Wednesday, November 04, 2015

Bear Market in Integrity Continues (Late 2015 edition)

Things, people, and/or ideas believed to have integrity, now seemingly compromised...(the second third  fourth latest updated and expanded version). The bear market in integrity continues unrelentingly…2015 edition.

Fantasy Sports
Mt Gox
NFL Football Air-Pressure
Bill Cosby
Pot Noodles
Michel Platini
"Kids Company" Charity
Student Loans
US Secret Service
Energy MLPs
Whole Foods Market
Bruce Jenner
American Police Conduct
Rachel Dolezal
Red Meat

Jimmy Savile (tnx Anon)
Rolf Harris (tnx Anon)
US Veterans Administration
The Red Cross
Justin Bieber
The London Gold Fix
Chris Christie

US Govt Agency Data Release
The UK National Health Service
Swiss Train Safety
Nick Clegg
IM Confidentiality 
BBC Management & Oversight
Risk Parity
Segregated Customer Accounts
Investment Consultants
Bloomberg Privacy
Dark Pools
London FX PM Closing Prices
Meredith Whitney

Reinhart & Rogoff
Jérôme Cahuzac
Japanese Yen
Jamie Dimon/JP Morgan
Banca Monte dei Paschi di Siena 
IKEA Meatballs

Wen Jiabao as "Humble Servant of The People
Lance Armstrong
Top Ten Lists
Austerity as an Economic Panacea
Harvard Students' Academic Honesty
BLS Statistics
Cyclical Recovery
Book Reviews
Strong Computer Passwords
'Organic' Food
Money Velocity
Undecided Voters
The Food Pyramid
Purity of '.999 Fine Gold Bars
Penn State Football
"Top of the Pops" 
Fareed Zakaria
The "risk-free" rate
LIBOR as a Benchmark
Public Sector Pensions
HFT as a Beneficial Provider of liquidity
Diversifying properties of Hedge Fund's
Einstein's Theory of Special Relativity 
Celtic Rangers
Macroeconomic Forecasts
John Paulson
FRB Open Market Operations
Standardized Educational Testing
Swiss National Bank
A Relaxing Cruise
WTI as Oil Benchmark 
Olympus Corp.
Payment Protection Insurance
HM Revenue & Customs
Sony Playstation Network
Social Mobility
Actuarial Return Assumptions for Pension Funds
Ryan Giggs
France   AAA
Boob Jobs
David Einhorn
Nuclear Power
Deepwater Drilling
Tiger Woods
Professional Cricket
Professional Cycling
High-Frequency Trading
Professional Baseball
Professional Tennis
Municipal Bond Underwriting
The Catholic Church 
Track & Field Athletics
NCAA Sports
US Congress
UK Parliament
Analyst Research
Credit Ratings
Newtonian Physics
The Stock Market
The Food Pyramid
Incentive Stock Options
Reinsurance Brokerage 
Lou Dobbs
The Mortgage-Backed Securities Market
Hedge Funds
Social Security
Government Balance Sheets
Tooth Fairy

Errr ummm Professional Wrestling is starting to look good by comparison - at least it makes no pretensions to be anything other than it is. What's left?

Monday, October 05, 2015

Giving The People What They Want

We live in a golden age of near-exponential knowledge-growth and consolidation in general, and more particularly, as it relates to drug discovery. That said, while Moore's Law incessantly drives down the cost semiconductors and related electronic equipment, and algorithmic software innovations are on the cusp of driving down the cost of much previously-expensive financial intermediation, healthcare, medicine, and pharmaceuticals specifically appear to marching in the opposite direction. This is as true for the eye-popping costs of newly-discovered and recently-approved medicines that may be weakly palliative, new drugs novelly treating rare diseases, or improving upon existing treatments to, as carpet-bagging scums Martin Shkreli and Valeant have brought to the public's attention, gaming a system easily gamed in order to take the insured population by the ankles, hold them upside-down and vigorously shake them until each and every penny, nickel, dime and $100 notes is loosened and falls from their pockets. It stinks, and it is disappointing to have seen Wall Street's best and brightest enthusiastically jump on the bandwagon and bankroll (as they did with Bill Erbey), so odious an arbitrage.

As a result, gobs, and gobs, (and gobs!) of money have been thrown at nearly anyone mining the drug-discovery coalface. Many are ostensibly genius-caliber scientists with attendant leadership skills and huge personal ambition. Future generations may thank them. But any leisurely walk through the woods of (listed) industry cannot help but anecdotally marvel at the sheer number of endeavors funded and floated, most of which will, inevitably be worth nothing to their equity investors. VCs may have exited, managers will have collected meaningful salary and bonus (and sold shares), investment bankers will have extracted their dues, but the ordinary biotech miner-forty-niner, ever wishful of scoring a Celgene or Pharmacyclics, will, if history is the judge, be rather more disappointed.

Noticing that my skepticism is getting ahead of me, I will tell you that I believe there is much to admire here. It – the “can-do” attitude, the lack of fear of failure, the willingness to pursue dreams – is the stuff that got us to the moon, and will cure cancer. But it's also the stuff that gave us Ory Weihs (who's made a small fortune getting paid rounding up on-line punters and delivering them to on-line gambling sites), Bernie Ebbers, and Enron and a list of contrapreneurs too long for this post.

Back when I was a boy (camera pans and zooms on to grizzled redneck with long white whiskers in blue overalls, in a rocking chair on the porch of a rural cabin, dragonflies buzzin' and banjos pickin'), there were practical limitations on floating wild-eyed out-of-the-money longshots. Minimum revenue thresholds, an operating history, the presence of profits, were prerequisites on most of the main bourses. Some was regulatory, some was due to scars burnished on popular wisdom from the 20s and subsequent crash. This never stopped people losing money in stocks, but it seemed to help limit the most egregious opportunism outside the ever-present bucketshops. Importantly, this meant companies were funded and often stayed private for much longer, until they came good with some revenue, and some profitable trading history, or less fortunately, had their plugs pulled by their (former) sponsors. It also meant that "professionals" were in charge of the investment process (FWIW). Sure, there self-described polymaths who were out of their league and blinded by the science and a sweet tongue, but there were also many highly-informed specialists, separating wheat and chaff, who carefully chaperoned the growth and magnificent contributions of the flagships.

“Netscape” changed that forever. Netscape was the Klondike-find that transformed and fueled the lust for exponential growth stocks as lottery tickets in the national imagination. And what The People want, The People get (with a bit of help from investment bankers, stockbrokers, and all variety of charlatans). The wanted The Internet, they got the internet. They wanted fiberlightwaveoptics, they got it NT, AVNX, JDSU at 11-digit valuations. They wanted Merchant Energy, and so the trucks arrived. Solar? Errr ummm ignominiously, obtained. Black gold? Granted and presently vomitting all over the west, Bakken, and Marcellus. Nothing, it seems, cures high prices and the hunger that fuels it, like high prices.

And so, here we are, today, with Biotech, present for decades – both blue-chip investment grade and the speculative garden variety, but never in as full-bloom as witnessed in 2015. Every investor with a stock portfolio seemingly has some biotech spec in their portfolio. Some research rocket-fuel, some drug-discovery beta. How many times have you heard your friends' regret about dumping Incyte @$5 (now $125/shr) or "taking profits" in Regeneron in 2011 after it doubled to $40 (now $475). Even my brother-in-law, a conservative stock-broker with income-oriented clients has taken to sexing-up their dossiers portfolios with exotic galloping  biotech  I've never even heard of. This is a reliable tell-tale (his clients are still suffering indigestion on their  MLPs). Apparently, the only thing worse than buyer's regret, is seller's regret, or, as it happens, not buying at all.

Cynics may question my motives for writing this. They may accuse me of being sore “to have missed out”. But for the record, let me say that I've lost money with the best of them, falling prey to most behavioural flaws underpinning investors losses, and really I just wish I could contribute more to this great wave (and shorting stock hardly rates as a worthy societal contribution). So instead, I've decided to help future biotech scions (and their bankers) by helping them conjure names for their future empires. Some may scoff at this effort, but so numerous are the listed companies that finding a suitable name is always challenging and may soon become a major problem.

You see, Biotech naming is a Scrabble-players fantasy. There are Improbable combinations of X's, Y's, Z's, and V's creating a realm of high-scoring naming possibilities, only a portion of which will seduce investors, and demonstrate just how uncreative HF managers are in their own choice of names.

(1) To start, choose a place name, favorite latin description of a vital organ or disease, or just a mainstream biological or life-science chemical term you might remember from high-school. (Tip: If using a place name, try to coin one evocative of health (Portland?) and avoid the rust-belt (Buffalo BioScience or Detroit DermoGenetics just sounds wrong!). (Tip: If using initials, use no more than 3; avoid word-images,  use only consonants,and  try to evoke something vaguely familiar)

(Sample terms: ) Cell, Bio, Epi Pro
(Sample Places: Portland, Cascade, Ranier, Olympic, Redwood, Eureka)
(Sample initials: RTW; QBZ, STP)

(2) Insert dazzling cool-sounding but ultimately generic biological or laboratory term.
(Tip: Use at LEAST one, but stringing two or three together works well too. Parsimony is not your friend when trying to seduce the punters.
(Tip: Capitalize the second and third term as well for important and lasting effect)
(Tip: Keep your Latin  dictionary handy if you get stuck)

(Sample Dazzlers: Epi, Med, Bio, Cryo, Derma,Gen, Gene, Ogics, Pharma, Mune, Immune, Med, Sys, Exis,Oral, Tryx, Tech, Onco, Cardio, Viro, Fibro, Zyme

(3) Finish it off with an appropriate bookend to seal it. Pay close attention to the alliteration. It should roll off the tongue so when investors are bragging about their latest Biotech investment, they won't feel inferior to their friends.
(Common Closers: Labs, Therapeutics. Research, Pharmaceuticals, BioPharma, Science
(Tip: If economical in stage 1 and 2, do not hesitate to choose a double-barreled ending. Like the English upper-class, there is some benefit to conveying superiority in your name choice)

(4) Putting it all together: Just do it. It's fun! Try a few and see if you can create investors' next ten-bagger!  Here goes....

FibroZyme Therapies
CryoDerma Oncopharmaceutical
Epitryx BioLabs
Eureka ViroImmune Bioscience
Medexis OncoScience Labs
Dermologic Drug Discovery
Vespasian Gene Therapeutics
BioCryoSys Pharma
BioCardial Research

(enough for this this week....!)

Thursday, October 01, 2015

Finding Fault in Fault-Finding

My spouse is an expert fault-finder, never failing to expose, highlight, broadcast, lay bare, unshroud, feature, examine, emphasize, reiterate, assert, underscore and remind ME of MY faults, weaknesses, inadequacies, shortcomings, failings and defects.

And of course, my spouse is often "right" insofar as I am quite imperfect, and (one of) the first to admit this rather human condition. For I am, at times, inattentive, inconsiderate, insolent, indolent, unthankful, unhelpful, ungrateful, unwittingly stupid (ignorant and dumb), uncommunicative, uncompassionate, unsympathetic, unconcerned what other people think of me, selfish, self-centered in addition to the bevy of other failings I cannot immediately recall but almost certainly possess.

To my credit, I am predisposed towards open-mindedness, possess a reflective streak that, more often than not, allows me to recognize (and regret and remorse) when I do something jerky. I also have a strong desire to improve, and be better tomorrow than I was yesterday. I do not always succeed, but my intention is good, and I believe my life is one of making demonstrable efforts in this general direction - both big and small.

Nonetheless, incessant criticism can be wearying, even to a principled, thick-skinned critic such as myself. Often, what makes it particularly difficult for the partner on the receiving end, is when valid criticism leaps from 'the action' and becomes personal, i.e. a complaint or critique supersedes the transgression itself. This is highly-corrosive and ultimately self-defeating for the critic IF the purpose of the criticism were well and truly about solving the specific problem.

This latter facet of an erstwhile objective issue is revealing.  Psychological literature abounds with explanations and understanding, the majority which centers on projection and avoidance. These underlying motivations do not preclude the legitimacy of any offending faults or transgressions, nor grant blanket license to the offender to ignore what may very well be serious issues. Such behavior does, however, give cause to examine the situation, and one's parochial motives, more closely. In a perfect world, this would mean introspection and self-reflection to insure, as Elvis Costello aptly put it, "one's aim is true".

When I read the persistent outbound criticisms of "Europe" emanating (mainly) from the political and journalistic right in Britain, I cannot help but sympathize with the Continentals. In these circles, Europe stands accused of being the cause of so many of Britain's ills, and the focus of such vitriol, one would be forgiven for asking what precisely is at the root of their anger. Make no mistake: "Europe" is far from perfect. They rarely miss an opportunity to miss an opportunity;  possess diverse often-clashing national identities; frequently shoot themselves in the policy foot; suffer internal squabbles that are difficult to even caricature; err on the side of consumer protection and often over-burdensome regulation, and have shoe-horned themselves into a currency union before the requisite amount of fiscal union to insure long-term stability and confidence. Anthropomorphizing them, they are guilty of these and countless other faults.

But the British penchant for Continental fault-finding is, I believe, disproportionate to Europe's so-called transgressions, and the sport, as pursued by the most enthusiastic and prolific of British Eurobaitors is, I posit, driven by projection and avoidance, in addition to the more obviously-cynical domestic political expedience.

It is far-easier and more comfortable for one to highlight other's flaws and shortcomings than it is to confront one's own problems - particularly when these flaws are close to the core of one's being. Practical, perhaps, but far from enlightening. Rather, Britain's most vociferous and persistent EU critics might do well to focus upon Britain's poor and deteriorating public education, underinvestment in virtually every aspect of public infrastructure (pubic transport, healthcare, roads, housing, communications), galloping inequality, negligent regulation of privatized natural monopolies, pervasive racism and xenophobia, rampant NIMBYism, a crumbling increasingly fragmented internal union, erosion of and unwillingness to enshrine fundamental human rights, as well as a first-past-the-post political system increasingly incapable of aggregating and representative more fragmented interests. Europe, the EU, the Euro, have NOTHING to do with these problems. When Britain begins to truthfully and earnestly acknowledge and confront these profoundly important problems, she might find herself better-placed to offer practical substantive advice to others on their ills with an aim that is true.

Tuesday, September 29, 2015

Farewell then Daiichi Chuo Kisen

Farewell then
Daiichi Chuo

by "slumping rates";
by falling demand;
by the stormy seas of
market forces,
so you

Fact is:
you've been 'listing'
for decades,
and many times before
I thought you'd
abandon ship.
Your debt
could have filled
the holds of
several of your
bulk carriers.

You'd survived
and the second
world war,
but not
the weight of
with OPM
(and deflation).

Your wishful
catchphrase was:
"Heading to be
the World's'' leading Tramper",
but your epithet
will read:
"Davy Jones' Locker, 2015".

Friday, September 04, 2015

Limitations of Pillory

past tense: pilloried; past participle: pilloried

put (someone) in a pillory.
attack or ridicule publicly.
"he found himself pilloried by members of his own party"
synonyms: attack, criticize, censure, condemn, denigrate, find fault with, give a bad press to, lambaste, flay, savage, brand, stigmatize, cast a slur on, denounce; 

Bold political leadership has been in more or less persistent decline for some time now. Be this primarily a result of a seemingly more benign period in history (World War in general setting the bar extremely high for subsequent politicians), the advent of technology that enables the rapid measurement of public opinion, or the slavery of modern parties in democracies to use these technologies and associated methods to maintain power irrespective of whether prevailing opinion sits atop dubious (or erroneous) understanding, is unclear to me. Whatever the cause(s), it is increasingly rare for an elected leader to lead, undertaking unpopular policy, however "right", necessary or correct whether morally, economically, or both, such action might be, for fear of being pilloried, with attendant electoral consequence.

The lack of boldness can be viewed as a virtue, for it can cut both ways, leading to ignominious moments in history such as the cultural revolution, the second US invasion of Iraq, collectivization of Soviet agriculture, the Khmer Rouge genocide, and the privatization of Britain's Trains, (and other public utilities) without meaningful oversight.

Former President Carter, despite being pilloried, ceded the canal to Panama, undermined support for nasty, corrupt regimes around the world, danced on the Israeli's (and Egyptian's) head until they made peace (which uniquely has prevailed). It was hard, but he was inspired by personal belief and resolve. Pres. Obama, despite many disappointments, for all the hatred and invective, has succeeded in his fight for universal healthcare (still far from optimal), engaging Cuba (after fifty fricking years!!!!), amnesty for (mostly LatAm) immigrants - all deeply unpopular, but almost certainly on the right side of "right" in the time-line of history. Leaders are routinely shamed by bolts of Nordic or northern European humanitarianism, but it is increasingly rare for Leaders in the large nations or blocs to lead the world in doing the right thing when the occasion requires.

So, it was with great surprise and admiration that I listened to Angela Merkel's one-and-half hour speech, leading her peoples, (and hopefully her reluctant european neighbors) to do the right thing, while shaming critics, ostriches, opponents, and nationalists alike. It certainly is a shame people and nations feel little shame today (outside Japan), yet, at certain moments it remains an effective call to action, engulfing and then, like a contagion, able to overcome people's baser, visceral xenophobic fears and parochial self-interest. But it takes leadership. And an eloquence of common sense and humanity. Thank you Angela Merkel.

That Britain and both her people and government, have remained so stubbornly mean-spirited is shameful. That East-Europeans and the Irish - whose migrants and refugees have been accepted, and integrated in their times of need, have been obstinate is shameful. That America,  Australia, and Canada with their vast space and wealth have done next-to-nothing is shameful. That China and Russia have done nothing is, while shameful, sadly expected given their historical (and present) role as persecutors themselves.    
Few believe accepting and settling refugees is a solution to the root causes of the crisis. But that isn't an excuse to not act humanely and generously in the face of crisis. For it is worth remembering that events can turn things upside down quickly and you never know what side of the fence you may find yourself on. And should the North Atlantic conveyor shut down bringing a return of glaciers to Northern climes, Brits may, ironically, find themselves begging for resettlement in Libya or elsewhere in North Africa or the Middle East.

Tuesday, June 30, 2015

Life Imitates Art

Marauders, pirates, outlaws, scallywags, and gangs of opportunistic thugs have, since time immemorial, been the scourge of civilized folk pursuing ordinary civilized life. Some have been officially-sanctioned (think Drake or Surcouf), while others were banished from society to life on the periphery (think Ronin). Most, from my anecdotal observations, however, seem to do what they do as an alternative means to make a living, mimicking one of nature's bullies: the frigate bird.

This threat, ignoring the very exercise of extreme and brutal power by states seen occasionaly in history, has largely remained peripheral, though on occasion they've bizarrely intersected with The State (e.g. Queen Ranavalona of Madagascar, or the Chinese Taipings), such examples being sufficiently rare and weird as to capture the considerable attention of George Fraser MacDonald. So rare, and so weird has it been, that the exploits of larger-than-life wanton criminal outlaws, and the good citizens' fight against them, have been a most fertile subject for writers and artists, particularly those of the pulp variety.

Oscar Wilde opined that "life imitates art", an astute observation – even more apt in modernity given the wide and numerous avenues available for mass-distribution. Foremost at this nexus of the criminally weird and the crazy Prophets - whether knowingly or unwittingly – is the self-proclaimed Islamic State, eerily resembling the violent and chaotic exploits of DC's most villainous Rogues Gallery. Anarky, The Joker, Firebug, Dr. Death, Cypher, Brutale, Deacon Blackfire, The Mad Hatter, Ra's alk Ghul, The Riddler, Proteus, Puppet Master, Thanatos, The Scarecrow, Roman Sionis, all conjured from authors' fertile imaginations, can hardly hold a creative candle to their real-life mimics wreaking havoc across the no-less-fertile crescent world. This result begs the simple question: How closely have the IS leaders studied, NOT the Koranic scriptures they purport to follow, but the collected exploits of Batman's colourfully-crazy nemesii? For if it was true that Bin-Laden was a big consumer of porn, is it any further-fetched to wonder whether al-Bhagdadi, al-Anbari, or al-Turkmani and their wicked henchmen have an accumulated and much-coveted stash of Caped Crusader pulp providing them with near-limitless inspiration?

As in the self-proclaimed Islamic State and their would-be Caliphate, DC's dystopias are riddled with logic flaws and conveniently irreconcilable inconsistencies. Ignoring that the most fantastical rogues have powers that defy the laws of the natural world, I've always found it difficult to suspend my disbelief when see the armies of seemingly loyal thugs and henchmen support their evil mastermind leaders in pursuit of their [rather dubious] goals - be they revenge, sadistic lust, political domination, or financial control of planet earth. This is as true of 007's nemeses, as it is of Dr Evil's and the hordes of baddies perennially threatening Gotham City. 

Their un-Flashman-like zeal to protect and even sacrifice themselves so their leaders can escape, is only matched by al-qaeda or IS acolytes, strapping a bunch of semtex to themselves before walking into a mosque, a busy hotel or a parliament building and pressing the “detonate” button, acts that belie normal comprehension - leading one to presume that most are undoubtedly as bat-shit crazy as their leaders. Others may be merely desperate, or perhaps motivated by sharing financial gain, or the benefits of power when their New Order prevails. I suppose one might ponder the similar question as to what motivates the disciples of Rupert Murdoch, but THAT question not on the menu today. 

Though these explanations might underpin some villainous actions, IS seems to more closely mimic many other archetypical patterns in DC rogue gallery scripts. They employ mind control methods to recruit and maintain their [expendable] army of loyal followers. They wear macabre masks and hoods to both terrify opponents and hide their true identities. They typically have family-related motivations, societal alienation or back-stories driving a strong desire for revenge. They pursue more or less psychotic, maniacal and meaningless acts of murder and destruction. They are often driven by a negative hatred of someone or something rather than a positive vision. Their leaders share decided prophetic or messianic-like complexes, and often had previous lives that one would consider “normal”. They share an absence of normal empathy for ordinary people and victims alike. Their leaders are often considered to be highly accomplished evil geniuses with a penchant for the macabre. And finally, they all wear ridiculous costumes or uniforms that is obvious to all observers but themselves.

However much Gotham City resembles Sodom & Gomorrah, most of both cities' inhabitants were ordinary folk, living ordinary lives – effectively caught in the middle between lunatic wickedness and callous corruption and greed. However apt this might be of the masses' predicament today, the problem remains: how does the (mostly innocent??!) populace protect themselves from the incursions of The Crazed, as well as from their own predatory elites. History (going back 1000 years to the Salafi-like Assasins sect) and practical observation suggests random covert acts of terrorism are, by definition nearly impossible to thwart. This is true of an idiot wishing to take out a plane with his “shoe” (saved by only by luck) as it is of an idiot with a AK-47 whose (tragically consummates) a whim to take target practice on a beach of humans..

But make no mistake: life imitates art in the realm opposing The Rogues – both publicly and in the shadows. “We”, the good citizens, have a metaphorical NSA Bat Cave in Nevada (and undoubtedly many more). We have our “Alfreds”. We have special forces resembling vigilantes, whose kit & kaboodle - secret weapons, Bat Planes and Bat Drones - together whose power, resolve and destructive force both commands the respect of and infuriates the demented ones. And, like the Caped Crusader, we suffer the duality of an external existence governed by probity and by The Law with a
tacit feeling that something darker, harsher, more flexible, is required to combat the rogues...something more Heart of Darkess Kurtzian…whose soundness, in better times, might be questionable. This is, at once, both necessary and fraught with multiple dangers – both practical and existential – and is a conflict seemingly resolvable only by/with counsel and oversight from the wisest (most incorruptible, least emotional) of women (and a few men), but not by wrath. 

It is important, at this stage, to remember that Batman never really was the near-perfect Batman/Bruce Wayne good-guy of the 1960's. Truer to his origins, he is The Dark Knight. He decidedly has some baggage. So he doesn't always get it right in the fight against the sick and twisted fucks, and for the avoidance of doubt, they ARE sick and twisted fucks. And sometimes his actions, against his own better judgment, resulting from his own back-story, make things worse, however good his intentions might appear. He is, after all, meant to be, just human...

Friday, June 26, 2015

What Have The Europeans Ever Done For Us

The interior of UKIPs headquarters. A darkened room with a very conspiratorial atmosphere. Nigel Farage and Douglas Carswell are seated at a table at one end of the room. Steve Baker, dressed in Activist gear — black robes and a red sash around his head — is standing by a plan on the wall. He is addressing an audience of about eight MASKED Activists. Their faces are partially hidden...
Steve Baker:
We get in through the underground heating system here... up through to the main audience chamber here... and Junkcer's wife's bedroom is here. Having grabbed his wife, we inform Juncker that she is in our custody and forthwith issue our demands. Any questions?
Graham Stringer:
What exactly are the demands?
Nigel Farage:
We're giving Juncker two days to dismantle the entire apparatus of the European Imperialist State and if he doesn't agree immediately, we execute her.
Kate Hoey:
Cut her head off?
Steve Baker:
Cut all her bits off, send 'em back every hour on the hour... show him we're not to be trifled with.
Nigel Farage:
Also, we're demanding a ten foot mahogany statue of Jacques Delors with his cock hanging out.
Douglas Carswell:
What? They'll never agree to that, Nige.
Nigel Farage:
That's just a bargaining counter. And of course, we point out that they bear full responsibility when we chop her up, and... that we shall not submit to blackmail.
(Applause) No blackmail!
Nigel Farage:
They've bled us white, the bastards. They've taken everything we had, not just from us, from our fathers and from our fathers' fathers.
Douglas Carswell:
And from our fathers' fathers' fathers.
Nigel Farage:
Douglas Carswell:
And from our fathers' fathers' fathers' fathers.
Nigel Farage:
All right, Carswell. Don't labour the point. And what have they ever given us in return?
Graham Stringer:
Freedom of movement, so we can live in Spain and France and...
Nigel Farage:
Oh yeah, yeah they gave us that. Yeah. That's true.
Masked Activist:
And consumer and environmental protection!
Douglas Carswell:
Oh yes... protection!, Nige, you remember how polluted the UK used to be like.
Nigel Farage:
All right, I'll grant you that the freedom of movement and consumer and environmental protection are two things that the Europeans have done...
Bernard Jenkin:
And the Convention on Human Rights...pfewww...we have NO protection under British Common Law...
Nigel Farage:
(sharply) Well yes obviously the Convention on Human Rights... Human Rights go without saying. But apart from the freedom of movement, the consumer and environmental protection and the Convention on Human Rights...
Another Masked Activist:
Single Market...
Other Masked Voices:
Cross border regulation... Food Safety....Reciprocal Healthcare... Regional Development ...
Nigel Farage:
Yes... all right, fair enough...
Activist Near Front:
And the wine...
Oh yes! True!
Owen Paterson:
Yeah. That's something we'd really miss if we left Europe, Nige.
Masked Activist at Back:
Cheap immigrant labour who works hard and does the jobs no one else wants to do!
Douglas Carswell:
It IS safe to use a public toilet...
Steve Baker:
Yes, they certainly know how to keep places clean... (general nodding)... let's face it, they're the only ones who could in a place like this...
(more general murmurs of agreement)
Nigel Farage:
All right... all right... but apart from freedom of movement, environmental and consumer protection, The Convention on Human Rights, a single market, cross-border regulation, food safety standards, reciprocal healthcare across Europe, regional development, wine, speaking with a single voice whern negotiating with USA or China, and cheap labour to do the jobs British people do not want to do... what have the Europeans done for us?
Graham Stringer:
Brought peace and prosperity....! Just look at what things were like BEFORE the EU....
Nigel Farage:
(very angry, he's not having a good meeting at all) What!? Oh... (scornfully) Peace and prosperity, yes... shut up!

Sunday, June 07, 2015

Farewell Alan Bond

So Farewell

The most

You gave
Laurie Connell
a "run for
his money".
(no pun intended)

Few young specs
will recall
your name;
they should.

For you were
a case study on
the peril(s)
of paying
way too much.

you also
lots of things -

But at least
you stole THE Cup
from the Yanks
fair and

(With apologies to Private Eye and EJ Thribb)

Wednesday, April 22, 2015

FIRE !!!! (J.K.....)

Guy walks in to the shadows of a crowded movie theatre. Yells "FIRE!!!!!". People scramble to exit. Some get trampled and hurt. It's ugly.  A few skeptics remain (for the movie's still running).  Of course, there's no fire. But people are prudently herd-oriented by nature so react viscerally.  The guy emerges from the shadows, and coolly takes a prime seat - perhaps his objective all along?  Some return to recoup their sunk cost, discover the predictable ending, or just watch Clooney, Pitt et. al. remove his shirt one more time. Sure, the guy runs the risk that he will be discovered as the causation of the chaos and mayhem. Sure, one of the larger and more muscular of the "victims" might punch him in the nose or break his leg(s). Or theatre management, might call the police, whether for civic purpose or liability containment. Others have employed the ruse successfully to obtain prime seats, with similar consequence. And despite its occasional reporting in the press, patrons, out of self-preservation, still react with the same visceral flight response. Sometimes they act in concert as two FIRE!!-Criers!! are more credible than one.  

But somehow, in electronic financial markets, such ruses, ploys, and games, are discounted by apologists - be they HiFTers, libertarians  (despite prevailing laws and regulations) and the recent arrest of the alleged perp accused of initiating the cascade. Why should one think it decidedly unacceptable in civic life, but somehow victimless, harmless and tolerable in financial markets?  I think there is some hypocrisy about.The beauty of electronic exchanges is that there is there is a record and audit trail that easily permits measurement and enforcement of acceptable behaviour as defined by the rules. Egregious behaviour (spoofing, layering, etc) should be glaringly apparent and is easily discoverable by the even the most amateur of data tinkerers. Canadian SEDAR requires blue-sky disclosure of MF time and sales (something the US should emulate for MFs and HFs). The failure of exchanges themselves to investigate and exorcise the demons (or facilitate availability of the entire package of participant-specific quote-level data to all investigators) leads one to imagine that commercial conflicts are rife (as if we needed further evidence. 

That exchanges themselves, and industry organizations have ignored/are ignoring this is perhaps not surprising. However the most striking [risk-management] issue - whether at the exchange, clearing-house, or executing broker or clearing broker level is the apparent total untethering of what a modestly-capitalised west-london punter can firmly enter and display on one of the most visible and largest exchanges in the world from the resources of that same modestly-capitalized punter can muster to make good the entry of orders for purchase, or sale of the leveraged positions, let alone the underlying magnitude of these positions. One wonders whether markets would have been similarly effected if participant-level disclosure indicating that  Navinder Singh Sarao's modest account was touting these bids/offers or merely some indicator that the posted buyer/seller had no chance of fulfilling commitments.

Tuesday, March 24, 2015

Yellen Isn't Yellin' Anymore

During times of liquidation, panic, and revulsion, when authorities are trying to establish a definitive floor under asset prices, and create an atmosphere of greater confidence in order to assuage fears and encourage longer-term capital investment, there is reasonable benefit clearly telegraphing policy intentions. Speculators may (and probably will) use this elevated level of certainty to front-run actual "real" flows. And this is fine and good since desired policy outcomes (at such times) tangibly benefit from the reduction and/or elimination of speculative short positions (or at the very least refraining from disinvestment or erstwhile liquidation). Policy objectives, are further hastened by speculative flows, at least initially, whether by confidence-bolstering or behavioral feedback effects.  While the promise of backstopping is real, the primary effect results from old-fashioned "jawboning" to harness otherwise pro-cyclical flows to stabilizing, counter-cycling effect. At such times, it likely that just credibly stating that one will pursue certain stated policy(s) with defined objectives is often more efficacious than the implementation of the policy itself - the operative word being "credibly".

There comes the point in the inevitably-cyclical process - recent context being QE2 or QE3 or the present (choose your poison) - where fear of the abyss has passed, and when prevailing policy's "certainty", is extrapolated and viewed as providing perennial and asymmetrical risk-reward, or a proverbial "free lunch", irrespective of the extraordinary conditions for which it was originally conjured, and its decidedly-temporary nature when seen in an historical context. This is the moral hazard that policy certainty can wreak in general, and what disturbs me about ZIRP/QE in particular. The macroeconomy, in its aggregate investment decisions, typically overshoots sufficiently well without the further help of leveraged, speculative flows. There is little to done about The People making overenthusiastic coincidental investment and consumption decisions on the basis of the recent past, outside the modulation of traditional fiscal and monetary policy. This IS the business cycle.

Given the size of the financial economy in general, the increasing size of trading-oriented, leveraged investments, and feedback-related trading and risk-management styles, and the general hordes within the momentum-driven electronic herd, much of which is focused upon, and driven-by observing rather arcane nuances in policy, central-bankers in particular should, rightfully, be mindful of aligning the aggregate animal spirits in the general economy with leveraged financial speculation attempting to game perceived policy certainty.  In short, in order to deter leveraged speculative activity at such times, when it is, as Rumsfeld might have termed, "decidedly unhelpful", i.e being pro-cyclical well-after the sell-by date of its usefulness, markets periodically NEED to be spanked. They NEED to understand that policy should, and will be, data-dependant. That might include whipsaw moves in rates and prevailing policies, even if sub-optimal with perfect hindsight. They [markets] need to understand there is no certainty, and no free lunch. And as more and more investment becomes rote, algorithmic, and systematic, these models (and their programmers), too must incorporate uncertainty at levels that incorporate longer-frame regimes than many systematic macro and risk-parity strategies contemplate or integrate, or other endeavors that overweight recent regimes at the expense of the more-distant-but-not-wholly-irrelevant past, or the next. Should one doubt the benefits of such an uncertainty principle,  simply imagine the wild rumpus that would ensue following universal pursuit of the free lunch. Some would argue we're already there (though I am not so stridently convinced despite sympathetic caution).  

Pulling away the milk-teat is never easy. Markets will need to get used to a return to policy uncertainty. There is significant momentum in the real economy, and it is likely it will not be derailed by a bias towards higher rates, or marginally-increased financial market volatility. We should not shed a tear for those Icarii who get run over by it's process.  I've no problem with the authorities acting as "Lender of Last Resort", or the idea of their provision of liquidity as systemic backstop. But precisely "where", and "at what cost" should remain ambiguous to prevent the cleverly rapacious psychopaths amongst us from [trying to] test their boundaries and aggressively game it. In this regard, the fact that Yellen isn't yelling [specific certain forward policy guidance] anymore is highly appropriate.  Get used to it. Embrace it. And remain mindful of charlatans with strategies overly-dependent upon mindless extrapolation and leverage.

Thursday, March 12, 2015

That FANUC Reply to ThirdPoint (in full)

Giving is Easy - Taking is Hard

Despite the occasional satirical joke, I've never had a grave problem with QE. Like many other sober-minded observers, QE, seen in its temporal context, was one of the few available weapons to put a floor under floor asset prices, finance the large counter-cyclical deficits thus preventing the worst of a delveraging-induced revulsion and associated dislocations of unemployment and output gaps, in an otherwise spartan policy armory. The limited policy options were partly due to rates' proximity to the ZLB, partly because of the difficulty in building consensual responses in an acrimoniously-divided polity and, yes, partly because of the moral furore surround culpability four the crisis.

Though my concerns about tin-foil hat hyper-inflationary fears were near-zero, so too were my expectations that QE would be a panacea. QE, was, never going to be a cure-all, but was decidedly positive whatever critics may say - if only for psychological, confidence-boosting affirmation that the authorities would not stand idly by, holding their willies, passively witnessing a liquidationist resolution, however-much Austrian School proponents were hankering for one.

With memories of Japanese premature fiscal withdrawal still fresh, I believe history will see QE2 as a useful example of trying to avoid past policy mistakes, by making sure foundations of recovery were sufficiently strong before modulating countermeasures. In isolation, it will not be judged harshly. QE3, from the start, was seen by many, as more contentious, and I also agree with their reservations. Growth IMO was sufficiently on its way, and would, (again IMO), have continued similarly without further asset purchases. However, seen in the context of Euro jitters, the silly sequester battles, Arab Spring upheavals, QE3 should also be seen as the Fed's attempt to prevent large political uncertainties from systematically undoing the meaningful progress. And while I was, and am, concerned about the embedding of Pavlovian behavior, I believe there was (at least some) merit in their response and we should accordingly throttle our harshest judgements. The alternative outcome will remain hypothetical, but the actual result of continued growth, faster-than-expected fiscal consolidation, straight-line drop in unemployment and emergence of real wage growth is hardly worthy of too-severe recrimination.

Maybe one-day, social scientists will accurately factor-analyze the transmission mechanism. Was it the QE-induced, low rates themselves? the psychological boost of asymmetrical forward-looking asset-price expectations given a newly-communicated floor?; the asset price market values, capital gains and their multipliers resulting from QE?; the multiplier effects of seamlessly funding counter-cyclical government expenditure - both automatic stabilizers and pro-active stimulus?; or was it just the generalized normalization of economic activity by removing fear of A Great Depression and feared Zerohedge-like survivalist dystopia? I invite readers to offer their attributions of choice and associated weight of contribution.

Whatever one's attribution, no one can ignore the obvious cumulative result of QE and its interactions: asset prices far and wide have soared as a result of the policy, creating unimaginably-large "windfalls" to asset-owners through little cause of their own. Attempts should have been to "sterilize" at least a portion of windfalls - through targeted fiscal policy - partly for reasons of fairness and equity, and partly to deter the systemic gaming in speculative leveraged bets upon one-way economic and financial policy.

How quickly investors forget. If you'd asked large asset owners in late 2008, or early 2009: "Would you give up a tranche of the future capital gains in asset prices in exchange for a floor under prevailing prices, and the near-assuredness of significantly higher asset prices in the future?", I am quite sure of the answer, given the widespread systemic fears and paucity of alternatives at the time. Investors, after all, pay 2&20 to HFs and PE for essentially the same (pre-tax) premise. Was not QE effectively the same proposition multiplied across the entire economy? The liquidationist alternative was clearly unpalatable to asset owners, and sub-optimal for nearly everyone else. IF, as the result of a policy directive, you bestow large windfall gains, it would be only fair to harvest a an additional share of those for the Public's Interest, since the goal of QE policy was NOT to further stoke inequality, nor accelerate the growth of fortunes for existing asset owners, but rather to prevent unnecessary liquidation, and deflation so private-sector balance sheet deleveraging could work its course, and to foster stability, so reviving private investment decisions in the real economy. But, as it happens, giving is far easier than taking away - irrespective if you're a welfare deadbeat (not my language) or a leveraged rentier.

Pundits and critics from the right rarely miss an opportunity to point out the inherent difficulty of unwinding government programs and bureaucracy. It is a criticism worth noting. For bureaucracies and organizations often assume lives of their own and wills to survive long-beyond the sell-by date of the problem or policy purpose, defending their mission and rights to exist with intensity and vigor. Once laws are enacted and forces mobilized, introspection is a novelty.

Yet, the same pundits and critics refrain from similarly-inspired criticisms when it comes to the beneficiaries of QE, and the protection of their windfalls. It is baffling. The right, politically, hates QE, and all that it stands for, but surely all of Jim Bunning's or Rand Paul's tirades would have been put to better use to promote some sterilization policy that would ameliorate the less-desirable side-effects, efforts that would not damage their populist dogma (excepting perhaps their relationship with Grover Norqvist)

Asset owners peculiarly act as if such windfalls somehow resulted from their own brilliance. Many, through every over-leveraged fault of their own, were a pubic-hair's breadth away from financial obliteration, saved by US - and I don't mean the United States, but rather you, and I, as representations of the taxpayer, or bag-holder as the ultimate underwriter of newly issued debt. Others - particularly in the tech world and on the left coast - are blind to the benefits wrought by munificence of The People, and the abundant liquidity finding its way into every inane crevice, and spilling over to provide VC's and PE investors exits at multiples unimagined even three years ago. And the "thanks" that all those west-coast libertarians afflicted with self-attribution bias, is to piss on the under-class who serve them, and wish for a Randian offshore tax-haven to insure they share as little as possible with the undeserving multitudes. These gripes are academic, but asset-owners would do well to reflect upon their self-attribution bias.

As a markets person, my concerns with QE (particularly QE3) remain consistent with concerns expressed in the past at one-way CB interventions. That is to say, it likely creates a moral hazard whereby financial institutions and speculators lean on the policy backstop to front-run, lever-up (be it risk-parity; duration, credit), in ways that ultimately create more systemic risk, volatility, sowing the seeds for future dislocation, and likely requirement for public market stabilization [again]. Such hazard is amplified by lack of sterilization. I admit I don't know precisely how it might be implemented, or the optimal boundaries or details, just that fiscal policy deterrents would help diminish some of the negatives to society of one-way unsterilized monetary policy largesse gifted to large asset owners caught in the happenstance of monetary policy.

Friday, January 23, 2015

"Pulling Out All The Stops"

Journos, observers, commentators, bloggers, traders, analysts, strategies, newscasters, reporters, and so it seems just about everyone else has a view on QE. And the result is overwhelmingly INTENSE. They've PULLED OUT ALL THE STOPS!!!!. No, not the ECB. I mean, anyone writing about the ECB's announced policy actions.

Below is an exhaustive (hyperbole?)list of the terms and associated language casually garnered from almost all the QE headlines and articles over the past few days. One could of course forgive any single instance of excitement, but in surveying the landscape, it's clear something's in the water. Especially in the United Kingdom (the nation with the highest and most pernicious sustained primary deficit, and a grand-canyon-sized CA gap - NB: intentionally exaggerated language) which is the source of most hyper-ventilative language (yes you guessed the Telegraph & Ambrose E.P. wins again). Even the usually-dry FT leapt on the bandwagon (sorry - OTT metaphoring is infectious), and sober BBC "joined the party" (drats!I did it again). Just have a look....

pushes-the-button on
financial bazooka
shock & awe
severe reservations
wrong type
tensions simmer
inevitably fail
deservedly fail
last throw of the dice
won't save
will not solve

Poor Draghi must feel like he's been gang-raped. OK, so it's "momentous", unprecedented" blah blah blah. Really? Euro 1 trillion (including existing programs) over the course of a year across an economy sporting GDP > EUR14 Trillion; Net Assets> (I've no clue but'll stake a stab...EUR 70 Trillion??)....hardly worth losing one's integrity over, considering all the program's practical limitations. As it happens, the Irish, and foreign obserservers writing in ENglish (India, Japan) were the most measured and least hyperbolic, using neutral language and refraining from the gratuitous ummm errr gratuitousness with words tethered to reality like.


Yes, the latter list is short...

Friday, January 16, 2015

A Recursive Crisis of Faith in My Chosen Lack of Faith

Uncountable belief paradoxes, logical flaws and non-sequitirs.
Magical thinking.
Legitimacy of dubious Profits.

One would be forgiven if one's first thoughts turned to the financial industry. Rather, as a sympathetic [amateur] satirist, I am of course referring to religion.

Such is my dismay at the actions of people claiming to speak, and act in the name of God - emphasising that this net is cast wider than Charlie Hedbo's assasins - I am beginning to seriously question my own faith in my chosen lack of faith - The Church of the Apathetic Agnostic. CAA's basic creed is simple: there is little point to arguing about something that neither can be proved nor disproved, though, even if a Supreme Being exists, he/she/it displays little concern for the affairs of humanity, so it's only sensible to requite with similar apathy. However, when the faithful project their inner beliefs outwardly, in a manifestly violent manner, I begin to wonder whether we need to respond with more serious weapons. Dawkins? Perhaps. But hardly as potent as...