

Macro Man: Peter Thiel - jakarta
http://www.bloomberg.com/news/marketsmag/thiel.pdf

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pragmatic
Hedge funds are leveraged to the hilt. Works great when you make the right
bets but when the whole world gets scared and starts calling in their loans,
you're SOL.

I wonder if you could relate financial hacking to code hacking. Once any
system grows so large, you can no longer keep it in your head. Many financial
instruments didn't exist when Buffet and Soros were making their money.

Of course we're now back to Taleb and his black swans.

~~~
Shooter
Clarium is leveraged about 3.2 to 1, according to industry databases. Not my
cup of tea, but less than many of their colleagues, especially given that
Clarium is so active in debt and currency markets.

Buffet and Soros both invest in derivatives these days, they just use more
common sense than your average quant when doing so. There is a huge difference
between mark-to-market and mark-to-model. [It's common practice, for example,
to have derivatives leveraged at 10-30X the value of a company while basing
all contract prices on things like the volatility of the company's stock - and
completely IGNORING the actual underlying value of said company and its
prospects. Quants can build entire models projecting stock prices far into the
future without even looking at the company's existing financial statements.
It's ridiculous.]

I've been thinking about the relationship between financial hacking and code
hacking a bit lately, because I know so many coders and quants that exhibit
similar negative tendencies...to the point that they even have the same
mannerisms, speech patterns, and physical tics. (To be painfully honest, my
thoughts were prompted by the passing of Erik Naggum, the reading of an
article about Asperbegers, and a conversation with a a quant @$$hole I
occasionally have to deal with - all in the space of an hour or so.)

I think there is a (vocal) subset of both financial and code hackers that are
so impressed with their own genius and the intellectual rigor of their models
that they forget to keep one foot in reality and to use common sense. They
forget or lose sight of the end goals and forget to be civil. They often win
the "smartest person" ribbon for the day, at the expense of being unsuccessful
in life. I'm oddly thankful that I lack the math or programming skills to be
so dangerous. My discomfort with - and distrust of - elegant mathematic models
has saved my fund from being clobbered a few times.

I'm genuinely baffled when people who are clearly so much smarter than I am
can't see to apply their skills in positive or obvious ways. I'm conflicted,
because I'm often jealous of their intelligence and skills, but I pity them
for never seeing the forest for the trees. I think there is a subset in both
types of 'hacker' communities that have this 'affliction.' They operate at a
higher level of analytical/abstract thought in one way, but are crippled a bit
in other regards. Different strokes and different folks make the world go
'round, I guess, but it is sometimes painful to interact with 'em.

------
voisine
wow... he must have made a killing... again. He's following
libertarian/austrian school economic predictions, so I suppose now he's
betting on the collapse of the dollar.

~~~
rdouble
This article is 2.5 years old. His fund got clobbered in the financial
meltdown. None of the people mentioned in the article still work for him.

