A Robust Pause for the Weekend...

Let's take a bit of a breather -OK?  

Need a day or
two to digest the approved NCUA Strategic Plan. But for all the disenchanted NCUA naysayers, I hope you will at least acknowledge the many "greenshoots" you see budding from the recent actions of the NCUA Board - they may not blossom, but there has been a noticeable turn towards Spring.

Getting a handle
on VaR...

Couple of folks have asked: What's with the "VaR - (Vacuous and Robust !)" phrase?,  which was used in a recent send-up of the not-so-funny  misapplication of statistics and economic modeling by one of our favorite groups from Never-Neverland - those  prognosticating, robusterian gnomes. 

Well, you already know that vacuous means "empty, thoughtless" and robust means "written by an idiot"; so I assume the question is about "VaR".


Here's what the "Financial Times" says about VaR - or "Value at Risk":

"Value at risk are economic models which have been a key part of banks' and regulatory risk management toolboxes for the last two decades, despite being heavily criticized for failing to predict the large losses incurred during the financial crises."

"The models attempt to forecast how much money banks could lose from operations, lending, and trading, within a certain time frame, by overlaying historic market movements with statistical analysis."

Economic "Quacks" should fear
Black Swans and other B.S. including their own ....

Sounds like gobbledygook I'm sure, but the focus of the FT article ("Bond Yields Threaten Risk Models") was that models were once again demonstrating that they in fact can not correctly anticipate nor accurately forecast future markets - despite the "seemingly sophisticated", but repeatedly faulty, mathematical/statistical window dressing .

But, so what...

The simple point is that credit unions continue to be flogged with "notional" (meaning "Magic Math") risk tools which repeatedly fail in volatile, dramatic fashion, under real world circumstances and...  

Unfortunately economists, and apparently NCUA capital markets "specialists", have a luxury that no credit union manager enjoys; when failures occur in their analyses or models, they are not held accountable.   

Being immune from accountability invariably leads to irresponsibility - usually flavored with a strong tinge of arrogance and hubris.

"Hey baby, C'mon
first time's free...

"Both regulatory gnomes and Wall Street dealers (as they are so appropriately called) continue to sell financial modeling "crack" on the streets in your CU neighborhood .... 

... and you and I know how that "model" works out.