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Showing posts from July, 2009

The Big Picture: calls bullshit on china growth

Barry Riholtz is a great read. Sometimes TBP can be downright hilarious and clever.

Barry runs 5th grade math to debunk popular myth of china growth (23%!!!). His findings are that either a/ china is lying through its teeth b/its monetary mass has grown by 23%.

Of course it is c/ all of the above. By controlling monetary mass, china controls monetary gauges of economic activity. Much like the FED enjoys this role in the US. Barry basically is saying that all of the growth could have been a monetary mirage engineered by the financial authorities.

Just like it was in the US. What with loose monetary policy since deregulation happened. In the US the monetary mass was set by the private sector. Naked CDS in default, they are the latest in financial aphrodisiacs. Money-vampires, they may have caused the liquidity drain that triggered the quant-panic implosion of aug 07.

Little souvenir of a terrible year, writing and depression

It's that little souvenir of a terrible year
which makes my eyes feel sore...
from Here’s Where the Story Ends by the Sundays

Adapted from a letter to a good friend

… the work and adrenaline keep you from thinking too much. Sometimes, that’s a good thing. It’s the down time, you’ve got to watch out for, the slow-growing doubts and anxieties that creep in the void. After 5 years of building a company--eating, sleeping, living and breathing that entity, and caring a lot about a lot of the people we worked with, selling it felt like selling a child. If the purchasing entity’s culture is radically different from your own, and (you may feel in your less charitable moments) represents everything you built your company as a reaction against...that feeling is compounded. You can out-do the haters, writing your own epitaph. Not that this maudlin navel-gazing will generate much sympathy among your friends and acquaintances, either. You sound like the jilted ex-wife, complaining about the new …

Economics in crisis

I am in ATL for the past 3 weeks and bored out of my mind. Thank god I got a trip to NYC tomorrow to work on OpenRemote a bit. Meanwhile I browse the economic commentary. There is a great article this morning in the FT about Economics in crisis. Read it, it is short and sweet and touches upon many of the topics explained in the "dummies" series.

The gist of the argument is that there are two camps, Ricardians and Keynesians. They disagree on basic problems facing our economy. The debate, including pro-eminent Nobel prize winners, has degenerated in schoolyard name calling without much progress being done on "the truth".

I agree, this does not look good. Whenever, in software development, I would see flaring arguments go up, I knew that 80% of the time the issue at end was irrelevant because unknown. Meaning when there is no "right or wrong" yet, because we just don't know what it is or because it doesn't matter.

So the root cause for me is one of…

Google Chrome OS.

It is as big as the death of MJ. The new OS by Google. To be delivered 2010.

Can Google finally unify the Linux camp and beat Apple? I believe they can. For me, OSX is a great OS in the sense that it is robust, usable and yes, pretty. It just doesn't get in the way. But then you can say the same of gmail and blogger. They are great products. They work, they are easy. Pretty? no... but hey, it is web software.

Of course a side of me cannot help but cringe at the thought that this is yet another pet project by Google. You know the kind. It crashes, it doesn't really work and it barely makes sense. You wonder if the project is seriously supported by Google or the pet project of Huan "zig-zag" Tseng, employee 43083.

And yet I hope they will pull it off. This feels different. Real. They have pulled off mail, blogger and docs in a relatively easy way. Android is an interesting project. At Open Remote, it makes all the sense in the world to have an OS that boot…

TF20: Indie Pop

Download.

Time for an indulgence. I have a sweet tooth for Pop. I was a teen in the 80's. There is excellent stuff being done today in the indie dance genre, which is really pop revisited with dance rythm and modern production. There is downright good music in there.

This mix was assembled with relatively new material, most within the year. For throwback there is some 80's raw. This is all originals, made from original, there is almost no production. It did take a long time to work on transitions. I threw in there two originals from the 80's, spot them.

Playlist: French, Yelle, a modern version of an 80's classic. Yelle has been specializing in porting old french pop to modern times. Computer Camp Love, 2009, catchy tune, very modern, funny lyrics. Needy Girl, by Cameo. One of the best tunes this year all around. The bassline is borrowed from the 80's original that is overlaid in the beggining, Rumors... There is another bassline in there that you might …

The fallacy of rational expectations

Rational expectations is how most modern economics models agents. In equilibrium, agents will choose the option that optimizes their outcome. This assumes a tremendous intelligence on the part of the human.

It is plain obvious our race does not possess this quality. Our decisions are faulty, made with partial information, based on gut instinct, sometimes just plain dumb.

Think about Ponzi type II investors. The investor speculates that the price of houses will go up, spurring demand for both credit and houses. This sparks a self feeding loop of a credit bubble and a housing bubble. This ponzi scheme is stable in the short term, even highly profitable and can go for awhile and becomes generalized (7 years?).

You will start hearing "real estate ALWAYS goes up" and other stupid things. In retrospect this is a sure sign the Ponzi is about to blow. People can rationally build up expectations that the market will go up based on short term experience and ignore the rational …

The Oil Glut

Nathalie went to bed one night and told me "I want to invest in oil". Oil was at $32, I believe this was 4-5 mo ago?. I went online to research just how one invests in oil. I read about Contango, ETFs and owning oil tankers. I realized a big part of the cost is the ongoing cost of storage. It seemed complicated and not terribly interesting. I told Nathalie I had no appetite for risk. Today Oil stands at $65.

Via naked capitalism, an article on supply and demand. Basically the short term supply is going to be huge. So downward pressure should increase. The article forecasts oil at $20. Mind you, before the bubble in commodities, I had read an article stating that oil would go from $70 to $50. It was basically right, even understated, considering that oil went to $30 but after having visited $150.

Such volatility in market pricing is mostly the result of the futures market. Any time someone tries to compute spot from futures, there is a lot of guess work going on. Also …

Buiter on credit and naked CDS

Excellent article by Willem Buiter, professor of econ at LSE, in the FT. I want to quote a few passages


Despite inadequate supervision and regulation, the financial innovation process that started in the final quarter of the 20th century probably improves overall economic performance during normal times. It does, however, increase the likelihood of abnormal times—panics, manias and crashes—occurring, and exacerbates the scope and severity of financial crises.

Those that have been following the for-dummies series will be able to dissect this sentence easily :) It is the monetarist argument in Buiter-speak. He writes well and fluidly but is a bit opaque imo. Financial innovation of MBS and associated CDS did result in a rapid increase of the total monetary volume. Buiter says


When risk is mispriced and misallocated, financial crises and collapses can occur. Financial crashes and associated defaults and bankruptcies are socially costly because they involve a waste of real resources as w…