In case you missed the news....

Or didn't read my post the morning of the French invasion of the Fed :

Fed May Cut Rate to Below Inflation, Risk Unleashing of New Asset Bubbles
http://www.bloomberg.com/apps/news?pid=20601109&sid=amPLl6VFY8FM&refer=home


Exactly what I thought would be the eventual outcome - unforeseen monkey wrenches and asset bubbles!!

Want to save the planet, reduce dependency on Middle East Oil and make less of an impact??

Turn veggie!

This article spells out what I've been saying when people ask me if I do my part,  I say "Yes, I do more than most, since I don't eat dead animals."

http://www.nytimes.com/2008/01/27/weekinreview/27bittman.html?em&ex=1201582800&en=f3cfee6abce3bfe4&ei=5087%0A

The Fed Cut For A Rogue Trader!!

The U.S. Federal Reserve -


made its most dramatic rate cut EVER - (bigger than for 9/11)


In response to a worldwide collapse of equity markets -


DUE TO A ROGUE TRADER MAKING LESS THAN $100k Euros!!!!!!


So...... you think maybe the Fed overreacted and is going to regret causing massive, unintentional, complex and unpredictable bubbles in the world's economies???

Fundamentalists should be thanking the Fed and Quants should be short term

Clearly this is another opportunity for fundamental traders to exit/go short, courtesy of the fed :-)

As for quants, I take some solace to what AQR went through during the end of the 90's when they were down almost 50%!  They were doing what quants do - expecting the markets to behave somewhat like they had for the recent and long term past - somewhat rationally.  The late 90's bubble caused that strategy to fail and being the pioneers they were, they were still discovering the field as they went along.  Well, anyone using a similar strategy (including yours truly) has been having a less than pleasant time since the summer of '07 and all of this turmoil is upending much of what we 'know'.

Only quants trading very short term / high frequency have any hope of maintaining returns.  Until, that is, that trade gets crowded too. (Like the low vol RIEF-like trade got crowded coming into summer '07).

Now, its time to figure out how to profit from future bouts of 'lack of diversity' and 'tight coupling' :-)

The Fed's Big 75 Bps Mistake

Just a quick note about the Fed managing yesteryear's economy. 
There are many parallels to this weekend's article on increased risk of worldwide pandemic outbreaks due to increased international travel and the worldwide healthcare systems' utter lack of preparedness to handle it - and the worlds economic risk of pandemic outbreaks.  The difference is that the coupling of the world's markets is even tighter and the spread even quicker. 
The Fed is managing under the illusion of yesteryear's lightly coupled economies.  To be fair though, not sure that they have any choice.

The reason today's 75 bps cut is a mistake is that they are taking a big move without understanding the effects of feedback loops in a tightly coupled financial world.  Better to do nothing or small things than to throw a monkey wrench in a random direction.

Markets serve to find a clearing price and I don't see how this will do much to rectify the world's over-housing and overspending.  Borrow from Peter to pay Paul enough and Peter ends up owning you....

Very nerdy, but awesome video

One of my favorite bloggers, Tim Knight, creator of prophet.net and their clean charting, has linked a youtube video at the bottom of this post:

http://www.slopeofhope.com/2008/01/tim-knight-isin.html

that is a parody of The Police's "Every Breadth You Take".   Well worth checking out :-)

Amazing show on PBS - Curious

About the brain and its complexities.  The common fruit fly has a brain the size of a sesame seed, and does some amazingly complex things.  A brain with 300,000 neurons.  And only a handful control the incredibly complex act of flying!   Something that the best scientists in todays world can't even come close to replicating no matter how many computers we throw at it.
See the show for a pretty good description. (link below)

What I've always mentioned to Dharma (my wife) is that I'm amazed that there are things THEMSELVES THE SIZE of a sesame seed, you know, gnats, that can fly in very complex ways - can avoid my hand and tissue very effectively, for example.

The show leads up to the question of mind vs brain.  The analogy made by a neuroscientist was that if you replaced one neuron in a brain with a suitably designed semiconductor switch, it should work the same way.  If you replace two or ten, it should continue to work the same way.  Eventually if you replaced all of the neurons with chips, would it continue to work the same way?  In the sense that it would be conscious and have an identity??  That is questionable and I believe it wouldn't work - the brain, I believe, does things at a subatomic and quantum level that creates consciousness.  If not that, then perhaps something about the complexity that arises from such an enormous number of neurons gives rise to consciousness.  Like cells vs animals and humans vs societies.  Traders vs markets....

What are your thoughts on this??

(Hahahahaha - get it?, no seriously what are your thoughts?)



Here's the link to the show:
http://www.thirteen.org/curious/

Unintended consequences

Here's an article that talks of an ostensibly positive change we as a society have made, which had an unwelcome and somewhat opposite effect, many generations later: (Clean environments lead to allergies.)

http://www.technologyreview.com/Biotech/19997/


What other examples can you think of ?

Want more money, better health and sharper focus??

Meditate!

http://www.time.com/time/magazine/article/0,9171,1147167-2,00.html

Joe Rogan talking about DMT??!? This guy is crazy!

Total waste of time, I'm sure, but very interesting:

http://www.youtube.com/watch?v=grcqs9cDuN8

NFLX - knew it!

Just yesterday, was speaking with a colleague about the writer's strike and the first new shows in a long time. He mentioned that's supposedly going to drive more business to NFLX and other 'alternatives', but felt that it may be a mixed blessing, in that it may also increase current subscriber's use of their services = higher costs, so it'll be a tug of war btwn the new subs and the higher costs per sub. My colleague gave the example of his brother, who NFLX must lose money on, because he's a heavy user. I then mentioned that I don't understand why NFLX doesn't just provide heavy users with a small $50 box that downloads those movies in DiVX, quicker than they mail it to him, and bring the cost to almost $0.

Couldn't make this stuff up, but it's what they announced this morning. Too bad I'm not long the stock!

I guess even Quant-abee's like to pick stocks sometimes...