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Ron, great article, but I'm a big skeptic of this whole topic and the
Prediction Company in general. If more and more trading groups are using
surefire econometric software to play the stock market, it seems to me the
volatility in the market should be going down. Why? Because more market
sell-offs not "justified" by the economic models would be immediately bought
into, and more market rallies not justified would be faded. On Tuesday, we
saw the most volatile day in market history...
As for The Prediction Company in particular, am I the only one on this list
that finds it "unusual" for a group that is supposedly so successful in the
markets to be promoting itself through a book and a website? I've always
felt that the best traders in history are for the most part completely
anonymous. They don't want to attract any attention to themselves, because
they don't want anybody analyzing their trading approach. My best
(cynical) guess is that the brains at Prediction know their trading models
are highly optimized, and could blow up at any moment, so they attempt to
create this mystique around their business, which makes people trip over
themselves to give them money.
I noticed on their website that Swiss Bank / UBS just bought a big stake in
Prediction. I'm pretty sure this is the same bank that gave Long Term
Capital Management over $700 million to invest, and literally begged them to
take more...
Bruce
----- Original Message -----
From: "Ronald McEwan" <rmac@xxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Cc: <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, April 05, 2000 12:37 PM
Subject: [RT] Re: US Govt. Manipulation of Stock Market
> Don wrote:
>
> "Maybe in the bowels of some underground bunker in North Dakota there is
> 55 massively parallel Cray computers orchestrating the buying of
> stock...these computers are kept cool by liquid nitrogen stored in old
> Minute Man missile silos."
>
> Well Don you were close, only I don't think the computer is in North
> Dakota. The government has been working on this for a few years now.
> Since the cold war is pretty much a done deal, they have been looking for
> alternative use's of the simulation technology developed at Los Alamos
> and Sandia. The guys who started the Prediction Company used to work at
> Los Alamos. And when the grant money for war technology started to dry up
> they headed for Wall St. Here is an excerpt from the "ASPEN" site at
> Sandia National Laboratories. This is the Alan Greenspan version of Trade
> Station. Also you may be interested to know that Citigroup has had a big
> hand in developing agent based computational models for economic
> analysis.
>
> http://www-aspen.cs.sandia.gov/index.html
>
> New Economics Model Simulates U.S. Economy
> Researchers at Sandia National Laboratories are developing a
> microsimulation model of the US economy that has the potential to
> significantly improve capabilities for analyzing and comparing economic
> policies.
>
> The new computational tool, called Aspen, capitalizes on Sandia's
> expertise in both evolutionary learning and parallel computing to provide
> several major advantages over more traditional economic models:
>
> Models the economy in a single, consistent calculation.
> Permits the impact of various legal, regulatory and policy changes such
> as monetary policy, tax law, or trade policies to be modeled in greater
> detail.
> Allows different sectors of the economy to be analyzed independently
> and/or integrated with other sectors to develop a better understanding of
> the whole economic process.
> Accurately simulates the behavior of basic decision-making segments
> within the economy, like households, banks, companies, and government.
> Aspen uses agents to represent the various decision-making segments in
> the economy. Each segment may have one or more agents representing it in
> an analysis. One of Aspen's key features is its ability to realistically
> reproduce the process used by actual economic agents to maximize utility
> or profit. Agents in Aspen not only can communicate with one another but
> also make "real-life" decisions. Through use of evolutionary learning
> techniques, the agents adapt their behavior according to changing
> economic conditions and past experience. In other words, they become
> smarter as they move through time.
>
> Widespread applications
> The model is designed to run on Sandia's massively parallel Intel
> Teraflop computer, currently the world's fastest. Through its use,
> researchers anticipate that the entire economy can be modeled in
> sufficient detail to be realistic. This would give Aspen widespread
> application in the following areas:
>
> Economic and financial market forecasting for the government, banks,
> brokerage firms, or venture capitalists.
> Impact analysis of tax law or government policy changes.
> Impact studies of technology shifts for industry, consumers, or market
> research firms.
>
>
>
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