Dec

3

Trefil/HazenI have been reading the excellent book The Sciences, an Integrated Approach by James Trefil and Robert Hazen, the content of which all college students should be required to master, as it integrates all sciences rather than giving a physics-for-poets kind of approach. It is shameful that 90% of all college students get out of school without being exposed to current knowledge and work in the major sciences.

The book's beginning chapters on the Night Sky, along with the posts of our own Dr. Zussman, whose erudition in astronomy is awesome, lead me to wonder whether the acorn falls very close to the tree in research. Certainly there are many insights from astronomy for speculators, and I don't mean the impact of the moon, which has been beaten into smithereens.

KeplerI would start with the way Tyco de Brahe, and then Kepler, worked together to figure out the orbits of the planets. It took very accurate measurements by de Brahe, and then some good scientific model-building by Kepler, to figure out the orbits were elliptical. I wonder if the orbits of bonds, stocks, and $/euro could be approached in a similar way. A good start would be a 3×3 table with the impacts of each.

I encourage all specs to look at their own fields and figure out what the major successful approaches to gaining knowledge therein were, and then to apply it to the markets. Such would lead to much better results that studying the work of the revered founders. A good start in my opinion would be for the astronomers among our readers to apply the methods used to determine the orbits of planets to the orbits of markets.

Bill Rafter remarks:

Looking at equity, debt and currency prices for liquid markets you would expect the respective market-clearing prices for those items to have digested the relevant information and to have valued themselves accordingly. However this is akin to the three-body problem from astronomy, which cannot be fully solved. That is, there is a certain amount of inefficiency. Specifically, we have found that in trading one of those categories, information from the other two provides better results than can be obtained without their inclusion. 


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