Rajiv
08-25-07, 06:26 PM
or Who’s Got a Turd in his Briefcase? (http://petras.lahaine.org/articulo.php?p=1707&more=1&c=1)
All the major financial analysts claim the ongoing and deepening financial crisis is in large part the result of investor uncertainty. This is because the investment banks, derivatives and hedge funds placed high risk, sub-prime mortgages and junk bonds, along with other more reliable debt paper into packages and sold them to institutional and private bankers who in turn ‘retailed’ them around the world.
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All the financial wizards, the super-smart scientific, mathematical, guaranteed 30% per year investment advisers have less credibility than a street corner con man. The most arrogant, pretentious, scientific speculators have been humbled; especially those oracles who practiced what is call among the insiders as ‘Quantitative investment’.
Quantitative investing (QI), the use of complex computer models in making investment decisions, was used and promoted by some of the reputedly smartest and highest regarded ‘gurus’ of Wall Street. For a decade the complex mathematical modeling produced extraordinary profits for Renaissance funds, Goldman Sachs and numerous other asset managers and hedge funds. With the massive sell-offs of assets to pay debts and the desperate drive for liquidity, all the assumptions of the QI went out the window. “The Model” cannot account for any crisis which calls into question ‘historical trends’.
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.
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“What’s the problem: The Market or the Model?”, one QI practitioner asked his colleagues.
The answer from the Market: “It’s the model stupid: All the QI use historical models that extrapolated past patterns into the future as if capitalism is a crisis-free system which changed incrementally and in which investors borrowed rationally to leverage purchases in line with their capacity to pay back any losses. That’s Main-Street folklore for retail brokers and the daily fare of American Enterprise ideologues.”
Scientific mathematical modeling in the Great Casino predictably turned out to be as fallible as numerology spun by Shamans to explain the life cycle.
All the major financial analysts claim the ongoing and deepening financial crisis is in large part the result of investor uncertainty. This is because the investment banks, derivatives and hedge funds placed high risk, sub-prime mortgages and junk bonds, along with other more reliable debt paper into packages and sold them to institutional and private bankers who in turn ‘retailed’ them around the world.
.
.
.
All the financial wizards, the super-smart scientific, mathematical, guaranteed 30% per year investment advisers have less credibility than a street corner con man. The most arrogant, pretentious, scientific speculators have been humbled; especially those oracles who practiced what is call among the insiders as ‘Quantitative investment’.
Quantitative investing (QI), the use of complex computer models in making investment decisions, was used and promoted by some of the reputedly smartest and highest regarded ‘gurus’ of Wall Street. For a decade the complex mathematical modeling produced extraordinary profits for Renaissance funds, Goldman Sachs and numerous other asset managers and hedge funds. With the massive sell-offs of assets to pay debts and the desperate drive for liquidity, all the assumptions of the QI went out the window. “The Model” cannot account for any crisis which calls into question ‘historical trends’.
.
.
.
“What’s the problem: The Market or the Model?”, one QI practitioner asked his colleagues.
The answer from the Market: “It’s the model stupid: All the QI use historical models that extrapolated past patterns into the future as if capitalism is a crisis-free system which changed incrementally and in which investors borrowed rationally to leverage purchases in line with their capacity to pay back any losses. That’s Main-Street folklore for retail brokers and the daily fare of American Enterprise ideologues.”
Scientific mathematical modeling in the Great Casino predictably turned out to be as fallible as numerology spun by Shamans to explain the life cycle.