Attack of the Killer Cucumbers: More on the Spanish Debt Crisis and Lower Quality Translation

Barbarino: That thing about the Great French Fry Phantom?

Kotter: You mean the Irish Potato Famine?

—Welcome Back Kotter

The need for speed in financial markets and the deceptive cornucopia of free information create the sensation that everything is available immediately. A parallel phenomenon is occurring in stock trading. As more and more trades are initiated by algorithms at greater speed and greater volume, more and more market breakdowns are occurring. Although no one can say for certain what is happening, at least part of the problem seems to be that computer systems can sometimes be overwhelmed by the amount of data that humans are trying to push through them. What lies in the future is no mystery: more and more speed bumps are going to be put in place by regulators on algorithmic trading to prevent crazy fluctuations. We already have automatic stops in many stock markets when a stock rises or falls too much. The referees turn off the system, suspend the stock, open the engine, and take a look to see what is wrong with the machine.

In translation, such technical fixes are not available. Our capacity to generate the linguistic equivalent of crazy stock prices is limited only by our common sense (always scarce) and the cost of fast machine translation (essentially zero).

In the age of the Content Tsunami, there is still too little information of decent quality available for investors who are interested in a foreign situation. The Internet and machine translation, though, create the deadly illusion that a savvy investor can go beyond the tiny amount of analysis produced by the Financial Times and The Wall Street Journal. Voilà. If you’re an analyst in a tiny boutique investment firm with two years of high-school French and you dated a Mexican girl from Amarillo in college, maybe you can use Google Translate to do the gisting of a few Spanish reports by the Bank of Spain or to parse one of Prime Minister Rajoy’s depressing statements (Machine-Translated Investment Research and the Spanish Debt Crisis). After all, any tiny bit of information (whether accurate or not) is necessary to get ahead of the crowd.

As in many other instances of how the Internet supposedly closes the gap between the tiny boutique firm and JP Morgan, this is a mirage. The big investment bank has a group of 20 or 30 Spanish analysts who speak very good English and are able to provide verbal or written summaries of information that often isn’t even written down. Moreover, these analysts are part of the local old boys' networks that communicate a lot faster and secretively than through the Internet. So when you see a blog such as ZeroHedge trying to beat the market using machine translation, you have to smile a little. 

As I have noted, ZeroHedge is very much invested in the whole foul-mouthed, white-collar macho Wall Street ethos of the cynical tough guy fighting alone in a Darwinian world. With all of ZeroHedge’s gleeful references to regular investors as Muppets diving over the Facebook IPO cliff, you have to wonder how their positions fare when they are caught out by some central bank decision or some European bailout plan because they don’t have access to off-the-record conversations with this Greek minister or that Spanish lawmaker (or even something as pedestrian as decent translations). I am betting that many a bloody Muppet massacre occurs behind the scenes that no one writes about. Maybe some of them are due to cheapo translation. 

In the markets, as in poker, the savvy player knows how to spot the sucker. The saying goes that if you can’t spot him, the sucker is probably you. And if you are using Google Translate for your investment research, the sucker is definitely you.

Now, mind you, even half-responsible people who honestly promote the virtues of automation usually add the caveat three-fourths into their PowerPoint presentation that technology should not be used to handle messages in which nuance is important. In my opinion, investment is one of those fields in which nuance matters (although I always wonder: in how many linguistic messages is nuance not important?)

An investment thesis is not data, after all. It may be based on data, but it is mostly a linguistic and conceptual construct. Allow me to use a very concrete example. Paul Kedrosky is a venture capitalist based in California who writes a popular blog called Infectious Greed. He is a very smart and successful investor who is well-read and writes interesting and funny stuff. But even he is prone to what we might call a naïve application of Lower Quality Translation.  

You may recall that around late May of last year, an outbreak of E. coli was detected in a shipment of Spanish cucumbers shipped to Germany. Normally, this would have been a rather typical spat in which a few borders are closed, European agriculture ministers mutter passive-aggressive insults, and everything is amicably resolved in some summit in which rather more caviar than cucumber is consumed. However, given the sensitivity over the Spanish debt problem, the cucumber problem suddenly popped up in the financial press.

Kedrosky went rooting around Spanish newspapers to see if he could get ahead of the market:

Germany and much of Europe are blocking Spanish cucumber exports on fear of the agricultural product’s connection to the outbreak of a virulent and dangerous form of E. coli. The variant has caused multiple deaths, and worries are increasing, particularly in Germany. 

What are the consequences? From a Spanish paper this morning: 

Spanish agrictultural [sic] trade is 3.8 billion euros, and the cucumber is 10 percent of total exports.
Ninety percent of production is exported.

The source cited is ABC, the more conservative of Spain’s three main broadsheets. The link (which is gone from the Bloomberg archive version I hyperlinked above but which I retrieved from my Google Reader) pointed to a Google Translate version of the Spanish article (the original non-translated version is here). Did Kedrosky link to the MT version because he wanted to be helpful to the reader or because he used the translated version to write his blog post? I really can’t tell you for certain. But one small detail suggests that he might have relied on the machine to formulate an investment thesis.

This is where Kedrosky gets in trouble: “Spanish agrictultural trade is 3.8 billion euros, and the cucumber is 10 percent of total exports.” That is a little ambiguous. If you don’t know the first thing about Spain, is 3.8 billion euros a lot or a little? Moreover, does “10 percent of total exports” mean: A) “10 percent of all the stuff Spain exports” (i.e., a lot) or B) “10 percent of all agricultural exports” (i.e., still a lot, but considerably less than A)? The translation doesn’t really provide any firm answer. But look at the subheading. It states the following in the MT version: “90% of production is exported and cucumber sales abroad suppose 10% of total vegetable.” Which is a mangled (Google Translate) version of this statement: “El 90% de la producción se exporta y las ventas de pepino en el exterior supon [sic] el 10% del total de legumbres y hortalizas.” Aha. So it's 10% not of all exports. Not even 10% of agricultural exports. It is 10% of exports of vegetables (!). But because the unambiguous sentence was mangled in the MT version, Kedrosky fixated on the more badly written--but better translated sentence--that contained a fantastic claim (Note the typo in the Spanish sub-headline and the brevity of the ABC item: this was obviously written at high speed in order to make some deadline or to put something up on the newspaper’s homepage; the figures may have been slapped together haphazardly at the last minute or may have been taken from outdated sources; a bilingual analyzing all of this non-linguistic information might have warned a researcher to dig further.) 

It was actually much ado about nothing. Sales of Spanish cucumber outside of Spain only account for 10 percent of total vegetable sales abroad. That is only 380 million euros, which is a paltry 0.15% of total Spanish exports. That is far from a decisive tipping point in a trillion-euro crisis. 

That little mistake marks the difference that drags you down from being the investor hero that makes a winning cucumber call to being the blogger zero who raises the alarm about a cucumber-fueled financial panic.  

To go from 10% of total exports by one of the largest economies in the world to little over a tenth of one percent of total exports is nothing more than a little nuance. So then: is this use of Lower Quality Translation for gisting justified? Well, I guess it is justified if you get it right. But that is a mighty big “if.” The problem is the frequency with which amateur users (and please note that Kedrosky is a highly sophisticated observer of both technology and the markets) mess up using the technology should highlight the fact that proselytizing in favor of cheap and quick translation can often be tantamount to placing razor-sharp blades in the hands of hyperactive, over-caffeinated chimpanzees. 

Miguel Llorens is a freelance financial translator based in Madrid who works from Spanish into English. He is specialized in equity research, economics, accounting, and investment strategy. To contact him, visit his website and write to the address listed there. Feel free to join his LinkedIn network or to follow him on Twitter.

Machine-Translated Investment Research and the Spanish Debt Crisis

I am not going to make the case that Spain is or isn’t on the brink. My opinion on investment in Spanish public debt is worth exactly a hill of beans in this crazy world, as well it should be. But as a language specialist, I would like to point out a few ways in which this crisis is based on very bad translations that, in practice, could lead to very flawed investment theses.

Spain might or might not default on its debt, I don’t know. I just know that when markets were saying that Spanish debt was almost as good as German debt they were mispricing it. Now, when they say it is worse than Zimbabwean debt, they might be mispricing it again. Focusing a lot on emotional images of pandemonium of Greeks or Spaniards throwing paving stones around is gripping, emotional, and targeted toward the more primitive parts of our brains that are easily moved by that sort of thing. 


Let me provide an example. The general strike in Spain a couple of weeks ago was widely followed. The unions are obviously strong and command a lot of following from even people who are not unionized. But the country is far from close to chaos. The violent incidents in Barcelona were pretty isolated. The strike in Madrid was a very tranquil day, with the streets mostly occupied by German tourists in town to support Hannover against Atlético.

Madrid looks pretty normal and boring, as the weather warms up and springtime is in the air. It is full of tourists doing touristy things and, in the evening, reveling drunks doing drunky things. On Wednesday I was coming back from lunch and I bumped into the vice president of the Spanish government, Soraya Sáenz, chatting with some colleagues outside a restaurant. There was not a bodyguard in sight. 


This is hardly the picture of a country on the verge of the largest sovereign debt defaults in history and massive street battles. Of course, my personal observations are purely anecdotal and worthless as investment intelligence. The bottom line is that the bonfires in Plaza de Catalunya are equally devoid of value for a real investor in a rational market.

Except we know people aren’t rational and markets aren’t always efficient. And right now there are a lot of people fueling the fires of instability to profit on credit default swap bets. And even some of the less emotional gasoline being poured on the fire--which masquerades as cold, analytical number-crunching--is based on appallingly poor translations. Take the example of a PowerPoint presentation that has circulated heavily through the Internet over the past week. It was drawn up by an investment company called Carmel Asset Management. 


The .ppt document was loudly endorsed by ZeroHedge, a very popular “investment” blog that has a distinctly nihilistic attitude very typical of the trader mentality: the world is insane; politicians always lie; markets are rigged by Goldman Sachs; there is a huge conspiracy against the little investor; Armageddon is just around the corner; the same guys who killed Kennedy control Apple stock; you have to have a bomb shelter in your backyard; and you basically have to be a paranoid sociopath to make an honest buck in the markets. The main author’s handle is “Tyler Durden,” the co-protagonist of Chuck Palahniuk’s Fight Club. Look at his Twitter account. It features a picture of Brad Pitt with a bare midriff playing Durden. The odds are, of course, that the author is a pale, overweight bald dude called Louie who trades stocks from his living room in “Joysie”. The thing is that, in addition to very analytical blurbs on the problems facing the Spanish economy, ZeroHedge also loves to show images of rioting (viz. “The Spanish RiotCam Has Arrived”). And also of making the parallels between any sort of mayhem in the streets of Madrid or Barcelona with the scenes at Syntagma Square in Athens.


The .ppt makes the bear case for Spain, the absolute worst-case scenario in which the country simply defaults on its debt. It points out factors that are undeniable: high unemployment (23%); unfinished housing crash (perhaps only half over); spendthrift regional governments; and shaky cajas overexposed to the housing bubble. 

One of the key claims in the presentation is that Spanish debt is actually much higher than many realize. The consensus is that Spanish debt is equivalent to 60% of GDP, which is manageable (sixty percent is actually lower than the debt-to-GDP ratio of “serious” countries like Germany [83%], the U.S. [100%], France [87%], the United Kingdom [81%], and Japan [233%]).

“Aha,” reply the ZeroHedgers and Carmels, “but that 60% is deceptive, because it does not include the debt owed by the comunidades autónomas, the regional governments.” The PPT tells us that: “Spain’s national debt is 50% greater than the headline numbers. Spain’s debt-to-GDP balloons from 60% to 90% of GDP with regional and other debts (Slide 2).” When you factor that in, the figure, they claim, is 90%, which is a lot scarier.

Well, it turns out that this is not actually true. The lower consensus 60% figure is accurate, because it includes both the money owed by the central government and all the goodies on which regional authorities splurged throughout the boom of the past decade. Listen to Luis Garicano, a leading Spanish economist, responding in comments on his blog from a reader who is freaking out after visiting ZeroHedge:

Zero HEdge se hace un pequeno lio. La deuda de las CCAA esta incluida YA en el total de la deuda publica. Otra cosa es la deuda bancaria con aval del estado y la “otra deuda avalada”

Which I translate as follows:

ZeroHedge is tying himself into knots. The debt owed by the autonomous regions is ALREADY included in the public debt total. Banking debt guaranteed by the government and “other guaranteed debt” is another issue.

So, who you gonna call? The economics professor who does this for a living (and, incidentally, is not a Spain bull), or the anonymous blogger who masquerades as the Nietzschean, psychopathic alter-ego of an alienated insomniac suffering from multiple personality disorder? I have my answer, but then again I’m an elitist, as some sock puppets mutter under their breath when they read this blog.

And then you start to probe the detail of the .ppt document, and the picture shifts a little more. A Wall Street Journal blog carried a very useful portrait of Carmel, the company making the bearish Spain call. First of all, Carmel manages $50 million. That makes it a very, very tiny player. Second of all, Jonathan Carmel, the head of the asset manager, reveals that he writes his own investment research and that his Spanish is very poor:

While Mr. Carmel has yet to visit Spain for his research, he says he has spent much of the past year combing through as many numbers as he can dig up, speaking with as many people as he can find and reading as much as he can with what he calls “my pretty bad Spanish.” “I’ve been using a lot of Google Translate,” he confesses.

 So, basically, we have a manager from a tiny boutique firm who has never visited Spain and who supplements mediocre language skills with Google Translate. And this is the research that moves the gigantic bond market that decides the rates that govern the lives of millions of people. I am not saying that any of this is evil. After all, Carmel’s PowerPoint very transparently reveals his firm’s interest in the matter:

We began buying Spain CDS in Q4 2011 because the country has significant structural problems within its economy, a debt load that is higher than the headline number, and a banking system with unrealized losses (Slide no. 10)

This means he is betting on a Spanish default (probably using massive leverage). Spain doesn’t have to actually go broke for him to make money. The CDSs only have to go up and his bet will pay off (if he cashes out in time):

Should the Spanish crisis flare up in 2012 as we expect, we can generate a 300% return on the annual premium (Slide no. 10)

Simply put, some of the financial mayhem is being fed by second-rate research based on machine translation. Markets are increasingly fueled by this ever-greater mass of information that is easily available. According to the data worshippers, this will only end up being to our benefit. And language automation will only make the world an even better place by providing approximate translations of this data. But that is a stupid illusion. Seeing grown men spout that silliness is the equivalent of watching those creepy middle-aged men at comic book conventions who still play with Star Wars figures. Because in investment, "close-enough" translation is actually "wrong" translation.


In financial markets, it is increasingly evident that greater information is not providing more rational markets that are better fed with accurate information. On the contrary, what we have is more noise. Noise like the one currently being generated by ZeroHedge and Carmel for their own selfish ends using low quality translations (anonymous blogs don’t have to disclose their positions in the markets, by the way). The Google translations used by Carmel are not capable of providing the fine points of financial data that can be better conveyed by a human translation.

As such, the reams of Spanish-language data translated into mediocre English and consumed by Carmel’s analysts are the equivalent of the stock-trading algorithms that are producing more and more frequent flash crashes.


Miguel Llorens is a freelance financial translator based in Madrid who works from Spanish into English. He is specialized in equity research, economics, accounting, and investment strategy. He has worked as a translator for Goldman Sachs, the US Government's Open Source Center, and H.B.O. International, as well as many small-and-medium-sized brokerages and asset management companies operating in Spain. To contact him, visit his website and write to the address listed there. Feel free to join his LinkedIn network or to follow him on Twitter.