The Securities Litigation Expert Blog

Big Data for Big Cities

Posted by Jack Duval

Feb 25, 2013 4:37:43 AM

The internet of things is coming to a city near you.  The New York Times had an interesting article on how real-time data of a cities traffic, water, and energy use can be used to reduce its resource consumption by up to 50 percent. (NYT)

NYU has started a program called the Center for Urban Science and Progress to study the "science of cities".  This is just one more example of how New York is becoming of of the dominate technology hubs on the planet.

The initiative at N.Y.U. is part of a broader trend: the global drive to apply modern sensor, computing and data-sifting technologies to urban environments, in what has become known as “smart city” technology. The goals are big gains in efficiency and quality of life by using digital technology to better manage traffic and curb the consumption of water and electricity, for example. By some estimates, water and electricity use can be cut by 30 to 50 percent over the course of a decade.

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Topics: big data, Statistics, NYU, Complexity, Predictive Analytics, NYT, education

Real-Time Big Data Could Be Next

Posted by Jack Duval

Nov 29, 2012 3:40:00 PM

This blog post continues our expert analysis of complex investments and their regulation.

The New York Times Bits Section has a nice article on Jeff Hawkins and his ideas on real-time big data analysis.  (NYT)  Here's the crux:

“It only makes sense to look at old data if you think the world doesn’t change,” said Mr. Hawkins. “You don’t remember the specific muscles you just used to pick up a coffee cup, or all the words you heard this morning; you might remember some of the ideas.”

If no data needs to be saved over a long term and real-time data can stream in all the information that is needed, a big part of the tech industry has a problem. Data storage companies like EMC and Hewlett-Packard thrive on storing massive amounts of data cheaply. Data analysis companies including Microsoft, I.B.M., and SAS fetch that data and crunch the history to find patterns. They and others rely on both the traditional relational databases from Oracle, and newer “unstructured” databases like Hadoop.

Much of this will be a relic within a few years, according to Mr. Hawkins. “Hadoop won’t go away, but it will manage a lot less stuff,” he said in an interview at Numenta’s headquarters in Redwood City, Calif. “Querying databases won’t matter as much, as people worry instead about millions of streams of real-time data.” In a sensor-rich world of data feeds, he is saying, we will model ourselves more closely on the constant change that is the real world.

If true, this would be a paradigm shift.
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Topics: big data, analysis, Statistics, Data Analysis, Jeff Hawkins, real-time, Complexity, Predictive Analytics, NYT, Analytic Talent

The Bubble in Yield Plays Continues to Grow

Posted by Jack Duval

Oct 29, 2012 3:33:29 AM

Nathaniel Popper, reporting in the New York Times, has a good piece on how individual investors are plowing into junk bonds just as they are getting more risky.  (NYT)  This continues the trend of yield chasing we have documented with our coverage of Energy plays in Master Limited Partnerships here.

The scenario is simple, the Fed has cut interest rates to near zero and intends to keep them there for the foreseeable future, while at the same time the baby boom generation is retiring at an accelerating pace.  These retirees need income but don't want the risk of equities.  Unfortunately, they are running right into the teeth of the bubble forming in risky income plays.  Like all bubbles, it will end badly.

Here are some highlights from the article:

  • Junk bond issuance has reached record levels this year

  • The average credit rating of companies issuing junk bonds has declined

  • The proceeds of many of these offerings are not going to operations, but to cash out private equity funds

  • Retail investors added $2.1 billion in the first three weeks of October, while institutional investors sold $256 million over the same time period

  • Retail investors added $22 billion to junk bond funds this year compared to $8.3 billion in all of 2011

  • LBOs are back in vogue

  • More and more junk bonds are issued that allow the borrowers to skip interest payments

For those of you who have been around for a while, this all sounds like the years leading up to the collapse of the junk bond market in the early 1990's.  (PIK bonds anyone?)

Key takeaways for investors and industry participants:

  • Investors should beware of the increasing risk in these yield plays, both from an investment cycle and individual investment perspective;

  • Compliance/supervisory officers should beware of seemingly high allocations to fixed income that are actually invested in speculative or aggressive high yield bonds or other risky income investments; and make sure the accounts are coded for such investments and that the advisor and investor are both fully aware of the risks

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Topics: chasing yield, Master Limited Partnerships, junk bonds, MLP, investments, LBO, Nathaniel Popper, risk, Compliance, private equity, NYT

Uh-Oh. Master Limited Partnerships Continue to Go Mainstream after 10 Years of Outperformance

Posted by Jack Duval

Oct 18, 2012 3:57:00 AM

This blog post continues our expert analysis of complex investments and their regulation.

The New York Times has joined the drumbeat of MLP coverage, noting how the relatively high yields and tax advantages of MLPs are drawing investors. (NYT)

Here's some facts that should give everyone pause before investing in these complex products:

    • They have an average 16.7 percent annual return for the past 10 years

    • This return is roughly 2x the S&P 500 over the same time period

I fear a lot of investors will be chasing the "hot dot" with MLPs and get in right at the top.  Remember, commodity prices can be volatile in the extreme, and these are almost exclusively energy plays.  The chart below shows the year-ending values of the Alerian MLP Index and the percent change from the previous year.

Click on chart for full screen version.

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Topics: Master Limited Partnerships, MLP, Data Analysis, S&P 500, investments, Complex Investments, Complexity, NYT

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