The black box economy - The Boston Globe
It would be ideal if the financial markets became a bit less opaque and intelligible before that happens. That would be the job of regulators, but Das isn’t sure that regulators have the intellectual horsepower to figure out what they need to do. “If you’re bright and you can make $5 million a year on Wall Street,” he asks, “why would you settle for making 50K as a regulator?”
A change in general sentiment about debt marks the start of deflation
The influence of perception:
As important as what goes on, is what people think that is going on…
Using Google Trends to Predict a Recession
Mish’s Global Economic Trend Analysis: Changing Social Attitudes About Debt
Here is a sampling of the headlines.* U.S. consumers pull back on spending, worry more about debt as economy weakens
* Consumers are cutting back
* US consumers worry about debt, pull back on spending
* Consumers pull back as economy weakens
* Americans buckle up for slowing economy
* Empty Malls as Economic Fears Spread
* Americans tightening their belts
* Consumers now spending less, worrying more
* More consumers start to show financial restraintChanging Attitudes Are Now News
Even Starbucks is affected.
The AP is reporting Starbucks tests $1 coffee, free refills. “Faced with growing competition from cheaper rivals, Starbucks Corp. is selling small cups of drip coffee for $1 with free refills as part of a test in its hometown.”
Coffee is a minor thing, but unwillingness to spend $5 for a cup of coffee had to start sometime. This attitude is spreading. And it’s the attitude that’s important, not the coffee.
Bernanke can’t reflate if consumers won’t spend, banks won’t lend, and businesses won’t expand. If prices are coming down (as they are with houses), consumers will wait. Those worried about their job will wait. Those starting to worry about retirement will wait. People will wait for houses, cars, and boats. People will vacation closer to home and spend less eating out. People will cut back in all sorts of ways.
The coming money panic
Dangerously Close to a Money Panic
The money panic brewing today is driven largely by this third kind of asset — derivatives of questionable value that were artificially created by Wall Street brokers, officially sanctioned by Washington regulators, and falsely rated by Wall Street rating agencies.
An hour with Warren Buffett, Melinda and Bill Gates
“This is great video. It reminds that Capitalism is just a tool which could be use for good as well. It is us humans who make the decision.” From a youTube comment
Conversation with a hedge fund trader…and how computers run the economy
Plus some interesting insights on black box trading…
n+1: And so the computers themselves are making these trades?
HFM: You build the models and the computer does the trading. You actually do all the analysis. But it’s too many stocks for a human brain to handle, so it’s really just guys with a lot of physics and hardcore statistics backgrounds who come up with ideas about models that might lead to excess return and then they test them and then basically all these models get incorporated into a bigger system that trades stocks in an automated way.
n+1: So the computers are running the…
HFM: Yeah, the computer is sending out the orders and doing the trading.
n+1: It’s just a couple steps from that to the computers enslaving— HFM: Yes, but I for one welcome our computer trading masters. People actually call it “black box trading,†because sometimes you don’t even know why the black box is doing what it’s doing, because the whole idea is that if you could, you should be doing it yourself. But it’s something that’s done on such a big scale, a universe of several thousand stocks, that a human brain can’t do it in real time. The problem is that the DNA of a lot of these models is very, very similar, it’s like an ecosystem with no biodiversity because most of the people who do stat-arb can trace their lineage, their intellectual lineage, back to four or five guys who really started the whole black box trading discipline in the ’70s and ’80s. And what happened is, in August, a few of these funds that have big black box trading books suffered losses in other businesses and they decided to reduce risk, so they basically dialed down the black box system. So the black box system started unwinding its positions, and every black box is so similar that everybody was kind of long the same stocks and short the same stocks. So when one fund starts selling off its longs and buying back its shorts, that causes losses for the next black box and the people who run that black box say, “Oh gosh! I’m losing a lot more money than I thought I could. My risk model is no longer relevant; let me turn down my black box.†And basically what you had was an avalanche where everybody’s black box is being shut off, causing incredibly bizarre behavior in the market.
n+1: By the black boxes?
HFM: Well, in the part of the profit-and-loss that they were generating to the point where, to give you an example from our black box system, because we have one…
n+1: A big black box?
HFM: Actually I think it’s gray, and it’s not in our main office, it’s off-site. And we made sure it has no arms or legs or anything it could use to enslave us. But we had a loss over the course of like three days that was like a ten-sigma event, meaning, you know, it should never happen based on the statistical models that underlie it. Why? Because the model doesn’t assume that everybody else is trading the same model as you are. So that’s sort of like a meta-model factor. The model doesn’t know that there are other black boxes out there.
Best creative advertising
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Invading personal space to boost persuasion
Recently I saw a joking comment on this photo, regarding the ex-president way to convince people through their physical overpowering, without touching them. I sense that the original poster concentrated on the funny side of it, failing to see that this is real and can actually be systematically used in situations where persuasion is needed. More photos here
Stop doing it yourself
The truism of the web: people talking about you is far more effective than talking about yourself.
Seth Godin
The economics of marriage
Excerpts from Tim Harford’s new book, The Logic of Life. - By Tim Harford - Slate Magazine
Charles and Luoh show that young black women facing a shortage of men try to increase their attractiveness as marriage prospects. The more men are in prison, the more likely women are to get themselves a job, and the more likely they are to go to college. College-educated people are much more likely to marry other college-educated people, so an education doesn’t just make you smart, it wins you a smart husband or wife.
The new worker
May you be fortunate enough to work in something you love.
The passionate worker doesn’t show up because she’s afraid of getting in trouble, she shows up because it’s a hobby that pays.
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About Javier Marti
As an Independent Strategy Consultant, speaker and founder of HypnoticSales.co.uk and SunshineHypnosis.co.uk, Javier is dedicated to help organizations, small businesses and individuals to optimize systems, increase profits and make better choices in business and in life. He is the author of the book "Mobile, Domains & The Future"
Javier also shares his knowledge and experience through information-packed and entertaining presentations in English and Spanish.
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