Gas prices again...

The price of gas is now plummeting. I can stop kicking myself for buying an SUV almost a year ago, though now I wish I'd bought when gas was $4 a gallon and they were scrambling to dump inventory. But, catching the market at its peaks is a gambler's game, and this year has been a roller coaster ride. Nobody ever thought prices could climb so fast, or drop so fast either- further convincing me that part of oil price futures was just another speculative bubble.

My school is now actively rolling out carpooling, at a time when gas is 60% of its peak from July. (I just filled my tank at 2.63/gal at BJ's today.) You just never hit these things right, except in hindsight. I'm gearing up to resume work on my dissertation proposal, about, yes, community college carpooling. Somehow the topic is slipping from stylish to passe as we collectively sigh with relief over another bullet dodged- unless of course the other costs of driving come into play, or the economy overall still continues to tank and even cheaper gas is harder to afford, or scarcity economics resume over the rapid depletion of a finite resource...

But reading the Times Union today I'm struck again with another article about a proposed wind farm in an Albany Hill Town- a farm of 3 turbines, which if we stick to the analogy is really a hobby farm- and the role of NIMBYism in defeating it based on "ruining the view". This sort of selfishness and short-sightedness really annoys me. Unlike solar cells, which work as long as you don't stick them were the sun don't shine, wind turbines only work where there's a lot of wind, which is limited by topography. Anyway, the costs of alternative energy have more to do with integrating the power into your house than the actual equipment itself- going from DC to AC, and into your house in parallel with the local utility's current is no real picnic- that can cost more than the turbine itself.

I'd love to put up a wind turbine in my back yard, but I'm surounded by trees and the turbine would have to go up at least 70 feet to catch a breeze, with a good anchor. You can't just stick one on your roof, unless you don't mind a wooden structure being gradually shaken apart by constant vibration- think of a clothes dryer on steroids in your attic, and why dryers are almost always put in the basement.

But mountian peaks are perfect for these things, except that they ruin the view for a few handfull of houses out in these rural areas. As opposed to the coal-fired power plants that have been dumping acid rain over the Adirondacks, where I'm from, for decades- why there are so many dying lakes with more than a handful of residents.

Let's face it- the future is electric cars charged by alternative energy. Period. The alternative is global warming and a massive shift of money out of the country- though we don't export all the money to hostile countries (Canada and Mexico sends us more than twice as much oil as Venezuela, for instance, and Russia and Iran sends us none.) Still, it's more than enough to help fund activities that aren't conducive to world peace.

I'd still like something analogous to "right to farm" laws in may locales- where farms can't be shut down just because the new neighbors from New York don't like the noise, smell, and early am roosters. I remember when living in California where neighbors would have to pull down solar water heaters from their roofs because some though the sight of weird, cheap neighbors would bring down their own property values. In this kind of climate, it really takes legal protection to keep the local complainers from mandating that everyone continues to pollute and burn imported fuel.

Can't get no relief

I think it started while watching Battlestar Galactica (news flash: I watch nerd TV shows, too), where in the last season some of the main characters heard some unrecognizable music and met together, realizing that they were in fact killer robots in human form. (Seriously.) The music turned out to be a remake of All Along the Watchtower. After realizing it's on a Hendrix recording in my car, the song has been stuck in my head ever since. A few lines stick with you, such as "Can't get no relief" and "There are many here among us who feel that life is a joke", and, who are we kidding, most of the song rings true these days.

OTOH, the constant barrage of bad news on the economy, constant speculation about war, the Great Depression, and bird flu rings more narcissistic than anything else- we as Americans have dealt with much worse in my parents' lifetime between the original Great Depression of the 30's, World War II, Korea, and the Cold War that I still remember. A dip in the stock market, no mater how severe, is hardly one of the Horsemen of the Apocalypse.

But it's more than halfway to Friday now, and there's another, hopefully non-apocalyptic week to follow.

Ground to a halt

It's midterms time and the stark realization that I've put in only a few hours of work on my dissertation proposal since the semester started. This doesn't look good.

I've got excuses abound, like teaching seven classes this semester, and being sick for about three weeks. A case of what started as food poisoning turned into a series of doctor visits and finally the removal of some massive inflamed growth ("the size of a golf ball") in my lower GI tract that the doc said could have turned into a deadly kind of cancer in a few more years. The doc summed it up: food poisoning turned out to be a blessing in disguise. It's taken a few days to digest (sorry) that bit of news- whatever that thing was, it had been affecting my health for years, not just a week or two. Removing it made me feel, well, years younger. Not like being 18 again, but not always exhausted as of late.

Those three weeks have put me behind schedule, even while realizing that I've dodged a bullet here. I think about symptoms I'd been experiencing, now gone, and think about my kids- being tired and short tempered with them a lot of late, and how unnecessary that all was. Time that I lost for not going to the doctor in the past couple of years, just toughing it out or ignoring symptoms. Just attributing it all to age or life or the PhD program slowly wearing me down, when it was just some growth in my abdomen almost big enough to be a dependent on my tax returns.

But that behind me, it's time to move on and do some real work- midterms grading...

Trust as competitive advantage?

It's a sunny Autumn Sunday, one of the last before the bitter cold of winter sets in. I'm inside grading exams while my kids go pumpkin picking at one of the nearby farms.

I'm distracted by the news still- and just a little thankful I don't live / work in the NYC metro area anymore. The economic bloodbath hasn't kicked in yet, though I darkly suspect it will over the next few months. Albany will have its own dark times, since we're dependent on state employment, colleges, insurance, and long distance commuters- we're a distant bedroom community for Wall Street, too. State budgets are about to get slashed, enrollment is likely to drop, insurance isn't going to escape the fallout, and the commuters... won't be commuting so much anymore.

I'm struck by the growing commentaries about financial models, especially this one in the NY Times about "geeks bearing formulas", and intrigued by calls to make the models more transparent, even "Open Source". There is one project, Quantlib, that alleges just that, an Open Source financial model, though I haven't really looked at it. This reminds me of lectures I give about Competitive Advantage- that a firm's ability to do business is based on possessing something special to give it an edge over its competitors. In the case of financial models, it's an issue of having better predictive ability- the model is better at reading tea leaves than all the others.

In reality, the competitive advantage may be a greater means of spreading risk through opacity. By making the model too difficult to understand, we're unable to do anything other than leave it alone. As I've mentioned on many an occasion to my computer science class, you can't trust anything you can't test. But, we've done the opposite- trust models because they seem to work, but we have no ability to test them- or at least given the lack of access and will to question them within the firms profiting from their use.

The idea for open source is this- open source destroys competitive advantage owing to the resource itself- what's the advantage of using something that's free to everyone? But by making the models open to all, the assumptions are exposed rather than hidden- making these firms easier to audit and, hopefully, more easily trusted.

The era of magic formulas may be over- we've gone from transforming lead into gold, and woken up to find our gold turned back into lead. Maybe we're even starting to understand that there wasn't really gold in the first place. Finance is about to rejoin IT as a support system, just another part of the infrastructure that keeps business and the economy running-- smoke and mirrors aside.

We have real problems to solve that can add value to the economy- like energy independence through renewables. Wouldn't that create jobs and cut back on the cash we export every year? That would be real growth.

Global Trainwreck

I'm both struck with the need to say something, and yet words escape me.
We all knew better, about debt, about overleverage, about speculation bubble after bubble, from dot-com stocks to real estate to commodities. "Creative financial instruments" that I was too dumb to understand that seemed to defy logic really did. And the global finance market really was just a game of musical chairs.

Being part of the IT revolution in the late 90's and early 00's, I'd always felt that the gravity-defying economic growth represented a real transformation of the economy, promising a future of gentler business cycles and accelerated growth, if not more leisure time and improved quality of life.

Now it looks like the day of reckoning is upon us, so to speak- more than a decade of the Federal Reserve asleep at the controls, the economy is just about completely derailed, pulling down the rest of the world with us. If anything, IT seems to have simply acclerated the growing divide between the haves and have-nots by removing the middle jobs that represented the middle class, accelerating the divide between upper level management and bottom-level workers- the much-heralded growth of the "service economy".

I think in part it's the IT-driven growth in complexity, even if it's not the whole story. Math models built on optimism and bad data played its part. But cloudy data and arcane formulas emerging from a computer seemed to grant undue trust in the outcome. Bad data and bad formulas drove bad models. I think about all the database bugs I cleaned up and multiply that out over every office in NYC, and I start to wonder how much smoke and mirror predictions drove the 90's economy.

Sure, we all saw the housing market as a giant ATM we could raid whenever we wanted. Real estate price appreciation over 10% year after year, outpacing salaries, seemed unsustainable. Everything seemed to defy gravity, and we ignored common sense. In the late 90's, we heard the Federal Reserves speculating that maybe the New Economy was "rewriting the laws of economics", which even at the time seemed roughly as comforting as an airline pilot declaring the same about the laws of gravity. And the end result seems to have been the same...