Marty Richard Jones
Mountain View, 19th January 2017
“I’ve been accused of vulgarity. I say that’s bullshit.” – Mel Brooks
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19 Thursday Jan 2017
Posted 4th generation Data Warehousing, All Data, Big Data, Big Data 7s, Big Data Analytics, dark data, data architecture, Data governance, Data Lake, data management, data science, Data Supply Framework, Data Warehouse, Data Warehousing, disinformation, governance, information, Information Management, Information Supply Frameowrk, Information Supply Framework, pig data, The Amazing Big Data Challenge, The Big Data Contrarians
inMarty Richard Jones
Mountain View, 19th January 2017
“I’ve been accused of vulgarity. I say that’s bullshit.” – Mel Brooks
If you enjoy this piece or find it useful then please consider joining The Big Data Contrarians. Continue reading
01 Monday Dec 2014
Posted awareness, Banking, Consider this, disinformation, Dogma
inConsider this: Financial Crisis and Subprime.
Martyn Jones
This is a republication of a piece written in 2009 on the subject of the Financial Crisis and Subprime loans. As the spectre of overreach and unhedged risks raises its ugly head once again, the temptation to republish this piece was just too much to resist.
Oh dear, whatever happened here? After years of over-borrowing and under-saving, the plentiful supply of cheap and easy money, the enthusiastic recklessness of a number of financial managers, and the complaisance of governments, the inevitable happened, and panic ensued.
It has not been edifying to see political leaders – people at one time we might have considered intelligent, cautious and wise human beings, falling over each other, in the courageous rush to identify scapegoats, to nationalise bad debt and to prop up failing companies.
After cursory deliberation, the condemnatory finger pointed at short sellers and Hedge Funds, and this mendacity passed by with little comment. Thankfully, the new blame game does not seek to target a conspicuous group of people, such as Swiss gnomes, which is progress of sorts, but it is still only a marginal improvement.
So, what caused the financial crisis? Superficially, the answer is simple; it has been the collapse of the subprime market and its impact on underwriters of usurious lending.
There was a time when people with bad credit ratings, or no credit ratings at all, would have found it difficult to obtain a high street loan to purchase a second-hand car, and would have had no chance of obtaining a housing mortgage.
Cheap and plentiful money, overvaluation and the property boom, changed all of that.
Subprime allowed people with dodgy credit ratings to acquire mortgages, albeit with inflated interest rates and draconian small print.
For years, things worked quite well, as the number of people keeping up with their repayments well-exceeded analyst’s forecasts, which meant that profits from subprime lending surpassed expectations.
This led to two things. The further downplaying of risk in the subprime market, and a boom in the number of banks offering subprime loans.
Traditionally, banks lent out money that they held in the form of deposits, in exchange for timely repayments. In many countries, banks were constrained by how much exposure to risk they could assume, in order to ensure solvency and liquidity; so, even when money was at its cheapest, they could not legitimately expand their subprime business beyond certain levels, without getting creative and by passing on risk to third parties.
What happened next? Just as some banks had cashed-in on insurance brokerage, some switched to the role of subprime lending matchmakers. This meant that they were able to take the upfront brokerage fees, and then pass on the loan arrangements to another financial house, and in this way, they increased their fees whilst offloading the risks inherent in holding especially risky arrangements.
Of course, the actual underwriters of these loans also wanted to reduce their risk exposure.
It is a simplistic explanation, but what these companies first did was to create a way to allow for betting on the overall performance of collections of mortgages – the fewer defaults the higher the gains, in order to allow trading in bets.
Additionally, because of the perceived low risk of subprime and the continued overvaluation of real estate, these bets came with an irresistible added value-proposition. A triple A (AAA) risk rating. “Look Ma! Just like government bonds”.
Then, these companies sold slices of these composite bets to other punters, charging for the betting slips based on a combination of risk, time duration and return.
There are various forms of betting on subprime performance, the most common products being Collaterised Debt Obligations, Mortgage Backed Securities and Asset Backed Securities, the riskiest bits of which are toxic waste.
Now, the calculation of the value and the risks in these bets are horribly complex, and frequently inaccurate. So, just to push the envelope, some people came up with a way to take a bunch of already complex pooled bets, and to create a mega pool of pooled bets, which they would then sell on to the market, as another investment product.
So, when economies tanked, it was the subprime market, mainly in the USA, that took the hit for the increase in the defaults on loan repayments. Worse still, because the holders of these bets could not honestly state either their riskiness or actual value, they became as desirable as financial crap, which meant that other banks were no longer prepared to lend them money, and for Prime Brokers to be denied loans, is like turning off their life support?
As attractive as schadenfreundin might be, letting Prime Brokers go to the wall is not a sensible option, as the survival of other companies and many jobs are also at stake.
The subprime downturn led to the current predicament, but that is not where it started, preceded as it was by the follies and frauds of the dot com era, the artificial “good times” brought on by government overinvestment in the military industrial complex and the costs of war and occupation.
We are where we are mainly because of one thing, decades of government, corporate and personal imprudence.
Many thanks for reading this piece.
File under: Good Strat, Good Strategy, Martyn Richard Jones, Martyn Jones, Cambriano Energy, Iniciativa Consulting, Iniciativa para Data Warehouse, Tiki Taka Pro
11 Saturday Oct 2014
Posted Big Data, BS, Data Warehouse, disinformation, information, Knowledge, wisdom
inI am a sceptic. Part of the awkward squad of troublemakers.
People who ask questions and who won’t stop asking.
People who won’t take bullshit for an answer.
People who are not preprogramed to follow certain paths, unquestioningly.
But to question everything.
Such as, “What the feck’s that all about then?”
I’m in good company. Many people who have made a difference have been fully paid up members of the awkward squad.
People in the awkward squad might sell dog food, but we know that we shouldn’t eat it ourselves.
I used to tell people.
“If you must exaggerate, try and remember this one thing”
“What’s that then, Marty?”
“Never, ever, believe your own bullshit or you’ll ending up having to eat it”.
I remember when Cloud first appeared on the horizon, a marketing idea that was to popularise the expression “put it on the cloud”.
I vaguely remember Larry Ellison being asked about Cloud.
If I recall rightly his reply was along the lines of ‘Cloud? Oh, you mean connected mainframes and data centres?”
He saw it, others saw it, and I saw it. It had been done many times before.
But cloud was new, exciting, vibrant and well, vague enough for the market.
Only that it wasn’t and isn’t new.
The only thing is, a handful of stylists and hacks were let loose on what already existed, and they came up with a new idea, that wasn’t new, creative or innovative.
It was just repackaged. Old wine in new bottles.
I have the same issues with marketing terms such as business intelligence, virtualisation and big data.
Can you imagine Steve Jobs peddling such rebranded and rebadged crap?
I can’t.
Big data brings all the promise of being better informed by having access to far more data.
But for most things in the commercial world quantity of data has never been the issue.
If anything, we’ve had too much of it and for far too long.
We’ve been doing big data for years.
Previously we called it Very Large Data Bases.
We have been handling some forms of highly structured data for years.
We used to call it things like text management, document management and knowledge management.
Not that it matters too much.
We are still looking for real insight, but most of us are overwhelmed by countless gigabytes, terabytes and petabytes of data, and much of what we get is recycled, repackaged and ultimately repetitive.
We are drowned in data, low-utility information and marketing hype.
For all the good that the information we receive does us, we may as well be more dog.
As Ad superman Dave Trott asked, what the feck does ‘be more dog’ mean?
Exactly…
It doesn’t mean anything.
We could write a whole litany of the endless succession of IT snake-oil merchants that have passed through techy-tinsel-town flogging yet another dead-horse as the latest and greatest Kentucky Derby favourite.
But that’s just hokie. Even the media and the presses are in on it, up-close and intimate collaborators in keeping reality from us, by burying us in shit.
Remember the joke about the mushrooms?
That’s right.
“Keep them in the dark, feed them bullshit, and watch them grow”
Well, it came true.
Like life reflecting comic art.
Actually, most of us are still starved of knowledge and insight.
And, as for wisdom?
What’s that then?