Fat Tails and Speculative Leeches

John Galtier writes:

Tails are not becoming “fatter”, the histogram is just growing to include more events. The author’s personal fear is that this complication of the world is not just rendering modern statistics useless, but the whole approach to modern investing. Money managers have strayed further from fundamentals than in previous thought cycles. Value dislodgements of the severity of the GFC have traditionally pushed investors back to the fundamentals and conservatism that create real wealth. Instead of propping up a failing system, it may be the case that CB’s have sanctioned market timing and speculation as real forms of growth.

If this reckless behavior continues, fundamental investors, the “engine” of growth in a properly functioning economy, may not be given the chance to allocate the patient capital needed to sustain growth and combat unnecessary volatility. The leeches (market timers and speculators) that rely on fundamentalists to maintain the sanity of prices and their movements will control the market and values will truly become baseless. For all the ramblings of Zerohedge prophets and gold stockpiling crazies, values are still relatively attached to fundamentals. Actions of central bankers threaten to give speculators a mandate to create a true fiat system where values and prices are only limited by the availability of ink and paper.

Hmmm…those speculative leeches! Dirty bastards. How dare they play by the rules of the game.

9 thoughts on “Fat Tails and Speculative Leeches

  1. And who exactly is John Galtier?

    Why is volatility unnecessary?

    Why are speculators and timers “leeches”?

    He sounds like another guy who needs a bull market to make any money and thinks it’s un-patriotic for markets to go down.

    Someone send him a towel to cry into please.

  2. “The leeches (market timers and speculators) that rely on fundamentalists to maintain the sanity of prices…”

    Wow that guy sounds like a pompous a** who wants the world to conform to his beck and call.

    No wonder we had a GFC.

  3. “An investor is a trader who is underwater.”

    Paulson directed his Sino-Forest & BoA investment strategy based on fundamentals without doing any due diligence raking over 1/2 billion loss. What do “fundamentals” have with reality of things if data for that “fundamentals” are essentially (and deliberately) flawed like skyscraper haphazardly built on desert sand by a fly-by-night building company?!

    If you get wiped out it’s your own personal fault not some “sneaky sleazebag speculator”. It’s a risk game not a frikkin’ kindergarten game (sure some guys have nannies in the form of central bankers but world is a big playground).

  4. I like Trender’s earlier thought about Zen “no-knowing mind.”
    In advance…
    And didn’t Jerry Parker (via Mike’s quote) remind us that “true fundamentals are always unknown?”
    Why not call them guesses-about-causes, or something less pompous than “fundamentals?”
    The sideswipe at Central Bankers has some merit, though:
    Even while they goose volatility into nice trends, they also collude, in effect, with politicians who try to restrict capital flows and actual trading, whenever calling us stupid names doesn’t cure their recessions.

  5. Quote: “Tails are not becoming “fatter”, the histogram is just growing to include more events.”

    Not quite. What is really growing is the compounding of cumulative errors!

  6. Trender Says: (what is really growing is the compounding of cumulative errors).You hit the nail on the head with that. You need to send the guy a email telling him that.

  7. Robert, my feeling is little in the article refers to reality. It’s intellectually sloppy, uncritically reliant on precedent, on untested assumptions and on the seemingly obvious. But I won’t be the one to tell him that. 🙂

  8. Apparently this writer missed out on the BIG up move in the stock market since 2009 – sorry dude!

  9. Or perhaps, the writer is not a member of the grand society of extrapolators and thinks that there is sanity in prices beyond what others are willing to pay.

    The more closed minded theoretical mathematics graduates you can convince of your magic formulas the better though. More dopes for your inner circle to piggyback on and more obvious trades for real investors to apply common sense to…

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