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Monday, September 27, 2010

The Left Right Paradigm is Over: Its You vs. Corporations | The Big Picture

The Left Right Paradigm is Over: Its You vs. Corporations | The Big Picture

For Fort Carson soldiers in Iraq, 'our mission has not changed,' officer says | fort, carson, new - Top Stories - Colorado Springs Gazette, CO

For Fort Carson soldiers in Iraq, 'our mission has not changed,' officer says | fort, carson, new - Top Stories - Colorado Springs Gazette, CO: "“Our mission has not changed,” Maj. Joe Bethel of the 3rd Brigade Combat Team said."

Quants fail to live up to expectations

FT.com / FTfm / Investment strategy - Quants fail to live up to expectations


At the beginning of the twentieth century, Scott’s Porage Oats were marketed as being produced entirely through an automated process: “untouched by human hand”. Towards the end of the century, a new variety of asset management could lay claim to such a slogan – “quants” or quantitative managers fed mathematical models of financial markets into computers, which were then supposed to select stocks with none of the biases and fallibility of human stock selectors.
Investors were easily convinced of this concept, perhaps seduced by impressive technical descriptions of models, perhaps dubious about the possibility of traditional asset managers beating the market. Large amounts of money poured into quant funds, both long-only and hedge funds.
“Assets managed quantitatively grew phenomenally in the late 1990s and early 2000s,” says Martin Knowles, head of equity manager research at investment consultant Towers Watson.
More recently, quant funds have struggled as their performance, by and large, failed to satisfy investors through the credit crisis and afterwards. Fund research company Morningstar looked at the US quant sector recently, finding a group of 65 quant funds were on average in the bottom quartile of all US equity funds over three years to July 2010. This includes funds from Bridgeway, Goldman Sachs, JPMorgan and Vanguard. Axa Rosenberg is shortly to liquidate four Laudus funds following a controversy over the handling of an error in one of its models. The controversy saw founder Barr Rosenberg and head of research Thomas Mead leave the company.
“Quant has got a bad press because of performance issues,” admits Eric Sorensen, president and chief executive of PanAgora, a US manager with a strong quant tradition. “When a lot of people come in and do the same thing, there are capacity constraints.”
It is difficult to get a precise handle on exact numbers flowing in or out of quant funds because the definition of such products is not clear-cut. Most fundamental managers use some quantitative techniques to filter their universe or provide suggestions, so the line between the two has become blurred.
“My impression is there have been asset outflows,” says Mr Knowles. “In one way, outflows are a good thing, because then you have less money chasing the same factors.” Nevertheless, this advantage will be minimal, he predicts, because the money leaving the sector is not material by comparison with the money that flowed in when quant was in fashion.
Investor attitudes to quant managers are not uniform, even after the struggles of the past few years. “Some clients have an appetite for the quant approach – it’s systematic, it’s easy to explain what the investment story is,” says Mr Knowles. “Some would regard it the opposite way, as a black box.”
Because many quant models identified and attempted to exploit similar factors in the market, such as momentum and value, the more money chasing these factors, the less outperformance any individual fund could achieve. They have also struggled in recent market conditions, explains Mr Knowles, because they frequently do best when the market is taking a clear direction.
“Inflexion points”, at which that direction changes, can be harder for a model to adapt to than a human, he explains. “Over the past year or so, the market’s been oscillating between worry and belief that everything’s going to be okay.
“That’s effectively been a whole series of inflexion points, which is generally not good for momentum strategies,” he says. 
This is not to say quant managers are sitting back and waiting for things to go their way again. Instead, many of them are re-examining their models, either because they are concerned they were not correct in the first place, or because they believe markets have changed sufficiently that new models, or at least adjusted versions, are necessary.
“The problem is that finding unique factors becomes ever more difficult as more and more people are looking for them,” says Mr Knowles, “and there’s an increased risk of identifying spurious relationships.”
Although it may be true figures cannot lie, it is very easy for them to mislead, suggesting trends or correlations that do not actually exist.
Other quants have looked at improving their trading techniques to squeeze extra performance from their models, while others are examining questions of timing in switching to eke out returns.
A reconsideration of the role of risk in portfolio management is another avenue for exploration by the mathematically minded. The fundamental indices that re-weight traditional market capitalisation weighted indices according to company metrics such as dividends have been in vogue for some time, but are often criticised for resulting simply in value investment strategies. Now alternative methods of weighting indices are being developed, such as the “anti-benchmark” approach of French quant Tobam, which systematically weights index components based on their correlation to each other to maximise diversification.
Since this approach is intended to minimise risk, as does the “minimum variance” approach, its success should be measured largely by the lower volatility it produces, but it has outperformed in most of the big markets Tobam invests in.
Like many investment innovations, quant managers’ core ideas have become mainstream – now they find themselves at the edge of thinking about what exactly investors want from their portfolios and how that might be produced.

Wednesday, September 08, 2010

7 Things To Do To Improve � The Kirk Report

7 Things To Do To Improve � The Kirk Report

Wall Street Actually likes Obama.

Stock market has performed well under his stewardship.
But he had a good leadin.

Bespoke Investment Group - Think BIG - 595 Days Into Obama's�Presidency

Wall Street Actually likes Obama.

Stock market has performed well under his stewardship.
But he had a good leadin.

Bespoke Investment Group - Think BIG - 595 Days Into Obama's�Presidency

Pants Size Chart - Waist Measurements for Men - Esquire


Pants Size Chart - Waist Measurements for Men - Esquire

Building on Faith in Lower Manhattan - NYTimes.com

Feisal Abdul Rauf


Op-Ed Contributor - Building on Faith in Lower Manhattan - NYTimes.com

Cogitamus: Just Because They Call Themselves That Doesn't Make It True

Modern conservatives and libertarians in the US want the US to be more like China.

Cogitamus: Just Because They Call Themselves That Doesn't Make It True

Beware of Greeks Bearing Bonds

Beware of Greeks Bearing Bonds | Business | Vanity Fair

Michael Lewis is a national treasure.

Monday, September 06, 2010

Sunday, September 05, 2010

Doubles

Open House, Day 7: Why Don't Doubles-Loving Fans Watch Live Doubles? - NYTimes.com: "Tennis is aspirational, like certain other distractions in life, and most people who play it recreationally, and who may have started as kids, in their dreams always dreamed about becoming great singles players, not great doubles players. In their dreams they held up the singles trophy on Centre Court. Doubles reminds them that they’re no longer young, that life can be disappointing, that not all dreams come true, and that not anything is possible. Well, maybe that’s a little too Dostoeyevskian, but you get the point."

Hunter and a bear

copyranter: This is how to use YouTube to sell a product.

Why killing "criminals" with drones is a war crime. - By Ron Rosenbaum - Slate Magazine

Why killing "criminals" with drones is a war crime. - By Ron Rosenbaum - Slate Magazine: "It raises serious questions about the war itself: Are we in Afghanistan to fight a religious sect because 10 years ago, when it was in power, it sheltered al-Qaida and might again in the future? Are, therefore, all members of the sect legitimate military targets? Are there no civilian Taliban, who, repellant as some of their practices are, nonetheless deserve protection from drone strikes?"

Polling Bias

Only 48 economists were asked and 4 responded. Any guesses to the bias that the 48 economists choosen by the WSJ might have?

Economists Want Policy Makers to Back Off - WSJ.com

The true cost of the Iraq war: $3 trillion and beyond

The true cost of the Iraq war: $3 trillion and beyond: "absent the Iraq invasion, we would still be stuck in Afghanistan. And this is not the only 'what if' worth contemplating. We might also ask: If not for the war in Iraq, would oil prices have risen so rapidly? Would the federal debt be so high? Would the economic crisis have been so severe?"

Friday, September 03, 2010

Impressions of Afghanistan - International - The Atlantic

Today's long and depressing read.
There is no way out.

Impressions of Afghanistan - International - The Atlantic: "“We’ve killed hundreds and thousands of Taliban over nine years, and killing another thousand this year is not going to be the difference.”)"

Republican Interests

From the comments of an article on the inconsistencies of republican policy proposals.

Marginal Revolution: What stance will (should) Republicans take on payroll tax cuts?:

"Republican interest in the actual effects of policy. The balancing concerns are:

a) What will give Republicans more power?
b) What is better for America's largest corporations?
c) What is better for America's richest people?"

Wednesday, September 01, 2010

Don't let you kids grow up to be salemen.

The Joy of a Salesman | The Big Picture

The Value of Education

Bill Dickens versus the Signaling Model of Education - Grasping Reality with Both Hands

The Three Illusions Shattered by the Iraq War



ABC The Drum Unleashed - Iraq and the collapse of neo-con illusions

The first of these illusions is the belief that preventive war was justified to combat rogue states. After the 9/11 attacks, it was confidently predicted that the twin pillars of national security policy during the Cold War - containment and deterrence - no longer worked against the Saddam Husseins of the world. As Bush said in 2002 (replayed with devastating effect in Oliver Stone's movie W): "After September 11, the doctrine of containment just doesn't hold any water as far as I'm concerned."

Today, it is clear that containment still has relevance. There is every reason to believe that any threat posed by Saddam, a cynical calculator whose overriding concern was consolidating power, not exporting martyrdom, could have been contained as it had been since the 1991 Gulf War. True, containment does not work against terrorists, who can run and hide, but rogue states do have a return address. Saddam knew if he smuggled weapons of mass destruction to Al-Qaeda or used banned weapons against US interests, his regime would have met, as Rice put it in another realist) life in 2000, "national obliteration" from the US nuclear arsenal.



The second neo-con illusion is the belief that democracy is an export commodity. This noble but misguided idea was an article of faith not only among the neo-conservatives in and out of the Bush administration but also among the anti-McGovern liberal wing of the Democratic Party. None of this was surprising - such idealistic instincts are as old as the republic itself. In the post-9/11 context, neo-cons and liberal hawks were adamant that problems abroad stemmed from the authoritarian nature of foreign governments, that the new era heralded an Arab spring, that the time was ripe for the political transformation of the whole region and that history was on the side of good over evil. The examples of post-fascist Japan and West Germany, the argument went, could be replicated in the Middle East.



The third illusion that guided neo-con policy was the Pax Americana or, as leading neo-conservative figures Bob Kagan and Bill Kristol once coined, "benign hegemony". This belief was engaged by neo-cons as well as liberal hawks following the collapse of the Soviet Empire and it gained more acclaim in the aftermath of 9/11. Even the words imperialism and empire, usually terms of abuse in American public discourse, were wholeheartedly embraced by many influential thinkers on the Washington think-tank circuit.