Down the Rabbit Hole We Go

Like Alice in Wonderland the saga just gets stranger by the week. Now one of the bailout victims is filing suit against the FDIC. It's not who you might think.

The shareholders of Wamu's parent company apparently feel they could have received a better payout in the open market. Who knows. It's going to be difficult to establish a fair value for the assets while the government is doing everything it can to prop up home values.

The latest salvo by the Federal Reserve Chairman Ben Bernanke makes the Fed a direct purchaser of US Government Debt thereby providing another avenue to prime the pump.

Unfortunately all this comes at a pretty stiff price. Debasing the currency isn't a good long-term or short-term strategy for dealing with overvalued assets. It's analogous to the factory owner who builds excess inventory to keep his people busy during a recession "hoping" that demand will quickly return to previous levels. The cash runs out and the people loose their jobs anyway. The additional inventory causes excess supply, lower prices, lower margins and possibly kills the company. In the end, nobody has a job, including the owner.

Governor Mark Sanford of South Carolina provided a pretty sobering piece in the Wall Street Journal. Mr. Sanford explains when you start programs based on temporary federal aid, your likely to have difficulty paying for it at the state level in a couple of years when the federal funding goes away.

I think we need more people in government who embrace the free market and also consider the consequences of current actions on future generations. Blaming greedy "Wall Street" for this big mess is the worst kind of populist tripe.

The Federal Government and the Federal Reserve created many of the conditions that caused this mess through manipulation of the interest rates in an attempt to prevent the last financial "crisis" following 9/11.

Everything being done to stimulate the economy and deal with the troubled assets is wrong-headed. We're putting a huge fiscal burden on our children and its just not right.

Photo by Phoebe Marple-Horvat from Flickr Creative Commons.

AIG: What $170 Billion Buys You

This morning we have more news of what $170 billion in our taxpayer bailout "investments" purchase. The case in point is AIG's disclosure last night that they were compelled to pay over $165 million to executives who are responsible for the companies overall financial difficulty. Just one of the many posts this morning can be found here.

While I'm sure this will be front page news all week and that senior AIG management will have to yield to the public outrage that will follow, clearly the bailout enables this sort stupidity. Because the government has chosen to prop up the weakest links, we should expect more of the same and continued massive public investment.

I took the time to review AIG's quarterly conference call data. They knew what was going to happen in mid 2007, but nobody wanted to acknowledge reality, especially those whose bonuses would be affected by it.

If you want to follow the chronology look over the investor presentations here and pay particular attention to the May 9, 2008 conference call cover sheet which includes the tag line, The Strength to Be There.

Illustration by Mike Licht of NotionsCapital.com vis Flickr Creative Commons.

LivePhish - What a Great Way to Promote Yourself

Phish Rift Click below to preview tracks from this show DOWNLOAD THIS ALBUM

I posted this with a few clicks from the Phish website. What a great way to spread music. Phish are clearly some clever guys.

William Anderson Goes a Litttle Too Far

I'll admit freely and proudly that I'm an atheist and a libertarian, but I have more faith in humanity than William Anderson displays in this post.

The article's inferred premise is that both Democrats and Republicans are inherently evil, hellbent on their preferred brand of demagoguery solely for the purpose of perpetuating their favored brand of mind control. The Democrats employing "fear of the loss of your job" the Republicans employing "national security fears."

I have enjoyed and learned from some of Mr. Anderson's writings in the past but this post is so scathing its reminds of something an intelligent drunk would say from a bar stool. You know the loud and obnoxious guy that everyone moves away from.

While the observable behavior supports the premise to some degree, I think Mr. Anderson is too harsh in his sardonic imputation regarding peoples motives. Isn't just possible that the ideas both parties have are based on:

1. Ignorance regarding how the world really works and what's good about incentives
2. Overblown feelings of self importance
3. Misunderstanding of cause and effect
4. Fear

I've known plenty of people who I thought were grossly inaccurate in their interpretation of cause & effect and the curative prescriptions they offered; however, that didn't make me think they were inherently evil.

It's clear to me that in general people are unstudied in economics and don't understand much of what they hear about the subject. I think it would be most helpful to have vigorous debate on the merits of the arguments without assigning evil intent to the motive. You can build bridges that way instead of enemies.

Austrian economic theory has a lot to offer in helping to shape policy. Unfortunately many people perceive Libertarians/Austria Economists as do nothing whiners.

Mature reasoning along with some clear leadership though example might be more helpful in building dialog. Unfortunately, all sides seem to be girding for ideological battle instead of sincere debate on the merit of the available facts, the symptoms and the source causes.

Photo by Chuck Patch at Flickr.com as chuckp

Tableau & Quantrix - Diplaying History & Modeling the Future

It's no secret that I'm a big fan of Tableau Software and their entire product offer.

Tableau is a great tool for investigating historical data, particularly when that data comes from very granular data sources. It's ability to quickly render the information easily and in formats that conform with the best practices of data visualization is uniquely accessible.

I'm promoting Tableau as a High Value Low Cost Business Information (BI) system. A system that can scale from flat files, spreadsheets....to enterprise class data warehouse files in a way that incremental and affordable to a much wider audience than existing (higher cost/more complex) business information systems.

However, Tableau isn't a platform for creating information regarding the future. A tool I've recently discovered is. It's called Quantrix.

Quantrix is a spreadsheet with a very different underlying data paradigm. Instead of using the traditional row/column/cell paradigm for indicating formula references, Quantrix uses a very different method for expressing formulas.

Quantrix expresses the spreadsheet workbook as a table called a "matrix." Rows and columns or the matrix dimensions are called "categories." The structure reminds me of what an Excel pivot-table looks and acts. The major difference is that this structure is native to how Quantrix is designed. The result is a highly "dimension-able" forecasting tool.

By defining underlying assumptions to the model in a separate "assumptions" matrix and associating those assumptions with a primary display matrix I can imagine very robust and clean modeling solutions being possible in Quantrix with much less effort than in traditional spreadsheet models.

The best way to get a basic understanding of the Quantrix is to click the view tour button here at the Quantrix website.

I'm excited about the possibility of using Tableau in conjunction with Quantrix to create very robust and granular forecasting models. I'm going to experiment with this idea over the next couple of months internally in my company. If the result works out as I imagine it can, I would hope to begin offering solutions using Quantrix and training in the tool as part of our High Value Low Cost BI solutions at InterWorks Inc.

To those of you tweeting or e-mailing me regarding questions about my earlier tweets regarding Quantrix, I hope this better explains my thinking on the tool and how I see Tableau and Quantrix being complementary solutions. Tableau for historical data visualization and Quantrix for modeling future events, potentially using the same grain of data for future modeling that's available in historical analysis via Tableau.