IIRC, their ELI5 testimony to the Senate (not the one you linked elsethread) is that RenTec's long-term strategy is to make a small profit over many many transactions. Versus buy and hold, or value invest, or whatever.
I don't understand anything about finance. That said, it sounds to me that RenTec is (or portraying themselves as) a classic volatility based hedge fund.
(A good friend is a hedge fund trader. He has tried to explain the maths to me a few times. Something something about Brownian motion, NPV, predicting herd migration. Alas, I am but a simple bear.)
But all their data collection gives me pause. I do think they they're better at spotting market signals. Like using FourSquare check-in location data to predict retail performance. Like using a VPN to spy on users to spot emerging competing startups.
My pet theory is that RenTec's play is restraint, to be patient slow capital. Even though they (probably) have data for bonanza predictions, like your NVDA example, they some how have the discipline to eek out modest profits, preferring consistency over riding the tiger.
And yeah, it’s not remotely surprising they’ve made trades like selling NVDA at $700. Judging a fish by its ability to fly etc. RenTech doesn’t work by picking stocks based on industrial trends or anything — as far as we know that sort of stuff is literally not even an input.
“Predict the market” is an insufficiently defined phrase to argue over. Strictly speaking, of course they cannot “predict the market.” You’re describing a time machine or a crystal ball, and no, they don’t have either.
What they can do, as demonstrated consistently since approximately their founding, is eek out tiny, repeatable edges on the market and exploit them at rather large scale in a variety of market conditions for dramatically longer periods than anyone else.
That is in practice the most consistently-slightly-correct market prediction anyone has ever achieved.
Maybe then it's real magic. Everybody knowns The Goetic Circle of Solomon cannot have more than 72 different demons. :-)
Are you familiar with "Fooled by Randomness" by Taleb? Here is one of the simple tricks discussed there. The details are of my own writing, the mechanics of it are as described.
How you can easily implement a Hedge Fund to beat the market and become a rich investment manager, that will show up every day on CNBC.
Step 1: Choose randomly 20 stocks from the hundreds in the NASDAQ and the SP500. Do this hundred times and create 100 funds.
Step 2: Let the funds run for a while and keep closing the worst performing
Step 3: At the end you will end with one or two that beat all market indexes
Step 4: After 3/5 years publish a full announcement page on the FT and Wall Street Journal, explaining how your Hedge Fund has consistently beat the market.
Step 5: Invite people to give you more money to manage, due to your amazing expertise.
Make sure to charge a 5% management fee. Show up on CNBC once in a while
for free, for increased exposure.
Step 6: Setup a Foundation to make sure you enjoy your billions tax free...
Another way to do, if you morals are let's say, more flexible, is setup several funds, trade your main ( profitable fund) again the other funds ;-)
Okay, so is that what you’re claiming they’re doing?
If so, please share your evidence.
If not, then I’m not sure what is the point of this conversation.
There are plenty of hypothetical ways to beat the market and they make for the same quality of conversation as a drunk uncle’s “brilliant” day trading strategy that he just needs a few bucks to execute. Carry on all day if you wish, no one will be better off for it.
:) If I crack the Renaissance Technologies fund algorithm I don't think you will be the first one I will notify...:-)
However, I know where I would start to investigate. The employees of the fund, do some of biggest political donations in the USA. Astute investigative journalists could start to look there. Are they doing to avoid scrutiny of their activities? If you cracked the market why such a high level of donations? Philanthropy? Then open your fund...
And 13f's only show their long positions on that day, delayed by up to 45 days. And from my understanding intraday was primarily what medallion did, 1 day to 2 weeks. No high frequency, no long term.
I don't understand anything about finance. That said, it sounds to me that RenTec is (or portraying themselves as) a classic volatility based hedge fund.
(A good friend is a hedge fund trader. He has tried to explain the maths to me a few times. Something something about Brownian motion, NPV, predicting herd migration. Alas, I am but a simple bear.)
But all their data collection gives me pause. I do think they they're better at spotting market signals. Like using FourSquare check-in location data to predict retail performance. Like using a VPN to spy on users to spot emerging competing startups.
My pet theory is that RenTec's play is restraint, to be patient slow capital. Even though they (probably) have data for bonanza predictions, like your NVDA example, they some how have the discipline to eek out modest profits, preferring consistency over riding the tiger.