The mathematical equation that caused the banks to crash

[abaxas]

I am more inclined to believe him when he runs his own local betting exchange shop and knows on a personal level people at Centurion, bet72.com and a number of betting exchanges and gave a talk at Betfair

He also was our chief contributor for the sports analysis/betting site I was lead dev on so worked with him closely, especially for the side of UI and getting some of the algorithms right.

10k was at one event, so horse racing on one day... in his spare time from running his shop. He was quite open about when he lost £6k on a meeting though

There was a blog from a lad who worked in the city and took a year out to do this on a serious level and made a good £100+k in a year, I think it was
http://thebetfairtrader.blogspot.com...k-to-101k.html

Knowing Darren the liar from bet72 immediately makes me suspicious.

NOTE : I am a professional gambler, ex arber, now horse trader.

[TheAnimus]

Any 'science' which continues to vaunt proven to be failed ideas is no science at all. You simply can't reason with that kind of wilful ignorance mentality.

So wise one that knows better than all those who study the subject full time (seriously listen to yourself!) what is the better solution? What is the answer?

Right now you appear to be widely writing off economic theory with no understanding of it, plenty of people suggested flaws with an economically valid argument behind it, its just governments didn't listen, and their ideas were not taken up by many in the private sector, thou plenty were.

Quite a few people had been suggesting these securitisations were bad for a while, they had, as a result been short on it.

I'd be interested to hear how you think say Schiller is wrong with his book "The Subprime Solution" as myself I think he is a vestided interest, but correct.

I think its funny you mock creationists, yet something which formally uses scientific process you don't want to engage in discussion with, instead you want to insist its wrong. That is exactly the response a creationist gives when talking about evolution. Sure all the models are dangerous because they don't capture certain behavior, but they are not 'wrong', the issue is that they are right so much of the time with such accuracy, people aren't prepared for the fallout when they aren't.

As you've (again!) failed to talk about which part of economics you think are wrong, how you would object to futures and options in stabalising onion pricing for instance? (third time in this thread mentioning that). I'm confused as to what it is you don't like? You say you want more regulation, but I've shown in this thread how that doesn't really work. You don't specify which kind of regulation you want.

Myself I'd like smaller more descrete legal entities, the fact they are still unwinding Enron shows how much of a fiasco accounting can be. However I don't think this is pratical, or rather I don't have any idea how to achieve it.

An example of correlated risk in a manner you might perhaps better understand is this anacdote from a mate, his friend was looking at backups, and realised they only used one provider, RackSpace, so they decided that they needed to hedge their bets, incase they suffered some massive outage. They found some small company, based in a differen't country and started using their services, until one day, they both stopped. The small company was actually hosted by RackSpace.....

Its VERY hard to see patterns in this world, that is ultimately the problem.

Look at bankers, what kind of problem do they really create, Germany has never had it so good right now, and that is even with the constant threat of Greece hanging over them. (The German government forced some banks to buy up risky greek bonds, this is their 'time bomb'). In the UK, if we hadn't had the economic arsonists in power who spent with public debt massively on things that generate no return, we'd be in the same boat.

To blame economics for this is as ignorant as it would be to blame maths. I would really suggest reading one of the books mentioned in my previous posts.

Its akin to blaming medical science for not curing cancer.

[finlay666]

Knowing Darren the liar from bet72 immediately makes me suspicious.

NOTE : I am a professional gambler, ex arber, now horse trader.

Maybe, but I don't know what you would have against that site (all I knew it as was running affiliate scheme offers like free-easy-money.com with the best new user bets)

Even though places like coral, bet365 and ladbrokes eventually limited me to pennies per bet (coral restricted my maximum wager to 5p after winning a substantial amount over a UFC event (fairly low odds either way and being a fight is prone to swings so was good to hedge the bets on at silly o'clock in the morning) I found sites like that useful to find the new bets from the high street bookies.

I also did do it in my spare time for a while, got enough to go on holiday (and enough left over to get a 2nd hand car when the other was BER) but never had the patience to develop a significant float and kept skimming it off for myself

[abaxas]

Maybe, but I don't know what you would have against that site (all I knew it as was running affiliate scheme offers like free-easy-money.com with the best new user bets)

Even though places like coral, bet365 and ladbrokes eventually limited me to pennies per bet (coral restricted my maximum wager to 5p after winning a substantial amount over a UFC event (fairly low odds either way and being a fight is prone to swings so was good to hedge the bets on at silly o'clock in the morning) I found sites like that useful to find the new bets from the high street bookies.

I also did do it in my spare time for a while, got enough to go on holiday (and enough left over to get a 2nd hand car when the other was BER) but never had the patience to develop a significant float and kept skimming it off for myself

Damn,

We should have had a chat when you sold me the xbox!

I did it full time for 3 years, wrote my own arbing software etc. I now allow others to use it and trade using it too.

Bit late to return though, bookies are now on the ball

[finlay666]

Damn,

We should have had a chat when you sold me the xbox!

I did it full time for 3 years, wrote my own arbing software etc. I now allow others to use it and trade using it too.

Bit late to return though, bookies are now on the ball

Ah well, I think I was more worried in getting home in one piece given the weather at the time

Yeah the only bookies that didn't limit me were Betfair/WBX, purely because they made commission either way I think

[Lucio]

I have a question, do people believe that something can be worth more than the sum of it's parts? After all, our economic model is based on the concept of "value added", you take something, process it, and thus increase it's value to more than it's original worth and the worth of your contribution on it's own. As I understand it, that's the key to economic growth, the continual adding of value to what went before.

[TheAnimus]

No completely not.

Its about efficency, pure an simple optomisation.

What is efficent and what is optomised, well thats the problem.

A classic example of it is the idea of a senior Russian official visiting London during the cold war, asking if he could speak to the minister responsible for keeping London so well stocked with bread.

It allows for things in competition to naturally have the more efficent victor, the problem is the process is blind, by this I mean you could have the one which uses slave labour win out, as its more 'efficent' in terms of whats needed for the workers.

But you also get things like insruance, if one of our homes burnt down odds are we wouldn't have the funds to restore it, but we can share the risk, in return for the reward of insurance premiums.

So it doesn't have more than its parts, its just you tend to get patterns of part usage appear which are more efficent and thus allow more than you would otherwise.

When people have 'designed economies' they have always failed by simple metrics such as food in comparison to the free for all of the freemarket. This is how economic tools and things can be productive, they can shape investment correctly.

[badass]

I do know, and the fact that economic peers not only failed to anticipate the disastrous results of the deregulation they screamed for, but use their failure as an argument to push for more deregulation (rather than accept it as evidence that the reality of deregulation does not meet with the rhetoric) and to re-establish the exact same proven to fail system all over again is solid evidence that either a) their lack of introspection means they're emotively operating by self-rewarding rhetoric rather than coming up with natural laws, or b) are intentionally robbing everyone blind. Which is true is irrelevant, the effect is the same. Everything beyond that is irrelevant marketing and brow beating dissenters with a torrent of bare assertions.

replace "disastrous" with "massively inaccurate" and "deregulation" with "CO2 reduction targets" and you could be talking about Greenhouse effect studies!

[Rave]

One important thing to remember is that the trading of many of these financial products such as derivatives isn't always bad for the economy etc. They may have helped lead up to the giant mess commonly labelled as the credit crunch but options are extremely helpful for real businesses that actually produce useful output (such as a farm) to keep a stable income.

I'll use the farm example:
A farmer wants to know how much money he'll get for his grain harvest next year and doesn't want to risk a price collapse. He's also not greedy do isn't bothered about losing potential profits if the price skyrockets.
The farmer sells futures for the 100 tonnes of grain at £100 per tonne at today's price that expire next year.
If the price of grain collapses, it makes no difference. The futures are all ready sold.
Provided the farmer can produce those 100 tonnes, he is guaranteed today's price for them. If the farmer also purchases insurance for crop devastation, he then knows his income over the next year and can plan based on that.
Without these products, there would probably be less small businesses that produce commodities.

Maybe. My grandfather was a beef farmer in Dorset, farming 100 acres. He died last year (aged 89, retired at 65) leaving an estate worth £600k after inheritance tax. Albeit that beefs ( ) are presumably less prone to poor weather conditions changing the yield, I don't think he ever had any insurance other than saving the surplus from the good years.

Ultimately insurance should be a necessary evil- a few people employed to skim a bit of money off and put it aside to save the few unlucky people from destitution when catastrophies happen. Those people should not IMO be paid considerably more than the people generating actual value.

But what actually happened in the credit boom was that pretty much every large scale transaction had a bit skimmed off by the insurance parasites- who then, AIG being the best example, couldn't make good- and got bailed out by the taxpayer, who ate the entire loss.

Explain how that's an efficient market please?

Amateur

One of our clients would comfortably make £10k+ on a big hourse racing event (by laying instead of backing mostly), but he was quite involved with the racing and knew things like form, going, horse age, jockey experience, ratings, weights etc (and did occasionally lose big)

Sure I'm an amateur, I'm just starting out, paid £20 for my month's worth of tips and made £40 so far, so a £20 profit. I don't trade all of my tipster's tips and I'm sure I've been lucky with the ones I have traded so far, the guy claims no more than a 2% per month profit if you follow every trade he recommends to the letter. I'm well up so far with a fairly minimal effort.

If I actually had time to sit in front of Sky Sports with a laptop I'd be making a lot more. I'm already spotting trends in the odds that can be jumped on. I wish I'd backed Scunthorpe tonight when I could have had them at 8-1, they steamed to 5-1 just before kickoff.

It would have taken a brave man to hold until they scored the first goal!

[badass]

Maybe. My grandfather was a beef farmer in Dorset, farming 100 acres. He died last year (aged 89, retired at 65) leaving an estate worth £600k after inheritance tax. Albeit that beefs ( ) are presumably less prone to poor weather conditions changing the yield, I don't think he ever had any insurance other than saving the surplus from the good years.

Ultimately insurance should be a necessary evil- a few people employed to skim a bit of money off and put it aside to save the few unlucky people from destitution when catastrophies happen. Those people should not IMO be paid considerably more than the people generating actual value.

But what actually happened in the credit boom was that pretty much every large scale transaction had a bit skimmed off by the insurance parasites- who then, AIG being the best example, couldn't make good- and got bailed out by the taxpayer, who ate the entire loss.

Explain how that's an efficient market please?

Chill! I never suggested that everything was acceptable, just that some derivatives have a genuine use.
And you'll not find me defending the practices of any of the bailed out institutions at all. As far as I am concerned, they should have been allowed to fail with (amongst other things) the government using credit forgiving (amongst other tools) and prison for certain people to deal with the fallout.

[TheAnimus]

I don't think he ever had any insurance other than saving the surplus from the good years.

Thing is thou, plenty of people aren't large enough, or efficent enough to have the margins to allow for complete destruction to their lively hood or property.

An example I'd give would be the home. Say you live in Cornwall earn £15k pa, and have a £65k property, which gets ruined by a freak tornado. You're probably not going to have hte savings, and given how rare it is, it wouldn't make sense to try to. Thats where the insurance helps, spreading it out amoungst other people.

The issue comes that the risk of freak tornado hitting all those homes in a street, might be correlated!