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Showing posts from 2014

Top Financial Stories 2014

I generally ask myself at this time of year what were the biggest stories of the past twelve months in business/financial news.

Of course, I choose the ones I do largely because they illustrate an important theme, and in the list below I'll spell out and italicize the theme. Yet the theme itself isn't the story.

What is life?

I remember the following answer to that question from something that Isaac Asimov once wrote, and that I read in my teens. This is from memory:

 Life is a localized resistance to entropy, employing enzymes as a critical weapon in this resistance.

There are at least four distinct elements to that definition.

1) Entropy is the general tendency of things to run down. Every energy exchange is a loser, with some of the energy turned to a useless form in the process of the exchange, so any closed system tends to run down.

2) Living things are a localized resistance. At certain times and places, things become more orderly (which is possible without violating physical law because they are open systems, not closed).

3) Life isn't the ONLY sort of localized anti-entropy. Volcanic activity is another example. It creates a mountain where there may previously have been a flat plain, a transition that represents a gain in potential energy. So to define life properly we need something mor…

O Holy Night

The original French lyrics were as follows:

Minuit, chrétiens, c'est l'heure solennelle,Où l'Homme Dieu descendit jusqu'à nousPour effacer la tache originelleEt de Son Père arrêter le courroux.Le monde entier tressaille d'espéranceEn cette nuit qui lui donne un Sauveur.Peuple à genoux, attends ta délivrance.Noël, Noël, voici le Rédempteur,Noël, Noël, voici le Rédempteur!De notre foi que la lumière ardenteNous guide tous au berceau de l'Enfant,Comme autrefois une étoile brillanteY conduisit les chefs de l'Orient.Le Roi des rois naît dans une humble crèche:Puissants du jour, fiers de votre grandeur,A votre orgueil, c'est de là que Dieu prêche.Courbez vos fronts devant le Rédempteur.Courbez vos fronts devant le Rédempteur.Le Rédempteur a brisé toute entrave:La terre est libre, et le ciel est ouvert.Il voit un frère où n'était qu'un esclave,L'amour unit ceux qu'enchaînait le fer.Qui lui dira notre reconnaissance,C'est pour nous tous qu&#…

From John Milton's Nativity Ode

I'll have nothing to say in this blog over the next couple of days. So this will be our last pre-Christmas post. On Christmas Day itself I'll post the lyrics of a favorite Christmas carol, largely because that's easy to do and I'm holiday-lazy.

See you then!

The following is a fine statement by John Milton of the eschatological hope bound up with Christianity, and for that matter with the Jewish messianic tradition. enjoy.

Time will run back, and fetch the age of gold,
And spekl'd vanity
Will sicken soon and die,
And leprous sin will melt from earthly mould,
And Hell itself will pass away,
And leave her dolorous mansions to the peering day.

Yea Truth, and Justice then
Will down return to men,
Th'enamelled Arras of the Rainbow wearing,
And Mercy set between,
Thron'd in celestial sheen,
With radiant feet the tissued clouds down steering,
And Heav'n as at some festival,
Will open wide the Gates of her high Palace Hall.

John Milton, Nativity Ode (162…

Cromnibus and the Swaps Pushout

President Obama apparently decided to support the omnibus budget bill late Thursday morning, December 11th. He supported the bill because Senate Majority Leader Harry Reid told him the threat of a government shutdown in the first quarter of 2015 was otherwise a real one, and the President should act quickly to get that off the table.

The next few hours appear to have been hectic ones, as alliances formed and shifted both for and against the bill, across party lines. The bill came to be called "cromnibus," apparently for "Continuing Resolution Omnibus." [Personally my first impression was that the "cr" stood from "cram." Alas not.]

At 9:37 Thursday evening, the bill passed the House, 219 to 206. Obama and House Speaker Boehner had both kept enough of their troops in line to get the result they both wanted.

The Senate passed it on Saturday night, with a vote of 56 to 40. The 40 who voted "no" included both Elizabeth Warren and Ted Cruz…

Causal Chains

A thought today from Bertrand Russell's book, Human Knowledge.

Russell is here discussing the relationship of cause and effect. He considers the possibility that the relationship might be entirely subjective, just a name for the fact that A regularly precedes B in my experience. Whenever I see a dry match struck against a rock, I then see a flame, etc. He refers to this hypothesis as that of a "world consisting only of data," because it involves seeing causation (and other relations) as connections between one datum and another, not as facts about some external world whence come the data into my subjective consciousness.

And of that idea, he says this:

"As regards the irregularity of a world consisting only of data, this is an argument to which it is difficult to give precision. Roughly speaking, many sensations occur without any fixed antecedents in our own experience, and in a manner which suggests irresistibly that, if they have causes, these causes lie partly …

What is "Money"?

Almost exactly four years ago, economist Paul Krugman wrote the following explanation of the difficulty in defining the money supply for purpose of monetarist analysis. I think it is worth the resurrection.

Surely we don’t mean to identify money with pieces of green paper bearing portraits of dead presidents. Even Milton Friedman rejected that, more than half a century ago. For one thing, a lot of those pieces of green paper are pretty much inert — sitting outside the United States, in the hoards of drug dealers and such. For another, checking accounts are clearly a close substitute for cash in hand.

Friedman and Schwartz dealt with this by proposing broader aggregates –M1, which adds checking accounts, and M2, which adds a broader range of deposits. And circa 1960 you could argue that those aggregates were good enough.

But now we have a large shadow banking system, in which things like repo serve much the same function as deposits; M3 used to capture some of that, but the Fed…

Currency War

Nouriel Roubini recently tweeted, "Currency wars coming, but don't bet on gold."

Roubini is an economist affiliated with New York University, Stern Sch. of Business. He has had an on-and-off relationship with the International Monetary Fund, and is probably best known to the general economics-literate public for the book Bailouts or Bail-Ins? (2004).

That Roubini believes "currency wars" are coming means that opinion has gone well beyond the "usual suspects."

But why does he mean you shouldn't bet on gold? In essence, he believes that as all currencies are about to drop in value relative to real assets, you should do your best to turn your currency into real assets. And this doesn't mean shiny metals. It means real estate and equities.

Time: Good Choice

Sometimes I argue with Time's choices for person of the year.

This year I cannot. The "Ebola fighters" generically are the POTY, and I can't imagine anyone more deserving.

All I'll do then, to pad out this entry, is quote a bit of Time's own thoughtful commentary on the Ebola outbreak that has made so many calamitous headlines in 2014.

"This was a test of the world's ability to respond to potential pandemics, and it did not go well. It exposed corruption in African governments along with complacency in Western capitals and jealousy among among competing bureaucrats. It triggered mistrust from Monrovia to Manhattan."

That's sobering, even if the alliteration in that final sentence is a little too neat.

The other finalists for the POTY distinction were: Ferguson protestors; Vladimir Putin; Taylor Swift; Tim Cook; Roger Goodell; Massoud Barzani; Jack Ma. Perhaps I should have b…

Temasek and automatic trading

Temasek, an investment company managing Singapore's surplus revenues, has bought a significant stake in a high-tech trading company: that is, 10% of Virtu.

Here's what Reuters said about the deal on Sunday.

Virtu's CEO is happy about this. "Temasek is an ideal partner for Virtu," etc. Why? Because Virtu is expanding "into new asset classes and geographies."

But what comes to my mind is that Virtu is the kind of operation that serves as the missing 'bad guy' in Michael Lewis' book, Flash Boys.

Lewis' book plays up the market distortions, the "rigging" of markets in his term, that can be accomplished through contemporary electronic/algorithmic wizardry. When the emphasis is on the speed for the wizardly machinations, this is called "high-frequency trading," though speed itself may not be quite as 'of the essence' as that term suggests.

One feature of Lewis' book that many readers found odd was that while h…

John Jay Chapman

I've just read a fine essay by Christopher Reid about the journalist/essayist John Jay Chapman (1862-1933).

Here's the link, if you would also like to dip into it.

And here's a link to one of Chapman's essays, Professorial Ethics (1910).

In that essay, Chapman writes that the type of men who become the presidents of colleges are those who, a rule, began life with ambitions in scholarship, "but their talents for affairs have been developed at the expense of their taste for learning, and they have become hard men. As towards their faculties they have been autocrats, because the age has demanded autocracy here; as toward the millionaire they have been sycophants, because the age has demanded sycophancy here."

Nowadays the word "millionaire" doesn't work well in this context. A million won't go as far in buying sycophants as once it did. Billionaires, though? Make that change and the passage likely still works fine.
Chapman certainly shared my …

Hannah Arendt

A quote from the opening passage of her 1961 book, ON REVOLUTION.

"Justifications of wars, even on a theoretical level, are quite old although, of course, not as old as organized warfare. Among their obvious prerequisites is the conviction that political relations in the normal course do not fall under the sway of violence, and this conviction we find for the first time in Greek antiquity, in so far as the Greek polis, the city-state, defined itself explicitly as a way of life that was based exclusively upon persuasion and not upon violence."

Like many thinkers before and some since, Arendt tended to romanticize the Greek polis. I believe this passage exhibits that fact. Surely the slaves within the walls of Athens could have told stories about the use of violence against their persons to keep them in their status as beasts of burden. I doubt "persuasion" in a contrary sense had much to do with that.

Still, I see her point. Before anybody would have thought to ju…

"Drew could not be reached for comment."

Rolling Stone ran a story recently, by Sabrina Rubin Erdely, on the rape-friendly culture at the University of Virginia. Here's a link.

At the heart of the story is a gang-rape of a woman named Jackie, a crime orchestrated by a "handsome Phi Kappa Psi brother" described in the story as "Drew." Erdely indicates that Jackie really is Jackie's first name, whereas "Drew" is a pseudonym.

Still more recently, Rolling Stone has said: "oops." Or, in their words, "in the face of new information, there now appear to be discrepancies in Jackie's account, and we have come to the conclusion that our trust in her was misplaced."
They aren't specific about the "new information." But they are pedaling backward from this story as quickly as they can.
Days before they started pedaling, two writers for SLATE  had made an observation that I think germane: although the inference that Drew has gotten away with his crime through the…

Engineers versus Bulldogs

Last week, in trying to write a blog entry on Thanksgiving weekend football, I mistakenly stated that the Georgia-versus-Georgia-Tech game was to take place on Thanksgiving day itself.

That was wrong. That game occurred two days later.

Of course if you really care about college football, you necessarily get your news on the subject, and even your opinionating on the subject, other places. Still: to atone for getting this wrong, I'll revisit the game now.

It was a humdinger, decided in overtime.

In the fourth quarter, the GT Yellow Jackets, leading 21 to 17, started playing very defensively, as if their plan was to run out the clock. But GT quarterback Justin Thomas pump faked a pass while scrambling, lost control of the ball, and the Bulldogs took over. They then drove for a TD and one-point conversion, putting them up 24-21.

By the time the Yellow Jackets got the ball back within scoring distance, time really was running out. Their kicker, Harrison Butler, would have to make u…

Carl Bernstein about Bill Clinton's first term

Back in 2007, as Hillary Clinton, Barack Obama, Joe Biden and several others were maneuvering in anticipation of the Democratic Party's upcoming presidential primary campaign, Alfred Knopf brought out a book by Pulitzer Prize winner Carl Bernstein, A WOMAN IN CHARGE, about Hillary's life.

Here's a fascinating passage, describing the inner workings of the Clinton administration in early 1994.

"Many of Bill Clinton's top aides felt that Hillary was impatient when listening to their criticisms [and that Ira Magaziner was acting as her bulldog]....Magaziner infuriated the president's aides when they learned he was meeting privately with the Clintons in the White House residence and urging them to make important decisions without consulting either the [health care] task force or the economic team. Hillary's stature with Bentsen and even her old friend Shalala was deteriorating.

"The president seemed caught between his wife and his advisers. More often than…

The Big Bang Theory

I'm thinking of the TV show now, not the actual theory.

One snippet of dialogue from an early episode sticks in my mind as a fine example of concise writing and character development.

In the character's world, they are fans of a reality teevee show about aspiring supermodels, and the various beautiful young women aspiring to that status all live together, "Big Brother" style, in a house in southern California.

One character, Howard, is determined that he will find the location of that house and visit the supermodels within the week.

The dialogue (I'm working from memory) goes something like this:

LEONARD: You'll never be able to get in there, Howard.

HOWARD: That's what they said to Neil Armstrong about getting on the moon.

SHELDON: No one said anything of the sort to Neil Armstrong. An entire nation spent a decade getting him there.

HOWARD: [Affecting a Kennedy accent]: Well, my fellow Americans, before this week is out, we will put a Wolowitz on one of…

Roy Bhaskar died recently

A Marxist philosopher, Roy Bhaskar, passed away on November 19, 2014. May he rest in peace.,

He is of interest to me only because he was such a magnificently terrible writer.

Marxism doesn't necessarily produce an awful, impenetrable, jargon-ridden prose style. Hell, Christopher Hitchens, Sidney Hook,  Terry Eagleton were all Marxists of one sort or  another (were or are -- I believe Eagleton is still amongst us). Yet each could write quite well.

But Bhaskar? Here is a sample of his work (chosen with malice of course, but all the better for that):

"Indeed, dialectical critical realism may be seen under the aspect of Foucauldian strategic reversal -- of the unholy trinity of Parmenidean/Platonic/ Aristotelian provenance, of the Cartesian-Lockean-Humean-Kantian paradigm, of foundationalisms (in practice, fideistic foundationalisms) and irrationalisms (in practice, capricious exercises of the will-to-power or some other ideologically and-or psycho-somatically buried source) ne…

Thanksgiving Football Thoughts

With all due respect to the Pilgrims, to the traditional sentiments of harvest time, and to expressions of gratitude, both cosmic and local, Thanksgiving Day for some of us constitutes chiefly the center of the football season -- its culmination for high schools, and a good time for the college games that serve as the natural lead-in to the wonders of the bowl-game season. Have you ever noticed, after all, how much a turkey looks like a football?

My personal thoughts in this regard this year turn to my alma mater, Marist College, home of the Red Foxes.

Their football season is over and it wasn't a resounding success. Their 11 games yielded a 4-7 record. But on the last of those games, November 15th, they kicked the butts of the Davidson Wildcats, with stand-out performances from their seniors. Of course, it sounds like a natural rivalry, a canine wild creature against a feline analog.

One senior, running back Emmanuel Onakoya, scored two touchdowns in the first quarter. Anothe…

Municipal Bankruptcy and Artworks

On November 7th, a US bankruptcy court judge, Steven Rhodes, approved Detroit's plan, allowing its exit from bankruptcy court protection.

One of the remarkable subplots in Detroit's bankruptcy-court saga has been the availability of works of art as collateral.

Rhodes' opinion described the Detroit Institute of Art as "an invaluable beacon of culture" and declared that the liquidate its assets, that is, to sell its artworks for the benefit of the creditors of the city, would be "to forfeit Detroit's future."

I'm not sure I believe that. After all, the works themselves would have remained intact, surely? Unless we believe that the high bidder would be someone with a malicious design to destroy what he/she/it was buying. I think the reasonable guess is that the artworks involved would generally have ended up in the hands of other museums, or in a smattering of cases in the hands of wealthy collectors willing and in fact eager to take good care o…

Chevron in Ecuador

I'm guessing that post headline will serve as click-bait. Welcome, new readers. This is my first mention of the famous/notorious Chevron/Ecuador controversy in this blog.

And I mention it simply to refer to a new book on the subject, Crude Awakening,Information here,

The author is Michael Goldhaber, an adjunct professor of law at Fordham University.

Vent your spleen (at either side in the controversy) in the comments section. Thanks.

Tavakoli on the "Unveiled Threat"

Janet Tavakoli has a new book out entitled Unveiled Threat: A Personal Experience of Fundamentalist Islam and the Roots of Terrorism.

Yes, I know. There are hordes of people these days wielding pens (or keyboards) these days to give their view of the world's discontents and the violently discontented. One can't keep up with them, nor should that be an aspiration.

But I know Tavakoli. We aren't close friends but we are work acquaintances -- I have been happy to quote her as a source or to call her for guidance on ongoing stories. None of these ongoing stories has had a lot to do with terrorism. So this drew me up short.

You see, Tavakoli is an expert on  "structured finance." her firm, unsurprisingly called "Tavakoli Structured Finance Inc." offers as her webpage says "independent risk consulting and expert witnesses services ... for derivatives, credit derivatives, synthetic collateralized debt obligations, total return swaps, special purpose ent…

CBOT/CME Merger: An Arithmetical Subplot

I've been thinking again, for no very compelling reason, about the merger of the two great Chicago exchanges in 2007. In form, it was an acquisition of the Chicago Board of Trade by the Chicago Mercantile Exchange, after the CME won a bidding war with the Intercontinental Exchange (ICE),

I'm looking at Erika Olson's book about the behind-the-scenes maneuvering that ended in that result. One of the many subplots involves ERPs, the "exercise right privileges" possessed by many CBOT members with regard to yet another Chicago institution, the Chicago Board Options Exchange.
This takes some explaining. First, neither the CBOT nor the CBOE is a mere set of initials. Each is a true acronym, "see-bot" and "see-bow" respectively. Second, the CBOE, established in 1973, does what the name implies. It provides a forum for the trade in options. It was initially a spin-off from the CBOT, and they had a close continuing relationship. One part of that: everyo…

Classic Jamesian text

"In one sense at least the personal [side of] religion will prove itself more fundamental than either theology or ecclesiasticism. Churches, when once established, live at second-hand upon tradition; but the founders of every church owed their power originally to the fact of their direct personal communion with the divine. Not only the superhuman founders, the Christ, the Buddha, Mahomet, but all the originators of Christian sects have been in this case; -- so personal religion should still seem the primordial thing, even to those who continue to esteem it incomplete."


Stefan-Boltzmann Law, Part II

In contrast to my usual practice, this time I'm putting the blog entry's image at the bottom of the page. Pretty wild and crazy of me, eh?
Resuming discussion of the same law we discussed yesterday. As a historical observation, it has its name because Jozef Stefan inferred it from experimental evidence in 1879, five years before Ludwig Boltzmann derived it in theoretical fashion.

The law is of considerable importance to certain contemporary issues, because the Earth itself, including its atmosphere, can be considered for purposes of prediction as a "gray box" of the sort I discussed in the last post. If we know how much radiation the earth is receiving from the sun, and we know how much of that energy is reflected away, vis-à-vis how much is absorbed, we should be able to say something about the heat of this box, this planetary system, as a whole.

The International Panel on Climate Change says that 30% of the sun's energy is reflected away, the remainder is abso…

Stefan-Boltzmann Law Part I

This came up in the climate-change discussion group I've mentioned before.

One participant in a heated exchange, seeking to boost his own scientific cred, challenged the other to explain the Stefan-Boltzmann Law. The second fellow refused to participate in that discussion, saying, "I suspect you copied the question from elsewhere, and would be unable to actually converse on the topic ... are you real or are you Memorex?"

That last reference tells me something about his age, at least.

Anyway, now I'm curious, so I do a little research. The S-B Law describes the radiation from a black body as directly proportional to the fourth power of that black body's thermodynamic temperature. Huh?

A "black body" is an ideal state, somewhat akin to those "frictionless surfaces" you encounter in "Intro to Physics" courses. But you don't get to this ideal state until you get to "Intro to Thermodynamics."

A black body is one that a…

Thoughts on "Gone Girl"


I'm about to discuss a movie still in theatres. I will do so without regard for whether you want the various twists and turns to come as a surprise. So if you're going to this movie, and you do want to be surprised, stop reading now.

It isn't that I'll spoil all the twists, but I'll simply write in a way indifferent to what I spoil. Clear? Good.

Still with me? Better. Here's the thing. The central female character in the movie is famous, in a way she does not welcome. She is named "Amy," and is the daughter of a husband/wife writing team who have created a successful series of books collectively entitled Amazing Amy. The fictional "amazing" character's life is a somewhat fictionalized version of the actual Amy's life growing up.

The police detective who first investigates Amy's disappearance buys into this confusion, at least early on. She recognizes "Amazing Amy" related materials around the house and s…

The Point of It All

What is the point of human life? We're all going to die anyway, after all, inhabiting thereafter an everlasting nothingness.

Here's an answer to that question that doesn't try to deconstruct it.

The point may involve saving the universe from itself. The Big Bang of contemporary astronomical theory, combined with the conventional understanding of the 2d law of thermodynamics, leads to a rather dismal prospect of a universe that expires slowly but inevitably into nothingness, by spreading out and cooling off until nothing is left. Like a clock that can never re-wind itself. Like our own lives, but on a really big scale. And with nothing left to carry on, nor any project left to be carried, or any place to carry it.  

Can the universe avoid that fate? Perhaps -- I suspect that advanced species can and sometimes do get far enough in their own scientific development to figure out how to beat the 2d law in their cosmic locality. Those localities then become sources of growth …