Comments on: Rise of the Machines http://www.cringely.com/2009/03/344/ Cringely on technology Mon, 15 Mar 2010 10:47:01 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Robert Young http://www.cringely.com/2009/03/344/comment-page-1/#comment-2391 Robert Young Mon, 06 Apr 2009 15:26:20 +0000 http://www.cringely.com/?p=344#comment-2391 (no way to edit, so I'll do it again. Bob: if you moderate, ditch the earlier one.) Yes, it is a zero sum game; well, unless and until the laws of thermodynamics are repealed. In the case of fiduciary trading (calling it investing is an insult to investors), nothing is built with the capital in play. It’s all moulah. Most of it goes from the many to the few. So, when you lose that 40%, the shorts DID make money on your loss. That’s what you can’t see through your rose colored glasses. Fact is, Bob got it right. (no way to edit, so I’ll do it again. Bob: if you moderate, ditch the earlier one.)

Yes, it is a zero sum game; well, unless and until the laws of thermodynamics are repealed. In the case of fiduciary trading (calling it investing is an insult to investors), nothing is built with the capital in play. It’s all moulah. Most of it goes from the many to the few. So, when you lose that 40%, the shorts DID make money on your loss. That’s what you can’t see through your rose colored glasses. Fact is, Bob got it right.

]]> By: Robert Young http://www.cringely.com/2009/03/344/comment-page-1/#comment-2390 Robert Young Mon, 06 Apr 2009 15:23:34 +0000 http://www.cringely.com/?p=344#comment-2390 Yes, it is a zero sum game; well, unless and until the laws of thermodynamics are repealed. In the case of fiduciary trading (calling it investing is an insult to investors), nothing is built with the capital in play. It's all moulah. Most of it goes from the many to the few. So, when you lose that 40%, the shorts DID make money on your loss. That's what you can't see through your rose colored glasses. Fact is, Bob got it right. Yes, it is a zero sum game; well, unless and until the laws of thermodynamics are repealed. In the case of fiduciary trading (calling it investing is an insult to investors), nothing is built with the capital in play. It’s all moulah. Most of it goes from the many to the few. So, when you lose that 40%, the shorts DID make money on your loss. That’s what you can’t see through your rose colored glasses. Fact is, Bob got it right.

]]> By: Bruce http://www.cringely.com/2009/03/344/comment-page-1/#comment-2389 Bruce Mon, 06 Apr 2009 14:13:20 +0000 http://www.cringely.com/?p=344#comment-2389 On the other hand, if you don't react and regulate, the honest investors lose faith in the market and take their money elsewhere. Permanently rather than temporarily as we see in the current crisis. I have to think that a lot of the approach both the Bush and Obama administrations have taken to address the crisis is being dictated by China. If China loses too much money on its commercial investments in the US, it will stop buying US government debt as well. And then the $#!T _really_ hits the fan. On the other hand, if you don’t react and regulate, the honest investors lose faith in the market and take their money elsewhere. Permanently rather than temporarily as we see in the current crisis.

I have to think that a lot of the approach both the Bush and Obama administrations have taken to address the crisis is being dictated by China. If China loses too much money on its commercial investments in the US, it will stop buying US government debt as well. And then the $#!T _really_ hits the fan.

]]> By: Bruce http://www.cringely.com/2009/03/344/comment-page-1/#comment-2388 Bruce Mon, 06 Apr 2009 14:06:18 +0000 http://www.cringely.com/?p=344#comment-2388 Your first paragraph reveals the biggest misconception that the public has about the markets in general: They are not a zero-sum game. Just as a rising market lifts all boats, creating wealth out of excess demand rather than actual money supply, a falling market makes more people lose money than win. So just because I lost 40% of my retirement savings in the crash doesn't mean that someone profited to take that money. It just means I failed to sell when prices were high. Once you get rid of that misconception, the conspiracy theories make a lot less sense. Your first paragraph reveals the biggest misconception that the public has about the markets in general: They are not a zero-sum game. Just as a rising market lifts all boats, creating wealth out of excess demand rather than actual money supply, a falling market makes more people lose money than win. So just because I lost 40% of my retirement savings in the crash doesn’t mean that someone profited to take that money. It just means I failed to sell when prices were high.

Once you get rid of that misconception, the conspiracy theories make a lot less sense.

]]> By: RichardB http://www.cringely.com/2009/03/344/comment-page-1/#comment-2292 RichardB Thu, 02 Apr 2009 15:29:02 +0000 http://www.cringely.com/?p=344#comment-2292 Yes, investors and bankers are herd animals. But what spooked them? What did they sense as danger, without conscious knowledge of the source of that danger? They panicked because they were out of business. The personal computer, plus internet, plus the entire history of markets available to all, made the Big Brokers irrelevant. Anyone with reasonable judgement could make reasonable investment decisions. The Big Brokers lost their monopoly. The only option remaining was to trade secretly amongst themselves. This secret trading is what has blown up. A meth lab blows up when the operators start consuming their own product. The barrier to entry for responsible portfolio management is a personal computer and some common sense. The current arrangement is for the manager to have trading privilege on the customers account. No money is sent to the manager. The manager charges a fee. The customer can revoke the managers privilege at any time. Neat, clean, safe, honest. Charles Schawb and Ameritrade spooked the Big Brokers. Yes, investors and bankers are herd animals. But what spooked them? What did they sense as danger, without conscious knowledge of the source of that danger?

They panicked because they were out of business.

The personal computer, plus internet, plus the entire history of markets available to all, made the Big Brokers irrelevant. Anyone with reasonable judgement could make reasonable investment decisions.

The Big Brokers lost their monopoly. The only option remaining was to trade secretly amongst themselves. This secret trading is what has blown up. A meth lab blows up when the operators start consuming their own product.

The barrier to entry for responsible portfolio management is a personal computer and some common sense. The current arrangement is for the manager to have trading privilege on the customers account. No money is sent to the manager. The manager charges a fee. The customer can revoke the managers privilege at any time. Neat, clean, safe, honest.

Charles Schawb and Ameritrade spooked the Big Brokers.

]]> By: Keeping the Secrets of Parrots since 2005 « jss books http://www.cringely.com/2009/03/344/comment-page-1/#comment-2291 Keeping the Secrets of Parrots since 2005 « jss books Thu, 02 Apr 2009 15:02:13 +0000 http://www.cringely.com/?p=344#comment-2291 [...] the Secrets of Parrots since 2005 Robert X. Cringley: Program traders did it with fast machines and CDS. Even so  Cringley is pretty [...] [...] the Secrets of Parrots since 2005 Robert X. Cringley: Program traders did it with fast machines and CDS. Even so  Cringley is pretty [...]

]]> By: Sammy http://www.cringely.com/2009/03/344/comment-page-1/#comment-2274 Sammy Wed, 01 Apr 2009 22:21:49 +0000 http://www.cringely.com/?p=344#comment-2274 Check out http://www.deepcapture.com for a whole ton of thought on this topic and naked shorting and lack of regulation in general. There are some good posts from professional traders in the comments. The bottom line is the politicians and regulators are way behind the predators and our economy is the food. Check out http://www.deepcapture.com for a whole ton of thought on this topic and naked shorting and lack of regulation in general. There are some good posts from professional traders in the comments.

The bottom line is the politicians and regulators are way behind the predators and our economy is the food.

]]> By: David http://www.cringely.com/2009/03/344/comment-page-1/#comment-2260 David Wed, 01 Apr 2009 18:38:46 +0000 http://www.cringely.com/?p=344#comment-2260 Michael Moore? Who is fool enough to add their voice to that hack? Michael Moore? Who is fool enough to add their voice to that hack?

]]> By: Braun http://www.cringely.com/2009/03/344/comment-page-1/#comment-2201 Braun Mon, 30 Mar 2009 18:04:34 +0000 http://www.cringely.com/?p=344#comment-2201 I'd like to piggy-back on this comment. I don't see how the "other side" of this works. Bob says that naked shorts (of CDSs) were being sold -- sold by an array of workstations. Ideally running the value to zero. Then you need a separate array of workstations (running different algorithms coming to the conclusion that the value of the CDS will go up), thus agreeing to buy the CDS is projected as a profitable gamble. You have to have sellers/buyers, or winners/losers. Bob appears to be describing this as one-sided, with no losers. To make money on selling short, you need someone to agree to buy those instruments at the later, lower price. I still don't get it -- who exactly was on the other end of those short-sells??? I’d like to piggy-back on this comment. I don’t see how the “other side” of this works. Bob says that naked shorts (of CDSs) were being sold — sold by an array of workstations. Ideally running the value to zero. Then you need a separate array of workstations (running different algorithms coming to the conclusion that the value of the CDS will go up), thus agreeing to buy the CDS is projected as a profitable gamble. You have to have sellers/buyers, or winners/losers. Bob appears to be describing this as one-sided, with no losers. To make money on selling short, you need someone to agree to buy those instruments at the later, lower price. I still don’t get it — who exactly was on the other end of those short-sells???

]]> By: Jim http://www.cringely.com/2009/03/344/comment-page-1/#comment-2199 Jim Mon, 30 Mar 2009 15:15:00 +0000 http://www.cringely.com/?p=344#comment-2199 As I stated above, this is a good companion piece to it: From a former IMF guy: The Quiet Coup http://www.theatlantic.com/doc/200905/imf-advice As I stated above, this is a good companion piece to it:

From a former IMF guy:

The Quiet Coup
http://www.theatlantic.com/doc/200905/imf-advice

]]>