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Alfred Rappaport and Todd Buchholz take sides on risk-taking
I agree. Read, whenever possible, the original academic papers, with particular attention to the disclaimers and raw data. Journalists rarely get it right when they write up their second or third hand reports, and even honest academics show their cognitive biases in their interpretations of the results. Jeff, I'm enjoying the free downloadable classics on your blog...Voltaire, Mencken, Epictetus...great stuff. Kudos. Fred— September 28, 2011 9:38 p.m.
San Diego unions push transaction tax
Really? This is supposed to prove one's intellectual bonafides? How about this one instead: Q: There are ten crows on the fence. A cat takes one of them. How many crows are left? A: None of them...the crows are too smart to stay put. Moral: Don't depend on math to assess intellignece, since it often masks real-world ignorance...what Hayek called the "Pretense of Knowledge" and what Taleb calls Procrustean thinking.— September 28, 2011 9:08 p.m.
San Diego unions push transaction tax
Yes. I agree. I'm quite ignorant. I'm very certain that I don't understand everything...in fact, I understand very little. That's why I'm always reading, questioning, re-examining evidence, asking if I'm allowing cognitive biases to shade my assessments. I'm certain I'm ignorant, and grow more so every day. Yet...when I assert something in a public forum, I'm usually able to back it up with independent well-respected sources. I'd hardly call myself a "populist", since I oppose bread and circus public expenditures...I've been so vocal in my opposition to such boondoggles as publicly subsidized sports stadiums that I've received death threats. (More than a few. Most of them unimaginative.) In fact, Jeff, I'd say that we probably agree on far more than we disagree. I'd also label myself as a sort of anarcho-capitalist-libertarian Ayn Rand kind of guy. But only if you add to this a big helping of recent cognitive science research, extensive IT experience, world-wide travel and work (yes, foreign languages too), plus the ceaseless devouring of books of all kinds. The more I know, the more ignorant I get. What I have learned about HFT, (something I've been interested in for a few years now), makes me quite concerned about its unintended consequences. If that scepticism makes me ignorant in your eyes, I'm quite pleased. I am quite happy to be thought of as stupid...it's when everyone agrees with me that I get worried about my position. Best, Fred— September 28, 2011 8:59 p.m.
San Diego unions push transaction tax
Jeff, you wrote: "On a big move down when the public is selling, I am buying and when there's a big move up I am probably selling into it. The public is wrong on average, a statistically large part of the time. For the system to exist, it is essential that the public buy at the top and sell at the bottom on average....there is no other way." EXACTLY. That's how markets REALLY work today. The professionals MUST depend on the ignorance of the masses and their willingness to fall for the same narratives again and again, with predictable results. The latest example seems to be the gold market...as soon as "everyone knows" to buy gold, the insiders are selling at what they know to be the peak of the bubble. Thanks, Jeff, for your openness and honesty. At least you're not dressing up your behavior in faux-philanthropy saying you're somehow helping the people. You're trading to beat others, in a very gamelike fashion with nothing personal...and that's about the only way to make real money in the markets today. Personally, I don't have the stomach for that. I'd feel guilty for getting paid for what I consider to be parasitic behavior. But I know quite a few people who make money in ways I find distasteful, and still get along with them well enough. So, seriously, everyone reading this should re-read what Jeff wrote. If you're "dabbling" in markets, you'll get taken to the cleaners by the pros who do this day after day and have so many advantages that pretending the market is "fair" is dangerous self-delusion.— September 28, 2011 8:50 p.m.
San Diego unions push transaction tax
Let me make a little pause here in the commenting to welcome Jeff...(aka nokomisjeff) to the discussion. I don't agree with everything Jeff has to say, but he is very well informed, articulate, and brings a fresh perspective. So, even if we disagree (hey, maybe BECAUSE we disagree) I'm really glad to have a new sparing partner here. Best, Fred— September 28, 2011 8:36 p.m.
San Diego unions push transaction tax
"You'd rather appear to be socially conscious instead of what you really are, cheap." "I suspect that life has passed you by and you're just a bitter also ran." WOW. I disagree with a guy about the utility and morality of HFT, offer what I think are cogent arguments, reply to his assertions...and suddenly I'm both cheap and bitter, having seen my life pass me by. I'll tell my wife and son this...I guess they should know that daddy is such a loser. Nokomisjeff...You've consistently avoided the straightforward questions I ask, instead just asserting that I'm ignorant, jealous, cheap, bitter, and so on. I know that I don't understand how everything in the markets works...and frankly, Mr. Jeff, neither do you. But I think I do understand the basics of High Frequency Trading, from a legal, economic, and technological point of view. What I assert is that this will not end well because: 1. Feedback loops creating Black Swan events not previously possible, but with HFT almost inevitable 2. Front trading rips off customers. It may be legal in some circumstances, and a lot of firms do this every day, but it's still immoral and indefensible as public policy 3. Traders don't actually understand the algorithms...most are too arrogant to admit it (So the captain of the ship keeps telling the hapless passengers that big white thing off the starboard bow is just an illusion, full speed ahead.) 4. Despite laughable protests to the contrary, these HFT systems are NOT available to the "common" investor. They're enormously expensive to set-up and maintain, and their primary purpose is to shave a little off each transaction -- ripping off the common investor. The highly touted liquidity HFT offers is likely to lead to price bubbles and crashes, while offering only the illusion of advantage to customers who are ripped off for far more than they're saving on transaction fees. The game is rigged. I'm not playing. That doesn't stop me from watching in grim fascination, and occasionally asking why those who claim to know so much are acting so stupidly. When the best reply I get is that I'm somehow "cheap" and "bitter"...it just makes me more certain that this will all end in tears. Best, Fred— September 26, 2011 7:55 p.m.
Is He a Citizen?
One of the main reasons we have illegal immigration in the first place is that LEGAL immigration is ridiculously difficult: http://reason.org/files/cb299f0134ca8bb75243c69ca… To demonize those who are forced to dodge this bizarre maze of contradictions is immoral. When I was on the Border Solution Task Force, I found too that those who are involved in this issue are too frequently unethical, immoral, and criminal minded racists. I quit that group to save my own dignity and reputation...I want immigration reform, not lynch mobs of the ignorant rounding up hard working people who happened to be born on the wrong side of a border. Full Disclosure: I've lived and worked, legally, in several countries around the world. Because of my technical skills and experiences, many places welcome me and I pay them a lot in taxes. My own country, however, according to the rules, would never allow me in...that's how pathetic current immigration rules are. Best, Fred Williams— September 26, 2011 10:12 a.m.
San Diego unions push transaction tax
All you need is a million to get started, huh? Well, I guess I'll just check my pocket for a bit of spare change and sign up for my account, right? Dude, you're living on a different planet from the rest of us if you think a "normal person" has a million laying around, plus the additional hundreds of millions required to have any chance of competing with the big firms. I appreciate the information you sent, since it buttresses my points. So far, you say "it's affordable", and "front running is legal". What about Black Swan vulnerabilities? Systemic risk from HFT? What about epistemic arrogance which Nassim Taleb describes so well? Your "sagacious" individuals...well, I say they're pompous gamblers who are playing with things they clearly do not understand, (they pay me and my friends to write it into code), or are so callous they do not care about the consequences. Legal and good are not the same thing. You may be clever, but you sound highly immoral. Best, Fred— September 26, 2011 9:53 a.m.
San Diego unions push transaction tax
Sure, liquidity...that's the "benefit". Is that worth the costs? You haven't addressed the problems I've listed above, other than saying that front running is both legal and moral in some circumstances. While that may be true, and while trading algorithms created by "sagacious" traders are also legal and in some perspectives moral, that misses the point. The system itself is put at risk by the HFT systems. Fraud is made nearly undetectable. Only the wealthy and well connected get these advantages, and everyone else pays extra. A transaction fee, no matter how miniscule, might be a reasonable way to remedy these systemic faults. Still, since I know the system is rigged in the first place, and the rule makers have become handmaidens, nothing will change. We both know, if you're honest, how this will end...very badly.— September 26, 2011 9:46 a.m.
San Diego unions push transaction tax
acannell, your argument only applies to those whose wealth was created by PRODUCING something of value. But in the case of HFT, NOTHING is created. It's simply parasitic siphoning of funds though the market-distorting insertion of an automated middleman. Ayn Rand would be denouncing this practice if she were around today. In addition, your argument assumes a level playing field, where no one enters the market with a huge advantage and rules are enforced fairly against all players. Anyone who's paying attention knows this is NOT the environment on Wall Street today. So while your rant is entertaining, and very familiar, it ignores reality in two key points, so doesn't really amount to much but sound and fury, and a real lack of understanding about how the markets actually perform in the real world we live in. Please, remember, Atlas Shrugged and The Fountainhead (much as I like them both) are just novels, science fiction really. You shouldn't base your world view on science fiction.— September 25, 2011 9:08 p.m.