>
I did an interesting interview with Damien Hoffman of Wall Street Cheat Sheet — most of the questions he asked were not the usual fare.
Have a look here . . .
While yesterday's US stock market close was poor, Asia and Europe didn't follow today as debt in Greece, Spain, Portugal, etc... rallied, their CDS narrowed and stocks bounced. The Greek finance minister said January tax revenues came in above expectations and that spending was below target for the month and said "that means the deficit reduction for January is well within what we have promised." The euro is rising in turn. Also helping is the story that Trichet is headed to the European Union leaders summit a day early in order to address Greece's problems even as the Greek finance...
read more »
July 7th, 2009 at 4:24 pm
barry – fantastic explanation of the misconceptions of the Boskin Commission and the not-so-deflationary pricing life cycle of tech products.
July 7th, 2009 at 4:26 pm
Actually, a mathematical model (unless exhibiting chaotic dynamics) will by definition be very precise, giving the same result for the same inputs. However, regarding reality, it might not be accurate. Not accurate but very precise! Precision impresses a lot of people.
~~~
BR: Restated: They all are inaccurate, most are imprecise!
July 7th, 2009 at 5:11 pm
Morpheus . . .er . . . I mean . . . BR-
great interview- looks like there is more to come- good observation that it was only a handful of people that brought AIG and Merril Lynch too their knees-
that you were also likened to Sub Pop Records . . . pretty cool. . .so would the TBP be like the equivalent of Sub Pop’s Nirvana or . . . maybe Soundgarden?
July 7th, 2009 at 5:43 pm
If you liked Barry in Part 1, in Part 2 he tells a story I believe will become Wall Street legend when our kids ask us about the Great Crash of 08. Should be up Monday.
It was a pleasure and honor to have an hour long conversation with Barry. Tens of thousands of hours of dorm room philosophizing finally paid off.
Thanks, Barry.
July 7th, 2009 at 5:44 pm
Nintendo, eh? Techmo Bowl?
July 7th, 2009 at 6:13 pm
Great interview, Barry & Damien. Well done. Looking forward to next week’s excerpt.
July 7th, 2009 at 6:21 pm
Re restated: “All models are wrong, but some are useful.” – George Box, statistician
July 7th, 2009 at 6:37 pm
BR, you observation about how prices deflate as you produce more of a good, is true of more than just technology (though it sure easier to see). it applies to just about any manufactured good. and models based on math (and computers) are always as good as those who picked the variables. and how they used them. and how they viewed the world too i would guess. and especially how their bosses do!!
July 7th, 2009 at 7:05 pm
“Anytime you are going to attempt to depict reality with a mathematical construct, the model will never be precise. ”
I think you meant “human behavior” instead of reality because Newtonian and quantum mechanics,for example, quite accurately depict reality.
~~~
BR: Excellent point!
I was being imprecise with my language, in referring to markets and the economy as reality
July 7th, 2009 at 7:09 pm
comment on statistics
http://baselinescenario.com/2009/06/30/statistics-and-basketball-for-beginners/
July 7th, 2009 at 7:36 pm
“Anytime you are going to attempt to depict reality with a mathematical construct, the model will never be precise.”
The name Kurt Godel comes to mind here.
July 7th, 2009 at 7:42 pm
@Fredex: Had fortten about George Box’s classic statement. Seems relevant.
@Wally: Wow! I guess this is the math stream. So how many people exactly remember Box and Godel?
July 7th, 2009 at 8:42 pm
Bailing out into Poly Sci? What a wimp.
July 7th, 2009 at 10:03 pm
The Subpop of the economics world! That is a very high complement.
Interesting that you use a factor model approach. Factor models when used correctly (basically managing less than a few billion) are incredible.
willid3:
The equation for sampling with replacement is the basis of all intelligent risk management. Most people do not understand this, so risk way, way, way too much or look at entirely inappropriate metrics, like VAR. Vary the success ratio until you reach historical lows or highs and you will have a good, but not exact, idea of the risk you are facing. Stress test with crazy numbers, and you will get your max risk over a 20 year trading period. Basically, sampling with replacement will tell you how bad it is likely to get over the next X trades, given your assumptions. The assumptions are simple enough to be “played with” and intuitively known.
Winning streaks and losing “streaks” are far more common than people expect. So many of the best traders in the world were gambling statistics freaks – who use this equation constantly in one form or another.
July 7th, 2009 at 10:35 pm
Barry, is that your Blue Steel?
July 7th, 2009 at 11:26 pm
Your picture needs a caption, like “I am serious picture, the big.” or some other LOL cat quote.
July 8th, 2009 at 9:40 am
“The sweater” makes a comeback in the dog days of summer!!