Haiku spam and double digit sigma events

Haiku Schmaiku

Howdy Ma'am,
Just spam, I am.
Five syllables short

-- Bloggerel Doggerel blog, 2007

Verse is courtesy of The Climateer, who doesn't write about climate too often, thankfully! He has a great blog description which is perpetually relevant: "In war, everything not censored is a lie."

The Climateer DOES write about investment bankers who blame statistics for their poor trading decisions... or possibly, outright deceptive practices. There was a lot of that going on in 2008. I finally hoisted some posts about double-digit standard deviations from my bookmarks and read them.

25 Sigma Event Very Unlucky

From Climateer Investor and others along the way, it seems like a 25 sigma event is impossible. "How unlucky is 25 sigma?" (2011): When Goldman Sachs was Really, Really Unlucky: 

"One of the more memorable moments of last summer’s credit crunch came when the CFO of Goldman Sachs, David Viniar, announced in August that Goldman’s flagship GEO hedge fund had lost 27% of its value since the start of the year."

As Mr. Viniar explained, “We were seeing things that were 25-standard deviation moves, several days in a row.” 

One commentator wryly noted: 

"That Viniar. What a comic. According to Goldman’s mathematical models, August, Year of Our Lord 2007, was a very special month. Things were happening that were only supposed to happen once in every 100,000 years. Either that … or Goldman’s models were wrong." 

See too the follow-up post a few months later in December 2011, "Barclays Hit With "Immense" Copper Trading Loss; 50 Sigma Move In Cancelled Aluminum Warrants. 50 sigma events don't happen.

David Viniar has quite a colorful past regarding accuracy and math. The Wall Street Journal wrote this fun, very brief article about him in 2012, Goldman Sachs CFO To Moody's: You Make No Sense. There's no paywall for you my loyal readers, because I get special links as a subscriber. Choice excerpts:

Goldman Sach's CFO David Viniar was asked on the bank's conference call about a possible downgrade by Moody's to Goldman and other investment banks. He responded with a sharp critique of Moody's ability to analyse. 

"We are as you know, we are quite analytical and when we do all of the analysis we cannot figure out why they are where they are," Viniar said. He added coyly "And so I just wanted to tell you that."

But Moody's isn't alone in having its math questioned by Viniar. Viniar also seemed perplexed by the Federal Reserve's arithmetic...

Viniar began extreme outlier exaggerating back in 2009, when he gave journalists a ridiculous accounting of the AIG scandal, which was more like the AIG Horror for the American public. This was the shameful incident where taxpayers were forced to pay the bonuses of investment bankers whom they had already paid to bail out. There was a legal rationale for it, but I don't know that public confidence in regulatory authorities and the U.S. government will ever recover.

Really bad Goldman Sachs in the limelight

You can watch good Senator Carl Levin (may he rest in peace) do his best for us in this video. Goldman Sachs was then under investigation for fraud. The Goldman mortgage bankers being questioned are Dan Sparks, the later infamous Fabrice Tourre, Mike Swenson, and Joshua Birnbaum. The setting is a 2010 Congressional hearing following the financial crisis. Senator Levin questions Goldman Sachs bankers about their well-known practice of exploiting their own customers as well as the investing public.

"That Timberwolf was one shitty deal."

David Vinier was there.

Climateer blog hasn't been updated since 2007, but it is a great read too.