Geniuses of F.I.R.E.

Posted On: Tuesday - January 17th 2023 7:20PM MST
In Topics: 
  Global Financial Stupidity

In a post a few weeks back, something came up that reminded me to write this post. Peak Stupidity has neglected the Global Financial Stupidity topic for quite a while. We figure it's pretty clear that it's all going down, so ... This is the form of stupidity that trumps all the rest, as in, when the Global Financial Stupidity peaks, the other tranches of stupidity will be liquidated likewise (unless, as I've noted before, we go Communist - not an impossibility by any means).

Wait, "tranches", WTF?? That was a segue into our topic today, with that word that may bring the reader's mind back 15 years to '07-'08, the time of the popping of the American Housing Bubble. Wow, it's been a decade and a half! Seems like it was just yesterday a friend of mine was not only blowing off his mortgage coming up on a year, but getting paid a couple of thousand by the bank to not trash the place before he sent them the keys. Yeah, "tranches", as in some sort of lumping together of the 3% down mortgage notes on $350,000 McMansions of unemployed divorcees and Mexican landscaping company CEOs... to be sold as A-rated investment "vehicles" to pension funds in Norway.

It was still a couple of years later, early '10 I think, when I came upon the anti-Global-Financial-Stupidity website named Zero Hedge. I learned a lot reading there and thoroughly enjoyed the comments, which were all about the stupidity of a nation that was economically led by its F.I.R.E. "industries. That stands for Finance, Insurance, Real Estate, and Education. (Some have it as just ending in Real Estate, without the Education "industry tacked on.) Especially with that first one, Big Finance, being on top, that's no way to run a big nation economically, depending on the manipulation of money as one's bread and butter.

How do all those people pay for that super-expensive real estate in NY City without making big money manipulating and trading around other people's money (well, or be in Real Estate one's self)? It's BIG BIG business! It doesn't produce a damn thing though.

Well, this post is about the employment of math whizzes, geniuses, so some of them tell us themselves, in that Finance industry. It seems like such a waste of talent. The illustrious and notorious Ron Unz apparently made a small fortune being employed in Finance there in NY City*. The writer John Derbyshire also spent some time in this field.

What are big-time math gurus needed for? I really want to know. What's going on making all this money at a higher level than the next Joe Finance is computer-run High Frequency Trading and I suppose also some schemes to organize assets in ways that require higher math to figure out.

High Frequency Trading is about making small profits on very short-term jumps or dips in stocks, by making millions of trades of millions of shares in seconds or milliseconds. I'd have thought that just requires good programming skills and lots of computing power. There must be more to it.

Then, all the complicated bundling of assets and leveraging of money must have some higher-level math involved too, I guess, but I also don't see how.

I mean, there's lots of numbers, but where does the high-level math come in, the stuff that would normally be drawn upon to solve physics problems? All I've got for background is the practical calculus through 3-D (really neat stuff) and the basic differential equations. I do know of other strange mathematical fields, with an inkling of what some of them are about.

I think of the idea of tensors. If you know what vectors are, and then you go from there to a quantity that needs 2 rather than just one dimension to make it meaningful, such as a state of stress or strain of that proverbial infinitesimal cube of material, you can see "hey, I get why someone came up with notation and this concept of a tensor". (The tensor allows one to go on up to n more dimensions from there.) Likely, the math was developed to fit the physics, but sometimes the math was worked out by pie-in-the-sky math geniuses and was awaiting a practical use when the physicists or engineers came upon a problem it ended up fitting.

Is there specialized math to fit this Finance work? Did new fields need to be developed?

No matter what, it's a waste of valuable math talent. America's got these bright guys going to NY City to get the computer programs to make more money faster, or arrange for a more profitable leveraging arrangement. Does it make one happy to use these talents to help Big Finance make a killing?

These bright young men could have been involved in new science and new inventions. Nope,this work gets done in China now. If we did want to do it, we don't need bright Americans, as the foreign Chinese and •Indian Grad students dominate the engineering, science, AND math graduate schools here. I guess, like Cadet Mayo in An Officer and a Gentleman, they got nowhere else to go!

PS: This is Peak Stupidity post # 2,500! That's about 6 years and 7 weeks into the life of this blog. This math genius says that's about 1 1/8 posts per day on average. Damn. I coulda' made more money sorting out tranches and programming big VAX machines to do UHF trading. I don't know though. I have a tendency to lose my ass on anything resembling gambling.

* I listened to an hour-long interview with Ron Unz, and he discussed his whole background, including this phase of his life. He was well-spoken, nice to listen to, and so much different sounding from what I imagine some of his insulting comments sound like in my head!

Adam Smith
Thursday - January 19th 2023 11:35AM MST
PS: Thanks, Dieter!

The Peak Stupidity Book Club collection would be a whole lot less interesting without your reading suggestions. It truly has never been easier to find and share books than it is today. (It's one of the things computers are really good at.)

It would have been a good idea to make a list of these links as I posted them. (Probably a little difficult to do now as sometimes the links change. For example, anything I've posted to mediafire disappears after about a month.) The good news is that I have local copies of all these books scattered across a few directories on my computers. (I download them to test them before I post the links.) I bet I could get motivated to organize them and upload them to a server where everyone could access them (and the links would remain consistent). might be a good place for this repository.(?)

Ulrich Bräker:

Cheers to a great evening, Dieter! ☮
Thursday - January 19th 2023 4:55AM MST
PS: "I don't quite understand what you have against Joan Baez' version of The Night They Drove Old Dixie Down- maybe not that important, but The Band never complained as far as I know."

Nope, not me. I think Joan Baez did a nice rendition, though it is weird for her to sing from the man's point of view. "Virgil Cain is my name". Linda Ronstadt turned around the lyric of "Poor, Poor, Pitiful Me", which worked.
Dieter Kief
Thursday - January 19th 2023 3:00AM MST

Mod. - WIFRED = Weapons, Insurance, Finance, Real Estate, Education.

WIPFRED = + pharma

Don't you worry,don't worry Mod. about an occasional delay if you need the time to overhaul the software: Just take it!

The PS-Book-Club could almost use some sort of storage place for Adam's great link-collection. Thx. Adam one more time, for your asthonishing findings. - Btw.: I think it has never been this easy to actually get the books you want to read than today. - Oooooh: Der arme Mann vom Toggenburg by Ulrich Bräker - the autobiography of a Swiss peasant who started to write (his autobiography = amongst the happy few quite known and appreaciated work from 18th century Toggenburg = Eastern Switzerland mountain range - from which you can see the Lake of Konstanz - - - this writing peasant Ulrich Bräker joined a library club in the Toggenburg, which has founded a library-club to make books and newspapers accessible for the people living in the Toggenburg. - They in those days mostly walked to this library in Wattwil in the Thur Valley - two or three ours for some of them: To be able to read the news and the latest works about science, politics, the novels...

I don't quite understand what you have agianst Joan Baez' version of The Night They Drove Old Dixie Down- maybe not that important, but The Band never complained as far as I know.
Wednesday - January 18th 2023 7:51PM MST
PS: Mr. Blanc, that psychology is hard to model, but I still don't see where any really high level math comes in.

Thank your wife for that joke. I hadn't heard it, but I'll use it.
Wednesday - January 18th 2023 7:49PM MST
PS: Thank you again for the easily-accessible books, Adam!

"In 2007, DTC settled transactions worth $513 trillion,..." Yeah, we're talking big money! What a simple web we weave, seen right there on Wikipedia....

"The kicking the can down the road from the bundle mania of 2000-2008 has reached the end and is part of the burn it all down in order to bring about the global soviet.
Nothing is too big to fail and reality is still undefeated." Agreed with this all, MFF.
Wednesday - January 18th 2023 6:11PM MST
PS Financialization has been a catastrophe. Perhaps, more accurately, it will be a catastrophe. We’ve only seen the tip of the iceberg, so far. Economic behavior is human behavior. Psychology is the study of behavior, so economics is a subfield of psychology. Human behavior is pretty chaotic, but it does aggregate, so patterns begin to emerge. Mathematical techniques can be used to model those patterns. The patterns are, as St Paul has it, seen through a glass darkly, so it’s not clear that economists are picking the right patterns. And even if the patterns are the right ones, there’s so much “other things being equal” involved (because there’s no way that they can model all the relevant variables, even if they know what the variables are) that the modeling only works as long as other things are equal. Nevertheless, sometimes the models work and large amounts of money are made. But, other times, large amounts of money are lost. This is why economic forecasting is so bad. This leads up to a joke that Mme B tells: Q Why are there economists? A To make weather forecasters look good. Congrats on 2,500 posts. Keep up the good work.
Muh Fweedom Fwies
Wednesday - January 18th 2023 11:00AM MST
PS The service economy is part of the Technocratic rule by unelected apparatchiks in faraway places that are usually autonomous zones in the host country.
Using the term host because they are parasites.
The world is about to learn why weak delusional men create hard brutal times.
The kicking the can down the road from the bundle mania of 2000-2008 has reached the end and is part of the burn it all down in order to bring about the global soviet.
Nothing is too big to fail and reality is still undefeated.
Adam Smith
Wednesday - January 18th 2023 10:36AM MST
PS: Kinda off topic... (Kinda not)...

Check out this little corporation that most of us have never heard of...
(Check out their total assets!)

There are a few other tiny little corporations like this located at 55 Water Street...

And this little corporation (which technically owns all of the publicly issued stock in the United States)...

Seems like Blackrock is not the world's largest asset manager.

Peak Stupidity Book Club
Wednesday - January 18th 2023 10:25AM MST
PS: Good afternoon, everyone...



American Psycho:

Wednesday - January 18th 2023 6:39AM MST
PS: Thank you for the encouragement, Dieter. I've got no plans to stop right now, though occasionally there'll be a slow-down and maybe a pause if I ever want to make the site more usable.

What are the "W" and "D" in the acronym WIFRED? I could not find anything in a few seconds.

Yes, Potomac Regime power has multiple forms. It's a shame the cultural power used to be a force for good, during the Cold War era.
Wednesday - January 18th 2023 6:20AM MST
PS: Yeah, that Norwegian bit was just from something off of ZH I remember, Alarmist. It was amazing what kind of stupidity could become an "investment vehicle" for people in another part of the world having no idea in what kind of shape/state the people they were (very indirectly) lending money to were in!

Beside the stats and human nature, they also didn't understand (or just didn't WANT TO understand) that what can't go on won't go on. Musical chairs is the way the ZH commenters looked at it.
Dieter Kief
Wednesday - January 18th 2023 1:36AM MST
Congrats Mod. 2500 is quite someting! Lots of work for - - -our pleasure and as an offer to the public to - - think & notice more precisely - and more humorously too!
- As Wehrmacht General Kurt von Hammerstein-Equord used to say in the 1920ies/thirties: Don't let you be distractd by seemingly terrible situations.
If you were right, I go on explaining the witty man's toughts, you'd be even more in need of - a distance to what's going on. Not least mentally. Don't get sucked into the malstrom of nonsense, that is flooding you...

So: Keep going, Mod., if you please! - and all the Peakers!

WIFRED - why did Zero Hedge not use this acronym? It is not that hard to find - took me a few seconds. - Aha: Weapons - - - would be my addendum.
Bret Easton Ellis is a writer who was close to the masters of the universe - as were Tom wolfe - and Matt Taibbi (Griftopia - one for the ages) - - -and Ellis wrote his essay collection White abuot New York (including Wall Street) and wokism - a brave & insightful book. Ellis got away with a few hits. But was not cancelled. He did risk it though. As I said - a brave endeavor.

Except for that, he focusses on the mentality of the NY bright working class, and finds some unpleasnt things in there, so to speak. nemly: Horror: American Psycho was his big hit. Now he has the Shards out a nightmarish and brutal family story...
Bt. - I've mentioned weapons because US military power seems to secur the monetary power. It's soft power too: The phantasy indutries of netflix, hollywood, pop...Shall I add big tech & the surveillance state and - - - pharma?
The Alarmist
Tuesday - January 17th 2023 8:53PM MST

Nah, the A-rated tranches went into the CDOs and CLOs packaged up for pension funds in the UK. The AAA tranches were sold to German banks and Sparkassen (essentially S&Ls).

The math was quite simple; it was the poor grasp of statistics and human behavior that screwed everything up.
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