Locklin on science

Nano on the pink sheets: anatomy of a pump and dump

Posted in fraud, nanotech by Scott Locklin on December 8, 2012

I don’t remember how this got into my browser window, but it got there somehow. Nanotech. Someone wants me to invest, like, cash money into Nanotech. They want this so much they registered a domain name dedicated to … some obscure company called “Nano labs” or CTLE on the OTC pink sheets. Please click on this link for some high comedy. Here’s a snapshot for posterity, since I’m pretty sure this website and the half dozen others I found will be nuked after the pump and dump.

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They’re not even clever about it. I’m not the only person to notice: someone over at SeekingAlpha has noticed. Someone who specializes in pinks at Boston.com was also suspicious. What boggles me is, this outfit is apparently worth $230.6 million dollars. The post-November publicity pump has added  more than $200m notional to their market value. They have no assets. They recently issued 100 million shares to their new CEO, Dr. Victor M. Castrano in exchange for “new nanotechnology.” Since lying to the SEC is a serious crime, they, to their credit, do  say that it “involves a coating that can be applied to almost any surface, has low thermal conductivity and protects surfaces from water leaks, corrosion and rust. Nanotechnology involves mixing microscopic particles into paints, coatings and films that can be applied to most surfaces to provide temperature resistance and increased structural integrity.” Yes, in fact, later press releases reveal they’re talking about the nano-invention known as “house paint.”

Dr. Castrano is  a graduate and professor of physics at a Mexican university whose physics department webpage is broken. A literature search turns up some actual references written by this guy, published in perfectly respectable journals. Though it is the usual dreary “nanotech” stuff which cheeses me off so much; one of those links involves goop made of chicken feathers.  What Doc Castrano does is considered respectable “nanoscience.” The journal titles are legitimate and even impressive.  Yet this company is an obvious fraud based on the sheerest nonsense. “Nano Labs” was originally founded in 1995 … to “sell and install stone, tile and marble products used in residential and commercial buildings.” Yet, somehow, in spring of 2012, they reorganized, , sold themselves for … $500, issued a zillion shares, and renamed themselves “Nano Labs Corp.” Why did they do this? I haven’t the slightest idea. I am guessing the CTLE ticker was already listed on the pink sheets; OTCQB is almost respectable; only one step away (via OTCQX) from NASDAQ, as they do some limited SEC compliance.

These clowns aren’t even bothering to change the wording of the marketing bullshit in their 10-Q. In the most recent 10-Q, they use the same line as in the above screenshot, “The Company is pursuing opportunities for global market leadership in the field of nanotechnology, a sector with the prospect of $2.6 trillion in global revenues – representing 15 per cent of all projected global manufacturing – by 2014.” It is my considered opinion that the field of nanotechnology will not be worth $2.6 trillion globally in 2014; not even if the dollar were to experience Zimbabwe-style inflation between now and then. I think it very close to an established fact that the  only way nanotech will represent 15 per cent of all projected global manufacturing by 2014 is if we are nuked into the stone ages by nanotech-weilding space invaders.

They  mention in their 10-Q that they only have one part time and one full time employee … yet their notional is $230.6 million dollars on the pink sheets market. And get a load of their 10-K statement, listing cash flows, debts and assets in the tens of thousands of dollars. Their company financial records look somewhat like my credit card statements on a bad year.

The way I see it, there are two and a half possibilities here. One is that the principals are frauds. Considering the nature of nanotechnology and “nanoscience” and the type of clown involved in hyping their “nano” research, and considering the preposterous websites and press releases pumping this stock, this seems a very strong possibility. The other possibility  is that the principals have been kidnapped by the Mexican Mafia for some other purpose; perhaps this company is being used for money laundering, or perhaps it is outright fraud perpetrated by mobsters rather than “respectable” nanotechnologists. I don’t know much about Mexico, but these guys are based there, and some very scary news reports come from that part of the world. If that is the case, I call on Doc Castrano’s “respectable” nanotech colleagues to send General Pershing  to his rescue. Finally, I count it as a half possibility that Doc Castrano and company are in earnest,  and are not familiar with the SEC regulations on fraud, or are not connected in any way with the publicity campaign going on in their name. This only seems like half a possibility, as their website, complete with links to 10-K and 10-Q financials, seems completely bonkers. I mean, what on earth is a “Nano mellon?”

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I  proclaim myself an agnostic as to which of the two and a half possibilities is the actuality, though I will vehemently maintain that these are the only two and a half possibilities which exist in reality. Their wave function  has only two and a half states. Unless you’re  long their stock or are involved in law enforcement, it doesn’t matter which possibility is true. What really matters is, this is a completely shady situation involving a seemingly legitimate nanotech researcher. A  legitimate nanotech news aggregation website, run by members of the Foresight institute, touts a “Nano labs” press release as something worthy of attention. This is a “respectable” website on the subject of nanotechnology, with actual venture capital experts  advising it. Yet, somehow these nanotech experts and big dollar VC types cannot see what I find completely obvious: this “Nano labs” CTLE company is an egregious and embarrassing fraud.

I think “nanotechnology” is a fraudulent concept, over sold by snake oil salesmen who should be reading comic books in their parents basements instead of bothering sensible people. Despite my horse laughs at the pretensions of “nanotechnologists,” I never expected to see something this preposterously brazen.  It is actually much worse than the imbeciles attempting to convince the world they have a working quantum computer, as at least some of the quantum computing community laughs at them in public. This is flim-flammery on a  significant scale, and abetted by the Nanotech hype machine. Other than  a few watchers of penny stocks and my own bad self, nobody seems to have noticed.  Shouldn’t real-life nanotechnologists care that their precious ideas are being perverted by frauds? Shouldn’t they be policing their own?

Naaaah! Why dull the nano fireworks?

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I’ve never tried to short a pink sheet. I’m not sure what the downside risks are of that if the SEC shows up and legally notices that this is being run out of someone’s boiler room. If they were traded on a real market, I’d short the shit out of them.

Edit add: this morning I notice the very same professor made the news a few years ago for allegedly turning Tequila into Diamonds.  I give up. Humanity is a pack of credulous numskulls without hope. That was linked everywhere from Arxiv to the BBC. I am picturing this guy with his bottle of Tequila,  a bucket full of chicken feathers and sporting a preposterous Speedy Gonzales sombrero counting stacks of greenbacks.

HFT using neutrino physics: Stats Jackassery

Posted in physics, stats jackass of the month by Scott Locklin on June 18, 2012

I’ve always wondered what good electroweak theory could ever do for anybody, technologically speaking. The unification theory between electrical  and magnetic forces produced huge technological benefits for humanity; pretty much all electrical, electronic and radio technology is the result -and the technological results happened quickly. Physicists work feverishly on unification theories, more or less because electromagnetic theory was so damned important to humanity. Electromagnetism was unified with the “weak field” way back in 1973 or so (or 1968, depending on if you count the theory before the experiment, which I don’t), and Salaam, Glashow and Weinberg were awarded the Nobel Prize for it in 1979. Call it a round 40 years ago. 40 years after Maxwell’s equations (the unification theory between electricity and magnetism) were written down, humans were using electromechanical power on a wide scale, and radio was already being used (in financial applications no less). Not so much has happened technologically since folks invented electroweak theory.

Espen Haug has apparently spoken of  a potential use for electroweak theory. It got carried by Forbes. His idea, which I assume was somewhat in jest, was using electroweak theory to do high frequency trading. Because neutrinos don’t interact strongly with the rest of nature (that’s why they call it the “weak force”), you can transmit a beam of them through the earth. Basically, Haug noticed that “through the earth” is a much more straight line than “across the earth” which is how signals are generally transmitted. The perimeter of a circle is longer than its diameter. Something which has been known since people started drawing circles in patches of dirt. Therefore, you can potentially trade ahead of price movements in far-away exchanges.

The problem with this, of course, is the fact that any beam of particles which can be transmitted through a giant piece of iron and silicon like the earth can’t be easily detected by anyone. There is a reason they call it the “weak force.” It’s really weak! Detecting any neutrinos at all is a pretty neat trick.  If we wait around a long time, and have really big detectors and a lot of neutrinos coming from somewhere, we can see a neutrino interact with a proton once in a while. People do this sort of thing for a living. It’s fairly important stuff for cosmology, astrophysics and high energy physics. Measurements are difficult, so any experiment involving neutrinos pushes knowledge forward.

I had thought about doing a Shannon type calculation, making some guesses as to neutrino flux humans are capable of producing and transmitting through the earth, and looking at cross sections of the best detectors, to see what kind of information can be transmitted in this way. Another way to think about it, how long do you have to sit around at your detector and count things to see an unambiguous signal in your Poisson noise? If it’s longer than a few milliseconds, you can’t do this trick and make HFT front-runny money.  I don’t know much about neutrino detectors, but I do know that the best ones are size of large scale mining installations, and the time frames for looking for interesting signals are measured in years. It turns out someone already did the hard work for me experimentally by building a neutrino telegraph.

The MINERVA detector has been used for this purpose already, in concert with a beam of neutrinos from Fermilab, which is probably close to the best we can do for making lots of neutrinos. The bit rate is reported as 0.1 bits/second, with a 1% error rate. It was also only through 240 meters of rock (it was about 1km total), as opposed to the diameter of the earth, which is 12750 kilometers. No high frequency trading is going to happen at 0.1 bits/second, or whatever lower rate one can get transmitting the beam through some large chord of the earth’s diameter, assuming you can do that at all.

There are other problems with the idea. How do you modulate a neutrino beam? Can you do it on a millisecond timescale? Maybe you can, but accelerators are big giant things, and doing things like ramping magnetic fields in them up and down to change the energy or amplitude of neutrinos, or accelerate a bit string of neutrino-making protons clumps takes a long time. Making an atom smasher which makes a lot of neutrinos … well, I’m guessing it will be even bigger than Fermilab, which is pretty damn big. I also don’t have a good idea of how collimated a beam of neutrinos are. My guess would be, “not very.” But even if you could make a neutrino ray with a laser-like milliradian divergence (almost certainly impossible), the beam radius on the other end of the earth will be measured in kilometers. This would imply that a detector at the other end would have to be very big indeed. Or else someone else could build a detector within the beam radius and see the same thing.

On the other end of things, the detector in the MINERVA experiment would indeed “fit in a basement” at someone’s trading office; it was only 5 tons of scintillators. Putting aside the beam divergence issue, this would work a lot better if it was a lot bigger. The more mass you have, the more neutrinos you can see. That’s why folks do things like using a cubic kilometer of antarctic ice pack as a detector. Assuming you could scale up the bit rate by increasing the detector size, maybe if you built one 100,000 times bigger, that would be good enough? I’m guessing that 500,000 tons of detector might cost a bit of money. I suppose it is possible, if unlikely. Submarine cables from San Francisco to New Zealand are around 80,000 tons, rather expensive, and not as complex.

Something tells me the HFT boys  aren’t going to be running triangle arb on neutrino signals, like, ever. Nice funding attempt though.

I don’t think Espen Haug deserves the stats jackass award, as he’s a serious guy who knows about noise distributions. He also hasn’t written any papers on the subject. Similar comments apply to the aptly named neutrino physicist, John Learned who presumably knows about detector noise, and isn’t actively agitating for neutrino ansibles.  Bruce Dorminey wrote it; he should definitely know better. Either way, Forbes published this, and it doesn’t even pass a sniff test: someone there was jackassed enough to publish this without disclaimers. For that, Bruce and his credulous numskull editors at Forbes Magazine are, stats jackass of the month:

Yet another stab at explaining the debt crisis

Posted in finance journalism by Scott Locklin on December 7, 2011

Why Michael Lewis Annoys the Bejeepers out of Me

Posted in finance journalism by Scott Locklin on August 29, 2011

Michael Lewis is the preeminent financial journalist of our age. In many ways, Michael Lewis is the only financial journalist of our age. No other author on finance is so widely read. His articles are widely taken as something like the conventional wisdom. This is a great tragedy, as, despite the fact that Michael Lewis is unarguably a great writer, he’s a terrible journalist. Reading a Michael Lewis article on finance is much like watching the evening news. It gives you the impression that you’re well informed, but in reality, you’ve been deceived by noise.

Consider his latest Vanity Fair missive. Michael Lewis attempts to get to the bottom of the German side of the financial crisis. This is an interesting and tremendously important subject. Why? Because Germans didn’t have a financial crisis. This, despite the fact that the German Landesbanks were the counterparties in a good fraction of the printing of shitty bonds (aka, Germans own a lot of the worthless bonds printed up by American banks). This despite the fact that the Germans own a bunch of shitty Greek government paper. This despite the fact that Germany was incinerated and invaded in WW-2, and half her territory and a third of her population incarcerated under communism until 1989. Yet, Germany is a prosperous and pleasant nation to live in; one of the best in the world. Germany manages to have lower unemployment than the US, despite all their unions and socialistic regulations for hiring and firing: laws which Harvard economist ding a lings will insist would be the ruination of the American economy. How did the Germans manage this?

Michael Lewis doesn’t know; he’s too busy making turd jokes. I’m not exaggerating. Some jackass gave him Alan Dundes’ imbecilic, “Life is a Chicken Coop Ladder.” This is a book documenting alleged German folklore surrounding scatology, and drawing the conclusion that Germans are prone to killing Jews because of inadequate toilet training. If you think that’s some kind of joke: it isn’t; the guy who wrote it is completely serious. The local Kraut-hating bigot who insisted I read it was serious as well. Lewis takes it at face value also, and uses it as an excuse to regale us with Teutonic turd humor for a significant fraction of the essay.

Lewis’ article is some funny and well written bigotry, including the obligatory Nazi jokes all English speaking writers are required to make when discussing German culture. Of course, if he did an article on some cannibalistic African hell hole in the same “light hearted” spirit, he’d be hounded by the Southern Poverty Law Center for the rest of his life as an evil cousin-fucking racist. Not that there is anything wrong with that: some of my best friends and all that. I’m just pointing it out.

Lewis has, according to his report, spent a grand total of about a week of his adult life in Germany. His report, like the rest of the VF roadtrip series, is an adolescent travel story: some ethnic stereotypes, with some bad financial analysis thrown in. It’s true, the Landesbanks were royally ass-raped by shady American bankers. It’s also true that Germans tend to be gullible and trust in authorities, such as the American credit rating agencies. This is a racial characteristic of virtually all Germans I have known; German-American or straight from the tap. It is also true that Germans tend to be orderly people with a deep seated thirst for justice, equity and social harmony. I don’t think this has anything to do with poop, and I don’t think Germans have any more interest in turds or mud wrestling than anybody else. The real story of Germany is their banking systems is awesome, despite the fact that the actual banks were run by retards (rather than thieves), and their economy is doing really well. Somehow the great journalist finds it more interesting making poop jokes, rather than getting to the bottom of this. Why do the Germans do so well, despite their getting the wrong end of the financial disaster?

The last Lewis article I read was about Iceland. Again, he gives a fair, if bigoted characterization of Icelanders: fearless risk takers who belong on fishing boats or strongman contests rather than trading floors. No real argument from me on that one: Icelanders are brave men. His silly prescription to heal the Icelandic economy? Let Icelandic feminists run their banks. I’ve got a better idea: why not let Germans run their banks? Germans have a longer track record, and have unarguably contributed more to banking, human civilization and the ordering thereof than all the feminists in all nations in all of human history.

The important story from Iceland, he missed completely: they told the EU and the world financial system to eat shit, and are actually better off for it. It was obvious they were going to, but Lewis didn’t raise the possibility in his 2009 article, or any subsequent ones. The other real story of the Iceland tragedy: there are actual villains, and they’re not brave honest-faced Icelandic fishermen. Lewis is too chicken shit to name them (he could have; I’m pretty sure wikileaks did). I’ll name them: the Tchenguiz Brothers -a couple of Iraqi guys from the Anti-Semitic central casting department who ripped Kaupthing off to the tune of 2 Billion dollars, and the fat bag of fecal debris who let them get away with it: Sigurdur Einarsson.

Lewis’ assertions about the alleged German love of turds doesn’t even pass the sniff test. He claims the Germans have the only toilet museum in the world? Well, I know of one in South Korea off the top of my head. Feeding the phrase into google nets one in New Delhi, one in Massachusetts, one in Texas, one in Ukraine, one in Great Britain and at least one on the goddamned internet. Who checks Lewis’ facts? My editor would shit on me from a tremendous height for making such an unsubstantiated remark, and he’s not even a little bit German. Similarly, Lewis got an assertion about Irish parliamentary proceedings wrong too: mostly because it got in the way of a good racial stereotype about my lazy, potato-eating, Bog Negro cousins. If he can’t get crappy little facts like this right … why should anyone believe him about anything else?

It’s difficult to resist mentioning Lewis the prophet. The way he runs around unexplaining things, you’d think he predicted our present financial predicament. He seems to claim to: Liars Poker was his prediction, dontcha know. While it was a great book, his memory is faulty. The internet is forever, or so I am told. Right before the poop hit the prop in 2007, Lewis was making farty noises at the heavy hitters at Davos who were warning of immanent dangers, calling them, “wimps, ninnies and pointless skeptics.” I owe Janet Tavakoli an apology: she was right about the guy. I’ll go out on a limb as a forecaster: his assertion that the Germans will continue to pay for lazy Greeks and other lazy Southern Europeans is dead wrong. I haven’t been to Germany in over a decade, excepting for airport fly throughs, and I know that for a fact.

Michael Lewis is part of the establishment. His position in the financial community is based on celebrity and patronage rather than actually knowing anything. The man lives in Berkeley for crying out loud. If you want to really understand what is going on in the world, you’re not going to get anything out of listening to a perfumed prince of the media-banking-government complex. No, I don’t think Lewis is in on any conspiracies; I just think it’s easier and more comfortable for him to be funny and misleading than right.