StreetEYE Blog

‘Big Data’

If ‘The Graduate’ were made today, Benjamin Braddock might hear a well-meaning uncle stage-whisper ‘Big Data’ instead of ‘Plastics.’ (Runners-up: ‘The Cloud’, ‘Social Discovery’, ‘Gamification’, the list goes on.) ‘Big data’ is a buzzword that people throw around a lot. What does it mean? Large data sets are not new. The IRS, the Census, Walmart, money center banks have always had big data sets.

What’s changed?

What I Learned

I didn’t really post as much as I would have liked this year. I envy people whose thoughts come out in a more or less coherent, finished form. When I post something, I always think of what I really wanted to say after hitting ‘publish’.

Today, I’m going to just try to write for an hour and post what comes out, hopefully resisting the temptation to ninja-edit.

My buddy Josh does a post with quotes where a bunch of people say what they learned over the last year. So what did I learn?

Social capital – or, the lost art of not taking a dump in the community pool

The first casualty when war comes is truth. – Hiram Johnson

Everybody talkin’ to their pockets
Everybody wants a box of chocolates
And a long-stemmed rose
– Leonard Cohen

Let’s talk a little about social capital.

According to studies, Greeks work the longest hours in Europe, and their retirement age is in the middle of the pack. Same goes for a lot of developing countries, and even some US inner cities. People work themselves to the bone, and they don’t get ahead.

Why are those countries in such a mess?

Broken Windows

So, some people are talking about Hurricane Sandy putting people back to work, and others are pointing out that this is the ‘broken windows fallacy.’ True, a massive superstorm is usually not a good thing. Nevertheless, three quick points.

English: Aerial view of roadbed collapse near ...

English: Aerial view of roadbed collapse near the interface of the cantilevered truss sections of the San Francisco-Oakland Bay Bridge. View northwestward. Cropped from original version to better fit San Francisco–Oakland Bay Bridge article. (Photo credit: Wikipedia)


The Paul Ryan plan

The Paul Ryan plan ‘Promotes saving by eliminating taxes on interest, capital gains, and dividends; also eliminates the death tax.’

So people like Mitt Romney, and all his heirs in perpetuity, would never pay another dime in income tax. How sweet is that? How fair is that?

It’s shocking that in this day and age, someone could make such a proposal, and be considered a serious person and politician.

The GOP has come an awful long way from its founder, who said, “Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” – Abraham Lincoln

A Target2 Thought Experiment

Suppose a Greek shipping magnate decides he’s not comfortable keeping his wealth in Greece, and decides to buy some nice real estate in Berlin. (As if most of the Greek wealthy hadn’t removed as much as possible to Germany, the US and UK long ago.) He writes a check for €1m on his Greek bank to the buyer, who deposits it at Deutsche Bank. To settle the check, the Greek bank wires the funds from its reserve account at the Greek central bank, the Bank of Greece. The Bank of Greece instructs the Bundesbank to credit Deutsche Bank’s reserve account at the Bundesbank. Then the Bundesbank is owed €1m by the ECB, and the Bank of Greece owes €1m under the Target2 system (corrected).

There has been a lot of controversy about this process, and the notion that Germany will get stuck with massive losses if, following massive capital flight now in progress to Germany, the peripheral countries leave the euro.

A thought experiment:

Domino on the edge

“The crisis takes a much longer time coming than you think and then it happens much faster than you would have thought.” – Rudiger Dornbusch.

Greece is at the moment of truth.

  • There is no longer a functioning government.
  • The ability to continue austerity is in doubt, and with it the ability to meet the conditions which the EU has set in exchange for funding the balance of payments.
  • Numerous commentators have openly questioned whether Greece can stay in the euro.


Startup Growth v. Revenue

Nick Bilton points to the lack of revenue at startups as signs of a bubble.

Now, I’m not going to say that things don’t look a little bubbleicious right now, with $1b valuations and acquisitions of tiny startups with no revenue.

But to some degree Bilton is channeling Eduardo Saverin, who famously pushed for early revenue at Facebook, clashed with Zuckerberg, and got squeezed out with a mere $2 billion or so for his trouble.

How to Create the Ultimate Linkfest

At, we love linkfests so much we named our website after them. When a knowledgeable professional is dedicated enough to get up at an ungodly hour to make an up-to-the-minute reading list for us, that just shows true love for the craft of investing, the game, and the readers. It just makes us warm and fuzzy. We salute Web linkfest all-stars like:

The Reformed Broker
Abnormal Returns
Naked Capitalism
The Big Picture
Crossing Wall Street
Economist’s View
Credit Writedowns

Putting together a great linkfest is tougher than it looks. This post is an attempt to put together a meta-linkfest of best practices for linkfest creators. If it saves the brave early-morning soldiers a few extra minutes with loved ones, or Mr. Sandman, it will worthwhile.

The Money Illusion

Irving Fisher (1867–1947)

Image via Wikipedia

Irving Fisher is mostly remembered, a bit unfortunately, for writing that stock prices were at a permanently high plateau…right before the Great Crash of 1929. He also invented the Rolodex, pioneered early economic statistics-gathering, wrote of the Fisher money equation PY=MV and the Fisher debt-deflation cycle. (See Sylvia Nasar’s Grand Pursuit – interesting but wouldn’t consider it must-read.)

For a while, he paid his employees in real wages. When his statistics showed the cost of living went up, their wages went up automatically. This made them very happy and think he was a great guy to work for. But then the price index went down and wages dropped. They weren’t happy about that at all and thought they were worse off.

People clearly aren’t able to make a month-to-month calculation in their head about where their wages stand relative to the economy’s overall price level. If you deem this a blinding glimpse of the obvious, you may not be fit to be an economist. Lots of economic models assume that people do all their thinking in real terms.

It’s all the more astounding that economists think ordinary people can do this, when economists themselves can’t even agree on what price measures to use for different purposes… should the Fed target CPI, the GDP fixed-weight deflator, the PCE chain-weight deflator? And the assumptions that have to go into those about imputed rent, hedonic adjustment, are pretty complicated and at least partly subjective (although they are necessary and smart people do the best they can).  

If you’re an economist, you talk about people’s anchored expectations about prices as ‘money illusion,’ as if the actual greenbacks you’re forking over are the illusion, and the ‘real’ numbers analysts conjure up are substantial.

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