https://www.youtube.com/watch?v=viy-zi3b5jq The Plan Is To Make You Permanently Poorer

[morty]

FED trying to shrink its balance sheet right, end of nearly free capital?  Is the U.K. planning the opposite?  

[Up the spout]

21 hours ago, no_dependent4663 said:

Agree with this take and suspet hes exagerrated his story immensley. Rather than suddenly growing a consience, the truth of his exit from industry is probably closer to severe burnout and reasling being a leftist grifter spouting the obvious and being an 'influencer' pays well for 0.1% of the work.

Exactly. Plus he's asking for donations of $1 - a multi-millionaire would rather sweep chimneys. 

[Up the spout]

On 15/02/2023 at 14:21, spyguy said:

Do you believe that?

 

It's a fact online, just as is his drivel - out of the two, I don't have a lot of faith in his opinion.

[Sackboii]

I haven’t read all the comments in this thread, but I have watched the entire video and my conclusions are:

Hes a classic plastic socialist.

Looks like he takes drugs with all his snivling and nose wiping.

Despite his rhetoric he still thinks house prices will rise, buy buy buy..!

 

Edited February 16, 2023 by Sackboii

[Up the spout]

22 hours ago, A.steve said:

Years ago, I spent a brief while in London - and, while I met people who knew 'Traders' - I was not introduced.  I'm not sure it was because our common acquaintances were embarrassed by myself or the traders, but they did think it a bad idea to socialise with us together.  The mindset involving analysis and active risk taking do appeal to me... not as a lifestyle choice for myself - but because I like analysis and it's always more interesting when there's a genuine purpose. 

I can't be sure about whether the character of traders is influential in the outcomes they achieve... or if that's all delusional.  I don't think I'd make it as a trader... I think, from time to time, I could come up with sensible ideas... but I don't think I could do it on-demand - when the job demands.  Even when I have a good idea, I'm plagued by doubts... and my thought process presents me with mammoth research requirements.  If I were to try to trade, I'd be permanently demanding more (specific) accurate information... that would likely to be hard-to-come-by... but I don't see that as being the obsession of traders in general... and also didn't seem to be this man's obsession.  Sure, he tells us that he paid someone to read his newspapers for him... that's not what I'm on about. 

I didn't buy the argument that he stopped being a trader because it didn't feel right to be earning lots.  He described himself as having been game-obsessed because he recognised that it was the gatekeeper to huge earning potential. I seriously doubt that he has stopped being motivated by this kind of challenge. He told us he was "all about maths" - but his strategy wasn't mathematical - it was about judging his opposition were arithmetically adept, cautious and street-dim.  Sure, that can work - but it isn't the edge that maths brings to the table.  I suspect that he found the environment challenging and, after a period of intense focus on being 'sharp', he burned himself out.

A more philosophical angle asks if anyone can consistently beat the market - or if any such claim is always incorrect.  I suspect that it can be done... but I don't think it easy... and I do think that luck is a more likely explanation of success in most cases.  The most convincing argument I can muster that one (probably) can consistently beat the market... is that people are very stupid and tend to copy each other.

 

Think about how some films are made with lots of newcomers, and they usually stink to high heaven but one or two show some quality and get employed again in bigger productions. Then you have the 'better' levels (still 'b' films) with a lot of semi-talented artists and production staff but still lots of journey men and absolute wasters. You sort the wheat from the chaff at every stage, often dropping 'stars' as well as up and coming talents until you have the cream of the crop b-list actors and producers - then you have some people that you can rely on to make money. This guy probably passed a few of those stages and got very lucky making a one-way bet (because of a once in a generation recession), and is living off that as long as he can. 

The guy's a total chancer - fair play he's trying to make the best of his hand but it isn't convincing.

[Young Turk]

On 2/15/2023 at 8:32 AM, Bear Goggles said:

Yes, great stuff - but not an easy message for HPCers:

• House prices are going to continue to rise after a short fall.

What about political risk? Aside from economic factors leading to an organic price correction, isn't it possible that increasing numbers of people will perceive themselves as being harmed by high prices and therefore eventually it will become expedient for a political bloc to take steps to reduce prices?

[zugzwang]

20 hours ago, A.steve said:

That's an exciting sounding story - but I don't believe it's accurate.  I don't believe that's what Quants really do, or ever did do - I have researched this topic - in depth.  The 'rocket scientists' (if they were even vaguely bright) would have known that the models they used - which might be appropriate in astronomy and physical engineering - were entirely inappropriate in the sort of complex, adversarial, dynamic systems that were claimed to be modelled.

 

There's science in finance but very little in economics. Seemingly related disciplines which have entirely different conceptual foundations and not much theoretical overlap. The latter, with no empirical basis for its postulates, is based on the idea of equilibrium, whereas finance theory is motivated by empirical data and modeling via nonequilibrium stochastic dynamics.

Black-Scholes option pricing theory has very few parameters so is capable of falsification (science). It has been falsified.  Empirically, the B–S model prices “in the money” options too high and “out of the money” options too low. The reason for this is that the observed distribution has fat tails and also is not approximately Gaussian for small to moderate returns. Care must be taken when employing it but it does work.

Two operational constraints for quants.

i. arbitrage opportunities are hard to find, time-limited, and generally offer diminishing returns requiring generous amounts of capital and/or leverage to profitably exploit .

ii. Fat-tail risk is impossible to eradicate completely so you're always in danger of blowing up.

LTCM had not one but two Nobel winning economists on its staff. Both expressed confidence in the long term stability of  capital markets, assuming that deviations from Black–Scholes option pricing would always return to historic market averages (i.e. equilibrium). When this didn't happen (after Russia defaulted on its debt) and the fund's positions became public knowledge LTCM was cornered by its rivals and suffered gambler's ruin.

[Square Mile]

20 minutes ago, zugzwang said:

 

There's science in finance but very little in economics. Seemingly related disciplines which have entirely different conceptual foundations and not much theoretical overlap. The latter, with no empirical basis for its postulates, is based on the idea of equilibrium, whereas finance theory is motivated by empirical data and modeling via nonequilibrium stochastic dynamics.

Black-Scholes option pricing theory has very few parameters so is capable of falsification (science). It has been falsified.  Empirically, the B–S model prices “in the money” options too high and “out of the money” options too low. The reason for this is that the observed distribution has fat tails and also is not approximately Gaussian for small to moderate returns. Care must be taken when employing it but it does work.

Two operational constraints for quants.

i. arbitrage opportunities are hard to find, time-limited, and generally offer diminishing returns requiring generous amounts of capital and/or leverage to profitably exploit .

ii. Fat-tail risk is impossible to eradicate completely so you're always in danger of blowing up.

LTCM had not one but two Nobel winning economists on its staff. Both expressed confidence in the long term stability of  capital markets, assuming that deviations from Black–Scholes option pricing would always return to historic market averages (i.e. equilibrium). When this didn't happen (after Russia defaulted on its debt) and the fund's positions became public knowledge LTCM was cornered by its rivals and suffered gambler's ruin.

Black Scholes or Merton Black have one ingredient that is subjective, that is the measure of volatility - thats the art piece - the rest being fairly static (risk free rate & div yield slight variance) - if you trade these options on the sell side you can play with the volatility parameter to your hearts content depending on the participants in the game.

[A.steve]

2 hours ago, Up the spout said:

Think about how some films are made with lots of newcomers, and they usually stink to high heaven but one or two show some quality and get employed again in bigger productions. Then you have the 'better' levels (still 'b' films) with a lot of semi-talented artists and production staff but still lots of journey men and absolute wasters. You sort the wheat from the chaff at every stage, often dropping 'stars' as well as up and coming talents until you have the cream of the crop b-list actors and producers - then you have some people that you can rely on to make money. This guy probably passed a few of those stages and got very lucky making a one-way bet (because of a once in a generation recession), and is living off that as long as he can. 

The guy's a total chancer - fair play he's trying to make the best of his hand but it isn't convincing.

I can't deny grasping the essence of what you've suggested... However... I think there are some more substantial intellectual questions that should be asked.

One question asks if this idea of "selecting the best" in order to perform overall is a shrewd and effective strategy... or a delusion in the eugenic and social Darwinist mould.  You peg this character as a 'chancer' - but I think it beyond question that he is bright.  A hypothesis is that the other traders, who continued, were no brighter.  If this chap was just lucky - can luck be concentrated by calling it talent?  Does talent really work like that?  If this chap was a chancer, is it not likely that his entire peer-group are also chancers?

The flip side of the coin is about whether everyone is only ever gambling - just like this chap was... but we don't recognise it as such when we have established a sufficiently convincing narrative otherwise to fool ourselves.

The corollary, in the markets asks if there is such a thing as investment - or if it is always speculation... and if speculation is distinct - in any way - from gambling.  I certainly feel there should be an ethical distinction between the two activities... but it is difficult to pin down.  Perhaps this ideological ethical perspective itself is born from my own delusion.

If there is such fundamental uncertainty about the basis of investing and speculation - where we have no clear idea about which sorts of behaviours are, or should be, rewarding... why does it come as a surprise that so many people can only cope by blindly bidding up the price of houses?

 

 

 

 

[A.steve]

43 minutes ago, Square Mile said:

Black Scholes or Merton Black have one ingredient that is subjective, that is the measure of volatility...

I don't agree... and not just about the identities of the individuals. I think you intended to mention Fischer Black, Myron Scholes and Robert Merton.

Volatility is not subjective - it is formally defined.  That really was at the heart of their 'innovation'.

There is a problem with the distinction between the Frequentist and Bayesian interpretations of volatility - but its definition is consistent between the groups.  There's also the argument that volatility is the wrong type of measurement to make sense of theoretical option prices... but that's a different story... as is the other problem... involving practical observations of prices seldom correlating closely with the models.

[A.steve]

1 hour ago, zugzwang said:

There's science in finance but very little in economics.

I'd rather argue that science exists in finance than economics - but I'm not convinced that science applies in either context.

If one were to argue for science applying in finance, one has to define how one is going to make relevant measurements and repeat experiments.  Science has the advantage that it is concerned with the 'natural world' - there's an assumption that one location is much the same as any other... that what matters is observable... and that relevant consequences can be demonstrated reliably over-and-over again without the rules you're trying to uncover morphing into something new.  With finance, these principles are tenuous, at best... and, if they apply at all, they apply in much more limited ways.

[Square Mile]

12 minutes ago, A.steve said:

I don't agree... and not just about the identities of the individuals. I think you intended to mention Fischer Black, Myron Scholes and Robert Merton.

Volatility is not subjective - it is formally defined.  That really was at the heart of their 'innovation'.

There is a problem with the distinction between the Frequentist and Bayesian interpretations of volatility - but its definition is consistent between the groups.  There's also the argument that volatility is the wrong type of measurement to make sense of theoretical option prices... but that's a different story... as is the other problem... involving practical observations of prices seldom correlating closely with the models.

Hey, I will give you some insight on this game as I have traded Options on both sides. The measure of volatility is subjective, we can use a log normal or various standard deviations on any time scale we choose. The pricing of options can be calculated from the implied volatility of actual market prices. So we take quotes/prices and derive the implied volatility. Now If I foresee an indication of interest at certain strikes prior to economic releases I will pump up my volatility parameter for participants to take a position, as the derivative market will always favour the seller, as we are making markets/liquidity afterall. Similarly from a friday afternoon to a monday morning you will see a huge chunk come off price for time decay, its not linear, far from it. As we approach expiration Black Scholes/Merton will experience wild Gamma moves over ATM Options and we will push futures to ensure they dont come into the money at expiration. This is how this game works. Science/Maths/Logic gets thrown out the window ..and Im a Physics guy.

Soc Gen did a huge surge in out of hours Futures on the CAC 40 index so that a knockout barrier option would be hit making it worthless for the buyer, I saw it, I smelt it, and watched in awe as the counterparty got shafted. No maths involved, just the game.

[A.steve]

10 minutes ago, Square Mile said:

The measure of volatility is subjective, we can use a log normal or various standard deviations on any time scale we choose.

Volatility is not subjective - and there are many formal approaches to establish approximations.  I am completely unsurprised that you've really told me that volatility is not measured in practice.  From an information theoretic perspective, the structure of these models are wrong headed.   There is confusion between events with an absence of an explanatory narrative and random unpredictable events.  The model is especially wrong because it is available to market participants and market participants set some store by its predictions.

Edited February 16, 2023 by A.steve

[reddog]

On 15/02/2023 at 12:21, spyguy said:

Do you believe that?

 

 

Must admit I haven't watched the whole video, but this guy isn't really passing the sniff test for me.  

 

He may have worked at Citibank but probably not in the position he is talking about, like a lot of professional YouTube performers there is probably a grain of truth to his purported life and a large junk of BS.

 

Also the background of most traders these days is not "being from a family of barrow boys", you would not even get on through the door (there may still be some of a much older vintage like that, but not someone that entered the industry in 2008).

 

Most traders now have a degree in a mathematical subject and have passed (or are studying towards) the CFA - which is hard!!

 

Here is his linkedin profile, even his job title seems a bit unusual: https://www.google.com/url?sa=t&source=web&rct=j&url=https://uk.linkedin.com/in/gary-stevenson-935a871a7&ved=2ahUKEwiWxZapiZv9AhUliv0HHbOFCAYQjjh6BAgLEAE&usg=AOvVaw264NMxqpXZPtFY7HS79o-P

[Square Mile]

11 minutes ago, A.steve said:

Volatility is not subjective - and there are many formal approaches to establish approximations.  I am completely unsurprised that you've really told me that volatility is not measured in practice.  From an information theoretic perspective, the structure of these models are wrong headed.   There is confusion between events with an absence of an explanatory narrative and random unpredictable events.  The model is especially wrong because it is available to market participants and market participants set some store by its predictions.

Theoretically it is measured, but those go out the window in a real trading enviroment. Consider Air France this year hedging the fuel (kerosine Crude derivative) forward pricing. They wanted forward options to buy fuel to fix their costs so to set there flight prices. Volatility went out the window as no Crude/kerosine traders wanted the exposure of setting a future price upon which they could buy with the current Ukraine conflict. Historic volatility played no part at all in pricing those options, like zero, pick a number!

[Big Orange]

4 hours ago, Sackboii said:

I haven’t read all the comments in this thread, but I have watched the entire video and my conclusions are:

Hes a classic plastic socialist.

Looks like he takes drugs with all his snivling and nose wiping.

Yeah, I picked up on that as well - classic symptoms of a active cokehead (or he recently gave up, but struggling and suffering from coke pangs).

Edited February 16, 2023 by Big Orange

[zugzwang]

20 minutes ago, A.steve said:

I'd rather argue that science exists in finance than economics - but I'm not convinced that science applies in either context.

If one were to argue for science applying in finance, one has to define how one is going to make relevant measurements and repeat experiments.  Science has the advantage that it is concerned with the 'natural world' - there's an assumption that one location is much the same as any other... that what matters is observable... and that relevant consequences can be demonstrated reliably over-and-over again without the rules you're trying to uncover morphing into something new.  With finance, these principles are tenuous, at best... and, if they apply at all, they apply in much more limited ways.

Statistical principles entered physics via thermodynamics. Tools from mathematical probability theory and statistics were adopted to quantitatively explain the unobservable and hitherto unknown microscopic behaviour of large populations of atoms. Controversial at the time this probabilistic approach has found application in almost all areas of physics in the years since.

Applying these ideas to finance is more tenuous, that's true. Electrons aren't conscious agents! And also the Law of Large Numbers applies - financial data sets are often huge but not Avogadro's Number huge. Stochastic processes like credit derivatives depend critically on a bath of liquidity for their sensible operation. When that liquidity dries up they fail unpredictably i.e. 2008.

[A.steve]

1 minute ago, Square Mile said:

Theoretically it is measured, but those go out the window in a real trading enviroment.

Volatility is a clear formally defined concept... that defies reliable measurement.

[Square Mile]

2 minutes ago, A.steve said:

Volatility is a clear formally defined concept... that defies reliable measurement.

Tmrw i can chose any volatility i like to price options.. u can accept or dismiss, so high that I am not inviting buyers, i can apply this variable to only the stupid who would accept or those who feel var risk is greater than i estimate. Its a real world game A.Steve, text books in the bin time.

[A.steve]

Just now, Square Mile said:

Tmrw i can chose any volatility i like to price options.. u can accept or dismiss, so high that I am not inviting buyers, i can apply this variable to only the stupid who would accept or those who feel var risk is greater than i estimate. Its a real world game A.Steve, text books in the bin time.

The fact that you type whatever you want into a field on a form does not make that number a measurement of the concept for which the form labels the field.  It does not make the concept subjective.

Tomorrow, I can use any any room dimensions I like when calculating wallpaper paste requirements.  This doesn't mean the room dimensions I invent describe reality. I don't find I own a mansion just because if I buy too much wallpaper paste for a bedsit... or vice-versa.

The honest thing to do would be to ignore the pricing model and set the price your intuition identifies.  Insisting that you can set a more sensible price by inventing a volatility to get the prices you want from a model that is unfit for purpose is the epitome of delusion.

[Square Mile]

2 minutes ago, A.steve said:

The fact that you type whatever you want into a field on a form does not make that number a measurement of the concept for which the form labels the field.  It does not make the concept subjective.

Tomorrow, I can use any any room dimensions I like when calculating wallpaper paste requirements.  This doesn't mean the room dimensions I invent describe reality. I don't find I own a mansion just because if I buy too much wallpaper paste for a bedsit... or vice-versa.

The honest thing to do would be to ignore the pricing model and set the price your intuition identifies.  Insisting that you can set a more sensible price by inventing a volatility to get the prices you want from a model that is unfit for purpose is the epitome of delusion.

[Square Mile]

To be fair you wont be the buyer of such an option, the counterparty is deluded should they accept the trade, the buyer of a 2 bed 2 bath rabbit hole in london for 500k is equally deluded on 3.5k per month cap and Int mortgage for 25 yrs... I could go on ..but quality French wine has the better of me.

Edited February 17, 2023 by Square Mile

[Lagarde's Drift]

7 hours ago, A.steve said:

The fact that you type whatever you want into a field on a form does not make that number a measurement of the concept for which the form labels the field.  It does not make the concept subjective.

Tomorrow, I can use any any room dimensions I like when calculating wallpaper paste requirements.  This doesn't mean the room dimensions I invent describe reality. I don't find I own a mansion just because if I buy too much wallpaper paste for a bedsit... or vice-versa.

The honest thing to do would be to ignore the pricing model and set the price your intuition identifies.  Insisting that you can set a more sensible price by inventing a volatility to get the prices you want from a model that is unfit for purpose is the epitome of delusion.

Hehehe typical HPCer. Raging at the wind.

Volatility is a human concept. Defined by humans. So it can mean anything humans want it to mean. Just because Ur textbooks define it one way doesn't stop the real world defining it as something else.

[spyguy]

9 hours ago, reddog said:

Must admit I haven't watched the whole video, but this guy isn't really passing the sniff test for me.  

 

He may have worked at Citibank but probably not in the position he is talking about, like a lot of professional YouTube performers there is probably a grain of truth to his purported life and a large junk of BS.

 

Also the background of most traders these days is not "being from a family of barrow boys", you would not even get on through the door (there may still be some of a much older vintage like that, but not someone that entered the industry in 2008).

 

Most traders now have a degree in a mathematical subject and have passed (or are studying towards) the CFA - which is hard!!

 

Here is his linkedin profile, even his job title seems a bit unusual: https://www.google.com/url?sa=t&source=web&rct=j&url=https://uk.linkedin.com/in/gary-stevenson-935a871a7&ved=2ahUKEwiWxZapiZv9AhUliv0HHbOFCAYQjjh6BAgLEAE&usg=AOvVaw264NMxqpXZPtFY7HS79o-P

The CIty has - or had -a pretty wide funnel.

It also had a pretty wide, greased exit door.

Not any more.

Open outcry has long gone.

Regulation and capital requirements means theres little to no speculative trading, be it banks or companies.

Most traders are operating positions for a supplier or a buyer.

 

[HovelinHove]

On 15/02/2023 at 08:32, Bear Goggles said:

Yes, great stuff - but not an easy message for HPCers:

• House prices are going to continue to rise after a short fall.
• You need to buy a house no matter how hard that seems, because the rich will keep being given free money and they'll keep using it to buy assets inc. houses.
• You need to buy a house or a rich person is going to buy it instead and rent it back to you.
• Negative equity isn't as scary as renting from a LL who can chuck you out on a whim.

He also says that the only way out of this situation is if the central banks stop giving money to the rich during times of crisis, or if the government starts taxing the rich via wealth taxes, (not income taxes).

You don't need to be Nostradamus to see that neither of those two things are on the immediate horizon.

Thanks for the summary, and saves me from watching it, although it does sound interesting. I am of this view and have been since COVID broke in 2020. I was half of this view since 2008, but felt that the TPTB couldn’t keep all the plates spinning to protect themselves, now I am convinced they will.

I think that not only the rich will keep buying assets like housing, but I think the big corporations, particularly banks will get in on the game too. I suspect they will hoover up a lot of the properties that Buy To Letters are offloading at the moment. I would if I was an asset manager. Long term, given our immigration rates, ever increasing rent is a given, therefore there will always be guaranteed yield on property. I think small time investors will be driven out of the market though due to regulations. I intend to move a significant chunk of future pension contributions into REITs that have a long term plan to build a non-commercial rental portfolio.

I think a peak to trough fall of 10% is now looking more likely than 20%. I am seeing shops full of people, pubs and restaurants busy mid week, letters from estate agents through my door saying that people want properties in my area. We will have a rocky year, with ups and downs, and there is always the war or some other black swan, but on current variables, I think if you can afford a property, get one while you can.