Feb

29

Nvidia Hits $2 Trillion Valuation on Insatiable AI Chip Demand

The chips are so valuable that they are delivered to the networking company Cisco Systems by armored car, said Fletcher Previn, Cisco’s chief information officer, at The Wall Street Journal’s CIO Network Summit this month.

H. Humbert is skeptical:

This won't end well, but I have no idea about the timing. I have a mixed record on predicting the future, so my prediction is worth what you paid for it, but this is what's likely to happen: due to the chip shortage (the TSMC bottlenecks described aren't easily solved in the short term) and their high prices, NVIDIA's hold on the software stack will be punctured. Someone will say "Hey, we need a second source, it's not good to just have one supplier". Once that happens their monopoly will be over, and it will deflate. Are there any signs of this today? No, none.

Asindu Drileba writes:

Nvidia's edge will evaporate if there is a breakthrough in a new AI paradigm that is not as computationally intensive as deep learning. Herding exists in research just as it does in markets. As of today, researchers are herding on deep learning because it is what has shown a great track record so far. But it is clearly known that there are better (but unarticulated) ways to build systems that exhibit the properties of Artificial Intelligence that industry wants to use to solve problems. As long as these techniques are not yet developed. I still see a growing market for someone like Nvidia in the long term.

H. Humbert adds:

Nvidia will see a growing market for a long time to come, the point is they're not levitating due to durable hardware advantages but because nobody wants to abandon their CUDA toolkit. Not yet, but some day someone will diversify for any number of reasons. They will still remain king of the hill, but cracks will develop.

Humbert H. comments:

Von Neumann latency and huge power consumption are issues and will eventually be a big enough problem. It is a know problem. If not solving the problem organically, I am sure they are looking out to buy the solutions if there are viable solutions. Don't know when it happens but will happen.

Jensen Huang's speech in 2011 about failure and changing course quickly. Sounds like a trader mindset.

Some alternate techniques are being developed but most of the average Joes don't know that yet. Speaking from my observation of what are happening, not just sheer speculations. This conference ISSCC - International Solid-State Circuits Conference on solid state device held this week at SF definitely covered areas related to high speed solid state device advances, limitations and solutions. The published papers and abstracts should have the most updated information.

Yelena Sennett is skeptical, too:

As long as Nvidia are buying their own chips, their sales will keep growing, especially if they keep recording it as revenue before delivery, lol. Scott McNealy's famous 'What were you thinking?' rant to investors for bidding Sun Microsystems' stock price up to 10x sales during the DotCom bubble:

At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?

It’s not different this time - trading around ~ 30 times sales! The only question is if the market is different this time and NVDA is just one stock that will not affect the general market when it goes down back to reality of $200 - $300.

Feb

28

Fractal scaling and the aesthetics of trees

Trees in works of art have stirred emotions in viewers for millennia. Leonardo da Vinci described geometric proportions in trees to provide both guidelines for painting and insights into tree form and function. Da Vinci’s Rule of trees further implies fractal branching with a particular scaling exponent.

H. Humbert writes:

I could never understand how fractals help with markets. Yes, the world is fractal, but fractals are essentially a way to describe the "roughness" of random patterns. But is this roughness permanent? No. Are the patterns predictable? No. Yet somehow some wiggles are described as bullish and bearish fractals. Sounds like snake oil to me.

Asindu Drileba responds:

You're right! Mandelbrot himself admits that his techniques cannot predict the direction a financial instrument will move. He however says that his techniques can predict "by how much" a financial instrument will move. He describes that "large movements are more likely to be followed by large movements" and "small movements are more likely to be followed by small movements." Here is a short video of Mandelbrot describing his model.

H. Humbert replies:

Never read his books. I know Victor hated him with passion, he was one of the three most guilty, the other two were Taleb and Buffett. Watched the video, a lot of words but nothing practical. Also since his mode of thinking is simple and algorithmic, and he is famous, if there ever was anything to be gained from it, by now algorithmic trading surely made all those possible gains disappear.

Laurence Glazier comments:

There is always an element of hand-waving in attempts to make things easier than they are, and it can be seductive. Nature, however, likes economy of means, and therefore if the same-ish pattern can be used at different scales, I would expect this to happen - but this assertion itself has an element of hand-waving.

H. Humbert adds:

To me the main element of hand-waving is that coastal topography and tree branch patterns created by very different mechanisms themselves have anything to do with predicting market moves where human psychology among many things is involved.

Zubin Al Genubi writes:

There are entire financial industries and degrees relating to prediction, measurement, and trading volatility. It is one of the most important aspects of trading and protecting yourself from ruin. A simple example of the importance of understanding volatility is its mean reversion. In time of stress and price drops this is a key.

Anatomy of a Meltdown: The Risk Neutral Density for the S&P 500 in the Fall of 2008, Justin Birru and Stephen Figlewski.

September 2008 was when the crisis hit in force….On 55% of the trading days in October and November 2008, the index moved more than 3% up or down (corresponding to annualized volatility in excess of 47%). Interestingly, while it is well-known that the market tends to move faster and further on the downside, in this extraordinary period sharp moves to the upside were just as common. On the two days with the largest price changes in October, the market rose more than 10%.

H. Humbert continues:

Once again something unpredictable happened that was difficult to take advantage of. It seems like crisis-related volatility would have to subside sooner or later when the crisis is over, is this a revelation? I recall the March 2020 day when the market hit the Covid lows. I literally said to myself "this has got to be the bottom". But did I do anything? No, because I really wasn't sure. Some forces ended the crisis, but they're only obvious in retrospect.

Feb

26

Sam Eisenstadt the founder of Value Line's methods (now conveniently canceled from mention in official history) liked to predict market moves on a monthly basis. His method now would predict a 200-pt move 6 months in future.

most similar to Eisenstadt regression methods are 2021, 2022, 2119, 2017, 2016, 2015, 2014, 2012, 2011, and 2008.

an inspiring story:

Nvidia Hits $2 Trillion Valuation on Insatiable AI Chip Demand

It took Nvidia NVDA 24 years as a public company for its valuation to reach the rarefied air of $1 trillion. Thanks to the chip maker’s role in powering the AI revolution, a second trillion took eight months.

Vic's twitter feed

Feb

25

A textbook example

February 25, 2024 | Leave a Comment

wednesday [21 Feb] was a textbook example of how deception and weakness can induce the vulnerable to do the wrong thing. the S&P hovered at a 12-day low at 4968 until close then prof came in and jumped market 60 pts in last 20 minutes. however they had wht weather gage in Germany all the way.

the symphony of all markets was very healthy for stocks and bonds on friday.

a sociologist with pregnant ideas that covers may aspects of monetary interactions:

Georg Simmel

Vic's twitter feed

Feb

24

Auschwitz Survivor Reveals The Secret To Overcoming Any Obstacle In Life with Dr. Edith Eger.

As a Jew living in Eastern Europe under Nazi occupation, Edith was taken to Auschwitz concentration camp with her parents and sister, at the age of 16. She explains how she found her inner resources, how she came to view her guards as the real prisoners, turn hate into pity and, incredibly, she even describes her horrific experience as ‘an opportunity’. She has liberated herself from the prison of her past through forgiveness.

Sushil Rungta writes:

I am also very fortunate to have met Dr. Eger a few times. Every meeting was illuminating. She really inspires by her story and by her humility. Both her books, The Choice and The Gift are must reads. Coming to the United States when almost 50 years old and accomplishing all that she has is truly remarkable. Also worth noting that her son-in-law is Noble laureate in economics.

Gyve Bones offers:

Last night I watched this dramatized documentary of the life and death of Fr. Maximilian Kolbe, a Polish Catholic priest who, as a prisoner in Auschwitz, offered his life for the tenth man chosen by the commandant to die in the starvation bunker in retribution for an escape from that cell block. The man was married and had children. Fr. Kolbe stepped out of the assembled ranks, which normally would get a prisoner shot, and asked the commandant if he could take the man’s place. The offer was accepted. He turned the starvation bunker into a chapel, with him leading the nine other men in constant prayer and singing hymns. He was the last one remaining alive, and so the guards dispatched him by injecting carbolic acid into his veins, which makes the CO² bubbles in soda, and causes the heart pump to cavitate and fail.

Feb

23

There is a backlash against travel meme occurring. I don't have numbers but I'm noticing travel is down. I don't feel like traveling. My traveling friends are staying home. I saw a magazine article on why travel is bad. Boeing is down.

The Case Against Travel
It turns us into the worst version of ourselves while convincing us that we’re at our best.

H. Humbert responds:

Boeing is down because of the well publicized mechanical problems and the exposure of their general carelessness. They're not affected a great deal by the minute-to-minute variations in travel demand due to long lead times and large backlog.

Pamela Van Giessen writes:

The Davos crowd has been pushing no travel because climate change. Except for their private jets to exclusive Swiss resorts.

Air fare to AZ is high for Feb-April and Scottsdale airbnbs are pricey so I’m not sure if travel is really down except to MT because no snow for skiing. A friend reports that Park City was busy for Sundance. Besides, don’t most people travel a bit later during spring break when the kiddos are out of school? And could it be they are booking their travel for when they can drive and avoid airport unpleasantness?

Word is that Coachella sales are slow but Stagecoach which takes place a week later sold out super fast. Seems like Coachella is flagging on the booked acts, not a lack of travel interest (given that Stagecoach is basically down the road). Charley Crockett tickets for the middle of nowhere Emigrant MT sold out in about 20 mins for June. Maybe it’s all local but I suspect a fair number of tickets were bought by out of towners.

H. Humbert observes:

I was in Napa Valley recently for somebody’s birthday and everything was sold out but the winery. Some people needed to find last minute hotel reservations, was almost impossible. The restaurant where you eat in a yurt had no empty yurts, in torrential rain. Not considered the best time of the year to visit it either because it does tend to get rainy.

Henry Gifford comments:

10 or 20 years ago Boeing moved their corporate headquarters to Chicago for the stated purpose that they wanted to be taken seriously by Wall Street. Headquarters >1,000 miles from the nearest factory? Insane. The place was run by engineers, which is smart for a company manufacturing complex things. Now I think they are run by accountants and lawyers - see how Detroit has been making out with that strategy.

The problems a few years ago with planes diving unexpectedly were caused by the MCAS system: Maneuvering Characteristics Augmentation System - an acronym giving little indication about what it is or does. The system took an input from one angle-of-attack sensor on the nose - a fin whose position changes with the angle of the wind passing over the nose of the plane - and if it saw the nose was too high (could lead to a stall: chaotic airflow over the wings causing a loss of lift), it automatically pointed the nose of the plane down. This broke the rule in aviation design that the failure of one mechanical device (the angle-of-attack sensor) should not lead to a crash. Bad sensor readings caused the sensor to push the nose down when the plane was actually flying fine - two planes nosed down into the ground, killing hundreds of people. A better design strategy is to require simultaneous failure of two mechanical devices to cause a crash. In other words, the computer should have been wired to two sensors. The crazy thing was that the computer was wired to two sensors; each plane had two, or optionally three. If the software received contradictory signals, a red light should have alerted the pilots and disconnected the "ANDS" (automatic-nose-down-system (my name), and if the plane was on the ground, it should not take off until the sensor(s) work. Basic engineering 101.

The company might do well with government contracts, automatic market share, etc. But it will be decades before the young and ambitious will be proud to work there.

Bo Keely relates:

A new Slabber just retired here from Continental Air. He insists that Continental for years has been tied to the CIA, and that he too was that. With a Masters in Electronics, he is also the person the President called to deflect missals gone astray. The technique is to send two jets after the launch to intercept the wrong destination. The most recent example was one shot from a submarine off Hawaii aimed for a Utah test target, that misguided toward LA. That would have been a horrendous traffic jam. The first jet, slower that the missile, intercepts its trajectory to radio the bearing to a second jet to close in to electronically knock the missile off-course. It landed outside San Bernardino to cause a forest fire that the military blamed on careless campers. Other scapegoats have been UFOs, but they've been US missiles.

Humbert H. is skeptical:

Distance from Hawaii to Utah is about 3000 miles. So slow moving cruise missiles can be ruled out. For either ICBM or IRBM, depending on the phases of the trajectory, the speeds can vary. These vehicles' speeds after the boost phases range from Mach 18 to 25. Mach 1 is 767 miles per hour. A typical passenger jet can reach no more than 600 miles per hour. There are many things about the fictional story of the ex pilot just simply don't add up.

Feb

22

I grew up playing lots of board games, and later, computer games. I see videos of college students not being able to do basic math, and I think, "They needed to play Monopoly when they were kids!" Here is an interesting Numberphile with Marcus du Sautoy about the game Risk:

The Game of Risk - Numberphile

du Sautoy has a book on games:

Around the World in Eighty Games
From Tarot to Tic-Tac-Toe, Catan to Chutes and Ladders, a Mathematician Unlocks the Secrets of the World's
Greatest Games

He is an interesting guy and has done a lot of popular math work.

Humbert H. writes:

I grew up in a house where cards were played all the time. We played everything from pinochle and canasta to spades and bridge. I was a degenerate rummy player in my teens, half a cent a point. Later on graduated to low ball, which is a truly sick game, only for the degens. Always managed to hold my own in all kinds of poker. Cards improved my memory and on the spot mental arithmetic. Learned a few hundred prop bets using cards and had a good measure of success with them. We still play all the time, and when grandbaby is a few years older, he can join.

James Goldcamp adds:

While Risk was always fun, it's Avalon Hill's Diplomacy that for me is the pinnacle of board games. It combines negotiation and cooperation useful in business, the bluffing and dissembling of poker, along with an element of pure calculation a la chess. While the board presents somewhat of a tight closed system (ask anyone who has played as Turkey!) I believe it teaches the best balance of grand strategy, pure tactics, and anticipation (and manipulation) of the intent and designs of the other players. In the initial days of the pandemic my gaming friends of decades prior reconvened using one of the free online diplomacy sites.

Honorable mention for baseball enthusiasts goes to another Avalon Hill great - Superstar Baseball. An excellent way for a kid to gain an appreciation for early 20th century players through Mays and Aaron.

Big Al wonders:

Was there a message here?

Thank you for your interest in the monetary policy game, Chair the Fed. The game has been a useful and fun tool to learn more about monetary policy. However, the Fed has updated its approach to monetary policy, and the changes are not readily accommodated within the existing structure of the game. As of June 1, 2021, the game is no longer available.

Asindu Drileba writes:

I came across this game from Jane Street.

Figgie is a card game that was invented at Jane Street in 2013. It was designed to simulate open-outcry commodities trading. Most of the skill in Figgie is in negotiating trades that benefit both the buyer and seller. Like in poker, your objective in Figgie is to make money over a series of hands.

Several financiers I have studied like to play games of chance outside the market - Warren Buffet (Bridge), Charlie Munger (Poker), Edward Thorpe (Blackjack), Vic (Checkers — I still don't know what to make of the checkers like board on the Daily Speculations homepage).

Feb

21

two unforgettable and brilliant things i have been reading are Willa Cather's A Chance Meeting and Mark Twain's account of the Queen's jubilee. the latter is appropriate for S&P at 5500 and should accompany all of Dimson's work.

Big Al offers:

Something else that may be fun:

Diamond Jubilee: Sherlock Holmes, Mark Twain, and the Peril of the Empire

Vic's twitter feed

Feb

20

There are many lessons in this short talk by Richard Feynman.

Barnum’s classic, The Art of Money-Getting, is read aloud in this video. A great addition to any spec’s collection. Quite dated, but the spirit is undeniable.

Feb

19

Wandered across it a bit randomly. Of course, one could argue that "experimental finance" is/should be what every trader is practicing.

Experimental Finance

Potentially useful links in this article:
Experiments in finance: A survey of historical trends

A key figure:

The Lab Man: How experimental economics emerged from the shadows
Jeremy Clift interviews Nobel Prize winner Vernon L. Smith

Also:
Herd Behavior in Financial Markets: An Experiment with Financial Market Professionals

Kim Zussman adds:

Late list member Ross Miller worked with Vernon Smith and Charles Plott during his undergrad at Caltech in the early 70s.

How to Stay Mentally Sharp Into Your 80s and Beyond

Vernon L. Smith, 97, is a very busy man.

The economist at Chapman University just finished writing a book about Adam Smith and works about eight hours a day, seven days a week in his home office in Colorado Springs, Colo. He enjoys chatting with friends on Facebook and attending concerts with his daughter.

“I still have a lot of stuff to do. I want to keep at it,” said Smith, who won the Nobel Prize in economics in 2002.

Feb

18

Terence Tao, who has been called the “Mozart of Mathematics,” wrote an essay in 2007 about the common ingredients in “good” mathematical research. In this episode, the Fields Medalist joins Steven Strogatz to revisit the topic.

Dr Tao's website.

Gyve Bones offers:

Einstein, Address to German League of Human Rights:

Although I am a typical loner in daily life, consciousness of belonging to the invisible community of those who strive for truth, beauty, and justice has preserved me from feeling isolated. The most beautiful and deepest experience a mancan have is the sense of the mysterious. It is the underlying principle of religion as well as all serious endeavor in art and science. He who never had this experience seems to me, if not dead, then at least blind. To sense that behind anything that can be experienced there is a something that our mind cannot grasp and whose beauty and sublimity reaches us only indirectly and as a feeble reflection, this is religiousness. In this sense I am religious. To me it suffices to wonder at these secrets and to attempt humbly to grasp with my mind a mere image of the lofty structure of all that there is.

Richard Feynman, from The Pleasure of Finding Things Out:

I have a friend who’s an artist and has sometimes taken a view which I don't agree with very well. He'll hold up a flower and say “look how beautiful it is,” and I’ll agree. Then he says “I as an artist can see how beautiful this is but you as a scientist take this all apart and it becomes a dull thing,” and I think that he's kind of nutty. First of all, the beauty that he sees is available to other people and to me too, I believe. Although I may not be quite as refined aesthetically as he is, I can appreciate the beauty of a flower. At the same time, I see much more about the flower than he sees. I could imagine the cells in there, the complicated actions inside, which also have a beauty. I mean it’s not just beauty at this dimension, at one centimeter; there's also beauty at smaller dimensions, the inner structure, also the processes. The fact that the colors in the flower evolved in order to attract insects to pollinate it is interesting; it means that insects can see the color. It adds a question: does this aesthetic sense also exist in the lower forms? Why is it aesthetic? All kinds of interesting questions which the science knowledge only adds to the excitement, the mystery and the awe of a flower. It only adds. I don’t understand how it subtracts.

Pope Benedict XVI, On Beauty as a Way to God:

I remember a concert performance of the music of Johann Sebastian Bach—in Munich in Bavaria—conducted by Leonard Bernstein. At the conclusion of the final selection, one of the Cantate, I felt—not through reasoning, but in the depths of my heart—that what I had just heard had spoken truth to me, truth about the supreme composer, and it moved me to give thanks to God. Seated next to me was the Lutheran bishop of Munich. I spontaneously said to him: “Whoever has listened to this understands that faith is true”—and the beauty that irresistibly expresses the presence of God’s truth.

Feb

15

how intervention spreads; gas stoves, toilets et al:

Interventionism: An Economic Analysis, by Ludwig von Mises and Bettina Bien Greaves

It is the purpose of this essay to analyze the problems of government interference in business from the economic standpoint. The political and social consequences of the policy of interventionism can only be understood and judged on the basis of an understanding of its economic implications and effects.

a very good precursor to Hume, Smith and Darwin:

The Fable of the Bees, by Bernard Mandeville

Mandeville's Fable of the Bees: A Reappraisal

Vic's twitter feed

Feb

12

i reviewed the Livermore book for Barron's and i believe if covers the bad quite well.

History Lessons for Investors
Reviewed by Victor Niederhoffer

Imagine that master novelist and chess aficionado Vladimir Nabokov wrote a fictional memoir about Capablanca—the 1920s world champion who never made a mistake on the board—and that Bobby Fisher then published an updated and annotated version, incorporating all of the important developments of modern chess strategy, along with a foreword by Anatoly Karpov.

A similar multilayered feast on investment is now available, with minor differences. Edwin Lefevre's Reminiscences of a Stock Operator is a novel told in the first person by a character inspired by legendary trader Jesse Livermore. This classic is now graced with extensive annotations by investment advisor Jon Markman and a foreword by hedge-fund manager Paul Tudor Jones.

The result is big and beautiful, cutting across two centuries of booms and busts and market and economic history, with a myriad of vintage historical photos and instructive historical charts throughout.

Peter Ringel responds:

Thank you, Vic. For many traders, Reminiscences was their first book about speculation.

Feb

11

Game theory

February 11, 2024 | Leave a Comment

the memory of old men staring disapprovingly out the winder at the University Club at the women on fifth avenue wearing miniskirts must be how the governors at the fed feel about the unprecedented decline in their boy's chances today [9 Feb].

what must they do to make sure they can remedy the situation. 30-year bonds now at a 60-day low at 119.75. the Governors must arrest the decline vigorously and soon.

i listen to Sherlock Holmes every nite and was surprised to come across this reference to Von Neumann and Morgenstern:

Sherlock Holmes and Game Theory

This essay reanalyzes the game theory interpretation by John von Neumann and Oskar Morgenstern of Arthur Conan Doyle’s “The Final Problem.”

Feb

7

It is not hard to see this is very late stages of speculative madness but I really would like to know how the risk management teams approve buying Nvidia stock here after adding $200 billion to market cap in 3 days?

Larry Williams offers:

Maybe my cycle forecast for NVDA would help:

Asindu Drileba writes:

I don't know why people are still buying Nvidia. But this is what I personally think of the stock. Nvidia has an 80% market share in the Graphics Card business. Their bread and butter used to be video gaming, 3d animation, video editing, later crypto mining, AI (computer vision), AI (Large Language Models), AI (Image generation) possible new advances may occur in Molecular Dynamics, Self driving cars etc. The CEO had an interesting interview where he talked about possible areas Nvidia may venture into.

But here is one strange thing about high performance computing (Nvidia's Niche): We would think that the better (higher performing) their products are, the less people would buy because people would do more with less right? It's actually the opposite.

— In gaming for example, when graphics cards improved people moved to less polygon looking characters and wanted more details like finer hair & plants. From there they even went to more computationally intensive algorithms like ray tracing that mimic real world scattering of light. Requiring even more compute in subsequent algorithmic advances.

— In Bitcoin, many people using Nvidia GPUs made it more difficult to earn money from crypto mining. Which requires people to have even more Nvidia GPUs just to continue earning the same income.

— In AI, when ever a new breakthrough was made, researchers often trained models with larger datasets, using more & more GPUs. Chat GPT for example was trained on 1 Trillion corpus of text.

So if they do maintain this 80% market share and these underlying industries continue to grow (and make new break throughs). It makes sense that Nvidia will be very valuable in the near or distant future. Buying now (at all time highs) is definitely dangerous but, even if the bubble pops, the underlying industries it facilitates will still be present. And if more breakthroughs in these industries are made, it makes sense that Nvidia still has some value left in it.

Cagdas Tuna responds:

Good fundamental points and there I have 2 counter outlook:

-Gaming industry; I almost everyday play an online game called Destiny 2, and their developer Bungie has reduced workforce around 10%. I know many other gaming companies are reducing/reduced workforce which doesn't give too much optimism in that area.

-Bitcoin mining; there is halving in a few weeks and this will require more powerful computers but it will also increase the cost which in the end will end up new miners losing money in most cases. Only way to maintain gains in mining is Bitcoin price to double or triple in a year.

Even on the best possible scenario it will not add 200 billion dollars worth growth in many many years.

Steve Ellison comments:

Words of wisdom from Rocky's Ghost, posted in the Spec List on April 4, 2017. And yes, I am long NVDA. I believe this is the study Rocky referred to.

Soros and I share very little. However, I have come to agree with him that the right position is to be long "bubble" (however defined). I used to subscribe to Anatoly's view and to be bearish during bubbled but I discovered that from a risk-adjusted-return perspective, it's better to be right "today" than right "tomorrow." Along this point, I read a study that shows a substantial percentage of stock returns occur during the last surge in a "bull market". If you miss this surge, it's very difficult to keep up with the indices in the short term. And in the long term, we're all dead.

Asindu Drileba replies:

Gaming Revenue was about $142B just in 2022. If cloud gaming, something Nvidia is planning todo is successful, I expect this to jump by several multipliers. I expect Cloud gaming to be a bigger business than say AWS. Gaming is really big, I believe you have heard about gaming being bigger than movies & music combined.

The Crypto market cap is $1.6T, a lot of these Crypto currencies use graphics cards to mine their currencies. So I don't think $200B is too much. For Nvidia which is well positioned in these industries, i.e., owning 80% of that market.

Humbert H. adds:

One fundamental point about predicting the future of NVIDIA. It's a complete accident (lucky for NVIDIA) that the hardware optimized matrix multiplication used for 3D graphics pipelines was also useful for AI.

K. K. Law riffs on The Great One:

Confirmation bias. And this is where the AI computation puck is at of course.

Cagdas Tuna realizes:

Now I see why everyone chasing this momentum with FOMO as all assumptions based on Nvidia will get all of the cake in the market!

Feb

6

Google DeepMind’s new AI system can solve complex geometry problems. Its performance matches the smartest high school mathematicians and is much stronger than the previous state-of-the-art system.

DeepMind says it tested AlphaGeometry on 30 geometry problems at the same level of difficulty found at the International Mathematical Olympiad, a competition for top high school mathematics students. It completed 25 within the time limit. The previous state-of-the-art system, developed by the Chinese mathematician Wen-Tsün Wu in 1978, completed only 10.

A collection of Olympiad geometry problems.

H. Humbert comments:

But it can't solve talent retention.

Google DeepMind scientists in talks to leave and form AI startup

Humbert H. writes:

If anyone were to ask, perhaps the real hidden value of the system could be for example in the application in discovery of new materials. Of course, the biggest question and the current AI can't solve immediately is how to syntheses the new materials in real experiment timely and to verify and validate the properties. If it could break new grounds in materials, one of the fantastic 7 is also on it too.

H. Humbert responds:

Depends on whether materials synthesis can be described via some set of rules. I don't know enough about it to see it one way or the other. I expect new drug discovery by pharma companies which is now being transitioned to digital molecule exploration from lab based experimentation to eventually use AI, at the every least for new protein synthesis which has both chemical and spatial folding problems and is a less general problem than "materials". DeepMind seems different from large language models that have been in the news lately in that it operates on much less data and is generally used to find better solutions to problems that are similar to games and have a more contained set of "rules" as opposed to mimicking human intelligence by mapping how humans answer questions after analyzing huge data sets.

Feb

5

Kim Zussman offers:

Meet the Investors Trying Quantitative Trading at Home

Pietros Maneos trades stocks like many of Wall Street’s most sophisticated operations: running dozens of computer-driven strategies in parallel to chase market-beating returns. But he isn’t some tech-savvy math type. He is a published poet who doesn’t know how to code. Maneos, 44 years old, uses online-trading platform Composer.trade to build, test and bet on quantitative trading algorithms that buy and sell stocks and exchange-traded funds out of his home office in Boca Raton, Fla. One algorithm, for example, holds a triple-leveraged exchange-traded fund tracking the Nasdaq-100 index if the S&P 500 index has recently trended higher—and Treasury bills otherwise. He is currently running 72 such schemes he constructed with the application’s graphical interface, but can also type requests in plain English that Composer’s AI will translate into code. “It’s like having my own personal black box,” he said. “You could argue that I’m a hedge fund with 72 strategies.”

Big Al is puzzled by this bit from the above:

Many users praise its simplicity. But several warned about the tax implications of wash sales and the absence of some common Wall Street risk-management tools, such as one that would automatically exit a strategy when a specified loss is reached.

Huh?

Zubin Al Genubi wonders about market microstructure:

On CME is not clear. Is there somewhere how price changes is explained? Seems the asks should go to 0 before price clicks up but they don't. There is a lot of juggling in the queue as well, spoofing, stuffing. I'm reading Flash Crash, by Liam Vaughan.

Jeff Watson responds:

Here is an excellent perspective on spoofing.

Big Al adds:

This book gets recommended a lot but I haven't read it. Pubbed in 2002.

Trading and Exchanges: Market Microstructure for Practitioners, by Larry Harris.

Asindu Drileba recommends:

I am currently enjoying this biography of Jessie Livermore by Patrick Boyle. It's so well narrated, I hope some of you enjoy it.

Henry Gifford observes:

Patrick Boyle says he used to work for Vic.

Feb

4

Under the central limit theorem, the distribution of sample means approximates a normal distribution as the sample size gets larger, regardless of the population's distribution. For a Gaussian distribution a sample size of 30 is fine. For Student T distribution with 3 degrees of freedom, which many of us use, with fatter tails, convergence under CLT requires a sample of at least 130! This would leave only some very broad trade criteria for a robust confidence level.

William Huggins responds:

that sample size is only required is you want to make confidence intervals based on the normal distribution (which requires convergence) but you can make confidence interval from almost any sample size and certainly with any distribution. the difference is that smaller sample T's produce large standard errors (due to fatter tails).

Theodosis Athanasiadis comments:

i believe one should approach testing and risk management differently. for back-testing you care more about the mean of the distribution so you should use either a bootstrap (as William mentioned) or even shrink the outliers using some robust statistic. for risk management/stops you should definitely use fatter tails.

Feb

3

Russ Roberts@EconTalker
Ninety seconds of economics. Shockingly clear and shockingly subtle.

Stefan Jovanovich comments:

This is the usual slight of hand by "free traders". Instead of discussing tariffs as a question of taxation, they always present it as a matter of personal liberty good vs. bad. Yet somehow that discussion never moves over to employment taxes; having the government take a quarter of everything even the lowest paid worker earns is not to be examinged as a matter of personal liberty.

The truth about tariffs as taxes is what Americans knew in the 19th century. If you want the revenue, the rate has to be low enough - 20% on average - that there is less pain in paying it than in smuggling or cheating. You cannot have quotas (funny how, in matters of employment taxes, we have them; no one is allowed to work for less than the minimum wage). Unlike employment taxes, tariffs take their money first from the wealthy; that was the Southern "way of life" complaint about them before and after the Civil War.

Feb

2

The most bull thing of the month is that a certain chair would not be reappointed if there were a change in admins. Thus, the certain chair like anybody else will be extra vigilant to save his job by creating an ebullient picture in next 10 months.

How Price Control Leads to…Socialism, by Ludwig von Mises:

The government believes that the price of a definite commodity, e.g., milk, is too high. It wants to make it possible for the poor to give their children more milk. Thus it resorts to a price ceiling and fixes the price of milk at a lower rate than that prevailing on the free market. The result is that the marginal producers of milk, those producing at the high­est cost, now incur losses. As no individual farmer or businessman can go on producing at a loss, these marginal producers stop pro­ducing and selling milk on the market. They will use their cows and their skill for other more profitable purposes. They will, for example, produce butter, cheese, or meat. There will be less milk available for the consumers, not more.

Full treatise: The Middle of the Road Leads to Socialism

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