The New York Times wrote:
"So it’s still too early to call this the worst recession since the Great Depression. But it’s bad, and it’s still getting worse at a rapid rate."
The New York Times wrote:
Worst month-over-month declines in nonfarm payrolls, with vertical access showing the number of jobs lost.
Steepest month-over-month declines in nonfarm payrolls, in percentage terms.
Tech Mecca could take harder hit than during dot-com bust, analysts say
Samuel Wilson, an analyst with JMP Securities who lives in the Valley and covers the industry, said the region's economic agony is evident in the growing number of vacant offices and unemployed tech workers. He notes that so many people are leaving the Valley, it has even gotten more expensive to rent U-Haul trucks to get out of town, and much easier to drive on the Bay Area's once notoriously-clogged freeways.
"There's no traffic -- what's the deal with that?" he quipped early Friday morning in a cell phone interview from his car as he was driving through Silicon Valley.
The region's office space vacancy rate has nearly reached the 2003 high of roughly 18% and that its unemployment rate is now worse than during the peak of the tech bust.
According to data released Thursday by the California Employment Development Department, the unemployment rate in the San Jose-Sunnyvale-Santa Clara area -- the area known as Silicon Valley -- reached 9.4% in January, surpassing the January 2003 peak of 9.2%.
So many people are getting pink slips and forced to leave town that one-way rental rates for moving vans have jumped two to three times more compared to rates for coming to the region, Wilson said. For example, it costs roughly $1,058 to rent a U-Haul in Silicon Valley on a trip to Denver, and only $353 for the reverse route, Wilson wrote.
Umrao jaan, You should think of setting up a fund to invest in Detroit real estate. Give it thought.Ameet wrote:Median price of home in Detroit now $7,500
http://www.chicagotribune.com/news/nati ... 5392.story
why would he want to become a 'slumlord' in a black cadillac and a coupla goons with baseball bats to collect rent from the cowering subjects?More than 4.5 million workers last year depended at least partly on variable pay, which includes tips and commissions, according to Labor Department figures. Meanwhile, the number of workers forced into part-time instead of full-time work soared 65% in the past year.
The average number of hours all employees work each week has also dropped. The commission-heavy sectors of retail and auto sales have been especially hammered.
As the recession cuts demand for goods and services, companies that don't shed workers outright must squeeze savings from the work force that remains. They typically do so by cutting hours. And as a recession persists, rising competition for jobs tends to shave wages and benefits. Companies lose any incentive to boost pay.
When companies cut or freeze wages for salaried or hourly employees, the workers tends to feel the effect gradually. By contrast, for waitresses, car salesmen, retail clerks and others whose variable pay hinges on economic cycles, a pay drop tends to be as steep as it is quick, said Sylvia Allegretto, an economist at the University of California, Berkeley. That's because sales-based compensation is more sensitive to swings in consumer spending.
A Rising Dollar Lifts the U.S. but Adds to the Crisis Abroad
By PETER S. GOODMAN
Published: March 8, 2009
As the world is seized with anxiety in the face of a spreading financial crisis, the one place having a considerably easier time attracting money is, perversely enough, the same place that started much of the trouble: the United States.
American investors are ditching foreign ventures and bringing their dollars home, entrusting them to the supposed bedrock safety of United States government bonds. And China continues to buy staggering quantities of American debt.
These actions are lifting the value of the dollar and providing the Obama administration with a crucial infusion of financing as it directs trillions of dollars toward rescuing banks and stimulating the economy, enabling the government to pay for these efforts without lifting interest rates.
And yet in a global economy crippled by a lack of confidence and capital, with lending and investment mechanisms dysfunctional from Milan to Manila, the tilt of money toward the United States appears to be exacerbating the crisis elsewhere.
The pursuit of capital suddenly seems like a zero sum game. A dollar invested by foreign central banks and investors in American government bonds is a dollar that is not available to Eastern European countries desperately seeking to refinance debt. It is a dollar that cannot reach Africa, where many countries are struggling with the loss of aid and foreign investment.
“Virtually all of the low-income countries are in very serious trouble,” said Eswar Prasad, a former official at the International Monetary Fund and a senior fellow at the Brookings Institution, the liberal-leaning research organization in Washington.
He went on: “This is the third wave of the financial crisis. Low-income countries are getting hit very hard. The flow of private capital to the emerging market has dried up.”
Private money invested in so-called emerging countries plunged from $928 billion in 2007 to $466 billion last year and is likely to fall to $165 billion this year, according to the Institute of International Finance.
The New York Times
March 10, 2009
They Tried to Outsmart Wall Street
By DENNIS OVERBYE
Emanuel Derman expected to feel a letdown when he left particle physics for a job on Wall Street in 1985.
After all, for almost 20 years, as a graduate student at Columbia and a postdoctoral fellow at institutions like Oxford and the University of Colorado, he had been a spear carrier in the quest to unify the forces of nature and establish the elusive and Einsteinian “theory of everything,” hobnobbing with Nobel laureates and other distinguished thinkers. How could managing money compare?
But the letdown never happened. Instead he fell in love with a corner of finance that dealt with stock options.
“Options theory is kind of deep in some way. It was very elegant; it had the quality of physics,”
Dr. Derman, who spent 17 years at Goldman Sachs and became managing director, was a forerunner of the many physicists and other scientists who have flooded Wall Street in recent years, moving from a world in which a discrepancy of a few percentage points in a measurement can mean a Nobel Prize or unending mockery to a world in which a few percent one way can land you in jail and a few percent the other way can win you your own private Caribbean island.
They are known as “quants” because they do quantitative finance. Seduced by a vision of mathematical elegance underlying some of the messiest of human activities, they apply skills they once hoped to use to untangle string theory or the nervous system to making money.
This flood seems to be continuing, unabated by the ongoing economic collapse in this country and abroad. Last fall students filled a giant classroom at M.I.T. to overflowing for an evening workshop called “So You Want to Be a Quant.” Some quants analyze the stock market. Others churn out the computer models that analyze otherwise unmeasurable risks and profits of arcane deals, or run their own hedge funds and sift through vast universes of data for the slight disparities that can give them an edge.
Still others have opened an academic front, using complexity theory or artificial intelligence to better understand the behavior of humans in markets. In December the physics Web site arXiv.org, where physicists post their papers, added a section for papers on finance. Submissions on subjects like “the superstatistics of labor productivity” and “stochastic volatility models” have been streaming in.
Quants occupy a revealing niche in modern capitalism. They make a lot of money but not as much as the traders who tease them and treat them like geeks (that part is very true). Until recently they rarely made partner at places like Goldman Sachs. In some quarters they get blamed for the current breakdown — “All I can say is, beware of geeks bearing formulas,” Warren Buffett said on “The Charlie Rose Show” last fall. Even the quants tend to agree that what they do is not quite science.
As Dr. Derman put it in his book “My Life as a Quant: Reflections on Physics and Finance,” “In physics there may one day be a Theory of Everything; in finance and the social sciences, you’re lucky if there is a useable theory of anything.”
Asked to compare her work to physics, one quant, who requested anonymity because her company had not given her permission to talk to reporters, termed the market “a wild beast” that cannot be controlled, and then added: “It’s not like building a bridge. If you’re right more than half the time you’re winning the game.” There are a thousand physicists on Wall Street, she estimated, and many, she said, talk nostalgically about science. “They sold their souls to the devil,” she said, adding, “I haven’t met many quants who said they were in finance because they were in love with finance.”
The Physics of Money
Physicists began to follow the jobs from academia to Wall Street in the late 1970s, when the post-Sputnik boom in science spending had tapered off and the college teaching ranks had been filled with graduates from the 1960s. The result, as Dr. Derman said, was a pipeline with no jobs at the end. Things got even worse after the cold war ended and Congress canceled the Superconducting Supercollider, which would have been the world’s biggest particle accelerator, in 1993.
They arrived on Wall Street in the midst of a financial revolution. Among other things, galloping inflation had made finances more complicated and risky, and it required increasingly sophisticated mathematical expertise to parse even simple investments like bonds. Enter the quant.
“Bonds have a price and a stream of payments — a lot of numbers,” said Dr. Derman, whose first job was to write a computer program to calculate the prices of bond options. The first time he tried to show it off, the screen froze, but his boss was fascinated anyway by the graphical user interface, a novelty on Wall Street at the time.
Stock options, however, were where this revolution was to have its greatest, and paradigmatic, success. In the 1970s the late Fischer Black of Goldman Sachs, Myron S. Scholes of Stanford and Robert C. Merton of Harvard had figured out how to price and hedge these options in a way that seemed to guarantee profits. The so-called Black-Scholes model has been the quants’ gold standard ever since.
(the Black Scholes has a whole list of assumptions behind it, that would make even a JNU /DSE/ISI ding dong blush)
In the old days, Dr. Derman explained, if you thought a stock was going to go up, an option was a good deal. But with Black-Scholes, it doesn’t matter where the stock is going. Assuming that the price of the stock fluctuates randomly from day to day, the model provides a prescription for you to still win by buying and selling the underlying stock and its bonds.
“If you’re a trading desk,” Dr. Derman explained, “you don’t care if it goes up or down; you still have a recipe.”
The Black-Scholes equation resembles the kinds of differential equations physicists use to represent heat diffusion and other random processes in nature. Except, instead of molecules or atoms bouncing around randomly, it is the price of the underlying stock. (I had already slammed this rubbish in BR. Of course it will resemble the heat equation idiots, because you assumed at a molecular level that stock prices have exactly the same properties as Brownian motion, which is the mathematical model for heat )
The price of a stock option, Dr. Derman explained, can be interpreted as a prediction by the market about how much bounce, or volatility, stock prices will have in the future.
But it gets more complicated than that. For example, markets are not perfectly efficient — prices do not always adjust to right level and people are not perfectly rational. Indeed, Dr. Derman said, the idea of a “right level” is “a bit of a fiction.” As a result, prices do not fluctuate according to Brownian motion. Rather, he said: “Markets tend to drift upward or cascade down. You get slow rises and dramatic falls.” (ah, after trillions of losses, Fyzzicists realize this , not much diff between ISI/JNU ding dongs and Ivy league Fyzzicists aye ?)
One consequence of this is something called the “volatility smile,” in which options that benefit from market drops cost more than options that benefit from market rises.
Another consequence is that when you need financial models the most — on days like Black Monday in 1987 when the Dow dropped 20 percent — they might break down
Afterward, a Merrill Lynch memorandum noted that the financial models “may provide a greater sense of security than warranted; therefore reliance on these models should be limited.”
That was a lesson apparently not learned.
Respect for Nerds
Given the state of the world, you might ask whether quants have any idea at all what they are doing.
Comparing quants to the scientists who had built the atomic bomb and therefore had a duty to warn the world of its dangers, a group of Wall Streeters and academics, led by Mike Brown, a former chairman of Nasdaq and chief financial officer of Microsoft, published a critique of modern finance on the Web site Edge.org last fall calling on scientists to reinvent economics. (most of 'em two left legged critters cant find their asses with their two hands beyond their narrow fields of expertise. Talk about "reinventing" anything !)
Lee Smolin, a physicist at the Perimeter Institute for Theoretical Physics in Waterloo, Ontario, who was one of the authors, said, “What is amazing to me as I learn about this is how flimsy was the theoretical basis of the claims that derivatives and other complex financial instruments reduced risk, when their use in fact brought on instabilities.”
But it is not so easy to get new ideas into the economic literature, many quants complain. J. Doyne Farmer, a physicist and professor at the Santa Fe Institute, and the founder and former chief scientist of the Prediction Company, said he was shocked when he started reading finance literature at how backward it was, comparing it to Middle-Ages theories of fire. “They were talking about phlogiston — not the right metaphor,” Dr. Farmer said.
One of the most outspoken critics is Nassim Nicholas Taleb, a former trader and now a professor at New York University. He got a rock-star reception at the World Economic Forum in Davos this winter. In his best-selling book “The Black Swan” (Random House, 2007), Dr. Taleb, who made a fortune trading currency on Black Monday, argues that finance and history are dominated by rare and unpredictable events.
“Every trader will tell you that every risk manager is a fraud,” he said, and options traders used to get along fine before Black-Scholes. “We never had any respect for nerds.”
Dr. Taleb has waged war against one element of modern economics in particular: the assumption that price fluctuations follow the familiar bell curve that describes, say, IQ scores or heights in a population, with a mean change and increasingly rare chances of larger or smaller ones, according to so-called Gaussian statistics named for the German mathematician Friedrich Gauss. (oops.. dont tell that to the social "sciences" monkeys in JNU , ISI and other ding dong places, you could get lynched)
But many systems in nature, and finance, appear to be better described by the fractal statistics popularized by Benoit Mandelbrot of IBM, which look the same at every scale. An example is the 80-20 rule that 20 percent of the people do 80 percent of the work, or have 80 percent of the money. Within the blessed 20 percent the same rule applies, and so on. As a result the odds of game-changing outliers like Bill Gates’s fortune or a Black Monday are actually much greater than the quant models predict, rendering quants useless or even dangerous, Dr. Taleb said.
“I think physicists should go back to the physics department and leave Wall Street alone,” he said.
When Dr. Taleb asked someone to come up and debate him at a meeting of risk managers in Boston not too long ago, all he got was silence. Recalling the moment, Dr. Taleb grumbled, “Nobody will argue with me.”
Dr. Derman, who likes to say it is the models that are simple, not the world, maintains they can be a useful guide to thinking as long as you do not confuse them with real science — an approach Dr. Taleb scorned as “schizophrenic.”
Dr. Derman said, “Nobody ever took these models as playing chess with God.”
Do some people take the models too seriously? “Not the smart people,” he said. (the lyin sonofabitch . In India , "experts"/ statisticicans, "economists" and other charlatans sold the modeling rubbish for 40 years and ruined everyone's happiness. And oh, they did play god with the command economy rubbish)
Quants say that they should not be blamed for the actions of traders.
“I regard quants to be the good guys,” said Eric R. Weinstein, a mathematical physicist (oh, yeah. being so objective aren't we , when we cover the ass*s of our own kind)who helps run the Natron Group, a hedge fund in Manhattan. “We did try to warn people,” he said. “This is a crisis caused by business decisions. This isn’t the result of pointy-headed guys from fancy schools who didn’t understand volatility or correlation.” (of course it was you lyin sack sh*t)
Nigel Goldenfeld, a physics professor at the University of Illinois and founder of NumeriX, which sells investment software, compared the financial meltdown to the Challenger space shuttle explosion, saying it was a failure of management and communication. (now that is seriously friggin funny and fundamentally retarded)
Prisoners of Wall Street
By their activities, quants admit that despite their misgivings they have at least given cover to some of the wilder schemes of their bosses, allowing traders to conduct business in a quasi-scientific language and take risks they did not understand.
Dr. Goldenfeld of Illinois said that when he posted scholarly articles, some of which were critical of financial models, on his company’s Web site, salespeople told him to take them down. The argument, he explained, was that “it made our company look bad to be associating with Jeremiahs saying that the models were all wrong.”
Dr. Goldenfeld took them down. In business, he explained, unlike in science, the customers are always right.
Quants, in short, are part of the system. “They get paid, a Faustian bargain everybody makes,” said Satyajit Das, a former trader and financial consultant in Australia, who likes to refer to them as “prisoners of Wall Street.”
“What do we use models for?” Mr. Das asked rhetorically. “Making money,” he answered. “That’s not what science is about.”
The recent debacle has only increased the hunger for scientists on Wall Street, according to Andrew Lo, an M.I.T. professor of financial engineering who organized the workshop there, with a panel of veteran quants.
The problem is not that there are too many physicists on Wall Street, he said, but that there are not enough
He ended his presentation with a joke that has been told around M.I.T. for a long time, but seemed newly relevant; “What do you call a nerd in 10 years? Boss.”
An earlier version of this article misspelled the given name of Satyajit Das.
Excellent point. In my company "R&D" division, we had a candidate who had a year gap in his resume. So when they interviewed him, they asked him about his missing year. He was frank in indicating that he took a year off in evaluating his life and career prospects.Singha wrote: its a system that breeds conformism to a unhealthy degree and rapidly kills the 'outliers/scofflaws' who seed major breakthroughs.
Bade Saar, that lognormal thing is the fundamental assumption of the Black Scholes Model! It assumes the natural logarithm of holding one plus the return from holding a stock for a time delta t , is normally distributed , with a given mean and standard deviation! ..Bade wrote:BTW, fizzicists also know of non-gaussian tails and distributions which are gaussian in log-normal space.
What works in biological measurements (invariant over time and repeatable anywhere) doesn't hold true in something as crazy in a world populated with Abduls, thinking and unthinking and driven more by emotions and instincts and not some "commie"/robot like "rationality" .Lots of biological measurements have this feature. Anyway fizzicists did not invent economics...
So the world gets what is wants...more witch doctors...aka Yum-BEE-yays...whose theories of economics works also half the time (50% probabilty) onlee...like a good toss of the coin.What works in biological measurements (invariant over time and repeatable anywhere) doesn't hold true in something as crazy in a world populated with Abduls, thinking and unthinking and driven more by emotions and instincts and not some "commie"/robot like "rationality" .
* Robert Peston
* 10 Mar 09, 07:58 AM
Many would say it's the thin end of a peculiarly ugly wedge.
I'm talking about a report in yesterday's Financial Times that Bank of America has withdrawn job offers from foreign graduates of US business schools.
What's the cause?
A Bank of America spokesman cites a stipulation by Congress on banks and businesses rescued with taxpayers' money that - if they're laying off US workers - they mustn't employ highly skilled immigrants.
Fair dos, you might say. What's wrong with "US jobs for US workers", to re-work an aphorism coined by our Prime Minister, at a time when jobs are scarce?
Well, financial globalisation was associated with a nation-blind and race-blind, meritocratic approach to recruitment that many would have described as making the world a more tolerant place, and therefore a more stable place.
Say what you will about the way that some big global banks, hedge funds and private equity firms have blown up our prosperity by their blind pursuit of short-term rewards.
But they were more culturally and racially eclectic than most other businesses.
What mattered to get to the top of one of these firms was brains and ruthless determination (oh, and it helped to be motivated by the prospect of making money beyond anyone's wildest dreams).
So their upper ranks were and still are filled with Indians, Chinese, African-Americans and a perhaps surprising number of French men (surprising because much of France's establishment took a rather sneering attitude to the Anglo-American approach to finance).
But for how much longer?
The global recession has prompted a rise in nationalism and protectionism.
For example, a Congressional committee is also this week expected to criticise US banks in receipt of state support for continuing to invest or lend in Asia and the Middle East.
This is dangerous stuff - because the less capital that flows across borders, the less money there will ultimately be for all of us.
The point is that when loans are withdrawn in a systematic way, there's a domino effect and a feedback effect, which ultimately cause the total contraction of credit to be much greater.
And although it was perhaps understandable that politicians were unaware of the poisonous impact of financial chauvinism in the 1930s, there's little excuse today (which is not to argue that protectionism caused the Great Depression - but simply to say that it didn't help).
Which brings me back to China - and the role that many would want it to play in reducing the severity of the global recession and in making the world a permanently safer place.
Our government, the US government and most of the developed world would like to see China consuming more of what it earns from exports.
In the short term, this should helpfully increase demand for our goods and services.
And in the longer term it would gradually reduce China's $2 trillion stockpile of foreign exchange - which many see as one of the main sources of the cheap capital that pumped up the credit bubble, whose bursting has done us so much harm.
But China, understandably, wants a tit for its tat.
China's Commerce Minister, Chen Deming, recently said this to me: "Our hope is that we can gradually reduce our financial surplus...The right way to do so is to consume our surplus abroad through our tourists or through our outbound investment activities".
This desire by China to own more of our productive capacity raises great alarm, especially in the US.
But if China is to consume more and save less, is it unreasonable for it to want to safeguard its future prosperity by acquiring businesses and real assets overseas, which will remit valuable dividends to it over the longer term?
Isn't this what the "imperialist" UK and US did at comparable periods of their economic development?
And is there a cost to us or a benefit if China were to provide our capital-starved businesses with the financial resources they need?
There's an argument that if we're to get through this recession in reasonable shape, we've got to become more relaxed - not less - about who owns what.
Ah Bade Saar . When you are dealing with all "Maya", what you might actually need is the Voodoo Witch Doctor , who does Mantra/Tantra/Black Magic than a "rational" science type who deals with "hard facts" . Consider this. Money is Wampum and then you creating more Wampum called bonds/stocks etc ut of an underlying Wampum called cash, and on this stock /bond Wampum, you create more Wampum called "Derivatives" , and on top of derivative Wampum, you create more Wampum called CDO, CDS, MBS and and More Wampum on that Wampum alphabet soup!. Basically you have created layers upon layers of Wampum, infact an entire pyramid of Wampum. And no, this Wampu pyramid /mountain was created by the Fyzzicists and poor fellows, already out of depth in the Wampum/Maya world, far removed from the real world of their training , simply lost it. The Voodoo Witch Doctors would have been more comfortable with Maya and atleast they would't have lost sight of the fact that it was all Maya onree.Bade wrote:So the world gets what is wants...more witch doctors...aka Yum-BEE-yays...whose theories of economics works also half the time (50% probabilty) onlee...like a good toss of the coin.
Why Pandyan saar?. Havent you heard of 1 cal colored water onree which is advertised as Diet Pepsi, Diet Coke, Diet This, Diet That ithyadi and having sales of a couple of billion dollahs each ?.pandyan wrote:and not to mention pristine water from fuji for $2/lt onlee and btw..there are 0 calorie flavored waters too; I saw a lady buy a dozen of 0 cal water and wondered if onlee I had loyal customers like this...
). I was dating one such blonde Mohtarma long ago and there was a lil kerfluffle between Pepsi and our esteemed babus once. Pepsi had introduced the Diet Cola in Yindia , but Babus's wouldn't give the all important "No Objection Certificate" . Why ?. Babu logic was, with 1 cal, it has no "nutritional value" and hence is not a "food", so I cant give you NOC to launch it as an "approved" food . Perfect, impeccable logic from the Yindu Babu, but Mohtarma was scandalized !.. 
Totally OT but ...vina wrote: In Yankee land, the mohtarmas were always very partial to this 1 calorie diet thing. They cant seem to drink normal water and drink onree 1cal soda (they dont want to get fat). Somehow, Cola as a substitute for water has seemed to do within 3 generations what millions of years of human evolution couldn't do.
.RaviBg wrote: Its not limited to mohtarmas anymore! Though not just the diet thing, it appears that americans just don't want to drink water with their food. Whenever I go out to lunch with my co-workers, many of whom are khans, they always grab a cola with their food. Very rare to see them get water. And it is the same in proper american restaurants, like Denny's, Applebees etc. They ask you what you want to drink, and you have to explicitly say water.
First they relocate/remove free water fountains from near the eating joints and food courts. Then the bottled water is priced the same as a Cola. So who wouldn't go for the cola? And guess who owns the bottled water brand(and thus controls relative price vis-a-vis cola)? Dasani or Aquafina anyone? No matter whether you drink a cola or consciously avoid it and go for bottled water the same amount of moolah to goes to same entityRaviBg wrote:Totally OT but ...vina wrote: In Yankee land, the mohtarmas were always very partial to this 1 calorie diet thing. They cant seem to drink normal water and drink onree 1cal soda (they dont want to get fat). Somehow, Cola as a substitute for water has seemed to do within 3 generations what millions of years of human evolution couldn't do.
Its not limited to mohtarmas anymore! Though not just the diet thing, it appears that americans just don't want to drink water with their food. Whenever I go out to lunch with my co-workers, many of whom are khans, they always grab a cola with their food. Very rare to see them get water. And it is the same in proper american restaurants, like Denny's, Applebees etc. They ask you what you want to drink, and you have to explicitly say water. If you say nothing ( like I used to do when I first got here, assuming they will get water instead since you don't have to order it), they don't bring you anything! Indian and Thai restaurants on the other hand always serve water first, just like in India. Used to be quite surprised when I first landed here and when I mentioned that to couple of americans, they too would wonder like "is it so?"
organic foods is khan populace's opportunity to taste real vegetable and fruits the way they are supposed to taste naturally. In the land of bland tasteless vegetables, it is their one opportunity to feel nature as it is. In yindia we pay the normal price for them, in massa they pay a premium.KarthikSan wrote:Whole Foods/Organic Foods are the 2nd greatest scam in God's world after Wall St. onlee
. And like the old "Mahmud was it ? song, it is a classic case of ladki very Hindustani in taste and food and all else.. So Jodi Hamari , Kasie Banega Jaani, Mai ladka hoon Angrezi, Ladki Hindustauni! 
