May 1, 2013

Still Just a Wedding Singer

Posted in Foolishness, Social Commentary, Useful day-to-day tagged , , , , , , , , , , at 8:44 pm by Doug Brockway

I’m on the road, alone in King of Prussia, PA.

This presents some dining challenges. Last night, on a recommendation, I went to a nearby “higher end” Mexican restaurant. Plaza Azteca was fine, not high end. The Dos Equis on tap made the meal.

Tonight, my GPS having not found the Chinese restaurant I aimed for I ended up here, at Seasons 52, a VERY busy very nice restaurant indeed. The wait for a table being 90 minutes I end up eating at the bar.

The upside includes my neighbors who know the place inside out, helpful with ordering…, but there’s this piano player…

He’s actually very good, for what he does but he can’t help overacting. St. George and the Dragonet (Thank you Stan Freberg) would take him in on a 412. Right now he’s singing Billy Joel’s Scenes song about Brenda-and-Eddie and he hasn’t pronounced the final syllable in a single verse, “in our Italian restauran'”….

Still, its not helpful to be truly good at something truly awful. A new neighbor, who it turns out also likes Furthur, and I got to talking. Imagine this very professional, passionate, lyrical, always on key Wedding Singer offering up his rendition of Jack Straw (Jack Straw from Wichita cut his buddy dow’…) or Uncle John’s Band (Well the first days are the hardest days, don’t you worry any mo’).

Right now out troubadour is singing about ju-ju eyeballs and toe-jam football and “I wish I was a headlight on a northbound train…”


November 7, 2012

The Return of the Oracle of Delphi

Posted in Social Commentary tagged , , , , at 11:00 am by Doug Brockway

In Ancient Greece, well through the Roman Empire, leaders from around the Mediterranean World would travel to Delphi for a private session with the Oracle who would predict their futures.

In 21st Century America the oracle is shadowed by the pollsters and none bears a stronger social import than Nate Silver, he of the 538 Blog.  I happen to think the world of his work and his predictive skills.  That said, it seems to me the public has a very shallow understanding of what he does and what it means.

On the Monday before the election I listened to Ron Insana of CNBC dismiss Silver as “averaging” polls.  He doesn’t.  He uses poll data , along with other data about past elections, their polls by day, and the history of those polls as predictors by year, as input to a model that does calculations and runs scenarios showing how the competing candidates can reach the needed 270 electoral college votes.  That Insana, or Hannity or any number of other people confuse a weighted, historical model with an average suggests they are incompetent.

Silver never once says that any given scenario is the one we’ll experience when we actually votes.  He merely says how many scenarios there are, of what historical relevance, that suggest one candidate or another will succeed.  He’s suggesting the odds that one person or the other will win.  He’s also clear, the actual vote is all.

There’s a lot of mis-understanding and, by default mis-reporting of statistical information in campaign coverage.  During the return coverage I saw a report that said since the democrats had won senate seats in ME and CT that “makes it harder for the republicans to win an East Coast senate seat.”  If you’re going to use stats, take a stats class…. 1st, there is no causality one state to another in the same way a coin flip is 50/50 each time regardless of past flips.  2nd, some states report earlier than others, which does not cause the later REPORTING states to have voted one way or the other.  The analysts and reporters are confusing the fact that they had conclusive return data from CT and ME before VA’s returns were in with a causal relationship from one state to another.

But, people believe that because the Oracle Speaks the Oracle drives events.  This morning, on Facebook, I saw the following comments re: Silver. “If Obama wins, i’m buying Nate Silver’s book (not just taking it out of the library. THAT guy’s my hero.”  Fair enough.  Buy the book.  He didn’t CAUSE Obama to win.  He merely indicated how likely it was based on what the polls were saying.  Along the same lines in the same stream I saw, ” He deserves a Nobel, Pulitzer and Barrington Library Teen Room prize.”  Maybe the Pulitzer.  I dunno’ from the Barrington Library.  There’s no Nobel for statistical analysis.

There’s other nuttiness.  The president was shown by one set of analysts to have certain advantages regarding the voting trends for women, for women of a certain age, for women who are unmarried.  I saw nothing about for women who prefer Pinochle over Cribbage.  But, the reporting is of the “women are telling us” ilk.  They aren’t, any more than corporations are people with feelings who like to dance on Saturday night.  The aggregation of the actions of women have an impact and represent a trend.  Inside that aggregation are many points of view almost none of which, individually, match up to political analysts pigeon holes.

I happen to be happy that Obama won and that some real clowns did not win senate seats for the Tea Party.  But the Oracle didn’t make it happen.  Voters with ballots did.

May 14, 2012

On Mitt Romney and Greg Marmalard

Posted in Social Commentary tagged , , at 2:07 pm by Doug Brockway

The attack of the posse on John Lauber did happen so long ago, one hopes this isn’t the most telling thing we learn about Mitt Romney this year. It did happen, for good or ill towards Romney’s prospects, when he was 17. AND, it was “only a prank.”

That said, think of the prank in terms of the two models of the movie Animal House. A prank the Delta’s would pull would be self-destructive, if at all, a deliberate and likely riotous thumbing of their noses at those in power (is “power elite” a term that’s too loaded to use?). Romney’s prank is not of this type. His is the type of prank the members of Omega would pull. They ARE the power elite and their pranks reinforce that, creating failing grades for the Delta’s (however deserved) and demeaning the kid who cleaned out the horse’s stable.

Romney’s character may not have been as vicious as Neidermeyer, the ROTC bully destined to be shot by his own troops in Vietnam. No, his “prank” is more the style of Gregory Marmalard, Omega house president, student body president, rich kid, without an actual moral compass. He ended up in jail as a result of his future role as a part of Watergate.

Like all of the movie Animal House, Marmalard’s character is an exaggeration. Still, when I think of the prank and I think of Romney I think I know the type.

October 29, 2011

Parking Lot Science Comes to Analysis of the EuroZone Crisis

Posted in Economics, Financial Markets, Social Commentary at 9:56 am by Doug Brockway

There’s a joke about a drunk who drops and loses his car keys in a parking lot.  He then goes and looks for the keys under a street lamp not because it’s near the where he lost them but because that’s where the light is.  The point being that one should look for keys, or data and answers, where the keys are likely to be not just where you can easily look… or easily frame an issue.

This story came to mind while I was examining a decision tree developed by STRATFOR, a private intelligence company that was distributed by the renowned investor and analyst John Mauldin‘s weekly e-mail letter.  The decision tree examines what are the real likely outcomes that the Eurozone, and the rest of us, will experience as they wrestle with the sovereign debt crisis currently centered on Greece and its debt.

This is a chilly, scary, and as far as I can tell accurate representation of what’s to come.  I truly wish I knew what, if anything, I can practically do about it as an individual for my own account.  But, in addition to that, it occurs to me that this image is but one side of the coin and could easily have been laid out from an entirely different perspective.  Instead of asking “What to do about Greece?” the creditor, what if we asked “What to do about Sovereign Debt Lenders?”  That image might look like this:

Take it as a given that the standard story line about feckless Greek legislators making unwise deals with lazy workers and outdated unions is true and the individual Greeks have been behaving badly as Michael Lewis’ Boomerang might suggest.  My personal guess is that the image is overwritten.  My deeper point is that the lenders are not the naïfs here.  It is the lenders who have the years and years of financial experience, deep data, analysis skills and resources, …. and lawyers.

The negotiations in Europe have been slowed by how much of a haircut the lenders will take on the debt.  50% was the target this time and deemed too much by the lending community.  Think it through. If the lender’s bets are not written off the tax payers must come up with the difference.  Whether you look askance at bailouts as the Tea Party does or at the riches of the 1% as Occupy Wall Street does you have to wonder why Step 1 isn’t to wipe out the feckless lenders.  Of anyone, they knew what they were doing.

February 19, 2011

‘Splain Yourself on Taxes

Posted in Economics, Financial Markets, Social Commentary tagged , , at 11:14 am by Doug Brockway

Inspired by some snarky-serious commentary by Paul Begala about the Conservatives’ positions on taxes I recently challenged a friend from Louisville to “’splain Kentucky and its ‘leaders.’”  As Begala pointed out some of the leaders in the US Senate and Congress on the Republicans’ side of the aisle who are most vocal about the wasteful spending in Congress hail from a state that, “according to the Conservative Tax Foundation ….received $1.51 back from Washington for every dollar it paid in federal taxes.”  Begala suggests we start by aligning tax payments with tax benefits.

My friend’s less than on-the-point response about Mitch McConnell, Rand Paul and Paul Rogers (head of the House Appropriations Committee) was that “they are bringing home the bacon and taking advantage of a broken system.  Nevertheless, we would all be better off with lower taxes and less pork.”

Well, as a tacit observation, the Republican leadership on the issue of spending and taxes is not nearly, not remotely as principled as it claims… and that, of course, puts it in the same boat as what the Democratic leadership does on the same issues most days.

So far most of the debate about how to reduce the deficit has the air of a farce.  I happened to catch a bit of Real Time With Bill Maher last night (that’s a strange show…).  Strangeness aside he had a fantastic visual aid: a plate of fried chicken (thigh and breast), mashed potatoes, and a very little bit of vegetables.  The pieces of chicken were labeled Social Security and either Medicare or Healthcare, I forget, but you get the idea.  The potatoes were labeled Defense.  The small bit that was vegetables was everything else.  He said that the plate is the budget and we’re trying to reduce it then, picking up one of those mini-cocktail corn cobs and said, “but we’re spending all our time arguing about this.”

We can’t seem to get to sensible conversations.  My father, who was a published economist and, like me, had the more proper, left-leaning politics….  wrote years ago, late ’80’s/early ’90’s, that Social Security should be means-tested and the retirement age of 65 was too fixed and too young.  There are plenty of people on the Left who understand and agree with this.  Similarly, there are likely many otherwise politically forlorn and twisted people, you know, Conservatives…. who understand that the US spending as much on Defense as the next 20 or so countries combined is nuts.  Secretary Gates seems to see that.

Instead we’re grousing about funds for NPR and protecting the US Army’s program to advertise by supporting NASCAR.

It’s like a business executive bringing rampant spending under control by working through the priorities in an obscure corner of the corporation that consumes less than 5% of the budget.

What’s going on in Wisconsin is a related and classic example of some good ideas and some reaching too far.  Most people I know think that public pensions are too rich, earned too early, and too burdensome for their benefits or for the public good.  Get a little deeper into it and you can see that unless something like bankruptcy can be engineered for US States they’re in a very hard place.  Its fairly clear to me that public workers of all stripes will have to accept significant adjustments simply to bring them closer into alignment with the general public (though reports are that the unions in Wisconsin that supported the new governor are exempted from his laws…).

Why any of that means that individuals shouldn’t be allowed to get together for their common good is beyond me.  I understand the argument about an implicit labor monopoly and it’s not too convincing in the face of the right to free assembly and the right to congress.  Does that make for dicey discussions and grey areas?  Sure.  But I don’t understand the move to restricting individual rights as appears to be the aim.

I wonder how long the new governor in Wisconsin actually thought about not reducing taxes, which he just did on February 1, in the face of his budget calamity or actually trying to recover from Wall St. the billions stolen via the sale of fraudulently designed CDO’s, based on clearly flawed sub-prime mortgages that were sold to his state pensions thus accelerating their default status.  OK, I understand the second idea has its practical challenges (even though it’s morally sound…) but it’s quite a bit myopic to grind so hard on state workers as if they are the sole cause or sole solution to his woes.

As a former colleague often said, “no fools, no fun.”

January 12, 2011

Is “the new normal” about dim sum?

Posted in Economics, Social Commentary tagged , , , , , at 8:51 am by Doug Brockway

In a recent posting on the NY Times’ Economix Blog, Catherine Rampell wrote about “the new normal.”   Her post, “The New Normal is Actually Pretty Old” is about whether what is happening now is, in fact, as new as people say or just another, to-be-expected turn of economic cycles.

What I found interesting was two graphs she included in her post.  The first showed a Google Ngram of the use of the term “new normal” over the past 100 years.

What I saw was a rough alignment of the first major spike in the use of the term with the ascendancy of the US on the world stage.  Certainly the US was a dynamic and important economic power since soon after the end of the Civil War but US global impact in diplomatic and military influence began with Theodore Roosevelt and the Russo-Japanese War and our establishment as the world’s most dominant economy occurred through the first quarter of the 20th Century.

Look at the right hand side of that chart and think about Asia.  Think about China in specifics.

Its not clear to me that the 21st Century will be the Chinese Century though if you’re going to pick one new candidate they’d be a good choice.  What may have more legs is the 21st Century as the GLOBAL Century.  The chart above aligns not only with China emerging onto the global stage but with a widely discussed sense that we are more entwined, region by region than ever before.  If you do an nGram of China it peaks in the middle of the 20th Century.  Here’s the graph for “Global”:

Of course, it could all be piffle.  The right hand side of the chart is rather short.  Who knows what the future holds?

October 16, 2010

Everybody’s Talkin’ [Past] Me…

Posted in Cognitive Dissonance, Foolishness, Social Commentary at 12:13 pm by Doug Brockway

It may be the political season, it may be the broader transition to “the new normal,” it may be that I’m increasingly a crusty som’ bitch, but it seems that I’m both watching and experiencing more and more conversations that aren’t.

Its a version of the classic Monty Python skit where Michael Palin pays for five minutes of an Argument but all he gets from John Cleese is contradiction.  Palin complains “an argument is more than simple contradiction!”  “No it isn’t” replies Cleese.  “Yes it is.”  “No it isn’t!”

In our house we recently finally upgraded to an HDTV and with that came access to HBO and Real Time with Bill Maher.  Last night a Wall Street Journal reporter and the founder of the Cincinnati Tea Party had a similar “discussion” about how much money was involved in the “bailout” and whether it was larger or smaller than the money spent on the war in Iraq.  I happen to trust the Wall Street Journal on this arithmetic (Iraq War is MUCH larger) but what fascinates, or annoys, is how otherwise intelligent people went on for quite some time without remotely acknowledging anything the other had said.  No it isn’t.  Yes it is….

I know of a company just starting up that is having very emotional internal arguments about owner compensation.  All the management knows that early revenue is key.  Because of this one wants to pay owners commissions on sales to encourage early sales.  The problem is that the basic nature of capitalist business is that owners take risks of profits and loss.  They distribute the net, after tax profits that are left over at the end of the day.  It may be a small number.  It may be big.  THAT’S the owner’s incentive.   If you pay an owner commission on the way to net profits you’ve paid that person twice.  No you haven’t.  Yes you have.  No you haven’t!….

Here’s a less important example.  You can pull data from the web that shows that after 1918, after Babe Ruth was sold to the Yankees, and before The Great Comeback of 2004, even though the Yankees won WAY more World Series than their share the Red Sox still got to the World Series as often as the average team.  Boston fans say they hate the Yankees even though data shows its not the Yankees keeping the Sox from having a world championship in that stretch.  Yes it is.  No it isn’t….

I find myself wishing for discourse.  For the ability to actually explore an idea with someone or someones without it being an argument.  Barring that, an argument, “a connected series of statements intended to establish a proposition” would be nice.

Unfortunately, too often you hear or find yourself thinking the equivalent of “Shut your festering gob, you tit! Your type really makes me puke, you vacuous, coffee-nosed, maloderous, pervert!!!”

And that’s just Abuse.  Arguments are down the hall in 12A…

August 13, 2010

Turn Off the Talk Show

Posted in Social Commentary tagged , at 9:55 am by Doug Brockway

I was struck by the focus of a morning talk show on local radio this morning.  They tee up subjects in 15 minute, sometimes half hour segments and at 7:10 the two hosts were having “a discussion” about Rand Paul’s non-kidnapping escapade and Ben Quayle, son of the former Vice President, who is running for Congress in Arizona and apparently has some sort of history as a soft-porn actor.

It got me wondering if these two items were getting much play elsewhere.  I have studiously avoided cable “news” for a couple of years so I can’t comment on the Beck/O’Reilly/Olbermann directly, but if you google any of their names and “Rand Paul kidnapping” you get LOTS of hits.

I decided to look at the “lame-stream media” and do a quick look on these “important issues of the day.”  Looking only on-line I found that the New York Times has nothing on these items in today’s paper and a handful of references to comments made about it elsewhere.  They have no articles on it.  The same is true about the Washington Post on-line and Google News.  From the other side of the aisle the Wall Street Journal Online also has a handful of links to posted-elsewhere gossip and some commentary quips, but no news at all on these items.

On the talk shows its important stuff and its stupidly presented.  Since both “bad-actors” today are conservative the one host was universally aghast and the other universally dismissive of the trivial nature of the acts.  On other days when people like Charlie Rangel or Elliot Spitzer are involved the roles are reversed.

With the talk-show format, where the important ratings driver is the intensity and emotion of controversy it takes a while, just listening, to get to any material clarity.  In these cases, as I understand it, the Rand Paul thing was an indiscreet, no one harmed, college prank, over 20 years ago; a classic “youthful indiscretion.”  I’ll make you a deal; I won’t tell you about mine if you don’t vote based on “news” of this sort.  Ben Quayle has bigger issues.  His acts are current (3 years ago), done as a formed adult, and are relevant as indicators of his perspective, insight, judgment and personal values.

There is nothing about the talk-show format that’s going to get you to this point of view without listening very carefully and editing out much of what is said and the emotion with which it is said.  It’s a lot of work.  But more importantly, its almost universally about small things in a world of big issues.

Maybe this is the stuff of talk shows because voyeurism equals ratings.  Maybe its because thinking deeply and talking carefully about taxes, wars, global warming and the economy are hard.

Regardless, I have a suggestion.  Turn off the talk show.

May 26, 2010

Don’t SPOF me, Bro’!

Posted in Financial Markets, Foolishness, Social Commentary tagged , , , at 4:49 pm by Doug Brockway

A SPOF, or “single point of failure,” is a part of a system which, if it fails, will stop the entire system from working. They are undesirable in any system whose goal is high availability, be it a network, software application or other industrial system.

Sometimes high availability is desirable as every minute a system is down money is lost.  If an airline’s reservation system is down they still own the planes but they can’t sell the tickets.  Sometimes high availability is desirable because having the system fail also means significant additional costs.  The owners of Three Mile Island and BP both understand this all too well.

Some in management understand the dangers and the costs of SPOFs quite well.  This brings us to two stories about Edward Crosby “Ned” Johnson 3rd, the CEO of Fidelity Investments.  Johnson’s reputation (I’ve never met him) is that of a particularly hands-on, operationally knowledgeable person.  In the early 1980’s Fidelity used to have its main data centers in Boston.  Ned was told by the manager of a data center there that it was secure, that no one, not even Ned, could get unauthorized access.  The story goes that Ned climbed over the computer window desk and into the data center.  Having made his point security was upgraded and over the next few years the data centers were moved out of the city center.

Not too many years later Fidelity established a facility in the Dallas area, including a data center.  Mainframe computers of the time, and for the most part now, were cooled by the circulation of water through pipes inside the machines.  On a tour of his new data center Johnson is reputed to have asked to see the back-up to the water supply.  Having seen that he asked to see the back-up to the back-up.  There was none.  Ned asked how much water was involved.  Given a number he concluded it was about the volume one has in a reasonable swimming pool so a pool was constructed on-site, for employee and family use, attached by pipes to the back-up to the water supply.

I don’t have the data on the volumes of trades or dollars that Fidelity was managing to in those times.  Suffice it to say that as the dominant, the largest mutual fund company, trade and dollar volumes were, and remain, quite high.  Johnson knew the near term value of lost transactions and the long-term reputational risk and revenue risk if his customers came to believe Fidelity was not a reliable partner.

He likely used different words but his message to management was, “Don’t [SPOF] me, Bro’!”

Wouldst that the management of BP took the same view in the Gulf of Mexico.  As I write they are attempting the “top kill” method to stop the gushing oil leak that has plagued us for over a month.  They had a controller on the blow-out preventer fail and no plan to deal with it.  They were drilling five miles down “where no man has gone before” and no at-hand, tested solutions to outages that are reasonably expectable.  The now famous Minerals Management Service blithely gave BP authority to go ahead without the plans and reports that are designed to prevent or control for disasters.  One can only wonder what any of these people were thinking.

One thing is clear, they weren’t thinking “Don’t [SPOF] me, Bro’!”

Causal factor of unavailability
Lack of best practice change control
Lack of best practice monitoring of the relevant components
Lack of best practice requirements and procurement
Lack of best practice operations
Lack of best practice avoidance of network/system failures
Lack of best practice avoidance of internal application failures
Lack of best practice avoidance of external services that fail
Lack of best practice physical environment
Lack of best practice network/system redundancy
Lack of best practice technical solution of backup
Lack of best practice process solution of backup
Lack of best practice physical location
Lack of best practice infrastructure redundancy
Lack of best practice storage architecture redundancy

May 25, 2010

The Quality of Loans is not Strained

Posted in Financial Markets, Social Commentary tagged , , at 3:26 pm by Doug Brockway

I did something fairly “wonkish” today. I read a newly published document from Fannie Mae titled “Lender Letter LL-2010-03, An Introduction to Fannie Mae’s Loan Quality Initiative” (LQI). As stated in the document’s introduction:

“Historically, many issues related to compliance with Fannie Mae selling policies are not detected until after loans are delinquent or through the foreclosure process. Loan repurchase requests to lenders have increased in the past three years, highlighting the need for an improved approach for working with lenders to deliver loans that meet Fannie Mae’s underwriting and eligibility guidelines. Fannie Mae conducted an extensive analysis to determine the primary drivers of repurchase requests and is launching the Loan Quality Initiative (LQI) to identify and implement policy, process, and technology enhancements to improve the compliance with underwriting and eligibility guidelines and mitigate repurchase risk.”

For loan investors (Fannie in this case) and their counterparties (mostly mortgage bankers, conduits and securitizers) the big issue is so-called “repurchase risk.” If the information submitted to Fannie Mae for their approval of a loan is incorrect or inaccurate than in many cases the banker must buy back that loan from Fannie Mae.

Some important things to know:

  1. Most mortgage bankers take out loans from large institutions and use those borrowed dollars to fund loans at your closing. They then turn around and sell the loan, often to Fannie Mae, and generate the cash to do it again,
  2. The loans they must repurchase are by definition, by “reputation” tainted whether there is actual fraud or error. The inaccuracy in the loan application may be immaterial to actual risk but the repurchase must happen in any case
  3. Since the loans are tainted the mortgage bank won’t be able to sell them to a third party.
  4. Mortgage banks don’t have the cash lying around to buy whole loans so the repurchase cash comes out of profits.

Many mortgage bankers were caught in this squeeze when investors stopped buying sub-prime mortgages at all. According to Implode-o-meter, “since late 2006 383 major U.S. lending operations have “imploded.””

Now, many face the prospect of going out of business because the loans they wrote in recent years have problems. Sometimes the issue is outright fraud, sometimes a mis-calculation of a formula, sometimes a missing document. The reason for the LQI is to reduce this activity in the future and create a more stable system, and that’s a good thing. That will work itself out for investors and bankers, for Fannie Mae, Freddie Mac and the rest.

What I find “curious” is the nature of the holes that the Loan Quality Initiative is aiming to fix. Here’s some of the issues they’re tackling:

  • Confirmation of Borrower Identity and Occupancy
  • Validation of Qualified Parties, and Borrower Credit Profile
  • Confirmation of Borrower Occupancy
  • Identification of Property Unit Number
  • Loan Delivery Enhancements
  • Validation of Loan Eligibility at Delivery

Reading down the list, with these, and other updates Fannie will only fund loans to people who actually exist, they’ll only do it with brokers and banks who aren’t on lists of crooks and incompetents, if you say you’re going to live in a house they’ll really be sure,… really, if it’s a condo they’ll make the loan on the right condo in the building or complex, and the loan that they fund will actually be a qualifying loan.

All systems and procedures have error rates. After all of the LQI initiatives are in place we’ll probably still be concerned about borrower identity and the rest. Still and all, it’s a sobering list. In my interactions with the mortgage industry as a customer the rules and the controls were paramount. At your closing you sign and sign and sign, document after document.

We were told that the mortgage process was solid. It wasn’t. We were told that BP understood deep sea drilling. They don’t. Many people are evoking the name of George Bailey from “It’s a Beautiful Life” lately. I often feel a bit more like another Jimmy Stewart character, Elwood P. Dowd….

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