Thursday, July 08, 2010

Quotes of the day

Hedge-fund managers, Wall Street’s best compensated and supposedly smartest investors, are dazed and confused. Reeling from the worst second-quarter performance in a decade, hedge funds have scaled back trading as they struggle to figure out where markets are headed amid sometimes vicious crosscurrents in stock, commodities and other markets, according to brokers and managers.--Saijel Kishan and Katherine Burton

Realize that markets don't care what you think and the best you can do is trade probabilities. Yeah, you're the House baby! So, with this great insight you look for set-ups, set your stops -- the place where you quote -- know you are wrong -- and quickly take profits on a small portion of your position while letting the other half (or third) r-i-d-e. You are on the road to recovering from your damage. And you feel good. Sort of. Maybe you publish a book, and then you reinforce your goodness feelings. You're managing risk and taking profits and letting profits run and ... ultimately trying to heal your wounds. Do what you need to do. But consider that maybe you don't need to follow the Psychological Rehabilitation template to trade. There are no police officers pulling you over for trading without a seatbelt (metaphor for stops). If you control the size of your trade and have a 'healthy' appreciation for market volatility, you don't need stops. It's not reckless, unless you're reckless. And if you're reckless, Psychological Rehabilitation trading will do you no good.--Milktrader

These expanded patents in the area of software and business methods are 99.9% nonsense. They fail the classic patenting criteria of being novel, useful, and non-obvious. They are also mostly contrary to the later interpretive overlay of passing the "machine or transformation" test, in which you might have been able to patent a new machine but you couldn't patent an idea or algorithm, such as how you shopped for the machine. Far from encouraging innovation and advancement in the "useful arts," as the Constitution originally envisioned and Congress wanted, software and business method patents have become a quasi-legal poison pill. Sometime it's from patents obtained years after application via circuitous paths and bankrupt companies, and sometimes it's straight-up planned extortion. Either way, these "patent trolls" lurk in the shadows, waiting for someone to unknowingly infringe. Then they sue in patent-plaintiff-friendly jurisdictions (of which there are ranked lists - we kid you not), forcing defendants, often small, unsophisticated companies, to settle rather than face the cost and uncertainty that defines litigating a patent case against a well-capitalized troll The costs associated with this are immense, as is the innovation penalty. Software companies now must file defensive patents just to make sure that they are not later submarined by useless patents originating with patent attorneys themselves or at failed software companies. We have officially exited economics and entered Kafka's courts.--Paul Kedrosky and Brad Feld

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