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"three distinct careers" Discussed on Bloomberg Radio New York

Bloomberg Radio New York

09:55 min | 2 years ago

"three distinct careers" Discussed on Bloomberg Radio New York

"And P. five hundred is down a tenth of a percent or two points at thirty thirty six the Dow Jones industrial average down a tenth of a percent or thirty six points to twenty seven thousand fifty four the nasdaq down a tenth of a percent or six points to eighty three nineteen ten year treasury up to thirty seconds the other one point eight three percent yield on the two year one point six three percent NYMEX crude oil is down one point eight percent or ninety nine cents to fifty four eighty three a barrel of my school down half percent or seven dollars sixty cents at fourteen eighty eight forty an ounce the euro one point one zero nine seven against the dollar the yen went away point nine seven Tom and Paul Caron think someone posted in time came with this very rich holds writing up is wonderful podcast as well we got some things to talk about today Paul get to that in a moment I want to talk about the nascent in legendary literature back thirty forty fifty years ago some of it from Capitol guardian Trust Company in LA the American funds group which of these beautiful studies about patients in the market and one of their classic studies is is it easy to get out of a market it's so hard to get back in once you get out it's a wildly asymmetric decision tree what people do right now who will be missed this Jane Norma's market well first they have to acknowledge their mistaken it knowledge I totally wise a medicine mistake you know it's not just that they got out of the market and couldn't get back in they have to admit I don't have the skill to market time and more importantly I don't have the self discipline when everything I know says I should be getting back in and I still can't pull the trigger we still getting emails from people who exited the market in a way and nine ten eleven just could not get back in they've been sitting in cash for a decade that just absolutely demolishes their lifetime returns in just one more quick question on this before you go to the theme of the week and that is if you market time X. number of times seven eight nine ten twelve times all you gotta do is miss one moon the threat destroys the mathematics and here's the fascinating math about this it's easier to dollar cost average back in let's say you're sitting on a hundred thousand dollars or a million dollars it's easy to say I'm one hundred ten percent of that would work every month but if the Julie is the data scientist and my firm he has a blog of dollars in data and he's crunched numbers and said historically anytime you sitting with a pile of cash you're better off investing the whole thing at once hold your nose and deal with it and if you're under sixty you have a long enough time period that even if you're buying at the top you're better off try doing that than trying to guess because you end up missing a decade like this where this would be five hundred triple how much you're saving on the downturn ten percent thirty percent the man it's a symmetrical the math doesn't work to try in time let's talk about the mathematician post talk about your podcast coming a fascinating what you've got going on tell us which what's on sure so Greg's upcoming is reporter of the Wall Street journal who who previously had written a book on fractures and on John Paulson the greatest trade ever about the mortgage short he spent the past three years chasing down Jim Simons and the rest of the crew who work at renaissance technologies and arguably the most successful hedge fund in history the book he wrote is call the man who saw the market have Jim Simons launched the quant revolution and I found it absolutely delightful it is my recommendation for financial book for the year just filled with us showtimes and and renaissance because the story is extraordinary so Jim Simons is this brilliant math geeks slash codebreaker who has had three distinct careers the first one was breaking Russian codes for the NSA and when he was young mathematician ended up getting fired when he said something in the media in that wasn't well regarded by his bosses about the Vietnamese war us hope of the U. S. in involvement in Vietnam led to him leaving this sub division of the NSA and so he becomes a professor at Harvard professor at MIT ends up going on my alma mater SUNY Stony Brook he built stony brook's excellence world class math department filled with noble Laurie it's filled with ground breaking research really puts them on the matter when when I went to Stony Brook it was a you know a reasonable state school that was rising in the rankings I couldn't get into Stony Brook today with my grades he helped build that into it well within our houses a Sudanese with the SUNY system the state university of New York system folks all the other schools and then there's Tony but that's a that's always been that way that that's certainly what it's been like post Jim Simons so he he eventually catches the book for investing he starts out as a bit of a macro tourists like every mom and pop trader and day trader does but eventually he comes to recognize that his mathematical skills a part of the stock market and he starts to look at the market as a math challenge it's not about investing it's not about putting your money to work for fifty years it's a math problem to be so and ultimately he solves it at least in a very small way the medallion fund the flagship fund of renaissance technologies the numbers are just hard to fathom sixty six percent a year for thirty years there's one there's nobody even close to it now they're not high frequency traders but they're not long enough to do is come up because so so what they do so this I could tell you how he does it but you probably won't be able to log normal basis is he doing it by making money or by not losing no he's doing it by making money he doesn't hire he doesn't hire economists a strategist with the usual street people he he hires computer linguistique hires mathematicians he says it would be on me and no they he doesn't care about beyond me all he looks about is what are the odd relationships that create an arbitrage opportunity that people may not be familiar with those are basically reversion to the me he's looking for the out wires on Xfinity he's in with the fit of leverage and a little bit you know holding period of weeks and and days really retirees years not and not second yeah it's so there's water like the way you treat only much more successfully he affected we created before they were Bloomberg terminals on every desk he created one of the very first real time databases of every stock price every tear in the world this was enormously expensive back before cheap servers and off the shelf databases they created this from scratch in the eighties when nobody else in the world had it and that was one of their great secret sources it's also why that was they charged five and forty four forget to one twenty they were charging a five percent management fee and forty four percent of the profits and despite that fear of them actually Simon says listen there's not enough for this to go around thanks so you outside investors for helping us but taking money and go home this is just for me and my employees average employee investor in the medallion funds employee investor fifty million dollars everybody who works there has become so fabulously rich they're all willing to sign these non disclosure agreements and when they leave renaissance okay they don't go to a competitor they're done thank you and Jim Simons and Greg's upper because our criminal history this weekend for drugs Akkerman doing again you'll be with Mr results this weekend book of the year this is Bloomberg national headlines right now is Michael bar Michael thank you very much Paul they get president Donald Trump is wondering why people he's never heard of are testifying in the house Democrats impeachment probe trump tweeted this morning as army lieutenant colonel Alexander Veneman is set to testify on Capitol Hill this morning women will be the first current White House official and with the first person to listen to trump's July twenty fifth call the president of Ukraine to come before Congress Veneman in prepared testimony says he twice raised concerns over the trump administration's push to have Ukraine investigate Democrats and Joe Biden the house is set to take its first vote to support the on going impeachment inquiry of Donald Trump the move that aims to nullify Republicans main complaint the process is illegitimate Pacific gas and electric is shutting off the power to hundreds of thousands of customers in northern California to prevent powerful winds from damaging its equipment and sparking more fires the announcement came even before the last block out had ended which shut power to more than two point five million people powerful winds are driving multiple fires across California global news twenty four hours a day on air and a tick tock on Twitter powered by more than twenty seven hundred journalists and analysts in more than a hundred twenty countries on Michael bar this is Bloomberg I don't think so much in negative nine Adele make it negative ten of the delegates thirteen.