The Online Investing AI Blog

The National Journal makes the point that the Millennial Generation is the unluckiest generation.

Sorta.

Because it is also the luckiest.

The Millennial Generation is loosely defined as the generation of Americans born in the 80s or 90s. Obviously, a lucky generation wouldn’t have the exact date of their creation, right? Just like every tool becomes a weapon and every weapon becomes a tool, technology has shaped this generation’s limitations and opportunities as no other.

The National Journal’s main point — although they’re a little wishy-washy about it — is that technology has replaced a lot of the jobs that former generations could access. Computers have increased production and automation has totally transformed the job market. That’s all true, too. And this is just beginning. We haven’t seen nothing yet.

However, the article stumbles a bit on just what advantages that technology has introduced. After all, Millennials have more computer power in their pockets than most university computer labs had in their facilities just a few decades ago. The technology has created turmoil, but every period of massive change has a transition period.

Technology is also starting to break the chains of wage slavery for this next generation of workers. More Millennials can create their own businesses online. They have access to apps and tools that give them the power of dozens of corporations at their fingertips. There are also more ways to earn money–blogs, websites, app development, affiliate businesses, etc.. We can’t forget, either, that  more Millennials can arrange their work in ways that just was not possible in previous generations.

The jar is definitely half-filled for Millennials.

Or is it half-empty?

What do you think?

Accelerating Technology, Dreams Come True, Internet, Money, Online Investing AI generation, graduation, millennials

Entropy by Jef Safi

Entropy has a bad rap.

When you hear about entropy in science class it’s usually described as a messy bedroom, a completely disordered state. It has nothing to do with intelligence, in fact, it looks like the complete opposite of intelligence.

But, according to a Harvard computational physicist, entropy holds the key to intelligence and — defying the bad reputation thrust on it by millions of high school science teachers — entropy is more like a state of exploration, or even play. It’s an insight that could lead to new technologies and has important implications for econophysics and stock trading, believe it or not.

Alexander Wissner-Gross, who is part of both Harvard’s Institute for Applied Computational Science and MIT’s Media Lab, recently published a paper called, “Causal Entropic Forces,” which, using cosmology as its inspiration, seeks to reveal the “deep connections between intelligence and entropy maximization.”

And that gives us a clue to how it works in finances and trading. Wissner-Gross sees entropy as the universe’s way to explore possibilities and to seize future possibilities as possible. As he tells Io9, it’s a lot like playing Go.

Read more…

Accelerating Technology, Automated Trading, Investing, Money, Online Investing AI AI, Alexander Wissner-Gross, entropica, entropy, software

The market is broken and the free market system is not fair — it’s a sham.

I hear that all the time. And it’s absolutely correct.

The free market is not fair. In fact, it can be downright mean.

There’s plenty of evidence that this is correct. You only have to look at the recent economic meltdown to see that the market has failed millions of people in the world. Hard workers have lost jobs. Dishonest investors have screwed honest investors. Businesses and money evaporated overnight.

It’s difficult to tell people who have endured some of the pain of this crash this, but it’s true: the market doesn’t work and that’s why the market works. In other words, systems that can’t fail on their own, never grow on their own. This is adaptation at its finest.

Despite the pain of deep economic corrections, people are struggling back on their feet devising new ways to handle the problem. I don’t know whether Bitcoin will ever be the next currency — but it’s a sign of that innovation process and it’s a process that is happening all over the country.

The ability for the market to readjust is why it continues to be the worst — and best — system we have. Socialism, at best, subsidizes poor economic choices and ideas for as long as possible, then it collapses in a heap. Most countries that are embroiled in socialism rarely see this. It’s just a modern twist on feudalism. There are a group of lords — mainly industrialists and politicians — who provide the bread and circuses; in exchange, the citizenry doesn’t threaten their castles with torches and doesn’t threaten their entrenched businesses with competition.

It can be much worse.

Read more…

Business Strategy, Internet, Investing, Money, Online Investing AI

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You are on a hot streak.

Each trade you make is a winner. The money in your trading balance begins to pile up. You reach the obvious conclusion…

You are good. Real good. You have the skills and knowledge to dominate the market. Or do you?

The biggest problem that traders and investors encounter is the difficulty of separating skill and knowledge from plain old luck. And, just as a coin can flip to heads any number of times before it eventually balances out into the 50-50 range, so, too, can trades inconveniently arrange themselves in lucky — or unlucky — streaks. This “streakiness” can lead to over-aggression during lucky bursts and despondency when the trader faces a series of losing positions.

How can you separate your skill from the random nature of the market.

There are a few ways to test — all, of which, take time and patients, which is unfortunate for the get-rich-quick trading set.

Counter-Markets

One way to test your level of skill above luck is to measure your performance in poor trading markets. As the saying goes, all ships rise in the tide. But, during bear markets can you find winning stocks?

Significant Results

While there are always going to be lucky streaks and unlucky streaks, if you consistently out-perform the market, you can be more certain that you’re not just the beneficiary, or victim, of luck. This should be measured in years — nor days, weeks, or even months.

Risk Management

This isn’t so much of an indicator of luck as it is a way to manage luck. Traders should use proper position sizing. Both traders and investors should manage their portfolios. Some more advanced techniques including taking short positions to balance long investments.

Read more…

Automated Trading, Investing, Money, Online Investing AI

I’m reading Van Tharp’s latest book, Trading Beyond the Matrix. I just started it so this will not be a complete review — expect that in the future, though.

But I am already intrigued.

Tharp believes that you don’t trade or invest in the market; you trade or invest in the beliefs of the market. Those beliefs are yours to control, or to allow them to control you. Hence, trading for Tharp is almost a yoga, a mental connection between brain and spirit. Indeed, there are yogic paths that stress mental exercises and meditation exercises.

But we don’t think of trading as a spiritual act. In fact, it’s treated almost as an act of defilement. Our society has twisted views on wealth and earning wealth. We praise and hate the practice. The structure of our tax system treats earning money as a sin by punishing — not rewarding — you for earning more money. It’s the ultimate sin and deserves the ultimate sin tax. Notice: there’s no progressive sales tax on cigarettes or alcohol based on use or over-use.

Tharp though approaches it almost as a Zen philosopher, who sees the extraordinary in the ordinary and the ordinary in the extraordinary. By consciously watching your thoughts and beliefs, the trader is learning about himself. As he learns about his mind, he is learning about the universe.

I sort of saw this coming from Tharp. The last book of his that I read — Super Trader — contained the prerequisite number of charts and graphs, along with trading tips, but did not shy away from spiritual matters. Tharp believes they are closely connected.

Once I’m finished I’ll try to post a review, or summary, of Trading Beyond the Matrix.

Resources:

Tharp Institute

Trade Your Way to Freedom

Super Trader

Dreams Come True, Great Books, Investing, Money, Online Investing AI, Success beyond the matrix, spirituality, tharp, trading, van tharp

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We’ve just witnessed a historic event.

Last Tuesday, the Dow — a benchmark for stock market strength — cruised to 14,285, well passed the former record set in Oct. 2007. As of Friday, the Dow rested at 14,397. And there was a collective shoulder shrug.

That reaction was in contrast to the heady days of stock market gains in the 1980s and 1990s when each Dow and Nasdaq record was reported breathlessly for days. It was a moveable feast.

So, what’s different about this record?

First, people are paranoid because the last record in Oct. 2007 was soon followed by an almost complete economic collapse. Within months of this record the Dow plummeted, losing half of its value and bouncing along those bottoms for years. Investors are wary of the same happening again.

They have statistical reasons to be wary. Raw economic numbers — GDP growth and employment, for instance — are not even close to the strength that led up to the rally in 2007. The housing market? It’s still a basket case. Also, the stock market gains are based a lot on government — especially the Fed — tampering with the numbers. Cheap dollars have fueled the rally.

However, it may be a mistake to hold this view on the economy exclusively. Remember fear can be just as damaging to your portfolio as greed. Also, remember that time has a way of balancing prices. What was up, might come down a little; what was down, may end up higher.

Read more…

Internet, Investing, Money, Online Investing AI crystal ball, Dow, gdp, inflation, Investing, market, stock market, stock trading

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The whole philosophy of using machine learning and artificial intelligence in investing is that machines can make trades quickly and without being burdened by emotions.

It’s the last bit that I’ll talk about today. Emotions — like fear and greed — skew the decision-making processes of the investor, causing him or her to but too high or sell to low based purely on feelings. A good example: you would probably pay more for food if you’re hungry than if you just had a big dinner.

Therefore — and this conclusion is inescapable — machines that do not have emotions can trade better.

Except, this logic is totally wrong. Well, not wrong. But it forgets the most important variable. The market and the economy runs on emotions. Even if every investor was an emotion-less cyborg, the rest of the economy, which underlies all stocks and commodities, runs on desires and emotions.

A successful investment system can not possibly rule out emotions. In fact, the most successful investment system would totally understand emotions, but not ruled by them. This system would understand how desire for something quickly turns to the desire to not lose something — fear. Likewise, it would be able to sense when the momentum of fear turns into a buying opportunity. It could sense that the greed in the real estate market was becoming too frothy, or that the fear of a recession was starting to bottom out.

In short, the best investment system understands emotions. It just isn’t ruled by them.

Read more…

Investing, Money, Online Investing AI AI, artificial intelligence, emotions, fear, greed, human, Investing, loss, machine learning, markets, predictions

Flickr Creative Commons — Mihhailov

You should all be ashamed of yourselves — you and your “level playing field” exhortations.

The rich and their children are hopelessly outmatched in so many ways by working- and middle-class folks that it’s not even fair.

OK, so maybe the rich do have certain advantages. They can send their kids to great schools. When they compound their money, a little is a ginormous sums. They can network and hobknob with contacts that can open up new opportunities.

But…

For the non-rich investor or entrepreneur, making money may actually be easier than the rich.

The Rich Are Lazy
Rich people become comfortable and their interests move toward other activities. They, essentially, become lazy and pampered. That’s a very noncompetitive stance.

The Rich Are Stupid
Stupid is a mean word. Uninformed? Yeah. That sounds better. But, despite the access to the finest institutions of higher learning, the rich are saddled with “Yes-sir-or-ma’am” thinking. They surround themselves with people who always agree with them — and that cuts them off from learning valuable lessons, both practical and academic. You’ll notice that the rich who make their money in one economic condition, rarely lead the next.

The Rich Have Lazy Money
The rich pass on money to their managers and handlers. Their managers may or may not have their best interest in mind and, so, can make mistakes or poor investments with the money.

The Rich Are Attached
Rich people are terribly loathe to give all the good things they have up (“loathe” — that’s what rich people do instead of  ”hate.”) Since they become attach, they fail to move out of bad opportunities and are slow to seize good opportunities.

Read more…

Investing, Money, Online Investing AI kiyosaki, Money, rich, rich dad, Success, wealth, wealthy

The magician’s trick works not by hiding things, but by showing things that you don’t need to see.

Flashy costumes. Funny hats. Sexy assistants.

They are all there to distract you from the magician’s manipulation behind those clever scenes.

It’s not too different from what both sides of the tax policy and wealth redistribution debate are giving you right now.

On one side, the magicians of higher taxes like to parade out images of working class family being stiffed by fat cats and their rich trophy wives. On the other side, the sorcerers of low tax rates whip out images of evil government bureaucrats from their sleeves. These are all  emotional and visceral images meant to obscure, not to reveal .

The high tax magicians say raise taxes and all of out problems disappear.

The sorcerers of low taxes will say that cut taxes and all of our problems disappear.

You need proof that their magic exists? They’ll trot out their trick ponies — studies that back their side of the argument. Read more…

Investing, Money, Online Investing AI, US Economy income tax, tax, tax policy

For many of us, mastery is a journey, not a destination.

Mastery is not just about doing something well, it’s doing something effortlessly well and doing something so well that you add to that field or profession. Think Mozart or Picasso.

There’s something more about mastery  though. It’s more than a gift because there are those who are gifted with skills and knowledge, but never truly develop those skills.

Maybe it’s just too easy.

Mastery is something more than a gift or innate ability, something intangible.

To become a master, you must know yourself and you must know how to let your gift use you. Hidden under your psyche lies the motivations that drive you to mastery.

It’s that last step that causes most trouble. People who have certain abilities are channeled into careers, then realize they are not satisfied in those professions. We call it burnout.

Robert Greene in his new book, Mastery, says:

“Your strategy must be twofold: first, to realize as soon as possible that you have chosen your career for the wrong reasons, before your confidence takes a hit. And second, to actively rebel against those forces that have pushed you away from your true path.”

I think this is the key to why many investors or traders burn out so quickly. For every Warren Buffett, there are a few million former investors who dropped out of the field early, or slugged their way toward retirement.

Read more…

Business Strategy, Great Books, Investing, Money, Online Investing AI, Success mastery, traders, trading, Warren Buffett