June 2010
May 2010
“The first episode was broadcast on 18 March 1985. The Melbourne-produced programme underperformed in the Sydney market. It struggled for four months before Seven Network cancelled the show. The series was immediately bought by rival Network Ten, who had to rebuild the sets after Channel Seven burnt them all to stop their rivals from having them.”
—Neighbours - Wikipedia, the free encyclopedia
“The damage was foreseeable and, in fact, foreseen. In 1998, before Li had even invented his copula function, Paul Wilmott wrote that “the correlations between financial quantities are notoriously unstable.” Wilmott, a quantitative-finance consultant and lecturer, argued that no theory should be built on such unpredictable parameters. And he wasn’t alone. During the boom years, everybody could reel off reasons why the Gaussian copula function wasn’t perfect. Li’s approach made no allowance for unpredictability: It assumed that correlation was a constant rather than something mercurial. Investment banks would regularly phone Stanford’s Duffie and ask him to come in and talk to them about exactly what Li’s copula was. Every time, he would warn them that it was not suitable for use in risk management or valuation.
Bankers should have noted that very small changes in their underlying assumptions could result in very large changes in the correlation number. They also should have noticed that the results they were seeing were much less volatile than they should have been—which implied that the risk was being moved elsewhere. Where had the risk gone?
They didn’t know, or didn’t ask. One reason was that the outputs came from “black box” computer models and were hard to subject to a commonsense smell test. Another was that the quants, who should have been more aware of the copula’s weaknesses, weren’t the ones making the big asset-allocation decisions. Their managers, who made the actual calls, lacked the math skills to understand what the models were doing or how they worked. They could, however, understand something as simple as a single correlation number. That was the problem.” —Recipe for Disaster: The Formula That Killed Wall Street
Bankers should have noted that very small changes in their underlying assumptions could result in very large changes in the correlation number. They also should have noticed that the results they were seeing were much less volatile than they should have been—which implied that the risk was being moved elsewhere. Where had the risk gone?
They didn’t know, or didn’t ask. One reason was that the outputs came from “black box” computer models and were hard to subject to a commonsense smell test. Another was that the quants, who should have been more aware of the copula’s weaknesses, weren’t the ones making the big asset-allocation decisions. Their managers, who made the actual calls, lacked the math skills to understand what the models were doing or how they worked. They could, however, understand something as simple as a single correlation number. That was the problem.” —Recipe for Disaster: The Formula That Killed Wall Street
“It had been billed as a beauty contest tailor-made for the Middle East: a pageant in which the contestants would not dress immodestly and the swimsuit round would be dropped.
But, despite efforts to cater for cultural sensitivities, plans to hold a Miss Palestine competition in Ramallah have foundered as organisers stand accused of “spreading moral corruption” by Hamas officials.
Thwarting the ambitions of the 58 hopefuls who had been expected to take part in the competition final on Sunday, the Palestinian Authority has asked that the event be postponed indefinitely because the date clashed with the first anniversary of the Israeli assault on Gaza.” — Miss Palestine contest shelved over moral fears | World news | The Guardian
But, despite efforts to cater for cultural sensitivities, plans to hold a Miss Palestine competition in Ramallah have foundered as organisers stand accused of “spreading moral corruption” by Hamas officials.
Thwarting the ambitions of the 58 hopefuls who had been expected to take part in the competition final on Sunday, the Palestinian Authority has asked that the event be postponed indefinitely because the date clashed with the first anniversary of the Israeli assault on Gaza.” — Miss Palestine contest shelved over moral fears | World news | The Guardian
“The new organism is based on an existing bacterium that causes mastitis in goats, but at its core is an entirely synthetic genome that was constructed from chemicals in the laboratory.
The single-celled organism has four “watermarks” written into its DNA to identify it as synthetic and help trace its descendants back to their creator, should they go astray.
“We were ecstatic when the cells booted up with all the watermarks in place,” Dr Venter told the Guardian. “It’s a living species now, part of our planet’s inventory of life.”
Dr Venter’s team developed a new code based on the four letters of the genetic code, G, T, C and A, that allowed them to draw on the whole alphabet, numbers and punctuation marks to write the watermarks. Anyone who cracks the code is invited to email an address written into the DNA.” —Craig Venter creates synthetic life form | Science | The Guardian
The single-celled organism has four “watermarks” written into its DNA to identify it as synthetic and help trace its descendants back to their creator, should they go astray.
“We were ecstatic when the cells booted up with all the watermarks in place,” Dr Venter told the Guardian. “It’s a living species now, part of our planet’s inventory of life.”
Dr Venter’s team developed a new code based on the four letters of the genetic code, G, T, C and A, that allowed them to draw on the whole alphabet, numbers and punctuation marks to write the watermarks. Anyone who cracks the code is invited to email an address written into the DNA.” —Craig Venter creates synthetic life form | Science | The Guardian
Dog Is Life // Jerusalem
The Fall
And though I rest from mental fight
And though sword sleeps in hand
“New York City, 1968. The RAND Corporation had presented an alluring proposal to a city on the brink of economic collapse: Using RAND’s computer models, which had been successfully implemented in high-level military operations, the city could save millions of dollars by establishing more efficient public services. The RAND boys were the best and brightest, and bore all the sheen of modern American success. New York City, on the other hand, seemed old-fashioned, insular, and corrupt—and the new mayor was eager for outside help, especially something as innovative and infallible as “computer modeling.” A deal was struck: RAND would begin its first major civilian effort with the FDNY.
Over the next decade—a time New York City firefighters would refer to as “The War Years”—a series of fires swept through the South Bronx, the Lower East Side, Harlem, and Brooklyn, gutting whole neighborhoods, killing more than two thousand people and displacing hundreds of thousands. Conventional wisdom would blame arson, but these fires were the result of something altogether different: the intentional withdrawal of fire protection from the city’s poorest neighborhoods—all based on RAND’s computer modeling systems.
Despite the disastrous consequences, New York City in the 1970s set the template for how a modern city functions—both literally, as RAND sold its computer models to cities across the country, and systematically, as a new wave of technocratic decision-making took hold, which persists to this day. In The Fires, Joe Flood provides an X-ray of these inner workings, using the dramatic story of a pair of mayors, an ambitious fire commissioner, and an even more ambitious think tank to illuminate the patterns and formulas that are now inextricably woven into the very fabric of contemporary urban life. The Fires is a must read for anyone curious about how a modern city works.” —BLDGBLOG: The Fires: Save the Date
Over the next decade—a time New York City firefighters would refer to as “The War Years”—a series of fires swept through the South Bronx, the Lower East Side, Harlem, and Brooklyn, gutting whole neighborhoods, killing more than two thousand people and displacing hundreds of thousands. Conventional wisdom would blame arson, but these fires were the result of something altogether different: the intentional withdrawal of fire protection from the city’s poorest neighborhoods—all based on RAND’s computer modeling systems.
Despite the disastrous consequences, New York City in the 1970s set the template for how a modern city functions—both literally, as RAND sold its computer models to cities across the country, and systematically, as a new wave of technocratic decision-making took hold, which persists to this day. In The Fires, Joe Flood provides an X-ray of these inner workings, using the dramatic story of a pair of mayors, an ambitious fire commissioner, and an even more ambitious think tank to illuminate the patterns and formulas that are now inextricably woven into the very fabric of contemporary urban life. The Fires is a must read for anyone curious about how a modern city works.” —BLDGBLOG: The Fires: Save the Date
“Investigators seeking an explanation for the brief stock market panic last week said Sunday that they were focusing increasingly on how a controlled slowdown in trading on the New York Stock Exchange, meant to bring about stability, instead set off uncontrolled selling on electronic exchanges.
It was an unintended consequence of a system built to place a circuit breaker on stocks in sharp decline. In theory, trades slow down so that sellers can find buyers the old-fashioned way, by hand, one by one. The electronic exchanges did not slow down in tandem, causing problems, according to two officials familiar with the investigation.
That could mean that the computers first flooded the market with sell orders that could not be matched with buyers. Then, just as quickly, many of these networks withdrew from trading. The combined effect might have set off a chain reaction that sent shares of many companies spiraling during the 15-minute frenzy.
After a weekend of analysis, many specialists at the major exchanges no longer believe that a single large sell trade in one stock, like that of Procter & Gamble, was the trigger, according to the people familiar with the investigation. Instead, they suspect that a mismatch in rules between the older New York Stock Exchange and younger electronic exchanges set off a frightening sequence of events.
(…)
Ever since computerized trading became dominant in the nation’s stock markets in recent years, market experts have been warning that the lack of consistent rules among exchanges and the increasing complexity and speed of computer trading systems could destabilize markets. This appears to have happened last Thursday, when stock prices plunged and the Dow Jones industrial average fell roughly 600 points in a few minutes.
Officials of the Securities and Exchange Commission and the heads of the four main exchanges are to meet Monday in Washington to discuss applying circuit breakers across all exchanges. Today, only the New York Exchange applies circuit breakers on individual stocks. A Congressional hearing on the episode is scheduled for Tuesday.
Investigators say the rule on halting trading was created for a time when one exchange accounted for the vast proportion of stock trading. But over the last half decade the Big Board’s share of the market has dropped sharply — in part because of regulatory changes to encourage new competitors — while ever larger volumes of stocks are traded on electronic exchanges without circuit breaker rules.
Investigators are now focusing on the events of last Thursday, when several hundred stocks on the Big Board, including five major stocks that make up the Dow — Accenture, Procter & Gamble, 3M and two others — went into slow mode.
This decision forced a switch to slow-motion trading as traders on the floor tried to arrest the decline by manually seeking out bidders. But that did not work, because trading shifted immediately to broader markets controlled by computers, where the plunge continued.
Regulators and the exchanges continued over the weekend to review the tapes from the millions of trades made last Thursday. The investigations are looking at what effect the decision to halt trading in these stocks in New York had on broader market confidence — and on algorithms used by computerized traders.
The scale of the shutdown on may have been a new phenomenon for these computer systems. They may also have been programmed to shut down in such a cataclysmic moment of stress, which would have had a further cascading effect in withdrawing bidders from the market and putting further intense downward pressure on prices. (…)
Senator Christopher J. Dodd, the Connecticut Democrat who is chairman of the Banking Committee, said on “Face the Nation” on CBS that he believed market regulators should consider new “marketwide circuit breakers” to deal with the kind of market break that occurred on Thursday.
“This is an issue that raises systemic risk,” Mr. Dodd said, adding that he had called for hearings on the matter.
Mr. Dodd also criticized the S.E.C. “Clearly the S.E.C., the Securities and Exchange Commission, needs to act,” he said. “They need to step up very quickly and let us know what happened here and what steps need to be taken.”
Senator Richard C. Shelby of Alabama, the ranking Republican member of the banking committee, said on the same program that he believed “the technology has gotten ahead of the regulators.” Instead, he added, “the regulators have got to get ahead of the technology. That is going to be a big challenge down the road. Otherwise, we could have more of this.”
The Homeland Security Department said Sunday that there was no evidence that a computer attack had started the stock spiral.
(…)
Not one of the regulatory agencies has said anything more about the possible cause of Thursday’s market break since a statement on Friday afternoon identified disparate trading conventions and rules as a possible cause and said the review was continuing.
The lack of coordination among exchanges has been one part of the investigation and is considered by regulators to be more of a magnifying event than the trigger of the market’s sudden swoon, according to another person close to the investigation.
As trading has been dispersed among a dozen electronic exchanges, the S.E.C. and other market regulators have maintained no centralized database of stock trades, order sizes or prices. That has made it more difficult for regulators to piece together what exactly happened on Thursday.
The S.E.C. has been warned in recent months by market participants, publicly traded companies and other regulatory agencies that the lack of coordination between trading platforms, as well as the expansion of high-speed trading in alternative markets, has furthered systemic risk, encouraged regulatory arbitrage and increased opportunities for market manipulation.
The staff of the Financial Industry Regulatory Authority wrote to the S.E.C. in April that “no single regulator has a full picture of all trading activities in the U.S. equity markets.” —http://www.nytimes.com/2010/05/10/business/10markets.html?src=twt&twt=nytimes&pagewanted=all
It was an unintended consequence of a system built to place a circuit breaker on stocks in sharp decline. In theory, trades slow down so that sellers can find buyers the old-fashioned way, by hand, one by one. The electronic exchanges did not slow down in tandem, causing problems, according to two officials familiar with the investigation.
That could mean that the computers first flooded the market with sell orders that could not be matched with buyers. Then, just as quickly, many of these networks withdrew from trading. The combined effect might have set off a chain reaction that sent shares of many companies spiraling during the 15-minute frenzy.
After a weekend of analysis, many specialists at the major exchanges no longer believe that a single large sell trade in one stock, like that of Procter & Gamble, was the trigger, according to the people familiar with the investigation. Instead, they suspect that a mismatch in rules between the older New York Stock Exchange and younger electronic exchanges set off a frightening sequence of events.
(…)
Ever since computerized trading became dominant in the nation’s stock markets in recent years, market experts have been warning that the lack of consistent rules among exchanges and the increasing complexity and speed of computer trading systems could destabilize markets. This appears to have happened last Thursday, when stock prices plunged and the Dow Jones industrial average fell roughly 600 points in a few minutes.
Officials of the Securities and Exchange Commission and the heads of the four main exchanges are to meet Monday in Washington to discuss applying circuit breakers across all exchanges. Today, only the New York Exchange applies circuit breakers on individual stocks. A Congressional hearing on the episode is scheduled for Tuesday.
Investigators say the rule on halting trading was created for a time when one exchange accounted for the vast proportion of stock trading. But over the last half decade the Big Board’s share of the market has dropped sharply — in part because of regulatory changes to encourage new competitors — while ever larger volumes of stocks are traded on electronic exchanges without circuit breaker rules.
Investigators are now focusing on the events of last Thursday, when several hundred stocks on the Big Board, including five major stocks that make up the Dow — Accenture, Procter & Gamble, 3M and two others — went into slow mode.
This decision forced a switch to slow-motion trading as traders on the floor tried to arrest the decline by manually seeking out bidders. But that did not work, because trading shifted immediately to broader markets controlled by computers, where the plunge continued.
Regulators and the exchanges continued over the weekend to review the tapes from the millions of trades made last Thursday. The investigations are looking at what effect the decision to halt trading in these stocks in New York had on broader market confidence — and on algorithms used by computerized traders.
The scale of the shutdown on may have been a new phenomenon for these computer systems. They may also have been programmed to shut down in such a cataclysmic moment of stress, which would have had a further cascading effect in withdrawing bidders from the market and putting further intense downward pressure on prices. (…)
Senator Christopher J. Dodd, the Connecticut Democrat who is chairman of the Banking Committee, said on “Face the Nation” on CBS that he believed market regulators should consider new “marketwide circuit breakers” to deal with the kind of market break that occurred on Thursday.
“This is an issue that raises systemic risk,” Mr. Dodd said, adding that he had called for hearings on the matter.
Mr. Dodd also criticized the S.E.C. “Clearly the S.E.C., the Securities and Exchange Commission, needs to act,” he said. “They need to step up very quickly and let us know what happened here and what steps need to be taken.”
Senator Richard C. Shelby of Alabama, the ranking Republican member of the banking committee, said on the same program that he believed “the technology has gotten ahead of the regulators.” Instead, he added, “the regulators have got to get ahead of the technology. That is going to be a big challenge down the road. Otherwise, we could have more of this.”
The Homeland Security Department said Sunday that there was no evidence that a computer attack had started the stock spiral.
(…)
Not one of the regulatory agencies has said anything more about the possible cause of Thursday’s market break since a statement on Friday afternoon identified disparate trading conventions and rules as a possible cause and said the review was continuing.
The lack of coordination among exchanges has been one part of the investigation and is considered by regulators to be more of a magnifying event than the trigger of the market’s sudden swoon, according to another person close to the investigation.
As trading has been dispersed among a dozen electronic exchanges, the S.E.C. and other market regulators have maintained no centralized database of stock trades, order sizes or prices. That has made it more difficult for regulators to piece together what exactly happened on Thursday.
The S.E.C. has been warned in recent months by market participants, publicly traded companies and other regulatory agencies that the lack of coordination between trading platforms, as well as the expansion of high-speed trading in alternative markets, has furthered systemic risk, encouraged regulatory arbitrage and increased opportunities for market manipulation.
The staff of the Financial Industry Regulatory Authority wrote to the S.E.C. in April that “no single regulator has a full picture of all trading activities in the U.S. equity markets.” —http://www.nytimes.com/2010/05/10/business/10markets.html?src=twt&twt=nytimes&pagewanted=all
“Peggle is at the end of history. It’s what the machine-elves made to draw us there. It is the Barbelith.”
—Twitter / Matt Jones
Play
