In The Fear Index, the latest thriller by Robert Harris, now heading for the Christmas bestseller lists, a brainbox hedge fund manager with little in the way of interpersonal skills discovers that his computer-driven trading system has flown out of control and threatens to send the world’s stock markets into an unprecedented tailspin. Anyone familiar with Mary Shelley’s Dr Frankinstein, or any Bond film, will recognise the genre: an oddball genius consumed by his own creation, conflagration, nemesis, the whole works – populist fiction at its best. But is it fiction?
Category: Old articles
Curious Episodes That Bode Who Knows What
The volatility we have seen in financial markets since the middle of July will go down, I suspect, as a good case study in future years for connoisseurs of curious episodes in market history. While years of experience caution us all against describing the market as having lost touch with reality, the past six weeks may come to merit just such a description. Salute the wisdom of crowds, by all means, but wisdom is precisely what seemed to go walkabout as soon as the big beasts in the investment community and government packed their bags and went (or tried to go) on holiday in mid-July.
Retreat of Hedge Funds No Bad Thing
The news that George Soros is throwing the last outside investors out of his Quantum fund and keeping it solely as a family office from now on provides a useful reminder that hedge funds are facing increasing obstacles, of which the regulatory requirements which prompted this move are just one. If they go back to being what they once were, namely private pools of capital with a finite number of owners and fend-for-yourself regulation, the investment world would, in my view, be no worse a place as a result.
Investment World Needs More Forensic Analysts
“To the best of our ability and belief”, runs the standard legal disclaimer on the research report I have just been reading, “all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable”. Such legalese is now familiar to every investor and is read (or rather ignored) many thousands of times every day. Yet sometimes, as on this occasion, it carries an extra resonance because of the explosive nature of the material to which it relates.
Time to Study Cycle Turning Points
Who said: “Investment results largely depend on how one behaves near the top and near the bottom” [of the market cycle]? The answer is Keynes, whose remark is quoted in a collection of some of his most famous comments about investment in the latest issue of the Journal of Portfolio Management. In my experience, that statement is broadly true, as indeed anyone who cares to think through the implications and study the evidence has to concede.
This Time He’s Playing for Keeps
Terry Smith’s office is high up on the 37th floor of Tower 42, formerly the NatWest Tower, from where there is a floor to ceiling view over Docklands and out toward Essex, a neck of the woods with which he seems to be associated in the popular mind. The public image of this high profile City figure is that of a pugnacious bruiser, someone with attitude who has made good in the money markets through a series of ballsy deals, and who likes nothing better than a good verbal scrap.
Jonathan Davis 