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Comment Re:I don't understand the need for high-speed trad (Score 1) 240

HFT does improve market efficiency. In other words, the price you pay at Exchange A for Equity Z is going to be almost exactly the price you'd pay at Exchange B for Equity Z. This applies to multi-listed instruments only, of course. Not sure how important that is to the average Joe, probably not much.

Comment Nothing Wrong With the Math (Score 5, Insightful) 371

The equation was not at fault: the output is only as good as the inputs. The real problem was the instruments being traded: credit default swaps. These are of dubious merit and much more complicated than more traditional underlying instruments (the thing on which you hold an option contract). For example, suppose you have an option to be 100 shares of Google at a given price. It's easy to evaluate the value of the underlying instrument because there's an efficient market for it: Google is traded on a public exchange and the value is agreed upon within a penny, generally. Black-Scholes works on Google options just fine and you can minimize your risk reasonable well using it.

The credit default swaps were much more difficult to evaluate because of the lack of an efficient market for them. The essential nature of the underlying instrument were very high risk mortgages, not too different in concept from so-called junk bonds. The potential return was high because the interest rate was high. The potential risk was high because the risk of default was high, making the underlying instrument worth very little, much less than face value. So take these risky mortgages and then buy insurance policies for them, this is standard practice. That hedges the risk of the actual mortgage itself. Bundle the mortgage and the insurance policy up into a quasi-mutual fund like product: you have x number of mortgage/insurance policy bundles with average risk of default at y. Getting more difficult to put a value on, especially since there is no regulated exchange for them and little oversight.

Not done yet. Add in that deregulation rules passed during the Clinton era allowed the banks that issue the mortgages and buy the insurance policies to also use their assets to trade on their own. This group within a group is called "proprietary trading". So, the prop-trading groups within the banks buy and sell the mortgages and insurance policies to each other in order to generate income for the bank. There are also other groups that buy and sell these instruments that don't actually issue mortgages. These are called speculative traders.

Finally, to put the finishing touches on this pile of doo, have a group create a new instrument: a binary option (it does or it doesn't) on a bundle of high-risk mortgages and their insurance policies. A binary option is essentially a gamble: it pays out if something happens, it does not pay out if something doesn't happen. Now you're buying and selling options contracts which predict whether a group of mortgages will fail or not. There's no regulation, no formal exchange (which helps create market efficiency). There's no reliable way to determine the value of the underlying instrument because it depends on knowing how many of the mortgages will fail. And don't forget that the banks were using their investment customers to create demand for a product they wanted to sell ("I think you should invest in such-and-such") without telling the customers that the banks themselves would be profiting by selling questionable instruments to their own customers.

This is the magic of unregulated capitalism (almost - the banks should have been allowed to fail in a purely unregulated capitalism system). Nothing wrong with Black-Scholes here. The real problem at the core is that the banks involved are so driven by short-term success that there is no room for sanity. Wrap it all up with the fact that the banks know they will be bailed out by the Feds if they fail. There is no penalty for risk and no regulatory oversight. Gotta have one or the other or we just plain deserve this insanity.

Comment Re:Awesome Jedi Mind Trick (Score 1) 1258

If you're against Christian teaching and you think you're an analytic thinker, I challenge you find out what's wrong about the content of the bible and find an convincing argument why people who believe in Christ are doing it in vein. If you want to show that the bible is made up, or its text is corrupt, I'm going to put you through scientific method process and axiomatic logic reasoning to establish your case.

Challenge accepted

Christianity as a belief system is not scientifically testable because its assertions are not falsifiable. The fundamentals of the belief system:

  • - Jesus Christ is the son of God
  • - God sent Jesus to Earth to save the souls of humanity
  • - Jesus died, came back to life, and left Earth
  • - If you believe in all those things, you will live forever

We can quibble about wording, but I think that's the general idea. It's fine with me if you want to believe all those things, but let's not go mixing science in there. By definition, these religious beliefs cannot be scientifically validated because the hypothesis cannot be proven false. For example, how do you set up an experiment to prove or disprove that Jesus was the son of God? You either believe it or you don't, but that's not science. You must be able to design a test that clearly demonstrates your hypothesis is true or false.

Comment Re:This seems... (Score 2) 299

I think slasher999 was saying that his capital gains taxes add 3% to his marginal tax rate, figured on his gross revenue. For example, if he earned $100 in 2011, he asserts that he pays $27 in income tax and $3 in capital gains taxes (meaning 15% of a roughly $21 capital gain, e.g.). In other words, he made $100 in income and $21 in capital gains. His marginal tax rate (excluding other taxes for this exercise) is 30%.

Comment Re:Can't someone sue the carriers? (Score 1) 322

Indeed. If the government began a program to spy on everyone domestically, it would undoubtedly cause a huge uproar, and likely be deemed unconstitutional ( at least I hope it would be deemed as such. )

The Patriot Act essentially allowed the government to do exactly this and without too much uproar. Specifically:

  • Title II Section 225 - Immunity for compliance with FISA wiretap
  • Title V as it pertains to National Security Letters (NSLs)

I guess I could go on but I threw up a little in my mouth and had to stop.

Comment Re:A sad world. (Score 1) 268

The problem doesn't come from the State using this information to catch criminals. The problem comes from the State using this information to harass law-abiding citizens improperly. Particularly troublesome is when the State criminalizes criticism of the State, which is not uncommon at all. Take a look at the police response to the various OWS movements. While to the rest of us, the OWS folks' behavior may seem kinda annoying and vague, it certainly doesn't rise to the level of criminal behavior that justifies the use of force we've seen against them. One could argue that there's no reason to worry about issuing the police riot gear, pepper spray, tear gas, etc: why worry if you're not breaking the law? The truth of the matter is that having this equipment (tear gas or license plate databases) is always subject to abuse. We have to very carefully control the power the State has over its citizens. Without proper oversight, I think there is ample evidence, both historical and current, that the State will use every available resource against its citizens, whether the citizens are law-abiding or not.

Comment Hate to admit it (Score 1) 1040

I started out hating Unity mostly for not being Gnome2. For business reasons, I pretty much have to stick with Ubuntu for now, and I've been a big Ubuntu fan for its ease of use.

I hesitate to admit that I don't hate Unity as much anymore. It's now more of a vague dislike: miss the menu where I can find the app I want, find Unity's desire to maximize any window I touch annoying, and, most of all, the menu proxy is difficult to use in combination with focus-follows-mouse (menu changes on the way up to the top bar if I mouse over any other window).

I find I just don't hate it enough to maintain my used-Linux-for-15-years snobbery.

Comment Google Example (Score 2) 743

Google invited me to interview for a Java programming job. They started the interview by informing me that I would be "the oldest person in the group" (I was 39 at the time). Then, I was invited to code a linked list in C on the white board while they watched. I can do this, I suppose, having done it 20 years ago while getting my computer science degree. And never done it since. I questioned the relevance of the problem pointing out that this was surely not required for programming in Java. It kinda went downhill from there...

Comment No point in arguing (Score 1) 943

Read an interesting article that suggests that arguing is essentially an effort to raise your tribe status at the expense of someone else. The impetus is emotional, not logical, and there's no advantage to conceding defeat. In other words, there's really no point in arguing or debating. Some set of the people already agree with you, some set disagree with you, and some set will just side with whomever they think is "stronger" as demonstrated by chest-thumping, I suppose. Nothing of intellectual value transpires.

Comment Re:Iran Opens Its First Nuclear Power Plant (Score 1) 496

For example, Iran is primarily Shiite. So is a large proportion of the population of Iraq which is next door. Therefore it is natural for the nation of Iraq to form close ties with Iran.

Heh, Iran and Iraq was at war for 8 years in the 1980s including chemical warfare. Saddam was no friend of Iran either, for as long as he was in power.

Yeah, both Muslims, but different flavors. Saddam and his crew were Sunni despite the fact that Iraq is majority Shiite. Now that he's gone, the government in Iraq, when it finally emerges, will likely by Shiite, reflecting the majority of the Iraq population. The natural assumption is that Iraq and Iran will strengthen ties.

Comment Re:Strange fascination (Score 1) 457

Sigh, I wonder about this, too. For whatever reason, our country seems to be a more violent place to live than some others. A friend of mine was attacked in her home, had her throat slit, and her house set on fire with her still in it. She managed to crawl out and go for help, but it was a near thing. Does that happen where you live? I have a permit to carry a concealed weapon and I am grateful to have it.

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