I currently am in the midst of writing a paper that suggests the regulators are the magicians of the markets. They direct your attention to the left, implies that your really should focus on the right. Time after time the central planners will steer the market to focus on this risk only to let the herd be blind-sided by the risk they are ignoring. There will of course be a rabbit pulled out of the hat at Jackson Hole and nobody would want to miss that. However, everybody is watching what is happening with the Feds and postulating how or even what they will do to make that rabbit pop out of that hat. Of course the assistants are in the know already. The lovely assistances will of course be able to buy all that jewelry and build castle in Vegas that such assistance need, from the crowd's tickets. But do not fool yourself that you can profit from these assistance they will only slowly get fat and growing old.

When the local college big football game is on, it is of course the time for the studious students to go to the library or simply go for a run around the other side of campus; But also it is the worst time to leave your car unlocked by the library or the other side of town. When the focus is on the imaginary, the divertive competitions of a game and fiscal policies of the Feds appear omnipotent. This is of course time to pay attention to what is real, the long term and risk all are currently ignoring.

I could specify hunting grounds and give data to validate this but will not because of the following reasons.

These extra-ordinary trades, without my bad ones, would seem like I was bragging.
2. I do not want to alert the competition to their mistakes
3. People do not remember what you told them yesterday, if it proves correct; it was their idea all along. History even becomes much more fuzzy, if you were right, and much clearer if you are proved wrong.

Yes, Virginia there are inefficiencies in the market, suffice to say look at the well spring of the Government's heart to find them.





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1 Comment so far

  1. douglas roberts dimick on August 30, 2010 10:53 pm

    As a premise of the Theory of Quantitative Relativity, electronic exchange markets are sanctioned human constructs. Therefore, in a nontechnical sense, both legally and systematically speaking, your analogy is spot on.

    In the US, it is particularly notable given the two party system post Watergate with both campaign financing and Congressional lobbying laws and regulation.

    In my research, what I found often overlooked from the smartboys of the market is that quantitative impression remains primarily relegated to analogous functions of experts who testify as to the reconstruction of and analysis at the scene of an accident.

    Granted, as probabilities are indicative of human behavior, much money has and continues to be made with such systematic approaches. Case in point is the reporting that 70% of certain markets are executed via algo-quant constructed automated programs.


    One may consider the Prediction segment at a la post-military applications for market systematics.



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