Thursday, July 31, 2014

Outside Looking In

Your money at work. For them.
It's all about getting information...they call it trading stocks, but it's really trading information. That's what we were doing.

--Turney Duff, former Galleon trader


Just peeped Scorsese's The Wolf of Wall Street, and I'd bet the average person would say it's about the craziest story ever. I'd get that. But Jordan Belfort's slimey infomercial rat-a-tat buggery is chump change compared to the middle-class soul sucking black hole that's the state of finance now.

Yesterday, Frontline aired To Catch a Trader, whose bullseye was puss sack Stevie Cohen (SAC Capital). Given that I've devoted a good amount of time to looking at finance now, not much these days surprises me. One thing did; "expert networks," camouflage for leakers on the inside who personally profit by leaking info (in advance, of course) to traders.

Turney Duff related how he picked up a call intended for Rajaratnam with a tip on Amazon. Raj wasn't around, so Duff took the call and the info. It being his first experience with insider rigging, he hung up and wondered what he should do.

He ended up placing a bet and "making" 500 g's in 30 minutes.

But it's what Duff says after this that's key, and I paraphrase: "I thought, 'Gee, if I could get a call like this every day, I could be a great trader too.' So I determined that I needed my own 'whisper guy' too."

Poker players don't cheat. In fact, gamblers are, at least when it comes to gambling, some of the most ethical and honest people I've ever encountered. But in this EM08 world where up is down, gangster dons like JPMC, Goldman and HSBC get away with historic looting, while nothing is done to police them -- even in the wake of their historic crimes! Meanwhile, walk into a Vegas casino and you'll have a camera up your ass and are surveilled at every turn.

Thursday, July 24, 2014

The Greatest Read, Ever: Stanislav Petrov

One of the most important skills is reading, not literacy-wise, but assessing information in order to make decisions, to act. Athletes, coaches, entrepreneurs, politicians, school counselors, shrinks, investors, parents... all of us in one way or another make decisions based upon reads of situations.

Here's back to back world poker champion Johnny Chan making one of the most incredible lay downs ever. For those non-poker players, a lay down is when you fold, or quit your hand, and here Chan is dealt pocket aces, the optimum starting hand in poker's "cadillac of games, Texas Hold 'Em (dubbed by two-time world champ, Doyle Brunson in his seminal book on poker,  "Super System," who's in the cowboy hat). 

Chan's read of the situation is spot on, but what's interesting is his assessment afterwards, that "instinct" just told him and he concluded that his aces were no good. As commentator Ali Nejad aptly says, it's poker at the highest level, true, but what's interesting here is that Chan gives credit to his instinct, his gut.

Now up the ante to human destruction, and that's light years beyond poker. That was the "poker table" Stanislav Petrov was at. And it's interesting that like Johnny Chan, something in his gut told Petrov things weren't right. 

I first heard the story of Stanislav Petrov via Glynn Washington's show, Snap Judgement. I recommend listening; it's the segment "End of Days." Kudos.

Too many stories in history are relegated to obscurity. Here's one that deserves sunlight, devoid of negotiations between the White House and the Kremlin, but nonetheless shows history playing out at its own highest level and the greatest read ever.


from The Atlantic

The Man Who Saved the World by Doing Absolutely Nothing

Thirty years ago, Stanislav Petrov proved a cool head in a Cold War.



Petrov receives a 2011 German media award from Karlheinz Koegel, chief of the German Media Research Group, during a ceremony in 2012. (Reuters)

It was September 26, 1983. Stanislav Petrov, a lieutenant colonel in the Soviet Air Defence Forces, was on duty at Serpukhov-15, a secret bunker outside Moscow. His job: to monitor Oko, the Soviet Union's early-warning system for nuclear attack. And then to pass along any alerts to his superiors. It was just after midnight when the alarm bells began soundingOne of the system's satellites had detected that the United States had launched five ballistic missiles. And they were heading toward the USSR. Electronic maps flashed; bells screamed; reports streamed in. A back-lit red screen flashed the word 'LAUNCH.'"

That the U.S. would be lobbing missiles toward its Soviet counterpart would not, of course, have been out of the question at that particular point in human history. Three weeks earlier, Russians had shot down a South Korean airliner that had wandered into Soviet air space. NATO had responded with a show of military exercises. The Cold War, even in the early '80s, continued apace; the threat of nuclear engagement still hovered over the stretch of land and sea that fell between Washington and Moscow.

Petrov, however, had a hunch -- "a funny feeling in my gut," he would later recall -- that the alarm ringing through the bunker was a false one. It was an intuition that was based on common sense:  The alarm indicated that only five missiles were headed toward the USSR. Had the U.S. actually been launching a nuclear attack, however, Petrov figured, it would be extensive -- much more, certainly, than five. Soviet ground radar, meanwhile, had failed to pick up corroborative evidence of incoming missiles -- even after several minutes had elapsed. The larger matter, however, was that Petrov didn't fully trust the accuracy of the Soviet technology when it came to bomb-detection. He would later describe the alert system as "raw." 

But what would you do? You're alone in a bunker, and alarms are screaming, and lights are flashing, and you have your training, and you have your intuition, and you have two choices: follow protocol or trust your gut. Either way, the world is counting on you to make the right call.

Petrov trusted himself. He reported the satellite's detection to his superiors -- but, crucially, as a false alarm. And then, as Wired puts it, "he hoped to hell he was right."

He was, of course. The U.S. had not attacked the Soviets. It was a false alarm. One that, had it not been treated as such, may have prompted a retaliatory nuclear attack on the U.S. and its NATO allies. Which would have then prompted … well, you can guess what it would have prompted. 

As Petrov, now retired and living in a town near Moscow, puts it of his decision: "That was my job. But they were lucky it was me on shift that night."

Thirty years later, there are lingering questions about the specific events of September 26, 1983. Was it really up to Petrov, the single man, to make the call? Weren't there other failsafes that would allow for malfunctioning technology? Wouldn't other cool heads, finally, have prevailed? Petrov, for his part, emphasizes the ambiguity of the situation, saying after the incident that he was never convinced the alarm was erroneous. (The odds of his getting it right, he now figures, were pretty much 50-50.) 

One thing that seems clear, however, is that the world carried on into September 27, 1983 in some part because Stanislav Petrov decided to trust himself over malfunctioning machines. And that may have made, in a very broad and cosmic sense, all the difference. Petrov's colleagues were professional soldiers with purely military training; they would, being trained to follow instructions at all costs, likely have reported a missile strike had they been on shift at the time. Petrov, on the other hand, trusted his own intelligence, his own instincts, his own gut. He made the brave decision to do nothing.

And we're here to read about him because of it. 

Hat tip Nicholas Slayton and Chris Heller.