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Sudden Demand For Logicians On Wall Street

samzenpus posted more than 3 years ago | from the most-popular-guy-on-the-floor dept.

Businesses 525

An anonymous reader writes "In an unexpected development for the depressed market for mathematical logicians, Wall Street has begun quietly and aggressively recruiting proof theorists and recursion theorists for their expertise in applying ordinal notations and ordinal collapsing functions to high-frequency algorithmic trading. Ordinal notations, which specify sequences of ordinal numbers of ever increasing complexity, are being used by elite trading operations to parameterize families of trading strategies of breathtaking sophistication. The monetary advantage of the current strategy is rapidly exhausted after a lifetime of approximately four seconds — an eternity for a machine, but barely enough time for a human to begin to comprehend what happened. The algorithm then switches to another trading strategy of higher ordinal rank, and uses this for a few seconds on one or more electronic exchanges, and so on, while opponent algorithms attempt the same maneuvers, risking billions of dollars in the process."

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525 comments

Well at least... (4, Interesting)

ls671 (1122017) | more than 3 years ago | (#32358324)

Well at least, they seem to start to realize that perpetual growth is impossible to achieve in a finite universe. For us, right now, this means our planet.

We may need to start businesses on other planets until we have conquered the whole universe in order to maintain the illusion that perpetual growth is possible.

Yet, the whole point of investing in the market is more or less (at least it was traditionally) based on a perpetual growth principle where there would always be new markets to conquer thus, rising stocks on average and a perpetually growing economy.

Since they seem to begin to realize that perpetual growth is impossible and that trading is what they have done all their life, they need to keep the profits coming in anyway. So they figured that by using "high-frequency algorithmic trading" they could keep the profits coming in.

Well, at the expense of whom ? How long can this trend be maintained before major problems arise in the economy ?

Re:Well at least... (5, Insightful)

serps (517783) | more than 3 years ago | (#32358352)

How long can this trend be maintained before major problems arise in the economy ?

before problems arise? Have you not been paying attention for the last two years?

Re:Well at least... (1)

Cryacin (657549) | more than 3 years ago | (#32358404)

We may need to start businesses on other planets until we have conquered the whole universe in order to maintain the illusion that perpetual growth is possible.

If that were possible, then there would be quite a while to go before we'd consume everything. And then, depending on your religion on the universe, either you'd keep expanding forever, or crunch in the greatest market correction of all time.

Re:Well at least... (3, Insightful)

HishamMuhammad (553916) | more than 3 years ago | (#32358546)

Those of us in the rest of the world, who have been suffering being the weaker part in the worldwide marketplace game, we've been paying attention for much longer than two years.

Re:Well at least... (2, Insightful)

SpaceLifeForm (228190) | more than 3 years ago | (#32358858)

Have you not been paying attention the last 40 years?

This is all about having an excuse for their machinations.

They will blame the geeks in court.

Re:Well at least... (3, Insightful)

feepness (543479) | more than 3 years ago | (#32358356)

Well, at the expense of whom?

Currently, other traders with less sophisticated algorithms.

How long can this trend be maintained before major problems arise in the economy ?

Until they start gets jobs as Secretary of the Treasury and writing laws that distort markets in their favor at the expense of everyone.

Re:Well at least... (2, Insightful)

Z34107 (925136) | more than 3 years ago | (#32358368)

But everything thus far shows us that perpetual growth is possible. Technology is a wonderful thing - each year we're able to do more with less.

That's not to say that a lot of what goes on in the market isn't pure, unadulterated bullshit, but real, honest-to-goodness "growth" won't stop until technology does.

Re:Well at least... (4, Insightful)

ls671 (1122017) | more than 3 years ago | (#32358410)

> Technology is a wonderful thing - each year we're able to do more with less.

A perpetually growing economy usually involves the average wage rising so average people can buy more stuff while still working less.

Have you looked around lately ? In fact you are right in some way: every year we need less people, so by the market rule, the average wage goes down relatively to what you can buy for a dollar on average, especially food and lodging.

Re:Well at least... (5, Interesting)

sqrt(2) (786011) | more than 3 years ago | (#32358488)

And bullshit like high frequency trading (really the entire concept of trading in derivatives, I hesitate to say the entire stock market in general because at its core there is something useful) only makes things worse - and at a faster rate. Every year a bit of wealth from every person in the lower 90% is siphoned off by traders and bankers and given to the top 10% or less. Over the decades a self reinforcing, self perpetuating system has been created, linked with government apparatuses that give it the appearance of legitimacy; this system rewards people who produce nothing of value, make nothing, enrich no one's lives, do not create art, do not expand the sphere of human knowledge, and provide no meaningful service to humanity or the country.

When it's possible to get rich just managing other people's capital and skimming off the top then the way we organize our economy is broken. This house of cards cannot stand forever when you stack more and more of those people on top of the working class, the foundation, that actually produces wealth and knowledge.

Re:Well at least... (5, Insightful)

Jah-Wren Ryel (80510) | more than 3 years ago | (#32358656)

this system rewards people who produce nothing of value, make nothing, enrich no one's lives, do not create art, do not expand the sphere of human knowledge, and provide no meaningful service to humanity or the country.

If only it were so simple. Efficient allocation of capital is extremely useful. It enables all kinds of progressive development that would never occur otherwise and stock markets (and derivative markets) are the best way humanity has come up with to do it. You might as well be arguing that farmers' markets and cattle auctions are just as useless - all they do is provide a meeting place and a means to buy and sell - they create nothing.

It should come as no surprise that the system can and is abused - that's pretty much the case for every system man has ever come up with. But to argue that capital markets are nothing more than siphons from the poor to the rich is to throw the baby out with the bath water.

Re:Well at least... (3, Insightful)

ppanon (16583) | more than 3 years ago | (#32359014)

Efficient allocation of capital is extremely useful. It enables all kinds of progressive development that would never occur otherwise and stock markets (and derivative markets) are the best way humanity has come up with to do it.

Stock markets for efficient allocation of capital, sure. Derivative markets, that's questionable, and in some cases downright laughable.

The markets need to be forcibly civilized. (5, Interesting)

Cordath (581672) | more than 3 years ago | (#32358840)

Margaret Atwood once described civilization as the judicious trading of "freedoms to" for "freedom from". e.g. You trade the freedom to murder anyone you like for freedom from being murdered yourself. While a rather distressingly large percentage of Americans would scream "COMMIE PINKO!!!" at me for daring to suggest this, I feel that the stock markets could stand to be civilized a tad.

What is the purpose of the stock markets? Are they meant to be a video game played by A.I.'s for big cash prizes, or a way of facilitating investment and trade? It's time to find ways of restricting high frequency traders. While cumbersome regulations are one option, perhaps a per-trade tax or user-fee would be better. A tiny one, percentage wise, that will only have a significant impact on high frequency traders. Cuts to other taxes could be made to offset them for average frequency traders and perhaps even benefit low frequency traders.

There are, naturally, many other ways to approach this. All it takes is resolve and, in the U.S. at least, thick skin.

Re:The markets need to be forcibly civilized. (0)

Anonymous Coward | more than 3 years ago | (#32358942)

Yes. This is actually an old idea, by Nobel Price awarded economist James Tobin [wikipedia.org] . It's about time this gets implemented.

Problem is, our top politicians, while some actually do talk about it (see late discussions e.g. in Germany), they'll be very careful to implement things in a way that they don't change anything.

It's not the greedy traders, it's politics, bought by said traders. Politicians are the real traitors and aren't doing the job they are being paid (handsomely!) to do.

Re:Well at least... (0)

Anonymous Coward | more than 3 years ago | (#32358972)

only makes things worse - and at a faster rate.

There are three ways of doing things, the good way, the wrong way, and the Max Power way!

Re:Well at least... (5, Interesting)

alfredos (1694270) | more than 3 years ago | (#32358980)

I subscribe that and add that the stock value concept is indeed useful but has been twisted beyond recognition. If I try to think about it with a clean sheet, I can't find a real reason why a company that manufactures screws is worth 10% more at noon than at 9 am and then 10% less at market close.

The company in my example behaves like most companies. They are going to open the next day and sell a bit more or a bit less, manufacture about the foreseen number of screws, some employees are going to get hired, others fired, others retire... Yet the swing in value of the whole company is based around news and rumours. Traders will "discount" this or that news on stock price of our happy screw manufacturer without even bothering about the steel stock or last month's sales. Some will buy stock and make a profit by noon if they are lucky, or loss at close if unlucky.

Now, what does all this have to do with manufacturing screws? Isn't there much more in common with Casino Royale than with industry and people building things and making a living out of creating something of value?

I attended a conference two years ago where an accountant explained that the concept of stock worth is fatally wounded. His theory, which I also agree wholeheartedly, is that stock should benefit the stockholder with dividends, i.e., with the net value generated by the company's activity. Not by the increase in the value of stock itself in the short term. Now there is a place for investors, he also said, who invest in stock and sell the stock. But that kind of operations ought to be separated by months or years, when actually the stock reflects the increase in the value of the company. Not by minutes, when the increase in value is nothing more than a throw of dice, even if you attach fancy and serious names to it.

Re:Well at least... (2, Funny)

Genda (560240) | more than 3 years ago | (#32358998)

If we can simply survive another decade the bullshit will reach critical mass, and gravitationally collapse! Then all we have to do is feed lawyers, politicians, and banker into it with sufficient angular momentum, and we should have a nearly infinite source of energy.

Re:Well at least... (1, Insightful)

Anonymous Coward | more than 3 years ago | (#32358524)

every year we need less people, so by the market rule, the average wage goes down relatively to what you can buy for a dollar on average

In this small minded view, the poster assumes partially correctly that the law of supply and demand works with intellectual capital.

If less and less people are required to do _everything_, I guess this may hold true. However, in an ever expanding economy, the "stuff" that needs to be done expands faster than the ability of people to do it, even when aided by technology.

So far, this has been true as far back as I can read in any history book (including wikipedia)

Technological advancement will not outpace our ability for production as a law of nature. The people on this planet that are capable of making the great leaps forward in common thinking are so few, that there has been no sign of technology getting ahead of our ability to use it to it's fullest. Several "Giant Leaps" would need to happen before this thought process could be proven to hold water.

IMHO - and I'm the worlds authority on that. ;)

Re:Well at least... (1)

Z34107 (925136) | more than 3 years ago | (#32358804)

You're assuming that all technology is labor-replacing - that a better machine always displaces a worker. That doesn't mean "you need less people" - it means the same person can crank out more stuff.

But I'm not arguing that the current economy doesn't suck, though it sucks less than last year. I'm also not arguing that high-frequency trading does anything useful for growing the economy.

Re:Well at least... not actually (3, Insightful)

pyalot (1197273) | more than 3 years ago | (#32358378)

What you seem to fail to realize is that growth has nothing to do with making a profit in derivative markets. And high frequency algorithmic trading has been here before, and now they step up that game. So as far as "change" goes, nothing has really changed, and nothing will, high frequency algorithmic trading is here to stay. If anything, this is making markets much more volatile. And if you think last weeks 1000 DOW drop was an exception, those are going to be more frequent.

Re:Well at least... (2, Insightful)

pushing-robot (1037830) | more than 3 years ago | (#32358416)

perpetual growth is impossible to achieve in a finite universe.

Technically, you only need to improve until everyone is happy. In other words, when we invent Soma. Or holosuites.

Whether that's reassuring or terrifying is left as an exercise to the reader.

Re:Well at least... (2, Insightful)

sqrt(2) (786011) | more than 3 years ago | (#32358508)

There will always be people who will not be satisfied with our current level of understanding, the current state of technology, and the current prospects for humanity's future. As has been true for all time, these people will push civilization forward.

Re:Well at least... (5, Insightful)

mwvdlee (775178) | more than 3 years ago | (#32358522)

Some people are mentally defective and will only be happy when they have more than others. Two such persons and they'll keep fighting eachother until everybody loses.

Re:Well at least... (1)

MaskedSlacker (911878) | more than 3 years ago | (#32358988)

Not some, most. The vast and overwhleming majority--so much so in fact, that you are defective if you are not like that.

Re:Well at least... (1, Insightful)

Anonymous Coward | more than 3 years ago | (#32358584)

Technically, you only need to improve until everyone is happy.

Actually, you only need to kill people until the survivors stop complaining.

Re:Well at least... (0)

Anonymous Coward | more than 3 years ago | (#32358432)

Obviously it's impossible to grow forever, but what makes you think it's going to stop any time soon? Have you randomly picked the current time for civilqtion to stop developing?

Re:Well at least... (3, Interesting)

Evtim (1022085) | more than 3 years ago | (#32358574)

The last book I read about mathematics and physics of human interactions, including economy, was "Critical Mass (how one thing leads to another)" According to the author the best models for predicting the stock market still perform worst than "gut feeling" of an experienced trader.

It seems that the models fail because no one out there plays the game according to the simple rules that are said to define the free market. Or because the system is inherently unstable and prone to collapse. Overall I got the idea that the free market is an illusion, say, like communism. A system that requires people to change themselves first in order to work. Man, such ideologies never work!

Anyway, I totally agree about the growth thingy. I have always advocated that we should self-control our numbers and keep the progress going even if it has to slow down a tad. Restructure our activities in such way as to merge within the natural cycles (like water cycle, carbon cycle and so on) It would mean ever more wealth and possibilities for the everyone. Instead we have a pyramid, a Ponzi scheme. I laughed my head off decades ago when the globalization plans were announced. What, you want to remove the foundation of the pyramid? Make everyone wealthy? Who says that? Oh, the people sitting on top of the pyramid. Right!

T-shirts slogan: "You cannot sustain a progression in a finite Universe moving in cycles"

Re:Well at least... (0)

Anonymous Coward | more than 3 years ago | (#32358746)

Stocks are supposed to eventually pay dividends. Companies are supposed to pay a share of the profits back to the shareholders in cash - as a reward for investing in the company.

It's how the most reputable companies used to operate. It doesn't happen much anymore.

Self regulating? (4, Interesting)

dna_(c)(tm)(r) (618003) | more than 3 years ago | (#32358348)

So, the next global financial crisis will happen a lot sooner? This is not a good thing. They invest in speculation instead of companies.

Re:Self regulating? (0)

pyalot (1197273) | more than 3 years ago | (#32358408)

I don't necessarily think it's a bad thing. It just means long-term investment can now be put to rest in its well deserved grave.

Re:Self regulating? (5, Insightful)

Anonymous Coward | more than 3 years ago | (#32358454)

That's one of the stupidest comments I've ever heard on here. No, really. It is.

Long term investment is the POINT of a stock market. It's to encourage the private sector to ALLOCATE MONEY EFFICIENTLY toward PRODUCTIVE activity. Shuffling money around constantly and making the only "productive" part the cut you get for the shuffling (not the actual thing you invested in) completely defeats that purpose. It's called RENT SEEKING by the banks and traders, and it's a BAD THING. It encourages money to be allocated poorly in a short sited fashion, only doing whatever will make the most commission for the trader and his company. It does the opposite of what the stock market was supposed to do.

Great googly moogly have people become so blinded by day trading as to think making money on the trading was the point of the market? If that's the way you're thinking, then just withdraw your life's savings from the bank, drive your ass to Las Vegas, and start "investing". You can be well ahead of Wall Street's curve on what they're trying to sustain: a massive legalized national casino.

Re:Self regulating? (0, Flamebait)

pyalot (1197273) | more than 3 years ago | (#32358528)

I think you mistake traditional practice with "was intended to". Please show me the writ, paper, law or stated intend that markets derive their right of existence to long term investment?

Weather you like it or not, markets come into existence not because some founding fathers sat together and wrote some noble goal onto parchment, but because somebody has something to sell, which somebody else might want to buy. And even tough you might not like it if long term investment becomes meaningless, this is merely a function of the times we're living in where ALL things are more volatile, the markets merely reflect and amplify that.

Now as far as stupid goes, you should perform some serious navel gazing there, because you project your own failed expectations onto a changed reality. Stupid is, to expect reality to behave like you'd like it to.

Re:Self regulating? (0)

Anonymous Coward | more than 3 years ago | (#32358664)

And even tough you might not like it if long term investment becomes meaningless, this is merely a function of the times we're living in where ALL things are more volatile, the markets merely reflect and amplify that.

Stocks represent companies, which are not volatile. Companies don't come into and go out of existence in the blink of a trader's eye. Research and development for new ideas, the construction of production facilities, business deals, even employee pay periods take time. They also take investment. That investment comes in the form of long positions and investors who want to build a business.

Re:Self regulating? (0)

pyalot (1197273) | more than 3 years ago | (#32358772)

Sure, companies aren't nearly as volatile the stock markets make them out to be. But it's well known that if you partake in the stock market game (by giving out shares), you're accepting to be synched in step with the global economy.

So if you think you can fund a company that does better then the economy around it, do yourself a favor, don't put your stock on any stock market.

Re:Self regulating? (5, Insightful)

sqrt(2) (786011) | more than 3 years ago | (#32358550)

This is one of the best comments I've read about this issue.

Too many people see things exactly as you describe. The "market" is just an abstraction, they don't make the connection to the real world companies that they are investing in because they don't see that as the point anymore. It used to be that you could take a small amount of money, invest it in a company with a good idea - along with many other people - and you could profit from it too. Getting money to people with good ideas, and letting people who could never start their own company have a chance to be involved in the process of business, that was the goal. Now, Wall Street is about finding new ways to creatively move, funnel, transfer, shuffle, and convert money so that when it comes out of the other side of the black box it's more than you started with. It might as well be a casino, instead of a random number generator or dice you have the ups and downs of real companies creating the random seed.

It would be funny if not for the fact that the rest of the US, the world really, are subsidizing this farce and allowing these people to get rich doing nothing productive.

Re:Self regulating? (1)

pyalot (1197273) | more than 3 years ago | (#32358590)

The idea that an individual company breaks out significantly from a massively synchronized economy is beyond ridicule. What you want is the world to get larger again, not to get news from halfway around it in milliseconds in front of your eyes, and generally just turn the big wheel of time back to the golden times of bliss and ignorance.

Newsflash: The world's become a small village, and every gossip and whisper is heard by many, many people. There's good and bad sides to this. But unless you're in possession of a time machine, you better get used to the idea and get on living.

Re:Self regulating? (0)

Anonymous Coward | more than 3 years ago | (#32358616)

Mod up.

The root of capitalism isn't gambling to generate profit; it's investing capital in corporations in exchange for part ownership, to generate long-term profit by helping a business grow. Investing differs from gambling in that the archetypal wise investor chooses to allocate money in companies that will use that money to develop to better fill market demands down the road; it's a long-term game of growth. The voting rights that go along with stock help the wise investor realize some control over his investment, whereas a day-trader or intra-second trader or anyone who doesn't hold stock long enough to make it to a shareholders meeting has no such hope of control, nor any long-term interest in the well-being of the company. Investing with control and voting rights has nothing to do with derivatives, stock futures, and highly opaque investment vehicles; investing in a company ought to mean transparency for the investor, because he needs to know what he's buying in order to understand why he's buying and how to vote. Capitalism is a symbiotic relationship between investor and corporation; picosecond arbitrage, naked shorting, and the like are a predatory relationship between the gambler and the rest of the market.

Investing and actual capitalism aren't gambling. High-frequency trading is gambling. Capitalism isn't just saying, "It's my money, and I can do what I want with it" including gambling in a market that is affected (and negatively, as we've seen over the past two years) by gambling. Capitalism is about the responsible allocation of capital for future growth.

Re:Self regulating? (3, Insightful)

Jah-Wren Ryel (80510) | more than 3 years ago | (#32358818)

Shuffling money around constantly and making the only "productive" part the cut you get for the shuffling (not the actual thing you invested in) completely defeats that purpose. It's called RENT SEEKING by the banks and traders, and it's a BAD THING.

No, it's not. Arbitrage is a much closer definition to what's going on - they are trying to treat one big market as if it were a bunch of micro-markets (as the time between trades gets shorter it effectively breaks the market up based on ranges of trading speed) and are looking to profit on the difference between them. If they were actively trying to screw with the markets - like pulling a pump-and-dump scheme, or bribing politicians for favorable laws, that would be a form of rent-seeking. But millisecond gambles on minute fluctuations in price is not rent-seeking any more than year-long gambles on large fluctuations in price is rent-seeking.

It encourages money to be allocated poorly in a short sited fashion, only doing whatever will make the most commission for the trader and his company. It does the opposite of what the stock market was supposed to do.

You are confused here. Sure there are people who think they can be individual players doing high-frequency trades and there are brokers willing to accommodate them. But they are a drop in the sea. The real money moving around is coming from funds, mostly the kind that are only available to high net-worth people. Those fund managers aren't trying to maximize brokerage fees, they charge a management fee regardless of the number of trades. Sure they may manipulate the system to max out any performance-based bonuses, but that's a common problem with any sort of fund, not just the ones that do high-frequency trading.

Re:Self regulating? (1)

wizardforce (1005805) | more than 3 years ago | (#32358438)

If only the circuit breaker worked as quickly as these trades do, then we might avoid destroying a trillion dollars because of a typo.

Re:Self regulating? (3, Interesting)

aquabat (724032) | more than 3 years ago | (#32358544)

If only the circuit breaker worked as quickly as these trades do, then we might avoid destroying a trillion dollars because of a typo.

That trillion dollars wasn't destroyed; it just got redistributed to people that are not me.

Re:Self regulating? (1)

redneckHippe (744945) | more than 3 years ago | (#32358462)

So, the next global financial crisis will happen a lot sooner?

The beginning of the financial singularity.

Re:Self regulating? (1)

martijnd (148684) | more than 3 years ago | (#32358588)

So here we are at Economy 1.1 , on the way to Economy 2.0. But not quite there yet.

All assets worth having are traded between computers at ever increasing speeds until one of the has a nervous breakdown (eg. a situation not foreseen in its models) and it loses its shirt and billions.

For the unforeseen situations (eg. random situation generators) we still need humans.

The solution is of course simple -- take out the randomness.

Re:Self regulating? (0)

Anonymous Coward | more than 3 years ago | (#32358802)

and it loses its shirt and billions.

For the unforeseen situations (eg. random situation generators) we still need humans.

The solution is of course simple -- take out the randomness.

No, the solution is already here: bailout the owner of the failed computer, so he can try again, with our money.

Re:Self regulating? (0)

Anonymous Coward | more than 3 years ago | (#32358494)

Well. That's the problem. Money should flow to and out of company wallets. Not around in the financial market.

There probably should be a ban on frequent trading in more than one direction. Would be really nice if transactions could only be made into one direction until a week or so has passed. No more quick buying and selling => significantly reduced risk of computerized stock crash and bubbles, less computers / other personnel employed in the financial markets. And it would still be well possible for the economy to run.

And the moral is: (5, Insightful)

Mathinker (909784) | more than 3 years ago | (#32358350)

Buy gold.

(Half in sarcasm, since if the world economy collapses totally, it would probably be better to have something like, say, food.)

Re:And the moral is: (0)

Anonymous Coward | more than 3 years ago | (#32358474)

it would probably be better to have something like, say, food

I hear CEO's of large banks are edible after roasting over a large open fire.

Re:And the moral is: (5, Interesting)

Inzite (472846) | more than 3 years ago | (#32358480)

There's a long-running joke among financial types....

If things are gonna get worse, buy bonds.
If they're gonna get much worse, buy gold.
If you're still worried, buy canned food, ammunition, and land in New Zealand.

Re:And the moral is: (1)

Ihmhi (1206036) | more than 3 years ago | (#32358822)

I heard the same joke, but it instead of New Zealand it was Iceland. Now the financial prospects of Iceland are going in the pooper and the skys have literally darkened. That's the last time I take a piece of financial advice from a stand-up comic...

Re:And the moral is: (0, Offtopic)

grasshoppa (657393) | more than 3 years ago | (#32358534)

Actually, food is probably the exact worse thing to buy. It's perishable, with no inherent method to obtain more.

Ammo, and weapons, is what you'd want if the world goes REALLY far south. You can simply take food as needed, AND you have a built in way of getting more ammo and guns. Assuming you are the prey.

Re:And the moral is: (1)

nacturation (646836) | more than 3 years ago | (#32358788)

Actually, food is probably the exact worse thing to buy. It's perishable, with no inherent method to obtain more.

I don't know... how long does your dried pasta, canned spaghetti sauce, and canned tuna last before it perishes?

Re:And the moral is: (1)

Ihmhi (1206036) | more than 3 years ago | (#32358838)

Food is good for the short term. For the long term, invest in hydroponics and a nuke-proof bunker with a good air filtration system.

All of those hippies living in communes won't be doing so great if they're having apples with a side of fallout.

Re:And the moral is: (2, Interesting)

Venerable Vegetable (1003177) | more than 3 years ago | (#32358890)

If it gets to the point where you need weapons, relying on weapons for more than the last resort of defense would be a bad idea. Unless you're an action superhero, youd get killed sooner or later or live as a scavenger the rest of your life.

You'd need friends. Be part of the strongest gang/army/whatever. And have usefull skills, like farming, mechanics or teaching, so you don't actually have to take part in the shooting.

Re:And the moral is: (1)

Anonymous Coward | more than 3 years ago | (#32358808)

Buy gold.

The problem with "buy gold" is that the 'market' buy/sell price isn't a price you and I can access.

The result is that most people are buying gold above the 'market' price and selling below the 'market' price.

This discrepency between the commercial and consumer gold markets means that the price of gold needs to significantly increase for consumer buyers to make a profit. This was possible in 2001 when gold was $300 an ounce, but it's much less likely at $1,200 an ounce.

The other problem with "buy gold" is that gold's value is based on emotion instead of scarcity or supply & demand. It might take a decade, but the world economy will get sorted out and gold prices will deflate.

This appears to be some kind of joke (0)

Anonymous Coward | more than 3 years ago | (#32358354)

Nice one though.

Making money by taking it away from someone else. (0)

Anonymous Coward | more than 3 years ago | (#32358440)

Whether it is a joke or not, it is clear that no private investor can possibly compete with an almost completely unregulated financial industry that can lie and cheat and which has almost complete control over the government.

Expect a call from my lawyer (1)

elronxenu (117773) | more than 3 years ago | (#32358374)

Sorry but I patented that idea^H^H^H^Hbusiness method.

... runs to submit patent application for switching legal strategies with a period of between 0.5 to 4 seconds ...

Practical Joke? (5, Interesting)

the_povinator (936048) | more than 3 years ago | (#32358388)

I am wondering whether this story is some kind of practical joke.

As someone who understands math to at least a certain degree (I publish in what is effectively applied mathematics), I know enough to say that this is bogus. The Wikipedia page on ordinal collapsing functions (http://en.wikipedia.org/wiki/Ordinal_collapsing_function) shows that they relate to transfinite numbers (various orders of infinity). It is, to me, beyond plausibility that this could have any practical application in trading-- unless it's some kind of weird fad that only the mathematicians understand is a joke. I think someone needs to dig down further into this source.

Re:Practical Joke? (1, Interesting)

creimer (824291) | more than 3 years ago | (#32358428)

Don't bother. Just a bunch of BS artists hiring whiz kids to find a pony in a pile of manure. Won't smell pretty if they do find the pony.

Re:Practical Joke? (0)

Anonymous Coward | more than 3 years ago | (#32358540)

How the fuck is this a troll? He's right. There's a bunch of people spitting bullshit and trying to disguise it by covering it up with more sophisticated bullshit. If you dig, that's all you'll find.

Re:Practical Joke? (4, Interesting)

Anonymous Coward | more than 3 years ago | (#32358478)

IANAST (set theorist), but my guess is that there are uncountably many trading strategies that don't allow for response to the other players strategies, but they can be indexed by ordinals (assuming choice). Furthermore, there is probably some kind of ordering on them so that a< b if b beats a. Transitivity would not be obvious (you probably would get somewhere if you restrict to some "good" subset or use some weaker sense of "beats"). Anyway, assuming that there are \kappa such strategies, and assuming that \kappa has infinite cofinality [wikipedia.org] you choose one strategy, and then someone else chooses a strategy that beats yours, so you use a larger ordinal (which then beats the other strategy). To index these larger ordinals you would need a way to represent them with finite data, hence the ordinal collapsing function. Terrifying. Set theory gives me nightmares.

Re:Practical Joke? (1)

the_povinator (936048) | more than 3 years ago | (#32358602)

That may well be true from a formal point of view, but I doubt it helps. You need a strategy that also works if no-one else is trying a similar strategy (if these strategies as a group are only profiting from each other, there's no reason to get in the game). Dan

Re:Practical Joke? (5, Interesting)

cobaltnova (1188515) | more than 3 years ago | (#32358914)

The point would be that anyone who isn't playing the game this way would be playing the game according to a strategy for some fixed kappa. Then you beat them automatically. I'm not sure such a well-ordering of strategies exist. Ostensibly, this is probably what the mathematicians are being recruited to determine.

Re:Practical Joke? (1)

wizardforce (1005805) | more than 3 years ago | (#32358490)

transfinite != infinite a very large quantity that is effectively uncountable but not infinite. I would imagine that a few billion shares would effectively be uncountable during these short time periods especially with the inherent volatility that arises out of how the stock market works.

Re:Practical Joke? (1)

the_povinator (936048) | more than 3 years ago | (#32358516)

To follow up on my own post-- from looking at the rest of his blog, it looks like Christian Marks is a real mathematician, probably with an interest in finance (e.g. he solves a math problem from the journal Advanced Mathematical Economics). So that part is for real, but I still suspect that the only ones who know for sure that this is bogus are not telling because they are earning seven figure salaries.

Re:Practical Joke? (3, Interesting)

NeutronCowboy (896098) | more than 3 years ago | (#32358552)

I've done a bit of googling, but nothing else comes up. What did come up, however, was David Li and his copula function. I can barely follow the copula function, and set theory is completely beyond me. However, what I will believe in a heartbeat is that hedge funds will throw million-dollar salaries at people to come up with a mathematical function that will tell them whether to sell or buy or something, regardless of whether they have any clue what the function actually means or does.

Again, I can't tell if this particular story is true or even makes sense. But the basic premise has already been proven.

Re:Practical Joke? (0)

Anonymous Coward | more than 3 years ago | (#32358770)

Just because you can't see any immediate application for finance doesn't mean there aren't any. There are in fact plenty of complex techniques used by quants to try to squeeze every bit of penny out of the system, and these can involve whatever the current fad is.

That being said, I agree that this doesn't look convincing. The source is one lone blog with no further references, and it's run by a guy whose writings make him look more like a hack (advocates wall street to have its own currency so it can bypass government regulation?!?) I wouldn't place much credibility on this particular "news".

It can't get much worse... (1)

Ranma-sensei (800217) | more than 3 years ago | (#32358396)

At least for us low-lives; my hypothecary credit depends on a fixated repayments carrier, and my interest is down and (almost) out.

Now I just wish the credit would go away and leave me alone. :P

If HFT wasn't bad enough (1)

sethstorm (512897) | more than 3 years ago | (#32358406)

It's like solving a problem by making it worse.

Re:If HFT wasn't bad enough (2, Funny)

syousef (465911) | more than 3 years ago | (#32358456)

It's like solving a problem by making it worse.

The technical term is "Wallstreeting".

As in "Hey did you read about Tiger Woods Wallstreeting his marriage the other day?" or "Damn! I'm Wallstreeted".

Re:If HFT wasn't bad enough (0)

Anonymous Coward | more than 3 years ago | (#32358928)

"Imma gonna Wallstreet you up bad!"
"You son of a Wallstreet trader!"

Heh ... that's THE solution to swearwords on TV. No bleep needed and it's meaner than any fuck, cunt or shit.

has anyone taken into account (4, Interesting)

nimbius (983462) | more than 3 years ago | (#32358430)

many stocks are valued entirely on speculation? how does one apply logic to that? what about crap like derivatives trading? effectively a "dont ask, wont tell" sort of thing based entirely on what you "think" the value of something that has no value might become?

Re:has anyone taken into account (1)

phyrexianshaw.ca (1265320) | more than 3 years ago | (#32358572)

the entire basis of stock market is "speculative value".

a company, when announcing some future ordeal, balloons with growth from stock purchasers that now feel the company is going to have more net assets when said announcement comes to fruition.

if the then lose faith along the way or are simply overshadowed by another company along the path, the stocks are sold off to people that think that the company will rebound, or people that are interested in a longer duration investment.

very little money ever changes hands in stocks. because it's all proposed potential values, only delta's are ever submitted from member to member.

Source? (0)

Anonymous Coward | more than 3 years ago | (#32358446)

This article makes little sense and the source is highly dubious.

Interpreted another way. (1)

dilvish_the_damned (167205) | more than 3 years ago | (#32358472)

I read it as:

Yadda yadda bunch of pseudo words yadda algorithm more yaddas.

Seems to me they need a few good engineers to boil down the theoretics into something smooth and workable. This talk of switching models should be run in tandem algorithms to help tune up the main trusted one in use and to test every concept under the sun. At least thats how I would work it. If I were King. That gives me and idea...

Gratuitous add: Vote for King elect Dilvish - he will ordinize your automated ruin, building more jobs. More Jobs! More jobs == better pay == more competitive market == cheaper prices for the things you want. So King Dilvish == cheaper prices && more pay at the same time. You wont find that concept taken too far anywhere else, right here.

Apparently I like posting while a bit drunk a bit too much. But this is post analysis so its too late for you.

Lies, Damn Lies and Theft! (5, Interesting)

Iffie (1410897) | more than 3 years ago | (#32358496)

Complexity in these algorithms is only to hide the fact that the are FRONT RUNNING trades, they have servers that are directly next to the ones performing normal trades and using the speed that affords they put themselves between buyers and sellers. Goldman Sachs steals 100 million USD every day. To hide this theft they claim sophistication. Same story with derivatives, they are FRAUD. to hide the fraud they are made 'complex' using the work of so called Quants. It is thieving and it is nonsense.

Re:Lies, Damn Lies and Theft! (0)

Anonymous Coward | more than 3 years ago | (#32358568)

Mod up. This type of "trading" should be a felony.

Re:Lies, Damn Lies and Theft! (5, Insightful)

Anonymous Coward | more than 3 years ago | (#32358600)

The same banks that perform HFT also act as brokers. They know where everybody's stop losses are. They can run your stops and cause you to sell, while triggering other people to sell the market short, then run the market back up and cause the shorts to cover, and cause you to buy again so you don't miss out. Rinse and repeat.

Mod parent and grand parent up! (0)

Anonymous Coward | more than 3 years ago | (#32358620)

Mod parent and grand parent up!

Re:Lies, Damn Lies and Theft! (1)

dontbgay (682790) | more than 3 years ago | (#32358758)

I'm not an expert in the field, but that at least sounds plausible. Why hasn't this been modded up?

Re:Lies, Damn Lies and Theft! (1)

martijnd (148684) | more than 3 years ago | (#32358968)

Agreed -- this is simply fraud.

Even with millions to spend on computers the traders had an unfair advantage , but front running makes this basic fraud on a large scale.

Just spotted the first communist of the season in the train this morning (and no this is not the US) -- red star & lenin button and all.

This guy might be on to something.

At Last (0)

Anonymous Coward | more than 3 years ago | (#32358498)

I can put my PhD in Mathematics to work!

And in other news: (1)

phyrexianshaw.ca (1265320) | more than 3 years ago | (#32358526)

Very few people will ever care. the world that people assume to exist in the stock market rises and falls as people feel more and more secure with their transactions.

yet things like this make people feel less secure with their limited knowledge over the system. in return, removing capitol from the market.

the more complex a system built on trust get's, the more likely it is to fall apart.

This is food for Slashdot readers (1)

G3ckoG33k (647276) | more than 3 years ago | (#32358566)

This news is food for Slashdot readers! It is my guess that there are more logicians (albeit self taught...) here than at most forums. But, what do I know.

Insane (0)

Anonymous Coward | more than 3 years ago | (#32358592)

First, start to enforce a five minutes timeslot for financial transactions. This will stop those pure speculative folks who kill the global economy.

oh goodie, business majors now in charge of code (3, Insightful)

Rick Bentley (988595) | more than 3 years ago | (#32358594)

This will end poorly (again). It's basically a bunch of business majors managing a poorly understood programming effort, but instead of running things in a development environment they're running it on massive computers and the variables are REAL MONEY. Hiring mathematicians to write their algorithms won't likely help, they will eventually do something stupid, divide by 0, have unbounded growth, or otherwise watch their program crash along with the market.

I'm cashing out everything, buying canned food and ammo and moving to a farm.

Re:oh goodie, business majors now in charge of cod (1)

milosoftware (654147) | more than 3 years ago | (#32358690)

I'm cashing out everything, buying canned food and ammo and moving to a farm.

Where you will grow your own canned food and breed more ammo?

Maybe you should take a few books as well, or better, read them before you move.

Re:oh goodie, business majors now in charge of cod (3, Funny)

nacturation (646836) | more than 3 years ago | (#32358832)

Maybe you should take a few books as well, or better, read them before you move.

Also, be careful with your eyeglasses. If you dropped them, it just wouldn't be fair when you finally had time enough to read.

Actual production models are secret (0)

Anonymous Coward | more than 3 years ago | (#32358666)

I would be surpriced if the speculants making good money are using strategies that they are willing to share with the genereal public.

Algorithmic traders keeps as many secrets as they can, and it is foolish to believe that accurate information about production models can be found as easily as the anonymous reader seems to suggest.

Bugs? (1)

KlausBreuer (105581) | more than 3 years ago | (#32358708)

Well, by now we should all know that the only way to make money on the stock market is by having some amount of insider information. Everything else you can more or less forget about. ...unless, of course, you hook up a couple of billion to a computer program and really, really hope that it does not contain any bugs whatsoever...

Funny thing about these trades (5, Informative)

JimboFBX (1097277) | more than 3 years ago | (#32358742)

If you watch a stock in real-time you can predict where it will move quite easily. Thanks to automated trading, you can just draw a line of best fit based on the stock's current direction and also determine a high and low amount of noise to where it will bounce around. Computer's have no idea how much a stock is worth, they just simply use these values to determine when to make a transaction and actually help self-perpetuate everything by being the major driving force behind a stock's movement. Changes in direction are caused by actual human intervention, such as a large buy order spaced out over several minutes.

For example, if an algorithm says "the high point is at $10.50", then when the stock gets that high it will sell the hell out of it until it bumps the price lower. Then when it says "the low point is $10.42", it buys the hell out of it again. However, if it notices an overall downward direction, it will reshift what it's idea of a high point and low point are as time progresses, helping to self-perpetuate that downward direction since it is probably one of many automated systems that work similarly and overwhelm actual human interaction with the stock price.

It's not necessarily a bad thing, if you realize this, then you can easily predict a stock's movement and make some easy income; knowing exactly where the low and high values are going to be at any point in time. Again, the only thing that causes a stock to change its movement is actual human interaction that results in the trend being broken.

hmm... this is gonna be fun to watch (1)

sxpert (139117) | more than 3 years ago | (#32358836)

when (not if) this crashes (once more)...
don't those morons learn from their mistakes ?

"fools try everything. that's how you recognize them !"

I am unimpressed (1)

drewhk (1744562) | more than 3 years ago | (#32358918)

Well, we have seen PhDs and Nobel laureates busting their funds (some even twice), so I am not amused. We should be more humble about our "knowledge".

Article == summary (0)

Anonymous Coward | more than 3 years ago | (#32358946)

It's just a blog post, the summary is the first two paragraphs condensed. No sources, except for some links to sites explaining some terms.

Equation of next bubble (0)

Anonymous Coward | more than 3 years ago | (#32359002)

investments(a) -> profit(a)

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