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gonna be ugly when wall st opens in the a.m.
wall st massacre....
- Thread starter Dancing Fire
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In Modeling Risk, the Human Factor Was Left Out
excerpt:
The Wall Street models, said Paul S. Willen, an economist at the Federal Reserve in Boston, included a lot of wishful thinking about house prices. But, he added, it is also true that asset price trends are difficult to predict. “The price of an asset, like a house or a stock, reflects not only your beliefs about the future, but you’re also betting on other people’s beliefs,” he observed. “It’s these hierarchies of beliefs — these behavioral factors — that are so hard to model.”
Indeed, the behavioral uncertainty added to the escalating complexity of financial markets help explain the failure in risk management. The quantitative models typically have their origins in academia and often the physical sciences. In academia, the focus is on problems that can be solved, proved and published — not messy, intractable challenges. In science, the models derive from particle flows in a liquid or a gas, which conform to the neat, crisp laws of physics.
Yet blaming the models for their shortcomings, he said in an interview, seems misguided. “The models were more a tool of enthusiasm than a cause of the crisis,” said Mr. Derman, who is a professor at Columbia University.
(full article at link above)
excerpt:
The Wall Street models, said Paul S. Willen, an economist at the Federal Reserve in Boston, included a lot of wishful thinking about house prices. But, he added, it is also true that asset price trends are difficult to predict. “The price of an asset, like a house or a stock, reflects not only your beliefs about the future, but you’re also betting on other people’s beliefs,” he observed. “It’s these hierarchies of beliefs — these behavioral factors — that are so hard to model.”
Indeed, the behavioral uncertainty added to the escalating complexity of financial markets help explain the failure in risk management. The quantitative models typically have their origins in academia and often the physical sciences. In academia, the focus is on problems that can be solved, proved and published — not messy, intractable challenges. In science, the models derive from particle flows in a liquid or a gas, which conform to the neat, crisp laws of physics.
Not so in financial modeling. Emanuel Derman is a physicist who became a managing director at Goldman Sachs, a quant whose name is on a few financial models and author of “My Life as a Quant — Reflections on Physics and Finance” (Wiley, 2004). In a paper that will be published next year in a professional journal, Mr. Derman writes, “To confuse the model with the world is to embrace a future disaster driven by the belief that humans obey mathematical rules.”
Yet blaming the models for their shortcomings, he said in an interview, seems misguided. “The models were more a tool of enthusiasm than a cause of the crisis,” said Mr. Derman, who is a professor at Columbia University.
(full article at link above)
Just now figured out that human bias is in their precious models??? Oh the horroror!!
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and again!!Date: 11/6/2008 11:15:13 AM
Author: Linda W
Here we go again!!!
Linda W
Super_Ideal_Rock
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Date: 11/12/2008 7:57:20 PM
Author: Dancing Fire
and again!!Date: 11/6/2008 11:15:13 AM
Author: Linda W
Here we go again!!!i need a loan Supa Granny.
I was just going to ask you for one. You wouldn''t deprive my two little grandsons Christmas presents now would you?????
Allisonfaye
Brilliant_Rock
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This is nuts. I don''t know what it bottomed out today at but I know at one point, it was down close to 400 points. It closed up 553. Crazy. I am getting whiplash just watching it.
By the way, did anyone listen to the testimony of these hedge fund guys? All they were doing were tooting their own horns and saying THEY shouldn''t be regulated.
By the way, did anyone listen to the testimony of these hedge fund guys? All they were doing were tooting their own horns and saying THEY shouldn''t be regulated.
miraclesrule
Ideal_Rock
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I was listening to NPR on my commute home tonight and heard a very knowledgable political economist. I guess that is what one would call her. Maybe some of you have heard of her before. Her name is Ann Pettifor. I found her knowledge of historical international economics to be easy to understand and quite fascinating. So when I got home I researched her on Google. I found this article that she wrote in 2003 that accurately predicted that the next credit bubble crisis would occur in America. This article doesn't provide all the detail and timelines of conversion from the gold standard to US Treasury bills to back US debt which all countries retain in their central banks, but I found it interesting that so many people outside our country seem to have such a grasp on America's role in creating a global economic crisis that would unfairly affect the middle class and the poor. I did like her solution to the problem, which I can't remember in the detail it deserves, but if you want to read the article she wrote in 2003 here is the link. She also wrote a book in 2006 apparently setting forth in detail what would happen in the next few years, and boy was she spot on.
Eerie 2003 prediction of America credit crisis
Eerie 2003 prediction of America credit crisis
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IMO...they didn''t do anything illegal.
Beacon
Ideal_Rock
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Agree w/ DF. They are acting within the law as it is now written. I personally think the tax treatment of what is clearly earned income as capital gain is not proper and I believe the law will change on this point.
Those hedge guys made a good point that they have not asked for or received any government help. (of course this could change).
I think they could be useful to government in creating regulatory policy and they are very wise to volunteer to do so. They may as well get ahead of it, as it is coming for sure.
I found their testimony very interesting and intelligent, though I did find Ken Griffin''s near tearful lament about the jobs at Canary Wharf in London that really should be in America to be almost laughable.
Those hedge guys made a good point that they have not asked for or received any government help. (of course this could change).
I think they could be useful to government in creating regulatory policy and they are very wise to volunteer to do so. They may as well get ahead of it, as it is coming for sure.
I found their testimony very interesting and intelligent, though I did find Ken Griffin''s near tearful lament about the jobs at Canary Wharf in London that really should be in America to be almost laughable.
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S&P is 806 points away from 0
strmrdr
Super_Ideal_Rock
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If GM or Ford and maybe Chrysler go under it will hit 5k or under is my prediction.Date: 11/19/2008 9:19:34 PM
Author: Kaleigh
Tell me about it....Date: 11/19/2008 6:56:20 PM
Author: Dancing Fire
Dow is 8000 points away from 0
S&P is 806 points away from 0
Beacon
Ideal_Rock
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That's going to be interesting to see how the Dow does if they go into C11. As far as their actual market caps, they are irrelevant. GM is #446 on th SP500 and represents 1/10thof 1 percent of the weighting. To put that in context, Bed Bath and Beyond is #272 in the weighting. So, as far as being a big deal in the stock market, it isn't and hasn't been for a long time.Date: 11/19/2008 9:34:56 PM
Author: strmrdr
If GM or Ford and maybe Chrysler go under it will hit 5k or under is my prediction.Date: 11/19/2008 9:19:34 PM
Author: Kaleigh
Tell me about it....Date: 11/19/2008 6:56:20 PM
Author: Dancing Fire
Dow is 8000 points away from 0
S&P is 806 points away from 0
AS far as their influence on the DJIA, of which they are a member, if they went to zero tomorrow, the net effect of that price change would drop the Dow 21.2 points. In fact, if they could get kicked out of the Dow and a better company could take their place maybe we would get a better Dow. After all, Woolworth once used to be a Dow stock.
Doesn't mean some people won't continue to sell this market though.
Under C11 they can still operate but have the chance to become much more efficient.
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the market is getting closer to 0 everyday.
Beacon
Ideal_Rock
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It''s getting pretty sad.
This reminds me of the dot com era. Not the dot bomb, but the part that came before it, the huge upswing.
Everyday XYZ.com stock would go up 7,10,12 points. Then the next day the same, and again, and again. Now we are doing the same thing in reverse, an absolute selling frenzy. When they start going parabolic, one is usually near the end.
Calling a bottom is impossible and the final bottom maybe quite aways out in time, but this kind of selling is sort of insane to me.
This reminds me of the dot com era. Not the dot bomb, but the part that came before it, the huge upswing.
Everyday XYZ.com stock would go up 7,10,12 points. Then the next day the same, and again, and again. Now we are doing the same thing in reverse, an absolute selling frenzy. When they start going parabolic, one is usually near the end.
Calling a bottom is impossible and the final bottom maybe quite aways out in time, but this kind of selling is sort of insane to me.
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if we have 10 more days like this,then i might break even.
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