Monday, August 13, 2007

Quants

Quants are Quantitative Strategy Funds.
"The trouble for quantitative funds started Aug. 3, when stocks started moving not only in ways that commonly used models didn't predict, but in precisely the opposite direction from what was expected. Equally troubling, the moves were far more volatile than models based on decades of testing assumed were likely. Those relatively minor anomalies escalated quickly this week, exploding into a global rout for quantitative funds by Wednesday."
Don't you just love that? " Decades of testing" and " assumed..likely" are two of the most destructive phrases in the English language.
It's precisely because, as Donald Rumsfeld would have it, " We don't know the unknown unknowns" that not everybody is stinking rich. And even those that are are feeling seriously less well off this week than even two weeks ago.
So what happens now? Well, the BofE hasn't so far lobbed any dosh at the problem. It's not a problem about to disappear, and it is certainly geometrically bigger in the US than anywhere else.
I predict a week or so of soothing words and calming markets, all of which will be blown apart again by something else coming out of the woodwork.
If not into speculative mode, I don't think it will matter too much. But if you need the money, get out now.

4 comments:

Winchester whisperer said...

Buy volatility

kinglear said...

ww - nice trading day today

Winchester whisperer said...

i was short, now long and happy to be up this month so far but it's a roller coaster ride at the moment!

kinglear said...

ww - if you're making any money at the moment you're GOOD!