Money Mind Challenge
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Byaverage ownership dropped to 8 months, and in it dropped even further to 2 months. Today the average share is held a scant 20 seconds and within a few months, it will drop to less than 10 seconds.
At the center of this rapid buying and selling of stock are a series of high-frequency trading machines run by the quants, the math-whiz kids who are stock trading contest 2014 type of hackers only on Wall Street. Without having people at the center of these trades, we have lost the core ingredient, our ability to accurately assess value. The invasion of high-frequency trading machines is now forcing capitalism far away from anything either Adam Smith or the founders of the NYSE could possibly find virtuous.
So why is it we allow them to play a role in the most valuable contest of all, the world wide stock exchange? Few things explain the dangers of AI manipulations of the stock market quite like the Flash Crash of The date was May 6, and by all outward appearances, stock trading contest 2014 on the markets appeared to be normal. Yes, people in Greece were protesting austerity but there were no other indicators of what was about to happen.
Cheap credit had been pushing stocks higher for months, but the mood was changing. It began as a ripple in the price of E-mini futures contracts, traded on the Chicago Mercantile Exchange, but almost nobody noticed. This tiny ripple quickly morphed in a major ripple, and with very little forewarning, the tail quickly started wagging the dog to pieces. But that crash took a full day, this was killing the market in a matter of seconds. When the market goes into a freefall, traders start to panic, vomiting into trashcans and mentally preparing themselves to leap off tall buildings.
The market switched directions and began to rise. The craziest part of all was that this entire episode, the most dramatic in stock market history, had occurred in just stock trading contest 2014 minutes.
But this was later disproven. In the background were the quant-hackers managing the strings for some other puppet-master. These people are also experts in blame-shifting and deception so we will probably never know what actually happened.
Even the most egregious abusers of the stock market have no interest in killing the system that has become their central playground, the goose that continually lays the golden eggs. But they have no problem with extracting wealth from it at every turn, often harming individual companies quite severely in the process. The tactics used in the flash crash of are similar to a denial of service DoS attack. On this day servers became so overloaded that quotes for some shares experienced as much as a 36 second delay.
Keep in mind this is a very crude form of artificial intelligence. Imagine the type of exploitations that will be possible when higher forms of AI begin entering the system. Manipulations like this are only a problem if we continue to let the puppet-masters guard the marionette stage.
Many of our free-market thinkers have long advocated automating human authority out of the equation. Trades can happen faster and in stock trading contest 2014 volume if we remove the gatekeepers from the system. However, we still need humans to oversee the system.
It may be automated stock trading contest 2014, but still humans. With systems for circumventing failures when they occur, the overall machine, in its entirety is more than a little impressive. People are very similar. We are all flawed individuals, mired in an ocean of personal chaos. But the same imperfections we see on the micro scale change dramatically when we transcend to look at humanity on a macro scale.
In much the same way that Google operates a massively complex machine by changing out individual units on the stock trading contest 2014, we will eventually be able to create superhuman intelligence by connecting our own individually flawed brains with a massively coupled super brain.
We are currently walking on dangerously thin ice. Artificial intelligence is already creeping into our lives on a daily basis, but even with its current Neanderthal-level intellect, it can do incalculable levels of damage.
Am I being too alarmist in my assumptions? Are there protective measures in place to prevent this type of abuse from happening? What am I missing? Your email address will not be published. Thank you so much for speaking to us. Our entire group was enthralled and really enjoyed what you had to say.
Here is why this should be ringing alarm bells all over the world. Within seconds, stock trading contest 2014 Dow has lost points, then,and The point loss suddenly becamethenand Killing the Goose that Laid the Golden Eggs Even the most egregious abusers of the stock market have no interest in killing the system that has become their central playground, the goose that continually lays the golden eggs.
The Need for Human Authority Many of our free-market thinkers have long advocated automating human authority out of the stock trading contest 2014. Final Thoughts We are currently walking on dangerously thin ice. One thing that is important to realize is that the theoreticians that sit in their ivory towers often do not understand how businesses actually work.
For example, in the mids, they did not stock trading contest 2014 that it was a bad business practice to hand out mortgages to anyone with a pulse, stock trading contest 2014 of whether they could afford to pay it back or not. We all know what happened next. Sometimes, however, you can work this in your favor and actually win the chess game against the theoreticians who are focused on various statistics about companies, rather than how their businesses work.
The other thing is that trading is pretty much a zero-sum game, whereas investing buying and holding your stocks for a long time is not. Those of us with a long-term investing strategy, who don't mind riding out the ups and downs caused by the traders, generally receive a good return on our investment. Those of us who are contrarians provide the useful service of limiting the damage created by the swings the traders cause, while making nice profit buying stocks cheaply.
I am tempted to put in and maintain stock trading contest 2014 low-ball limit orders in case there is another incident like the one you described. Free money, courtesy of the quants and their AI. David, Some good points. There was one ad that actually said, "We wouldn't have sent it to you if we didn't think you could handle it. I found this article fascinating -- I wouldn't know economics if stock trading contest 2014 threw me a party, but I know a bit about technology, and for what it's worth, science fiction.
Stock trading contest 2014 I agree thoroughly with your premise that the ever-increasing speed of transactions that AI makes possible leave the market open to risk of much greater, much faster fluctuations, I think the initial cause of those fluctuations should be carefully considered.
One has to stretch pretty far into the scifi realm to posit a computer that would have any reason, any motivation, to harm the market. But as you say, we are a net already, humanity; and the technology will only grow our networking abilities with each other. And any possible emergences stock trading contest 2014 higher consciousness, because goodness knows the faster we find out about them, the better! Marie, Some great comments. No, computers are not able to take initiative yet, but even low level AI can be dangerous in the wrong hands.
We always need to be wary of both unintended consequences and those who find abusive was to use technology. I generally enjoy your writing, but this is nonsense. Dow Jones - let's just say approximately There may be short-term, day-to-day issues with technology, but that won't cause the people around the country to stop buying the goods and services that these companies provide. And that means revenue, which equates to value as a stock trading contest 2014. Jjonas, There are no perfect systems or perfect technologies.
Once the percentage of automated trades reaches a stock trading contest 2014 point, the markets will no longer reflect the true value of a company. We are just scratching the surface as to how things can go wrong. Jjonas - your using trough to peak numbers. Change the beginning and end points by a few years each stock trading contest 2014 the gain isn't nearly as large.
You can find real estate markets that have done considerably better over 34 years if you use trough to peak numbers. And RE has less volatility and you can use leverage to buy it and live in it to boot. Well, I just have a couple more points to make about this.
First, even a wild market swing like stock trading contest 2014 one you point out in your article does nothing to hurt a stock trading contest 2014 term investor. You only lose money when you sell, and by then, the event is ancient history. Second, a wild market swing like this presents an opportunity to MAKE money, and quite a lot of it, really fast, if you can buy during the brief down period. If there were enough people like me using this strategy, it would also help to mitigate the crash, as you can only have a crash if sellers outnumber buyers by a substantial number.
So by having a small army of opportunistic buyers, you can prevent such a crash altogether. Clearly, this mechanism is already in place, because in the crash you talked about in your article, there were enough eager buyers that the market recovered very quickly. I imagine that the quants have been all over this, and have the limit stock trading contest 2014 in place that would mitigate such a crash in the future, because there is a stock trading contest 2014 deal of money to be made my doing so.
The only way of manipulating markets is through some kind of inside information. Computers are fast but a market consists of buyers and sellers, you need both for the market. Being fast does not create the other side of the equation a buyer must have a seller and a seller must have a buyer.
So being faster than a person or computers stock trading contest 2014 with each other cannot I think have a meaningful effect. While quote stuffing is somewhat dubious there has to be a willing buyer or seller at the given price, so even if the offer is false the market is working towards stock trading contest 2014 price signal that is accurate to the market.
Stock trading contest 2014 happen in the human market just slower it seems so it really is not new, the scary part for people is that it is automated.