Nine posts in one

January 13, 2012

As my posts have been getting longer of late, I’ve ended up with a vast number of items that I meant to write but, well, haven’t. Since I’m not going to get to all of them, I’ll do some quick hits here.

Dave Crisanti, a high-frequency trader himself, makes a good case that at some point, “trading volumes begin to have zero marginal value”. All too often we treat stock-market liquidity as an obviously good thing, when in fact that isn’t the case at all. As a result, he’s in favor of a 0.25% financial-transactions tax, despite the fact that such a thing “would drive me out of business”.

Jessica Silver-Greenberg has the story of people who are being told that they qualify for a new credit card — but only if they use a large chunk of their new credit to start paying down written-off debt. Once a debt is more than seven years old, you’re no longer legally responsible to pay it, and in most cases the debt is past the statute of limitations. But, nastily, if you start paying one of those old debts again, then it becomes “re-aged”, and you are, again, legally responsible for it. So these credit cards are invidious things.

I asked FICO about this, too, to see whether paying off an expired debt might at least help your credit score a bit. The answer? No. “Assuming the expired debt is no longer appearing on someone’s credit report,” said FICO spokesman Anthony Sprauve, “it is not impacting their FICO credit score”. If you want to get a new credit card, make sure you’re only paying new debt when you do so, not old and expired debt as well.

Landon Thomas says that the French and German banks which held a lot of Greek debt have now sold it to “hedge funds and other independent investors” who aren’t as amenable to arm-twisting. Which means that the Greek restructuring is looking more and more likely to be coercive and non-voluntary, even if that means triggering credit default swaps. Thomas says that triggering CDS is “a move that Europe and Greece are desperately seeking to avoid”, but he doesn’t explain why.

In a related story, IFR reports that hedge funds have been trying to buy up “blocking stakes” in certain bonds, which would allow them to veto any “voluntary” restructuring. As Anna Gelpern says, the most likely outcome is that nobody wins.

Josh Brown has let the cat out of the bag: Druce Vertes’s Street Eye is a fantastic one-stop shop if you want to see what finance’s top tweeps are linking to. It’s a bit like an automated Counterparties, and I’m a huge fan. Because it’s automated, it can’t range too wide: it’s heavy on the mainstream-media stories. But it’s none the worse for that.

Cathy O’Neil has a great post on one of the central problems of quantitative finance: because the models being used aren’t public (indeed, they’re jealously guarded and highly secret), the results being thrown out by those models are almost certainly false. The problem applies to science more generally, too — scientists don’t like sharing their models, and science suffers as a result. The fight over public access to taxpayer-funded research is an important story, but published science nearly always omits a lot of important information which would allow the results to be replicated. We’ve got to fix this somehow.

¶ Is hunger becoming a middle-class problem? According to a new report, 32% of New York households earning between $50,000 and $75,000 a year are having difficulty affording food. For households earning more than $75,000 per year, the percentage has rose from 4% to 24% between 2003 and 2008; it has since fallen back a little bit to 16%. Similarly, 30% of New Yorkers with a college degree, and 21% of New Yorkers with a graduate degree, have difficulty affording food.

¶ At the same time, if food is getting more expensive, that’s not necessarily a bad thing. As Mark Bittman reports, America’s meat consumption has been falling quite dramatically, which is probably good for the nation’s health. And a large part of that is a function of it getting more expensive.

¶ And Matthew Wald has an intriguing story: motor fuel companies in the US will have to pay about $6.8 million in fines for not adding cellulosic biofuel to their product in 2011. Which isn’t really their fault: it simply doesn’t exist, outside a few labs. Wald seems to think this is very silly. But I don’t. These fines will help speed development of a commercially-viable cellulosic biofuel product. Science evolves in response to incentives: look at the way we abolished CFCs only after the government forced the matter.

¶ Finally, here’s a chart of Goldman Sachs’s popularity over the past two years. It seems to be pretty steady, around the -20 range — that’s very negative. It means that if you take the percentage of people who heard something good about the company lately, and subtract the percentage of people who have heard something bad, you’ll end up far underwater. But the good news, for Goldman, is that it has recovered from its all-time lows circa Abacus.


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