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A Moneymaking Machine Like Few Others
- zump 10y agoI wish I knew about this place as a kid. I would have tried my darnedest to get in. Frustrating how a single bit of information can alter the course of one's life.
- cconcepts 10y agoI'd agree with you if human worth was measured by how many zeros appear on your bank statement. Thankfully, it isn't.
- deleted 10y ago[deleted]
- azatris 10y agoIf you did that for altruistic causes (donating your wealth), it would make you quite worthy of a person at least in my book.
- toadi 10y agoI hope if you're that smart you would at least apply it to something more worthwhile.
- fma 10y agoWorthwhile doesnt usually bring in fame or fortune, just warm fuzzy feelings. Unfortunately my landlord does not warm fuzzy feelings as currency. Do something for society that makes money so that you can do something for society.
- freyr 10y agoHey, they put dinner on those yacht builders' tables.
- tomp 10y agoLike working for Google selling ads?
- 20161112 10y agoI can relate. I received an offer from Two Sigma, then failed the background check because of something seven years earlier. If I had known just how much that event would end up costing me.
- bbcbasic 10y agoI upvoted you. I think your account is genuine because it was created on the date of your username, and the other date username accounts are a joke as they were created today.
- bradleyjg 10y agoAre you sure? Okay say you found out about Renaissance at 14--were you really going to spend the next decade and a half of your life working towards getting into and then completing a Phd in physics or math from a prestigious program just for the chance to interview at Renaissance?
- sean_patel 10y agoThis sounds like the fictitious company in the Series "Billions". How did these guys make 98.5% in 2000 and 33% in 2001 in the depths of the .com collapse of Wall Street? Something smells fishy.
- hkmurakami 10y agoThey're a high frequency shop that often won't have a net long position in any assert class. In addition, market turmoil is when trading shops make the most money.
- awaythrow856 10y agoThis is categorically incorrect. They are not a high frequency shop, and they hold positions overnight. Two Sigma, however is a high frequency shop. (I work in the industry.)
- Lazare 10y agoRenaissance Technologies is, somewhat famously, not a HFT shop.
- atemerev 10y agoThe only remaining option is pair correlations / volatility arbitrage. :)
- Jugurtha 10y agoYou might want to take a look at a book entitled "The Quants" by Scott Patterson. He talks extensively about Medallion. Inception, speech recognition people, etc.
- alecco 10y agoI dropped that book. Fortune's Formula is much better.
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- hkmurakami 10y agoRecommended reading: The Quants.
- 20161113 10y agoWhat did you do seven years ago?
- deleted 10y ago[deleted]
- 20161114 10y agoOr didn't do, but was wrongly accused of doing.
- lovich 10y agoAre these sockpuppets? Why is this chain from three usernames that look like they were autoincremented?
- ryuker16 10y agoThey're AI sockpuppets.
- null0pointer 10y agoYeah WTF? they look like they could be dates or incremented...
- nl 10y agoThe first one (20161112) created their account on that date. The other two are - I presume - jokes.
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- sixdimensional 10y agoOnce while applying for jobs I had an interview for a dev job with a firm like this. They refused to tell me exactly what they did, or even the company's name. I had to sign an extensive NDA before I could even interview (it was weird having to sign an NDA when it wasn't clear who I was signing it for)! I was fresh out of school and flubbed the interview, but will never forget the experience. All they told me was, I would work around the clock, but if I came and did my job I would likely make a mint.
- mrdrozdov 10y ago> Eventually the scientists went so far as to develop an in-house programming language for their models rather than settle for a numbercentric option such as ASCII, which was popular at the time.
- keyle 10y agoThat was a nice eye roll on that line. Sadly the whole article was pretty pointless. It was one of those wowsa wow wow wow woop woop article, by the end of it you know nothing more than they take speculative risks on short/medium term using futures. Which any CFD trader does.
- fowkswe 10y agohttps://s-media-cache-ak0.pinimg.com/564x/50/82/c0/5082c0ac8a4beadb85d58c09453a1a7a.jpg https://s-media-cache-ak0.pinimg.com/564x/50/82/c0/5082c0ac8...
- seibelj 10y agoI've been waiting my whole life for a computer that lacks number-centricity!
- 01d3 10y agoFools! ASCII isn't numbercentric, it has far more letters than numbers!
- davidnc 10y agoI'm curious to know what the original statement was that got mangled into this. Maybe the author heard ASCII instead of C? Not sure where numbercentric would come in, though.
- gdne 10y agoI feel sad that so much brain power goes into market arbitrage. They produce nothing usable by anyone else. Imagine if these people built companies that made new advances and new products.
- imaginenore 10y agoAt the very least, they produce liquidity. If you saw someone selling a brick of gold for a dollar, wouldn't you buy it to resell it?
- osrec 10y agoLiquidity that brings with it random, often unexplained volatility... But yes, I would probably buy the brick, and can understand why people lucky enough to have colo servers do this.
- imaginenore 10y agoVolatility hasn't changed much since the 70's: https://qph.ec.quoracdn.net/main-qimg-62a6ee89ddc1c930de9afb84fe5ccf62?convert_to_webp=true https://qph.ec.quoracdn.net/main-qimg-62a6ee89ddc1c930de9afb...
- cmdrfred 10y agoThat chart is net volatility over 12 months and ends at 2014. I wonder how more recent and granular data would look.
- osrec 10y agoI was going to make the same point. At lower timescales, things look very different. Also the number of orders, cancels and corrects has exploded in the last couple of decades, purely because of algorithmic speculation. This makes the market significantly less transparent, and the weird and wonderful matching algorithms employed by exchanges often get gamed by colo'd traders with the relevant knowledge.
- danielvf 10y agoTwo Sigma, mentioned in the article is currently hosting a fun AI programing contest at http://halite.io http://halite.io The learning code is not steep - you can really move up the ranks with simple improvements. I've had a great time.
- yitchelle 10y agoThanks for sharing. For someone that has zero knowledge and wants to get started in AI, which language would you recommend?
- PeterisP 10y agoIf there's a language that you know best and highly prefer, then use that; but if you have no preference then Python is very suitable at the moment, as it's both easy to get started in it and also easily extending to powerful numeric computation and machine learning frameworks.
- danielvf 10y agoFor playing the game? Any language you like. If you explicitly want to move into deep learning, I'd start with Python, since it has excellent math libraries (pandas/scipy) and neural libraries (keras).
- wslh 10y agoIn another article [1] it says "Currently Renaissance has three funds: Medallion, Renaissance Institutional Equities Fund and Renaissance Institutional Futures Fund. The latter two have been open to investors, but losses and withdrawls have left the funds wilted ($30 billion to $6 billion in three years)." [1] http://www.businessinsider.com/bob-mercer-peter-brown-2010-3 http://www.businessinsider.com/bob-mercer-peter-brown-2010-3
- justinsaccount 10y agohttps://www.amazon.com/When-Genius-Failed-Long-Term-Management/dp/0375758259 https://www.amazon.com/When-Genius-Failed-Long-Term-Manageme... https://en.wikipedia.org/wiki/Long-Term_Capital_Management https://en.wikipedia.org/wiki/Long-Term_Capital_Management > Initially successful with annualized return of over 21% (after fees) in its first year, 43% in the second year and 41% in the third year, in 1998 it lost $4.6 billion in less than four months following the 1997 Asian financial crisis and 1998 Russian financial crisis requiring financial intervention by the Federal Reserve, with the fund liquidating and dissolving in early 2000.
- sixQuarks 10y agoHow do we know those returns are real? $1 million invested at the beginning would be worth $4.5 billion today at 35% return per year.
- tedunangst 10y agoIt's not compounding.
- icedchai 10y agoIf it's like any other fund, it most certainly is.
- freyr 10y agoRead the article before jumping into an argument with uninformed speculation. They distribute profits to keep the fund capped at about $10B.
- icedchai 10y agoYeah, I read that. They don't tell you how often they raise the caps.
- giarc 10y ago>Renaissance currently caps Medallion’s assets between $9 billion and $10 billion, about twice what it was a decade ago. Profits get distributed every six months.
- icedchai 10y agoI can read, thanks. That doesn't answer the question. How often do they raise the caps? What happened before 10 years ago?
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- riskable 10y agoNote: This is merely my opinion... The only way they're making money like this is by cheating the system. I highly suspect they're using their public funds to feed data into their private one in order to siphon off profits. It's like a pyramid scheme except the mechanism of moving money is a form of market manipulation and this article is playing right into their hands by making them sound like geniuses ("it's all scientists!"). Clearly, if this business is run by "smart people" (scientists) then their other two funds--which are actually accessible--must be promising! Right!? TL;DR: The investors in the public funds are likely being scammed.
- branchless 10y agoThe system itself is broken. Money is supposed to be a proxy for value added, yet these guys are adding nothing. Don't come at me with the "investing in winners" guff. They are taking real wealth.
- sunsu 10y ago"taking real wealth" from whom? It is not a zero sum game.
- grogenaut 10y agoIf as the GP suggests they're making moves based on certainty of the larger fund's move, they can often be making the larger fund's gains smaller, which is counter to the interest of their customers in the larger fund.
- branchless 10y agoYes it is when you don't create wealth
- ChuckMcM 10y agoActually, it isn't. I believe you are conflating the concepts of "currency", "wealth", and "value." Here is an example I used with my kids once. Let's say you went the Pittsburgh Pirates game in 1978[1] and you caught the first home run hit by then rookie Barry Bonds. If you sold it in 1978 you would have been lucky to get $50 for it, if you sold it in 2007 when he retired with 762 home runs you could have gotten significantly more for it, perhaps several tens of thousands of dollars, and if you sold it in 2011 after he was tainted by steroids you would get less. But in all that time, the ball was just the ball. It's value went up, its value went down. As it went up and down the value of other home run baseballs also changed in value, but in ways completely unrelated to the value of Barry Bond's first home run ball. If you owned every single home run ball from the major league the value of any one ball was only related to that ball's history and not to the other balls. Quantitative analysis of markets is the art of figuring out how to recognize the value of something is changing before others do, and capture that value by acting on that knowledge. Whether it is offering to buy Barry Bond's first home run ball because your model suggests he could become an all time home run hitter, or selling it in 2009 because your model suggests Barry is likely to be tainted by the steroid scandal in baseball. You didn't steal any money, you didn't change the amount of "value" in the market, and the amount of "value" in the market it not controlled by a fixed number, its controlled by other events completely outside of your control. You bought something before others knew it would be valuable, you sold it before others knew it would be less valuable. Definitely not a zero sum game. [1] http://m.mlb.com/cutfour/2015/06/04/128375782/watch-barry-bonds-first-mlb-home-run http://m.mlb.com/cutfour/2015/06/04/128375782/watch-barry-bo...
- eevilspock 10y agoThat we have an article that discusses people providing no value to society yet working the system to extract billions of dollars (and the political power that comes with it) as if it were fascinating and cool rather than obscene tells us how fucked up our society is right now. Imagine reading a newspaper in 1840 reporting on a group of scientists who are making a killing in cotton because they figured out, using statistics Moneyball style, how to maximize profits by buying slaves that nobody else wants. Imagine the article tells it as a story of smart guys who amazingly did what no one else could do, with nary a comment or even awareness about the evil of slavery.
- mistermann 10y agoDon't worry, they provide liquidity. Surely you remember how dysfunctional and the financial markets were before we had sufficient liquidity? I mean heck, it could take minutes, MINUTES, to execute a trade.
- eevilspock 10y agoExactly. That 1840 article, I forgot to mention, has a sidebar on increased SLAVE LIQUIDITY.
- ryuker16 10y agoThis needs to be an onion article badly. Perhaps a parody of modern ads put in the context of 1830 southern America. IBM: outthink slave rebellions before they even happen. Apple: ichain. Manage your slaves without even leaving your Manor.
- deleted 10y ago[deleted]
- pgwhalen 10y agoI'm not gonna argue that financiers are curing cancer, but it sure does bother me that so many intelligent people who understand nothing about the industry have just grown to assume that it provides no value to society.
- rezashirazian 10y agoI've been dreaming about building stuff like this (on a much simpler scale) for a long time. Perhaps a model that takes in past quarterly reports, commodity prices, executive performances and news regarding a company and calculates 'tones' surrounding a company. (for example appearance of 'good performance', 'meeting targets', 'vast improvements' would possibly yield a positive tone where as 'disappointing returns', 'failed endeavours' etc would yield negative). Then gauge past price sensitivities to various tones and see if there is any way to train the machine to speculate merely on these 'tones'.
- aantix 10y agoSentiment analysis is pretty common in most NLP packages. The algorithms are already in place; you're half-way there. :)
- qwrusz 10y agoFor those questioning the returns, it's important to remember this fund's strategies clearly have capacity constraints. The article mentions a cap of $10B and a decade ago it was half that amount. Why cap the size? What this means is usually whatever strategies RenTec employees are using in their Medallion fund likely do not work at larger dollar amounts. Even worse, attempting to run a quant strategy above its size constraint can break it (this includes exposing too much about it to others). This would lead to it not ever working again even if they went back to only using small amounts. if it aint broke, dont break it.
- Rainymood 10y agoIn the video they call him Jim Simon, is this a typo? I think his name is Jim Simmons, was this intentional?
- makeset 10y agohttps://en.wikipedia.org/wiki/James_Harris_Simons https://en.wikipedia.org/wiki/James_Harris_Simons
- known 10y agoFormer D. E. Shaw & Co management
- kriro 10y agoMakes me wonder why they don't just invest all the money under management in that fund. Edit: They are capped and take out profits...so I wonder if the cap is the magic or if they use better algorithms for their private fund (only natural since it's their own money). They would have the same inputs (their data sets, infrastructure, programming language etc.) so I wonder if they have two very different models (<=10 billion and >10 billion) or how those are linked.
- makeset 10y agoBecause liquidity is finite. Profitable investment opportunities don't scale indefinitely. When you discover that an asset is being offered for cheaper than what you think it's worth, pretty soon either you or others buy up all the cheap supply, and the price catches up with your valuation.
- scandox 10y agoSuper smart people. Financial Alchemy. Computers. Secrecy. What could possibly go wrong? https://en.wikipedia.org/wiki/Long-Term_Capital_Management https://en.wikipedia.org/wiki/Long-Term_Capital_Management
- DrBazza 10y agoI'm working in the industry, and came from astrophysics, and intend to return to it one day. I would have stayed, but when the salary is 10x or more and you have a family, it's an easy decision. A part of me always feels dirty doing what I'm doing when I see news about Hubble, New Horizons, etc. And as for 'super smart people', I'd just say quants in general are 'super smart' at the very narrowest of mathematical problem sets, but shouldn't be let within a mile of a compiler. And they shouldn't be invited to parties either.
- deleted 10y ago[deleted]
- nl 10y agoEventually the scientists went so far as to develop an in-house programming language for their models rather than settle for a numbercentric option such as ASCII Wow. It's amusing to imagine what the people at the fund told the journalist which ended up being turned into that. A perfect example of the "noisy channel" idea in information theory.
- herge 10y agoMaybe it's some offshoot of APL, hence the ASCII quote?
- nl 10y agoThey are lots of IBM people. But surely not?!
- anentropic 10y agoI was kind of imagining they told it exactly like that, as a joke, to see if it ended up in print without getting picked up by someone who knows what a computer is
- lordnacho 10y agoI'm a fund guy, and my take on RenTech is this. We're lucky to even have heard of them. RT started off as a CTA. If you look at CTAs a good Sharpe is something like 1-1.25. You can buy a book that will get you most of the way there, and it's really simple (Author Andreas Clenow, I forget the title). I have actually verified this myself, coding it up in Python. If you simulate a random walk that has a sharpe of 1, you'll find there's plenty of periods where it's down or sideways. So you need investors. They have to pay you management fees so that you can run the thing while it doesn't make money. Simons then changed tack. In the early 1990s the fund industry was very different. Most funds were discretionary funds where the boss decided what to punt on, and investors were used to trusting them to do so. So changing tack to another systematic strategy, in equities, could be sold to the investors. Now this is significant, because there's a lot more stuff you can do with equities. There's industry structure, there's individual company information, there's analyst predictions for each firm, each firm has its own price series, there's corporate actions, and so on for thousands of stocks. Contrast that with CTAs where you have a couple dozen liquid things, maybe 40, in a few categories (bonds, equities, commodities, FX). If you find a strategy that works for a commodity and it gives you some Sharpe, maybe 0.1, and we assume for simplicity they are uncorrelated (which they aren't!), you can roughly sum them up to sqrt(n). So there's a big difference between 40 and say 2000. This is just a vignette, don't take it literally. But the point is you can find strategies that in aggregate are much better in the equities space. Purely my opinion, I don't often talk to people about this, so no feedback other that my collaborators. So back to the story, Simons builds this thing and it starts printing money. Now he's insanely rich, and the thing never loses money. So what does he need investors for? They are getting a free ride until the fund hits capacity. Now if he had just gone straight to the Medallion fund, the thinking is the same. Why on earth would he need investors? If he didn't need investors, why would he have his name out there? He wouldn't, and neither would anyone who'd discovered anything similar. There's probably a few groups like that out there. They're unlikely to have built out the capacity, because they never became hedge funds. But I'm thinking they're out there.
- denzil_correa 10y ago> RT started off as a CTA. Pardon my ignorance but what is a CTA?
- MrJagil 10y agoHere is another Bloomberg story about Robert Mercer, for those interested: http://www.bloomberg.com/politics/features/2016-01-20/what-kind-of-man-spends-millions-to-elect-ted-cruz- http://www.bloomberg.com/politics/features/2016-01-20/what-k...
- UhUhUhUh 10y agoSomehow this reminds me of LeGuin's "The Dispossessed".
- nathan_f77 10y agoA few comments: > Eventually the scientists went so far as to develop an in-house programming language for their models rather than settle for a numbercentric option such as ASCII, which was popular at the time. I might be missing something obvious, but this makes no sense to me. ASCII is not a programming language. And although UTF8 has taken over, I think ASCII is still very common. > (To this day the company’s website, rentec.com, looks like it dates from the Netscape era.) That's not very fair. I think the design is quite modern and minimalistic, and the website has definitely had some recent updates. It uses jQuery 1.11.3, which was released last year. > When the bill came, they would pull out a special calculator that could generate random numbers. Whoever produced the higher number picked up the tab. I can't figure out why the author decided to include this anecdote. I also can't figure out why the scientists didn't just flip a coin. Another random thought: It's interesting to think that whenever I've bought or sold some stock in the past, that little piece of data has made it's way through all of their millions of lines of code, and all of their neural networks. They might have even made a few fractions of a cent based on my behavior. > By studying cloud cover data, they found a correlation between sunny days and rising markets from New York to Tokyo. Wow. That's incredibly interesting, and that's just one example. Alright, their code has probably read all of my tweets, too. And everything else I post about online. Especially on all the subreddits for investments and stocks. > I don’t know, like 90 Ph.D.s in math and physics, who just sit there looking for these signals all day long. Oh geez. Yeah, they're looking at everything. Traffic, Yelp reviews, Pokemon Go, Netflix ratings, flight delays. I don't know, maybe even newspaper horoscopes. Maybe the newspaper prints something that says Virgos are going to get lucky with an investment. And then they watch all of the online activity of all the virgo investors who still read newspapers. Oh. And all of those companies selling your data? They're buying that, too. This sounds like a fascinating place to work. I want to know some of their secrets. One more random thought: They knew Donald Trump was going to win. I guarantee it. And they probably made a ton of money on all those stocks that went up.
- solotronics 10y agoflipping a coin can be rigged. I practiced and can flip a coin in my favor about 80% of the time.
- mdotk 10y agoThese guys pay a ton of tax and also have investors like pension funds they take along for the ride.