Tuesday, October 11, 2011

Volatility Butchers Quantitative Hedge Funds

One of our long time theses is that quantitative finance as it is now accepted is a myth.  An invention of the ego that is destined to fail.  And along with it, Wall Street’s quantitative trading and the hedge fund industry is going bye-bye. 

The Goldman Sachs quant fund that is cited at the bottom of this article was once $12 billion dollars in size.  That is, before it imploded under its own incompetence and finally closed with $1.6 billion in assets.   Well, we said this was going to happen and it has.  

So, I’m sort of curious.  What does it say about someone’s intelligence that they receive high academic grades in a field of study that is eventually found out to be based on myths and lies perpetuated by ego of the self-deluded mind? (Quantitative finance MBA programs and courses of study)  What does it say about the professors who are teaching it?  And the financial community who then spends billions of dollars building massive institutions of the ego to embrace it?  And all of the financial advisors who pushed it like crack cocaine?  And all of the economists who shilled for it?  And all of the support industries that grew up around it?  And all of the journalists who wrote of their brilliance?  And all of the politicians who rewrote and dismantled the laws to allow it?   

All of our long term calls continue to work out quite nicely, albeit, more slowly than I anticipated.  More slowly because the status quo continues to spend other people’s money in its own self-interest rather than spend that money to build a new, sustainable and emotionally-enriching reality for all of us.  

posted by TimingLogic at 2:14 PM

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