Re: General Thery seminar

["Ronald Calitri" <calitrir@xxxxxxxxxxxxx>]

Rely to

> Harry Veeder > >From: "Ronald Calitri" > >Paul Henry Barkley Ted
> >    Henry's model is actually quite good. It is however, a crowded
terrain
> >compiled from many papers. The financial market emulates academic
finance;
> >and there wouldn't be a game if everybody wasn't able to win at least
> >somewhat consistently. By the way, Henry you are right that returns are
> >falsifiable; you neglect to note this is the standard practice in most
> >living corporations. The indices are compiled with error.
> >    So Barkley, let's try a different "game". Suppose there are two types
of
> >traders in the market: True and False. The True traders adhere to their
own
> >fundamentals. That is, they cast their balance sheets and income
statements
> >after every trade. That is for ordinary investors, whose borrowing or
> >lending depends on present circumstances.
> >The False traders cast their balance sheets only when they are overbought
or
> >over-sold. The distinction is designed to allow them to appear less
hedged
> >when appealing to borrowers and more hedged when going after investors.
That
> >is for corporate investors with accounts on many sides that may be loaded
> >off.
>
> I like your discussion but I don't like your characters.
> It seems to me there are insecure traders and secure traders.
> Secure traders cast their balance sheets and income statements
> *before* every trade. The insecure trader is either undersold or oversold
> because they cast their balance sheets and income statements only after
> every trade.

You have it exactly the opposite. the "False" traders are "Securitizing".
They cast accounts that are biased for financing purposes. The "True"
traders are "insecure" in the sense that they are required to be fiduciary.
It is more a matter of social position than choice, most people leverage
wealth only once or twice. Think about how you would cast your circumstances
in a good light if you would like to obtain a loan. It is hard. Then imagine
how if you had a business you would arrange streams of loans and bookings of
transactions to accomplish this "falsehood". If you cannot do this in your
head, it is good for 8 % of the work-force.

By the way, French and Fama showed over a decade ago and repeatedly that
fundamental accounts guide  the stock market; so this way of thinking would
appear to have some influence.

Chiao,
Ronald Calitri

>
> Harry Veeder
>
>