Saturday, February 28, 2009

On politically motivated personality assassination...

TF has posted up another of “those” emails. Fascinating one this time that quotes (almost in full) an “article” published by a gent who I will not honour with further publicity here. Well, that may be a little difficult as I am going to link to a couple of his ‘net pages...

Here is Snopes on the email that TF has publicised.

Now, Snope’s pages are protected so I can’t quote directly but they do link to the article written by Sam Vaknin. It differs little from the email quoted by TF. Actually, if you read it it could equally if not more so be applied to the immediate past President and most particularly to his cohorts of loving supporters. Remember all of the “left-wing-media-bias” wailing from the likes of the right?
At first, in a desperate effort to maintain the fiction underlying his chaotic personality, the narcissist strives to explain away the sudden reversal of sentiment. "The people are being duped by (the media, big industry, the military, the elite, etc.)", "they don't really know what they are doing", "following a rude awakening, they will revert to form", etc.

And again...
Narcissistic injury inevitably leads to narcissistic rage and to a terrifying display of unbridled aggression.

Sound familiar?

And how about this?
The narcissistic leader fosters and encourages a personality cult with all the hallmarks of an institutional religion: priesthood, rites, rituals, temples, worship, catechism, mythology. The leader is this religion's ascetic saint. He monastically denies himself earthly pleasures (or so he claims) in order to be able to dedicate himself fully to his calling.

Remember the "I talk to God every night"? Though honest reflection would apply that fragment more to Cheney than to GWB. After all he was the one that "denied" himself the earthly pleasures collected through the good offices of Halliburton Corp.

“Fascinating” stuff!! What sport! What brilliance!!

Until, as Snopes suggest, you dig a little deeper.
The contents of this website are not meant to substitute for professional help and counseling. The readers are discouraged from using it for diagnostic or therapeutic ends. The diagnosis and treatment of the Narcissistic Personality Disorder can only be done by professional specifically trained and qualified to do so.

In other words, the validity of the email, the original article, are of as much validity as the mindless prognostications of the probligo.

Does that mean I should be famous?

Sunday, February 15, 2009

A little deja vu

Drifting around the 'Net on a lazy Sunday... the good guys at ALDaily drop this one in my lap.
Funds worth trillions of dollars start to plummet in value. Political pressure to be “socially responsible” distorts the market decisions of government-related enterprises, leading to risky investments. Investors who once considered their retirements safely protectedwake up to a sinking feeling of uncertainty and gloom.

Sound like the great mortgage-fueled financial crisis of 2008? Sure. But it also describes a calamity likely to hit as soon as 2009. State, local, and private pension plans covering millions of government employees and union workers with “defined benefit” accounts are teetering on the brink of implosion, victims of both a sinking stock market and investment strategies influenced by political considerations.

Now it doesn't matter how hard I try, I can feel some sympathy for the "beneficiaries" of this.

In the early '80's I had been contributing to a defined benefit plan superannuation scheme for some 20 years. The tri-ennial audit* certification was about 5 years overdue. (There is a different name here that I can not for the life of me put a neurone to). Then - revelation!!! It was announced by the Government that the fund was not technically but literally broke.

It turned out the the last released tri-ennial audit had shown an adverse trend in contribution account values and current pension values. That trend had not been reported by the auditors.

It had reached the point where the fund was paying current pensions from current contributions and had been doing so for some while.

Overnight, I lost in excess of 1/3 of the total value of my personal account plus the right to the guaranteed benefits.

Currently, my super funds are all specified as "Cash and Savings only" for investment. Yes the returns have been crap - less than 2 1/2% per annum for the past five years. But if they show a loss for last and this year there is going to be several different kinds of hell being raised.

*The missing word was "actuarial". Silly me.

Thursday, February 12, 2009

How the banking system "works"...

Well, I guess that sometimes things just fall into my lap. Seems too that this is one of those occasions.

First, the outgoing (jumping if not pushed) “bankers” apologised to a Parliamentary committee. Interesting that the only printed reports exclude one of the more pertinent points. At the end of the tv report on the late news last night, each of the four was asked what banking qualifications they had. One claimed a Harvard degree in business administration should be qualification enough, one was a lawyer and the other two claimed (I think, as the responses were somewhat muffled) “experience” as their primary qualification.

But it gets worse. The “whistle-blower” is someone who does get it. And don’t for a moment think that the processes involved and the analysis in the US would be any different – they would not.

A sampler –
In my view, as an experienced risk and compliance practitioner, the problem in finding the real cause of the banking crisis is being made more complex than it needs to be.


- But let’s start with the cause and this fairly obvious proposition: even non-bankers with no “credit risk management” expertise, if asked (and I have asked a few myself), would have known that there must have been a very high risk if you lend money to people who have no jobs, no provable income and no assets.

If you lend that money to buy an asset which is worth the same or even less than the amount of the loan and secure that loan on the value of that asset purchased and, then, assume that asset will always to rise in value, you must be pretty much close to delusional? You simply don’t need to be an economic rocket scientist or mathematical financial risk management specialist to know this. You just need common sense. So why didn’t the experts know? Or did they but they carried on anyway because they were paid to do so or too frightened to speak up?


- In simple terms this crisis was caused, not because many bright people did not see it coming, but because there has been a completely inadequate “separation” and “balance of powers” between the executive and all those accountable for overseeing their actions and “reining them in” i.e. internal control functions such as finance, risk, compliance and internal audit, non-executive Chairmen and Directors, external auditors, The FSA, shareholders and politicians.

He’s been reading my mail!!
- When I was Head of Group Regulatory Risk at HBOS, I certainly knew that the bank was going too fast (and told them), had a cultural indisposition to challenge (and told them) and was a serious risk to financial stability (what the FSA call “Maintaining Market Confidence”) and consumer protection (and told them).

- I told the Board they ought to slow down but was prevented from having this properly minuted by the CFO. I told them that their sales culture was significantly out of balance with their systems and controls.

- I was told by the FSA, the Chairman of the Audit Committee and others that I was doing a good job.


after I was dismissed and to prove just how seriously HBOS took risk management, I was replaced by a new Group Risk Director who had never carried out a role as a risk manager of any type before. The individual concerned had primarily been a sales manager and was a personal appointment of the CEO against the initial wishes of other Directors


- I am quite sure that many many more people in internal control functions, non-executive positions, auditors, regulators who did realise that the Emperor was naked but knew if they spoke up they would be labelled “trouble makers” and “spoil sports” and would put themselves at personal risk.
Read the whole thing – it makes the blood curdle.

And, as I said at the start, do not imagine that there will be any difference if the truth ever emerges from Merrill Lynch or any of the other American banks being bailed out.

Let’s start the process by having all of these (hopefully ex-) employees forfeit their personal stock holdings to the government.

Sunday, February 08, 2009

On parallel histories... and depression

Do you remember this?
...there is one section of the community that has benefitted from that wealth. It is not the mum and dad investors, the ordinary people. It is the community that has earned multi-million dollar bonuses and stock options; the hangers-on who pimp worthless product to an unsuspecting and ignorant market.

In other words, we are seeing what happens when the economy is run by snake-oil medicine men and itinerant side-show freaks.

Thanks to the old confirmation bias and the good folks at ALDaily I have come across The American featuring an article titled “Our Epistemological Depression”. Now, I had to look “epistemology” up in the COD to make sure I got it right. “The theory of the methods or grounds of knowledge.”. The opening paragraph
The history of socialism is the history of failure—and so is the history of capitalism, but in a different sense. For the history of socialism is one of fundamental failure, a failure to provide incentives and an inability to coordinate information about supply and effective demand. The history of capitalism, by contrast, is the history of dialectical failure: it is a history of the creation of new institutions and practices that may be successful, even transformative for a while, but which eventually prove dysfunctional, either because their intrinsic weaknesses become more evident over time or because of a change in external circumstances. Historically, these institutional failures have led to two reactions. They lead to governmental attempts to reform corporate and financial institutions, through changes in law and regulation (such as limited liability laws, creation of the FDIC, the SEC, etc.). They also lead market institutions to reform themselves, as investors and managers learn what forms of organization and which practices are dysfunctional. The history of capitalism, then, is the history of success through dialectical failure.

I am not going to dispute the difference. Socialism (true socialism, not the kind Americans dream of in their nightmares) stifles experimentation, expels individuality. Capitalism on the other hand (in its dreams at least) sees the individual as prime, sees wealth as the incentive for innovation and greed. That Muller sees the success of Capitalism (yes, the capitals are important to me...  ) as derivative from “dialectical failure” (the failure of logical debate?).
But [the various known causes of the current crisis] are not the whole story, and certainly not the most original part of the predicament. What seems most novel is the role of opacity and pseudo-objectivity. This may be our first epistemologically-driven depression. (Epistemology is the branch of philosophy that deals with the nature and limits of knowledge, with how we know what we think we know.) That is, a large role was played by the failure of the private and corporate actors to understand what they were doing. Most heads of ailing or deceased financial institutions did not comprehend the degree of risk and exposure entailed by the dealings of their underlings—and many investors, including municipalities and pension funds, bought financial instruments without understanding the risks involved. We should keep this in mind when we chastise government agencies such as the SEC for failing to monitor what was going on. If the leading executives of financial firms failed to understand what was taking place, how could we expect government regulators to do so? The financial system created a fog so thick that even its captains could not navigate it.

In other words, “they knew not what they were doing”.

Arguable, there were some who knew very well what they were doing. The lessons lie at the next level down with the people who "accepted" what they were told or even not told but believed. (Does that sound familiar? It should!!)

Has that changed? Is it likely to change? Reading both the lines and between the lines of the new Administration it seems likely not. Well not yet anyway. Muller again...
The cult of “accountability” was linked to key innovations that turned out to have unanticipated undersides. One was the shibboleth of linking pay to performance, which put a premium on schemes that purported to measure performance. This tended to produce “hard” numbers that seemed reliable but were not. It created tremendous incentives for CEOs, executives, and traders to devote their creative energies to gaming the metrics, i.e. into coming up with schemes that purported to demonstrate productivity or profit by massaging the data, or by underinvesting in maintenance and human capital formation to boost quarterly earnings or their equivalents.
Two milestones in the process of creating the fog of finance were the transformation of Wall Street investment banks from private partnerships to publicly traded corporations (beginning with Salomon Brothers in 1986), and the repeal of the Glass-Steagall Act of 1933 through the Gramm-Leach-Bliley Act of 1999. The former created tremendous incentives for risk-taking, since the firms no longer invested using the money of their top executives, who instead were remunerated based in large part on the amount of business the firm conducted, creating incentives to increase business by producing ever more complex and opaque financial instruments, such as collateralized debt obligations, swaps, etc. Then along came Gramm-Leach-Bliley, which opened the door to unlimited contagion, so that when one financial sector turned downward, it took the rest with it.

Looking ahead, the sort of government regulation and private re-organization that will be most beneficial will focus on these epistemological problems. Some of this goes under the rubric of transparency: making the asset holdings of financial institutions more publicly visible in order to reduce the problem of counterparty risk. Equally desirable would be transparency through the reduction of complexity, which includes avoiding intra-institutional contagion through greater limits on the ability of financial institutions to engage in an open-ended variety of financial activities. It means, in short, the reformulation of something like the Glass-Steagall Act, which would separate savings banks, investment banks, insurance and brokerage from one another.

Would that help? Well it might in the short term. The difficulty is the requirement for “new” controls – the anathema of Capitalism. The very greatest difficulty is really stated elsewhere. Remember Enron? That particular shibboleth is one which Capitalism would like very much to sweep under the carpet of history. Yet, in truth it is exactly the same process as has been the current “financial crisis”. A group of high level managers, accounting and financial practices used to increase their personal wealth and at the same time to conceal the truth, self promoted as “the brightest men in the room” beyond question or even doubt.

And, while one or two individuals have thus far been brought to account (to justice and not money) the lunatics are still in charge of the asylum.

Thursday, February 05, 2009

On "near death experiences"...

There is a small item over at TF's place about traffic offences, speed limits, red-light cameras etc.

I dropped the note that (amongst other relative but more mundane things) I have had three "near death" experiences while driving. I thought that I would give a brief description of each, not to brag at all about any aspect but to illustrate just how much on a knife edge we are on the roads.

First, going sideways on a gravel road in a Mini (the original 1960's style). Cause? Poor observation on my part. We had been following another car on a gravel road for some 20 minutes. I knew the road well and knew exactly where I could get past and out of the dust. The problem was that I did not notice as I pulled out to overtake that there was a ridge of gravel about 8" deep up the middle of the road - left by the road grader. Minis being what they were, the front wheels went through the ridge but the back wheels didn't. Going sideways at 60mph within 2 feet of another car is not exciting...

Second, losing traction at speed on a lifting corner. You know the kind of thing, you are going round a bend where the road is going uphill then as you go round the road starts going downhill. Cause - stupidity, driving far too fast for the corner.

Third, skating through four lanes of heavy traffic with no rear suspension. Cause - bad luck. Driving at 65mph and I hit a 3/4" square bar, probably about 2ft long. The bar got tossed into the rear suspension, bending the lh suspension arms into a "U" shape and causing the car to turn violently to the right (we drive "Keep left" so guess where I was heading). I managed to get the car to turn left when I had already crossed one lane of opposing traffic - there was no centre barrier - and heading back to the correct side of the road. Someone was looking out for me as I passed into the only gap in the opposing traffic and out again without hitting anything or anyone. I think that TF would say "Praise the Lord" but I was just far too busy getting the car onto the side of the road and stopping it to think much past the original Aussie/Kiwi cuss-word...

Tuesday, February 03, 2009

If ever it is needed...

here is incontravertible proof that the ol' probligo not only exists (he's the tubbier one with the red shirt), but has rellies as well!!!

Actually that was a very enjoyable (for us, third) Christmas dinner. It is omitted that my stepmother, Jill, was also staying at the farm with Ruth and Stephan. I resisted the temptation to make a hole in the pond, but limited my involvement to pretending to rake out some more of the kikuyu.

I don't see enough of my sister. Shame.

Monday, February 02, 2009

Two (minor) cautionary tales...

First comes this story about Facebook, and the next step in their development of the system -
FACEBOOK is planning to exploit the vast amount of personal information it holds on its 150 million members by creating one of the world's largest market research databases.

In an attempt to finally cash in on the social networking site, once valued at $US15 billion ($23.6 billion), it will soon allow multinational companies to selectively target its members in order to research the appeal of new products. Companies will be able to pose questions to specially selected members based on such intimate details as whether they are single or married and even whether they are gay or straight.

The company, which has struggled to make money from advertising, has been demonstrating the benefits of its new instant polling tool to business leaders at the World Economic Forum in Davos.

Following from that is the latest Aussie panic about Google -
YOUR local phone exchange is down and your landline and mobile are not working. You need to make an urgent business call but you have no way of communicating with the outside world. What do you do?

A similar scenario hit the internet yesterday when Google, the dominant search engine, suffered a malfunction and marked all websites as dangerous, blocking them from use.

Millions of users were unable to access the sites they were looking for, and instead received the warning: "This site may harm your computer".

While the problem lasted only about 40 minutes, experts estimate millions of dollars were lost from online transactions dependent on the company's search functions. Users reported failures on other Google applications such as Gmail, which has 1.3 million accounts with the Department of Education.

"What happened? Very simply, human error," was Google's response. It said its list of sites containing malware - set up to protect users from potentially harmful sites - was wrongly updated and all sites were automatically blocked.

"Unfortunately, the URL of '/' was mistakenly checked in as a value to the file and '/' expands to all URLs," Google's vice-president of search products, Marissa Mayer, wrote on the company's blog.

But the failure of the search engine giant - believed to capture about 70 per cent of its market - raised questions about how widespread the financial impact would be of a longer or permanent failure of Google's products.

"It's critical infrastructure because people have it so interwoven and so ingrained into their existence that they can't live without it," said tech enthusiast Dave Gray from

"It scares me to think 'What if something would happen to Google today?'. Businesses would go under, massive amounts of money would be lost, core businesses would fail because they base their business models on using Google services.

"You've only got to look at the biggest-selling phone for the last quarter of last year, which was the iPhone. It's integrated with Google. It's got Gmail built into it, it's got Google Maps built into it, it has YouTube, which Google owns," said Gray.

Google's global range extends beyond internet searches on When the outage occurred yesterday, users reported failures on other Google applications like Gmail - which is now has 1.3 million email accounts with the NSW Department of Education - and iCalendar, used by businesses to organise and manage events for clients. A longer outage could have impacted the archiving of sites, thus rendering organisations dependent on an online presence for profit or profile virtually invisible to the public.

I remain, yours truly,
probligo the luddite