Buy The Dip: RIP Quant God
A peek at an aborted article
Apologies for delayed ‘stack this week. Norway has just enjoyed a four-day weekend – thanks to our national day on May 17 and Pentecost on May 20 – and the weather was too ridiculously good to do anything inside.
This is what I was up to when I’d normally be writing BTD.
Anyway, before I get to this week’s links I thought I’d discuss one of the many many posts that never actually came to life.
Last week I began and eventually aborted a long post on Jim Simons. A ton of great obituaries had already been written, and what I wanted to do – exploring what made Simons and Renaissance so special, and using it as a way to discussing quantitative investing as a whole – would realistically have taken more time and effort than I can allocate to it right now.
The initial conceit of the post was to compare Simons to Robert Oppenheimer. Both were obviously brilliant people in their own right, but what really made them stand out was their ability to harness the abilities of other brilliant (but often fractious) people.
Ok ok, fine, the result of Oppenheimer’s work was obviously a bit more important. He helped birth the nuclear era. A film about him bagged the Oscar for best movie this year. Simons merely traded financial securities – albeit a lot of them, very well, over an exceptionally long period.
However, quantitative finance has for a long occupied a special place in my heart (along with Islamic finance and sovereign debt restructuring), and Jim Simons was for over a decade my white whale. Just look at the man.
To many people the field seems recondite, complicated, anonymous and kinda dull, at least compared to more loquacious fund managers who will gladly talk to journalists about what the Fed is doing wrong, why Tesla is overvalued, how Netflix will win the streaming wars or explain ad nauseam the nuances of the geopolitical issue of the day.
To me, quantitative finance is both riveting and so obviously more important to understand if you wanted to grasp how markets actually function today – let alone what they might look like tomorrow. My interest in passive investing actually grew out of my curiosity about quants. After all, index funds are basically just a very simple quant fund. And what is really ascendant in finance is a systematic approach.
Moreover, once you get past the denseness of the jargon and concepts, quant trading and investing is an intellectually rich and fascinating field, full of canonical fights and disagreements, and the quants themselves often turn out to have a far more varied hinterland than most people in finance.
The natural corollary to my quant fascination was a low-key obsession with Simons, who encapsulated a lot of what made the field so interesting. For a while I’d periodically call up his PR person to remind him that I was keen on doing a Lunch with the FT with him. He always declined, so I went around slowly gathering what reporters call “string” - colourful tidbits, anecdotes and quotes from people in or around the Renaissance orbit - for a proper deep dive at some point. I killed the project when I learnt that Greg Zuckerman was working on his book, knowing that what I might write would almost certainly be superseded and surpassed (it was, Greg’s book is absolutely incredible).
But all that reporting revealed something even more interesting. At least I think so.
A lot of places hire brilliant people. They’re no dullards over at Two Sigma, DE Shaw or Citadel either. Or at a host of frankly more mediocre places you might not have even heard of. Wall Street comp means you will routinely find mathematical Olympians, wunderkind coders and former CERN physicists pretty much everywhere. But Renaissance stands out even among the rest of the quant royalty, and that is thanks to Simons’ rare ability to get the best out of the financial equivalent of the Manhattan Project.
Ok I’ve talked myself into it. At some point I’m going to have to actually write this post…
Anyway, here is FTAV’s output over the past week (Monday excepted, that will be in next week’s BTD):
📈Small-caps: Part Deux. I revisit an old post, one of the many joys of Alphaville.
📈Buying back some Treasury market liquidity. Sleight of hand or a clever bit of financial engineering?
📈Some gentle inter-institutional investor violence. Comparing and contrasting some big wealth funds.
📈 Brace yourselves for the *checks sellside note* Santa Claus rally! Christmas: now a vibe, rather than a time.
📈How much would you pay for a Pi? Raspberry Pi: a bit cool, a bit weird, but maybe not that cheap.
📈Reimagining Zambia’s restructuring in an alternative New York dimension. Would the proposed NY legislation even help?
📈Bad Swiftonomics (Britain’s version). Actually, it’s about ethics in Taylor Swift economics journalism
📈What even is inflation? There are weird quirks in how CPI and PCE measure price growth — that matters.
📈American AI data centres may use as much energy as new US solar farms produce. It takes a nation of PVs to host our chat.
📈Dairy me, now the CFTC wants a piece of the $191mn Cowzi scheme. Heifty stuff, even in a bull market
📈A better Anglo American defence: sell the good bit, keep the bad bits. Ditch copper to pay for digging holes in Yorkshire. Yes, really!
📈2023 was a bad year for women. The XX factor.
📈Arise, bioship. Back to the future
📈Geely’s US float is self-driving. Attention Zeekr.
📈The all-American cheat sheet to Europe’s trade weak spots. Hit ’em in the prawns.