Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
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.
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.
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.
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.
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.
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.
on reforms necessary.
new cell phone technology: This is from this
week's Twice Magazine. It's called In-Home
Cellular Boosters Get Boost.
Wi-EX and Samsung have announced products that boost indoor cellular coverage,
each in markedly different ways.
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 Samsungs 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 phones battery life.
however, are designed as much to reduce congestion on a carriers network
as they are to improve in-door coverage, and they will be sold only through
cellular carriers. They work like this:
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
isnt 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 carriers soft switch automatically
hands the call off to the carriers nearest cellular tower. Likewise,
calls are handed off from cellular tower to the femtocell when a user walks
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
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
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.
zBoost solutions improve interior signal coverage but dont offer automatic
hand-off from the in-home base station to a cellular tower. They also dont
require phones to be registered to take advantage of the signal boost.
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.
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 thats
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
The zP, however,
is designed for single users, whereas Wi-Exs other models can handle
multiple calls simultaneously.
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.
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?"
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
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
smiled smugly and asked, "Yes??" "There's something wrong with
my ear", he stated.
nodded approvingly and smiled, knowing he had taken her advice. "And what
is wrong with your ear, Sir??"
piss out of it," he replied. The waiting room erupted in laughter.
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 time," said the boy.
"Why is that?"
the mom asked puzzled.
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 .
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