Fear Quantitative Trading

[Jefferson23]

Written by Simon Johnson
May 14, 2010 at 8:15 am


Look forward. The holy grail of any serious financial market player must now be: Become Too Big To Fail. You can do it is as a megabank – this part is obvious. But you can also do it as a hedge fund or some other lightly regulated pool of capital – this, after all, is the lesson of Long Term Capital Management that has never been addressed.

And quantitative trading, while in principle just one approach to investing or even only set of tools, greatly increases the complexity and opaqueness of markets – further allowing you to become big (in any future sense) relative to the political and economic system, and moving us closer to a more complete version of the stock market shut-down we saw on May 6.

For more on this, see my review of Michael Lewis’s The Big Short and Scott Patterson’s The Quants - now in The New Republic’s on-line book section.


http://baselinescenario.com/2010/05/14/fear-quantitative-trading/


* Even when we have good guys like this, we still end up fucked.


.Senator Kaufman Was Right – Our Financial System Has Become Dangerous


By Simon Johnson, co-author, “13 Bankers: The Wall Street Takeover and The Next Financial Meltdown“

Update: link to Senator Kaufman’s speech yesterday

Senator Ted Kaufman (D, DE) is best known these days for arguing that, as part of comprehensive financial reform efforts, our biggest banks need to be made smaller. His advocacy on this issue helped build support around the country and forced a Senate floor vote on the Brown-Kaufman amendment, which was defeated 33-61 last Thursday.

Senator Kaufman has also pushed strongly the idea that in recent years there was a pervasive “arc of fraud” within the mortgage-securitization-derivatives complex. This thesis also seems to be gaining traction – according to the WSJ today, the criminal probe into this part of the financial sector continues to develop.

But the Senator’s biggest home run has been on a different issue: his warnings about the dangers of high-speed trading, involving “dark pools” of money, appear to have been completely vindicated – ironically enough, also last Thursday. Read the rest of this entry »


http://baselinescenario.com/2010/05/13/senator-kaufman-was-right/

[bemildred]

1. It's all about gaming the markets, it has diddle to do with investing.

If it looks like a casino, it is a casino. Casinos are much more profitable than investing in the real economy.

[Jefferson23]

2. Yep, like the mob.

[bemildred]

3. Pretty much. nt