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Sudden Demand For Logicians On Wall Street
An anonymous reader writes "In an unexpected development for the depressed market for mathematical logicians, Wall Street has begun quietly and aggressively recruiting proof theorists and recursion theorists for their expertise in applying ordinal notations and ordinal collapsing functions to high-frequency algorithmic trading. Ordinal notations, which specify sequences of ordinal numbers of ever increasing complexity, are being used by elite trading operations to parameterize families of trading strategies of breathtaking sophistication. The monetary advantage of the current strategy is rapidly exhausted after a lifetime of approximately four seconds — an eternity for a machine, but barely enough time for a human to begin to comprehend what happened. The algorithm then switches to another trading strategy of higher ordinal rank, and uses this for a few seconds on one or more electronic exchanges, and so on, while opponent algorithms attempt the same maneuvers, risking billions of dollars in the process."
Well at least, they seem to start to realize that perpetual growth is impossible to achieve in a finite universe. For us, right now, this means our planet.
We may need to start businesses on other planets until we have conquered the whole universe in order to maintain the illusion that perpetual growth is possible.
Yet, the whole point of investing in the market is more or less (at least it was traditionally) based on a perpetual growth principle where there would always be new markets to conquer thus, rising stocks on average and a perpetually growing economy.
Since they seem to begin to realize that perpetual growth is impossible and that trading is what they have done all their life, they need to keep the profits coming in anyway. So they figured that by using "high-frequency algorithmic trading" they could keep the profits coming in.
Well, at the expense of whom ? How long can this trend be maintained before major problems arise in the economy ?
Everything I write is lies, read between the lines.
So, the next global financial crisis will happen a lot sooner? This is not a good thing. They invest in speculation instead of companies.
Buy gold.
(Half in sarcasm, since if the world economy collapses totally, it would probably be better to have something like, say, food.)
He wants his arrow back... with interest :)
What you seem to fail to realize is that growth has nothing to do with making a profit in derivative markets. And high frequency algorithmic trading has been here before, and now they step up that game. So as far as "change" goes, nothing has really changed, and nothing will, high frequency algorithmic trading is here to stay. If anything, this is making markets much more volatile. And if you think last weeks 1000 DOW drop was an exception, those are going to be more frequent.
Experiments and other stuff
As someone who understands math to at least a certain degree (I publish in what is effectively applied mathematics), I know enough to say that this is bogus. The Wikipedia page on ordinal collapsing functions (http://en.wikipedia.org/wiki/Ordinal_collapsing_function) shows that they relate to transfinite numbers (various orders of infinity). It is, to me, beyond plausibility that this could have any practical application in trading-- unless it's some kind of weird fad that only the mathematicians understand is a joke. I think someone needs to dig down further into this source.
The
many stocks are valued entirely on speculation? how does one apply logic to that? what about crap like derivatives trading? effectively a "dont ask, wont tell" sort of thing based entirely on what you "think" the value of something that has no value might become?
Good people go to bed earlier.
It's like solving a problem by making it worse.
The technical term is "Wallstreeting".
As in "Hey did you read about Tiger Woods Wallstreeting his marriage the other day?" or "Damn! I'm Wallstreeted".
These posts express my own personal views, not those of my employer
Complexity in these algorithms is only to hide the fact that the are FRONT RUNNING trades, they have servers that are directly next to the ones performing normal trades and using the speed that affords they put themselves between buyers and sellers. Goldman Sachs steals 100 million USD every day. To hide this theft they claim sophistication. Same story with derivatives, they are FRAUD. to hide the fraud they are made 'complex' using the work of so called Quants. It is thieving and it is nonsense.
This will end poorly (again). It's basically a bunch of business majors managing a poorly understood programming effort, but instead of running things in a development environment they're running it on massive computers and the variables are REAL MONEY. Hiring mathematicians to write their algorithms won't likely help, they will eventually do something stupid, divide by 0, have unbounded growth, or otherwise watch their program crash along with the market.
I'm cashing out everything, buying canned food and ammo and moving to a farm.
My favorite quote doesn't fit into 120 characters. Now no one will like me.
If you watch a stock in real-time you can predict where it will move quite easily. Thanks to automated trading, you can just draw a line of best fit based on the stock's current direction and also determine a high and low amount of noise to where it will bounce around. Computer's have no idea how much a stock is worth, they just simply use these values to determine when to make a transaction and actually help self-perpetuate everything by being the major driving force behind a stock's movement. Changes in direction are caused by actual human intervention, such as a large buy order spaced out over several minutes.
For example, if an algorithm says "the high point is at $10.50", then when the stock gets that high it will sell the hell out of it until it bumps the price lower. Then when it says "the low point is $10.42", it buys the hell out of it again. However, if it notices an overall downward direction, it will reshift what it's idea of a high point and low point are as time progresses, helping to self-perpetuate that downward direction since it is probably one of many automated systems that work similarly and overwhelm actual human interaction with the stock price.
It's not necessarily a bad thing, if you realize this, then you can easily predict a stock's movement and make some easy income; knowing exactly where the low and high values are going to be at any point in time. Again, the only thing that causes a stock to change its movement is actual human interaction that results in the trend being broken.
Maybe you should take a few books as well, or better, read them before you move.
Also, be careful with your eyeglasses. If you dropped them, it just wouldn't be fair when you finally had time enough to read.
Want to improve your Karma? Instead of "Post Anonymously", try the "Post Humously" option.
Margaret Atwood once described civilization as the judicious trading of "freedoms to" for "freedom from". e.g. You trade the freedom to murder anyone you like for freedom from being murdered yourself. While a rather distressingly large percentage of Americans would scream "COMMIE PINKO!!!" at me for daring to suggest this, I feel that the stock markets could stand to be civilized a tad.
What is the purpose of the stock markets? Are they meant to be a video game played by A.I.'s for big cash prizes, or a way of facilitating investment and trade? It's time to find ways of restricting high frequency traders. While cumbersome regulations are one option, perhaps a per-trade tax or user-fee would be better. A tiny one, percentage wise, that will only have a significant impact on high frequency traders. Cuts to other taxes could be made to offset them for average frequency traders and perhaps even benefit low frequency traders.
There are, naturally, many other ways to approach this. All it takes is resolve and, in the U.S. at least, thick skin.
John Slattery for Prescott Financial urges you to diversify your gold portfolio with women and sheep.
Society is so fucked up that people are being paid 7 figure salaries to develop smarter gambling algorithms, that produce no real value, when they could help solving science hardest problems. Specially people with this knowledge.
The siphoners add no value to the market, in fact exactly the opposite. They take advantage of market anomalies that can only be detected by ultra-high speed trading to remove money from the system. A simple example of a market anomalies would be taking advantage of the distributed market place whereby you can trade the same stock on many exchanges and none of them perform at the same speed. So you see which way the stock is moving on a fast exchange and then take advantage of that on a slow exchange before it has had the time it needs to react. Just like betting on a horse race after it has finished because you know the result before the bookmaker is aware the race is over.
The other high frequency shops are adding value to the markets in the same way a market maker used to. They serve a function of keeping the market liquid. This means that a buyer can always guarantee to buy a stock or a seller can always guarantee to sell a stock because the market maker keeps some inventory to bridge any transitory lull when there are more buyers than sellers (or vice-versa) and yet the price is deemed to be correct. They are the brokers who reduce fluctuations in the market and offer a valuable service, even to a joe who wants to sell his 50 shares in IBM.
Just like anything, there are good guys and bad guys. The tool is high frequency trading. It can be used for good or bad, depending on who is using it and what they are using it for.
Disclaimer: I don't do any high frequency trading.
4 seconds is too long to leave an opportunity of more efficient reallocation of capital unexploited, yet there are people who have been unemployed for over a year? This implies that we've created an economic system where it is a more efficient use of resources to rearranging ownership of theoretical constructs than finding a place in society for people who have none? Doesn't it seem that we've sort of lost sight of what the purpose of an economy is?
Companies can issue new stock. When a company has its initial public offering (IPO), it generates some arbitrary number of shares, and offers them to the market at a certain price. People buy them, and the company gets the money, which is the number of shares multiplied by the initial price. Typically, some number of shares are allocated to the founders, or other people who held shares when it was a private (not publicly traded) company. These people make money if the price goes up.
Companies can also issue stock after the IPO. If a company needs to raise capital, it has two choices. It can go to a bank and ask for a loan. This will then need repaying at some interest rate. If the expected return is higher than the interest rate, then this might be a good idea. Alternatively, it can issue some new stock and offer it to the market. If the market buys it, then the company gets more money.
Issuing new stock has the same effect as printing new money; it causes something like inflation. If a company issues more stock, then the value of the existing stock goes down - the total value of the company remains constant[1]. If a company keeps issuing new stock, then there will be the perception that the company's stock value will decrease so no one will buy any when it's offered.
If the new stock is offered at the correct price, then it won't have any effect on the stock price, because the increase in money in the company's bank account will precisely offset the decrease in stock value from the dilution.
Ideally, the company will then use this new money to expand, and the value of the shares will increase. Effectively, the new shares are buying the new part of the business. If the share price goes up, then the company can later issue more stock and raise more capital.
[1] This is a massive oversimplification, and doesn't take into account the secondary feedback. For a full explanation, you need a much more complex model. For example, if the company is issuing new stock to expand, then the market might take the planned expansion into account and the stock price may go up.
I am TheRaven on Soylent News
Look for these very mechanisms to be banned by congress, the senate and possibly by presidential decree as the kind of "wealth creation without effort but strictly through gaming the system" which led us down the same path that derivatives did.
All of the gains were wiped out and everybody but the insiders got stuck with the multi-trillion dollar tab when the music stopped and we found out the chairs were rented and had all be repossessed.
These are the kinds of games which should be outlawed.
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The problem with minimum wage laws is that they do not set the bottom wage, they merely remove possible wages below it.
If I could work for dollar increments, then I can work for $1/hr or $2/hr or $3/hr and so on and so forth.
When legislation demands a $7/hr minimum, then my options are this:
$0, then $7/hr then $8/hr and so on.
The bottom option of zero dollars never disappears, it just gets more common when min wage laws are enacted.