finance – An Autonomous Agent

Debt: The First 5,000 Years – David Graeber

anautonomousagent — Sat, 29 Jul 2017 13:49:59 +0000

Debt: The First 5,000 Years, by David Graeber, is a fascinating and astounding look at the ubiquity of debt in human affairs. It replaces many “accepted” theories on the origins of money and debt and disproves the Myth of Barter by studying the anthropological record. From my own experience, economic theories and models are almost never based on actual historical observations, only upon assumptions about human behavior and interaction that I personally find naive. Just look at the Efficient Market Hypothesis or the idea that humans are rational decision makers — these ideas or their assumptions quickly fall apart with a simple analysis. For instance, as Chomsky points out, the advertising industry exists to create irrational decisions. People can lie and manipulate; they can be greedy or ascetic. It is nice to finally have a down-to-Earth study of actual historical accounts of human interactions without forcing the current paradigm on the past. Graeber’s book provides a wake-up call for people to see a more realistic view of the interactions of humans, debt, markets, government and money.

No One Would Listen: A True Financial Thriller – Harry Markopolos

anautonomousagent — Tue, 18 Nov 2014 19:36:00 +0000

In No One Would Listen: A True Financial Thriller, Harry Markopolos, the financial fraud detective who studied Bernie Madoff’s questionable returns in early 2000, narrates the entire history and investigation of Bernie Madoff’s ponzi scheme — starting in 1998. I was shocked, as was Markopolos, on learning about the negligence and failure of the SEC on numerous occasions. The book provides a good summary account of the Madoff fraud and the people involved. It also provides important insight into financial fraud, reform, and regulations.

The Misbehavior of Markets: A Fractal View of Financial Turbulence – Benoit Mandelbrot

anautonomousagent — Wed, 27 Aug 2014 23:45:00 +0000

I’ve been wanting to read The Misbehavior of Markets: A Fractal View of Financial Turbulence by Benoit Mandelbrot for a number of years. Mandelbrot helped to change the way people view financial market dynamics. This book is definitely a must read for people working in the financial industry. However, Mandelbrot was not the first. It is a little surprising that Mandelbrot did not talk in detail about the work of R.N. Elliott or Robert Prechter, among others, which I think complement Mandelbrot’s work on financial fractals. Patrick Harris wrote a short paper discussing whether Mandelbrot should have cited Elliott (link to paper).

To me, the idea of infinite memory processes is one of the most important concepts touched on by Mandelbrot in this book. It suggests that economists and traders should be developing models and theories which value the importance of price series and data going back decades. And it makes sense to me that people and prices do not change their fundamental behavior over extended periods of technological evolution. However, I suspect that organisms do change their fundamental behavior if the time horizon is thousands or millions of years. I am very curious to read more about Hurst’s studies of the Nile.

A Stock Exchange for Species??

anautonomousagent — Sun, 06 Jul 2014 23:44:00 +0000

It seems to be entirely possible, and even beneficial, if there was an exchange, analogous to the NYSE, where traders and investors could buy and sell “shares” of a species. The exchange would begin by issuing an IPO on every species. For example, ticker symbol: QA could be the “stock” for Quercus alba.

We need to think outside the box to protect our environment and I see this a way to benefit both man and nature. Man will be awarded with more assets with which he can diversify his financial holdings; nature will win in various ways — including the proceeds of the IPO to protect the species.

This would be initiated to test the idea that a traded asset can be something more general than an organization consisting of human labor and assets.

You may argue that a stock must have a fundamental basis in the value of human commodities and labor. That may be true, however, what limits the definition extending to non-human commodities and the labor of nature? In any case, for the experienced investors, how many companies have you seen being valued in the billions with little or no assets and no profits? In fact, a species actually has an enormous value and potential in terms of biology, ecology, and the sustainability of human activity.

There are numerous possible arguments against this, which I would enjoy countering. Perhaps I will devote more to this in a future post.

Golden Boy: The Harold Simmons Story – John J. Nance

anautonomousagent — Sat, 05 Jul 2014 02:07:00 +0000

I was a long term investor in Harold Simmons’ Keystone Consolidated Industries and now I am currently sitting on a nice return from an investment in Valhi. Being a coattail investor in his companies has paid off — if you can enter at a low price. Some have called him an “Evil Genius” and even a crook. However, I find his story to be an amazing story of business success, legal battles, and cunning financial maneuvers to become an icon of the rags-to-riches success story. His biography, written by John J. Nance and entitled Golden Boy: The Harold Simmons Story, provides a great account of the building of his empire.

Thoughts About a Project and GPUs

anautonomousagent — Mon, 07 Apr 2014 18:13:00 +0000

I want to do something which combines GPU programming, finance, and/or conservation — something which will help the relationship between humans and the environment. There are a few ideas in my head. One is about displaying data with 3D graphics to give traders more than just a ticker price. The price of a security is a minimal form of information. What is a good method to display the daily progression of trade volume? Most information about short sells, margin levels, and ownership levels are hidden; revealed only on a monthly or quarterly basis. This infrequent update hinders the development and understanding of crash prevention. Combining all of this information into a visual display based on an Ising model (example) and N-Body particle simulation should be informative. Of course I am simply speculating and putting thoughts into words. The two books I am currently browsing through are: OpenCL in Action by Matthew Scarpino and CUDA Handbook: A Comprehensive Guide to GPU Programming by Nicholas Wilt.

CUDA Samples:

Brief Overview of My Experiences with Stocks

anautonomousagent — Tue, 25 Mar 2014 01:29:00 +0000

My first foray into the stock market was after reading the books of the popular writer, Jim Cramer. And it resulted in buying several penny stocks which were developing “revolutionary” new products. They did rather poorly and I decided to try buying stocks of more well-known companies, like Goldman Sachs and some others which I do not remember. This was in 2007-8 and the tiny gains from my small investments were financially negligible; however, it was an experience.

My knowledge of markets began to change as 2008 progressed into 2009 and I gained experience trading stocks. I lost interest in Cramer and found the work of Benjamin Graham to be far more fascinating. While in high-school I was fascinated by Benjamin Graham’s record of success and his value investing approach to choosing investments. My interest continued as an undergrad in college; I remember reading all of Graham’s articles while sitting through accounting class. Reading Security Analysis more than twice, I attempted to put my newly learned skills to the test. The potential to find muddied gems hidden from view by the dirty coating applied by “Mr. Market” spurred my desire to master the art.

There were a few stocks which I had bought at various times during the period of 2008-9; they fell and rose with the rest of the market during the roller coaster ride from which many people still feel dizzy. One was Reddy Ice, which ended up bankrupt. However, I did not have much money to invest until after the downturn. In this favorable condition I began to search through hundreds, if not thousands of stocks. The final list of suitable candidates fitting Graham’s criteria included a steel producer called Keystone Consolidated Industries. Owned mostly by Harold Simmons’ Contran, the stock had a market value of $36 million. Having a pension fund the size of Texas and a decent sized steel operation (around $500 million of sales per year), I felt this was the best choice. It turned out to be a wise investment, as I finally liquidated my position when Contran finally purchased all the shares at around $9.00. Even at this price, the company’s market value was only around $100 million — a real bargain for Contran, since the pension fund had around $700 million in assets at the time and only $350 in NPV of pension obligations; not to mention the profitable steel company. Carl Icahn, the only other large shareholder, said not a word at the paltry price of $9. To this day, I still believe a fair price should have been at least $20 per share. Despite most of the value being reaped by Contran and Simmons on this transaction, I did benefit.

After this success (and the passing of three years), I found that I lacked the same fascination with Graham as I did a few years before. I think my interest waned as I witnessed “Mr. Market” in action and I realized first hand that market sentiment played a huge role in price determination. “How could people not see the value?” I always asked myself. “Was this a flaw in Graham’s strategy?” And it was precisely this question which led me to realize that people and markets are far from efficient. Graham’s method is only successful for a large diversified portfolio of undervalued stocks. In fact, I really think that value does not exist as an absolute quantifiable truth; value only exists as a social relationship between commodities as Marx writes in Das Kapital. And by doing so, its expression is subject to the whims of human emotion. It is with this perspective which I began reading about the behavior of traders and markets.

Today I am surprised to learn that Harold Simmons passed away in December of 2013. He was a clever man who grew a few thousand dollars into billions.

Flow Chart of Price Formation and Reaction

anautonomousagent — Fri, 21 Feb 2014 03:54:00 +0000

I think that live price data is important, however, there are far more important numbers to be recorded in a financial market. Live data such as: current number of shares long; current number short; size of investor gain (or another measure to see how long a specific investor has been holding his/her position), etc.

Price can change in a matter of micro-seconds; in the 1930’s this observational task would have been deemed impossible — keeping track of such rapid price changes. Now, computers allow humans to do this with ease. What is preventing society from recording and publicly displaying other data in rapid manner. In other words, can we not use our computers to observe the ubiquitous “invisible hand” of market exchange?

I can only imagine visualizing this data analogously with the video showing flights traveling around the world:

Now, imagine that all the flights leaving Europe are people exiting (shorting or selling) an asset. And imagine that all the flights entering Europe are people buying the asset. Obviously, some issues since # of buyers == # of sellers in real market.

Perhaps this can not be done — obviously, obstacle #1 is state regulations and the corporate black-box. Corporations would see this freedom of information as a threat to their competitive edge and states would deem this “anti-capitalistic.” I like to think that such live data, publicly available may help market regulators and the public make better decisions with regard to investment decisions. Most importantly, such data would immensely improve academic understanding of market behavior.

David Harvey

anautonomousagent — Tue, 18 Feb 2014 04:28:00 +0000

David Harvey has an amazing awareness of society. Listening to him discuss his perspective and ideas about cities, money, and capitalism brings with it the joy of great insight into the behaviors and relations of human activities which the intellectual listener will enjoy. I will have to eventually pick up a few of his books. For now, I will watch his lectures:

Class 01 Reading Marx’s Capital Vol I with David Harvey

Crisis Theory and the Current Conjucture

David Harvey Rebel Cities to Revolution Dangerous Ideas for Dangerous Times

Lecture by David Harvey

David Harvey | Para entender ‘O capital’ (Porto Alegre)

The Contradictions of Capital

A Commentary on Marx’s Method

Bioecon TV presents DAVID HARVEY: UNRAVELLING CAPITAL´S CONTRADICTIONS (Spanish)

The Nature of Capital – David Harvey

David Graeber and David Harvey in Conversation

The Urbanisation of Class Struggle – David Harvey – Marxism 2012

David Harvey identifies patterns in the Crisis of Capitalism and discusses Urban Struggle

DAVID HARVEY – AT THE GATES OF A NEW WORLD – Day 1 – Part 1

Price Simulation of Trader Matrix Video

anautonomousagent — Sun, 01 Dec 2013 02:02:00 +0000

The following video is the time evolution of a network of 10,000 traders and their effect on the price movement of a stock.

For more information, please read the following paper:

Non-normal Model of Stock Prices