Looking at graphs can be deceiving. I used to be chief analyst for Europe's equivelant to the MIT media lab and am fascinated by how people respond to data and information. A static graph isn't the way we go through life. So here are the 10 Year rolling returns of the S&P 500 animated. The long term if you will. I threw the PE data for fun. Data is from Shiller.
Note the data is plotted as a semi-log and that looking at single countries data is a limited look at the concept of Equities as it is represents a selection and survivorship bias and compounded by using a sample of 1.
One of the best books, I have read that explains how people interact with various media and form biases is The Media Equation. Music by De Phazz
Just a little video of the housing prices using Case Shiller Data and annual median incomes.
Household income in a catchment area is the ultimate arbiter of aggregate house values. It works like a carrying capacity argument for a species occupying an ecological niche. Homes need peoples incomes to support their values. I know it is a weird way of expressing it.
I wrote about the current issue back in 2007 and a potential loss of value estimated at $6.6 trillion. It was outlandish then, but rather pedestrian now. For more detail on the thought processes in 2007 look here.
A book that has been getting rave reviews and is on my to read list is Barry Ritholtz's Bailout Nation. Barry usually has a pretty solid view on things.
The source data for the movie is hereDownload ShillermovieV1.0. If you want a regular XLS file without the whizbang overpirced office 2007 graphics let me know and I can send you a copy. Music by De-Phazz. Video capture with Camtasia and MS excel VBA For Loop.
"High finance", used to be a phrase exemplifying large amounts of value and high degrees of acumen. It turns out in retrospect that High finance, meant bankers and mortgage brokers gone wild on CDO & CLO crack.
Finance is a shared cultural belief system and set of behaviours, not a physical reality. In finance, the most well known sub-culture from a western finance perspective is Sharia finance which seeks to adhere to various culture practices of lending and interest etc. Many cultures practice alternative forms of lending, saving and allocating capital.
Through various western eras, lending has been allowed or not for various groups with various constraints based on the fashions of the times, the label usury is a culturally subjective term that springs up in times of fiscal crisis..
In music Lo-Fi refers to a style that is purposely sub-optimal from an acoustic fidelity perspective but aesthetically more pleasing. Lower fidelity doesn't always mean lesser quality as quality in music is a subjective value.
I would argue that a culture's use of finance relative to the human biases inherent in any group means that some form of Lo-fi finance may be longer term optimal. Lo-Fi finance could actually increase fidelity (trust) in the system long term. For the econo geeks out there (the groups long term utility function may be optimized using sub-optimal local or short term temporal constraints)
Lo fidelity finance could be an interesting point of research for the behavourial economists out there.
Glass Steagall was an excellent example of Lo-Fi finance in action. Glass Steagall's repeal in 1999 was a call for optimization, speed and ironically financial strength. Woops.
Another great example of Lo-Fi finance is the Credit union. Credit unions are the unwashed little hippies of the finance world. They aren't "power suits" etc., but have done well all things considered. I don't mean to get all "Amish" on you, but Lo-Fi has some serious potential. The Lo-Fi label in finance could serve the same function as the Organic label does in stores. People could choose a brand with known qualities.
The manifesto for Lo-Fi finance has some basic ground rules.
Seperation of investment banking from deposit taking
Seperation of any high gamma (or convexity exposures) unless fully hedged with the undelrying. This is about CDS and other forms of asymmetric leveraged low probability high impact risk taking.
A predetermined threshold of market domination in any geography or market segment to avoid concentration of risk in any entity
Elimination of the Basel 11 capital accords
Elimination of the Ratings agencies as a systemic threat
Lo-Fi participants would not be allowed exposures to non-lo-fi participants
Others, please suggest them....
The participants would agree to them and most likely any Lo-fi participant would be barred from engaging with a Hi-Fi operator in all but limited forms of risk exposure.
Lo-Fi would involve separating many risk activities and preclude certain firms from engaging in them. Yes it would be short term sub-optimal, but long term stable.
Eventually deep cultural norms are forgotten or thrown off, only to be rediscovered when something bad happens. The Repeal of Glass Steagall is just such an example of a codified norm that may be relearned in some new fashion.
The CIO of the USA has put an interesting tool for looking at spending in the US at www.usaspending.gov. It looks pretty whizbang. I haven't checked the data available etc. and what is under the hood, hopefully it has a good signal to noise ratio. I put a little chill Moby into the soundtrack. Watching the govt spend is anxiety inducing enough. The video doesn't show much of a story, just the widgets at work.
For those interested in making videos, windows movie maker is probably on your PC via Microsoft and camstudio video screen capture software is available free. Here are the steps to animate an excel series
Load a data series and chart into excel
Open up the developer section and put in a For loop to increment the appropriate variable
In the For loop tell excel to "activate the chart worksheet" which will recalculate it. you can play with recording you actions to see the code for this.
Run the loop while record the chart region of the screen with Cam studio running
Excel is usually so slow updated charts that you can capture the motion
Import the CamStudio AVI file into windows moviemaker
Create your relevant information slides in powerpoint as graphic stills( titles pictures etc.).
In powerpoint use the saveas:picture setting to export the still frames
import the pictures into movie maker
For extra speed adjustments in the excel video clip use the half speed, or double speed effect in Windows MovieMaker
Season with music to taste by importing MP3 etc into windows movie maker
Upload to video sharing site of your choice
This sounds complicated, but it takes 7-15 minutes once you get the hang of it and can bring data to life for many people. It is a great way to understand data as relationships or time unfold.
