About
I am a former scientist now working in asset management. I’ve been fortunate enough to work at some of the finest research institutes in the world.
I am deeply concerned that our leaders, despite best intentions, are taking us down a road to ruin. Misguided measures currently under way amplify the erroneous policies of the recent past and must be reversed before it is too late.
I also believe strongly that elements of the economy that are not suitable for survival should be allowed to perish. This goes for multibillion dollar corporations as well as overextended consumers. Only under these naturally competitive conditions can the economy can adapt and the fittest survive. When enterprises and individuals are unnaturally selected to survive when economic conditions indicate otherwise, we are led to complacency and a bastardized economy.
Economic Darwinism 
Great essay (“Letter to Obama”). Why don’t you sign your work, so we know who to thank.
Thanks for your comment Steve. For me to say what I want to say as openly as I want to be able to say it, it is best that I remain anonymous for a variety of reasons I’d rather not go into (but you can probably imagine).
As far as thanking me, I think you just did and I appreciate it.
You mentioned in a thread over at Yves’ blog that you had risk models using levy stable distributions.
I’m sure much of what you have is proprietary – but I’ll ask anyway.
I’ve read Mandelbrot’s “(Mis)Behavior of Markets” book. I’m reading Hull’s text on derivatives now. Interesting reading when Mandlebrot’s data is there in the back of your mind…
…so as a fiduciary / investor, where should I go next in search of practical and applicable knowledge about the topic of non-Gaussian distributions in finance?
I’m an engineer (electrical) with some decent math background (signal processing, stats, and lately some software methods like Baysean classification etc… so while I’m not an actual rocket scientist the math doesn’t put me off.
Any leads would be most appreciated and would (IMHO) make a great post for your site.
A great place to get started with stable distributions is Professor John Nolan’s web site:
http://academic2.american.edu/~jpnolan/
He’s got a bunch of really good papers and, if you use Matlab, his Toolbox is really good.
I also really like Kevin Dowd’s book
http://www.amazon.com/Measuring-Market-Risk-CD-ROM-2nd/dp/0470013036
That should give you plenty to start with, but don’t hesitate to ask here if you have any questions.
Thanks, ED! I’ll check these out…
I came to your site from a comment you made at Zero Hedge. Thank you for sharing your quote about the world bubble. I think you may be onto something. I could not agree more with your Economic Darwinism view. Beds made should be slept in.
I also fully understand your desire to keep a low profile. The most gifted get shot first.
May you be blessed with fresh revelations!
“I also believe strongly that elements of the economy that are not suitable for survival should be allowed to perish. This goes for multibillion dollar corporations as well as overextended consumers.”
So, a little Depression is good for the soul?
Essentially, yes. That is the idea. Although I would say that depressions are what happens when you attempt to avoid recessions as if they were the plague. Recessions can be a good thing, but when the Fed and Treasury intervene to avoid recessions at all costs, we end up where we are today.
It is better to let a manageable forest fire clear the brush now and then rather than douse every spark. The latter only leads to a build up of brush and an ultimate inferno.
Ahh, but this thing that you mention–
“when the Fed and Treasury intervene to avoid recessions at all costs”
that did not begin until mid-2007 or mid-2008. My view, it was
40-odd years of bad economic policy that got us to the point where
the Fed and the Treasury (and the Bank of England) suddenly and in
something of a panic decided they had to intervene at all costs to
prevent depression.
I get what you’re saying about manageable forest fires. But we have had
our little fires — recessions — with some regularity. I hold that policymakers
rely on dogma, rules that are believed to work because they used to work.
I hold that the Fed (restricting M1 money to fight inflation) in concert with
Congress (tweaking the tax code endlessly to improve economic growth)
have managed to increase the level of spending in our economy while
decreasing the quantity of spending-money available. I hold that these
consequences of policy are *the* *primary* *cause* of our increasing
reliance on credit, and of our otherwise-inconceivable accumulation of debt.
I hold that all or most all of our economic probblems emanate from this source.
The intervention I was referring to dates back to the early days of Greenspan, i.e. the knee-jerk easing whenever the economy seemed to catch a cold. Strictly speaking, we have had recessions, but not severe enough to curtail bad behavior and weed out weak institutions. Goosing the economy with easing at every sneeze is what I was referring to. The interventions of the last 2 years have been gross and extreme and beyond the realm of any sensible analysis.
I’m on the same page with you regarding policy. The only thing that allowed that policy was the reserve status of the USD. Unfortunately, I don’t see any improvement in that policy and the reserve status of the USD is waning.