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Bodybuilding Mexican Academic

I was going to title this something about robot trading….blah, blah, blah but sticking the words bodybuilding Mexican and academic in the title seemed to be much more fun.

This article does what it says o the can – it is a about a bodybuilding academic whose speciality is artificial intelligence and its application to trading systems. The notion of AI systems does intrigue me because they all seemed to focus on the same style of trading which is seemingly a variant upon the notion of high frequency small gain trading. This makes me wonder sometimes if these systems don’t introduce an inherent instability into the market place as evidenced by last years flash crash. And whether there might not be something Darwinian in their evolution. For examples in the 1980’s before the advent of world wide data networks it was often possible to arbitrage certain markets because of price discontinuity that occurred as a function of the lumpy flow of information. These opportunities disappeared with the integration of world markets. I wonder whether we will reach a situation where the opportunities targeted by high frequency AI systems gradually disappear as the high frequency market place becomes ever more crowded.

 

PS: That’s the good doctor in the photo above

Bodybuilding Mexican Academic

I was going to title this something about robot trading….blah, blah, blah but sticking the words bodybuilding Mexican and academic in the title seemed to be much more fun.

This article does what it says o the can – it is a about a bodybuilding academic whose speciality is artificial intelligence and its application to trading systems. The notion of AI systems does intrigue me because they all seemed to focus on the same style of trading which is seemingly a variant upon the notion of high frequency small gain trading. This makes me wonder sometimes if these systems don’t introduce an inherent instability into the market place as evidenced by last years flash crash. And whether there might not be something Darwinian in their evolution. For examples in the 1980′s before the advent of world wide data networks it was often possible to arbitrage certain markets because of price discontinuity that occurred as a function of the lumpy flow of information. These opportunities disappeared with the integration of world markets. I wonder whether we will reach a situation where the opportunities targeted by high frequency AI systems gradually disappear as the high frequency market place becomes ever more crowded.

 

PS: That’s the good doctor in the photo above

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Best and Worst Days

Last year I wrote a chapter in a book called The Wiley Trading Guide In it I banged on about lies that brokers tell people and some of the profound misunderstandings that those involved in the supply side of trading have.

In particular I took aim at the notion of buy and hold and its oddly skewed notion that if you were not in the market all the time then you would miss the best days. Well as you could gather this notion is bollocks and it is much more important to miss the bad days instead of catching the good days. I stuck in a few nifty graphs to illustrate this.

Someone who has read the book sent me this image this morning – it basically says the same thing. You are better off missing the worst days than getting the best days.

Banker Pay

Apparently $1.6 million is not a lot to get by on……..

WSJ …. The paymaster noted that median precrisis pay was about $2.2 million a year. On average, some $200,000 came in base pay, with the remaining $2 million coming in an annual bonus, about 60% of which was paid in cash.

That is roughly $1.4 million before taxes, leaving after-tax take-home cash of about $700,000 a year, he calculated. That is slightly less than at the banker-pay peak of the early 2000s.

Today, the paymaster said, median banker pay is about $1.6 million. Base cash pay is higher, at about $400,000. But now, the bonus portion has been flipped. About 60% to 70% comes in the form of deferred compensation, largely in company stock.

That means there isn’t nearly as much cash coming in during the first year of the pay package. Roughly speaking, that comes to about $380,000 in after-tax cash. A princely sum by most standards, but quite a comedown for anyone conditioned to take home nearly double that.

The smaller annual cash payout might mean fewer days of vacation at the Atlantis or one less domestic helper, but the deeper issue is the amount of pay that is deferred and dependent upon the long-term success of the bank.

This calls into question the grand bargain of investment banking.

In the precrisis days, bankers would work ungodly hours, fly halfway around the world at a moment’s notice and kiss up to clients and superiors, all for the promise that they would retire rich in their 40s or early 50s. It was like working a job that had a very lucrative pension.

Now, with so much of his or her compensation at risk, the prospect of the banker toiling deep into his 50s or even his 60s is very real.

The surprise is, this has less to do with direct regulation of pay and more to do with the profitability of the business itself.

A weak economy, tighter rules on using leverage and higher reserves are indirectly hitting salaries. Investment banks just aren’t making money like they used to. “The reality has only partially sunk in,” said the paymaster. “It’s harder to put the kids through school.”

The other dream for bankers was to hit it big with one great year. But that too is getting harder. Top bank officials across the Street report the number of $5 million earners has fallen significantly since the crisis. The once-vaunted “$10 million man” is the rarest of breeds. Today, a $5 million salary puts a banker at the 90th percentile for pay, according to the paymaster’s figures.

The long-term deferred-compensation packages are chilling the banker labor market, because unvested shares disappear when a banker switches jobs. Even “garden leaves”—the mandated vacation time between an old job and a new one—have extended to 90 days from the precrisis 60 days. With fewer people switching posts, there is less activity in the entire system, which has the effect of keeping salaries down.

Sad Bastards

If you are one the supposedly 400 gazillion people (sad bastards) who will be tuned into the royal wedding then this is for you.

Sad Bastards

If you are one the supposedly 400 gazillion people (sad bastards) who will be tuned into the royal wedding then this is for you.

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