[p2p-research] More Bubble Trouble? | zero hedge

[Paul D. Fernhout]

From:
   "More Bubble Trouble?"
   http://www.zerohedge.com/article/more-bubble-trouble
"A lot has happened in the markets in the last eight years, but one thing
remains constant, greed and fear. In my last post looking at whether the
recovery will mirror the decline, I concluded that all the liquidity in the
system will ensure another bubble and we all know that asset bubbles do not
end well. But what are the bubbles in the making? Lawrence Delevingne
reporting for the Business Insider blog recently wrote on Ten Bubbles in the
Making: ..."

Just musing over whether I want to earn seven figures as a quant. :-)

Not saying where the decimal point is or the pay period on those seven
figures I might make is a typical numerical and statistical trickery as I
try to shift mental gears to get a taste of that life. :-)

From:
"Incorporating Human Behavior Into Wall Street Mathematical Models"
http://science.slashdot.org/story/09/09/13/1626257/Incorporating-Human-Behavior-Into-Wall-Street-Mathematical-Models
"After watching the stock market struggle for the past year, financial
experts from Wall Street and academia are putting more effort into bringing
behavioral modeling into their complex financial calculations. "The risk
models proved myopic, they say, because they were too simple-minded. They
focused mainly on figures like the expected returns and the default risk of
financial instruments. What they didn't sufficiently take into account was
human behavior, specifically the potential for widespread panic." Analysts
are looking at research from other fields to supplement the hard mathematics
of risk assessment. "Financial markets, like online communities, are social
networks. Researchers are looking at whether the mechanisms and models being
developed to explore collective behavior on the Web can be applied to
financial markets." Another avenue they're exploring is how we react to the
spread of disease. Jon M. Kleinberg, a computer scientist at Cornell, said,
"The hope is to take this understanding of contagion and use it as a
perspective on how rapid changes of behavior can spread through complex
networks at work in financial markets.""

 From the article:
http://www.nytimes.com/2009/09/13/business/13unboxed.html?ref=technology
"""
Financial markets, like online communities, are social networks. Researchers
are looking at whether the mechanisms and models being developed to explore
collective behavior on the Web can be applied to financial markets. A team
of six economists, finance experts and computer scientists at Cornell was
recently awarded a grant from the National Science Foundation to pursue that
goal. ... “Good or bad, moral or immoral, people are going to make markets
and trade via computers, and this is a natural area of financial engineers,”
says Emanuel Derman, a professor at Columbia University and a former Wall
Street quant.
"""

But one of the reasons I did not do to well in the Princeton PhD program in
OR & Statistics in the 1980s that produced so many quant types of people for
the global financial industry is that I thought it was all so bogus and
fraught with various risk. :-) (I actually did not go there for that, but
the finance people dominated there for a few reasons, unfortunately.) Though
that was more an intuitive feel; only later at the IBM Speech group in the
1990s (where the staff was constantly being poached by Wall Street as the
mathematical models are similar) over lunches did I learn the dirtier side
of the models and why the would fail eventually. And it is exactly how they
did -- "picking up nickels in front of the steam roller" as Warren Buffet
and others said -- you get a good annual return using someone else's money
until it all falls apart, but you get your good paycheck until the party is
over. And even then, as we just saw, the government then socializes all the
risk to pay out the winners in the last iteration of gambling, but leaves
the gains in private hands.

Anyway, so clearly, it seems the p2presearch list with all this knowledge of
social networks is perhaps about to be poached by Wall Street. :-)

Still, it's been said, the lowest point in someone's life is not when you
go to sell out, but when you go to sell out and nobody is buying. :-)

But see also, as funds pick themselves up from the recent disaster:
   "Momo Quant Shops Hiring, No Prior Finance Experience Necessary"
http://www.zerohedge.com/article/momo-quants-shop-hiring-no-prior-finance-experience-necessary

One difference then is that in the 1980s at PU I still thought free market
capitalism made some moral sense and one might approach it with more hope
for making it work well. Now that I think the whole thing as far as the
numbers is mostly (not entirely) a collapsing sham built around play money
bubbles (again, with some exceptions like green energy), with none of the
issues of externalities or systemic risks or wealth concentration being
controlled given a massive failure of government, I feel somewhat
differently about participating in it. :-)

But sadly, I don't have much of a choice of participating in the market yet;
and even those with huge amounts of capital still have to make choices as to
where to put it.

Anyway, so, say I help Jane Street turn a billion dollars into trillions of 
dollars. What does in matter at this point, given I expect most rationing to 
come to an end within twenty years from the success of RepRap-like devices, 
from printed solar panels, and from peer-to-peer construction of free 
commonses, and a bunch of other things? I'm sure there is stuff that could 
go wrong, of course. Not sure what exactly. I guess I'd get sidelined 
pushing numbers around -- that's the big loss as I see it. But, it might do 
more good to ship money off to charities eventually, or invest in renewable 
energy companies? And it's not clear I have much more to say than what I 
have already said.

And, it would at least be a notch up from these scammers: :-)
   http://www.zerohedge.com/article/what%E2%80%99s-your-home-worth
"stories abound about landlords collecting rent just before, during, and
after forclosure. on many condos they're also not paying the association
fees, just pocketing the dough because they know they're going to loose the
place anyway. i've even heard about alot of people renting out
empty/foreclosed places they never even owned to begin with- they just
stroll into the bldg, find keys or make keys, and put an ad on craigslist.
the banks, bld security, and neighbors are none the wiser. some enterprising
'landlords' are renting multiple units and collecting many thousands per month."

This was funny as well, also at that link: :-)
"""
Houses can be bought using conventional investment valuation criteria, but I
think it would be a mistake to overlook the simple fact that men buy houses
at whatever price simply to keep peace in the household, under the "if mama
ain't happy, ain't nobody happy" rule.  (I see you all saying "amen to that"
out there.)  I have joked with my fellow matrimonial inmates how a very
serious argument can be made that the bubble was due to the availability of
credit but also the overwhelming need of wives to move up in the pecking
order, as willing gatherers of "more stuff" with whihc to feather the nest.
   Left alone, men would live in trailers, wear old jeans and stained
T-shirts, have a very expensive cable TV setup, and drink beer. Not much of
a consumer society there.
"""

Of course, that's stereotypical and not always true. :-) But it is an
example of "the psychology of bubbles" that hedge funds and others are
thinking about hiring people to analyze. :-)

Although they could do well just hiring Jim Stanford:
   http://www.paecon.net/PAEReview/issue21/Stanford21.htm
"""
Step 2: Accept that all our efforts to explain the world have failed.  The
'market' is the holiest symbol in all of economics. It's magically automatic
and efficient. And supply always equals demand. The whole profession of
mainstream, 'neoclassical' economics is dedicated to the study of markets
and how they can be perfected. The problem, however, is that in real life
these idealized 'markets' don't explain much at all. Powerful non-market
forces determine most of what happens in the economy - things like
tradition, demographics, class, gender and race, geography, and
institutions. Indeed, what we call the 'market' is itself a complex,
historically constructed social institution - not some autonomous, inanimate
forum. Power and position are at least as important to economics, as supply
and demand.
"""

Anyway, the general trend on jobs is, as I say, down, down, down, due to
automation and improved design and limited demand. But, that does not mean
there are not minor counter trends, at least for individuals occasionally.

If I found a job in CT, then homeschooling laws are easier there too. :-)

These people are interesting, but not in CT:
   http://www.janestreet.com/apply/skills.php

Their claimed policies are interesting from a p2p point of view, too: :-)
   http://www.janestreet.com/workplace/
"""
The Jane Street workplace is organized to nurture and liberate the
intellectual energy of the people who work here. We eliminate the obstacles
that rein in creativity: no hierarchy, no dress code, no politics. Rewards
and responsibilities come not from "face time" or "putting in long hours,"
but from working effectively in a team, developing new ideas and insights,
acting effectively under pressure, serving as a leader and mentor. Many
firms that develop trading strategies lock in employees with restrictive
contracts. Our philosophy is to establish an environment in which people
will choose to stay and flourish. We view our employees not as opponents in
a game, but as partners in a quest.
"""

Anyway, just musing. Not sending out resumes yet. :-)

Feel free to comment, even along these lines: :-)
   "The Three Temptations of Christ"
   http://christswords.com/?page_id=609

Although no doubt stuff like this might be more appropriate in my case: :-)
   http://en.wikipedia.org/wiki/Bedazzled_%282000_film%29
"After taking Elliott to her nightclub in Oakland in her black Lamborghini 
Diablo, the devil gets Elliott to sign her substantial contract, and 
delivers his further wishes: He wishes to be rich and powerful, with Alison 
as his wife. The Devil makes him a Colombian Drug Lord whose wife despises 
him and is having an affair with her language tutor - pointing out that he 
never wished for Alison to be in love with him - and whose business partners 
are about to double-cross and murder him. ..."

I've also been exploring what goes into Medicaid eligibility and getting
food stamps. :-)

But, I'd still rather work out something open sourcey in-between, like a
service offering related to the Pointrel system. :-)

An interesting biography, by the way, about what it took to be an 1800s
social change agent:
   http://en.wikipedia.org/wiki/Karl_Marx
"Karl Heinrich Marx was born in Trier, in the Kingdom of Prussia's Province
of the Lower Rhine. ... Marx's parents had him educated at home until the
age of thirteen. ... Karl Marx married Jenny von Westphalen, the educated
daughter of a Prussian baron, on June 19, 1843 in the Pauluskirche at Bad
Kreuznach. Marx and Jenny had seven children but due to poverty only three
survived to adulthood ... Marx generally lived a hand-to-mouth existence,
forever at the limits of his resources, although this did to some extent
depend upon his spending on relatively bourgeois luxuries, which he felt
were necessities for his wife and children given their social status and the
mores of the time. ... In London Marx devoted himself to two activities:
revolutionary organizing, and an attempt to understand political economy and
capitalism. ... Given the repeated failures and frustrations of workers'
revolutions and movements, Marx also sought to understand capitalism, and
spent a great deal of time in the British Library studying and reflecting on
the works of political economists and on economic data. By 1857 he had
accumulated over 800 pages of notes and short essays on capital, landed
property, wage labour, the state, foreign trade and the world market; this
work however did not appear in print until 1941, under the title Grundrisse.
... During the last decade of his life [age 54 to 64], Marx's health
declined and he became incapable of the sustained effort that had
characterized his previous work. He did manage to comment substantially on
contemporary politics, particularly in Germany and Russia. ...

I'm mid forties, so by Marxian standards, I've got about ten years left of
good work, and a less than 50/50 chance my one child survives. :-( But, it's
one hundred fifty years later, so obviously, some things have changed. So, I
can try to be more hopeful. :-)

What a weird world -- that such minor choices as where to work, essentially
doing the same thing in each case of three cases (computer programming and
data analysis often about economic and cultural issues) can make such a huge
difference in personal income and wealth.

A central problem of our times is IMHO both guiding and surviving the
humane collapse of the scaffolding of capitalism that surrounds a
post-scarcity and mostly peer-to-peer society yearning to grow. :-) That's a 
real "Trickster" thing -- but the interesting thing about Trickster is that 
he or she is still of this world and still has to eat. If Trickster was not 
of this world, the message of those stories would be very different.
   http://en.wikipedia.org/wiki/Trickster

From:
   http://www.amazon.com/Trickster-Makes-This-World-Mischief/dp/0865475369
"A model of rangy, creative, but not far-fetched interpretation, in this 
case of a common mythological archetype, the shifty trickster. With often 
inspired readings of a variety of myths, including the Homeric Hymn to 
Hermes, North American tales of Raven and Coyote, myths of the Yoruba god 
Eshu and the Norse god Loki, Hyde (Art and Politics/Kenyon Coll.; The Gift, 
1983) delineates some of their common themes: voracious appetite, ingenious 
theft, deceit, opportunism, and shamelessness. Through such themes trickster 
tales dramatize a mythic consciousness of accident and contingency 
(supplementing fate), moral ambiguity, foolishness, and transgression--in 
other words, the world as it is, rather than the way it may originally have 
been intended by the more senior gods. While careful to note that tricksters 
are heroes in a symbolic, imagined world and fixtures of wider polytheistic 
moral orders, Hyde ultimately identifies the trickster's crucial role as 
boundary-crosser with the provoking one often taken up by the artist in 
modern times."

Or:
   "Chapter One of Trickster Makes This World: Slipping the Trap of Appetite"
   http://www.nytimes.com/books/first/h/hyde-trickster.html
"""
The trickster myth derives creative intelligence from appetite. It begins 
with a being whose main concern is getting fed and it ends with the same 
being grown mentally swift, adept at creating and unmasking deceit, 
proficient at hiding his tracks and at seeing through the devices used by 
others to hide theirs. Trickster starts out hungry, but before long he is 
master of the kind of creative deception that, according to a long 
tradition, is a prerequisite of art. ...
   Coyote in fact and folklore, Raven and Thlokunyana in mythology--in each 
of these cases, trickster gets wise to the bait and is therefore all the 
harder to catch. The coyote who avoids a strychnined carcass is perhaps the 
simplest case; he does not get poisoned but he also gets nothing to eat. 
Raven and Thlokunyana are more cunning in this regard; they are bait-thief 
tricksters who separate the trap from the meat and eat the meat. Each of 
these tales has a predator-prey relationship in it--the fish and the 
fishermen, for example--but the bait thief doesn't enter directly into that 
oppositional eating game. A parasite or epizoon, he feeds his belly while 
standing just outside the conflict between hunter and hunted. From that 
position the bait thief becomes a kind of critic of the usual rules of the 
eating game and as such subverts them, so that traps he has visited lose 
their influence. What trapper's pride could remain unshaken once he's read 
Coyote's commentary?
   In all these stories, trickster must do more than feed his belly; he must 
do so without himself getting eaten. Trickster's intelligence springs from 
appetite in two ways; it simultaneously seeks to satiate hunger and to 
subvert all hunger not its own. This last is an important theme. In the 
Okanagon creation story, the Great Spirit, having told Coyote that he must 
show the New People how to catch salmon, goes on to say: "I have important 
work for you to do ... There are many bad creatures on earth. You will have 
to kill them, otherwise they will eat the New People. When you do this, the 
New People will honor you ... They will honor you for killing the 
People-devouring monsters and for teaching ... all the ways of living." In 
North America, trickster stepped in to defeat the monsters who used to feed 
on humans.
   The myth says, then, that there are large, devouring forces in this 
world, and that trickster's intelligence arose not just to feed himself but 
to outwit these other eaters. Typically, this meeting is oppositional--the 
prey outwitting the predator. The bait thief suggests a different, 
nonoppositional strategy. Here trickster feeds himself where predator and 
prey meet, but rather than entering the game on their terms he plays with 
its rules. Perhaps, then, another force behind trickster's cunning is the 
desire to remove himself from the eating game altogether, or at least see 
how far out he can get and still feed his belly (for if he were to stop 
eating entirely he would no longer be trickster).
"""

--Paul Fernhout
http://www.pdfernhout.net/