Stock options, while not stocks, cannot exist without their underlying parent. We are comfortable with this fact; the underlying has a direct influence on its derivative. Yet when it comes to statistics, math, etc…we treat these units of measurement as if they are not a derivative of the things, persons, or events they represent. This is a mistake. Math, in all its forms, is necessarily a derivative of the pre-existing events they seek to permanently quantify. Stats are the children of emotions, and can never be totally void of their direct ancestry.
Look at it this way-how many stock charts have you studied for IPO's coming to market in the near future? None, why? Because stats are results not causes, and can never cause results. Now there are tons of emotions in the halls of corporations preparing to go public. Founders have created product, marketed product or service, created strategic partnerships, sold product, reached critical mass in the private sector, and now prepare to go public where all owners will become very liquid, very quickly.
This truncated scenario is full of emotions...now here comes the trader, the last one in line seeking to acquire a small mountain of money from looking at the result of a string of emotions that the company founders have had for years. Everything is emotionally driven, show me historical technical analysis on stocks that don't yet trade and then you'll be onto something.
The quicker one understands the role of emotions without becoming overly emotional about this fact, the better trade or investment decisions can be made.
Math existed before we discovered it. It then follows, there may be higher laws yet undiscovered that will trump or atleast dilute current math concepts.
Gravity did not come into existence when we agreed, it has always been. Simply put, truth welcomes believers, but doesn’t require any. This would suggest that 2+2 equals 4 not because the universe says so, but because those are the components of counting, man has created for our organized usage. Does 2 + 2 equal T7^ or Z1? Well, unless you know undiscovered languages, you wouldn't know. In other words, we define everything relative to our human frame.
If you view emotions as water, everyone has them. From water some get ice, some steam, some irrigation, some sanitation, some energy, etc…the question is then, are any of these derivatives “pure” or better said which of the water derivatives are absolutely, inherently void of water, or at minimum the influence of water? None.
How does this concept directly influence the trader or investor? Check back for the concluding Part III.
Friday, June 6, 2008
Tuesday, June 3, 2008
The Emotions of Math - Part I
As trading becomes increasingly more statistical in nature one must acknowledge the birth of another question, what is the inherent nature of statistics? I am rapidly approaching an interesting conclusion…emotions.
The general belief that systematic, analytic models are less emotional than discretionary trading is fundamentally flawed. Statistics, in any discipline, are a 2nd mover, the 1st being the cumulative human actions that stats must, per se, be based upon. So then stats, probabilities, and the like, simply quantify the most ubiquitous element of human nature, emotions.
This suggests that equations, assessments, and even math itself is deeply rooted in emotions, for without such they cannot noticeably exist.
The math market, or stock market as many prefer to call it, is the finest example of mathematical emotions. Black boxes simply do a better job, at times, recognizing the patterns of past emotions without compounding trading decisions with the convolution of real-time emotions. The vacuum of code then is advantageous because it minimizes the indecision or delay one’s nervous system causes, even for the most robotic of traders.
An intentional embracing of emotions, for the trader, may result in more profitable trading than ignoring the same. The irony is while traders seek to be more “robotic” robots seek to become more human.
The stock market has no abstractions or haphazard components, only actions and re-actions that are perceived as such to the mechanically bent trader. Categorizing the discipline of one’s emotions as "trading psychology" does violence to market context. Traders wrongly buy into the assumption that stats, charts, spreadsheets, and the like, exist with a higher level of intellect, when in actuality they are simply a cleaner composite of dirty emotions.
Traders seeking net improvement in an increasingly systematic market have no choice but to re-evaluate the concept of emotions. What exactly are emotions? Can any strategy truly eliminate them? Elimination is a natural impossibility. Just as one cannot swim in a waterless ocean, one cannot trade a strategy not influenced by emotions. The deception that one can trade this way is ego-candy, and makes the trader feel superior. A quality that takes a lot of emotion to even notice.
For the student of language (connotation vs. denotation) the phrase "emotional mathematics" does not necessarily ring oxymoronic bells. Admittedly, it does take effort to move past the sudden intellectual shock the phrase causes.
In the end, all market participants enjoy a good ride on that pretty Ferris wheel called deception. It’s fun! Our computers are computing other computers; codes are written to recognize other codes, and consequently the support you noticed on your chart is now more a function of others noticing the same rather than actual support. We’ve convinced ourselves that the only way to win is to hire a programmer to program a static box of pure, unemotional market intelligence, not realizing there is no such thing.
The general belief that systematic, analytic models are less emotional than discretionary trading is fundamentally flawed. Statistics, in any discipline, are a 2nd mover, the 1st being the cumulative human actions that stats must, per se, be based upon. So then stats, probabilities, and the like, simply quantify the most ubiquitous element of human nature, emotions.
This suggests that equations, assessments, and even math itself is deeply rooted in emotions, for without such they cannot noticeably exist.
The math market, or stock market as many prefer to call it, is the finest example of mathematical emotions. Black boxes simply do a better job, at times, recognizing the patterns of past emotions without compounding trading decisions with the convolution of real-time emotions. The vacuum of code then is advantageous because it minimizes the indecision or delay one’s nervous system causes, even for the most robotic of traders.
An intentional embracing of emotions, for the trader, may result in more profitable trading than ignoring the same. The irony is while traders seek to be more “robotic” robots seek to become more human.
The stock market has no abstractions or haphazard components, only actions and re-actions that are perceived as such to the mechanically bent trader. Categorizing the discipline of one’s emotions as "trading psychology" does violence to market context. Traders wrongly buy into the assumption that stats, charts, spreadsheets, and the like, exist with a higher level of intellect, when in actuality they are simply a cleaner composite of dirty emotions.
Traders seeking net improvement in an increasingly systematic market have no choice but to re-evaluate the concept of emotions. What exactly are emotions? Can any strategy truly eliminate them? Elimination is a natural impossibility. Just as one cannot swim in a waterless ocean, one cannot trade a strategy not influenced by emotions. The deception that one can trade this way is ego-candy, and makes the trader feel superior. A quality that takes a lot of emotion to even notice.
For the student of language (connotation vs. denotation) the phrase "emotional mathematics" does not necessarily ring oxymoronic bells. Admittedly, it does take effort to move past the sudden intellectual shock the phrase causes.
In the end, all market participants enjoy a good ride on that pretty Ferris wheel called deception. It’s fun! Our computers are computing other computers; codes are written to recognize other codes, and consequently the support you noticed on your chart is now more a function of others noticing the same rather than actual support. We’ve convinced ourselves that the only way to win is to hire a programmer to program a static box of pure, unemotional market intelligence, not realizing there is no such thing.
Monday, June 2, 2008
Rem Koolhaas - Juvenile Genius
One can only imagine that as a child Rem Koolhaas must have spent a lot of time in time out. There is a pouting posture embedded in his rather refined comportment. When being interviewed, Koolhaas engages in a delayed satellite-type of dynamic before answering questions. It is as if he is processing the unadulterated folly of the pedestrian mind. While listening, and watching him speak one does not know whether his pseudo-defensive air is intentional or sub-conscious. This observation is in direct harmony with the polarizing, and arguably ingenuous architect born Remment Koolhas. Humility is not his strongest character trait, mysterious social and architectural commentary is.
Born in 1944 in Rotterdam, Netherlands, this Dutch architect is a dominant figure in today’s architecture circles. Critics have argued that Koolhaas ignores all consideration for beauty and taste. In essence, many wonder whether his designs are an outgrowth of his love for designing, or his hate for the same. Whether it be glass floors, figure eight stairs or translucent walls, the rub for many is that his personality is more confusing than his designs. In an interview with Charlie Rose in 2004, Koolhas admitted that he “detest” the current architectural system. This explains much.
Before any of his drawings were built, his writings and social commentary had established their own reputation. His firm, Office for Metropolitan architecture (OMA) birthed another entity, AMO, its philosophical, conceptual twin. Through AMO, Koolhaas has taken on diverse subjects such as changing the European flag. One of his flag renditions was a bar code.
He is Professor in Practice of Architecture and Urban Design at the Graduate School of Design at Harvard University and is credited with authoring the campus center design at the Illinois Institute of Technology in Chicago. He also authored the very nice Prada Epicenter in Los Angeles. The scope of his projects is rather astounding from a 575,000m2 Asian based headquarters, studio, and cultural center for China’s national broadcaster, China Central Television, to the grand renovation of a Beijing bookstore, one of the largest in the world.
This eclectic existence has rendered a wide variety of awards and commendations, yet not without consequence. Some of his most notable recognitions include: Pritzker Prize (2000), Praemium Imperiale (2003) Royal Gold Medal (2004). Other projects that have been equally loved and hated include: The Casa da Música in Porto, The Seattle Central Library, and the Netherlands Embassy Berlin.
The Seattle Library is beyond description. Its abstract, seemingly unpredictable form, for many, has no visual or architectural logic. Yet, the library is praised for its internal design and the functionality it achieves. It is this stark contradiction within the same project that leads the variety of opinions about the man, his mind and his work. The Pritzer Prize Jury took the position that one must understand a Rem Koolhaas design is as much about the depth of idea as it is the building that results, a rather gracious commentary.
His 2004 published book “Content” is the rarest of products. For starters, the cover is covered with political and pop culture photos that one would expect more from a Mad Magazine than from a world-renowned architect, thinker. The book is self-described as, “an explosion in an idea factory, or a wild party thrown by a Pritzker Prize-winner.” The mood of “Content” is considerably more delirious than the Koolhas 1978 classic manifesto by the same name.
“Content” is designed as a disposable magazine with mysterious rants and seemingly on purpose abstracts. In one portion of the book a woman is depicted leaving her infrared heat signature on a tombstone. In another, Vermeer paintings are paired with scenes from TV's reality show Big Brother. Ironically, the book title serves as a reminder of what a book should actually have.
Other published writings include: Mutations (2001), Great Leap Forward (2002), The Harvard Guide to Shopping, (2002 published by the Harvard University Graduate School of Design), The Gulf, S, M, L, XL, and Ubiquitous China among others.
For many, the only lasting, logical impression of Koolhaas architecture does not emanate from his buildings but rather from his writings in the Delirious Manifesto. In it, he aggressively exposes the contradictions of architecture and urban design practices. He argues for the trapping nature of urban existence and the pivotal role modern architectural theory plays in the spiraling system called the city. Koolhaas writes in Delirious, "The City is an addictive machine from which there is no escape." The same can possibly be said of the man, his ideas, and his work.
Born in 1944 in Rotterdam, Netherlands, this Dutch architect is a dominant figure in today’s architecture circles. Critics have argued that Koolhaas ignores all consideration for beauty and taste. In essence, many wonder whether his designs are an outgrowth of his love for designing, or his hate for the same. Whether it be glass floors, figure eight stairs or translucent walls, the rub for many is that his personality is more confusing than his designs. In an interview with Charlie Rose in 2004, Koolhas admitted that he “detest” the current architectural system. This explains much.
Before any of his drawings were built, his writings and social commentary had established their own reputation. His firm, Office for Metropolitan architecture (OMA) birthed another entity, AMO, its philosophical, conceptual twin. Through AMO, Koolhaas has taken on diverse subjects such as changing the European flag. One of his flag renditions was a bar code.
He is Professor in Practice of Architecture and Urban Design at the Graduate School of Design at Harvard University and is credited with authoring the campus center design at the Illinois Institute of Technology in Chicago. He also authored the very nice Prada Epicenter in Los Angeles. The scope of his projects is rather astounding from a 575,000m2 Asian based headquarters, studio, and cultural center for China’s national broadcaster, China Central Television, to the grand renovation of a Beijing bookstore, one of the largest in the world.
This eclectic existence has rendered a wide variety of awards and commendations, yet not without consequence. Some of his most notable recognitions include: Pritzker Prize (2000), Praemium Imperiale (2003) Royal Gold Medal (2004). Other projects that have been equally loved and hated include: The Casa da Música in Porto, The Seattle Central Library, and the Netherlands Embassy Berlin.
The Seattle Library is beyond description. Its abstract, seemingly unpredictable form, for many, has no visual or architectural logic. Yet, the library is praised for its internal design and the functionality it achieves. It is this stark contradiction within the same project that leads the variety of opinions about the man, his mind and his work. The Pritzer Prize Jury took the position that one must understand a Rem Koolhaas design is as much about the depth of idea as it is the building that results, a rather gracious commentary.
His 2004 published book “Content” is the rarest of products. For starters, the cover is covered with political and pop culture photos that one would expect more from a Mad Magazine than from a world-renowned architect, thinker. The book is self-described as, “an explosion in an idea factory, or a wild party thrown by a Pritzker Prize-winner.” The mood of “Content” is considerably more delirious than the Koolhas 1978 classic manifesto by the same name.
“Content” is designed as a disposable magazine with mysterious rants and seemingly on purpose abstracts. In one portion of the book a woman is depicted leaving her infrared heat signature on a tombstone. In another, Vermeer paintings are paired with scenes from TV's reality show Big Brother. Ironically, the book title serves as a reminder of what a book should actually have.
Other published writings include: Mutations (2001), Great Leap Forward (2002), The Harvard Guide to Shopping, (2002 published by the Harvard University Graduate School of Design), The Gulf, S, M, L, XL, and Ubiquitous China among others.
For many, the only lasting, logical impression of Koolhaas architecture does not emanate from his buildings but rather from his writings in the Delirious Manifesto. In it, he aggressively exposes the contradictions of architecture and urban design practices. He argues for the trapping nature of urban existence and the pivotal role modern architectural theory plays in the spiraling system called the city. Koolhaas writes in Delirious, "The City is an addictive machine from which there is no escape." The same can possibly be said of the man, his ideas, and his work.
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