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The Unbearable Asymmetry of Bullshit

Science and medicine have done a lot for the world. Diseases have been eradicated, rockets have been sent to the moon, and convincing, causal explanations have been given for a whole range of formerly inscrutable phenomena. Notwithstanding recent concerns about sloppy research, small sample sizes, and challenges in replicating major findings—concerns I share and which I have written about at length — I still believe that the scientific method is the best available tool for getting at empirical truth. Or to put it a slightly different way (if I may paraphrase Winston Churchill’s famous remark about democracy): it is perhaps the worst tool, except for all the rest.

In other words, science is flawed. And scientists are people too. While it is true that most scientists — at least the ones I know and work with — are hell-bent on getting things right, they are not therefore immune from human foibles. If they want to keep their jobs, at least, they must contend with a perverse “publish or perish” incentive structure that tends to reward flashy findings and high-volume “productivity” over painstaking, reliable research. On top of that, they have reputations to defend, egos to protect, and grants to pursue. They get tired. They get overwhelmed. They don’t always check their references, or even read what they cite. They have cognitive and emotional limitations, not to mention biases, like everyone else.

More here – Quillette


How Meditation Changes the Brain and Body

To meditate mindfully demands ‘‘an open and receptive, nonjudgmental awareness of your present-moment experience,’’ says J. David Creswell, who led the study and is an associate professor of psychology and the director of the Health and Human Performance Laboratory at Carnegie Mellon University. One difficulty of investigating meditation has been the placebo problem. In rigorous studies, some participants receive treatment while others get a placebo: They believe they are getting the same treatment when they are not. But people can usually tell if they are meditating. Dr. Creswell, working with scientists from a number of other universities, managed to fake mindfulness.

More here – The New York Times

The 1980’s Are Coming To An End

So I am sitting in the pointy end of an old Ansett bus waiting to be ferried back to Melbourne. A few hours earlier I had been wandering around the offices of a very large and well known Sydney based broker. They had flown me up to talk about setting up a derivatives trading desk. Apparently, they had found out the hard way that getting a former shoe salesman to to teach clients about derivatives was a bad idea. Who would have though that?

So I did the rounds of the broker, meeting all the relevant peanuts and being shown the size of their boardroom table. This was supposed to be impressive; it was one of those dick things. The smaller the tackle the larger the boardroom table. After the tour where one is supposed to go oh and ah at everything because that impresses Sydneysiders who don’t think you have ever seen a bridge before. We sat down at said supposedly impressive boardroom table to talk about the job. I am always bored by preamble so was anxious to get to the point and the easiest way I found to get people to the point is simply to ask – how much? All broking jobs are the same, the surroundings are the same and the people are the all same. It is merely a matter of how much you are paid to put up with the shit that the industry entails. Anyway head peanut leans forward in a conspiratorial manner and and says that they are willing to pay you $25,000 a year. Without thinking, which is the way I do most of my talking I replied so what am I going to do for the remaining four and half days of the week? To my surprise this brought the interview to a screeching halt. It is surprising to me peoples perceptions of how much is a lot of money.

The next day I wander back into my office – broking is a same shit different day sort of business. The day begins with a morning meeting where analysts tell us all what stocks they think are going to do well. An analysts view on how well a company will do is based upon the immensely important consideration of did the company pay for lunch and was it a good lunch at somewhere decent such as the Flower Drum.

My view of the morning meeting is that if you do the opposite of what analysts say your clients will make money.  After the morning meeting I wander across the road to the little greasy spoon which makes the best toasted cheese sandwich in the world. Back in the office the formal trading day begins with the opening of the market – this used to be vaguely interesting but the equities trading floor is gradually being phased out and replaced by electronic trading. I would still occasionally wander back down to the floor just for shits and giggles. It was always interesting people watching the desperate’s in the public gallery who would scribble down prices in strange little notebooks and mutter to themselves. Interestingly, as the technology changed this flotsam that hung around exchanges simply migrated somewhere else. They became a feature of the new market display area where they would argue over access to the display terminals with all the ferocity of drag queens who spotted somewhere wearing the exact same outfit as them.

The morning drags on – routine is part of the broking life, as is dealing with total idiots. Money or the promise of money seems to attract them in droves. I get a phone call from a peanut who wants to list his house – I kid you not. Someone how this idiot had managed to get through to me and he explained in long boring detail as to why it was a brilliant idea for him to list his house in St Albans on the ASX. If you not know where St Albans is look it up – you find it filed under places I would prefer to go to jail rather than live in.

Before the market went fully electronic it used to have a lunch break because lunch is something gentleman did. So I wander off down to the Burke Street Mall to grab a Red Rooster $2 meal deal. Its a glamour life in finance but someone has to do it. On the way back I check into David Jones – at this time in my life I had a bit of a tie fetish and I had a young girl who bought me clothes on spec.I would wander in and try things on and give the thumbs to anything I liked.

Many years later I ran into this girl at my gym and she gleefully informed me that she had named her first son after me. This caused me to drop the weight I was holding on the end of my gentleman’s extension…..

That however is a different aspect to  life in the late 1980’s.


One of the most devilish conundrums faced by traders is what to do when an instrument they are following gives a valid signal but this signal is either at an all time high or low. Such a situation has recently occurred with wheat, which according to my system gave a valid sell signal as it moved to a new low.

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The rues that govern trading often run counter to the rules that seem to govern the rest of society – in our daily lives we seem to have a built in barometer of what we think things are worth. This barometer is generally correct in our daily lives. For example, we know that if on Wednesday we walk into our local baker and the price of a loaf of bread has risen from $5.00 to $15.00 that we are being ripped off. Our value scale in this instance has worked. Similarly, if we walk into a car yard and see a car advertised for a fraction of its value we know that something strange is going on and all sorts of alarm bells go off.

Yet, in trading this inbuilt sense of the economics of life is useless.Granted, there are people who think they know what something is worth and they generate all manner of models and hyperbole to justify this judgement. They make the mistake of believing that the market is somehow listening to their internal narrative. These are the sort of people who are convinced that oil is worth $100 a barrel and that the market is just wrong. The only value in trading that is true and correct at all times is the value given to something by the market. You will often hear statements along the lines that the market  market is incorrect in its assessment of the value of something. As a basic principle the market can never be wrong – if we assume that the market is a synthesis of all opinions and knowledge then the price and trend it sets for an instrument is correct and anything else is simply titling at windmills.

As a basic rule we have no ides how high or how low prices will go.


Biased Shorts: Short sellers’ Disposition Effect and Limits to Arbitrage



Not certain about the wing.


Not dead, just resting

IN 1990 hedge funds were still rare birds; 500-odd funds managed around $40 billion, mostly for rich individuals. Few people understood what they did or bothered to find out. By the end of 2015, the sector had mushroomed to include nearly 9,000 funds managing roughly $3 trillion. Along with private equity, the industry was classed as an “alternative asset”, attractive to pension funds and endowments. But a recent wave of fund closures, and the expectation that more will follow, suggest the industry’s era of stratospheric growth may be in the past.

On the surface, fund closures are the norm in a cut-throat industry: every year hundreds of fund managers call it quits, only to be replaced by yet more would-be masters of the universe. But the gap between closures and launches is narrowing (see chart). In the first nine months of last year 785 new funds were launched and 674 were closed, according to Hedge Fund Research (HFR), compared with figures of 814 and 661 over the same period in 2014. In 2016, for the first time since the worst of the financial crisis, there may be more closures than launches, says Amy Bensted of Preqin, a data provider.

More here – The Economist

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