Same old story since the beginning of TIME. The elite at the top convince the masses that they are too stupid to understand the higher complexities. It used to be in religion and politics. The difference is that the financial markets show them up to be the frauds they are and the gullible fools the rest of us are to believe them.
Great textbook analysis... But world class traders operate well beyond the textbooks. All the events I mentioned were different... But each created a general, irrational market panic... And fearful markets have certain common characteristics... Such as liquidity crunches and their effects. ** Many of the same historical correlations breakdown in each crisis. ** Experienced traders do not necessarily become better at making money in good times... But they become DRAMATICALLY better at preserving capital in a difficult market. How is this done primarily? "Know when to hold 'em, know when to fold 'em, know when to run." In other words... professional judgment and decisions... As opposed to locking into a suicidal quant strategy. Your brilliant, canned quant strategies may work well 90% of the time... But there are obvious times when they break down... Times that can break you. A lot of things have NOT "reverted to mean" since last summer... And people still waiting for "reversion" in October... Do not have enough experience... And are not qualified to be managing large funds. In my experience... At 5 years trading you get hurt in these crunches... At 10 years you should be breaking even... At 15 years you should be EXPLOITING the ** incredibly inefficient ** markets that result from panic . If not... Then the trader is are too dogmatic... And got stuck way down on the learning curve. Also... There is a huge problem with "spurious correlations" in the quant world. You can find fairly dissimilar securities that may have a high correlation for many years... But unless the correlation is logical and explainable and expected... And the securities are of the same industry and type and terms... The correlation will often break down at ** the worst possible time **. Well thought out long/short baskets are a good partial solution. World class traders are great at avoiding "spurious correlations"... Whereas academics and pure quants and novices and hedge fund egomaniacs... Will always fall into this trap. Yawn 1,000,000 times. All the blowups make the same mistakes... It's just not news anymore.
Thanks for the detailed reply, I tried reading it twice, still I am not sure if it was a response to my post at all though. Maybe you haven't read my post at all, that would explain a lot. I guess the gist of it is that you consider yourself a world class trader and "all those quants" are morons. Oh well, whatever. Good trading to you.
"Stupid Quants" is the theme of this thread... If you had bothered to read it. Sorry that you took a big hit this summer... And that it's all so personal for you. In contrast... Many more experienced traders... Knew EXACTLY how to take advantage of this year's meltdown... And can't wait to exploit the next one.
No, the topic is not "stupid quants" (I am not a "quant" either), the topic is the viability of multi-factor arb equity strategies after this summer's melt down and recent adjustments they have made. Your posts are repetitive and off topic: "world class traders" (yourself) vs. "stupid quants" (the others) Not surprisingly, in another quant thread you were running your mouth labeling the RTS algo package a "scam" because "you never heard of it". I take nothing on this board personal. I just see you exposing yourself as what you really are: somebody who has a glamorous picture of himself and his "abilities" and in reality you are and you know nothing.
Let's try to keep the personal attacks to a minimum. No point in derailing an otherwise interesting, intelligent discussion..
I'll admit freely that I have no use for academics to about the 25th percentile, nobody has wasted more of my time and brain cpu cycles than academics in this entire life... Ok, Nassim Taleb is great... I get a chuckle every time I think about this particular thread though http://www.elitetrader.com/vb/showthread.php?s=&threadid=102794 Some academic came on a site owned by guys that built a $100 million business by trading, questioning the beliefs of traders and sharing his wisdom about efficient markets!! It reminds me of a cartoon in Mad Magazine I saw in a barber shop way back in the 50's when I was a kid, a scientist is standing in the middle of a giant footprint declaring that the giant ape is obviously a myth... Pattern trading by amateurs tends towards randomness, I wonder if on the average have all the combined quant funds made money over the last few years or are they randomness with good marketing skills?? This [admittedly not so recent] article states that quant funds on the average do a good bit better than managed funds but do they do better than the averages?? http://registeredrep.com/moneymanagers/finance_not_man_machine/
You got it. They are picking up nickles in front of steamrollers. The 25 sigma bullshit is for plausible deniability when they lose the suckers $.