Quick Charlie Sheen joke.

This one is whizzing around the Internets, so stop me if you've heard it before.

Actually, this intro is longer than the joke, so there will be no time to stop me. It's just a figure of speech.

Q: How much cocaine has Charlie Sheen done?
A: Enough to kill Two and a Half Men.

Thank you. Try the veal! I'll be here all week.

Introducing the Bachelor-mobile!

Volkswagen has been working on a new prototype for truly basic transportation for about three years now and has unveiled the prototype, announcing it will be available for sale in China in 2012, just in time for the end of the world if we are to believe those pesky Mayans. The car is four feet wide, eleven feet long, a single seater with a rear mounted one cylinder diesel engine that in prototype got over 100 km per liter of fuel, which would mean getting between 230 to 260 miles per gallon. The tank holds 1.7 gallons (7 liters) and the price before tax, tip and dealer preparation will be about 4000 yuan, which right now translates to $600 American.

I call dibs on the nickname The Bachelor-mobile for three important reasons.

1. The owner is completely oblivious to the idea that his car is a phallic extension.
2. The owner is happy to let the world know he is as cheap as hell.
3. Sorry, honey, I can't give you a lift. There's no room.

I would also like to quote my nephew Eli who said, "1.3 billion Chinese are about to have an epic bumper car match."

I know the young people prefer LOL, but I'd rather type... Tee Hee!

Sunday Numbers 2.0, Vol. 3: Continuity

It's easy to explain the idea of a continuous curve on a surface in everyday English. If you can draw a picture without ever lifting the pen from the surface, that is a continuous curve.

In this picture, let's assume the blue curve is just being hidden by the red curve at the five points of intersection. This means we can see the red picture is continuous and we will assume the blue picture is continuous. The difference is that the blue line represents a "smooth curve" and the red does not. This becomes important in differential calculus.

This particular drawing is from a lesson on how integral calculus works to find the area under the blue curve and bordered below by the horizontal line (representing the x-axis) and between the vertical lines labeled a and b. The graph in red is also a continuous curve.



There are lots of ways to have mathematical functions that create discontinuous graphs as well. The function pictured to the left is y = Floor(x), represented in most math books by the odd looking brackets you see in the picture where the bottom of the brackets exist but the top do not. The idea of Floor is that any real number x has a closest integer that is less than x. For example, Floor(2.5) = 2 and Floor(pi) = 3. (Oh-h-h-h-h-h... Floor(pi)!) The Floor of any whole number is itself, so Floor(4) = 4, but as soon as we move down from 4 the tiniest tick, Floor(3.999999999) = 3. This means you have to lift the pen off the surface and put it down away from the line segment you were drawing previously.

The standard way for mathematicians to state that a function is continuous this is "The function f(x) is continuous at all points x for which it is defined". the converse is "The function g(x) is not continuous at some set of points". It can also happen that a function may not be defined at a point x, but can either be continuous for all points near x, which we call a neighborhood of x. Conversely, a function may be undefined at a point and discontinuous at that point. A famous example of that kind of discontinuity is y = 1/x, which isn't defined at 0, is approaching infinity if x is positive and close to zero, but approaching negative infinity is x is negative and close to zero.




The mathematical template for continuity proofs is called epsilon-delta, where these two Greek letters are stand-ins for really small numbers. In the picture to the left, the red line represents the function f and f(a) = b. If we want to prove that f is continuous at a, which the picture shows to be true, the plan of attack is to let some nebulous observer choose a small number we will call episilon. What is asked of us is to find a neighborhood around a such that the inequality b - epsilon < f(x) < b + epsilon for every x in the neighborhood. We usually are asked to make the neighborhood around a to be symmetrical around a so the letter delta is added to a and subtracted from a to give us the boundaries of the neighborhood.

Let me give an example. We want to prove f(x) = x² is continuous around x = 4. I could let epsilon equal some specific small number like 0.01, but the true proof comes from proving it for any given small number. Since 4² = 16, we would look for the square roots of 16+epsilon and 16-epsilon, both of which will be very close to 4 is epsilon when very small. We then would see which square root is farthest from 4, and the distance would be our delta.

This is a very standard part of analysis. The standard "big" way to split up math is into analysis and algebra, and if I had my druthers, I'd rather do algebra. A lot of proofs in analysis are kind of tedious, while occasionally, algebraic proofs can be very pretty and elegant. If you want to see the average math graduate student's eyes glaze over and a nearly unstoppable desire to sleep overtake him or her, just say "epsilon-delta".

I don't know, someone from the analytical side of the field might stumble upon this post and give a spirited defense of epsilon-delta proofs, but I have to admit, if it happens, it will be the first time I've heard of it.

Next week: Logic and eccentric Britons.

Philip Glass and melody.

I saw the Ensemble Parallèle's production of Philip Glass' 1993 chamber opera Orphée at the Herbst Theater last weekend and I loved it. I got a comp ticket from my very generous blog buddy sfmike, the author of the Civic Center blog, who was also a supernumerary in the show, one of the spooky strongmen/clowns who move everything in the Underworld that is incapable of moving itself. He writes about the many rehearsals and the critical review, which you can read about through the links.

The show only played twice and I will be able to tell people years from now that I saw it. They will be positively envious or I will be silently judging them.

I struck up a conversation with a fellow audience member, a woman named Bonnie who was connected to the new wave/punk scene back in the day, so we had many common points of reference. She loved the production but said she wished Philip Glass was more melodic.

Allow me to retort with embedded videos from the You Tubes.



This is the movement entitled Some Are from Glass' Low symphony, based on side two of David Bowie's great album Low, produced by Brian Eno. Some might argue that this is melodic because the work of Bowie and Eno is melodic, and that argument has some merit.





There is yet another Philip Glass work from the early 1990s called Passages, a collaboration with Ravi Shankar. Shankar plays on nearly every piece, but Glass wrote half and Shankar half. This one by Glass, Ragas in a Minor Scale, is very melodic indeed. I actually have a large section of it running through my brain on heavy rotation right now, and I don't mind a bit.

Again, thanks to sfmike for the ticket to the show, and also for an impromptu Oscar party with a prediction competition that neither of us won, sad to say. Congratulations to Cindy, the winner.

How much do I love Hilter finding out about bad news?

Well, a lot.

This time, someone tells the Fuhrer about Scott Walker taking the prank call from someone pretending to be billionaire right wing asshole David Koch and, as usual, Hitler is very well informed and not at all pleased.

Enjoy.

Book review: The Big Short by Michael Lewis

Back in the 1980s, Michael Lewis went straight from Princeton to Wall Street, though his degree had nothing to do with finance. His lack of expertise did not hurt his career, but he quit the field just a few years later, much wealthier and terrified as hell. He turned his experiences into the book Liar's Poker, and in the bargain found a calling better suited to his talents, writing non-fiction best sellers.

Not without cause, Lewis thought he was watching an industry headed for an apocalypse and right soon. Conservative sectors of the financial industry were going nuts in the 1980s, due in no small part to de-regulation. He was in the game when the previously dull and solid savings and loan industry crashed, and he worked at Salomon Brothers, the first investment bank to go public. This meant the owners were no longer gambling with their own money, but instead with the money of the stockholders. Old timers were appalled, but it wasn't really the end of the world, even though some big names went to prison, including Michael Milken, Charles Keating and John Gutfreund, Lewis' former boss at Salomon Brothers.

No, the real crash of the financial industry was still about twenty years in the future, and when it came, Lewis decided to write an article about it for the now defunct Portfolio magazine, and then expand the shorter piece into the book The Big Short.

While Liar's Poker was kind of a bug's eye view of the financial world because Lewis was such a little fish, The Big Short is more like a worm's eye view. Because of non-disclosure agreements, it's hard to get the people at the top to talk. He did get some valuable information from insiders who saw the trouble in subprime loans early like Meredith Whitney, Steve Eisman and Greg Lippman, but a lot of the narrative of his book follows some very small fish indeed, investors local to the San Francisco Bay Area instead of New York. (Lewis lives in Berkeley.) These outsiders saw that if it was possible to bet against the loans being made by subprime lenders, the odds were massively in their favor.

Home ownership used to be straightforward. Get a down payment together, show proof of income and a solid credit rating and you could have your piece of the American Dream. That, of course, was in the quaint 20th Century. With sub-prime lending, down payments and proof of income would vanish as criteria and all that remained was your credit score. The thing was, it was pretty easy to go from no credit history to good enough to get a loan in a matter of months by getting a single credit card and paying off the entire balance every month. Lewis tells the tale of a migrant worker making $14,000 a year picking strawberries getting approval for a home loan of over $700,000.

You might argue the strawberry picker was an idiot, and I wouldn't disagree. But what about the idiocy of the company that made the loan? How can they possibly turn a profit on this? Lewis does a good job explaining this as well. A lot of subprime companies made the loan, got the points up front off the not really credit worthy buyer then sold the loan immediately.

Okay, you might say, but who's a big enough idiot to buy the loan? The loans were based on teaser rates and balloon payments. Maybe the strawberry picker could make the teaser rate payments, but he'd probably not be able to continue two years later when his monthly payment blew up. No matter, thought the alleged non-idiots taking the gamble on him. If he keeps paying, fine. If not, his house value probably went up, then he could re-finance. Worst case scenario, the company buying the loan now could foreclose and they owned a house, an alluring piece of the American Dream they could sell for a profit.

They could see no way this well-thought out plan could fail.

They couldn't, but others could. The thing was, to bet that the housing market was really a massive bubble, you needed to enter the bond market. Some people might think the stock market is a place where the big fish eat the little fish, but the stock market is to the bond market as a well maintained aquarium is to the deep blue sea. With exotic bonds like the Credit Default Swap (CDS) and the even more arcane Collateralized Debt Obligation (CDO), it was nearly impossible to know exactly what you were buying and even the alleged "experts" couldn't agree on what the things were worth. There's a very funny scene where Lippmann from Deutsche Bank, the biggest fish Lewis could talk to who bet against the CDOs, calls up his counterpart at Morgan Stanley, who thought the incredibly bad loans in the obscure package really deserved a triple A rating. The deal was set at 100. Lippmann's model said they are worth 72. The person from Morgan Stanley counters that their model put the value at 95.

"Fuck your model," Lippmann patiently explains. "If you really think they are worth 95, I will sell them to you at 77. Otherwise, dude, you owe me $1.2 billion, and I want it fucking now!"

Of course, this was not the end of the conversation. Lawyers stepped in and eventually Morgan Stanley paid Deutsche Bank half that amount, $600 million, for being on the wrong side of a tiny part of the biggest bet in the history of the world.

The Big Short is supposed to be the story of gamblers in a zero sum game, which means for every dollar one gambler might make, someone else at the table has to lose a dollar. But here's where the story gets scary. A single loan could be repackaged again and again into derivatives like CDSs and CDOs, and the amount of money actually tied up in home loans that wouldn't get paid off was a tiny fraction of the money floating around in the casino that every major player in the financial world was gambling in. Some were on the right side but many on the wrong side so deep, bankruptcy was their only option and the winners wouldn't get paid off.

Like I said, it's supposed to be the story of gamblers. The main characters in the book are smart guys on the right side of the bet like Dr. Michael Burry, an obsessive researcher who stopped being a surgeon to become an investment advisor, and Charlie Ledley and Jamie Mai, a couple of neighbors in Berkeley, California who started Cornwall Capital and dove bravely into the bond market, only to be mocked by the big fish with whom they swam as Cornhole Capital. But all the good guys get their bets paid off, and so do all the idiots, only two of whom are featured prominently by name, Howie Hubler at Morgan Stanley and a CDO manager named Wing Chau. All of them get paid off because of the massive bailouts of the financial sector under presidents Bush and Obama, engineered by the scum in charge Ben Bernanke and Tim Geithner.

While I have mentioned many of the plot points, there's plenty I haven't talked about, and The Big Short is still a ripping good read, largely because Lewis is a better writer than I am. While there is a good chance you will finish the book either somewhat depressed or pissed off as hell, I still recommend you read The Big Short. The sad moral is that the idiots and thieves are still in charge up and down the line, and you can see in slow motion the post mortem of the last train wreck they caused while waiting for the next one.

Republicans making sense! Not a dream! NOT an imaginary story!

There's a lot of balloon juice floating around Washington D.C. right now about the situation in Libya. Hillary Clinton says Qaddafi has lost all credibility and should step down. Senators McCain and Lieberman, who never met a war they didn't like, want as much military intervention as possible. There's talk of a "no fly zone" being bandied about by White House spokesfolks.

Who is saying we should take it easy? Who is saying we should get all multi-national on this situation if we stick our noses in at all? Sen. Richard Lugar, Indiana, the guy I keep hoping will be the start of bringing the Republican Party back from the lunatic brink.

It's a long shot, I know, but it may come about some sweet day.

Who agrees with him? Lindsey Graham, who usually sides with Grandpa Walnuts and Droopy Dogg, a.k.a. McCain and Lieberman.

I know Republicans making sense is rare. In fact, I invented the label for the first time today after nearly four years of blogging. But sometimes, you have to take the sanity where you find it.

Thank you, Sen. Lugar, I hope people will understand you are the voice of reason on this.