Dec

19

On a best efforts basis, remove morality and legality from the analysis, then correlate the architecture, conducting, and harmony of the work in terms of its enduring production, and we may arrive at a single word following the viewing of Pitt’s cited video performance of Madoff –- Maestro.

Three years ago, some four months before coming to China, I was “brought in” by a former high-frequency trader ($350m per annum) – he was like a brother, whom I have known now some 15 years. He was angling to “get in” with this guy in New York who was providing consistent, annual high returns. Perhaps he would set up a clearing operation with the big guy’s firm, whereupon then he could schmooze a book of business?

My friend’s father had the guy managing his money. Home in Westchester… Winter residence at Palm Beach Polo Club… A golf family… Great people…

I look back on my conversations with father and son about Madoff – his name was never mentioned to me. I think the Peak-End Rule was then flashing like a stoplight at a poorly lit, inner-city intersection of New Haven on a rainy, black of black nights, when only the after-hours joints are still trading; it was flashing as starkly as the red flags were streaming, fender mounted among industry vocals, including those notifying clients, the press, and the SEC that “Something’s Afoot” and the butler didn’t do it – yes, it almost has that Broadway pizzazz, don’t cha think(?)…

But enough, though, of the harmonic convergences… for then there is the missing 6:10 minute encapsulation in the video…

A ground shattering divergence at a level nearing the missing 18:5 minutes?

(see watergate)

Mark the time from 19:15 to 25:25 of Pitt T. Maner’s cited video… Josh explains the architectural alignment of greed and fear as correlated in the “fundamental quant models” so driving electronic market exchange systems.

Herd mentality: in seven years of research and development, I could swear that it was the cause and effect, but its recording appeared erased. Alas, Josh so testifies.

To those who dismiss the psychotic patterning of “the markets,” listen to the 6.10 minutes. Note the repetition of words “herd” and “animals” to describe funds buying “cheap” stocks and selling “expensive” stocks as “bets.”

Question: what is the relative basis for those quant generated characterizations of valuation?

As Josh notes, in the August event, what appeared uncorrelated either actually was or became so assimilated, whereby correlation was a de facto quantification in of itself from a program trading perspective.

Was that market occurrence a 25 Standard Deviation event?

How do we quantify these variables of correlation, deviation, particularly given the multi-tiered concentration(s)?

Is the video’s audience participant’s (low-high pressure system) weather analogy indicative?

Victor’s opening (December 10) post on Peak-End reports twice the variability of lowest compared to highest peaks. Consider Josh’s discussion of the periods of “time” corresponding to the building up of positions a la greed contrasted by the fear-struck collapsing of positions – note his use of “pain.”

I am the 1974 4-H Dairy Champion of Cumberland County, Maine. The cow’s name was Beth.

That said, be it large animals (the fund type) or dairy cows, when herding out to pasture or into the barn for milking, relativity of speed and variability of direction is as determinative (if not more so) than size of the herd.

Thus, we may now see how “quantitative relativity” is what the program trading and portfolio management industry has been missing since quant-algo fashion became sexy.

When, may we ask? Oh, right around the time Madoff was ramping up. Henceforth, the need for firms big and small to retool their fundamental programs accordingly is unto itself the primary rationale for a rules-based paradigm shift.

We did not need Mr. Madoff’s confessional to tell us so. Still, those at the SEC may come to recognize his crime(s) in the hopes to prevent a repetition…

He was a maestro because he understood relativity of positioning. He knew where to place his firm, being a gatekeeper as a marketmaker first, a hedge fund second, whereby the former “enabled” – see prior article’s AA clinical reference of – the latter to lie, cheat, and steal at intoxicated levels of leveraging.

Then again, position is relative and not just among the herd. Two often volume is confused for mass.

The email response from my former trader (forever friend) in Florida… yes we lost everything my father is taking it real bad worried about him.

Granted, a single cell organism within a corpus of complex organs, but the nature of markets – and why there is that “hand” thing going on – is because where there was one, there can become two… and three… then four… and so on until a market is made, perhaps then only to be lost (or conceded upon confession) by a correlating inversion of that very same process.

Herding much of anything is a process, one may note…therefore, laws of relativity become front and center (for managing a herd), determinative of any calculation, formulation, even estimation, thereby necessitating rules-based quantification…

Like the once young farmboy, sitting atop the posted end of a funneling fenceline, counting heads in preparation to close the gate upon all passing through, not to forget the rustlers themselves… Here, in the case to be before the court, swinging it shut, were two market-making sons – whereby we can only mitigate that moment of cognition, as he enables them to turn him in…


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