A Glorious Waste of Time

Wolfie — May 15, 2008, 3:06 pm

I’ve spent most of the last week going through some sort of nail-biting home IT hell centred around a gradually failing system disk in my PC. Its only about a year and a half old but suddenly it started failing to boot on a regular basis, only saveable by chkdsk. Clearly on its last legs (after refusing to de-fragment) I sent of to Alienware for a new disk for them to send one in a plastic bag with next to no protection only to then limp through formatting making little “cheeping” noises as it spewed IO errors. Thanks a lot guys, great help in a crisis. The day finally saved after a lot of sweat by a disk from PC World and very helpful disk utilities from Paragon and everything is ship-shape once again. I’m glad that’s over but I’ve become rather more of a hard-disk expert than I ever wanted to be and I’ll definitely be starting a regular backup schedule from now on. My advise, look after your disks.

If you live in London you will be well aware that we are living through a whirlwind of violence at the moment, it almost feels oppressive the way every time you turn on the TV news there has been another attack in the Capital. Even though the news presenters strenuously try to avoid giving us a clue as to the identity of the assailants you can be pretty sure that they will be an immigrant by the time you are leafing through the morning paper. As was the case in the unprovoked attack on Jimmy Mizen earlier this week, which has spurred the Mayor and other politicians to start another “zero tolerance”/”stop and search” campaign. Somehow I don’t think it’s as simple as that. Take a look at the weekend murder of Steven Bigby in Oxford Street, he was out on bail and tagged for the gang rape and acid attack on a sixteen year old girl. Why was such a vile and dangerous young man out on bail? Well my dear Londoner for the simple reason that the prisons are full and they simply don’t have anywhere to put them anymore. We have a serious problem and political sticking-plasters are not going to help this time.

Crossroad London Elections

Wolfie — April 29, 2008, 9:02 pm

The London Mayoral elections are now almost upon us. For some they are of little interest for others they believe that it doesn’t really matter who’s running London but I would beg to differ to both such individuals. London now stands at a crossroads. The current mayor says that he will unite Londoners but I’ve never seen a more divided London in my life with a growing immigrant inner London vying for favours and an indigenous outer London recoiling in distrust. Knee deep in corruption, cosying up to foreign dictators and Islamic fundamentalists whilst dreaming of converting London into his Marxist utopia Ken Livingstone is a ruthless machine politician who uses public money to burnish his image while brushing aside serious questions about his conduct with a disturbing nonchalance.

It doesn’t matter what the other candidates have to say :

Ken Livingstone must be stopped!

I suggest you watch the film below before you cast that vote…

 

Dispatches - The Court of Ken 2/5
Dispatches - The Court of Ken 3/5
Dispatches - The Court of Ken 4/5
Dispatches - The Court of Ken 5/5
Update :
See the Boris Johnson campaign video.

Courchevel Report

Wolfie — April 24, 2008, 2:13 pm

I find my ski breaks a most excellent catharsis for modern living. A weeks or so of fresh air, intense exercise and escape from the rhythm of your daily work and commute regime. Its funny how my wife always resists the trip from booking until about the third day, whereabouts she falls in love with the sport and wants to stay indefinitely - such is the dynamic of married life.

This years booking was a last-minute affair as I suspected that snow conditions could well be problematic, a cautious approach which paid off as the snow arrived very late this year, as is gradually becoming the norm as the pace of Alpine climate change slowly accelerates.

A 'Mario-Kart' finish.
A “Mario-Kart” finish to the day’s skiing
awaits the tired skier at 1850.

Bright sunlight during the day may seem ideal but as the surface melts in the noonday sun and freezes in the evening it soon becomes a sheet of ice. Add to that regular snowfalls which rapidly get pushed into mogul fields on the busy piste and you soon have some quite challenging skiing conditions.

We had a great time but couldn’t help but notice a few cracks showing. In spite of it still being high season the pistes were surprisingly quiet and the bars and restaurants doing only modest trade. Maybe it’s the exorbitant prices that keep people away but the distinct lack of piste bashing is not going to encourage people to return; many pistes were rendered impassable to the novice skier thanks to this neglect and as one instructor explained to my wife, this is entirely due to management in-fighting and incompetence rather than lack of funds. The continued [and excessive] pace of hotel developments seems optimistic but with the snow gradually retreating up the mountain and no visible investment in snow cannons, particularly around the base of the final pistes the villages may soon find themselves empty anyway.

People in Britain often complain about the deterioration of our standards of television but a dose of evening French TV is a good reminder that we still have a long way to go before we sink to French levels, which are so low they are quaintly amusing. It was interesting to note the growing pains that they are going through at the moment with the customary propensity for civil dissent; one demonstration because Sarkozy hasn’t done what he promised and another because he has. I do pity the French predicament.

Photo slideshow.

We’ve Moved

Wolfie — April 15, 2008, 10:47 pm

When I say we’ve moved I don’t mean our home, I’m talking about the server for this site. This blog is now physically a resident of England once more which should provide more responsive navigation for my UK and European visitors and coupled with the more powerful server, faster page loads for everyone. I’m also hoping fewer outages too!

Anyway, I’d like to be able to say its good to be back but how could I say that after such a magnificent skiing trip? Its back to fear and loathing in the City and a raging battle for managerial supremacy as heads roll and new empires rise in the office; oh how I find it hard to give a damn. I guess that just the colourful tapestry of life.

Piste-off for a bit

Wolfie — April 8, 2008, 10:40 am

Relaxing after a day's skiing at Courchevel 1850.
Courchevel 1850 - back soon.
 

Quote of the day

Wolfie — March 26, 2008, 12:24 am

To that, Lewis retorted: “The role of the president of the United States is to support the decisions that are made by the people of Israel. It is not up to us to pick and choose from among the political parties.” The audience members applauded.
 
     Representing Hillary Clinton: former White House official Ann Lewis

Oops! Elections, don’t you love ‘em.

History of the Credit Crisis

Wolfie — March 23, 2008, 4:34 pm

The last two weeks in finance have certainly been interesting, not just for the spectacle of market volatility and the federal reserve blundering but also for the stream of ill-informed drivel appearing on the pages of the press and broadcast media. At this rate I may have to revise my forecasts for the year.

What is currently billed as a credit or liquidity crisis is nothing of the sort, if it was then the federal reserve’s liquidity injections would be having some effect and they are not. This is a confidence crisis in the whole American banking system following decades of deregulation, lax regulation when applicable and corruption colluded between government and business.

The origins of the present sub prime crisis can be found in the Nixon Administration when with his appointment to the SEC, Mitchell, removed the prohibitions to trades in futures and similar “bets” that has made the American markets so unstable. A number of academics including Fisher Black, created a series of formulas by which traders could manipulate the markets to realise huge profits. The result of these moves would inevitably lead to our crisis by creating the impression that risk could be eliminated.

The current crisis on trading floors of the major markets and the hedge fund offices and banks might lead one to think that no one has had any idea that such a crisis might unfold. However, lessons from the Crash of 1907 and that of 1929 led to changes in the laws governing finance during the 1930s under FDR.

Many feel that the government should step in and correct the problem by making the taxpayers pay for the imprudent acts of some, while noting that we have learned that financial institutions were too lenient with credit. Others have traced the evolution of the crisis and shown that post-Depression (1929) laws regulating credit producing entities were removed in the last 30 years making way for the sub prime collapse. This is the correct lesson to learn. As Donald MacKenzie and Yuval Millo have shown in their 2003 article, “Constructing a Market, Performing a Theory,” J. of Sociology, the legal barriers to the trading in derivatives were removed by political interference with the post-Depression experience with speculation. This grew out of the peculiar social environment of the Chicago markets in the 1960s and 70s and the way traders rediscovered option theory, taking advantage of volatility skew.

The Chicago Board of Trade hired former Presidential aide H.H. Wilson to become its president in 1967. Wilson hired Joseph W. Sullivan, a Wall Street Journal political correspondent as his assistant. Together they began to explore the feasibility of trading in futures on commodities of a variety of products with the involvement of a trader named Leo Melamed. This led to discussions to revive trade in financial futures that had fallen into disrepute during the first half of the 20th century. Gillian Tett in an article in the Financial Times (27/08/07) noted that market collapses have been associated with innovations that seem to have changed the rules. However, as in 1907 and 1929 our present dilemma is not due to a new innovation but an old one packaged as new. Stock options and futures were, as MacKenzie and Millo note “integral to 19th century exchanges.” The 1929 crash put such activities and speculation in derivative instruments under the category of wagers and gambling. They note that as late as the 1960s the SEC “remained deeply suspicious of derivatives… A futures contract was legal, the Supreme Court ruled in 1905, if it could be settled by physical delivery of a commodity such as grain. If it could be settled only in cash, it was an illegal wager.”

Sullivan and his associates went to work on the political framework to undermine this institutional memory of disaster and the legal restrictions that reinforced it. SEC Chair Manuel Cohen refused to listen comparing options to “marijuana and thalidomide.” But by using university economists like Burton Malkiel and Richard Quandt, Sullivan was able to create the argument that there was a mathematical and rational basis for options to make the market more efficient. With help from William Baumol, Malkiel and Quandt, and with the resources of Robert R. Nathan Associates, they produced a campaign purporting to show that an options exchange was in the public interest. In 1971 Richard Nixon appointed tax lawyer William Casey as chair to the SEC and the result was an end to the prohibition of a market in options and futures derivatives. In the 1980s Fisher Black and Merton, two professors of economics, developed formulas to streamline this process in the modern context and a number of firms like J.P. Morgan invented financial devices in the 1990s to sell debt associated with securitized mortgages based on their ideas. These began the current explosion in liquidity, the devices were called derivatives and we know them from a number of letters, like LCDS (Loan credit default swaps), CDS of CDOs (credit default swaps of collateralized debt obligations), CFDs (contracts of difference) and basically they are means of placing bets on movements in the markets. The way was open to the floodgates of speculation.

What we need is a longer institutional memory and to reinstitute the laws prohibiting speculation and to separate banking, insurance and brokerage functions as we learned was necessary after 1929.

We presently live in a globalized financial economy where if there are problems they affect everyone. A lack of diversity in any system makes it susceptible to any stress throughout the entire system. There is little resilience in a flat world. The Chinese and the Japanese are constantly under pressure to become more enveloped in this system. At present the Japanese are less affected that other economies, but the Anglo-Americans the most. The idea of such an economic unity has been favoured by a number of economic theories, but in historical comparison it looks little different from the binding of ones subjects by kings or as happened in the late Romanic Republic it takes on the character of tribute to a hegemonic centre, like Italy after the Civil Wars where little was produced and its people had to be increasingly supported by imports. In likewise fashion Americans have been on a spending spree for nearly 20 years with little or no saving.

The amounts involved in this current financial bailout is frightening, but minor in effect in the financial markets, as described in Krishna Guha’s article in the Financial Times (18/12/07). What is disturbing is the transfer of the risk created in the past 5 years via SIVs, derivatives, etc. from private financial institutions to the Federal Home Loan Bank system. Guha reports that “roughly three-quarters of a trillion dollars a year” has been assumed. Essentially while we were all watching the Fed lower interest rates and create cooperative agreements to shore up the financial system, the “shadow banking system” that created the current sub prime balloon and the derivative industry has been shunting off the risk to the public purse. In our present case, the FHLB may eat all the sins of the banking industry but we cannot expect the process to take place without catastrophic effects on the dollar. The only winners will be the financial wizards who have had sufficient connections to be able to regurgitate their risk on the taxpayer. It is also interesting that Japanese companies, like Nomura’s recent interest in Collins Stewart, the British investment bank, are making purchases abroad. We may be seeing Japan coming out of the collapse of credit and a property bubble, while America is heading into one.

While we have been fixed on the spread of the collapse of liquidity and credit, the answers to fix the problem have been old school those based in past theories of governmental intervention when markets fail. As Schumpeter argues in his analysis of Business Cycles (1939), these he noted are related to changing tempo in investments needed for the periodic renewal of productive forces. However, he also saw that discovery of new resources or invention and innovations could affect this tempo. Financial devices of the past two decades have been described in academic circles to have been productive innovations , but this is debatable, instead of productive innovations they seem to have been in the class of wealth transfer devices. When looked at in this light, it appears as if there has been little productive innovation since the advances of biotechnology and internet expansion in the 1990s. There have been none in energy, certainly bio fuels and ethanol have been shown to be poor advancements in existing technology and raise the cost of food. The main overall change in technology investment in the past 8 years has been in security and military spending and this has produced little in new technology and general applications. If there is a recession it is due to low real investment in the developed countries coupled with low saving and too much spending on luxury and prestige goods in the Anglo-American sector and this includes a large segment of spending in the housing area on renovations and overbuilding of large energy dependent housing units.

Update :

If that was a bit hard for you to digest (via Bearwatch), try this :

The Credit Crisis, Illustrated - The Adventures of Accordian Guy in the 21st Century

Blind Budget Day

Wolfie — March 12, 2008, 6:58 pm

From the BBC Have your say section :

Whatever happens, it won’t benefit me.
 
I drive a car to get to work every day to do a job I hate, so I can pay tax so other people don’t have to..
 
I’d leave if I had my own country to go back to.
 
Working Class tax payer, Bracknell

Wow, Super Computer

Wolfie — March 6, 2008, 1:09 am

Alienware Uber gaming machine

 

This just popped into my in-box. Its quite a monster of a gaming machine, I’d imagine it can really perform (as well as look pretty mean), its so impressive it almost makes me wish I could be bothered to actually play computer games. They look pretty fun but frankly the lack of intellectual stimulation leaves me a bit cold. Anyway, you’ll understand what I mean if you watch this short and witty video review of Crysis. This machine was made for this game…

 
 

Six Things before Eighteen

Wolfie — February 23, 2008, 1:11 pm

Sophia has tagged me with this question, “Six things to do before you reach 18″. Every generation complains about the younger one behind it but somehow we haven’t yet reverted to primeval goo so they must be turning out basically alright. Most of the problems arise because the politicians want to get involved in child rearing, a job that I suspect requires the personal touch rather than dogma. Anyway, based on my personal experiences here is my selection :

Do something selfless

Get involved in a charity fund raising event or help elders in your area.

Find your personal passion

Find a hobby or interest that inflames your personal passion and throw yourself into it, the personal rewards are character building.

Discover your musical taste

Music is the food of love, it can transport us to another place and fire our imagination. Everyone’s taste is different so experiment to find yours.

Learn the history of your homeland

People have lived and died so that you can live in freedom, learn about them and what it means.

Learn to take responsibility for another

Take care of your younger sibling or a pet, learn what is required to have responsibility for another life.

Get a summer or part-time job

Your parents work hard to give you what you have, its time you got a taste of what will be required of you one day. A mundane menial job will remind you of what will happen if you don’t work at your studies.