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Harry Newton's In Search of The Perfect Investment Newton's In Search Of The Perfect Investment. Technology Investor.

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8:30 AM EST, Wednesday, April 25: The big news has been the BIG earnings by hedge fund managers. James Simons topped, with around $1.7 billion for last year alone. Simons is a 69-year-old publicity-shy, former math professor and former code breaker for the Defense Department. Simons uses complex computer-driven mathematical models to make bets on stocks, bonds and commodities, among other things. His fund which he founded, Renaissance Technologies, routinely gains over 50% a year.

I was a charity dinner last night for the Innocence Project and fortuitously sat next to the head of the quantitative department of a major Wall Street firm. This man, a Ph D in statistics, has 50 people working for him. His group creates the models which his firm uses for its own trading and for some of its larger clients. I gently asked him to explain what he did and how this stuff worked. The key, he said, is to look for patterns, behavior that repeats itself. For example, certain stocks might bounce up on a certain pattern in volume and then drop when that volume temporarily lulls. The idea is to identify the pattern before the drop, sell the stock short and buy it back as it starts to come back.

The identification of patterns and the buying and selling is done by computers. Often there's only seconds or minutes between trades. There are also models that try to find patterns in corporate earnings and pick stocks for buying and selling -- in which case the holding period might be as long as several months.

When I naively asked "Is there something I could read on how this quant stuff was done?" I was politely told NO. Everyone keeps their techniques to themselves. And wouldn't you, if you could earn $1.7 billion in one year and then do it again the following year and the following year. I did learn that everyone in his department spends time finding patterns and then writing software that will do the predicting. All this involves a huge amount of computing power. Fortunately, that's become real cheap these days. My friend's department uses masses of Sun servers.

When I posed my argument about the market being unpredictable, he answered that there are patterns in unpredictability. He told me a story: Imagine I've been told by my doctor that the operation I need had a 95% chance of a success. I'd undoubtedly opt for the operation. Now imagine being told that the operation had a 5% chance of killing me, of leaving me dead on the operating room table. I might now decide not to have it. See?

To read more on hedge funds, but not their quant methods: The New York Times on "Top Hedge Fund Managers Earn Over $240 Million" and also Blank Slate Hedgies. The Wall Street Journal online has a section devoted to Hedge Funds.

The Innocence Project hits 200. Two hundred innocent people have been freed from jails as a result of DNA evidence. Many of the 200 exonerees were there last night. The longest jailed was 25 years. Imagine that -- 25 years in jail for a crime you did not commit.

The pattern repeats: Innocent man is picked up by police anxious to solve crime. The man is subject to long hours of interrogation. I heard stories of 12 hours without food, water or rest. The police feed a description of the crime. The victim is confused, tired and "will do anything to stop the interrogation." The victim identifies wrongly -- often picking a man with a beard, even though she had said that the attacker was clean shaven. Many exonerees had watertight alibis that were simply ignored by the prosecutor. No one is arguing, least of all me, that there are no guilty people. I believe that important reforms need to be made, including DNA testing, video-taping of interrogations, and reforms in eyewitness identification.
Read more on reforms necessary.

Neat new cell phone technology: This is from this week's Twice Magazine. It's called In-Home Cellular Boosters Get Boost.

New York — Wi-EX and Samsung have announced products that boost indoor cellular coverage, each in markedly different ways.

Atlanta-based Wi-EX has unveiled a pair of indoor cellular-signal boosters, and Samsung has unveiled Ubicell-branded femtocells, which are essentially low-power cell sites scaled down to book size. One of Samsung’s Ubicells will be available through Sprint Nextel later this year, Samsung said.

Both types of devices can be installed by consumers in their homes, and both improve indoor cellular coverage to reduce the potential for dropped or missed calls from interior locations where cellular signal strength is low. The improved coverage also extends a phone’s battery life.

Femtocells, however, are designed as much to reduce congestion on a carrier’s network as they are to improve in-door coverage, and they will be sold only through cellular carriers. They work like this:

A 50-milliwatt in-home femtocell communicates via cellular spectrum to a cellphone within a 5,000-square-foot area. Within that range, a cellular conversation is routed over an Ethernet-connected broadband modem, traveling via the Internet to a carrier-operated “soft switch” designed by Samsung. The conversation isn’t converted to the VoIP protocol but is converted to a different standard that enables cellular-format voice streams to travel over the Internet.

If the cellphone user walks out of femtocell range, the carrier’s soft switch automatically hands the call off to the carrier’s nearest cellular tower. Likewise, calls are handed off from cellular tower to the femtocell when a user walks within range.

Only registered handsets will be able to use a particular femtocell, which takes its name from the scientific term for one quadrillionth. Femtocells have lower range than picocells (a trillionth) and microcells (a millionth), which are intended to improve coverage in public places such as train stations, malls and the like.

Femtocell technology competes with Unlicensed Mobile Access (UMA) technology, which offers the advantages of femtocells but requires the use of a Wi-Fi-equipped cellphone to place wireless calls through a Wi-Fi-equipped broadband modem from inside the house.

Samsung plans to launch an 850/1,900MHz CDMA 1x EV-DO femtocell through Sprint before the end of the year. It can be used for both voice and data transmission.

Wi-EX’s zBoost solutions improve interior signal coverage but don’t offer automatic hand-off from the in-home base station to a cellular tower. They also don’t require phones to be registered to take advantage of the signal boost.

Typical zBoost signal boosters increase indoor signal coverage up to 2,500 square feet and consist of an antenna, base unit, coax cable and mounting bracket. The antenna may be installed inside, near a window, or any place that there is a strong cellphone signal. For best reception, the antenna can be installed in the attic or outside. The antenna connects to the base station via coax cable.

These solutions typically retail for $299 and up, but Wi-EX is bringing down the price of in-door cellular-signal boosters to $99 with the launch of a low-power version intended for single users in small spaces and for on-the-go use in hotel rooms. The device, called zBoost zP, is available in a $99 version and a $149 version.

Each zP version features a small base station that sits near or hangs on the window. The $149 version comes with a 20-foot cable that connects the base station to a small indoor antenna that transmits the cellular signal to a cellphone that’s within a 6-foot to 12-foot radius. With the $99 version, the 20-foot cable must be coupled directly to the phone.

The zP, like the top-end $399 zBoost, operates in both the 800MHz and 1,900MHz bands so it can be used with any CDMA or GSM carriers’ phones. That includes phones from carriers whose networks operate in both bands and hand-off voice calls from one band to another depending on signal strength. In addition, zP and zBoost work with phones from carriers that deliver voice on one band and data on another.

The zP, however, is designed for single users, whereas Wi-Ex’s other models can handle multiple calls simultaneously.

Tasteless Joke -- 1
They always ask at the doctor's office why you are there, and you have to answer in front of others what's wrong and sometimes it is embarrassing.

There's nothing worse than a Doctor's Receptionist who insists you tell her what is wrong with you in a room full of other patients. I know most of us have experienced this, and I love the way this old guy handled it.

An 86 year old man walked into a crowded waiting room and approached the desk.... The Receptionist said, "Yes sir, what are you seeing the Doctor for today?"

"There's something wrong with my dick", he replied. The receptionist became irritated and said, "You shouldn't come into a crowded waiting room and say things like that."

"Why not? You asked me what was wrong and I told you," he said. The Receptionist replied; "Now you've caused some embarrassment in this room full of people. You should have said there is something wrong with your ear or something and discussed the problem further with the Doctor in private."

The man replied, "You shouldn't ask people questions in a room full of strangers, if the answer could embarrass anyone. The man walked out, waited several minutes and then re-entered.

The Receptionist smiled smugly and asked, "Yes??" "There's something wrong with my ear", he stated.

The Receptionist nodded approvingly and smiled, knowing he had taken her advice. "And what is wrong with your ear, Sir??"

"I can't piss out of it," he replied. The waiting room erupted in laughter.

Tasteless Joke -- 2
A little boy walks into his parents' room to see his mom on top of his dad bouncing up and down. The mom sees her son and quickly dismounts, worried about what her son has seen. She dresses quickly and goes to find him.

The son sees his mom and asks, "What were you and Dad doing?"

The mother replies, "Well, you know your dad has a big tummy and sometimes I have to get on top of it and help flatten it."

"Your wasting your time," said the boy.

"Why is that?" the mom asked puzzled.

"Well when you go shopping, the lady next door comes over and gets on her knees and blows it right back up."

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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