Monday, March 31, 2014
High frequency traders plan their next move - to see the 'buy' orders of millions a fraction of a second before they can be placed.
Author Michael Lewis ('Flash Boys') described in detail this morning (CBS Early Show) how flash traders- using the high frequency trading (HFT) gambit are able to see milliseconds ahead of your buy orders to get there before you can, buy the stock and raise the price - so you don't come out as far ahead as you thought. Also, the same applies to sell orders. They can get there first, and you get much less than you originally thought you would.
Lewis, who originally appeared on '60 Minutes' last night, emphasized the flash traders often trade on fractional share values but these pile up. Billions can be made off the backs of poor ordinary suckers, who trust that when they place buy or sell orders no shenanigans or secret advantages are afoot. But alas, this isn't the case. It only takes a tiny fraction of a second of flash trader advantage for them to see slightly ahead - to what you're intention is - and doing it before you do.
Incredibly, none of this seems to be illegal, though New York AG Eric Schneiderman said this morning (on the same Early Show) that:
"There are two things we have to do. One is to investigate the Commodities Futures Trading Organization, and the SEC has to investigate whether there's anything currently illegal and second, we have to inquire whether this requires new laws and reforms to catch up with technology".
Which means that in the meantime the ordinary investor is a sitting duck, at the mercy of these high frequency traders and their flash trade computer algorithms.
Readers may recall HFT first came to light in the May 6, 2010 “flash crash” of over 500 points. This event brutally demonstrated the perils of so –called “flash trading”. Then we first learned of the high speed computers which use special algorithms to detect large buy and sell orders then adjust their trades to take advantage. Since the high speed computers can act in nanoseconds( to either buy or sell) with the flash information, they inevitably get the better of the more conventional (slower) investors. The “flash crash” likely occurred because a number of flash computers processed information too quickly or inaccurately inciting a mass sell off.
What’s the little guy investor to do? Not much, and as I’ve repeatedly stated before, no little guys belong in the Wall Street scene, especially if they have lots of money (say in 401ks or IRAs) they are depending on for retirement. The reason is not just flash trading but many other gimmicks, including market timing, mutual fund or stock hyping, and misrepresentations, e.g. of "5 year annualized returns".
For example, the 5 -year annualized return (without dividends) at the end of 2012 showed negative 0.6 percent. But at the end of 2013 it showed 15.4 percent, and you'd have been kicking yourself for not being in the market. But hold strain! The reason for the difference is that for the latter 5- year stats the dismal 2008 stats were entirely wiped off the books from the standpoint of the "five year return", especially the S&P 38.5 percent drop without dividends.
How influential is flash or high frequency trading? According to The Wall Street Journal (‘Fast Traders Face Off with Big Investors over ‘Gaming’, June 30, 2010, p. C1) it accounted for two-thirds of total stock market volume. All other things being equal, that meant unless one had access to a flash trade system or algorithm himself, he had a 2 in 3 chance of being victimized by flash trades, if even peripherally. Today, some four years later, that HFT volume exceeds 90% and the little guy is in a perilous position unless he also has access to such trades. In most cases, as AG Schneiderman observes, it is large institutional investors who use them to gain advantage for their members.
Let’s look at one example of how HFT works. Say a flash trade system or firm, using its high frequency computer, detects a large buy order for a stock listed initially at $20 a share. Then - with milliseconds advantage - the flash trade firm will immediately begin scarfing up the stock – driving up the share price – say to $25 or $30 a share or more before you can buy it. The large (institutional) investors then buy it at the lower price, and the flash firm makes a killing, while the ordinary "Joe Schmoe" loses out, paying more.
Bear in mind here 401ks are typically invested in mutual funds comprised of a body of stocks, maybe ten or so. The flash traders’ capability with their high speed system is such that it can control the numbers for all the stocks of a particular fund, though true, there are some funds (e.g. Vanguard Group) which offset some of the effects by systematically lowering trading costs. This is often done by narrowing the spread between what investors pay to buy and sell shares.
Other funds don’t fare as well since the flash traders’ systems “front run” them. Thus, a stock’s orders (or many stocks in a fund) get “picked off” by the flash traders’ computers that detect the orders, then adjust to benefit. This may well be why mutual funds are being decimated as reported in MONEY magazine ('Mutual Funds Gone Down the Drain', March, p. 19). According to the piece, citing a Morningstar report: "of all the traditional funds operating a decade ago, 4 in 10 shut down before 2014."
Why should you care? As the article notes:
"Even though you can cash out, costs rise and performance falls as the end nears."
This is all the more reason flash trading needs to be brought under control. Readers who seek to lean more should get hold of Michael Lewis' book, 'Flash Boys'.
What is the threshold for separating a myth or legend say that “leprechauns exist”, or Bigfoot, from fact? Historically, it has been the presentation of at least one concrete piece of evidence – or member of the fabled set - such that the one exception disproves the (fictional claim) rule. Thus, the duck-billed platypus was once regarded as 'myth' until one was actually identified. Similarly, if I can present one Leprechaun I can squelch the claim they are a “myth” or “fable”. The fact that no one has been able to do so indicates that in all probability they are and will remain an Irish fable. Same thing with the tooth fairy and undoubtedly the Loch Ness monster, Bigfoot, and the “rock apes” that were a favorite Florida myth in the 1950s- 60s.
Now, what about the legend of 'vagina dentata' or vaginas bearing teeth, which undoubtedly comprise the worst form of nightmare for most males.
One site ( tvtropes.com) blathers:
And the writer acknowledges:
“One of the biggest surprises I encountered during my visit to the collections (the University College London Pathology Collections which comprise over 6,000 specimens dating back to around 1850), was the revelation that the female reproductive anatomy can, and occasionally does, grow teeth.”
Sunday, March 30, 2014
According to a UK Guardian Report, e.g.
"Some parts of the world could soon be at a tipping point. For others, that tipping point has already arrived. "Both warm water coral reef and Arctic ecosystems are already experiencing irreversible regime shifts," the approved version of the report will say."
"The gravest of those risks was to people in low-lying coastal areas and on small islands, because of storm surges, coastal flooding and sea-level rise."
This is already being seen in islands like Barbados, where the increasing sea level is reclaiming ever more prime beach land. It's also at work in South Florida, steadily shrinking beach sand unless it's constantly replaced. But tourists sunning themselves on beaches is the least of our concerns. The biggest is catastrophic climate change leading to the runaway greenhouse effect.
NY Times' columnist Nicholas Kristoff, several weeks ago, noted a contest he'd held for the "Neglected Topic" winner among his columns. By a large margin it was climate change with one person comparing it to "staring down an asteroid". This is not exaggeration, other in terms of the time scale. If we fail to act decisively and dramatically our species will experience as much devastation as if a Torino scale 9 asteroid had hit. What are we doing about it? Nothing of substance! Even Kristoff admitted:
"We in the news media manage to cover weather very aggressively but we are reticent on climate."
He adds that the coverage of climate has actually declined in American media since 2007 - according to researchers at the University of Colorado. As this media attention factor has declined, so also have the proportion of Americans who accept global warming is real. Of course, the largest divergence is between Republicans (24% accept it) and Democrats (65%).
Into this milieu, statistics guru Nate Silver has entered with his revived 538 blog, now incorporating a climate science section. Unfortunately, Silver picked exactly the wrong person to be the central contributor - a denier named Roger Pielke Jr. who - truth be told - isn't even a climate scientist. According to one profile on Wikipedia:
"Pielke Jr. is an American meteorologist with interests in climate variability and climate change",
Leaving out all the fulsome bollocks on his assorted "numerical modeling" skills this is basically what it all comes down to: his meteorological background. As I noted in a Jan. 2012 post on the climate agnotologists, citing the Jan.-Feb. 2011 issue of The Columbia Journalism Review, most meteorologists have a distorted view on climate change- global warming. They can't help it (as Al Roker also demonstrated a couple weeks ago) it's how they're taught. The Review pointed out the following aberrations in its survey of members of the American Meteorological Society (AMS) and why most don't buy climate change:
2- Most skeptic meterologists (like Bob Breck an AMS-certified chief meteorologist at New Orleans WVUE) didn’t properly recognize the limits of their own scientific training – and hence the implausibility of their pronouncing on climate science.
3- Because of (2) the skeptic meteorologists tend to see their own “informed intuition” as the source of some kind of ersatz scientific authority – particularly if the skeptics are also excellent communicators, or fancy themselves so.
Some of the paradoxical statistics that were cited in the article, based on surveys carried out by Emory University Journalism lecturer Kris Wilson, included:
- 29% agreed with Weather Channel mogul John Coleman’s take that global warming was “the greatest scam in history”.
-Only 24% believed that humans were responsible for most of the change over the past half century.
- 50% were certain this wasn’t true and that humans weren’t responsible.
-Only 17% of the opinionated TV weathermen “received a graduate degree, a prerequisite for an academic researcher in any scientific field”.
He basically brushes aside climate change as if it were a trivial concern. His proposal is to tax carbon at such a low and inconsequential rate that even Exxon Mobile agrees to the tax, and then to use the proceeds to fund more research on alternative energy and other mitigation strategies. That's IT. Well almost.
He also spends an inordinate amount of time bashing climate scientists (which he is admittedly not) for being human beings and voicing their intense concern for the future of the planet, which their research has shown is in big trouble if we do nothing or little to decrease carbon emissions in the very near future. This book is not worth reading and I regret the time I spent getting through it. If you want to learn about climate change and our options for dealing with its consequences, there are dozens of other books that really address the issue.”
A recent salon.com article on Pielke Jr. perhaps offers some of the most trenchant observations of the guy, such as:
Even someone who is sympathetic to the claim that political considerations sometimes find their way into climate science might shrink from Pielke Jr.’s characterization of climate science as “a fully politicized enterprise.” He makes such institutions as the
The Jewish Daily Forward meanwhile has this take:
Saturday, March 29, 2014
A letter in Physics Today (January. p. 8, 'The Search for Magnetic Reconnection in Solar Flares' ) summarized the problem of establishing the theory of magnetic reconnection associated with solar flares. Peter Foukal noted that we need a direct observational method, as opposed to mere tantalizing clues. He used as an analogy the nature of sunspots and how a century ago the vortex -like structures (e.g. penumbral whorls) suggested magnetic fields. However, the actual magnetic field existence wasn't really established until George Ellery Hale used the Zeeman splitting of a spectral line to actually detect spots' magnetic fields. E.g.
Where the left image shows the line-centered sunspot for which the Zeeman effect (right image) is detected and measured. The greater the spectral line splitting the greater the magnitude of the associated magnetic field.
In a similar way, studies of coronal morphology and motions have left solar physicists in a similar position today. There are tantalizing clues for reconnection, but no direct evidence. Foukal cites an earlier article (Physics Today, Sept., 2013) by Johanna Miller that mentions a key signature of reconnection appears to be an intense motional electric field. This would be defined:
E = vB ℓ
where v is the plasma velocity, B the magnetic induction, and ℓ a length element. Foukal notes that "some evidence for such fields has been observed using a relatively simple polarimeter to measure the Stark effect", and that comparison of such observations with the recently developed three dimensional models that Miller describes "might finally enable us to decipher the role of reconnection in solar flares." (The graphic attached shows one such 3-D model for a solar coronal loop with an assumed potential to spawn solar flares via magnetic reconnection).
Key to this is settling, establishing "whether the potential drops expected with reconnection occur across solar structures that produce detectable emission in Stark - affected hydrogen lines."
Make no mistake this would be an enormous advance given that so many current flare parameters, including for energy and power, are more in the way of indirect estimates.
For example, estimation of flare energy from the soft x-ray record is fairly straightforward and entails multiplying the SXR flux (left axis) of the “half-power” points by the time duration (horizontal axis) then by the recorded flare area in square meters. A segment of such a record is shown below:
Consider the flare occurring at 04h 30m UT on Nov. 6, 1980 with an estimated half-power point flux of F = 10 -5 W m –2 and a duration t » 3h » 10800s. If the associated Solar Geophysical Data records show it has a flare area of 10 23 m 2 then:
Flare energy » (10 -5 W m –2) (10800s)( 10 23 m 2 )
» 1.1 x 10 23 J
The power of the flare is then estimated, by dividing the energy by the time of duration, so:
Flare power » 10 19 W
Other quantitative estimates are possible but they require that specific models be applied (say for ‘double layers’) or that other ancillary measurements be known (say the magnetic flux, j = BA, where A is the area of the spot, say, and B the magnetic induction).
If the electrical resistance R, associated with a pre-flare system is known, then the current I can be estimated and the region assessed for a flare. Thus, if R is known and we know (from basic physics) that:
P = I V(t)
Which is a reasonable value though one would like to know its time evolution up the instant of flare eruption.
Friday, March 28, 2014
My wife was somewhat alarmed on receiving what I regard as a predatory marketing email, whose title blared: 'ARE YOUR MULTI-VITAMINS KILLING YOU?'
She asked me what I thought, and I immediately replied: "It's total recycled horse manure from another shyster out to make a quick buck! In fact, not taking vitamins is what's leading too many to an early death!"
She accepted that, and continues to take her vitamins, which I believe have helped in making her look ten to fifteen years younger than her actual age. (As everyone who encounters her says.)
Anyway, this absurd email went on to claim:
Jaakko Mursu, a nutritional epidemiologist at the
Wow! 6 percent. So how did Mursu et al come up with this figure anyway? The fact is anyone can play games with statistics and show whatever he wants. It reminds me of the old statin claim:
"Statins reduce risk of heart attacks by 33%".
Later found to have been based on comparing a statin-taking sample of 1,000 with a control group of 1,000 where the first experienced 1 cardiac event, and the latter experienced 2 - hence the drug marketeers stat "wizards" computed (which anyone even without a statistical background can see is wrong):
(2 - 1) /3 x 100% = 1/3 x 100% = 33%
And Voila - a 33% improvement! Which was duly reported by the hobbled, semi-competent corporo-media and which had many people thinking: 'Wow! I need to get statins!"
Not appreciating the actual stats disclosed an insignificant difference. So, one was no more likely to have a cardiac event taking them than not doing so. I suggest the same mumbo jumbo could form the basis of the "6 percent" difference here. Say looking at a population of 1,000 vitamin takers, versus a control group of the same number, with 994 survivors in the first group vs. 1,000 in the second. Of course, to single out a vitamin (or 2, or 3 or 4) as the unique cause of death is something no one can prove in any case.
Nevertheless the email blurb went on to say:
According to TIME magazine, scientists have suspected for some time that vitamins and supplements may not be as beneficial to health as previously believed: "In recent years, studies have shown that vitamins such as A, C and E, which were supposed to lower risk of chronic illnesses like heart disease and cancer, didn't provide much benefit. But many patients kept taking them anyway, and few doctors actively discouraged it...
The problem here is that no serious independent researchers ever made such claims, though megadose Vitamin C was briefly linked to interferon production in the 1980s, but later retracted. Vitamin A, meanwhile, has always been a vitamin one needs to be wary of, and most vitamin takers are cognizant of its risks in even "low" doses.
The email goes on to claim:
Not only are multivitamins linked to a higher risk of death among a group of 38,000 women, average age 62, who were studied for nearly two decades, but Mursu's team found higher odds of death associated with several other supplements, including:
- Vitamin B: 10% higher risk of death, compared with nonusers
- Folic acid: 15%
- Magnesium: 8%
- Zinc: 8%
who've found it essential in combating the drastic loss in nutrients from the presence of glyphosate permeating our food supply via GMOs. Magnesium and B-complex, as he notes, are essential supplements for life extension, as well as warding off Alzheimer's.
The vitamin scare mongers also are uninformed about the loss of phytonutrients over the decades, and the general loss of nutrients even in organic foods or 'wild grown' foods. Particularly over the past 100 years, we've altered the way we produce food so radically that we've actually removed too many vital nutrients that once, yes, were staples of our ancestors diets. And I should add, was a major reason they've not have had to take vitamins.
Actual RELIABLE studies published (not the bollocks cited by the snake oil salesmen) only in the last few years show our current produce selection is remarkably devoid of phyto- nutrients. These are the compounds that reduce the risk of cancer, diabetes and cardiovascular disease. The reason? With the advent of Corporate agriculture, we've systematically stripped phyto-nutrients from our diet and replaced crops bearing them with diluted GMO substitutes.
Research on nutrient decline by biochemist Bruce Ames shows the following:
- Over the last 50 years, the amounts of protein, calcium, phosphorus, iron, riboflavin, and vitamin C in conventionally grown fresh fruits and vegetables has declined by 50% or more.
- Wheat grown 100 years ago had twice as much protein as modern versions.
In other words, in order to replace the nutrients, vitamins you're not getting you'd have to consume vastly larger quantities of veggies - and to absurd proportions! Who the hell is going to eat ten tomatoes, or three pounds of peas or beans in a day, or drink two gallons of milk? Give me a break!
Part of the problem also has been corporate PR luring American tongues away from the earlier varieties of plants-crops with the highest amount of phyto-nutrients. A lot of this has to do with the other development, the emergence of fast food especially laden in sugars. The contra-indicator? Some of the best produce bearing highest phyto-nutrient content have bitter tastes!
As one example, take a look at corn. Today, we're conditioned to eat (and indeed only find available) the white and yellow varietes, so no blue corn is to be found. The crap we consume today (yellow and white corn) has from 1.54 mg to 70.2 mg of anthocyanins per 100 mg dried corn, compared to 99.5 mg of anthocyanins per milligram of dried corn available from blue corn.
If you're still not convinced, check out greens . Most people into diet wholesomeness believe spinach is the healthiest food around today, but is it really? In fact, there are only 0.89 mg of anti-oxidants in fresh spinach compared to ordinary dandelion greens (which the Germans use in their salads) which had 6.89 mg anti-oxidants per 100 mg.
Still skeptical, then look at apples .Most 'Muricans gravitate to a Granny Smith or Red Delicious apple - which contain 205 mg and 108 mg of phyto-nutrients per liter of juice, respectively. But the fact is the Siberian crab apple delivers 4,606 mg of phyto-nutrients per liter. If you really want to stay healthy and do away with vitamins, it's dandelion greens and Siberian crab apples you ought to be consuming - along with blue corn!
But since we aren't eating these things, we're not consuming anywhere near the level of anti-oxidants and phyto-nutrients we need - hence the ongoing need for vitamins.
This brings up the question of why the anti-vitamin lobby and medical-industrial complex is so determined to try to convince people to stop taking them. Well, dismissing the profit motive of the ones who sent Janice the email, which ended up advertising "super foods" - as if such could really exist in our GMO-contaminated, nutrient depleted environment- there is one plausible reason: a determined effort to reduce life span so too many people aren't around to collect social insurance benefits via Medicare or Social Security. Get most people to stop taking them, scare them into it if you must, and watch the life expectancy of those non-consuming groups diminish, leading them to croak before they can even collect Social Security at 62.
In terms of Medicare, it would relieve thousands of medical practitioners having to be faced with provider cuts completing mounds of paper work for every elder patient. It also removes the social stigma of refusing to treat older patients, or having to ask them to look for charity clinics because the doc is too busy or miffed to deal with the bureaucracy. Finally, it would relieve them of having to tell a terminal patient 'hasta la vista' because there is nothing more the practitioner (e.g. oncologist) can do to help - so why continue a futile effort?
In other words, if people just croak years younger it saves all that grief.
Oh, and let's not forget the biggest economic tidal wave of all: the coming onslaught from Alzheimer's disease expected to explode in the next twenty years to leave 15 million Americans affected. Most of these will contract the disease after age 70. If people die younger, say at age 60 or 63 from refusing to take vitamins, than a whole lot fewer people will get Alzheimer's and the budget won't be shattered from the costs of care.
Never mind, as John Phillips showed, vitamins can actually help stave off Alzheimer's.
Fortunately, Janice has deleted her "super foods, not vitamins" email and returned to packing next week's supply of vitamins in her container!