"A Demon of Our Own Design", by Richard Bookstaber

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber

My rating: 3 of 5 stars

well written and very relevant. has particularly good description the blossoming and subsequent tailing off of statistical arbitrage -- with insight you won't find in some of the other recent, dime-a-dozen journalist books ("The Quants" springs to mind).

The author also makes a cogent argument for a simpler financial marketplace and against yet more layers of regulations. His point is that extra regulation merely adds more complexity, thereby increasing rather than decreasing the chances of a future crisis. The examples of Three Mile Island and the ValuJet crash are particularly illuminating here.

One gripe was when he discussed the economic service rendered by so-called "liquidity providers" (market makers). While I agree that someone providing a two-way market, and thus exposing themselves to risk from price movements, I do not see how the argument applies to trend-following "high frequency" traders, who essentially front-run genuine orders and profit from the resulting price "momentum". In reality, these operators are mere parasites, profiting from their privileged access to the market (through expensive "co-location" agreements with the market operators and sophisticated IT infrastructure). Far from providing liquidity, these guys are sapping it -- "liquidity vampires" wouldn't be an inapt appellation. It's an important distinction and one that could have implications for market stability (witness the recent May 6 "flash crash" in the NYSE).

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It puts the lotion on its skin...

A little gem from a few years back that I just rediscovered (well, M- rediscovered it and mentioned it to me, but as we're all anonymous here I may as well claim credit...): the song "Lotion" by The Greenskeepers.

It's well worth checking out on YouTube. The song is a tongue-in-cheek homage to the character Buffalo Bill from Silence of the Lambs and is very funny. I love the chorus near the end alluding to the scene where BB starts to lose his temper: "oh put the lotion in the f**king basket, bitch, put the lotion in the basket..."

The Guitar Diaries #10

The main "takeaway" from my latest lesson was the idea of comping using minimal-istic three note chord voicings on strings 6, 4 and 3. The archetype for this style is Freddie Green who apparently played pretty much nothing but this type of comping during his 40 years with Count Basie's orchestra.

We covered a few different progressions to get familiar with the idea, including an old Guitar Player lesson by Lenny Breau.

Iron Maiden: Flight 666

I watched this documentary/concert film the other night. It tells the story of the "Somewhere Back In Time" world tour (which I was lucky enough to catch at Twickenham in July 2008).

The tour was quite an achievement: flying on their own plane (Ed Force One), with vocalist Bruce Dickinson as pilot, they covered 50,000 miles in 45 days, performing 23 shows on 5 continents. (This doesn't count the European leg of the tour which they did later in the year.)

It's an interesting and very enjoyable watch -- definitely a must-see for nostalgic Maiden fans. What stood out above all is how the guys have basically stayed close to their roots and are very down to earth about it all -- a stark contrast to the self-absorbed, prima donna antics of Metallica as seen in Some Kind Of Monster.

Garden Pics

(1) Potato patch:

(2) Planter boxes: the tall plants in the background are snowpeas (L) and broad beans (R). In the foreground are parsnips, swedes, spinach, rocket and a bunch of other things I can't remember..

(3) In the rockery at the back there is a lime tree. In the foreground is the recently-completed stormwater drain in front of the retaining wall. The two lengths of drain are joined under the cement by 90mm plastic pipe, and at the far end another pipe joins up to the pit at the back corner of the house. It seems to be doing its job so far based on a couple of recent downpours -- but only time, and a few really decent inundations, will tell.

Jump Back: New Apple iPod Shuffle Restores Fanboy Faith

A while back I ranted at length about my disgust at the 3rd incarnation of the iPod Shuffle (you know, the one with no buttons and the required apple-branded headphones blah blah blah).

Well, it looks as though Steve Jobs may just be an Interim Solutions reader, because the latest iPod Shuffle has just been announced, and guess what: the buttons (and basic design of the third generation model) are back, baby! With the important addition of playlist capability -- allowing you to go beyond a single amorphous 2GB randomized list and cater for different moods.

At 69 aussie big ones, this is once again looking like pretty good value. The simple, robust design really is ideal for jogging or the gym.

For now I'm still persevering with my 3g model, but it may soon be time for this fanboy to upgrade...

P.S. Another major upgrade is the new nano, which has an all-touch screen face. I'm less impressed by this since it represents (a) more power needed and thus shorter battery life, (b) a bigger area to get scratched, and (c) harder to change songs/volume with the iPod in your pocket. I do like the fact that it includes a radio (something that is standard with most other brands but which Apple have obstinately refused to include in most of the iPod family).

The Guitar Diaries #9

Last week's lesson was another mixture of revising previous material and introducing a bit of new stuff. The new stuff included jazzing up the Mr PC progression by adding more passing chords, some basic improvisation based on simple motifs starting from each chord root note, and a few more arpeggio ideas in the harmonic minor scale.