Maison Fleury

Yello Bostich, Remix contest at Beatport

2009-11-26T23:42:00.000-08:00

What does a guy like me, with way too much time on his hands do for fun? Well those that follow the production on this blog know I have a passion for mixing electronic music. Getting familiar with the tool Live by Ableton, has been a ton of fun over the past 2 years.
Yello Bostich -- Strange Creatures Remix by marc fleury
Recently Beatport (one of the biggest DJ download sites) has been running an open Yello contest to remix Bostich and Oh Yeah! (Oh Yeah was their biggest cross-over hit in the 80's). I have picked up Bostich because it was typical Yello for me, crazy fast music with moments of lyrical/chorus genius. I try to key on those elements and stretch them out, replay them in a different order. Besides the drum beat, that I had to redo, everything else is from the original with just sound work. Interesting how the resulting sound is techno.

KNOWLEDGEABLE FEEDBACK APPRECIATED ON SOUNDCLOUD ENTRY.

Exponential Monetary Growth under Basel 2

2009-11-20T10:36:00.000-08:00

I have been reading this working paper by Trond Andresen.

ABSTRACT: A Basel-type bank regulation regime has the side effect of endogenous money growth. The growth rate turns out to be inversely proportional to the required minimum capital/asset ratio. This money growth contributes to avoiding debt crises, as opposed to non-bank lending which increases debt but not money stock, and is therefore dangerous in the long run. Banks often prefer to sell loans onwards. It is shown that this doesn't only decrease the bank's risk, it may also imply faster asset growth for the selling bank by allowing an increase in the flow of new extended loans.

I will try and present the equations of the first part, offer a generalization of the framework, and briefly discuss the results.

The papers look at the balance sheet of an idealized bank, it has assets, and liabilities. Double entry accounting states:

Assets + Cash = Debt + Equity. (0)

Which can be read as all assets and cash need to be coming from debt or paid-in equity. This equations holds in time as the bank starts earning money. Equity is then defined as liquidation value, where you liquidate all assets, add cash, pay debt and what is left is distributed to equity.

The quantities studied are:

A, the amount of assets the bank holds. This is the amount of loans that are extended. A loan is something that pays ia*A to the banks (think of your mortgage, a 7%). It cost you ia*A ($/YR). This model captures bad debt in the form of lambda*A. Lambda is the rate of default on debt. Think about sub-prime, lambda was assumed to be 15%, it turned out to be 30%. It also models repayments as r*A, r being the portion of loans repaid per year. The assets also grow at the rate of new loans which we call l.

The equation of growth of A (noted A') is straightforward

A' = l - r*A -lamda*A (1)

And reads "The rate of growth of the assets is the amount of new loans minus the loans that are repaid minus the loans that default". If you can read the above equation as the sentence, nothing more complicated will be coming your way.

The equation for the growth (rate of change) of Liabilities is the following

L' = l -r*A - beta*(ia*A-il*L) - ec (2)

The first element is l is the same the new loans. The reason they show up here as well is that all cash that is lent by the banks is deposited back in the banks.

r*A is the amount of loans that are repaid. To repay a loan you pay with money from your deposit. So it is substracted here.

The bank makes money on the difference between the rates in and out. It gets paid a flow ia*A (think your mortgage at 7%). In turn, it pays, il*L to you on your deposits (think 3%). That is captured by the flow (ia*A-il*L). The flow from operation is the profit margin of this flow, which we call beta. Hence the beta*(ia*A-il*L).

Here, compared to the Andresen original, we have introduced a new variable ec as the amount of paid-in capital raised during the period. This is a flow of new equity issued.

We define C as the amount of cash the bank has on hand. Cash grows as the company makes it from operations per the rate above or it is raised on the markets. Cash in turn is drained as it is loaned out, we call this flow lc. This is captured by the following equation on the first derivative, or rate of growth of C which we note C':

C' = beta*(ia*A-il*L) + ec -lc (3)

new loans are created all the time, this is where debt money is lent into existence we call this flow ln. The total amount of loans at each period is:

l = lc+ln (4)

These five equations define a banking sector that emits debt money, raises capital, generates earnings.

As a further requirement we impose a Basel 2 constraint on the system. It is defined with the capital ratio, where capital/assets is not to go below a threshold we call k.
C/A = k (5)

Equations (1-4,5) define a simple model of a bank under Basel rules.

To study it, we can at this stage run computer simulations without loosing generality. However we can introduce further simplifications to find the Andresen equations.

Specifically if we impose C'= 0 and C=0

(5) <=> (A-L+C)/A = k <=> A(1-k)=L

Or a hard linear relation between assets and liabilities, expressed by k.

and

(3)<=> lc = beta*(ia*A-il*L) + ec

Which simply states that all cash-flow from profits and paid-in equity are recycled as loans in this assumption.

Then (1) resolves to

A' = (beta*i-lambda)/k*A + ec/k (6)

With i = beta*(ia-il*(1-k))

(6) is the slightly generalized form of the Andresen differential equation. ec is in practice a function of time, the amount of cash raised by the banks over a period of time but if we simplify by assuming ec=0 (no cash raised) then (6) resolves to the Andresen case which has the solution:

A = A0*exp(gt) (7)

defining

g = (beta*i-lambda)/k) (8)

Assuming all cash flow from operations is relent out, assets will grow exponentially with time under Basel 2. QED.

A comment on debt money growth rates

Look at equation (8)

If beta*i > lambda, then g > 0 and debt money grows exponentially.

If however bad debts spikes beyond the capacity of the business to generate free cash, then

lambda > beta*i <=> g<0

In this case, the debt-money supply needs to shrink exponentially to satisfy Basel. In other words, Basel compliance means a deflationary dynamic after a bad debt shock. A shrinking money supply can trigger a deflationary depression.

Equation (6) offers some relief but means new equity needs to be raised to satisfy A'>0.

Next we will look at central banks and how deficit spending can stabilize the money supply.

What is Thanksgiving?

2009-11-19T09:48:00.001-08:00

An English woman asked me this simple enough question today. Thanksgiving is the biggest American family holiday. It takes place on the last Thursday of November and is also the biggest air travel date in the US. As a family holiday, it is associated with all the things people usually conjure up when they think of family obligations, and people they only see once a year, with whom they may or may not get on well. My favorite movie about Thanksgiving and the modern American family is Home for the Holidays starring Holly Hunter.

In grade school, American children dress up as Pilgrims and Indians and are taught how the Pilgrims escaped religious persecution in England and gave thanks for their very first successful harvest in the New World, with a celebratory feast to which they invited their new friends, the Indians. Of course some of these escapees of religious persecution didn’t turn out to be the most tolerant people themselves. Then perhaps the Indians weren’t thankful when we later killed them and took their land, but only kill-joys bring that stuff up.

Thanksgiving also comes with various required dishes that many Americans hate, but prepare anyway because otherwise it wouldn’t feel like Thanksgiving—the chief ones are turkey, sweet potatoes, wild rice, cranberries and pumpkin pie. Depending on your individual tastes, the recipes you select, and your cooking ability, these dishes can either be mouth-watering or stomach-churning. In my case, having a Mother Who Could Cook turned me into the worst of both worlds--a judgmental eater, who never bothered to learn any of the basic holiday dishes because there was always somebody there willing and happy to cook them for me and everybody else.

Since I will be away from home and want to cook my own Thanksgiving dinner, my good friend has suggested I go to the Butterball website, which even has a turkey hotline. Whenever, I despair of my country, I am comforted to see this return to our roots and thoughtful marketing, aimed at me, the consumer. The Butterball website dispenses useful information like how long to bake your turkey based on its weight, how big a turkey you should get based on the number of people you are inviting and a recipe selection that caters to the two Americas—those whose lofty and unachievable ideals that lead them to attempt a demi-glace once a year, and those who happily grab the bouillon cube and water; those make their own pie crusts and those who grab the ready-made variety off the freezer shelf at the grocery store. In the US, there’s even a new option for centrists—the roll-out circle of pie crust that you can feel good about pressing into your pan, sometimes it’s even made with real butter.

A family member who once worked in Unilever’s baby foods division described the middle-ground consumer as the Holy Grail of Marketing. I asked her what Unilever thought about women like me who breast-fed for a year and made their own baby food? She said: “We don’t even bother to try and market to people like you. Our ideal consumer is the guilt-ridden mother who is willing to pay more to give her baby healthier off-the-shelf options.” After four children, whom I duly breastfed and made healthy home-made purees for, that woman is me! I’m glad to learn that I matter, that someone cares. Thank you for giving me those choices Butterball!

By the way, it was once brought to my attention in blog comments, some of you are offended by the fact I and other citizens of the US call ourselves Americans. Yes, some of us are aware that we are only one country in the continent of North America. However, if you can’t find any grossly more offensive use of imperialist, Euro-centric, US-centric linguistic manipulation to focus on, shame on you. Please devote your energies to finding and marketing a better alternative, preferably identifying with the struggle of indigenous native peoples…and not a16th century Italian mapmaker.

Book Review: The Hemingses of Monticello

2009-11-19T05:58:00.000-08:00

I picked this up as an impulse buy at the book store, and I'm glad I did. Like most Americans, I associated Monticello with Thomas Jefferson. Although I hadn’t read any Jefferson biographies, what I had read about him lead me to admire him as a Great Man of the Enlightenment—humanist, writer, builder of nations, universities, and of course, his own very lovely neoclassical house on a hill—Monticello—Italian for little mountain.

I wasn’t ignorant of the contradictions of the writer of “We hold these truths to be self-evident: that all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness…” being a slave-owner, who had a long-term relationship and fathered multiple children with one of his slaves. I just didn’t see the interest of commenting on the obvious contradictions or indulging in historical “what if” fantasies. Thankfully, neither does Annette Gordon-Reed.

Her book is not about de-bunking Jefferson. She’s more interested in members of his family, about whom much less is known—the eponymous "Hemingses of Monticello". Gordon-Reed focuses on the Hemings for two convenient reasons: their connection to a well-known American historical figure, the fact that, due to this connection, there is somewhat more documentation about them than their peers in the plantation South.

What did this South look like? Gordon-Reed describes a pre-Revolutionary population of opportunistic frontier pioneers, living off tobacco as a cash crop. The English govt. gave the settlers land based on a head-count system—a certain number of acres for themselves and every other person whose passage they paid to the Colonies. Over time, the primary labor for the plantations evolved from English-born indentured servants to imported, enslaved Africans and their descendants. She explains that the typical Colonial plantation-owner was deeply indebted, usually to English trading firms and speculates that the self-interest in canceling that debt, as well as the Colonists’ desire to further encroach westward into the Indian lands (limited by Britain pre-Revolution) were less lofty ideals that may have accompanied “no taxation without representation.”

The story begins with Elizabeth Hemings, the daughter of an African-born woman and an English ship’s captain. There is some evidence to the effect that Hemings’ father recognized that he had a daughter and may have wanted to free her, but could not because her mother was the property of another man, who refused to sell her. She explains how, the word mulatto, for mixed-race people of African and European descent comes from the word mule, an animal that cannot reproduce itself—that the Colonies had laws against miscegenation but they were only applied to poor whites or situations where the mother was white and the father was black. When plantation-owners like Jefferson’s father-in-law, John Wayles, took slave mistresses, like Elizabeth Hemings, and fathered children with them, the law looked the other way.

The growing number of these mixed-race children and the constant fear of slave revolts, caused the colonists to significantly depart from English law. The English tradition would have granted the child the legal status of the father, which would have meant freedom. Instead the Colonies looked to Roman law as inspiration, basing a child’s legal status on that of its mother—thus the children of free fathers and enslaved mothers, would remain enslaved.

The Hemingses were Thomas Jefferson’s family in the literal sense, not just from a paternalistic plantation owner’s view. Many of Elizabeth Hemings’s children were his wife’s half-brothers and half-sisters. When he married Martha Wayles, Elizabeth and her children came with her to Monticello. One of these half-sisters was Sara (called Sally) Hemings, who became Jefferson’s mistress and the father of his children, after his wife’s death. Gordon-Reed explains how the Hemings family’s mixed-race status and blood connections to the Wayles/Jeffersons gave them a privileged status at Monticello—many of them were taught to read and write, they were given better clothes than their enslaved brethren, taught trades, exempted from field labor, given more freedom of movement. Some members of the Hemings family eventually received their freedom, something that would not be an option for the enslaved people of Monticello, outside that family. Gordon-Reed makes the point that house work, while physically less taxing than field labor, was certainly arduous enough and presented the stress of negotiating emotional and physical proximity to the plantation masters. It also cut them off from the more Afro-centric traditions/culture that the fieldworkers were able to maintain.

Gordon-Reed is careful about not generalizing or making assumptions where they cannot be made. She notes that an enslaved woman, like Elizabeth Hemings, could not refuse sex with a white man, whether the children that resulted from these relationships were the product of rape, or whether there existed some emotional attachment with the children’s father depended on individual circumstances, not documented for the historical researcher. She notes that the same was more or less true for white women and their husbands. While these women had a relationship that existed “in law,” they often did not necessarily choose or love these husbands.

One of the more striking facts that I learned about Jefferson is that his wife died from complications resulting from her frequent pregnancies and childbirth. Gordon-Reed points out that while he apparently loved his wife and was inconsolable at her death, he could not have been ignorant of his role in the circumstances causing her death. On her deathbed, Martha Jefferson made her husband promise never to take another wife, a promise Gordon-Reed speculates was likely motivated by her own experience with two stepmothers and the desire to protect her children. Jefferson kept his promise to his wife, and later when seeking another outlet for sexual companionship, looked no farther than with her enslaved half-sister, thus keeping it all in the family, with a woman who did not have a legal status and could never be a step-mother to his children in the eyes of the law.

I haven’t finished the book yet, but it does shine a not-very-comforting light on a not-so-distant era, a world where the children of the plantation owners would be given an enslaved child their own age to be a companion and later servant, a world where the house on the mountain is a symbol for the desire to aesthetically and morally distance oneself from the harsh realities of the plantation economy and the enslaved peoples that make it work; a house that was literally built and run by Jefferson’s own mixed-race family members; a reminder that the leisure to pursue the accomplishments achieved by Thomas Jefferson were underwritten by the enslaved labor of the people who tended to him, to his family, and his plantation. It also gives a face to those enslaved people, and looks at how they carved an identity for themselves, particularly, how a mixed-race family like Hemings both benefited from and paid a price for the different and ambiguous status they occupied within the Peculiar Institution.

The apology of Geithner: AIG

2009-11-18T08:21:00.000-08:00

Geithner was pewned like a noob. Yves Smith of naked capitalism wants Geithner lynched for how he handled the AIG situation. This was covered in another entry called "don't send a boy to do a man's job" namely that Geithner, could have negotiated a better deal than paying PAR on CDS.

It gets a bit technical but bear with me.

One first important fact is that in the CDS bucket AIG was holding there was a 4:1 naked to covered ratio. Why is this important? SocGen and reportedly Calyon and DB all held the CDOs. So these guys were taking serious REAL losses on subprime. But for each one taking a loss, there were 4 just SPECULATING, mostly worldwide Hedge Funds through primary dealers IB.

A first real shame, imho, is that these speculating HF clients would have taken NO LOSS on a default of the payments but the premium they paid, the notional was never put in play by these guys. NAKED CDS IS THE FIRST SPECULATING ABSURDITY. G-boy could have in principle said "you and you were speculating, not taking real losses so screw you, we are not paying jack shit, go fuck yourselves". Of course in real-life this means a bunch of law suits and contract breaking and is plain impractical because see below.

But to put things in perspective, guys like Paulson (not Hank, the hedge fund guy) were deified as the “geniuses that saw it coming and pocketed $2B out of it”. Top dogs indeed! I squarely put the blame at the feet of the instruments of mass destruction they used, NAKED CDS on synthetic and straight subprime CDOs to speculate. Run some numbers: if Paulson personally made $2B and assuming he gets 50% of a 20% performance fee that means the fund brought in $20B (at least, if he gets 10% it was 100B the fund brought in), well RIGHT THERE is your CDS mess money. And how do we pay for it? with hunger in the US! I am not even joking or being facetious on this one. The direct result of the massive speculating was an amplification of damage.

Second, I am trying to replay the picture in my head, I am not sure G-boy had much room to maneuver. It is the “fait accompli” theory. He had his back against the wall. Let me try and explain how I see it.

GS and most Investment Banks (IB) were just holding back-to-back agreements.

Case A: One hedge fund was long, the other short. IB has no beef holding 2 canceling swaps, one short one long with 2 HF. I will call this HF-HF

Case B: One hedge fund was short, bought from IB, IB re-insures with AIG, the final trade has a structure that looks like AIG-HF, as opposed to HF-HF.

It is speculated that panic of AUG 07 was triggered by the unwind of a large portfolio of HF-HF. Remember that naked CDS just created 4 times the volume of liquidity that was put in the first place through CDOs on subprime. This to me is a mind-boggling mistake since it created a LIQUIDITY IMPLOSION. Quants started barfing. If the subprime debacle was $250B of real losses, a 4x multiplier meant: on top of $250 of vanishing assets, the HF+IB system had to come up with $1000 (yep, 1 TRILLION) in ACTUAL liquidity over a relatively short period of time. This is assuming 100% of CDOs were covered. Adjust the numbers for the proportion of CDO that were covered (?10%, i am making up) and you still arrive at the pretty scary numbers of $100B of liquidity. This in my mind, is the suspect #1 catalyst for the 07 quant panic. (A liquidity implosion triggered by CDO subprimes and fueled by naked and covered CDS) So a few HF went POOF! and took the market with them, in a generalized LTCM panic moment.

But more importantly, in the second scenario AIG-HF, you see where the system fell down. Here is how the run plays out imho (pure speculation :) . The CDS goes nuclear as the subprime virus spreads, it triggers liquidity needs at the HF level then the IB level. This is where things get complicated. At this point, the liquidity is GONE from the IB and the velocity of the money is nil as the recipients are not putting it back in game. We got a liquidity drain followed by a liquidity desert. So the liquidity stops at the recipients who go cash amid imploding Bear and markets. So first of all any haircut on naked OR on covered would have resulted in a real liquidity loss at the IB level as the CDS horse had left the barn. Anything less than par would have in fact left holes in place AT THE IB level. Of course the real shame to me is that the HF level (or proprietary IB desk) that was speculating all along (naked) got paid in the first place AND triggered the liquidity crunch. The crisis of insolvency was driven and realized by a crisis of liquidity. In retrospect the authorities were right to first treat liquidity problems even in the face of insolvency.

Then the dynamics laid out in the referenced blog take over, namely, AIG is nationalized anyway, so there is no threat of a legal bankruptcy possible anyway, the french and the german, not only are facing real losses but also understand that the FED will NOT hamper the US IBs and just hide behind their counterparts.

A tell tale sign is that 2% cut UBS offers. Think about it, the underlying CDOs where 70-90 down? That tells you UBS was acting as a IB broker and had ALREADY paid par on their contracts.

And why did they pay par in the first place? because unlike their US govt, they had 1/ contractual obligations (IB-HF) that would have resulted in lawsuits bar bankruptcy negociations 2/ They KNEW uncle sam would ultimately FOLD when confronted with the FAIT ACCOMPLI described above.

G-boy was a tool, a pawn, there was NOTHING he could do. The FED has been put in place to prevent runs on the IB system in 1907, that is its charter, what it does. That is what it did. A/ Audit the FED B/ Ban naked CDS. The AIG/CDS payment was a systemic disgrace where no one bears the blame.

The free market, if left to its own devices, creates monsters. It is high time the pendulum swing back from "laissez faire" with some skull cracking force.

Google Wave for Scientific research

2009-11-17T17:20:00.000-08:00

As I dive into financial modeling and under the probing of a friend, I asked myself if google waves would lend themselves to scientific research and collaboration. After 30 minutes of late night browsing I must say I am blown away. Found a program called Latexy for Latex formulas, a program called igor for reference management, wolfram alpha has a robot, mathematica proper talks about doing one. Most important I think that the time feature will be killer to see how the research evolves and progresses... sort of a built in CVS.

But the thing that really blew me away was the mass of people. Within a couple of weeks (ok months if you were really early on the beta), some of the specialized discussions are really cool and it is the first time I really felt the "mass of people" right there in my face, 300 of them, discussing the topic I wanted to discuss (how to include LaTeX into waves).

I have started a wave on endogenous money growth in modern monetary system. I will share it as a public wave as soon as I have some meat in there :) I am excited, impressed and giggling like a little girl. New technology that I think I can use does that to me. Some aspects of it still puzzle me, when I first saw it as a forum replacement, i was not so excited, but for targeted applications like this, it could be killer. I want to believe. I want to believe it is not slideware and will be definitely giving it a serious ride.

State Capitalism

2009-11-11T06:05:00.000-08:00

On the 20th anniversary of the fall of Berlin Wall, Martin Wolf has a thought provoking commentary in the FT:

Similarly, at a global level, radical reforms must be made in the financial and monetary systems. To put it bluntly, the banking system has been gaming the taxpayer on an intolerable scale. This must end, in one of two ways: the sector must be made subject to the market or become a heavily regulated ward of the state. Again, the curbing of huge credit bubbles must be an integral element in the formation of regulatory and monetary policies. Finally, the dependence of the global monetary system on the currency of an over-indebted superpower is neither desirable nor sustainable.

Powerful words, that barely need translation. The basis is
1- The banking system HAS BECOME PARASITIC
2- They must be nationalized or allowed to fail. "Free Market" is an illusion.
3- The world reserve currency cannot be only the dollar since the FED will print away its over indebtedness.

I would go one step further, the FED may have stabilized the current mess but truth be told, the more I learn about "money" the more disturbed I am by what the FED is. A cartel of private interest with unlimited access to the public purse by way of controlling the printing presses. It is an alien scenario.

She's Still Not Preoccupied with 1985

2009-10-23T02:14:00.000-07:00

I first heard this song waiting for carpool pick-up in my Volvo SUV☺ Not very nice to mothers are you Bowling For Soup? In cheesy recent pop, we much prefer Fountains of Wayne’s “Stacy’s Mom (has got it going on)” thank you very much. While I did (and still do) enjoy a lot of 80s music, I was also happy to put that decade behind me—no snakeskin miniskirt, boyfriend, or Duran Duran concerts to wax nostalgic about there.

My memories of the high school in the 80s have a lot more in common with Curtis Sittenfeld’s Prep than “The Breakfast Club” or “Sixteen Candles.”

So it is not without irony that I find myself shopping for an 80’s theme party at H&M, where clothes from that decade seem to have made a comeback. They are playing “Blister in the Sun,” a female-vocalist, Euro-pop version that lacks all the angst of the Violent Femmes original. I score a pair of leatherette leggings, fuchsia satin top and black Members Only-style jacket. Paying for these clothes, wearing rather conservative and uninspired “bourge-y” sweater, slacks and Ferragamo handbag, I’m sure the register girl at H&M thinks I’m schizophrenic or have a whole alternative night-life as a street-walker.

After the H&M experience, I feel the need to explain to the 20-something sales-girl at Sephora the objective behind my request for shimmery fuchsia eye shadow: “I’m buying this for an 80s party” meaning “I don’t normally have this bad taste.” The sales girl with the dyed black hair and nose ring (who definitely was not born earlier than 1980) is impressed. “Una fiesta, anos ochenta, que guay!” She explains this to her gay male sales associate with the Clark Kent-style glasses. He’s impressed too. “Una fiesta ochentera! We wish we were going.” Are the 80s suddenly cool again, even for people too young to remember that decade?

Actual items of clothing or accessories worn by Nathalie MF in the 80s

1) Baggy sweater and leg warmers
2) Stirrup pants
3) Jellies shoes
4) Neon socks
5) Shirts with shoulder pads
6) Large hoop ear-rings
8) Stonewashed jeans with zippers at the bottom of the leg. I babysat many hours to save up the $50 for that pair of Guess jeans.
9) Overalls
10) Catholic school-girl plaid skirt, white shirt with Peter Pan collar, knee socks and penny loafers--until my transfer to “The John Knox Institute” which didn’t have a uniform, but did have a strict dress code
11) Lots of Laura Ashley floral skirts and dresses. Embarrassing but true. I spent a lot of time ironing yards of floral fabric to perfect this look.
12) Bermuda shorts and argyle knee socks.
13) Kelly green and electric blue eye-liner
7) Pouf-dress for prom
14) Total write-off year? 8th grade: braces, bad Farrah Fawcett haircut, put on a few pounds, but did not grow taller, had chicken pox the summer before, which was not good for skin, almost failed Algebra…

Then vs. Now

Favorite High School Reunion depiction—30 Rock Episode where Liz Lemon goes back to suburban Philadelphia for her 20th reunion: their private plane gets stranded in the bad weather and Jack accompanies her. She says nobody will believe he’s young enough to be their classmate and he counters: “Rich 50 is like middle-class 37.” She remembers being a nerdy outcast, but they all remember her as being mean, sarcastic and intimidating. She plays spin the bottle and winds up with Jack. They not only don’t kiss, he decides her classmates are right about her.

Sure I was: Nerdy and sarcastic, but most definitely not intimidating.

Happy I grew up then because….no cell phones, messaging or Internet. The stupid things you said and did were confined to throw-away notes or your high school yearbook--not broadcasted, mass-distributed and memorialized in the ether.

Moved on to the 90s for:

Curtis Sittenfeld “Prep” fame-whore/narrow-miss media humiliation

Graduated from college in 1994. Pitched my failure to find a job, combined with large number of interview opportunities to Rolling Stone writer for their “Gen X column—looking for the first job episode.” Used winning lines like “I discussed this with my grandmother and her friends and they said “Honey, we just don’t know what to tell you. When we graduated from college, we joined the Junior League and started playing bridge’;” “I used to write about Personality and Artistic Theory, now look at me, I’m writing about evaporators and batch digesters;” “I picked which college recruiting meetings to attend based on the quality of their buffet spread;” “I failed my interview for a derivatives sales and trading position at a large multi-national bank. I don’t think it mattered so much that I didn’t know what a derivative was…it was the moment I discussed my senior thesis on Samuel Johnson’s theories about being un-able to enjoy/live-in the present because we are constantly fixated on a past or future, which is either far worse or impossibly idealized compared to the ever-vanishing present…where The Head wrote me off as not possessing the driven, goal-oriented Derivatives personality.”

Almost (sort of, not) briefly Infamous

The article never got published and I got three good meals out of this (including one at an upscale restaurant!) on Rolling Stone’s tab.

Will never be representative of my generation because

I actually know most of the lyrics to Dr. Hook and the Medicine Show’s “Cover of the Rolling Stone”…

Open Source, a modern day Marxist Utopia?

2009-10-22T01:37:00.000-07:00

I have been palling around with Marxists. I know, I shouldn't. I feel like the odd duck... a multi-millionaire, reading modern marxist utopias. The Marxists underground still exists, it is even experiencing a bit of a revival. They feel even emboldened by the current soiled diaper mess western ultra-liberal capitalism has created.

Obviously choosing to be a Marxist economist wasn't a fast pace track to academic success. Truth be told, the main reason I relate, is that they are the only ones modeling banks and modern fiat money in a way that makes any sense to me.

(Main conclusions basically state that interest bearing instruments, a la bonds, are detrimental to a society's economy when said economy is not growing at a brisk pace)

But mostly I think some old Marxist conclusions, such as "Banks are pigs that are detrimental to society", are worth dusting off. They should be revisited in light of the current abuses of ultra-liberalism and the banking disgrace it has engendered, where those that caused the most pain, reap the most rewards. Free markets self-regulations, fairness and other bollocks.

Anyway... enough digressing. I was reading a paper by one of my favorite academics these days, Trond Andresen. You can find the paper on "Utopia/Dystopia" here. Handle with care, modern Marxist utopias are not for the faint of heart and mostly take root in science fiction ... The relevant passages to the OSS topic are

Another objection is “why should people at all work in/with factories and manufacturing plants when they instead can do all this more meaningful and/or entertaining stuff?” The answer to this is twofold:

• A minority of people is deeply fascinated by tinkering with technical processes, and gradually making them run even better. And they are not very interested in interacting with people as the central point of their job.

• Pride: The select few that control the utopia’s manufacturing plants and process industry are the persons enabling society as a whole to enjoy its very high living standard. They know it, and the others know it too

These factors have been already identified as driving forces behind Open Source. Open Source is done by geeks fascinated with infrastructure and plumbing. Yes, I did take pleasure in solving complex problems. There is a certain pride in being a alpha dog amongst alpha dogs. I always got off on that. Most of you also do. This need to create, even for free, for the sake of creating or showing off will always remain, in a monetary society or not. The profit motive isn't always the motive.

A final point in this section about a long-term utopian scenario, is “can we get there gradually”? Ignoring the controversies on the political left about “reform versus revolution”, I will here suggest that a modern market economy may (at least in theory, assuming that persons/parties with the political will for it is in power) be gradually changed in the direction of the utopia, by – among other things – carefully selecting activities that are “ripe” for being made public and cost-free for the users. Such selection can be done based on at least one of the following criteria being fulfilled for the product or service in question:

1. Limitless consumption is no problem, capacity- or environment-wise (example: local phone calls, Internet access). (This is the sole – and therefore unrealistic – premise of Marxian “higher-stage communism”.)

2. Consumption is due to its nature inherently limited or rationed (example: schools, hospitals, funeral services, local public transport but not long-distance travel).

3. Neither, but attitudes have changed, so that people voluntarily abstain from over-consumption of a certain good/service.

Hmmmm, are modern marxists completely underestimated? They have also laid out a clear reason why we were succesful in OSS. It was just a low hanging fruit. Is OSS's success, the clear first sign of a "higher-stage communism"? Afterall, limitless consumption of bits is harmless, production is low cost and work is play as per the first quotes. "From each according to his abilities, to each according to his needs" could definitely sum up how goods move around in the OSS communities: a few produce according to their abilities, the mass consume according to their needs. What may not apply or simply be obvious in industry that are "people intensive" becomes a plain truth in software.

Yet, a part of me shuts down when I realize this is making sense. What is wrong with me? After all, I spent most of my short professional life, making sure we made money at OSS and monetized our success. I still feel passionately that outstanding individuals should get rewarded in OSS, how "Ayn Rand" of me, how so 1990's!. That we would get paid for producing software, that we would market goods in order to make a living and beyond seemed like a foregone conclusion yesterday, it stills seems so today. I have not compromised on that point. And I am obviously very grateful for the luck we have had and in no way would I change what we have done with professional open source for some vague promise of a better tomorrow. I am still a realist at heart?

But are they incompatible belief? Can you be a communist in a monetary society?? In that light, isn't professional open source, a socialist utopia that embraced making money? More on the topic of monetary modern marxism soon.

The Beauty Issue

2009-10-21T10:10:00.001-07:00

My husband and his friend both assume that another friend of theirs is quite a hit among the ladies. Apparently high school and college were good times for X. “Can you imagine that they used to call him the 'Devastator'."

The irony is that neither my husband, nor his friend, bothered to ask actual women, including their own wives, what they think of X. The man in question is nice enough looking, but I haven’t spent much time thinking about him. The truth is that all above-average looking people are simple abstractions to me, unless they’ve written, said or done something that particularly piques my interest.

I don’t relate too well to the (outward) absence of obvious flaws in other people—like being too nice or too beautiful. No doubt this stems from an instinct to preserve dignity. One wonders if the unnaturally beautiful or virtuous might be applying their own (higher) standards to us: aka “could use an extra hour of treadmill every day,” or “needs to use more age-defying facial moisturizer” or “if you don’t have anything nice to say, don’t say it.”

Even worse, if I suspect that an above-average good-looking person spends a lot of time improving or maintaining their physical appearance. Extreme self-discipline also makes me uncomfortable—seems too much like a self-mortification fetish. I, myself, last tried a diet in 2005—the South B(i)tch ™, which is exactly how carb-deprivation made me feel. Every time I’ve made an effort to diet or exercise more, I’ve lost the same five pounds, which immediately come back--since I haven’t been willing to make a Permanent Lifestyle Change. I do love walking and hiking, for the pleasure of these activities, not because they are connected in my mind with Self-Improvement. The irony is that all these men who spend hours buffing up in the gym would probably get more female attention if they did something like join a cooking class or book club or learn to dance.

On the self-improvement note, I recently received an email inviting me to a book signing by a former high school classmate who has written a book of lists to help people cope with those life-changing events—buying a new house, getting married, having children, getting divorced, dealing with death, and even the impossibly improbable like the World Trade Center Bombing on 9-11. I thought about this. I make lists too. This gives me a convenient sense of accomplishment, while enabling me to further procrastinate from the tedious things I mostly don’t want to do. I put things in neat stacks or star emails in my in-box. My rationale is that if something is important enough, somebody will remind me to do it and it will then pop back to the top of the list, and eventually I’ll take care of it.

Are women less judgmental about physical appearances than men? I thought about men who would not fall into the category of Somebody Whom Other People Consider Exceptionally Attractive that I would find interesting, like Salman Rushdie, for instance. I loved The Enchantress of Florence. What sort of woman, I wonder does a sensitive, deep writer-type like Salman Rushdie find attractive? Wife number four, Padma, model, celebrity chef. She's beautiful and she can cook, what went wrong there? Apparently, she wasn’t supportive enough of his career. What could the source of the “connection” he feels with most recent girlfriend, Pia Glenn be? Oh wait, that didn’t work out either…because he couldn’t get over Padma. He may write like an angel, but he appears to have the emotional maturity of a 16 year-old…

The interesting thing about getting older is that, for most people, it’s a great equalizer. Apparently X has been going to pick up his children at their school, and noticed that the high school girls in their plaid mini-skirts and knee socks still look cute, but they don’t give him a second look. However, he feels that his appearance is quite appreciated by these girls’ mothers. Sorry “Devastator” you’re cougar bait now.

TF21: Detroit Techno

2009-10-12T05:01:00.001-07:00

Detroit Techno by marcf999

I don't know if it is because it is autumn but I always seem to go back to the deep techno sound when October weather hits. Something about the melody and hard beats.

I have always loved Detroit Techno. It is funny how little most americans know about Detroit Techno. To them Detroit is a city living in 3rd world squalor. To me and most europeans of my age (40) Detroit is the birthplace of electronic music. When mop-rock was still all the rage in most inland US, the Detroit DJ's were touring european clubs and were blown away at 3000 kids dancing to inner-city black techno music. I remember sharing a cab with a journalist that was going to take pictures of Derrick May at his club, I was headed to the club myself for an afterparty during the Detroit Electronic Music Festival in 2003. He asked "who is he?", I explained just how influential he had been to the world electronic music scene and bla bla bla... the guy seemed genuinely confused, he was from Detroit and had never really heard of him, he was just there to take pictures. I was truly dumbfounded.

Anyway, nowadays, one of the artists that I think is most in line with what I consider Detroit Techno is "DJ Bone". He has been around for a few years. The stuff he does is really good. The label is called "Subject Detroit" and it features Rennie Foster, which I remixed last year. The sound is hard. Aggressive even. But in true Techno fashion after a few listens it starts sounding like a lullaby to me. This is a compilation of recent (and no so recent tracks) on Subject Detroit. Hope you like it.

Playlist:
Music- DJ Bone
Minimal- Matias Aguayo- Marcus Rossknecht mix
Alias- Aux 88
R.I.D.E - DJ Bone
Good Time Charlie - Rennie Foster
Break It Down - Alekxis Jaina
One More Tune - DJ Bone
Sin City - DJ Nasty
Structured Music - Stephen Brown
Belt of Orion - Rennie Foster
Dead or Alive - DJ Bone
Hot LZ13 - Rennie Foster
Beauty in Decay - DJ Bone
Change (Acapella) - DJ Bone
Crusin Down 7 mile - DJ Nasty
Flying Object - DJ Nasty
Cause of Action - DJ Bone
One Way Out - Mark Williams
Platform 9 3/4 - Alekxis Jaina

Hola! or La Prensa Rosa

2009-09-30T07:41:00.000-07:00

“I moved back after five years, and nothing had changed. It was like re-discovering old friends.” The two French women and I were talking about the Spanish magazine “Hola” and the cast of characters that regularly grace its pages. In Spain, these people are called “Los Famosos.” Outside of Spain, with two or three exceptions, nobody has heard of them. The fact that three foreign women living in Spain, with respectable educations and otherwise challenging intellectual preoccupations and jobs had become aficionados of Hola! was intriguing, to say the least.

My Spanish mother-in-law explains it this way—“It’s a mental vacation. I can read the same article a second time and not even realize I’ve read it before.” Hola! was started in Barcelona, in the 1940s to focus on “la espuma de la vida”—(poorly translated by me) as “the frothy side of life.” Someone once told me it is the largest circulation magazine in the world. I have not verified this. What I do know is that Hola! pays people for exclusives and that many of its regulars earn all of or a decent supplement to their income selling “exclusivas”.

The Hola! formula never wavers: the photographs are authorized by the subjects and, to the extent that such a thing is possible, are always flattering. The call-outs inform us that the Hola’s cast of characters are “ready for love”, “in love”, “deceived by love”, or “recovering from love.” “So and so is thinking about getting pregnant”, “is pregnant”, "offers us exclusive photographs with her beautiful new baby.” These people give us exclusive tours of their homes, discuss their deceptions, tragic losses, projects and aspirations.”

Sus Majestades Los Reyes

At the top of the Hola! pantheon are their Majesties the King and Queen; their two daughters, the Infantas (my French friends agree there is the nicer looking daughter and “la moche”—the ugly one); the heir, Principe Felipe, who usually looks very dignified; and his brunette Barbie wife, Leticia; and the grandchildren. Their Highnesses are in Hola! by grace of who they are and tolerate the media attention with a certain bored “noblesse oblige.” Unlike the British Royals or the Princesses of Monaco, the Spanish royal family generally behaves itself and doesn’t offer much in the way of juicy scandals. This makes them less entertaining than the sub-deities of Hola, who make a concerted effort to maintain their status as regulars in its pages.

The Woman Who is More Noble than Everybody

People who know about Spanish history will tell you that among the Grandest of the Grandees of Spain, are the Albas. The Duquesa de Alba is so noble that if she were in the same room as the Queen of England, the Queen of England has to give her precedence. This is because back when the Queen of England’s ancestors were backwater Hanoverian electors, The Albas were Somebody’s. When Spain ruled the Holy Roman Empire, the Duque de Alba was at the center of things, suppressing rebellions in the Netherlands. He was immortalized as a bogeyman for later generations of Dutch children: “If you’re not good, the Duque de Alba will get you.” One of the Duquesa de Alba’s ancestors may have been the model for Goya’s “Maja Vestida” and “Maja Desnuda.”

What does the Woman Who is More Noble than Everbody look like? She has a distinctive white person’s Afro of frizzy gray hair and a face that sports the plastic surgery Masque of Death—facial skin pulled tight and immobilized by Botox, the Surprised Eyes, lifted up and pulled at the corners, and the Joker Mouth, stretched wide and tight for a perma-smile on the sides, offset by the puffy Collagen Lips. The Duquesa de Alba has an affectation for “hippie chic” clothes that might be in the closet of your teenage daughter. Occasionally, she has a health crisis and is wheeled into the front page of Hola! with mini-skirt hiked up around her waist and wild pattern stockings on her frail legs. The Duquesa de Alba has a “novio” or boyfriend. He is her son’s age and has some sort of time-punching, civil-servant job. Before her current novio, she had a second husband, a former Catholic priest, named Jesus. Real toffs debauch their Jesuit confessors. Before that she was married to some nobleman who fathered her five children.

When the Duquesa has a health crises, which happens more frequently these days since she’s getting on in age, her novio wheels her around and otherwise appears attentive to her needs. Hola! is very interested in the progression of her relationship with her novio. The Duquesa’s children are also interested in the progression of her relationship with her novio. If this relationship progresses too far, it’ll cut into their inheritance. None of these children appears to have done anything interesting with their lives besides appearing in Hola!

Tita Cervera—dite la Baronesa Thyssen

Tita Cervera also sports the plastic surgery Masque of Death, but instead of the grey Afro, she has a blond beauty shop “do”. Her wardrobe tends to Couture and is more restrained than the Duquesa of Alba’s (when you’re born Very Noble, you don’t need to make such an effort). I don’t know who Tita Cervera was but apparently she likes Art. At some point in her life she married Lex Baxter, an American actor who played Tarzan. Baxter was as a Stepping Stone. Thanks to him, she got a villa called Mas Mananas (More Tomorrows) and an introduction to the better sort of Society. In Society, she met a rich old German, called the Baron Thyssen, who inherited lots of things and also liked Art. Tita Cervera married the Baron, and became a Very Great Lady, or at least a very rich one. At some earlier point, she had a son. Nobody knows where he came from, but the Baron Thyssen adopted him. The Baron Thyssen finally had the good taste to die and leave Tita Cervera with lots of money and lots of Art. Tita Cervera had the good taste to make sure the Baron left a lot of this Art to Spain, so now you and I can go look at it in the Thyssen Bornemisza museum.

Tita Cervera has a son who looks a bit like a Spanish redneck—or maybe that’s just the rockero wardrobe and all the tattoos. He appears a lot in Hola! with his wife and their son, giving exclusive tours of their villa in Ibiza. Apparently, his mother doesn’t like his wife very much because she demanded that her “grandson” submit to a DNA paternity test. I guess that’s publicly calling your daughter-in-law a whore. Much ado about the DNA test, but the grandson passed. I think the only reason the son and daughter-in-law put up with Tita Cervera is because, otherwise, they’d have to give up their villa and get real jobs.

Tita Cervera may have the last laugh. She either adopted or genetically concocted (lots of speculation here) twin daughters. All we know is that she got them from some birth mother/rental womb rental womb out in California. Now we see lots of photos of the beaming Tita Cervera with her (not-so-cute) twin toddler daughters. Apparently it’s not just enough to triumph over the physical indignities of aging, but the limitations of childbearing as well. In the process, you can show up your ungrateful oldest son and his trashy wife.

Isabel Preysler, or How to be a Successful Ex-Wife

Isabel Preysler used to be married to Julio Iglesias and is the mother of some of his children. I think she also married a succession or combination of the following: Political Bigwig, Captain of Industry and Member of the Nobility. I can’t keep track. Since they didn’t have the good grace to leave her a widow, she divorced them or maybe they divorced her. My mother-in-law has a theory that powerful men like to be collectors, so they seek out women whose CV lists the names of many of their peers. She also says that La Presyler is rumored to have a special trick of passing out during the er, “little death.” Powerful men must really go for that too.

Isabel Preysler either has a better plastic surgeon than these other women or has the good fortune to possess the holy trinity of aging well—good skin (likely due to her Asian ancestry—she’s Filipina), good bones, and not putting on weight. My mother-in-law adds a commentary here based on the Spanish expression: “Las mujeres se enjamonan o se aparchimientan.” (With age) Women either become ham-like or parchment-like. She also offers some consolation for those of us who might be leaning in the ham direction. Subcutaneous fat does one have one advantage. It smoothes out your skin. The Hams can always console themselves with the fact that they’ll have fewer wrinkles than their Parchment friends.

La Preysler’s age-defying looks serve her well because she is one busy woman. In addition to posing for Hola!, she appears in print ad campaigns endorsing various products. Twice a year, she travels over to the US and takes a picture with George Clooney to promote Porcelanosa. There was some disagreement among the French people at the party as to whether Porcelanosa is a line of “chiottes” aka plumbing fixtures, or tiles. I think the tiles won out. To be fair, la Preysler isn’t the only one. Once you come to Europe, you realize how many “serious” American actors supplement their income here pimping out various products. George Clooney is also the face of Nespresso coffee and Hugh Laurie did a big Schweppes Campaign.

Isabel Preysler has one successful son, Enrique Iglesias, and a few other children who don’t appear to do much of anything besides appearing in Hola!

Carmen Lomana in “The Rich Also Cry”

I used to wonder what Paris Hilton would look like in her 60s. Now I know. She’s going to look like Carmen Lomana. Actual Hola! readers may wonder why I included a B-lister like Carmen Lomana. They may not even know who Carmen Loman is. That is because they haven’t seen Carmen’s YouTube video hit “The Rich Also Cry”—“Los Ricos Tambien Lloran”. Unlike her younger counterpart, Paris Hilton, Carmen Lomana’s video does not involve any physical exertions. Thank God! Carmen’s Chilean industrial engineer husband had the good taste to die at 49 and leave her a very wealthy woman. Her male-servicing days are over, thank you very much. What does Carmen Lomana do in her life/video? She shops, trys on clothes and shares her opinion about La Crisis. Researching Carmen Lomana on the Internet, all I learned is that her cleavage is a “feat of engineering” and that she wears a lot of Couture. Her interview with the journalist includes such gems as:

“Do you have lots of closets for your clothes?”

“I don’t have closets, I have rooms?”

“What do you do with your time?”

“I don’t know. What do you do? I get up at nine, I take my breakfast in bed. I spend an hour there reading the papers. I look at my agenda. I take calls from my bankers and lawyers to discuss business. I plan my day. I have a doctoral candidate who’s writing a thesis on me. That’s the ultimate luxury.”

“Carmen, are you feeling the Crisis?”

“Not personally, but it affects you…seeing my friends…people who have lots of assets but don’t have “dinero cash” to go to the supermarket…I mean those that were always poor, you know--the ones that beg--they’re used to it…but it’s tragic to see somebody who used to have a job in reduced circumstances.”

“Are you doing anything for La Crisis. For instance do you go to mercadillos (flea markets)?”

“Well, I do try to shop less, out of political solidarity. I’m wearing things that I haven’t worn in five years, and you know what? They still look great"…”Mercadillos?” You mean like those ones in the villages? Oh I love them. I’ve never been, but I’m sure they’re great.”

Schyzophrenic markets

2009-09-22T14:19:00.001-07:00

Trying to make sense of the current markets can lead to schyzophrenia.

On the one hand fundamentals that triggered the financial crisis haven't changed one bit. The housing market is still in the doldrums. Banks are still sitting on piles of rapidly deterioting toxic shit. The banking system is still bankrupt. Occident is drowning in debt. Some call for a biblical debt jubilee, but really inflation is taking care of that for us.

On the other hand we are now experiencing the impact of QE. Or "printing money" by the federales and the Chinese, who print money tit-for-tat to keep RMB in line. QE as a simple effect, it makes all USD numbers go up. This makes the dollar worthless so that from the outside, FX sees a constant or shrinking US economy. This is pure monetary inflation. But will the stability afforded be enough to mend the economy?

But it even looks like "recovery", "end of recession". But is it just inflation with recession. Of course, the "numbers" say there is no recession, because the numbers go up. All that matters is that markets are going up. What started as a monetary spark is now looking like a bona-fide ponzi fire rally, where momentum investors pile on. The Federales wanted stability. They get a bubble.

But really are we just in the midst of the biggest government led bubble? Back in April I wrote about the government wanting us out of cash, bullying us into buying shit with QE. It is the very definition of a sucker's rally but really who am I to fight the government? I feel like a sucker for doing the smart thing?

So my trades reflect my schyzophrenic understanding of the economy, monetary policy and the markets. On the one hand I buy puts on equities to reflect a bearish view of autumn, on the other I sell puts on commodities to reflect a bullish view on those. I stand ready to reverse these trades. I don't know what I am doing, really. I am buzy investing. I am a little scared. The panic button is not far.

Why Capitalism fails: Minsky edition

2009-09-15T16:32:00.000-07:00

Via "the big picture" a link to the Boston Globe. The article focuses on Minsky as the "coqueluche" amongst economists. He is so hot right now.

Minsky is now all the rage. A year ago, an influential Financial Times columnist confided to readers that rereading Minsky’s 1986 “masterpiece” - “Stabilizing an Unstable Economy” - “helped clear my mind on this crisis.” Others joined the chorus. Earlier this year, two economic heavyweights - Paul Krugman and Brad DeLong - both tipped their hats to him in public forums. Indeed, the Nobel Prize-winning Krugman titled one of the Robbins lectures at the London School of Economics “The Night They Re-read Minsky.”

Today most economists, it’s safe to say, are probably reading Minsky for the first time, trying to fit his unconventional insights into the theoretical scaffolding of their profession. If Minsky were alive today, he would no doubt applaud this belated acknowledgment, even if it has come at a terrible cost. As he once wryly observed, “There is nothing wrong with macroeconomics that another depression [won’t] cure.

Funny. The Minsky financial hypothesis goes a little something like this

Crisis
keynesian magic
out of crisis
lending is risk averse
so lending works
so those that lever on top show better return
so more lever comes
so more risk is taken on
generalized monetary inflation ensues
risk quality deteriorates
there are speculators, ponzi investors and crooks
the system is then very fragile, a little asset price variation will trigger a generalized run on assets as people deleverage.
go to step 1

Interestingly the solution to number 2, the keynes part did not involve sending money to highly skilled unionized workers but sending money to the very poor and unskilled. The article then points out that most neo-cons would get sick at the thought of reversing trickle down economics in a bubble-up economics. But again, instead of giving made up money to guys like me, give it to the poor! to someone who really needs it! So straight-forward! Obama! do it! do it! do it, dollface! do it!

I have been studying this field since Aug 2007 (has it been 2 years already? sheesh) on a semi serious basis. It is hard for me to do anything seriously these days. Retro-fitting the FIH in some models is something that has been in the back of my mind for the past few months. It has to be a flow of funds, the levels of debt need to be computed with something that incorporates the FIH, probably somewhere in the expected volatility of returns. But enough bla bla bla, probably the time for some math...

Taken: American stereotypes of the Continent in Femme Jep

2009-09-11T09:35:00.000-07:00

A recent email thread on the subject of fifth graders and why most of them do not need cell phones...let alone text messaging, called to mind this movie.

...Can't imagine why a fifth grader needs a cell phone for a school trip to France. I can barely figure out the international dialing prefixes from and to various countries, myself...but, then maybe I'm not as smart as a fifth grader. Do they actually think their child is in-danger, in their private school, guided tour over there? Reminds me of an in-flight movie I saw…

“Femme Jep” refers to a genre of movies featuring women (from the French word “femme”) in danger (jeopardy). It seems that some women have a statistic-defying penchant for encountering Mortal Danger. Or maybe it’s a vocation to one day appear as guest invitees, sobbing on the maternal bosom or sympathetic paternal shoulder of the host, saying things like “I know I shouldn’t have gotten into that car.” Think the whole tedious thread with Jack Bauer’s daughter, Kim, in the early 24s. The girl couldn’t make it further than 2 exits on the highway without encountering a psychopath or rapist.

Taken is the story of a down and out, ex-US Special Forces father (surprisingly cast as Liam Neeson), trying to build a relationship with the teenage daughter he neglected, back when he was making the world a safer place for democracy. He is nervous about his daughter and her girlfriend traveling alone to Paris. Rightfully, so, as it turns it out. Barely have the girls gotten off the plane at Orly (or maybe it’s CDG, can’t remember) when they meet a young French cheeseball, who offers to share a cab with them, on the way to their apartment. Lo and behold, he turns out to be a Spotter. Before the afternoon is even over, our two virtuous American girls have been abducted by a, get this, White Slavery Ring. Now, I know this sort of thing exists and it is perfectly awful, but the truth is they are far more likely to target girls from poor countries whose families (if they have any), can't afford to find and get them back. If I were an enterprising white slaver from Kryzhghfuckistan, do you think I would go to the trouble of abducting upper middle class American girls from the cab line at Orly, girls with ex-Spec Ops dads just waiting for a chance to Redeem Themselves, not to mention well-heeled stepfathers with private planes?

The highlight of the movie is an auction in the basement of an elegant hôtel particulier in Paris (definitely an Eyes Wide Shut “transgression among the rich and powerful” look to this scene), where wealthy buyers, including degenerate Arab sheiks, bid for the flower of our teenage American womanhood. Taken plays out like a de Sade plot, without the benefit of (intentional) social satire. Because, if you owned a multi-million dollar yacht, you’d actually need a pillowcase and handcuffs to get an attractive woman onto it?

Reading Wikipedia, I was surprised on two accounts 1) to learn that the movie had been financially successful 2) that it had been written and produced by Luc Besson. That would explain why the action scenes and suspense build-up did work well. Reflecting on Besson’s other work, I definitely like The Professional and La Femme Nikita better, but Not The Fifth Element! In the first two, the visual quality of his storytelling makes up for the limited plot.

As for Taken, part of what makes it a B movie--in addition to, as a by-product of?...the unoriginal story, and the uninspired storytelling, is its reliance on clichés—the young girl in jeopardy, the hard-boiled, yet tender-hearted father, the nefarious villains, the crooked cop. In this way, the film-maker can 1) by-pass the hard work involved in coming up with multi-faceted characters and plot 2) be assured that he is plugging into characters and themes with which his audience can easily identify. The only thing that surprised me, was that the underworld image of Paris, as such a dangerous place, was one them.

Deleveraging vs QE

2009-09-08T23:12:00.001-07:00

Can be analyzed in terms of Friedmanism vs Keynesianism. In July consumer credit fell by 21B out of 2.5 T or an annualized rate of 10%.

From The Big Picture.

Micro-economics explains the drop, people can't find credit easily, they don't want to spend and job prospects are slim, so they deleverage.

Macro-economics explains QE, against this backdrop of disappearing debt-money the central banks are printing as much money as they can.

Deflation: 250B QE: 250B Friedman: 1 Keynes: 1. The markets look stable.

UN calls for new currency

2009-09-08T01:23:00.000-07:00

It was in the making. It is more believable when it is not the Russian, Chavez, Petrostates and other totalitarian regimes calling for it. In a interview with Bloomberg a UN official shoots for the sky. Money quote:

“The most important lesson of the global crisis is that financial markets don’t get prices right,” Flassbeck said. “Governments are being tempted by the resulting confidence game catering to financial-market participants who have shown they’re inept at assessing risk.”

Ouch.

Flow of Funds model central to crisis prediction

2009-09-08T01:13:00.000-07:00

The FT this morning has an interesting opinion piece.

Ever since Aug 07 the economic profession is caught up in a self-centered post mortem analysis, how could they miss this crisis so badly?

Central to the contrarians’ thinking is an accounting of financial flows (of credit, interest, profit and wages) and stocks (debt and wealth) in the economy, as well as a sharp distinction between the real economy and the financial sector (including property). In these “flow-of-funds” models, liquidity generated in the financial sector flows to companies, households and the government as they borrow. This may facilitate fixed-capital investment, production and consumption, but also asset-price inflation and debt growth. Liquidity returns to the financial sector as investment or in debt service and fees.

Basically this is a focus on the derivative equations of money. Do not focus on equilibrium but on the flow of money. In the flow of money you see interest, new debt, repayments etc and when you see these it becomes trivially clear that the OECD was on a debt binge or as the article mildly puts it

Growth in the US and UK has been finance-driven since the turn of the millennium.

Ouch. I am slowly reaching the conclusion that, from a theoretical standpoint, money is never in equilibrium but can only be understood in dynamic models, money is always in movement.

Solar prices plummet in 2010

2009-09-05T10:51:00.001-07:00

Via naked capitalism, some numbers about solar power

Of course this spells pain for the existing capacity holders. The commentary points out that the over-supply in from china, but if it is, it is going to take a long time before it reaches Spain or the US. So I am fuzzy as to how this impacts local prices. Also if the prices go down and over-capacity is detroyed then the prices go back up, problem solved. In the meantime we have plenty of cheap solar power... so consumption should go back up... I wonder why they have the numbers go down in consumption, this does not follow normal "supply/demand" logic.

Texas leads as California dreams on By Newt Gingrich

2009-09-02T05:41:00.000-07:00

I thought Newt was dead, but no, the latest from the hot-head in the FT....

Sustained reckless budgeting financed by endless tax increases reflects exactly the kind of society that Americans do not want.

Hey noot! in the picture you will find the legacy of Bush years with tax cuts and big government spending... another reason why I disconnect from the hypocrisy of the political discourse of republicans. Repugs needs to reconnect to their fiscal conservative roots before long.

Buiter: most finance is socially nefarious

2009-09-02T05:22:00.000-07:00

The more I read Willem Buiter, the more I like him. This morning in the FT he denounces the financial sector as a harmful sector in some instances.

I believe that efficient financial intermediation and a dynamic financial sector are essential for the proper functioning of any decentralised market economy; I also believe that too much financial sector activity is not only socially worthless, but actually harmful. Take financial derivatives. A financial derivative is a bet created by the issuer whose payoff depends on some aspect of the performance of an underlying financial instrument. If the bet pays out when the buyer of the derivative is worse off, we call it insurance. If the bet pays off when the buyer of the derivative is no worse off, we call it speculation. Speculation need not be a problem; it is a necessary feature of the efficient allocation of risk, as long as only one party to the transaction is engaged in it. To tame the rampant excessive speculation in the derivatives markets, it is sufficient to require that at least one of the parties involved in a derivatives transaction has an insurable interest. The Tobin tax does nothing to achieve this. An example: credit default swaps (securities that pay the holder when a bond defaults) can be issued in amounts much larger than the value of the underlying bonds. Anyone who owns CDS in excess of the value of the bonds he owns benefits when the debt defaults, creating obvious moral hazard. The issuer of CDS whose value is much larger than the underlying bonds has the opposite moral hazard: there is an incentive artificially to reduce or eliminate default risk. The simplest solution is to require that CDS pay out only if the same amount of the underlying bond is presented.

Which is a long winded way to say "Ban naked CDS!". Interestingly I think his analysis of moral hazard is incomplete. Namely even if you hold the bond your interest is to see the company completely default in some way to see your CDS pay out in full.

Toxic finance

2009-08-24T10:34:00.000-07:00

Munchau today in the FT talks about Toxic Finance and a new research paper writing by Pasini et al (Dauphine, Paris). It is about 120 pages and goes into details of CDO/CDS and the whole alphabet soup. I will be reading this in great detail in the days to come. If anyone fancies following me in this endeavor, please help :)

Software for the non-software girl

2009-08-22T08:21:00.000-07:00

In a recent conversation with my sister, she mentioned her semi-annual “let’s look at the direction of your career” meeting with her boss, and the fact that she would need to make a decision between the “management” and “specialist” track. My sister works for a rather typical subsidiary of a multi-national conglomerate with its shares of mergers, shake-ups and spin offs—so her two main concerns were 1) job security 2) the ability to advance.

I told her to definitely go for the specialist track. When push comes to shove, the superfluous management layer is the easiest to trim. Not only is “managing people” highly over-rated (you become the person responsible for those boring-as-shit employee performance reviews); it is also highly un-differentiated. Everybody claims they can manage people; whereas, in my experience, the most effective managers were formerly People Who Could Get Shit Done. This past experience tends to make the former Person Who Could Get Shit Done good at detecting other people Who Can Get Shit Done and extracting useful work out of them. Lest you think I’m naïve, I won’t fail to mention the second and altogether nefarious breed of manager. THIS person’s meteoric rise in the corporate hierarchy owes to 1) the fact that they are surrounded by people even more incompetent than themselves 2) aware of their own limitations, they channel their energies into sucking up to their superiors and taking credit for their colleagues and subordinates’ work…until such time as it is expedient to betray those colleagues and subordinates. Such is the way of the world. Unless, you fall into the latter category of person, it is best to 1) learn to speedily recognize them 2) stay out of their reach.

Nothing is so conducive to keeping out of the clutches of The Nefarious Manager and preserving your job safety, amidst the inevitable corporate re-orgs, as acquiring some valuable skill…preferably a skill involving the company’s arcane software systems, or, failing that, a good relationship with the right geeks so that if, called upon, you actually know the people Who Can Get Shit Done. The farther people are From Getting Shit Done, the less likely they are to know whom to call on when a problem occurs. One day, for some interminable amount of reasons related to the company’s jury-rigged, legacy apps and forced upgrades from the Even More Nefarious Database and Everything Else on the Planet Vendor, X fails. Akil in department Y might know how to fix or patch X. Secure in his job, not so much because it’s an enviable job, but because the job involves the plumbing of the company’s jury-rigged arcane legacy apps that none of his superiors will come near, or possessing some more generalized knowledge that will easily enable him to get a similar job somewhere else, Akil has a decision to make 1) he can make-up some lame-ass excuse for why fixing X is impossible, an excuse that would be utterly transparent to a person with some modicum of technical knowledge, but flies above the head of The Nefarious Manager, because The Nefarious Manager has spent the greater part of his/her life studiously avoiding actual work…or 2) he can fix the problem. In this situation you either want to 1) be Akil 2) have built up a good store of credit with Akil.

Never in a million years did it occur to me that I would work in the software industry. I was nerdy person, but definitely a Humanities nerd. My school experience with Math and Science was gratitude in being able to get as far as I did, and even more gratitude for stopping where I did. The last computer class I ever took was a BASIC class in eighth grade. I had to work my tail off to get a B+ and, even then, I sensed that I reached my limits. I am not even a remotely logical person. In fact, I’m not sure I really believe in logic. My limited experience of looking at the world is that this is not a place where Logic and Reason prevail. The survival skilz I’ve developed (from being kicked in the ass by my own errors) don’t so much resemble a Philosophy as little collections of dictums along the lines of: “You are always better off working with an amoral mercenary who will double-cross you at the first opportunity to the extent that you can SEE those opportunities (concurrently or before the mercenary); you should always beware the well-meaning fanatic, to the extent that you CANNOT see into the working of such a person’s mind and, therefore, will fail to predict their behavior.

Why did I enjoy working in software? I’ve written on this theme in the past. Here’s another angle on my previous, accidental career. First, shallow but true, being a woman, in a field where women are under-represented, the male/female ratio definitely appealed to my vanity. If I’d worked in marketing or communications in some more traditional industry, I’d have never gotten a second’s notice. Second, as a writer, I can relate to engineers, to the extent that I think both professions tend to get frustrated with the Actual State of Things (the Illogical World filled with its Nefarious Scheming Individuals and jury-rigged, Crap Legacy Systems). Writers and engineers tend to like building their own worlds, where they can exert total creative control. While my husband and I became entrepreneurs by default--because nobody in their right mind with any money or gravitas in the software industry would have supported us—the latter reason is why I can no lo longer imagine working any other way. Third, in open source software, I enjoyed working in a collaborative field. The myth that other people are going to do Your Work for you, for free! (“You should be grateful I use this free POS, tell me right now, why will not JBoss scale with my app!”) is completely ridiculous. The truth is that people who tend to specialize in relatively narrow fields, where there are few people with whom they can communicate, are often very willing to share their knowledge (but not with idiots). If they enjoy what they are doing and are smart, these people have invested some time and effort acquiring this knowledge (or, if they are lucky, had a Eureka! moment), so sharing that knowledge validates their work and experience…

Naked CDS and Shorts

2009-08-19T04:02:00.000-07:00

I have talked about Naked CDS many times on this blog. Legislation is now being proposed to curb the use of these instruments.

One of the arguments coming from the crowd that believes all legislation is bone-headed is that "would you ban naked/covered shorts as well?". I believe the two constructs are not equal and should not be compared.

Naked CDS is 4 times the non-naked volume. In other words when a debt defaults the payments needs to be 400% of the nominal value of the debt (assuming all debt is hedged).

Let's say the short interest in a stock is 40% (high). When the stock goes to zero with default on debt, the cash that needs to be ponied up for the short portion is 40% of the nominal of the equity.

If debt is 1 and equity is 1 then the impact of a naked CDS is 10 times bigger.

Naked CDS truly are dangerous instruments that should be heavily regulated.

Class Traitor?

2009-08-11T04:43:00.000-07:00

Little hussy with no sense of family identity or loyalty to “her people”

This is probably one of the worst things you could imply about a person in the American South. A recent, inconsequential Facebook exchange, involving a reflection on my middle-class upbringing, provoked a most unexpected, vituperative and, thankfully, private--or else all my Facebook “friends” would be having a good laugh at me now--email. The offended family member wondered how I could consider an upbringing that included trips to Europe “before adulthood!” “exclusive” private schools and membership “from both sides of my family!” in “the most exclusive country club in Atlanta” middle class?

My entire life I considered myself a member of the middle class. Was this a false delusion? Was I, in fact, a class-traitor--a phony and a hypocrite who wouldn’t recognize the American middle class if it were two feet from my nose?

Why middle class? To begin with, in the US, you can’t be upper class without money. Whatever financial resources my antecedents possessed, had mostly disappeared by the time my cousins and I came around. It’s not that the money was completely gone—it helped pay for my sister’s and my private schools, summer camps, or trips to Disneyworld or cruises with our grandparents. However, money had ceased to be a comforting presence you could count on, with an air of nonchalance--described by “The Preppy Handbook,” as “the golden retriever snoozing by the fireplace: nice to have around, but not exactly something you make a big deal about.”

Ironically, the family’s most recognizable “middle class” trait, reinforced by its increasing distance from the flush days, was the need to demonstrate that we occupied a better plane of existence than the ordinary mass of humanity (whom we greatly feared sinking back into). This tendency manifested itself in little observations such as: so and so is “as common as pig’s tracks,” “country people don’t eat lamb,” “fine bone china,” “leaded crystal,” “cradle-born Episcopalian,” “the Junior League,” “debutante,” “all the men in our family are SAEs”, “only tacky people (whose marriage we haven’t been invited to) get married during Lent,” etc.

On the contrary, my limited experience reading about, and interacting with the Personages of this World (or, more frequently, their children)—where my presence was as remarked upon, to borrow a phrase from Neal Stephenson, as “a mouse turd in the pepper”--is that the upper class does not need to point out to you that they occupy a better plane of existence. This fact is blindingly obvious.

"Wait ‘till I get my money right"

Love the refrain from "Can't tell me 'nuthin" by Kanye West. The origin of my improved circumstances, in the plumbing of the Internet, is obscure enough not to attract much attention outside the middleware ghetto. In fact, the one moment of maximum public awareness was when a Personage—I’ll call him Genghis Khan—did take sufficient notice of my husband and our company to upgrade us from “mouse turd in the pepper,” to “mouse,” and, consequently--attempt to squash us. Surviving that and fading back to obscurity has been a good thing.

Growing up among inconsequential provincial snobbery, cradled in a family mythology emphasizing our participation in Great World Events and our proximity to Great Personages of this World--sometimes based on fact and, barring that, convenient coincidence--has somewhat immunized me to my current, improved circumstances. Like the French comedian, Coluche, I don’t consider myself a “nouveau riche,” but rather an “ancien pauvre.” Whatever penny-penching or profligate habits I may have, they, like my identity, were developed long ago.

I hate the word “networking”: cultivating people because you feel they can be of use to you. Thankfully, no one tries to flatter me; I would respect them less if they did--to be so deprived of self-respect to flatter somebody as inconsequential as myself. As for the occasional person who tries to cultivate me to get to my husband (or rather my husband’s money), the irony is that I spent the greater part of my career trying to shield people from my husband. If they get to him, they get what they deserve—he has very specific opinions about fools.

There’s a French expression: “pour vivre heureux, vivons caches.” This translates to “To live happy, live hidden.” The family’s picaresque repertory contained many cautionary tales, where instances of extraordinary success were reduced by unfavorable World Catastrophes—the French Revolution, the Great Depression, World War II, the Cuban Revolution (less mention was given to latter generations’ propensity to coast off the prior generation’s success, and spend down the capital). Of all these stories, my favorite was the tale of René Madec. Madec began his career as a humble cabin boy in the French East India Company; fought for the French in their ill-fated attempt to establish a foothold in Pondicherry; sometimes French corsair, sometimes British corsair; taken prisoner by the British, he deserted from the Bengal army and became military instructor to various Indian princes, rose to rank of Nawab and, later, king of Deccan, in the service of Great Mogul Shah Alam II. He accumulated great wealth, married a "descendant of Genghis Khan," before returning in triumph to his native France. Alas, as he was transporting a portion of his treasure back to France, his boat encountered a storm and was sunk to the bottom of the sea.

Mostly I’m grateful to my family their role in my sense of identity, however twisted it might be, and for their story-telling ability. One day, I hope to perfect this art myself. In the meantime, I’m off to learn more about l’Emmerdeur, the incomparable Jack Shaftoe, and his lady love, Eliza, Duchess of Qwghlm and Arcachon in "The System of the World," book three of Neal Stephenson’s Baroque Cycle.

Quotes: "The Story of your life is not the story of your life, it's your story." From my sister-in-law, Carmela, would be grateful to anybody who can help me source this one.

"Success is a complication in the disease of ambition"--attributed to her father by JS Van Buskirk in Facebook update, possibly source-able elsewhere, as well.