Just another half-baked, hair-brained idea.

Nearly the past two years, I’ve masochistically taken some math courses, the first of which was at Harvard.  Leaving with my tail between my legs and a C in my hand, I left that ivory tower disappointed but some sense slapped into me.  I realized that my brain for mathematics has atrophied.  Just like a muscle, it became weak after the rigorous advanced calculus courses I took in high school.  Undergrad didn’t do much – it was all business math.

So I took that first math class over again elsewhere, a little defeated but with a better knowledge of what to expect.  And then a theory occurred to me: train my brain as I do my body.  In swimming, I’ve been trained to gradually build up my yardage until I peaked for about a month before the big meet: championships.  Two weeks before the meet, I would taper and concentrate on maximum sleep and good nutrition.  Then bam, seconds dropped and successes had!

I took a page out of my own history book and did the same with math.  Started small, a couple hours here and there.  Always would start with “warming up” my brain, either by simple exercises from old chapters or rereading notes.  I’d peak to about 3 or 4 hours each sitting of studying and taper off a few days before an exam.  Good night sleep, good nutrition, and I was primed to go!

Again: BAM!  An A- in that course.  Boo-yah.

Lemma: It also occurred to me that this similar atrophying of the brain might be linked to diseases like alzheimer’s.  If one physically eats junk most of the time, all white breads & rice, few veggies & fruits, etc, issues with the body begin to surface, like heart disease, diabetes, complications with obesity.  So how different is it if one consumes junk in terms of reading tabloids, watching TMZ (…and fox news…), passively consuming information that will not progressively elevate their intellectuality?

The pursuance of knowledge should be similar to the goal of good physical health.

The “Nobel” prize for economics was announced today – received by three economists for their research in labor economics and search theory (very poignant).

One of them is actually a behavioral economist, and I looked up his book Behavioral Economics and its Applications on Amazon.  Here is what I came across:

Do the math – How absurd! 25 cents for a $44 book.  When, if you look right next to this ad, people are selling the book used for significantly more:

Why would anyone use Amazon buyback?

The irony of this being on a behavioral economist’s book page…

“Definition: A linear transformation T: U → V is invertible if there exists a linear transformation L: V→ U such that LT(u) = u, for all u in U, and TL(v) = v, for all v in V.”

Plain english, please.  I assume this means that a matrix for a linear transformation is invertible if you are able to reverse the transformation and get to the same starting point…  seriously, someone correct me before I get too far along.

Theorem (The roguelynn inequality) – Mathematics is masculine if, and only if, there exists explanatory language that is not simple english, such that your ego does not exist in the state of mind spanned by the confused basis L.

Proof: Let T be the text book at hand, such that T is written by mathematician(s).  Also, let basis L be the language in which T is written, given that it is written in obfuscating english.

Suppose there exists a student S, such that S needs to learn textbook T.  In order for the product of TS = grade of A, there must be the learning of L from T, such that the product of TS is an isomorphism to L. Recall that TS ≠ ST.  Therefore, TS = [A]L.

Editor’s note: I’m even confusing myself.

My point is that I find abstract mathematics pretty masculine.  And the reason is such that I read something, and I question “is this what it really means?”  While the frustration increases, it leaves me with a bruised ego from the sense of “I should probably know this, but this obfuscatory language is questioning my sense of the subject…”  It’s the same kind of testosterone induced sense of ego where one doesn’t want to ask for directions.  You’ve been there before, you should know how to get there now…

I get the sense that mathematicians don’t want “the common folk” to learn this stuff (which pushes me more…) from the difficult language in which they write.  I’m left to struggle through this, impatiently but rewardingly so.  It seems like a perpetual loop – once I understand this, I will continue to write such logic based arguments only to confuse others.  And I know my response will be “what, you don’t understand?”  Understanding abstract math almost divides and creates “classes” within intelligence.

Oddly, I’m cultivating an interest in pure and applied mathematics…  It’s a moth to a flame thing.

This leads me to another theorem that I have.  More finance-y based.  For those of you that are familiar with the DOS-based program Bloomberg, equipped with it’s very own keyboard, you can relate when I say the first time I saw that, I thought “wtf…”  While the key word “TOP” is logical for Top News, and perhaps “FWCV” may be intuitive for Forward-looking Yield Curve analysis, how the hell are you supposed to know this right off the bat…   But the whole system is very foreign, especially in the age of “user-friendly programming.”  Granted, similar to my point above, I feel damn proud having figured out *some* of the system, and have a general comprehension of how it works and where to get information.  Might I say, that I am indeed certified in such a program, and still do not know all that Bloomberg can do?

I should also make the point that while this program is quite antiquated, it is vastly utilized in the field of finance since it was released (in the 80s?), and therefore will be quite difficult to change such a system.  When will computer programmers, bankers, financial engineers and economists start working together?

*cough* I think I just hit on a bit of the problem of how this crisis got started… but that’s for another time.

A little Christmas cheer – I had a lot of fun with this.  I also took some writer’s liberty/creative license in making this work.

On the twelfth day of Christmas,

My true loathed gave to me

Twelve trillion netting,

Eleven more banks a-failing,

“Ten” percent a-seeking,

Nine banks repaying,

Eight-y five % debt ‘n’ digging,

Seven bailouts ‘n’ counting,

Six quarters of recession-in’

Five squawking gov’nors,

Four percent for loans,

Three inflation hawks,

Two strong doves,

And a chairman in the hot seat.

In sidestepping the absurdity that was my differential equations class…

I’ve always wondered the intrinsic value of the quarter.  In limiting this thought process to only the city and college campuses, what is the actual value of the 25 cent quarter?

I write this now because a young mother stopped me on the way to the library asking for quarters for the parking meter.  I only had two, which I would have gladly given up, no problem.  She had a cute daughter, I didn’t mind.  But after some resistance, she gave me a dollar.  I paid $0.50 to get $1.00.  In what other circumstance would I receive double my “investment” instantly?  If I had given her only one quarter, would she still have given me a dollar?  Honestly, I think not, I think I would have been out 25 cents.  Which would be of no concern to me, it’s only a quarter.

But say I was concerned in being out that quarter.  I do have coin-operated laundry machines in the basement of my apartment.  Quarters are indeed valuable to me too.  In fact, I often steal quarters from an understanding benefactor (I still owe him some coffee…).  I’ve lent some quarters to roommates, refusing nickels and dimes in return, insisting on quarters at a later time.

I feel like in the case of the quarter, it’s not exactly a coin representing monetary value.  It’s a means to get parking and laundry, and there’s a premium on the quarter.  Seeing as how I won’t take 25 cents in nickels and dimes, more than willing to take a dollar for two quarters, and also willing to pay in coffee for quarters (which can simply be swiped on my debit card, rather than use change), I think that establishes some sort of premium on the coin.

I think that premium is a bit high too, but still nominal.  Paying double for the value of the coin, woah that’s steep!  But, it’s only a dollar.  Stealing 8 quarters, wow jack pot! I can do a load of laundry!  Ah, $3.38 for a latte, no problem (and, if I use dollar bills to pay – that’s two quarters in return! double jackpot).

I feel like a whole thesis could come of this.  I would enjoy it, too.

The dork that I am, I’m in the middle of yet another economics book.  Butterfly Economics is the exploration of rogue economics before Freakonomics and the like.  Pretty awesome – talks about Reich and Krugman before they’ve gained popularity.

The main subject of the book is how social influences go against traditional economic thinking where the most efficient prevails.  One thought he brought up was the idea of the QWERTY keyboard, how come this inefficient model of a keyboard outlived other/better solutions for typing needs.  Where did the idea of QWERTY come from though?  Who was the brilliant jackass that thought this keyboard could possibly be superior to others?

Just a question that I know I won’t get an answer to.

Alright hopefully most of the members of the ‘B-con book club’ have read through a good potion of the first half of the book. 

I’ll admit it – I’m a slow reader.  So thank god for the day off next Monday.  But I do have some thoughts that I’d like to see float around.

First off – before reading this, I intended on getting around to reading the Wealth of Nations.  Well – thankfully, I don’t have to, nor do I have a desire to.  But chapter 3 has just reiterated him being a grandfather to economics.  Like that cute old man that has stories and stories on end to share.  I wish I could hear him ramble. 

I was surprised to read that a lot of ideas of his were collective efforts from others, not necessarily originally his own.   Did anyone know this?  In the introduction, he lists who he’s going to talk about in the book, e.g. a madman, a skeptic, a tramp.  The philosopher now clearly is Smith, despite him being ‘unoriginal’ in his most popular book.

In the book, Heilbroner raves how Smith put together the idea of selfishness being productive for the nation as a whole, that this concept of greed socialistically benefits personal need.  During Smith’s time, the market did operate in laissez-faire fashion.  But, does it now? 

 Side note - I’m just loving the relationship between Malthus and Ricardo.

 Happy reading

Dear Timothy Geithner,

It’s tough to say how well you will do as Treasury Secretary for the Obama administration.  Clearly you are qualified.  Yet it’s quite “coincidental” how you misinterpreted your tax obligations (and you even worked for the Treasury, come on…).

But that’s beside the point.

Read this article »

Finally – sorry – the last pillar of the basel II agreement.

The third pillar – it’s pretty simply – it requires banks to be more translucent with their reporting, allowing markets to get a better grasp of what’s going on inside the bank.

Let’s take a step back on the topic – why do I care?  Not just because banking is a rather important topic of conversation lately.  This is an international document that lacks the ability to be enforced.  Different cultures, different government regulations that affect banking more directly rather than an elusive, global document.  It’s worth talking about, getting familiar with, just as international accounting standards are being adapted to global companies. 

But overall – this is pertinent to current times.  I’d like a clearer definition of what a bank considers its assets before I invest.  I’d like to know how Lehman Brothers developed its CDOs and derivative products. Or how banks managed their risks, what they were exposed to, what to expect for risk in the future and how it’s pieced together.  

Smart people can develop complicated financial models to outsmart the market, to dissipate risk and create a win-win situation.  But let’s have regulations that piece together all of these, to understand CDOs and what-if situations of unwinding them.  Of conceiving irresponsible rating agencies inflating MBSs or plain company bonds.  Well, I guess I’m getting a little ahead of myself.

But a clearer presentation to the market of internal activities would allow the possibility of smart people to conceive these possibilities of failing banks, poor loan practices and the overall ripple effect on others.

I don’t think it’s too much to ask for a free market with free information.

Ahem – they just didn’t get lucky this time around.

In Barry Ritholtz’s blog post, Why Economists Missed the Crisis, he mentions as a whole, economists obviously misjudged the crisis.  He quotes Dean Baker in saying “incentives in economics profession, just as in finance, strongly encourage a lack of original thinking” – stemming from Keynes.  But so spot on for economists’ thinking. 

There are really effective, highly profitable money-making instruments out there, with all the derivatives growing in creativity.  And there are brilliant financiers and economists out there, but there’s too much information to comprehensively judge the outcome of investments, and the economy in general.

Personally, look back at my very first posting in 2007.  Spot on. *dust the shoulders off*