CME Ending Floor Trading
One item in my art collection is a Leroy Neiman work of the Chicago Futures Exchange. That last vestige of the swashbuckling era of commodities floor trading is closing down. While the decision is clearly a corporate bean-counter at the CME Group Inc. who has no idea about the art of trading, we are losing something so vital to our financial culture that we may be seriously altering the future forever. To be a really good trader, it required a “feel” of the markets, which something that is just not describable and even harder to capture in programming. Losing the floor will forever alter the course of trading.
The CME is the world’s largest futures-market operator. It has announced that it is closing most of its futures trading pits in Chicago and New York as electronic trading has become the overwhelmingly dominant way futures contracts are bought and sold. The move is scheduled to take place by July 2nd, and this will forever end a near 150 years of trading tradition.
It was the live exchange that enabled the development of the economy from ancient days when the Romans developed active places for trading corporate shares in the Temple. The Via Sacra was the ancient Wall Street of Rome. Thomas Gresham learned economics at the Amsterdam exchange representing England in the buying and selling of its debt. It was John Law who learned economics and developed the laws of supply and demand while trading on the exchange. The developments from live trading are numerous for what emerges from the interactivity is a interesting synergy that is greater than the sum of the parts. This would be like taking a trading room and dividing it into private offices eliminating the intercommunication and feedback loop,
Believe it of not, I was probably the last guy to have an old paper tape. I kept on my desk even when I had a screen. Why? The paper tape reflected the real market. It would sound like a machine-gun when the market was active and quiet as a mouse on other days. You never missed a beat for the tape showed the price and size of the trades. In commodities, there were EFPs (Exchange for Physicals) in the morning showing the overnight activity. There was a ton of info on the paper tape that is lost on a screen.
Additionally besides that information absent on screens, it was thesound that helped to hone my trading skills. I could “feel” blood on the floor during a panic day from the tape. There was a sixth-sense one got that cannot be achieved from screen trading. This is really the end of an era. A very sad day for that magic synergy will be lost and in the process, we will lose that crucible that forged some of the greatest traders in history from Jesse Livermore on down.
The first paper ticker tape appeared in 1867. It was actually the brainchild of Edward Calahan, who configured a telegraph machine to print stock quotes on streams of paper tape (the same paper tape later used in ticker-tape parades). The ticker, which caught on quickly with investors, got its name from the sound its type wheel made.
Calahan worked for the Gold & Stock Telegraph Company, which rented its tickers to brokerage houses and regional exchanges for a fee and then transmitted the latest gold and stock prices to all its machines at the same time. In 1869, Thomas Edison, a former telegraph operator, patented an improved it making an easier-to-use version of Calahan’s ticker. Edison’s ticker was his first lucrative invention and, through the manufacture and sale of stock tickers and other telegraphic devices, he made enough money to open his own lab in Menlo Park, New Jersey. It was at that lab where he developed the light bulb and phonograph, among other important inventions. Edison had great imagination and that is what it took to revolutionize the world.
So it is interesting that BUT FOR THE STOCK MARKET, you might still be using oil lamps like the Romans. Historically, it takes capital to create something new. That is why communism fails. Capital must concentrate in the hands of an individual who will follow his vision. Otherwise, he must convince unbelieving people to invest. Socialists just get jealous of someone else’s accomplishments and really want to punish those who further society robbing them of the fruits of their own labor.
Capital concentration is the key to progress. That is why Christopher Columbus, an Italian from Genoa, could not sell his idea in Italy and had to pitch the Spanish crown. They believed in him for Spain was accustomed to higher learning thanks to its Arab population. After all. Columbus was pitching the idea in 1490 that the world was round, which came from calculations that migrated to the West after the fall of the Byzantine Empire in 1453. Creative Destruction?
The concentration of people coming together to trade produces a magical Petri-dish from which many advancements in economics have emerged. Before income taxes really applied to everyone, full service at a gasoline station was standard. With each step forward we lose a bit of the past. Today, you are taxed on everything several times and you have to pump your own gas in the cold and rain (except in New Jersey). With the closing of floor trading, market-making will decline and volatility will rise. Yes they will save money per trade, but in the end, pumping your gas in the rain will not reduce the price of what we pay – just the quality. Goodbye to long tradition which the consequences are yet to be discovered.
Puerto Rico in Sovereign Debt Crisis
Puerto Rico is also in the middle of a debt crisis. A federal judged ruled it was unconstitutional for a state to modify municipal debt. Government debt is worst of all for there is never any fiscal management. All they do is is assume we schmucks are always there with deep pockets. They never know how to manage money and just blame us for not paying enough for them.
The Risk of Artificial Intelligence
People like Stephen Hawking and Elon Musk are worried about what might happen as a result of advancements in AI. They’re concerned that robots could grow so intelligent that they could independently decide to exterminate humans. And if Hawking and Musk are fearful, does this mean you probably should be too? While no doubt interesing men, are they really competent when it comes to programming?
I have tinkered with AI since the early 1970s. There is no doubt these guys are influenced by concepts like in the movies Terminator and the Matrix. But from a real world programming side, to outdo human thinking is easy. A computer model can far surpass humans in so many ways. What we have done in finance is unparalleled. Such technology could be developed in medicine eliminating the personal opinion of what a doctor “thinks”. My mother’s sister died of a leaky heart valve. Her doctor never noticed. One day, a intern worked in his office. He listened to her heart and said you have a problem. It was too late. A computer that could do medically what Socrates is doing economically would save a lot of medical costs and lives. That was one of my interests in turning to that after I was finished coding Socrates.
But the fears running around about AI are really unfounded. They are based upon a THEORY that somehow consciousness will emerge from creating a program. Not that someone codes this development, it somehow just is born. I will never sayABSOLUTELY NO WAY, for this is a untested theory. It assumes that somehow man could create a soul so to speak. I just do not believe that.
Absolutely every step has to be coded. How do you move your arm? The thought must first emerge in your brain, your mind must know what path to send an instruction down to move the muscles. There are countless paths. You have to decided the direction. Which precise muscle to move and how. There is a tremendous amount of coding that would be required.
I am pretty good at programming. This is all conceptual design. You first have to see it in your mind and then figure a way to code it to accomplish that end goal. This is not eary stuff. Sometimes you have to stare so hard at the problem and suddenly you see through it like a pane of glass – ah the path. Then the coding. The debugging is enough to drive you insane. The slightest most subtle error can take days to find and then you feel so stupid for it was in plane sight all the time. All of that requires the concept of how to accomplish a task. But how do you create emotion? That is different. Now you are talking about the freedom to just act arbitrarily. Of I could mimic a random thought generator seeded with the timer taking the last digit of the second. But that only creates the appearance of randomness. In programming, it isIMPOSSIBLE to create a true random generator for you quickly discover, whatever the project, it will fall back into as cycle forpure randomness cannot be coded.
I do not even know where to begin to try to createREAL human emotion since it is impossible to create randomness. I can mimic human emotion. You will get to see some of that in the final launch of Socrates. He can even joke. If you want to buy something that will decline sharply and is nowhere close to reaching a low in time or price, he can even come back and ask –Are you really sure? Did you have a bad day? But this is simply mimicking human nature. It is not creating it.
There is a substantial difference between actual random thought and mimicking since the first I cannot create, while the latter is a piece of cake. I would not know where to begin to create true emotional random thought since it is impossible to create even a simple random number generator. This is extremely important. For computers to turn against mankind as in the Terminator series or the Matrix, it requires emotion from which a random decision is made - like no I had a nasty day and suddenly I decided I do not like you.
I can create a self-aware systemthat will protect itself. No problem! I can create a system that will self-destruct or even defend itself with an electric charge – no problem. All that can be accomplished with writing code. I can even give a computer the ability to see as well as speak. That is no problem. Police already have facial recognition software. A computer can know who you are when you enter a room. While all of that may be food for Sci-Fi movies, but it is not the type of computer that will turn against its creator! If the government wants to create robots to kill man on command or create an army, that is no problem. It does not take free will to do that. Soldier are train to obey orders and NOT to question authority. Police are the same.
Government does not want independent thought – they do not even want intelligent police for the same reason Stalin kill intellectuals. Government wants mindless and emotionless drone. There machines can be lethal for it is the LACK or emotion of randomness. There is no compassion or sense of guilt. In that respect, a machine is tenacious and will complete its task. That is not AI that we need to fear and those in power would never want a machine with the capability of human emotion for then it could turn against its creator.
Where machines could be lethal killing machines that I could even create with the ability to survive and decide which street to go down independently, I have no idea how to create that ability of randomness that is essential for emotion. Without that core essence of humanity, it could never turn against it creator. As for this THEORY that somehow consciousness would just emerge on its own? Well its a theory. So is honest government.