Portfolio The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution

Good read

A good book for someone interested in who Jim Simons is and how he became the algorithmic trading guru. Is nicely written, have a good pace and can be very involving. The end part is a bit uneven. Seems like the author really focused on the years the book was written and recent political calamities. In my opinion, those developments are trivial comparing to the making of Renaissance Capital and will be very soon forgotten .So soon one-third of the book will become irrelevant. For people looking for tips on investing; this is not a book about how to invest, this is just an account of Jim Simons career. For tips on how to trade using algorithms look elsewhere.

The book contains only the publicly available information about the Jim Simon and his fund. Nothing new. Though the author has tried to put this information together and present it in a book.

In the end they don’t even answer the original question, how did Simons solve the market ? Lots of details of unimportant events and less details about the real market struggles.

Biografia perfetta

Un libro muy interesante sobre un personaje que desconocía por completo. Muy bien escrito y con mucha información.

Enjoying this book! I haven’t finish this book yet :)

Note that I said “business” and not biographical, trading, investing, or politics. In reality, this book is all of those. I don’t understand why some reviewers complain about the book not revealing any trading secrets. What were they expecting? The master code driving all RenTec trades? I think the book gives enough details for anybody to understand what these guys were into as they developed their trading systems. I know I personally would have loved having this book in my hands 8+ years ago. It would have saved me a lot of time. That’s because a book like this helps you understand how far behind you are in the process of developing a trading system (and, as a corollary, how impossible it would be for you -an individual investor- to beat these guys). We are talking about an army of PhDs using machine learning and speech recognition models to try to identify market patterns...in the 80s!!! Today, they have (real time) data on every potentially measurable thing on earth (and out of it) and they are putting that on the hands of the most talented people with the most advanced techniques! The most appealing thing of all is that they are not even high frequency traders. They are an investment firm (i.e. they are on the buy side). They don’t play with the advantage of knowing how orders are coming in and trading against that. Now, that’s probably the only advantage they don’t have. There are a lot of very popular quantitative funds out there and their returns are not even close to those of RenTec. It seems as if this was yet another example of a the winner-takes-all situation. So, RenTec would be like the Microsoft of the trading firms. As I’m writing this, we are in the middle of the coronavirus lockdown in the US. It’s April 6th and some are saying that we are hitting the apex. Hopefully that’s the case. Anyways, the reason why I mention this is because anyone who’s been following the markets in the last few years know that the last couple of years have been extremely volatile compared to the previous 10 years. So, reading a book like this in that context is a extremely humbling experience. It reinforced my conviction that the most an individual investor with limited time and a full time job can do is asset management. By that I mean that it will be very difficult for a retail investor to beat the S&P 500 on an absolute basis. So, the best they can do is to try to beat it on a risk-adjusted basis (based on metrics like the Sharpe or Sortino ratios for example). So, back to the book. Before Jim Simons started his firm, he had been working for the government as a code breaker. Apparently, the statistical/mathematical techniques used in code breaking are similar to those used in speech recognition (which is what Mercer and Brown were doing for IBM before joining RenTec). In particular, they were using Hidden Markov Models to predict sequences of data. In other words, they were using an extremely advanced form of Technical Analysis. And that was just when they were starting in the 80s. At the beginning of this review I said that this could also be tagged as a book on politics. And that’s because of the critical role that Bob Mercer played in the last presidential elections. It would not be far-fetched saying that Mercer is who made Donald Trump president of the US. The author goes into a lot of detail describing the developments that took place during the presidential campaign. It made me aware of how flawed the system could be. Mercer just happened to be a shy and nerdy scientist how found himself so rich that he could spare millions of dollars financing his libertarian hobbies. Unfortunately, he was smart enough not to fund the libertarian party but the Republican one. My final take on him is that he was just a conservative and racist person. Finally, I found the last chapter of the book really interesting. In there, the author explains the impact that these quantitative funds are having on the money management industry and the market as a whole. He does seem to confuse an important concept though. He likens “active” managers to “traditional” managers. And he confronts active managers vs quantitative ones. As everyone knows, quantitative funds can be actively managed (RenTec’s Medallion fund is actually a perfect example). The only difference is that -in these cases- the trading decisions are made by an algorithm, not a person. On the other hand, you can perfectly have traditional/discretionary managers that are quite passive (Warren Buffett). In any case, this is actually not that important since the reader can still get the main point the author is trying to make (which is that discretionary managers are nowadays outperformed by systematic/quantitative algorithmic funds). He actually gives a bunch of good examples as to how this occurs. In short, a very enjoyable and interesting read.

Nice Quality and good book on stock market; it is the type book that will give you motivation or business idea for trading in to the stock market.