Maybe you are coming to our MDM Summit in London, February 8-9.  Perhaps you can share with me your war stories related to MDM, and how you got round them.  I certainly could do with the help .

I was reading the WSJ this weekend and I spotted a very interesting book review: The New American Divide, WSJ Print Edition January 27 2011

http://online.wsj.com/article/SB10001424052970204301404577170733817181646.html

This extract or book review, from the upcoming “Coming Apart: The State of White America, 1960-2010” by Charles Murray (of “The Bell Curve” fame) won’t sit well with many readers.  The review explores primarily the cultural divide that has separated what was a newly emerging middle class in the 1960’s and looks how the economic and social differences between the now forming slightly-more-upper-class and the now-more-lower-class.  The middle class apparently, nudged along by social policy of the 1960’s, basically went separate ways.  The data Murray shares seems to show that there are indeed two different cultural groups that came from a common pool that was “us”.  The cultural gap that Murray explains is what others would call “income inequality”.  Such inequality is the playground of the politicians, and in today’s economic climate, this is very topical.  Murray suggests however that such inequality is as a result of a deeper, more culturally driven divide that remains in place today.  His answer to the reduce the gap, and to impact or slow the growing economic gap enjoyed by both groups, is for those that “have” to sell the merits to those that “don’t” and to encourage those that “don’t” to behave more like themselves.  This won’t go down well since it will be derided by many as politically incorrect.  My experience in the UK, during the 70’s and 80’s, epitomized by the schism with which Thatcherism is perceived, suggest Murray has some good points.  The “progress” we adored in the 60’s did create unintended consequences – and many of our politicians, because they are politicians, won’t accept that.

This is a comment from an article I read over the Christmas break: True Conservatives are writhing in their graves, Letters, Financial Times, US Print Edition, December 15^th 2011

http://74.6.238.254/search/srpcache?ei=UTF-8&p=true+conservatives+are+writhing+in+their+graves&fr=aaplw&u=http://cc.bingj.com/cache.aspx?q=true+conservatives+are+writhing+in+their+graves&d=4786238963519893&mkt=en-US&setlang=en-US&w=ee1991a1,72c9e8b6&icp=1&.intl=us&sig=el2dFkwUq5syiRnTUAoJtA–#axzz1k6a0i2zS

I have to disagree with John Szemerey.  His letter to the FT was in response to UK Prime Minister David Cameron’s avoidance of signing up to the emergency agreement just before Christmas to save the Euro.  I happened to agree with the Prime Minister’s decision, though it was not the ideal result the UK has a chance to preserve its own economy while many Europeans attach their lifebelts to a leaderless, rudderless Titanic.  That being said, I think Szemerey misunderstands what Conservatism means.  He says, “Churchill, Macmillan, and Heath – must be writhing in their graves at the betrayal of the ideals for which they fought during their political lifetimes.”  He concludes, “The euro crisis would not have occurred if Britain had been a member of the euro group of countries”.  That last point wound up my clock since it is clearly preposterous.  The crisis did not occur in isolation to what happened in the US.  The euro crisis was always “hiding” since its primary cause is an imbalance in trade between the richer, producer countries and the southern consumer countries.  See Europe’s crisis is all about the north-south split, Alan Greenspan, Financial Times, US Print Edition, October 7 2011.  The gap in trade balance was always going to cause a crisis and it took the US housing bubble to trigger – but if the US had not crashed, the euro crisis would have happened later.  I don’t really know one Brit who opening talks about giving up political and economic sovereignty to a bunch of Europeans, in the way the French desire it (which, by the way, have their own reasons to counterweight their German neighbor).  Britain needs a truly open market and that is what should be protected in Europe.  Political unification is not going to happen soon, not least because France and Germany have differing views on what this means anyway, and that is another reason why the euro crisis was just waiting to happen.  So I don’t think Churchill would be writhing; he will mostly likely be sound asleep with a wry smile on his face.  As to Heath, I don’t really remember him but what I do remember I don’t like.  I matured, politically, when Thatcher sacked a tired, old Conservative party that needed reviving.

And here is a book review, also from the Christmas break:  Parker Payne Investigates, Agatha Christie, GGP Media.  I read the collection many years ago and had forgotten how good they were.  I happened to find this fine hardback edition and decided to reacquaint myself with Christie’s fine work.  I again remembered, all too soon, that the collection is too short.  If only there were more sorry souls for Parker Payne to help make happy!  I am not sure I could ever force myself to visit him though.  He was all too quick to correctly disarm his clients.  His travels were from a bye gone age when everything was a little more prim and proper, and I wish I had been there.  For a rainy day, or a long train or plane ride.  8 out of 10.

Little, in my view.  Despite the European press having a field day trouncing the British (as they always like to do), the result is extremely risky.  The first country to flounce such “budgetary controls” in the past was Germany!  France did too.  Do you honestly think that with automatic rules in place that such things won’t be overridden with the paymaster general has to go overdrawn for a few months?

What are these countries singing up for?  They are supporting the idea that their fiscal and budgetary plans will be submitted to a central authority for approval.  This central authority is not yet known, but if it represents any part of the EU structure, it will be unelected politicians or technocrats that no one even knows the name of.  Does anyone seriously think this will save the Euro, or resolve the current debt crisis?  Better yet many of these other countries have yet to ratify the agreement with their own governments at home.  So it is not even a done-deal, yet.

The one good set of agreement came Thursday when decisions were taken by the ECB to increase the set of funds available to it to help support banks.  Though details leaked also that the ECB was taking lower quality bonds from banks to help ease the liquidity problem.  Seems like the ECB is watering down its asset quality, and all it can do is print money.

This so called “agreement” just does not work.  There is one major issue not addressed at all, and one minor issue that will come about as a result.  The main issue that is at the heart of the debt crisis is that EU countries are economically at odds with each other.  Germany is a creditor nation, led by exports and not (consumer) spending.  Greece, in the other hand, is the mirror image.  Greece is a debtor nation, consuming and not exporting.  Greece is economically too small but look at Italy, Spain, Portugal, and other countries – even France.  The root of the problem is the imbalance in the way the countries P&L are managed.  Until and if there is one P&L, this model cannot work.  The fault lines will remain in place.  Having a budget control in place does not change how these economies work.  Until and if Germany acts more like Greece, and Greece acts more like Germany, the issues will remain.

Second, the implied budget control process is fraught with political disaster.  What will happen when a peripheral country submits their budget the EU control body say, “sorry buddy, you are spending too much you need to cut back somehow”?  This has to happen, and by a lot, due to the main issue outlined above.  Many countries that go through this process will cry “foul” since they will be told buy a third party to change how they run their countries.  This willingness to shift sovereignty is what this new agreement is all about.  But it seems no one is talking about how it will work.  Politicians will baulk from being told to cut, cut, cut, and governments will topple or be in conflict with the new budgetary process.  Worse, the penalties for violation of budgetary rules will be financial.  That’s dumb.  This is like penalizing a thirsty man by taking his access to water away – he remains even more thirst.

This new agreement sounds good – but does not hold up.  It can’t work as documented so far – in fact there is a severe lack of documentation.  It seeks to address a future failure of a European country that fails to manage its own money – that is not the problem at hand.  We have failed and failing governments now!  And to read how the European press are “all over the odd man of Europe” (Britain) is just rich.  The Financial Times US print edition ["Britain's cold shoulder for Europe", December 10, 2011) wrote a narrative about how the meeting panned out Thursday and Friday.  It turns out that the UK was blighted and prevented from explaining its real requirements that would have prevented the veto.  President Sarkozy, apparently, summarized the UK's requirements incorrectly and many other leaders therefore misunderstood and immediately went against the UK"s demands.  Frankly I am glad.  If Britain is isolated, they are (as Terry Smith, chief executive of Tullet Prebon, "...as isolated as someone who refused to join the [unfinished] Titanic just before it sailed.”  So be it.

Economics: Rituals of Rigour. After mistaken claims made ahead of the global crisis won much academic support, long-held assumptions were called into question – but the real world often remains overlooked or ignored. http://www.ft.com/cms/s/0/faba8834-cf09-11e0-86c5-00144feabdc0.html

Financial Times, Print Edition, August 25th 2011

As a closet economist I found this article very entrusting.  John Kay, a visiting professor at the London School of Economics, discusses the state of the reputation of economists.  Given that we are in the middle of a long winded and painful economic cycle, and that we seem to be subject to opposing economic, if part political, forces pushing for government spending, or debt reduction, one has to ask – what have economists got to say, and what they say, is it right?  It seems that the conditions we find ourselves under are somewhat unique, so no single historical experience matches completely.  Some argue that the US situation more closely resembled what happened to Japan in the last 10 or more years (long time slump).  But ignoring the actual answer to this question, this article explores how our economists develop their theories and play them out – with tools and technology – interestingly mentioned (game theory) in this weeks Economist (Technology Quarterly).

An unpalatable solution- Eurobonds could restore confidence, but at a cost http://www.economist.com/node/21526325

The Economist, Print Edition, August 20th 2011

The European economic condition seems to fluctuate daily – though much of the news these days seems to negative.  I certainly think that Greece has to default, and leave the Euro.  I can’t see Germany bailing out the profligate Greeks all the while those same Greeks, and now Italians, refuse to change the behavior that needs to change.  We are not too dissimilar here in the US; but being the reserve currency, the pressure on US debt cannot be as critical.

Notwithstanding this view, the article was very good.  The idea of Euro bonds stem from the conclusion that Europe needs a single economic police or policy formulating machine.  Since each state maintains its own economic policy, the shared currency does not solve all the problems resulting from very different economic cycles and cultures.  The Euro needs, requires, such resulting machinery.  But it won’t happen soon.  So Euro bonds cannot be guaranteed, and Germany wont (constitutionally) accept such risk unless others are on the hook to share in the payment.  So the idea is sunk, yet increasingly is seen as one of the main pathways to saving the Euro.

The reality is that the German governance will call the shots that count, and it might yet be that Italy that sinks the Euro, before the Greeks do what they must (leave the Euro).

Banks sued over mortgage deals http://www.ft.com/intl/cms/s/0/c3656efc-d57c-11e0-9133-00144feab49a.html#axzz1XDkdzYg4

Financial Times, September 3rd, 2011

Where will this all end?  How on earth can the US government or its agents sue banks for selling dodgy mortgages?  Who will sue Fannie and Freddie for themselves selling mortgages to those that could not afford to pay?  Who will sue the rating agencies for not doing their due diligence?  Who will sue the government leaders that unwittingly encouraged the whole debacle over years of social engineering, off the back of capitalistic success?  I can’t see what this move is likely to deliver.  What are these people thinking?   Clearly this won’t go to court – so a settlement is what is sought.  So the banks, bailed out, be under even more pressure.  Why don’t we clean up the mortgage mess?  Not everyone has the right to a mortgage – we each have to earn it, and demonstrate the ability to pay it!

Anyway, I also got up to speed with my Economists.  I was going to blog on the economic issues this week but before I could, this week’s print edition (August 6^th-11^th) arrived earlier than normal, on Saturday morning.  What delight – I could read the Economist on time!  Well the lead article (Time for a Double Dip?) was top drawer – just what I wanted to blog.  It concerned the signed “debt-deal” between Democrats and Republicans: I quote:

There was a deal to be head: keep up spending in the short term, with a stress on much–needed infrastructure investment, as well as extending the temporary tax cats, in exchange for a big medium-term reduction in the deficit, centred on entitlements and tax reform. Congress did precisely the opposite, failing to support the economy now and failing to find enough cuts over the next decade to stabilize America’s debt.

This paragraph concluded:

Would you build a factory today if you knew that taxes had to rise eventually, but had no idea which ones?

Bottom line is the deal that was signed was really a non-event.  Our politicians have let us all down.  The left wants to protect entitlements (we can’t afford too, so let’s talk about cuts) and the right wants to protect/cut tax rates (let’s make a fair tax system and cut out the fiddles).  An article on CNBC captured the point that this problem is not new, or short term, but was set in train many years ago.  In “America’s fiscal rot set in years ago“, HSBC chief economist Stephan King is quoted as saying, “Even before the financial crisis, the fiscal path was unsustainable: an ageing population combined with extravagant social security commitments suggested either the need for massive tax increases or draconian spending cuts.”  Both parties need to treat running our country as we try to run our households.  Someone needs to stand-up and stand-out for conservative rectitude.  But who?

To put oil on the fire, this week the FT carried an article that suggested the EU needs to raise interest rates urgently to cut off the inflationary pressure in central EU that is building.  Such a policy would kill off any hope for Greece to save itself by increasing tax receipts through economic growth.  The two (or more) speed of Europe is real but uniform policies cannot, and are not, working.  The EU has not agreed one overall policy for solving the Greek “problem”.  The risk is that Greece will have to default, and/or leave the Euro.  If Greece considers or leaves the Euro, Portugal, Ireland and then Spain will come under excruciating pressure to address their debt issues.  And larger yet is the inflation pressure  that continues to build in China that is actually more significant to the stability of the world economy.  Interestingly the turbulence for the Euro, makes the Dollar’s challenges less worrisome.

I read somewhere – not sure where – a phrase that related to the current situation: “we are all just shuffling deck chairs around on the Titanic”.  I would add a humorous perspective: our economic leaders are all starting into the same bright headlights.  No one wants to blink- just in case when they open their eyes, the light has gone out and they would be the first to spot it go.

Much has been written about “pattern analysis”.  In fact a lot of Business Intelligence (BI) has focused on providing insight to business users to aid in decision making.  However, the classic problem I first mention is more common than we admit.  What if a user is presented with the facts; what if the technology works perfectly – and what happens if the users decide to do something else instead! 

On January 15^th 2011, in the US print edition of the Financial Times, I read an article titled, “Fed misread dangers of housing crash, minutes show”.  The article highlighted how the Fed had been receiving data that clearly showed a bubble in the housing market; worse, the data did suggest misalignment with pricing and risk exposure through the growth in unconventional mortgages.  The data was there; some members of the Fed called out the risk.  But the “collective” decided that the data was not conclusive.  No action was taken.  Disaster was assured.

This is an over simplified blog, I admit.  Of course we have re-interpreted the data and found the issue.  If we knew then what we know now, things would be different.  But the point remains: it does not matter how good our IT solutions are (I include the technology to support an MDM discipline) if our users decide otherwise, disaster can always be assured.  We should never forget that it is the user, the business user that is king here.  We spend a lot of money on trying to understand the predictable outcomes; do we spend enough on trying to understand the unpredictable?  I wonder.

I read with interest the sections on commodities – which explore likely demand trends, and price considerations short and medium term.  Overall the World Bank does not (some months now) expect any serious inflation drivers from raw materials and commodity angle.  This rings mostly true with more recent data – but I must admit, given my monetarist believes, I think that the QE we have followed (mostly in the US) has or will create huge pressures down the road that will drive inflation.  This is a medium to a long term view.  However, I saw some new data that is more short term that is worrying.

On January 22^nd I was reading the US print edition of the Financial Times.  The headline that caught my eyes read, “Global Steel production racks up biggest increase in 50 years”. Despite the alarming headline I had to ask myself- is this demand based, or price based, or both?  After reading the article I conclude that both demand is increasing (think China mainly) but also price based.  On January 24^th there was another FT article that said, “Steel prices set to soar”.  Overall, this is very interesting.  Steel is one of those commodities (like oil) that sits at the start of many other value chains.  If Oil is approaching $100 a barrel, and steel is increasing in price dramatically, this is a shorter term flag that implies inflation may soon be baking into our future.

My favorite peeve concerns how EVER business application should do a better job of managing its own data.  Some of the data in applications is shared with other applications – and some of this is master data (such as product, customer, etc).  However, these same applications use/publish/consume other data – that is specific to it.  This is NOT master data; though some may call it “application master data” or as I would prefer to call it, “application specific data”.  I am sure some of you fall into either (or other) camps.  The problem is, if we call it “master data” it becomes very confusing: what does MDM concern itself with – managing for re-use “customer” across all applications, or managing all data in all applications?  The former seems to be something we can do; the latter sounds like something we tried to do many times before and can never do well.  Maybe the latter follows from the former.  Anyway, I hope the note is popular.  It is certainly a popular question. 

On the political front, I seem to have struck a chord.  On December 9^th I commented on how Angela Merkel was saying things that were unhelpful with respect to long term safety of the Euro.  It turns out that some Germans in her own parliament are saying the same things.  Maybe with the right pressure Merkel will get a new vision.  If not, I fear that the Euro will suffer, and as a result Europe’s economic situation will worsen.  The article in the US print edition of the Financial Times today highlighted how the European Central Bank will, if things continue, become Europe’s (largest) “bad bank”.  A “bad bank” is a concept that separates the high risk (even near worthless) assets (in this case bonds) from those that have a future.  To think that a central bank could absorb “bad assets” to such a degree is hard to imagine – but it is good that some folks are talking about this risk.  If any of us had more spine, we would actually say that some European countries are actually bankrupt!  Already economists are looking at the value of debt that has to be covered in 2011.  And it’s not a pretty picture.

Now for the personal economic commentary: On the economic front I was saddened to see Angela Merkel, the German Chancellor, saying all the wrong things.  In the Tuesday December 7^th US print edition, it was reported that:

 Angela Merkel, the German Chancellor, has ruled out two of the most widely backed ideas for combating the ongoing eurozone’s debt crisis, saying that she saw no need to increase the size of the European Union’s €440bn rescue fund and that the bloc’s treaties did not allow for the creation of a Europe-wide bond.

This seems crazy to me.  No government can buck the market – we have seen this time and time again.  In recent days the cost for European countries to borrow has soured, and talk has moved beyond Portugal (they will have to be bailed out) to Span, and even Italy.  Faint murmurings were heard in regard to France!  The problem is that the fund, as is, is not big enough to save Spain!  So there is no choice but to talk up the idea of the fund being bottomless.

The second point is more political than economic.  The German government does not want to take on a real liability that will materially impact their own borrowing costs.  As it stands today Germany is somewhat insulated from its weaker partner conditions.  With a Euro bond, the increased cost to borrow would start to spread more evenly acorss the community.  This would tarnish German economic ‘success’ (ignoring the fact that the very imbalances created by Germany’s export led economy are part of the problem).  What they are not thinking about is what happens when Spain goes under.  At that point the talk will drift back to “the Euro is doomed”.  What price the cost of borrowing in Germany then?

A larger fund and a Euro bond, mutual liability, is about as good as it could get.  These would be stronger weapons to tackle the “market”.  If Merkel continues to resist, disaster for the eurozone is more a matter of time.

And what did I see the following day?  In the Wednesday December 8^th US printed edition, the headline was, “Is there the will to save the eurozone” from columnist Martin Wolf.  Hang on everyone – its gonna get pretty wet in here soon.