Slashdot Mirror
Quant AI Picks Stocks Better Than Humans
Mr_Blank writes with this excerpt from an article at MIT's Technology Review:
"The ability to predict the stock market is, as any Wall Street quantitative trader (or quant) will tell you, a license to print money. So it should be of no small interest to anyone who likes money that a new system that works in a radically different way than previous automated trading schemes appears to be able to beat Wall Street's best quantitative mutual funds at their own game. It's called the Arizona Financial Text system, or AZFinText, and it works by ingesting large quantities of financial news stories (in initial tests, from Yahoo Finance) along with minute-by-minute stock price data, and then using the former to figure out how to predict the latter. Then it buys, or shorts, every stock it believes will move more than 1% of its current price in the next 20 minutes — and it never holds a stock for longer."
It's been said before, and I'll say it again. You should ban anyone buying a stock and then selling it within timeframe x (where is 1 week/6 months/1 year). Anything to cut down on the insane bullshit.
Nothing could possibly go wrong!
Conservation of angular momentum makes the world go round.
and it never holds a stock for longer
So this is really an automated gambling system rather than a tool for investment.
I am becoming gerund, destroyer of verbs.
In for 1.
If the g'vt kept the data on you that google does you'd better believe you'd be calling it "doing evil"
so what's the novel part?
news text-mining has been used for years
How long before the fact that this device is making trades based on other people's trades begins to affect the way THEY trade?
I want to delete my account but Slashdot doesn't allow it.
Ooops, we got things wrong with our last calculations and almost caused a global meltdown.
Now, we're being more sensible and taking a longer view of things. Like about 20 minutes.
This type of day-trading provides absolutely no value to the economy and should be regulated to death. Also, I have a hard time believing it would work in the long term, as the news is a lagging indicator 90+% of the time. It might work for shorting in that respect... but even that would be too late and high risk.
All these quant systems seem to do is increase volatility at the expense of the market establishing a general direction.
I'm all for an IRS withholding of 1% on sales of assets held less than a week, and I am a fairly active trader.
if it can beat the system then doesn't the whole stock market become redundant?
The thing is... This will only work if the rest of the market are humans, if everybody would use this it wouldn't work. So only one player can use this 'cheat'.
What is the point of this?? How does this help create a more efficient economy and better society??
----
Go canucks, habs, and sens!
Ars Technica wrote an interesting article about this almost a year ago. What is happening now isn't anything all that new. As several people have already mentioned, yes this is dangerous because these tools trade in extremely large sums. Slashdot even covered United Airlines stock dropping from $12 to $3 when the news crawler for one of these tools thought an old story was new and the tool proceeded to dump its entire United holdings causing a massive sell off by other investors. http://arstechnica.com/tech-policy/news/2009/07/-it-sounds-like-something.ars http://tech.slashdot.org/tech/08/09/10/203233.shtml
Essentially all a hacker would have to do to really abuse this system is plant a couple of fake stories on yahoo finance while shorting(or going long I guess) the stock the fake story is about. I doubt that yahoo finance(or any finance web site for that matter) is so secure that they could fend off a horde of attackers motivated by a payday thats potentially in the millions.
Monstar L
what caused Proctor and Gamble stock to lose a third of its stock price in the space of minutes for no apparent reason?
One Citigroup trader fat fingers a trade and sells way too much and the computers start selling like crazy to follow him.
We do not need to remove them. Regulations keep the playing field more even. Without them we'd see most of the wealth of this country flow up to a select few.
Blar.
Yup - and the great bit is you don't even have to predict it correctly!
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
other than earning its investors more money over money which didnt produce any goods or services while being generated. water vapor. dud. nada. nothing. paper wealth. then it booms, and real sector pays its price, while the money jugglers have become unrighteously rich.
Read radical news here
You know what a long term investment is ? a short term investment that failed...
It takes 40+ muscles to frown, but only four to extend your arm and bitchslap the motherfucker
A trade every 20 minutes would generate an obscene amount of transaction cost. These are the costs associated with stock trading and any successful Trader/Manager team would seek to minimize these things and create a strategy that maximizes gain for the least amount of trades. Given this system is trading so frequently it would seem to assume zero transaction cost. Quite
I would also think that any more than a few of these trading bots would create a market impact that would nullify the advantage eventually.
Its also kind of weird to invest based on information that is not reliable, or not stemming from the fundamentals of a stocks earning potential. Creating portfolios based on glamour, popularity or essentially inefficiency is a disaster waiting to happen. These gimmiks will work until a catastrophe happens, but by then so much more is committed than is was ever prudent and the damage is done. Investing based on artifacts or involving anything you don't understand with your own 2 hemispheres means that you as an individual are being manipulated and you are investing for irrational reasons.
Unless this technique can be balanced or controlled in a risk management context, or understood at a low level to behave in parallel with existing market benchmarks, then only the penultimate fool would see this as responsible investing and not patent gambling and recreation with your surplus funds.
While I see the expectation of any product to magically increase in value over time as fundamentally insane, there are securities that can offer utility in markets. If this kind of information is really that valuable to a majority then it will eventually be securitized. If this is something that only a minority can exploit and is not private information, some Tony Soprano somewhere in the world will call it illegal. And thats the other reason not to bother - because none of the markets are truly open and will never be truly efficient while goverments are waiting to intervene. Maybe there is opportunity in the many small irrationalities of the human mind since the market participants are almost all human. What else could this information harvesting be capturing besides some departure from fundamental consideration? If the fundamentals are considered and reflected in the price, then any other change is short term and technical, to be nullified.
I should watch what I say lest I bump up Apple stock!
This reminds me of Moneytron in the 80s, it turned out to be a money laundery scheme.
What could possibly go wrong? *cough* Long Term Capital Management *cough*
There is an alternatively and it just might address the capital gains issue. We tax capital gains at the same rate no matter how long you keep the investment. Why not have a sliding scale that bases the capital gains tax rate on how long you hold on to the stock. Suggested tax rates. At the same time, investors are always crying that capital rates are too high. With this scheme, they would be in control of what rate their investments would be taxed at.
1 second ... 99% ... 95% ... 90% ... 75% ... 50% ... 35% ... 20% ... 10%
1 minute
1 hour
1 day
1 week
1 month
1 year
5+ years
You could even put the tax rates on a continuous scale that negates any advantage to holding on to an investment just long enough to meet a benchmark. Yes, short term investments would be taxed at a confiscatory rate, but that is the general idea. We want to slow down the rate of trading. At the same time, investors are always crying that the capital gains rate is too high. This would put them in control of what tax rate their investments is taxed at. All they need to do is to hold on to investments long enough. This scheme would also favor the little guy who probably holds on to investments for a longer time.
http://www.robschumaker.com/publications/IEEE%20Computer%20-%20A%20Discrete%20Stock%20Price%20Prediction%20Engine%20Based%20on%20Financial%20News.pdf
There's no big difference in having a bought vehicle and a bunch of AAPL (Apple) stock. Why?
-You buy stock expecting to gain profit. Why else would you buy it?
-You buy a vehicle expecting it to help you gain profit. Why else? To pollute the earth?
-You could also make profit by selling the car with a slight overprice when its older... just to minimize your personal losses.
-You will always end up having more capital than you can consume, thus you are wise and invest it because the inflation will eventually eat your cash savings. Thanks for that goes for your fiat monetary system. The amount of money is not diminishing in the World. This is ensured by your stupid mortgage loans and "value creating" dreams. Look what you have done to the earth!!!
Hypocrites go to church. That's the place for you.
i dont think they took in account that it costs money to do the buy and sell trade and the cost i am sure exceeds the few pennies they make on the stock.
Disclaimer: My job before I went into further education was to assess investment strategics, both quants and nonquants. I have assessed the quant asset management strategies of most of the top banks.
Quantitative investment strategies are a dime a dozen. Given a data set you use this data set to create decision rules. You adjust the decision rules until get get an outperformance. Hey presto.
For further verifiability, add:
A) a "sample period" and an "out of sample period" (so make the strategy based on period 1 and 'verify' it against period 2 - of course, if it didn't work "out of sample" it would never be presented to you in the first place. But this cannot be mentioned in the presentation, because that would be "data mining" or "fitting the curve to the points", so people will instead go, "well, FIRST we got up this great idea for a quant strategy based on period 1, and then when we were totally certain how great it was, we TESTED it against out of sample period and found it still worked!"
B) you must create the strategy first and test it afterwards, because anything else would be "data mining". So you go "OK, we used our collective investment insights to think 'which stocks perform really well?'" and THEN we thought 'how can we implement these factors in a model' and THEN we found that, to our surprise (but of course we knew it all along) that it gave you a great performance history!
Of course, the bane of all quant strategies is:
X) There is no getting around that all quant strategies are by definition using old data to predict about future movements. The data is created from reality - reality is not created from data. That means if reality changes in unpredictable ways the data is worthless. Because the world changes constantly, yet 100% of quant strategies show fantastic performance, that means that you very, very commonly see quant strategies that had a stunning backtest performance but look like shit 6 months after launch.
Y) There is no getting around that there is fantastic competition in the quant space - moreover, that because "can be shown to work" must be based on a data set, and there is only ONE SINGLE data set available to ALL quant strategies (namely, the data set of 'reality'), it follows that by definition there can be ONLY ONE STRATEGY THAT WORKS BEST. You can of course classify into value/growth strategies, momentum etc, but if a perfect data analysis points to a perfect strategy, all funds should come upon the same thing, and whatever normally rather small gains there would be should be split amongst all of them. I read a piece by Goldies Quant strategies which showed that the "implied outperformance performance" based on accounting factors a few years ago took 60 days to "close", whilst more recently it has taken less than a day.
In conclusion, either 1) This strategy is going to shit out in 3-6 months anyway, or 2) it's not worth bothering with for a number of reasons, amongst others that it's going to be outcompeted pretty fast. I myself heard discussions about text analysis strategies 3-4 years ago, and the concept is much older than that.
If this program worked at all, I'm curious why Schumaker and Chen did not keep this to themselves and just retire to the level of Sergy and Brin. With a small wad of cash to get the ball rolling, it would just snow ball into ever-increasing cash reserves.
They could start a lot of business ventures from the 1/2 acre deck of the 800' mega yacht anchored in the Med, all while their secret stock market money machine worked its wonders.
Ah, right. Web Bot makes a (more or less) triumphant return, does it?
Well, a couple of cherry-picked results (you know, such as "data from five non-consecutive weeks in 2005") could net a snakeoil salesman a couple of million, so I guess it does what it was written for.
I've seen similar things about people choosing stock at random and performing better than your average stock fonds. Some of them, anyway, pretty much what you'd expect by chance - the pros don't have a magic wand to show them what stocks will rise, they gamble just as much as ordinary folk who stumble into the stock market. The difference is that they're not gambling with their own money, and they get paid handsomely for it. After all, "professional" only means that you're getting paid for it, not that you're any good at what you do.
As such, color me unimpressed if someone finds a hand-picked dataset for a bayes filter that does better than a professional trader.
I propose a tax on all exchanges on wall-street, this tax will be inversely proportional to the length of time one has held the stock. It will be equal to about $1/stock for stocks held for one day, and about $100/stock for stocks held for one minute. You can imagine what this will do to millisecond trading. However, proper investors (holding stock for months/years) will not be affected much at all.
The large companies that would be employing this sort of system have agreements with the exchanges where the companies actually get paid to trade shares, because in doing so they make sure there is always a sell and buy offer out there when someone wants to trade their shares in any particular company. The transaction costs are thus effectively negative. It is similar to the setup used in high-frequency trading: http://www.nytimes.com/2009/07/24/business/24trading.html
If you were a small trader doing this you would get decimated by fees and other costs. But then again, you also wouldn't have the access required to set up the needed connections between your algorithm and the exchange computers.
Of course, this is not investing at all, it is gambling. It is setting up a computer that you hope can spot the spin and direction of the ball in the roulette wheel before betting is called off. Sure it could it make you a lot of money, but it isn't helping the market or society or the company being traded at all.
if you really had a bot you were able to use to PRINT MONEY (ie it runs and your bank account grows and grows and grows), would you tell anyone about it? On the other hand, if you DIDN'T have such a bot, but thought you could convince other people that you did, would you tell people then?
One hundred per cent of these stories are of the latter type: especially by researchers.
destroy them - they are thieves, stealing money every day, every second, millions of times per second. I said on the 7th of April that HFT is theft, have been saying it for years, then of-course on the 6th of May we had the 1000 point drop on the stock market.
If anyone here trades, they know how the stocks have looked for the past 10 years at least - if in a single sector, like banking, a stock dips, it means other stocks in the same sector also went down by about the same number of %. If one mining stock dips, you can be certain the others have dipped at the same time, if a pharma stock dipped, the other pharma stocked dipped with it.
Then they swing back, not to exactly the same levels, just a bit under, but they come back. Much more rare is an occurrence where all stocks in a sector all go up, of-course after they all will come down. In fact it's a nice way to make a quick buck: watch for a dip in all stocks in a sector, buy, don't worry if it does not come back up immediately. They all dipped together, they'll come back up (on average it's true). If they all go up unexpectedly, short them and wait a bit, it may take into the next day, but they'll crash back down.
All of this AFAIC is the doings of the HFT scheme. Those are computers fighting computers, those are programs that synch up together for a reason: they all have very similar algorithms, often it's the same people who write them, of-course the algorithms are similar. Even when different people are involved in writing them, they are all aimed at taking money away from humans.
From humans, but not from machines. When machines fight other machines with the same algorithm that they have for taking money away from humans, then they cause these massive swings.
I am certain that the 1000 point dip in May was nothing more than the same thing taking place, only the synchronization was a little too good, they did not get out of their algorithm loops for a little too long of a time (maybe a few seconds too long really).
Then we had a story about banks hiring logicians to improve the HFT algorithms. They will be trying to 'improve' the algorithms to fight other machines now. So it's another arms race and it will end very very bad. They will eventually crash the market totally. Anyone doing anything long term in the US market right now is insane. You are definitely much better of buying gold/silver or something physical to hold on to rather than being in US market but also in US dollars or Euros it looks like.
Another crash is coming, they'll blame it on terrorists with fat fingers I am sure.
You can't handle the truth.
If the free market is better than anything else then why doesn't the treasury department offer government stock?
There are two sides to a trade. By sending a buy signal this raises the stock price, so any sellers coming in right after get the benefit of a higher sale, even though they might not have any new information. It might mess up other day trading bots, but when it comes to stocks buyer beware.
bash-2.04$
bash-2.04$yes "Don't you hate dialup connections?"| write USERNAME
and this development helps humanity, how?
The only possible benefit I see is to help to bring the end to this fiasco that is Wall Street.
Because doing stocks for 20 minute increments is probably like CDO's and all these other types of things that return money 99.999% of the time and lose terribly .001% of the time.
Bad news happens randomly. Series of bad investments happen randomly.
Several places have reported that GS makes money because they see the bids coming IN and buy the stock and sell it to the person trying to buy stock- it's called front running and when humans do it, it's illegal.
If quant is so good- then like everything else that was good, it will become more common.
If it really is that good, then people will eventually stop playing the game.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
RTFS. As long as the transaction costs are less than 1% of the transaction, it will be making a profit.
There's already a better method, which doesn't kill liquidity (as some have suggested below)... simply put a microtax on all stock transactions of less than a percent.
Even this super-AI is going to make mistakes - it's profit margin is not likely to be large on the _average_ transaction, to microtaxes like this will keep this sort of activity to a minimum. Lots of people have suggested such a tax.
http://thehill.com/homenews/house/56789-afl-cio-dems-push-new-wall-street-tax
Basically: this sort of transaction does NOTHING for the economy except leech money from the people that actually produce things. Wall Street, as a whole, has a purpose: allocation of capital to build the economy. But there's no reason that people working on Wall Street should make more money than other facilitators or utiilities of our system, like payroll accountants or garbage collectors. The only reason they do is because we let them.
If so, I'm buyin'
Get rid of the current traders, and replace them with a bunch of monkeys who have been taught to push the 'Buy' button when they see a banana and you will find that share prices go up, every time a bunch of bananas is delivered to Wall Street.
The current bunch of monkeys have been taught a different set of rules, but the current rules are no more sophisticated than that. If enough of them believe those rules then the rules come true. They read a headline, are told a rumour, or see the clouds clear, and hit the buy or sell buttons accordingly; the share prices go up. They read about a plane crash, run over a rabbit or see a headline in the business section; they hit sell, and the share prices go down.
The rules change over time and you need to be one of the insider monkeys so that you pick up on the new rules. Whatever rule it is which the majority of trader monkeys believe, is the rule which will move the markets. There's nothing clever about it and it contributes nothing to the common good; it just redistributes wealth to from the poor to the already wealthy.
Now what do you have to say about that, you small brained, big mouthed idiot monkey.
The are in financial services business, providing liquidity needed by investors who want to buy their long-term holdings at the time when it suits them (investors.)
So stop all this bitching about speculations - it reeks of USSR. There 'speculation' was criminal offense. Want that? Move to North Korea.
There is plenty of land. Better transport makes it possible for people to live further afield from their jobs. It's also always possible to grow vertically by tearing down single-story dwellings and putting up multistory buildings--i.e., make dramatically more efficient use of some of the land we already use for housing.
Also, the US population growth rate is about 0.9%. Even with a constant housing supply, this puts an upper limit on how much you could expect the housing demand to grow per year--and it's less than the historical return of bonds and stocks, and the historical inflation rate.
Are you adequate?
There are HFs using this strategy now using dedicated reuters feeds and trading in microseconds. This means new information is impounded into stock prices well within a second. In the article they used yahoo news and minute by minute stock data? That's laughable. I suspect the reason for their returns is that they they are indexing the time information arrived, and the price you could trade at that instant incorrectly. In other words the information arrived at t + 5 seconds, and they execute the trade at the quotes available at time t. Also I suppose they are not including margin and transaction costs, reasonable slippage, and risk-adjusting their returns?
I for one welcome our new AI money printing overlords.
then only the penultimate fool would see this as responsible investing and not patent gambling and recreation with your surplus funds.
Explain to me how the "second to last" fool plays into this scheme again.
And along comes a russian guy and steals the source code. Hmm...now that's happend before hasn't it :P
Say NO to unpaid Internships!
The only data they provide is from a CHOSEN non-consecutive 5 week period and their return was 8.6%. If each trade was expected to make 1% in the next 20 minutes then this system may be no better than random. There is not enough information to determine if they did a proper analysis (ie number of trades, longer period, random period, transaction costs, ensure that the strategy is scalable).
The other strange thing is that they are comparing long term investment strategies (mutual funds) to day trading. These are radically different things. A mutual fund can expect to make around 6-8% a year (similar to the S&P), while this short term strategy should make 89%(52/5 * 8.6%) a year. This is occurs because it profits off short term price inaccuracies, which always exist.
If it is basing a lot of its decisions on news about the company, though, it is at least to some degree based on perceived value of the company.
It's intelligent gambling, in other words, more like playing poker than playing black jack, and nothing at all like playing roulette or craps.
I'd still call it gambling, but if it actually works well it shouldn't have any detrimental affect on the market, because it will be largely based on the actual value of the company being traded. In other words it's gambling on whether or not X piece of news is going to have a negative or positive effect on a stock, instead of just watching trends and gambling on whether a trend will continue or reverse.
Security is mostly a superstition... Avoiding danger is no safer in the long run than outright exposure. - Helen Keller
now i must build a bot that can do this in eve..
I'd rather trust an AI, which just uses the solid numbers, stochastics and statistics
than some sleazy suit who will ignore all rationality (not that he was that good in math in the first place) and gamble away all my money if he thinks he has a lucky streak...
The MAFIAA is a bunch of mindless jerks who will be the first up against the wall when the revolution comes
You don't understand modern markets. Even _if_ there are costs, they are VERY efficient for connected players trading small quantities (small in the overall scheme of things, a million or so on a liquid stock is nothing). If it were true (it's probably not) a hedge fund could make a killing with any nontrivial 20-minute predictive power. Do you know what it costs a company to trade? Do you know what dark pools are?
And even better: if you don't absolutely have to make your trade _right now_ - i.e. if you are prepared for it to take a few seconds and possibly might not happen at all then - you can trade through liquidity providing orders. The transaction costs for those, after every possible cost center is taken fully into account, remain very negative: i.e. you get PAID (both through a below mid-spread price, and also explicit $ that get deposited in your bank account as a thank you gift) to transact. (There are certain downsides, but if you understood them you wouldn't be making your comments.)
To clarify that last point: let's suppose you knew for a fact that Microsoft shares were going to go nowhere much today. This would be incredibly valuable knowledge: you (not an individual investor, of course) could just buy and sell all day accumulating the payments you get for all this trading. More trading on a stock that's not really moving much: more $ to you. (This is not theoretical, many companies earn a lot of money by doing just this.)
To forestall the obvious comment: Well, yes, this does not apply to individual investors! But the bonuses have to come from somehwere: _you_ exist to feed Wall St. We have a whole goverment department (the SEC) dedicated to making sure that individual investors remain confident in the equity markets. Not: be treated fairly. Not: encourage appropriate investment. But: keep the public _confident_ that it's a good thing to siphon 1% a year of their assets to Wall St professionals. Our markets are governed by rules and regulations with a very clear purpose; just don't think it's a purpose that benefits you.
I see a new race developing here. People will now pay big bucks in order to colocate their trading servers at the buildings of financial news services so that they can get the fundies first.
Do they all win?
Or they ultimatelly destabilize stocks they are play^H^H^H^Htrading with, or maybe entire market.
And not in months or years, but in minutes and hours.
http://opencm3.net, http://www.nongnu.org/gm2/
Cops will carry AI cams in their cars to identify "suspicious" individuals to pull over and ask for "papers". In an attempt to foil the bots, sales of Barry Manilow shirts will shoot through the roof.
Table-ized A.I.
It sounds like this technique would get chewed to shreds by transaction fees.
When the trucker moves the widget from the factory to the store, he changes its value by moving it from the place of creation to the place of use. Any student of economics knows that major economic leaps have taken place when the costs of this have reduced - from carts to canals, from canals to railways. This is because there are real costs involved; you can regard the energy and investment in moving goods as being exactly as much part of their manufacture as pressing or welding. But the electronic transfer of the stock market transfers ownership at negligible cost and therefore adds no value, so any price increase is simple inflation.
This is exactly what has happened to the economy: house prices inflated, share prices inflated, but the actual value of the underlying assets barely increased. We are now trying to reduce a debt which is purely the difference between perceived value (what people will buy things for) and their inflated value.
The fact that people like you believe the nonsense you have posted is the underlying fact behind the financial crisis.
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
.... how the stock market responds and in essence figures out how to sap off money based on this relationship. But where does the money sapped off come from?
At the end of the day what will have been achieved is high level abstract manipulation that only further deteriorates the value of the stock market for business investment and retirement financial returns.
We have already seen the results of such stock market manipulation on a world scale that neither helped business or retirement funding but rather destroyed it from banks and corporate retirement funds and much worse if you just follow the money and what manifested from where it was taken from.
Dial 911
http://www.pbs.org/wgbh/nova/transcripts/2704stockmarket.html
Originally, the stock market was not a form of gambling but a form of insurance. Investors in trade voyages in the days of sail and marine anarchy expected that some ships would not come back, therefore they wanted to be able to invest in multiple voyages. Joint stock companies formed to carry out a voyage would then sell shares, spreading the risk. (They did this at Lloyd's Coffee House in London.) The sale of shares meant that the money they had invested in the voyage came back to them before the voyage was complete, thus creating liquidity (i.e. the joint stock owners had cash again to invest in new voyages before the first ones returned).
Short term trading is purely gambling, but does not necessarily create any more liquidity than long term investment. Hence my observation that your comment is bogus.
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
Well then, Somalia waits for you. Go on. No pesky immigration laws. Just get there and start living the dream! *Laugh* as you think of the socialist hellholes like Canada, the USA and Sweden that you left behind.
Please do not read this sig. Thank you.
Also not as an argument but just a note: the term you are looking for is Fiat money, paper money originally was just a reciept for gold and you can have fiat coinage as well.
"Fiat money"? Now that's interesting. If we had a monetary system where each unit was worth, say, 1/10000 of the cost of manufacturing an automobile, what impact might that have?
It is funny, the free market caused the worsed financial crisis in decades that now has to be solved with the socialists means of having the taxpayer bailing out the free market and yet you claim it is the best system and needs to fixing.
Rampant stock speculation has NOTHING to do with the idea of investment that stocks were intended for.
License to print money? No, license to create a bubble. Rampant stock speculation does NOT create real value. That is why it always bursts.
Capitalists like you are truly the black knight.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
Everyone who says that investing, even for 20 minutes or 2 seconds, is the same as gambling is a total idiot.
When you gamble, generally you expect to lsoe money while taking a huge amount of risk for a huge upside. Massive skewed utility functions of wealth make this rational. When you invest, you expect to make money and generally take less risk but have less upside.
People, if you say that gambling is the same as investing you don't have a clue what you're talking about. Totally different.
Microsoft's monopoly appears to have become limited to home and small business PC operating systems. What is Microsoft's market share in video game consoles? In MP3 players? In smartphone operating systems? In server operating systems? In web browsers, even among users of its own desktop operating system? The widely publicized antitrust lawsuit covered the use of a desktop monopoly to build a web browser monopoly. But now, Internet Explorer is right on the verge of losing its majority, and though it will still enjoy a plurality for the foreseeable future, plurality without majority implies lack of monopoly.
Close, but no cigar.
That 0.01 is NOT taken from somewhere else. It is "generated" but generated from nothing. It is the air in the bubble and then it bursts. We had this long before, the great depression was build on it. EVERYONE speculated. And LOTS of money was being generated it seemed, but where did it come from? Nowhere.
You might have heard of the phrase "your ship coming in". Where does it come from?
At least in part from the old dutch practice of funding the sailing of a cargo ship by writing out shares. Anyone could fund some money to build/outfit a ship and would in turn get a share of the profits it would generate on its voyage. This was a long term investment as a voyage to the far east could take 2 or more years. It was a also risky, you could build a bridge to the far east out of all the lost ships (oh okay, you can't but it sounds dramatic).
Now say that I took a share of 100 florins (a shitload of money but a nice round number to work with). I watch the ship sail and hope that it will come back in 2 years time with a fat cargo of spices that will trade for a fortune. My ship will have come in. Or it will sink.
BUT this ship does not exist in a void. It will encounter other vessels. Say that six months out it has crossed the horn of Africa. A seriously risky part of the journey. It comes across another ship making its way back and this ship reports what has happened to Holland. What happens to my share? Well nothing EXCEPT that SOMEONE might be willing to pay me more then 100 florins for it because the risk of it failing has now been reduced. My share has increased in POTENTIAL value. Someone with 200 florins might buy my share. I get a lower but certain profit while that person will gain less of a profit IF the ship comes in but has a higher chance of it then I did.
Other factors can add or substract from this. Say that it has been a calm year at sea and I get news that dozens of ships are making their way back. The price of spices will fall. Less risk of no return but less profit. Or say that nobody has yet reported on my ship at all. Risk has sky rocketed that it has sunk and my share is without value. Might I sell it lower?
THAT is stock market speculation. Betting on the POTENTIAL value of something. The problem is NOT with the speculation itself. The problem is when the speculation starts to be based on nothing. Those ships need to build, to be sailing, to be buying and selling cargo in order for there to be anything to speculate on. And that seems to get forgotten.
The speculation is no longer about the chances of the ship making it with a good cargo but on the speculation itself. Speculators no longer follow the shipping news but share prices themselves.
Take the recent price drop of BP shares. Why? Because of the oil spill? The company makes 60+ million profit PER DAY! The cost of the oil spill are spare change. Yes it will hurt their bottom line a bit but it is really just the cost of doing business. There should be no selling going on because the company is at no risk. Without speculators, there would be no selling going on. No long-term investor would have a reaosn to sell. Not buy perhaps but not sell since selling when a stock is going down means you are loosing money. Only the short term speculators have to sell because they can't afford to simply wait out their investment and need their money now.
We have allowed the stock market and the banks to turn themselves into "THE economy". A bank should be a service provider that real business makes use of. The same a law firm or cleaning company. Instead they have come to think of themselves as the most important part, the very engine of the economy. It is silly.
Imagine this. A justice system is part of civilization right? But when you consider the justice system to BE civilization, I think you would not like the results.
Don't confuse the means with the end. The tool with the goal.
There is nothing wrong with speculation, there is something wrong with
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
A few years ago, MIT's "Technology Review" wrote about these amazing nifty "quant" investors who used brilliantly-derived equations to predict stock prices, and were cleaning house. Somehow I'm skeptical of the latest incarnation of formulaic investment strategy. Of course it's helpful to look at all the available data about a company, but aren't short-term news analysis tools doomed to unpredictable behavior once more than one person is using them?
By the way, without getting into the rants above, the people criticizing "the free market" above ought to read about the Community Re-Investment Act (which forced banks to make bad loans) and the federally-created banks (which existed to promote house sales beyond what a free market would justify). As recently as a few years ago, Angelo Mozillo of Countrywide Financial (and of the "Friends of Angelo" in Congress) publicly told his colleagues they should ignore their own financial risk analysis, ie. rational self-interest, in favor of altruism towards the poor. There's room for regulation, but what we've got is not a free market. There's massive government regulation existing to manipulate the market and reward failure, rather than to just curb the most dangerous and useless behavior.
Revive the Constitution.
Or to it another way, the presence of constabulary in a marketplace does not make it any less free, because they have no influence on the prices.
Where can I buy one of these?
The Free Market is a concept invented by republicans to feed the gullible. Indeed, it is one of the most important sources of new sheep to fleece.
Every single thing about that is incorrect.
wealth
currency
money
those are three different things..you are equating them.
You can't create wealth out of thin air. Your idea about thin air wealth creation is the perpetual motion of economics, it just doesn't work that way.
Furthermore, this infinitessimally short buying-selling period is starting to remind me more and more of calculus, and integrating under the curve. Those who buy and sell once/day are missing out on a lot of detailed motion in every stock. As the trading times get shorter and shorter, the investor/gambler/choke-holders are nearing the actual curve and siphoning off any advantage that a less frequent trader may have. Mark my words, if this continues unabated, Wall Street will be on its knees soon because the only "people" who trade with any success will be software programs that operate like a vice-grip as the time-domain and the frequency-domain both get optimized out of all creativity, and an honest prognosticating human who uses reason and a newspaper will have better odds at any casino in Vegas.
*** once i really listened, the noise just went away. -liz phair
In TFA it gives some numbers regarding the profitability of their system over the toy 5-week period. It is something like 8.5% whereas the next mutual fund is 6.5%. I don't see any language determining whether this is a statistically significant (or significant in any sense) difference at all -- I'm wondering if such at thing would even exist in these contexts. I would assume that any good prediction algorithm includes some stochasticity, so I wonder if this 2% difference can be relegated to noise or whether it is actually doing well. It seems like such a small amount after all (though, granted, 2% of 5 billion dollars is a nice chunk of change). But the other ones are doing something like 25% (in the world, I don't know the difference), so it certainly only seems to be doing mediocre at best...
...charge a normal goods sales tax on the transaction. Why should stock sales be different from selling anything else? That will slam the kabosh on these fast computer trades.
Actually, some brokers provide apis to their service that would allow you to hook up an algorithm. The one I know of is interactive brokers.
Most-not all but most-government jobs do not create wealth, they are part of redistributing already produced wealth, or worse, doing that plus laying a lien on future wealth production to pay for government workers retirement pensions etc, or to pay off government paper-loans-plus interest, because they simply refuse to run a balanced budget.
This is grossly simplified, but is the current status of the US economy
1/5th are working producing wealth, with a subsection there of a top layer of ludicrously paid people who are technically "working", but in the skimming and scams business in NYC and Chicago mostly
1/5th are retired
1/5th are children
1/5th are unemployed or under employed (due in large part to the top 1% wanting huge profits from offshoring, combined with governmental collusion to let this happen), and many of whom receive so called "entitlements"
1/5th are government workers
So, we have less than 1/5th the population supporting the remainder
This is unsustainable, why we are having an economic crisis now, and why the US will eventually fall like every other empire in the past
There are services for high-volume trading where the transaction cost is essentially zero (in comparison to consumer-grade online brokers). For example, you might have a high monthly payment in exchange for one-cent transactions.
I been using the following strategy for the last 5 years or so and it saved my nest egg during the last few crazy years. It is based on a book by Harry Browne. The idea is to preserve the purchasing power of your money that you worked hard to make. There are 4 conditions the economy will be in. Prosperity, Recession, Inflation, or Deflation. The idea is to build a portfolio that can survive any of these situations.
There are only 4 investments you need to CYA in any of these situations.
Stocks do great during prosperity and not so well during inflation, deflation, and recession.
Bonds do OK in prosperity but also do well during a deflation. They do poorly during inflation and recession.
Gold does extremely well during inflation but poorly the rest of the time.
Cash is important during a recession and actually does well during a deflation. It is neutral during prosperity and does poor during inflation.
The basic idea is to put 25% of your portfolio into each of these. Stocks should be a large S&P 500 fund, Bonds in 25-30 year Treasury Bonds, Gold in Bullion Coins, and Cash in a Money market investing in short term Treasuries. Then as you get money to invest just add it to your cash portion. Monitor the portfolio and if any of the categories is out of balance by 10% (below 15% or above 35%) of the total portfolio rebalance the whole thing.
It might seem like you won't get anywhere but in reality it lets a small part of your portfolio go along for the ride of any particular run. The limits make sure you cash in and buy some of the other things that are depressed at the time. The best thing is you don't have to time the market or worry when things get bad. During the crash of 2008 I was OK because gold and bonds went up and I actually had to sell some to buy stocks because they went below 15% of the portfolio. Overall I ended 2008 up 3% which wasn't too bad.
I love Jesus, except for his foreign policy.
The idea here is that the market reacts to news in highly predictable ways, which it does. Any person of average intelligence can read a press release about, say, IBM being hit with a major lawsuit, and predict with near 100% accuracy that the stock price will decline a little in the short term. But humans react to the news relatively slowly. It takes a minute or so to read the press release and then decide to act on it, even if you happen to see it the instant it hits the wire.
What this system does is try to react to the new in almost real-time, because it can scan the news much faster than any human, and can scan a lot more of it. It is undoubtedly less accurate at determining which way given information is going to move the stock price, but as long as it is accurate enough, it can respond before even the fastest-acting segment of the market does. It waits a few minutes for the market to catch up, then cashes out. Meanwhile, it is continually scanning for other news that it can use to predict short-term market responses.
It doesn't have to be particularly smart... just fast.
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
This kind of software, if it really is so accurate and if it were commonly affordable to even small traders, would become almost a requirement to trade successfully, especially if you were a small trader who trades on the side. Wouldn't that make software traders more common than human traders? If so, then human decisions would be drowned out by software decisions.
What sense would that make? If some companies are (even temporarily) ignored by humans, then what would the bots do with its stock?
In my eyes that highlights two things:
- the stock market is now gambling where players are permitted to use bots.
- the need to give humans a chance to research companies and innovation before trading (as has been mentioned so often by others).
So my question is... where will this lead?
Short term gains are taxed as regular income.
Only if you hold a stock for 12 months or more do you get to take the capital gains tax.
So the government is already punishing these people with higher taxes but they don't care.
It's more important that they make money consistently than worry about the quantity of money. Consistency ends up better in the long run.
Work Safe Porn
FALSE.
High volume trading is quite cheap. When you have direct access to the exchanges, costs run in # of shares traded. And if you have 20,000,000+ shares traded a month, your costs are minimal (like 0.1c/share, (or $0.001 for Verizon employees ;)). It works out to a small fraction of a one percent of the trade. The fees that you pay to a brokerage, like $5/trade or $10/trade and they charge flat fees, well, they would be losing money if you bought 10m shares in a trade, but that $5/trade is generally pure profit if you only trade 100 or 1000 shares at a time.
Check out,
http://interactivebrokers.com/
They offer API level access to trading.
The idea behind this algorithm is to gain money on a price "bump" after positive news reports. It can gain 1-2% and that's big money. The idea not to hold more than 20 minutes simply means that if there is no price bump within 20 minutes, then the news is probably not that important anyway. Move the money somewhere else.
What works amazing today never quite seems to work so amazing down the road
How JP Morgan & Goldman Sachs made $100 million profit per day in the last quarter?
Here's a clip:
"Let's say that there is a buyer willing to buy 100,000 shares of Broadcom with a limit price of $26.40. That is, the buyer will accept any price up to $26.40. But the market at this particular moment in time is at $26.10, or thirty cents lower.
So the computers, having detected via their "flash orders" that there is a desire for Broadcom shares, start to issue tiny "immediate or cancel" orders - IOCs - to sell at $26.20. If that order is "eaten" the computer then issues an order at $26.25, then $26.30, then $26.35, then $26.40. When it tries $26.45 it gets no bite and the order is immediately canceled.
Now the flush of supply comes at $26.39, and the claim is made that the market has become "more efficient."
Nonsense; there was no "real seller" at any of these prices! This pattern of offering was intended to do one and only one thing - manipulate the market by discovering what is supposed to be a hidden piece of information - the other side's limit price!
With normal order queues and flows the person with the limit order would see the offer at $26.20 and might drop his limit. But the computers are so fast that unless you own one of the same speed you have no chance to do this - your order is immediately "raped" at the full limit price!
The presence of these programs will guarantee huge profits to the banks running them and they also guarantee both that the retail buyers will get screwed as the market will move MUCH faster to the upside than it otherwise would.
If you're wondering how Goldman Sachs and other "big banks and hedge funds" made all their money this last quarter, now you know."
http://www.counterpunch.org/whitney04162010.html
http://www.counterpunch.org/brown04232010.html
I'd like to buy homeland for our 10 million people. http://twitter.com/mahadiga
In fact, the shock that started the great depression was caused by congress deciding that gambling was immortal and raising interest rates for margin buying. And the stock market only recovered once later administrations relaxed the restrictions. We already tax capital gains differently depending upon the duration.
The Christian religion has been and still is the principal enemy of moral progress in the world. -- Bertrand Russell
You obviously don't get it or understand the markets. A house flipper is an investor compared to a day trader, and if both are smart, takes substantially less risk. More often than not, a flipper will even do improvments on a house they want to flip. Seen any trader or most investors do that with Exxon, BP and so on? Disclaimer -- I trade for a living, usually longer than 20 minutes, and yes, it's more often than not a gamble, though I predict well. Because it's human nature and nothing else that determines the "value" of a stock certificate. You can wipe your butt with one, that's the value unless someone else will pay for it when you want to sell it. Period. Buying stock in a company doesn't help that company unless you bought it from them directly. Period, full stop. OK some companies own some of their own stock, so if you buy enough to make it go up, you help them a little bit....do you have a clue how much that takes to do? Of course, any trader can beat the big guys, because they can't just buy X percent of their net worth in any equity (or other instrument) all at once without driving up the price of what they are buying or driving down the price of what they sell. This is one of the very few cases on this planet where the little guy actually has an advantage -- I can buy or sell my whole net worth in milliseconds and just barely see the effect on the markets -- they can't, and the quick can catch the middle of the moves they create.
Why guess when you can know? Measure!
Is this going to be available to the public?
Sure, but can it beat a monkey?
Exactly how long will it be until someone creates a smart predictive system, that predicts the best way to maximize profits and trading efficiency, is to eliminate the random human element.
I will cry a little laughter when our computerized trading overlords start to short and sell commodities and corporations before actively nuking them and making a huge profit. Our lives are literally being bought and sold by computers.
Automated Stock Predictions
I'd like to buy homeland for our 10 million people. http://twitter.com/mahadiga