HFT does improve market efficiency. In other words, the price you pay at Exchange A for Equity Z is going to be almost exactly the price you'd pay at Exchange B for Equity Z. This applies to multi-listed instruments only, of course. Not sure how important that is to the average Joe, probably not much.
Before we start making plans for Andromeda-crash watching parties, let's not forget that at about the same time our sun will become a red giant and expand to beyond the orbit of Mars.
The equation was not at fault: the output is only as good as the inputs. The real problem was the instruments being traded: credit default swaps. These are of dubious merit and much more complicated than more traditional underlying instruments (the thing on which you hold an option contract). For example, suppose you have an option to be 100 shares of Google at a given price. It's easy to evaluate the value of the underlying instrument because there's an efficient market for it: Google is traded on a public exchange and the value is agreed upon within a penny, generally. Black-Scholes works on Google options just fine and you can minimize your risk reasonable well using it.
The credit default swaps were much more difficult to evaluate because of the lack of an efficient market for them. The essential nature of the underlying instrument were very high risk mortgages, not too different in concept from so-called junk bonds. The potential return was high because the interest rate was high. The potential risk was high because the risk of default was high, making the underlying instrument worth very little, much less than face value. So take these risky mortgages and then buy insurance policies for them, this is standard practice. That hedges the risk of the actual mortgage itself. Bundle the mortgage and the insurance policy up into a quasi-mutual fund like product: you have x number of mortgage/insurance policy bundles with average risk of default at y. Getting more difficult to put a value on, especially since there is no regulated exchange for them and little oversight.
Not done yet. Add in that deregulation rules passed during the Clinton era allowed the banks that issue the mortgages and buy the insurance policies to also use their assets to trade on their own. This group within a group is called "proprietary trading". So, the prop-trading groups within the banks buy and sell the mortgages and insurance policies to each other in order to generate income for the bank. There are also other groups that buy and sell these instruments that don't actually issue mortgages. These are called speculative traders.
Finally, to put the finishing touches on this pile of doo, have a group create a new instrument: a binary option (it does or it doesn't) on a bundle of high-risk mortgages and their insurance policies. A binary option is essentially a gamble: it pays out if something happens, it does not pay out if something doesn't happen. Now you're buying and selling options contracts which predict whether a group of mortgages will fail or not. There's no regulation, no formal exchange (which helps create market efficiency). There's no reliable way to determine the value of the underlying instrument because it depends on knowing how many of the mortgages will fail. And don't forget that the banks were using their investment customers to create demand for a product they wanted to sell ("I think you should invest in such-and-such") without telling the customers that the banks themselves would be profiting by selling questionable instruments to their own customers.
This is the magic of unregulated capitalism (almost - the banks should have been allowed to fail in a purely unregulated capitalism system). Nothing wrong with Black-Scholes here. The real problem at the core is that the banks involved are so driven by short-term success that there is no room for sanity. Wrap it all up with the fact that the banks know they will be bailed out by the Feds if they fail. There is no penalty for risk and no regulatory oversight. Gotta have one or the other or we just plain deserve this insanity.
If you're against Christian teaching and you think you're an analytic thinker, I challenge you find out what's wrong about the content of the bible and find an convincing argument why people who believe in Christ are doing it in vein. If you want to show that the bible is made up, or its text is corrupt, I'm going to put you through scientific method process and axiomatic logic reasoning to establish your case.
Challenge accepted
Christianity as a belief system is not scientifically testable because its assertions are not falsifiable. The fundamentals of the belief system:
- Jesus Christ is the son of God
- God sent Jesus to Earth to save the souls of humanity
- Jesus died, came back to life, and left Earth
- If you believe in all those things, you will live forever
We can quibble about wording, but I think that's the general idea. It's fine with me if you want to believe all those things, but let's not go mixing science in there. By definition, these religious beliefs cannot be scientifically validated because the hypothesis cannot be proven false. For example, how do you set up an experiment to prove or disprove that Jesus was the son of God? You either believe it or you don't, but that's not science. You must be able to design a test that clearly demonstrates your hypothesis is true or false.
I think slasher999 was saying that his capital gains taxes add 3% to his marginal tax rate, figured on his gross revenue. For example, if he earned $100 in 2011, he asserts that he pays $27 in income tax and $3 in capital gains taxes (meaning 15% of a roughly $21 capital gain, e.g.). In other words, he made $100 in income and $21 in capital gains. His marginal tax rate (excluding other taxes for this exercise) is 30%.
Indeed. If the government began a program to spy on everyone domestically, it would undoubtedly cause a huge uproar, and likely be deemed unconstitutional ( at least I hope it would be deemed as such. )
The Patriot Act essentially allowed the government to do exactly this and without too much uproar. Specifically:
Title II Section 225 - Immunity for compliance with FISA wiretap
Title V as it pertains to National Security Letters (NSLs)
I guess I could go on but I threw up a little in my mouth and had to stop.
The problem doesn't come from the State using this information to catch criminals. The problem comes from the State using this information to harass law-abiding citizens improperly. Particularly troublesome is when the State criminalizes criticism of the State, which is not uncommon at all. Take a look at the police response to the various OWS movements. While to the rest of us, the OWS folks' behavior may seem kinda annoying and vague, it certainly doesn't rise to the level of criminal behavior that justifies the use of force we've seen against them. One could argue that there's no reason to worry about issuing the police riot gear, pepper spray, tear gas, etc: why worry if you're not breaking the law? The truth of the matter is that having this equipment (tear gas or license plate databases) is always subject to abuse. We have to very carefully control the power the State has over its citizens. Without proper oversight, I think there is ample evidence, both historical and current, that the State will use every available resource against its citizens, whether the citizens are law-abiding or not.
I started out hating Unity mostly for not being Gnome2. For business reasons, I pretty much have to stick with Ubuntu for now, and I've been a big Ubuntu fan for its ease of use.
I hesitate to admit that I don't hate Unity as much anymore. It's now more of a vague dislike: miss the menu where I can find the app I want, find Unity's desire to maximize any window I touch annoying, and, most of all, the menu proxy is difficult to use in combination with focus-follows-mouse (menu changes on the way up to the top bar if I mouse over any other window).
I find I just don't hate it enough to maintain my used-Linux-for-15-years snobbery.
Google invited me to interview for a Java programming job. They started the interview by informing me that I would be "the oldest person in the group" (I was 39 at the time). Then, I was invited to code a linked list in C on the white board while they watched. I can do this, I suppose, having done it 20 years ago while getting my computer science degree. And never done it since. I questioned the relevance of the problem pointing out that this was surely not required for programming in Java. It kinda went downhill from there...
Read an interesting article that suggests that arguing is essentially an effort to raise your tribe status at the expense of someone else. The impetus is emotional, not logical, and there's no advantage to conceding defeat.
In other words, there's really no point in arguing or debating. Some set of the people already agree with you, some set disagree with you, and some set will just side with whomever they think is "stronger" as demonstrated by chest-thumping, I suppose. Nothing of intellectual value transpires.
For example, Iran is primarily Shiite. So is a large proportion of the population of Iraq which is next door. Therefore it is natural for the nation of Iraq to form close ties with Iran.
Heh, Iran and Iraq was at war for 8 years in the 1980s including chemical warfare. Saddam was no friend of Iran either, for as long as he was in power.
Yeah, both Muslims, but different flavors. Saddam and his crew were Sunni despite the fact that Iraq is majority Shiite. Now that he's gone, the government in Iraq, when it finally emerges, will likely by Shiite, reflecting the majority of the Iraq population. The natural assumption is that Iraq and Iran will strengthen ties.
Sigh, I wonder about this, too. For whatever reason, our country seems to be a more violent place to live than some others. A friend of mine was attacked in her home, had her throat slit, and her house set on fire with her still in it. She managed to crawl out and go for help, but it was a near thing. Does that happen where you live? I have a permit to carry a concealed weapon and I am grateful to have it.
An argument could be made that this kind of activity increases the efficiency of the markets involved as a whole. One of the results of high-volume, high-speed trading is that the difference of the top-of-the-book for a particular security at different exchanges tends to approach zero. These systems are designed to analyze market data from many different exchanges at the same time. One of the simplest strategies is to look for a brief arbitrage opportunity based on a termporary gap between the best bid of one exchange with the best offer of another. As this gap approaches zero, the overall efficiency of trading that security increases. Everybody benefits from a more efficient market because it becomes simpler to determine the value of a particular security, which, under certain circumstances, is decidedly non-trivial.
Teacher sees dope deal go down, pulls both students in. Weed/speed/whatever is "missing" and no sign it was dropped...
now you get in the territory of _maybe_ getting to a more intimate search.
Yeah, agreed, a more thorough search is called for. But that search should be conducted by the police, not school administrators. And call the parents. This is not in school administrators' remit.
I'm pretty sure that a white hummer is worse for the environment then a small black sedan.
Agreed, but what if you could fix both problems? Ban hummers (the vehicles) and make dark-colored cars more energy-efficient and you're better off than if you did only one or the other.
It seems to me that, when faced with a proposal that makes, say, a 5% improvement on a problem, a common negative response is that the solution doesn't entirely correct the problem so why bother? A 5% improvement gets us to a 5% better world. Solve the hummer (the vehicle) problem next. The two are not zero-sum.
Explain why we are still not in an ice age if the "natural contributions of the Earth's own systems" are stable and don't cause climate change.
The natural contributions referred to do contribute to climate change, of course, as do other factors like fluctuations in the Earth's orbit around the sun and continental drift. The thing that makes the anthropogenic contributions to climate change troublesome is that they happen over a dramatically shorter period of time than is typical for natural events.
And when I say, "troublesome", I mean, of course, troublesome to us. The Earth will cheefully cruise along whether we infest it or not.
The implication seems to me to be that an automated trading program made a decision that an actual human trader wouldn't have. In fact, automated trading programs typically make the same decisions that human traders do, they just make them faster. A trader who sets up an automated trading program typically will set the program up to do just what he himself would do; he just wants to gain some leverage from a decrease in lapsed time before the order gets placed. Without automated trading programs, the same problem might easily have occurred as human traders read the flash from Bloomberg.
Full disclosure: I work for a company that produces automated trading software.
Have you priced out just fixing the problem by buying a real connection?
This country-mouse has priced out a real connection. I currently get my broadband over wireless DSL, bounced, I crap you negative, off a neighbor's barn across the valley. We're lucky to have it, but the ISP is very flaky, sometimes leaving us without service for several days until they get around to rebooting their router, or whatever the problem-du-jour is.
Some neighbors and I spec'ed out a T1. The base cost is less than $400/mo if you live within a provider's "footprint", which typically matches the wired DSL service area. Outside of that footprint though, you pay per mile essentially on a monthly basis. The cost for us would top $1000/mo, just for the line. The ISP would charge us another $250/mo or so.
Even so, that cost might be justified if we could get enough neighbors interested. If you figure a reasonable cost for highspeed for less tech-dependent neighbors would be about $50/mo, then you'd need to get 60 or so households involved. That's certainly doable, but then you run into the second problem, IMO.
Most country-mice out here with me are not as technology-literate as I. If I got myself in the business of supplying highspeed (via wireless, I guess, from my house) to my neighbors, it seems I'd also be in the business of fixing the multitude of problems that seem to strike Windows boxes (not turning this into a flame-war, if they used Linux, there'd be a multitude of Linux problems for them), all with the same symptom: the internet don't work. What if the power fails in the middle of the night? Am I responsible for getting service back up within a certain period of time? Can I go on vacation? What if one of my neighbors decides to host a warez server? Am I liable?
In the end, we decided to skip the T1, though the whole idea is strongly tempting. Perhaps the price will moderate somewhat over time.
Slashdot Mirror
HFT does improve market efficiency. In other words, the price you pay at Exchange A for Equity Z is going to be almost exactly the price you'd pay at Exchange B for Equity Z. This applies to multi-listed instruments only, of course. Not sure how important that is to the average Joe, probably not much.
Before we start making plans for Andromeda-crash watching parties, let's not forget that at about the same time our sun will become a red giant and expand to beyond the orbit of Mars.
Sizzle
Poof
The equation was not at fault: the output is only as good as the inputs. The real problem was the instruments being traded: credit default swaps. These are of dubious merit and much more complicated than more traditional underlying instruments (the thing on which you hold an option contract). For example, suppose you have an option to be 100 shares of Google at a given price. It's easy to evaluate the value of the underlying instrument because there's an efficient market for it: Google is traded on a public exchange and the value is agreed upon within a penny, generally. Black-Scholes works on Google options just fine and you can minimize your risk reasonable well using it.
The credit default swaps were much more difficult to evaluate because of the lack of an efficient market for them. The essential nature of the underlying instrument were very high risk mortgages, not too different in concept from so-called junk bonds. The potential return was high because the interest rate was high. The potential risk was high because the risk of default was high, making the underlying instrument worth very little, much less than face value. So take these risky mortgages and then buy insurance policies for them, this is standard practice. That hedges the risk of the actual mortgage itself. Bundle the mortgage and the insurance policy up into a quasi-mutual fund like product: you have x number of mortgage/insurance policy bundles with average risk of default at y. Getting more difficult to put a value on, especially since there is no regulated exchange for them and little oversight.
Not done yet. Add in that deregulation rules passed during the Clinton era allowed the banks that issue the mortgages and buy the insurance policies to also use their assets to trade on their own. This group within a group is called "proprietary trading". So, the prop-trading groups within the banks buy and sell the mortgages and insurance policies to each other in order to generate income for the bank. There are also other groups that buy and sell these instruments that don't actually issue mortgages. These are called speculative traders.
Finally, to put the finishing touches on this pile of doo, have a group create a new instrument: a binary option (it does or it doesn't) on a bundle of high-risk mortgages and their insurance policies. A binary option is essentially a gamble: it pays out if something happens, it does not pay out if something doesn't happen. Now you're buying and selling options contracts which predict whether a group of mortgages will fail or not. There's no regulation, no formal exchange (which helps create market efficiency). There's no reliable way to determine the value of the underlying instrument because it depends on knowing how many of the mortgages will fail. And don't forget that the banks were using their investment customers to create demand for a product they wanted to sell ("I think you should invest in such-and-such") without telling the customers that the banks themselves would be profiting by selling questionable instruments to their own customers.
This is the magic of unregulated capitalism (almost - the banks should have been allowed to fail in a purely unregulated capitalism system). Nothing wrong with Black-Scholes here. The real problem at the core is that the banks involved are so driven by short-term success that there is no room for sanity. Wrap it all up with the fact that the banks know they will be bailed out by the Feds if they fail. There is no penalty for risk and no regulatory oversight. Gotta have one or the other or we just plain deserve this insanity.
If you're against Christian teaching and you think you're an analytic thinker, I challenge you find out what's wrong about the content of the bible and find an convincing argument why people who believe in Christ are doing it in vein. If you want to show that the bible is made up, or its text is corrupt, I'm going to put you through scientific method process and axiomatic logic reasoning to establish your case.
Challenge accepted
Christianity as a belief system is not scientifically testable because its assertions are not falsifiable. The fundamentals of the belief system:
We can quibble about wording, but I think that's the general idea. It's fine with me if you want to believe all those things, but let's not go mixing science in there. By definition, these religious beliefs cannot be scientifically validated because the hypothesis cannot be proven false. For example, how do you set up an experiment to prove or disprove that Jesus was the son of God? You either believe it or you don't, but that's not science. You must be able to design a test that clearly demonstrates your hypothesis is true or false.
I kind of think that Mr Hawley learned some things
Wouldn't that be the sign of an open mind and, accordingly, be laudable?
I think slasher999 was saying that his capital gains taxes add 3% to his marginal tax rate, figured on his gross revenue. For example, if he earned $100 in 2011, he asserts that he pays $27 in income tax and $3 in capital gains taxes (meaning 15% of a roughly $21 capital gain, e.g.). In other words, he made $100 in income and $21 in capital gains. His marginal tax rate (excluding other taxes for this exercise) is 30%.
Indeed. If the government began a program to spy on everyone domestically, it would undoubtedly cause a huge uproar, and likely be deemed unconstitutional ( at least I hope it would be deemed as such. )
The Patriot Act essentially allowed the government to do exactly this and without too much uproar. Specifically:
I guess I could go on but I threw up a little in my mouth and had to stop.
barely_legal_threesome.rpm
Link?
The problem doesn't come from the State using this information to catch criminals. The problem comes from the State using this information to harass law-abiding citizens improperly. Particularly troublesome is when the State criminalizes criticism of the State, which is not uncommon at all. Take a look at the police response to the various OWS movements. While to the rest of us, the OWS folks' behavior may seem kinda annoying and vague, it certainly doesn't rise to the level of criminal behavior that justifies the use of force we've seen against them. One could argue that there's no reason to worry about issuing the police riot gear, pepper spray, tear gas, etc: why worry if you're not breaking the law? The truth of the matter is that having this equipment (tear gas or license plate databases) is always subject to abuse. We have to very carefully control the power the State has over its citizens. Without proper oversight, I think there is ample evidence, both historical and current, that the State will use every available resource against its citizens, whether the citizens are law-abiding or not.
You want to trade penetrating bombs for cuddling bombs or, worse, where is our relationship going bombs? On second thought, that might actually work.
I hesitate to admit that I don't hate Unity as much anymore. It's now more of a vague dislike: miss the menu where I can find the app I want, find Unity's desire to maximize any window I touch annoying, and, most of all, the menu proxy is difficult to use in combination with focus-follows-mouse (menu changes on the way up to the top bar if I mouse over any other window).
I find I just don't hate it enough to maintain my used-Linux-for-15-years snobbery.
Google invited me to interview for a Java programming job. They started the interview by informing me that I would be "the oldest person in the group" (I was 39 at the time). Then, I was invited to code a linked list in C on the white board while they watched. I can do this, I suppose, having done it 20 years ago while getting my computer science degree. And never done it since. I questioned the relevance of the problem pointing out that this was surely not required for programming in Java. It kinda went downhill from there...
Read an interesting article that suggests that arguing is essentially an effort to raise your tribe status at the expense of someone else. The impetus is emotional, not logical, and there's no advantage to conceding defeat. In other words, there's really no point in arguing or debating. Some set of the people already agree with you, some set disagree with you, and some set will just side with whomever they think is "stronger" as demonstrated by chest-thumping, I suppose. Nothing of intellectual value transpires.
For example, Iran is primarily Shiite. So is a large proportion of the population of Iraq which is next door. Therefore it is natural for the nation of Iraq to form close ties with Iran.
Heh, Iran and Iraq was at war for 8 years in the 1980s including chemical warfare. Saddam was no friend of Iran either, for as long as he was in power.
Yeah, both Muslims, but different flavors. Saddam and his crew were Sunni despite the fact that Iraq is majority Shiite. Now that he's gone, the government in Iraq, when it finally emerges, will likely by Shiite, reflecting the majority of the Iraq population. The natural assumption is that Iraq and Iran will strengthen ties.
Sigh, I wonder about this, too. For whatever reason, our country seems to be a more violent place to live than some others. A friend of mine was attacked in her home, had her throat slit, and her house set on fire with her still in it. She managed to crawl out and go for help, but it was a near thing. Does that happen where you live? I have a permit to carry a concealed weapon and I am grateful to have it.
An argument could be made that this kind of activity increases the efficiency of the markets involved as a whole. One of the results of high-volume, high-speed trading is that the difference of the top-of-the-book for a particular security at different exchanges tends to approach zero. These systems are designed to analyze market data from many different exchanges at the same time. One of the simplest strategies is to look for a brief arbitrage opportunity based on a termporary gap between the best bid of one exchange with the best offer of another. As this gap approaches zero, the overall efficiency of trading that security increases. Everybody benefits from a more efficient market because it becomes simpler to determine the value of a particular security, which, under certain circumstances, is decidedly non-trivial.
Teacher sees dope deal go down, pulls both students in. Weed/speed/whatever is "missing" and no sign it was dropped... now you get in the territory of _maybe_ getting to a more intimate search.
Yeah, agreed, a more thorough search is called for. But that search should be conducted by the police, not school administrators. And call the parents. This is not in school administrators' remit.
I would have been somewhat amused if their laptop got stolen as well. Yes, I know I'm a terrible person.
Exactly, to put it differently, "steal an iPhone one day and have a free laptop delivered to you the next."
There's an mplayer-plugin for Firefox that streams flash (and many other formats) right in the browser.
to summon moral outrage. I know it's wrong. Really. Any help would be appreciated.
I'm pretty sure that a white hummer is worse for the environment then a small black sedan.
Agreed, but what if you could fix both problems? Ban hummers (the vehicles) and make dark-colored cars more energy-efficient and you're better off than if you did only one or the other.
It seems to me that, when faced with a proposal that makes, say, a 5% improvement on a problem, a common negative response is that the solution doesn't entirely correct the problem so why bother? A 5% improvement gets us to a 5% better world. Solve the hummer (the vehicle) problem next. The two are not zero-sum.
Explain why we are still not in an ice age if the "natural contributions of the Earth's own systems" are stable and don't cause climate change.
The natural contributions referred to do contribute to climate change, of course, as do other factors like fluctuations in the Earth's orbit around the sun and continental drift. The thing that makes the anthropogenic contributions to climate change troublesome is that they happen over a dramatically shorter period of time than is typical for natural events.
And when I say, "troublesome", I mean, of course, troublesome to us. The Earth will cheefully cruise along whether we infest it or not.
The implication seems to me to be that an automated trading program made a decision that an actual human trader wouldn't have. In fact, automated trading programs typically make the same decisions that human traders do, they just make them faster. A trader who sets up an automated trading program typically will set the program up to do just what he himself would do; he just wants to gain some leverage from a decrease in lapsed time before the order gets placed. Without automated trading programs, the same problem might easily have occurred as human traders read the flash from Bloomberg.
Full disclosure: I work for a company that produces automated trading software.
http://en.wikipedia.org/wiki/Strangelet#Dangers
Some neighbors and I spec'ed out a T1. The base cost is less than $400/mo if you live within a provider's "footprint", which typically matches the wired DSL service area. Outside of that footprint though, you pay per mile essentially on a monthly basis. The cost for us would top $1000/mo, just for the line. The ISP would charge us another $250/mo or so.
Even so, that cost might be justified if we could get enough neighbors interested. If you figure a reasonable cost for highspeed for less tech-dependent neighbors would be about $50/mo, then you'd need to get 60 or so households involved. That's certainly doable, but then you run into the second problem, IMO.
Most country-mice out here with me are not as technology-literate as I. If I got myself in the business of supplying highspeed (via wireless, I guess, from my house) to my neighbors, it seems I'd also be in the business of fixing the multitude of problems that seem to strike Windows boxes (not turning this into a flame-war, if they used Linux, there'd be a multitude of Linux problems for them), all with the same symptom: the internet don't work. What if the power fails in the middle of the night? Am I responsible for getting service back up within a certain period of time? Can I go on vacation? What if one of my neighbors decides to host a warez server? Am I liable?
In the end, we decided to skip the T1, though the whole idea is strongly tempting. Perhaps the price will moderate somewhat over time.