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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: GPS Info who wrote (105512)

4/12/2014 10:50:29 PM

From: Maurice Winn

1 Recommendation

Recommended By
John Pitera

Read Replies (1) | Respond to of 217779

GPS you didn't follow the reasoning. Theories don't need equations to be valid. Humans developed very powerful brains which did linguistic calculations based on reasoning. Aqueducts worked well without equations to define Reynolds Number.
<I thought not. So you have a theory without equations. Good luck to whomever buys into your theory. >

Not even one little bit persuaded. Now there's a mindset that's obdurate. But understandable since you obviously did skim-reading and missed meaning.
<Once I can measure your success, I may makes some bets myself. >
You obviously missed the four years in a row that my 31 December gold price predictions were perfect [within a dollar] and I even threw in a free 30 June 5th one which was almost perfect. You can click back upstream here to see how amazingly prescient they were and how amazingly far in advance [2 years]. I did cheat though and did use mathematics not just words and reasoning. I stopped predicting because, as I stated here, nearing the financial speed of light in financial relativity theory, the fluctuations were going to get too big to predict well enough.

But let's not get side-tracked from the Flash Crash which was the actual subject. <I already know about HFT from reading about them for the last several years. I also understand the dangers for overall markets and the guarantees profits for the large players with computer systems near the trading centers. I also understand margin calls. However, none of this would lead me to believe in your theory that leads to an understanding of “flash” being equivalent to several months of market upheaval.> I don't believe you have not read about what caused the flash crashes other than from me, but maybe somebody else has identified that it's not "market upheaval" or systems failure or being close to the trading centres which causes the flash crashes.

<With a flash crash no human can respond quickly enough to prevent a loss.> They don't have to respond to avoid a loss. Just do nothing and the price goes back up again. A flash crash is not a sudden fall. It's the fall followed by an equivalent rise. But actually, humans can respond quickly enough to join in but their information is so bad on the instantaneous price that they are unlikely to succeed in buying and selling or selling then buying during a fast flash crash. The fast flash crashes are liquidity tests and games of chicken held between competing computers. But they are also testing human responses and humans can panic and sell within a couple of minutes. The longer "flash" crashes are not just testing trader responses but seeing if there are concatenating margin-calls which can pile up and crash, for example, a Lehman Brothers, which happened.

<As a substitute you could tell me of any market bets that you may have placed based on this theory, and their outcomes.>

Just for fun, here are excerpts from an email exchange [thanks to the wonders of Gmail which has good storage and search functions] with our daughter who worked at Barclays Capital in London:

7/14/08
to Emily.Winn

Suggestion = get $10bn from "sovereign funds" which are countries with
loads of money, which will make Barclay's balance sheet super-tank.
Then stand by to bid on Lehman, Fannie, Freddie, Merrill Lynch and a
lot more besides. Make that $20 bn. They have that much sloshing
around wondering what the heck to do with it.

7/14/08

to me

Our department has actually just been moved downstairs so now we are
next to our Sovereign Funds department. I actually bumped into Gay Huey
Evans who is our person in charge of the relationship with sovereign
funds last week. She tried to bust in on me while I was in the toilet
(our main toilets were broken so I was using the handicapped one in the
hall way, she had the same idea but I beat her to it - we had banter).
She's a nice American lady who is also Vice Chairman of Barclays
Investment Banking and Investment Management (IBIM) which is the lingo
for grouping Barclays Capital, Barclays Wealth and Barclays Global
Investors.

8/15/08

to Emily.Winn

... though Lehmans is increasingly lookiing like a company to nab for
Barclays in conspiracy with a Sovereign Wealth Fund.

etc... I think there are a couple more. I have no idea whether Emily discussed Lehman etc and would not ask and she would not say, but it was quite a coincidence that Barcap was ready to go and went and now owns a good chunk of Lehman. Bob Diamond got promoted but then ran into Libor problems.

I started a company specifically for the purposes of trading on my non-equational [and mathematical where applicable] financial relativity theory. You can click back upstream here to read the trades it did, but I shorted Wells Fargo, J P Morgan and Broadcom, then covered them about the same time that Warren Buffett bought into WFC in a big way [and at the same price]. That was a lot of fun and highly profitable. The company has been sitting on cash for a while until some bright idea arrives. The company also bought Globalstar at 38c and sold at $1.48 [GSAT has carried on up to $2.60 and is now to be listed on NYSE. A long-term buy was GNOM but it became a 20% loss when a buyout was forced. I should stick to speculating.

The point of my discussion about "flash crashes" is the mechanism rather than the time. In fact they do not happen before humans can do anything. Humans can react in a minute and do if they are there and on-line and ready to go. Flash crashes are different durations. The big one was somewhat shocking so got lots of attention. <It is not arbitrary to label a rapid price change that happens within a few seconds as a “flash crash.” These have been called flash crashes specifically because they happen so quickly. The point was to distinguish these from market downturns occurring over several months or years. With a flash crash no human can respond quickly enough to prevent a loss.>

My meaning, as Humpty Dumpty says, and as a reasonable reader would know, is not to pretend that a crash of longer duration is a literal "faster than a blink of a human eye" flash, but to identify the meaning behind the flash crash = the causal relationships = the why [all good mathematical equations].

A pedant would say a flash crash can be 3.14159 minutes long and any longer than that is not a flash crash [FC]. FC = 1pi. That is a good mathematical definition but irrelevant to sensible investing. FC is a dimensionless number in quantum physics related to the time it takes for the speed of light in a given gravity field to circumnavigate a ring of HFT computers around the NYSE, Nasdaq, Dow, S&P 500 divided by the time it takes to place an offer and cancel it again. In common lingo "It's a Flash Crash... arrrgggghhhh!!!"

The transition from laminar to turbulent flow is not related to flash crashes: <
Please get back to me when you find one, and we can both review its applicability to redefining “flash crash.”> They are different phenomena but of course the HFT million mile a minute supersonic flash crashers are watching for such transitions and will be in like hungry dogs when they spot a transition or that they might be able to cause the transition.

Mqurice