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The Winton Papers: Speculation, Wise

While I have not seen it, apparently Gordon Gekko opines in the new ‘Wall Street’ that:

“The Mother of all evil is speculation.”

Let’s hope Oliver Stone doesn’t actually believe that (if he does, fantastic moron). The counter? An excerpt from the publication ‘The Winton Papers’:

“Speculari, the Latin root of the verb to speculate has the literal meaning ‘to observe’, and a study of speculation will show that most successful speculators can be well described as ‘observers’. To be successful this observation must of necessity be detached and unemotive and thus where great social and moral issues are at stake, it is perhaps not surprising that this view point should arouse some distrust and hostility among the general population (particularly when the speculator profits at a time of general discontent). Yet this detached observation is clearly in the spirit of the natural scientist and the act of speculating for money is in the spirit of the empirical scientist’s restless yearning to add to empirical knowledge and put theories to the test. Thus making money from mathematical models [systematic trend following] is in one sense less about the corruption of intellectual endeavor than about the appropriate statistical test of the utility of such models for the development of scientific theory.”

Note: ‘The Winton Papers’ were published by Winton Capital.

“Speculation is Evil… You Greedy Bastard Covel!”

Alexander Ineichen writes:

“The financial crisis was not ’caused’ by a single event or a single group of investors. More likely, a series of conditions needed to be met for the dominos to fall one by one and the system to crack. The idea that hedge funds were the first stone to fall and thereby causing the chain reaction, seems infinitely improbable from what we know today. However, a disproportionate amount of regulatory zeal and political energy is spent on regulating ‘alternative’ funds. This we find odd, especially given that the ‘too big to fail’ issue is the single most important aspect related to systemic risk and is far from being resolved.”

He adds:

“Politicians blamed speculators for ‘causing’ oil to go to $147. However, politicians didn’t thank speculators for ‘causing’ oil going back to $35. This seems odd. In the Greece situation, it’s again the speculators who get blamed. Bismarck often remarked that if one likes laws and sausages it is best not to see them being made. This is probably also true for the price mechanism in a free market economy, as the impact of the market responding to bad news isn’t always pretty.”

Ineichen stop being so right.

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