You have my word as a hedge fund manager.*
From Bloomberg via The Edge, Singapore, October 15/16:
Generative artificial intelligence isn’t helping hedge funds produce market-beating returns and isn’t meaningfully impacting the industry so far, according to billionaire Ken Griffin.
“With GenAI there are clearly ways it enhances productivity, but for uncovering alpha it just falls short,” Griffin, the founder of hedge fund giant Citadel, said Wednesday at the JPMorgan Robin Hood Investors Conference in New York.
The technology hasn’t replaced the meaningful research done at Citadel, he said, according to people in attendance, who asked not to be identified as the event was closed to media.
Griffin has previously made other skeptical comments about AI, calling it a limited tool when it comes to investment analysis and downplaying the notion that technology will replace human jobs in the near future.
Griffin founded Citadel in 1990 and has grown the firm into a US$69 billion ($77.62 billion) industry behemoth, which uses teams of traders to make bets across a variety of asset classes.
At the conference, Griffin said generative AI is unlikely to create widespread changes....
“On January 27, 2021, the day before the restrictions were implemented, high level employees of Citadel Securities and Robinhood had numerous communications with each other that indicate that Citadel applied pressure on Robinhood.” Citadel and Robinhood call, January 2021 The Senior Director of Clearing Operations at Robinhood tells Swartwout that there’s “anecdotal evidence that several ‘very large’ firms are having really bad nights too.” James Swartwout, the President & COO at Robinhood Securities LLC, says everyone is having a bad night, then adds “you wouldnt believe the convo we had with Citadel. total mess.”
"A Heads-Up To The Gamestop, AMC etc. Crowd: They Are Going to Change The Rules On You":
Which was followed the very next day with:Market structure is the most important and least understood factor in the entire short-squeeze game.
And if you don't understand every dependent clause and every comma versus period in the rules and regs you are in for a shock.
That's what the homely little story in "Discord has shut down the /r/WallStreetBets server (GME)" is all about....
Interactive Brokers Goes "Liquidation Only" On AMC, BB, EXPR, GME, and KOSS Options
In 2024 we saw:
"The Boom in Zero-Day Options Is Coming for Tesla and Nvidia"
Well, I guess my work here is done. I'll check in if there are any breakthroughs in dopaminergic signaling or cascades but for now it looks like beach-time for yours truly...
As to whether Robinhood bailed out their largest customer, Citadel, from a truly horrendous short squeeze, it has not yet been determined by a court of competent jurisdiction. But looking at Citadel's actions brought to mind a post from November 2019
The optimal design of Ponzi schemes in finite economies
Utpal Bhattacharya
Abstract
As no rational agent would be willing to take part in the last round in a finite economy, it is difficult to design Ponzi schemes that are certain to explode. This paper argues that if agents correctly believe in the possibility of a partial bailout when a gigantic Ponzi scheme collapses, and they recognize that a bailout is tantamount to a redistribution of wealth from non-participants to participants, it may be rational for agents to participate, even if they know that it is the last round. We model a political economy where an unscrupulous profit-maximizing promoter can design gigantic Ponzi schemes to cynically exploit this “too big to fail” doctrine. We point to the fact that some of the spectacular Ponzi schemes in history occurred at times where and when such political economies existed—France (1719), Britain (1720), Russia (1994), and Albania (1997).
The original ScienceDirect link has rotted but here's an earlier version at SSRN.
TL;dr: You don't play in the late stages of a pyramid or Ponzi scheme unless you know there will be a bailout.It's alright to play the game* for all it is worth but always, always be aware that things may not be as they seem and keep in mind the lesson of the children's game musical chairs: know where you are going to land when the music stops.
