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 unz.com comments sound like in my head!