery. That costs rather more to lift. In any case, once the infrastructure to aid lift is in place, the variable cost is the electricity to run the pumps (into and out of the well) and the supply of material to inject. That's mostly water, which is ironic in the case of middle east oil, since there's so little of it nearby.

In sum then, there's money to be made from existing wells even at $50 or $60 a barrel. That's my guess, of course. And, it seems, for the Saudi's too.

Putin on the Schitz [update 2]

Incentive.
Incentive.
Incentive.

As always, when there's a disruption in the process which created the time series the quant relies on to forecast future values, ignore the time series and look to the changed incentive proposal.

By now all but the most self-absorbed Fox News watcher is aware that something is going on in resource extraction economies, both foreign and domestic. Yes?

The ruble seems to have steadied from its leap off the cliff, but the flight of moolah from Russia appears unabated, and so from Brazil as well.

Why might all this be? Of course, there's the simple finances of it: lower $$$/barrel of petro means lower $$$ for Vlad. Thus, the ruble drops relative to the Buck, and the Money Men decide that Vlad isn't the savior they told him he was. Not that Vlad actually put all that petro and gas in the ground with his own two hands, of course. Lower $$$ for Vlad means he has to call on his police state to keep the lid on. "How much gasoline for that bag of carrots?"
[update]
Here's a snippet from a CBS News report today

With the ruble hitting record lows, many Russians rushed to unload their shrinking bank accounts on high ticket items like refrigerators and dishwashers.

(Remember: trade is always barter, just that "modern" economies use currency as a kind of lube job.)
[end update]
You read similar here not too long ago. "His" interest rate gag won't work: domestic moolah is leaving by the boatload along with foreign. With the ruble now basically a worthless domestic currency, and Russia not nearly a self-sufficient domestic economy, Vlad could well go to war someplace. Stoke, once again, the vision of Greater Russia (USSR) for Real Russians. Stay tuned.

The fundamental problem for all extraction based economies is that, by the nature of the beast, they have to be fascist. And the reason for that is simple: the value lies in the ground, so control of the ground determines control of the resource, which means control of the moolah. That fascism may be direct, as in Russia where Vlad and his buddies "own" the petro, or it may be indirect, as in the USofA where pliant government moats "private" ownership. The USofA, you say? Beacon of democracy? Not so much in the resource states. The oil, coal, and farm states have been very Red since the Founding. The few that stole the land, not always knowing what resources lie within (beyond soil and timber and rocks), from the Natives wanted to keep the value unto themselves. Pliant local and state (and, on occasion, federal) governments saw to it.

While it does cost more to get the stuff out of the ground once the easy X% has been taken, the value of the stuff is determined by the use of the stuff in production. There is no value-add to extraction; I don't care what Vern Smith bloviates. In the case of petro, cracking towers turn raw petro into various different compounds, with attendant different uses. Value-add exists for that, certainly. If folks can't afford to use, or they need bags of carrots to eat, petro price drops.

So, what does this all mean Mr. Natural? It means that interest rates here in the USofA are about to tumble from their already painful (if you're a coupon clipper) lows. How can that be? All that Russian and Brazilian and such moolah is looking for a safe haven. That'd be us. All that USofA moolah that might have gone to resource extraction also needs to find another home. Treasuries are lookin' mighty good. Expect the next auction to dip even further (the 10 Year Note is 13 January; will be interesting here's a concise report). Supply and demand, Econ 101: mo money chasing diminishing number of chairs as the music plays on.

[update 2]

In a stunning analysis this week, Goldman Sachs found almost $1 trillion in investments in future oil projects at risk. They looked at 400 of the world's largest new oil and gas fields -- excluding U.S. shale -- and found projects representing $930 billion of future investment that are no longer profitable with Brent crude at $70. In the U.S., the shale-oil party isn't over yet, but zombies are beginning to crash it.

And, I'll bet most readers laughed out loud when I said that the next 10-year Note auction would be instructive??

Ides of December Nudge

Another in the desultory reminders that you need to read this guy.

Matter Over Mind

It's deep into sports season. NFL is winding down to the last few games, Heisman is today along with the Army-Navy game, NBA is at the ¼ mark. Johnny Manziel is described as a midget. Adrian Peterson doesn't get off Scott free for beating his kid. Baseball teams swap players at multiple tens of millions of moolah a pop; having had some for just a few months. All these obscenely paid walking meat sticks get that money in large part because taxpayers foot the bill for the venues in which they play. Said venues being the only real capital needed to field said teams; the other costs are the franchise fee levied by the other owners (one step removed for Ballmer, but it's the same thing) and the payments to the aforementioned walking meat sticks. Free market? The NFL, as organization, is arranged as a non-profit. That's the truth.

And I, not for the first time, wonder why it is that adolescent males (and, increasingly, females) are willing to spend many hours in the gym/weight room/track getting big muscles, but not a nanosecond in the lib to build a big brain. The odds of finding employment as an NBA player? Well there are 30 NBA teams of 12 (15 if you count inactives) players each. Discounting foreigners (which one could do in years past...) that yields, at best, 450 slots. On a population basis of 319 million, with about 80 million of basketball age, and a 50/50 split in sex for that age cohort, we end up with 40 million candidates. The odds: .001% of being a NBA player; and that assumes all positions are available all the time, which, of course, they're not. For a absurdly detailed analysis of the NBA, go here.

Yet, these walking meat sticks will spend mind numbing time making big muscles, fast muscles, and so forth. In basketball there is the age-old wheeze, "you can't coach height", which limits the odds still further. Not so much in football (unless you're a midget quarterback in an era of tall ones) and baseball. The fact remains: "working" toward a career (typically measured, on average, in single digit years across all of them) in professional sports is as probable, at best, as winning Lotto. This is one case, even if the arithmetic says so, that expected value may not be a rational driver of decision. One need only remember the issue with airplane travel: there's not much chance of a crash, but if you're in one, there's a majority probability of not living through a crash.

According to the 2014 ICAO safety report, the total number of plane accidents in 2013 was 90 world-wide. Only 9 of these accidents were fatal accidents, that is, accidents involving fatalities. The Global Fatal Accident Review of the Civil Aviation Authority gives a total number of 0.6 fatal accidents per one million flights for the ten-year period 2002 to 2011. When expressed as per million hours flown, this number is 0.4. The corresponding number of fatalities is 22.0 fatalities per one million flights or 12.7 when expressed as per million hours flown.

(Or, you can look here.)
Depends on which expected value is of most value to you. Same, it seems, with teen age males. They see a massive carrot (the obscene payment if you play), but ignore the even larger stick (the more massive likelihood you'll be flippin' burgers with those pretty muscles). Those who prefer to not fly in tin coffins are derided as delusional, yet young males who decide to devote themselves to becoming a professional athlete are "living the dream"???

It appears to be that the mind numbing activities of muscle building are preferred just because they dull the mind. After millennia since we crawled out of the muck, we'd rather regress to lower levels of consciousness. Drink and drugs do the same thing, too. Not that Mormons are all that likeable for their temperance. It's kind of sad. Gives the Right Wingnuts ever more fodder. One might also note the increasing prominence of ruralism in entertainment. Country songs, swamp people, gold diggers (not the floozies), huntin' and fishin' shows, farmsonly.com (city folk just don't get it, of course), and so forth. As if the "simpleminded life" were the better one. Trouble with thinking that way is that all those pointy headed -ologists (over a number of centuries of study) have figured something out: it's the density of cities that leads to progress. All those low intellect bush people in Africa and peasants in South America and Asia are proof of that, right? (OK, before regular reader gets her panties in a bunch, that's sarcasm!!) Yet, here we see purposeful regression to low achievement.

Crazy Schizo Quants

OK, so back in 2012 the Right Wingnuts were blaming Obambi for hiking gasoline prices (and, by necessity, petro price). The lobbyer doesn't have a link to the advert, anymore, so here's the quote of note:

Since Obama became president, gas prices have nearly doubled. Tell Obama we can't afford his failing energy policies.

Today, Mr. Market, led by the same Right Wingnuts is going out of its mind over falling gasoline and petro prices: here (and, of course, nearly every news source).

U.S. benchmark crude scythed below $58 a barrel for the first time since May 2009 for a weekly loss of nearly 12 percent in the midst of a tumble whose severity and magnitude matched what happened during the 2008 financial crisis.

Makes one wonder who the USofA economy is run for? All of us?? Or hedge funds?

Those Crazy Quants

Regular reader, by now, is aware that I take the view that quantitative analysis is for both fun and profit, but that it should be attempted somewhat gingerly when the venue is human behavior. We get to make the rules up as we go along, unlike the other animals, minerals, and vegetables which live by God's (or Nature's, depending on your -ism) rules. The rules don't change. We ain't Brownian motion, fur shur.

Well, I just found this post on r-bloggers.

The eBook reprints several unpublished articles and reports from the Econophysics Group at ETH Zurich.

"Econophysics"???!!! And all this time, I'd viewed the Europeans as, generally, more astute. Guess not.

Widget Wonderland

Three semi-related posts went past my eyeballs today. The thread which hangs them together is the value of value. How do we figure it?

First, Blankenhorn takes on Amazon, among my favorite fubar companies. As is often the case, the comment stream is as significant as the post. The poster child for the "we lose money on each sale, but make up for it in volume" approach. Either Amazon attains monopoly, i.e. pricing, power over retailing or it goes belly up.

Second, one Peter Greulich (not familiar) takes on IBM. Here the issue is both the danger of goodwill and the structure of companies. How to value IP, services from IP, and goodwill (e.g. the sale of WhatsApp)? IBM has been shedding real capital and real production for many years. It wants to see the ROI of software driven services. The WhatsApp home run as paradigm for Big Companies, if you will. So do many corporations. Good luck.

Third, Rob Hyndman takes on Data Science. What is it? Who does it? Is it just stats with a new name? Is it just OR, with a new name? Is it more, in some sense, than just stats (Janert says so)? Likely.

Taken together, some musings on the value of value. Micros and quants invariably practice reductio ad absurdum (in the second sense, and on themselves) by looking only at the financials and ignoring the real world aspects. How else would they have blessed liar loans? If quants and micros took the "science" part of data science seriously, may haps we wouldn't go through Great Recessions? One of the comments on the Hyndman post is on that point.

If science viewed thought as property, we'd still be cavemen.

Prometheus Unbound [update]

The mainstream pundits, and the blogosphere too, continue to be perplexed by the refusal of open market interest rates to rise as they had hoped/wished/needed. So, it falls to moi to yet again 'splain some more.

The notion of moolah as commodity rests on the base assumption of trade in real goods: that supply and demand are functionally infinite, and that the "curves" result from individuals' (and remember, corps are people too) levels of psychic satisfaction. To put it yet another way: real demand requires only that "I" want another widget and have the moolah to pay "more" for that widget. The only limit is my satiation with said widget. On the other side, supply, Widget Corp. is willing to make widgets until Hell freezes over if enough folks want them. Availability of production inputs are assumed to be infinite in the sense that a source of supply always exists, at some price.

Now, when it comes to investment, the situation gets a bit gnarly. The MBA types, and most quants, don't distinguish between fiduciary capital and real capital. Most, likely, don't even acknowledge that the latter even matters. But, of course, it does and explains what's going on now. Financial engineering isn't real engineering; not by a long shot.

If we view moolah as an investment commodity, then the gnarl sets in. On the supply side we have retained earnings by business and non-consumption by the rest. On the demand side we have business. What's the motivation by business to take fiduciary capital (moolah, to you and me) and turn it into physical capital? One thing only (in a rational world, of course): that the plant and equipment so made will yield more profit than by not doing so. Nothing else. Financial engineering, so beloved by Wall Street and The City, doesn't count.

Note, however, the difference in the demand function betwixt consumer demand and capital demand: the consumer just wants a better hard on, but the CxO demands that the capital produce returns **not otherwise attainable**. The CxO, if s/he's rational, isn't maximizing some satisfaction function, but some very specific engineering breakthrough. In order to get that return the CxO has to know, or have a high probability, that the new plant and equipment are better than what s/he's got now.

Said plant and equipment may be something entirely new, such as a Swiss screw machine around 1870, or it could be off-the-shelf items not yet adopted by a business. Either way, unless such plant and equipment actually exist, there is no demand for the fiduciary capital. It will just sit around as retained earnings or used to buy back shares or buy bling for the CxO class. Since the MBA and quant class remain stuck in a 19th century mindset (Right Wingnuts all), they can't see that the arc of technology and resource availability has turned, at best, flat. If one considers the widgets we use today, how many implement a semantic that didn't exist before say, WWII? I'll bet a nickel that the number is 0. Capital has spent the last few decades in ever decreasing incrementalism. Ponder that for a moment. Near zero interest has not a thing to do with Big Gummints, but an utter void in the heads of the CxO class to find new, and useful, ways to turn moolah into machines.

This is the base reason so much fiduciary capital has been thrown at non-productive uses such as residential real estate. The Masters of the World are intellectually adrift. And we, as a species, know just about all there is to know about physical reality. Hell, we've found the God Particle. Once you've reached the edge of the World, there's no frontier to explore.

[update]
Sometimes ya just shouldn'ta oughta got out of bed. Left the punchline in the briar patch. So, here it is.

Widget Corp. can go buy more land, labour, and physical capital if it has the moolah. What it can't buy is any new Law of Nature (or God, depending on your -ism) or the brains to find it. Those two either exist, or they don't. These days, the chances that there remain any of the former get nearer and nearer to 0 and thus the chances to buy the latter (I wonder, would paying Newton or Einstein more moolah made any difference?) do too.

A Rock and a Hard Place

From the first time I recall seeing him, I've been convinced of Chris Rock's cerebral approach to comedy. Yes, he is foul mouthed, but the fundamental ideas are sound. He is of course, a high school drop out. Stay in school kids.

So, it comes as no surprise that he and I have/had a similar take on the 2008 election: force the Right Wingnuts to wear the albatross. I was pretty convinced that I should vote for McCain, since there would be no way for the Right Wingnuts to avoid the albatross with the McNugget in the White House and Palin pandering to the guns and God folks. It would be a painful time, but the Right Wingnuts would be toast. Likely for more than a generation.

Didn't happen.

What happened next was predicted: the Right Wingnuts out maneuvered the Obambi into a Trickle Down Recovery, thus getting nearly all the moolah, and the 99% a crumb here and there. Obambi, and the DNC, did the dirty work of the Right Wingnuts, who get to point at Obambi and say, "where's the jobs??"

In the end, we really elected McCain and Palin.

60 Seconds

That appears to be how much time and effort went into last night's "60 Minutes" piece on consumer credit card and ATM and such hacking. If you accepted the statements made, then you believe:
1) retailers and banks are doing everything humanly possible
2) Eastern European hackers are the Smartest Computer Folks in the World
3) breaches can't be stopped
4) Corps. should buy the services of that "security expert"

Here's what we actually know (and the "60 Minutes" reporter[s] would have if they did any reporting):
1) the POS breaches are due to antique versions of Windoze that Corps don't want to spend money to upgrade
2) Corps. routinely don't isolate valuable and vulnerable customer nets from the rest
3) hackers are using time honored methods to breach old versions of Windoze
4) banks are replacing OS/2 run ATMs, which are nearly bulletproof, with Windoze rather than secure certified *nix

I want to be clear with my point of view here. I think that migrating from OS/2 to Windows is the most stupid thing that can be done to an ATM Machine.

So, as with the coders who refuse to upgrade their skills to Organic Normal Form™ schemas, Corps. continue to run vulnerable systems for customer data just because it's seen as too expensive in time and money "to do the right thing". [Aside: if banks ran ATM networks as described by Allen Holub in "The Bank of Allen" series, none of these problems would occur, of course.] IOW, once again, the problem isn't tech it's politics. The restitution, if any, is a slap on the wrist. Just a cost of doing business. The restitution and fines for allowing breaches can be written off, so the taxpayer picks up most of the cost. The upgrades can still be put off. The CxO types still get their fat bonuses for saving on IT spend by not taking security seriously.