This is interesting: http://www.2008wmsg.org/en/, but it’s already over.

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This article is hilarious:

As a trader turned philosopher, Taleb has railed against Wall Street risk managers who attempt to predict market movements. Even so, Taleb said he saw the banking crisis coming.

“The financial ecology is swelling into gigantic, incestuous, bureaucratic banks — when one fails, they all fall,” Taleb wrote in “The Black Swan: The Impact of the Highly Improbable,” which was published in 2007. “The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup.”

…

Taleb is angry that Wall Street is continuing to use traditional tools such as value at risk, which banks use to decide how much to wager in the markets.

“We would like to society to lock up quantitative risk managers before they cause more damage,” Taleb said.

This being recruiting season, there was a guy from the risk management division of a certain big bank here talking up his job and company. (The week after that, their stock was halved and last week it was even in the single digits. That’s another story.)

He wasn’t very specific but I got an impression of the very crude and non-rigorous method of “value at risk”, something like the 90th percentile loss value based on some unverifiable model, but not an actual hard bound. So what do you get? Obviously everybody builds up their portfolio right up against the 90th percentile and a digital waterfall effect at the boundary becomes that much more likely. There is nothing wrong with quantitative risk management. There is something wrong with bad ideas even if they are “quantitative”… Probably worse, because it gives the layman a false sense of invincibility.

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A simple thought experiment. Some index ETF’s apparently have an inverse or 2X inverse “short” version. For instance, SPY and SDS.

Ignoring the expense costs, suppose the inverse ETF’s do what they aim to do: maintain the inverse or twice-inverse daily percentage moves of the reference index, then they are good for a particular kind of straddle strategy. Suppose you believe the daily prices of the reference index going forward are strongly directional (that is, if it goes up one day, then it may go up for several days afterwards, or if it goes down, then it may go down for several days). But, you don’t know which way it will be.

Then one way to get a potential gain from this is to take a purchase of both the forward and inverse ETF’s at the same exposure. That would mean 2 units of SPY and 1 unit of SDS, for example. Several days later, if the assumption is correct, then there will be a net gain, because the absolute gains coming from the “winner” ETF will be larger and larger with compounding, while the absolute losses from the “loser” ETF will be smaller and smaller. In the extremal case, the winner ETF goes to infinity and the loser ETF goes to 0.

Of course there is a cost for violating the assumption. The cost comes from the daily rebalancing of the inverse ETF’s. That would mean a path of reference index prices that fluctuates around the initial one. In that case, the inverse ETF loses value gradually, depending on the size of the moves. The 2X inverse ETF would lose even more. But if the realistic alternatives are small daily fluctuations or a few days of big directional moves, then this strategy wins. This seems especially appropriate for the current period.

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For an advanced economy with advanced electronic banking systems, it is embarassing that there is no bank that has branches in all parts of the country and no electronic funds clearing other than on “business days”. Computers don’t have geographic boundaries nor do they take breaks. Why can’t money be available everywhere (without resorting to a middle-man cash machine network) and be freely transferable 24/7?

For that matter, what is the fear of a central bank? In some countries, banks are like utilities and post offices — public services provided by the government. The First and Second National Banks were killed because people did not trust the government with their money. Well, it seems like big commercial banks can be trusted even less. Also, it’s not like anything would function with just community banks. It’s not a country of farmers any more…

I mean, capital allocation decisions can still be locally made and subject to market forces, as they should, but banking infrastructural issues like described here (and regulatory ones, some say) should have no reason not to be national, am I wrong?

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Here’s a problem posed to me by a friend:

Consider an equilateral triangle ABC with edge length 1. At each vertex is an object that is capable of movement at exactly speed 1. Beginning at time 0, each of the three objects moves toward its initial adjacent neighbor object, as in a game of pursuit. Of course, by symmetry, the objects will meet at the incenter of ABC. The question: how far will they have traveled?
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… in this ad:

Here’s the quote in question at 0:37:

One of the things which I think has increased the cost of living has been this administration’s reliance on a high interest rate policy.

In fact, the issue of the day was over fiscal policy being too tight and being overly concerned about the threat of inflation.

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Treasury sells $40 billion in bills for Fed at 0.30%

The Treasury Department issued $40 billion in 35-day cash management bills Wednesday at a rate of 0.30%. Proceeds from the sale will immediately be transferred to the Federal Reserve to fund its operations to improve liquidity in money markets. The sale was needed to help the Fed expand its balance sheets, which has been shrinking as it lent out cash to banks and primary dealers to keep the financial system working.

Not nearly as bad as this scenario, where

… the accounting trick is simply for the Federal Reserve to “agree” to “buy” worthless assets like new government bonds that nobody else wants and for the government to turn right around to “fund” the Federal Reserve with the new money it got.

In fact, quite the opposite. I’m glad that people still want Treasury bills, even to the tune of zero (and perhaps soon to be negative) yield. I guess there is really no alternative. Where else is money to be kept … I would keep it where people/companies are most willing and able to produce valuable goods, but these are hard to identify clearly these days, so a proxy is as good as anything.

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a novelty

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About 10 years ago, when .NET was put out as a strategy for providing software services over the internet, I jokingly quipped that across the API interface, it’s just a black box, you’ll never know if you have actual humans answering your queries and passing the data back, as long as it’s in the right format! Imagine if “Jeeves” were an actual person answering what you “Ask”ed. Or if some translation tool were actually human-powered. It’d be pretty cool in a horrible way, like a reverse Turing-test. Students of the Humanities may even call it “dehumanizing” but we’re all evil engineers so who cares… hohoho

But guess what, this is an actual industry. Here is an article that shows, to my great amazement, that people have not only taken this concept to heart to solve the real problem (for spammers and hackers) of automated CAPTCHA decoding by low-wage humans, but they’ve even managed to load-balance the whole thing to reduce latency! What … the hell!
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link.

Edit: All right, the author deleted the page, but Google says it started out like this:

Screw NBC Watch CBC/CBUT for 2008 Olympic Coverage28 Jun 2008 by teamstrannon

For Americans the road to our 2008 Beijing Olympics will be on a 12-15 hour delay. That is NBC’s best attempt to give us timely Olympics coverage in our high-end technology era. You’d think it was still 1950. Yep folks, that’s all we’re …

Basically the Canadian network CBC (and local affiliate CBUT Vancouver) had Olympics on live coverage, so people in select markets in the US served by cable that picks up that Canadian channel could bypass NBC completely. It was better editorial coverage anyway.

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