What Goes Up Must..... (house-flipping gone awry)

 Is the housing bubble soon to burst (again)? or only Zillow's algorithmic attempt to reap profits from it?:

https://www.bloomberg.com/news/articles/2021-11-02/zillow-shuts-down-home-flipping-business-after-racking-up-losses

(H/T Mike Lawler)

Looming... Student Loan Debt

via HERE

For quite awhile now this country's student loan debt crisis has concerned me more than the housing crisis of 9 years ago ever did — the housing crisis had potential, if painful, solutions (some of which I suspect have been avoided)... I’m not sure the student loan debt dilemma has realistic solutions going forward. Most concern addresses the younger generations strapped with these loans, and the ramifications both for them directly and longer-term implications for the overall economy, but something I didn’t even realize was how many “baby boomers,” specifically over 60, are hampered by the problem as well!

This Marketwatch piece focuses on the issue:

http://www.marketwatch.com/story/baby-boomers-and-student-debt-the-problem-no-one-is-talking-about-2017-01-05

In part:

“The number of older Americans with student debt is growing faster than any other age group, according to the CFPB, and it appears they’re struggling. Nearly 40% of federal student loan borrowers over age 65 are in default…”

For many it means, having Social Security garnished, in turn leaving them with poverty-level income in their retirement years.

Check out more about general student loan debt at Phil Ebersole's blog:

https://philebersole.wordpress.com/tag/student-loan-debt/

We’re in deep doo-doo, that, just like the housing bubble, no one seems to much talk about (perhaps because they have little positive or intelligent to say). Worse yet, we’ll soon have an Administration bent on concentrating yet more wealth in the few, while sending the rest into deeper, more drawn-out recession/depression. Long-term, there may be a solution as brick-and-mortar colleges go the way of brick-and-mortar bookstores, and the cost of education significantly comes down -- but that's VERY long-term; in the meantime several generations have a tough future ahead... tougher lives than their parents had.

Four years from now, it will once again be the Democrats screaming, “It’s the economy stupid!” …but will it already be too late? It remains a bitterly horrible irony that so many of those who voted for Trump and retrograde Republicans, will be those most adversely affected by what passes for their “policies.”

Improving the 'Dismal Science'

Edward Frenkel's twitter-feed led me to this 19 min. conversation with mathematician Eric Weinstein in which Eric "explores many creative ways that physics and more sophisticated forms of math can be used to rescue economics from itself and restore its now tarnished reputation":

Economics 101?

"The mystery of irreproducible results," and overselling of "austerity" (the Reinhart-Rogoff fiasco)… i.e., math gone awry (Excel miscoded) in the "dismal science"… from Paul Krugman:

http://tinyurl.com/crnc5p7

Financial Trading 101... NOT!

"The year after Myron Scholes won the Nobel prize, his hedge fund crashed."

and,

"Black-Scholes changed the culture of Wall Street, from a place where people traded based on common sense, experience and intuition, to a place where the computer said yes or no."

-- from yet another article on how the infamous Black-Scholes formula brought near-ruin to the financial system:

http://www.bbc.co.uk/news/magazine-17866646

The article is by Tim Harford, but he ends quoting Ian Stewart:

"... for Ian Stewart, the story of Black-Scholes - and of Long-Term Capital Management - is a kind of morality tale. "It's very tempting to see the financial crisis and various things which led up to it as sort of the classic Greek tragedy of hubris begets nemesis," he says.

"You try to fly, you fly too close to the sun, the wax holding your wings on melts and you fall down to the ground. My personal view is that it's not just tempting to do that but there is actually a certain amount of truth in that way of thinking. I think the bankers' hubris did indeed beget nemesis. But the big problem is that it wasn't the bankers on whom the nemesis descended - it was the rest of us."

 What I can't help but wonder, is whether we've truly learned anything through all this... or, are we essentially in the midst of repeating the whole process all over again????

Fractals and Finance

Wonderful piece on the application of Mandelbrotian fractals (and Levy distributions) to finance:

http://triplehelixblog.com/2012/04/fractal-finance-a-rogue-mathematician%E2%80%99s-search-for-answers/

an excerpt:

"It was the winter of 1961. When he made this discovery, Mandelbrot was at IBM, studying income distribution patterns between the rich and poor. The Harvard economics department invited him to speak about his work. He walked into the office of his host that day to a surprise. On the chalk-board was a figure with a convex shape that opened to the right. He immediately turned to Professor Hendrik Houthhakker and asked why his diagram was already drawn. Houthhakker was perplexed: ‘These are graphs of cotton prices.’
"The puzzling similarity in pattern between income distribution and cotton prices got Mandelbrot thinking. Was it pure coincidence that the two were spitting images of one another, or was there a deeper truth in the strange connection between the two pictures? And so it was that Mandelbrot was propelled into investigating the mysteries of finance."

and it concludes this way:

"These models, Mandelbrot’s body of work suggests, have caused us to misperceive risk in a dangerous way. His work is a potential explanation to unusual market volatility: it suggests that our notions of ‘usual’ might be incorrect. There are academics who have taken up the baton from Mandelbrot, who died last October. These scholars work to build fractal descriptions of markets, models that take into account the Levy distribution. It remains to be seen how long it will take Wall Street to begin using these Levy-based models."

Ian Stewart on Black-Scholes

             (Black-Scholes Equation)

Good piece (as usual) from Ian Stewart on some of the mathematics underlying the financial crash:

http://www.guardian.co.uk/science/2012/feb/12/black-scholes-equation-credit-crunch

From the article:

"Anyone who has followed the crisis will understand that the real economy of businesses and commodities is being upstaged by complicated financial instruments known as derivatives. These are not money or goods. They are investments in investments, bets about bets. Derivatives created a booming global economy, but they also led to turbulent markets, the credit crunch, the near collapse of the banking system and the economic slump. And it was the Black-Scholes equation that opened up the world of derivatives."