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How To Profit From Planetary-Scale Computing
An anonymous reader writes "MIT physicist Alex Wissner-Gross and mathematician Cameron Freer have devised a technique for exploiting geographic location in high-frequency trading, reports FastCompany. From the article: 'We view this work as one of the first serious, credible justifications for covering the planet's surface with computers. [...] We've perhaps identified a new type of natural resources that sovereignties might take advantage of.' Physicist and hedge-fund manager Jean-Philippe Bouchaud says, 'This shows that the technological arms race to extract every penny from high-frequency mechanical arbitrage will soon reach its ultimate limits.'"
The traveller who has never before experienced an arctic summer, and who has been accustomed to think of Siberia as a land of eternal snow and ice, cannot help being astonished at the sudden and wonderful development of animal and vegetable life throughout that country in the month of June, and the rapidity of the transition from winter to summer in the course of a few short weeks. In the early part of June it is frequently possible to travel in 'the vicinity of Gizhiga upon dog-sledges, while by the last of the same month the trees are all in full leaf, primroses, cowslips, buttercups, valerian, cinquefoil, and labrador tea, blossom everywhere upon the higher plains and river banks, and the thermometer at noon frequently reaches 70 deg. Fahr. in the shade. There is no spring, in the usual acceptation of the word, at all. The disappearance of snow and the appearance of vegetation are almost simultaneous; and although the tundras or moss steppes, continue for some time to hold water like a saturated sponge, they are covered with flowers and blossoming blueberry bushes, and show no traces of the long, cold winter which has so recently ended.
George Kennan, Tent Life in Siberia
it got destroyed just 5 minutes before the question was computed.
Hear hear.
I pulled out 100K out of the markets because I can't just put up with HFT anymore. So Buy and Hold was a bad idea. Now investing is a bad idea.
You can't put in a stop-loss order anymore on anything you own because every day you have to worry if a mini-flash crash hit one of your issues and triggered it, then the SX won't unwind YOUR trade but they are glad to unwind the fuck-up trades the HFT guys caused.
The thing is, arbitrage doesn't create liquidity, it simply capitalizes on the mistakes other people make.
Generally speaking arbitrage depends on the existence of liquidity (the ability to sell an asset without greatly moving the price) in order to work. It's impossible to capitalize on a "mis-priced" asset if there is no market for that asset. That doesn't mean however that arbitrage is without value. Price convergence is a common result of arbitrage and it tends to reduce price discrimination.
In a certain sense, all business is an exercise in statistical arbitrage - exploiting the difference in prices between two or more markets. You buy goods where they are cheap (possibly assembling them) and sell them where they are dear. Without the ability to exploit price spreads profit is impossible. If someone makes a "mistake" in pricing, we should expect someone to step in to take advantage of that mistake.
Without an arbitrary investment in rental properties housing prices would fall. Supply and demand. It's a fallacy to think that if you flood the market with homes prices will drop never mind the current bust scenario. It is the land that has value and by turning land into investment properties you make land more scarce for those who would buy a home to live in. This drives up prices for the land itself. Without rental properties the developers would be out as they need those investors to buy up the surplus lots. We would return to buying individual lots, hiring a contractor and architect and having a home built.
That would be a good thing, employing many more skilled craftsman and less premanufactured homes built in factories.
A fool throws a stone into a well and a thousand sages can not remove it.
Yes they do speed up price discovery. More buy and sell orders mean a lower difference between the spread between the price to buy(The Bid) and the price to sell(The Ask) a security. When there is a large difference between the two then people's orders become more spastic and volatile. They don't have the assurance of being able to sell or buy back right away if things go bad. Hence larger and more sudden orders.
I'm puzzled by your inference that humans already know the performance of a future stock. They don't. Nobody knows what's going to happen in the markets. All we have is educated guesses, and entrusting a computer to scalp trade for you is one possible educated guess to make.
Yes the events of the flash crash were alarming. But the stock market is a complex adaptive system. There have been new laws put in place, and if need be there will be more.
And as for why companies may be trading above their 120 day moving averages; perhaps it has something to do with the rebound from after the stocks crashed? After the market lost about 50% of it's value seem to me that any bounce back from that low would be a sharp one. The market has to come to an exaggerated fall to find the bottom.
Damn straight. I don't think that everyone is seeing the total loss of confidence and how jaded the younger generations are becoming with the whole stock market fiasco.
Lots of us just are refusing to play that game at this point.
It's sad, when I can go on a microfinance site, give money to some random, nearly unverified person across the internet, and not only have better confidence that my money is being well-kept, taken care of and safe, but also providing a better return than putting that money into the stock market, even with the most conservative of investing strategies!
I presume you're talking about Kiva or something very similar. If so, I agree completely. I've lent my initial stake about 10 times, and each time it's an actual investment. I picked companies that I though could use effectively use the money, sent them the cash, then watched as they repaid it. It's a gratifying feeling, I tell you.
Dewey, what part of this looks like authorities should be involved?