Steve Cohen Developing A.I. To Replace Expensive, Talentless Traders

Tyler Durden's picture

Steve Cohen, the infamous billionaire hedgie who plead guilty to insider trading back in 2013 and paid a record $1.8 billion penalty, has never been shy about offering up his opinion on the lack of real trading 'talent' in New York.  Speaking at the Milken Institute Global Conference last May, Cohen said “Frankly, I’m blown away by the lack of talent...It’s not easy to find great people but we whittle down the funnel to maybe 2 to 4% of the candidates we’re interested in...talent is really thin.”

And while we would be the last to argue that there's a huge pool of people in New York truly worthy of Cohen's coveted 8-digit salaries, we might suggest that in his particular case the pool of applicants may be somewhat limited to the select few people willing to risk jail time for their employer....but that's just pure speculation. 

Nevertheless, one way to avoid those pesky insider trading charges going forward, or rather to solve the "thin talent pool" issue as Cohen would say, is to simply develop artificial intelligence to do all of your dirty work.  As Bloomberg points out, Cohen's family office, Point72 Asset Management, is currently analyzing years of trading behavior of top traders in an effort to replicate the type of bets that allowed SAC to massively outperform the broader markets for years.

Cohen’s Point72 Asset Management, which oversees his $11 billion fortune, is parsing troves of data from its portfolio managers and testing models that mimic their trades, according to people familiar with the matter.

 

Using analyst recommendations as an input, the effort involves examining the DNA of trades: the size of positions; the level of risk and leverage; and whether an investment was hedged, said one of the people. It also entails looking at the timing of trades, assessing pricing and liquidity in the market, and the duration over which managers build positions.

 

The model will identify patterns and relationships based on those analytics and seek to replicate bets, the people said. Point72 is also experimenting with automating the work of its execution traders, who place buy and sell orders with brokers on behalf of money managers.

Cohen

 

Of course, Cohen's A.I. strategy is hardly unique in today's market with any number of algo strategies driving random market volatility on any given trading day.

Firms across finance are developing automation technologies to help their business. At Bridgewater Associates, the world’s largest hedge fund, a key project underway involves developing algorithms based on employee data to help automate management decision-making. JPMorgan Chase & Co. is investing in automated technology to streamline systems. One program, called COIN, for Contract Intelligence, interprets commercial-loan agreements that once consumed thousands of hours of work each year by lawyers and loan officers.

 

“The risk of automation is that the programs could go haywire,” said Jason Kennedy, founder of London recruitment firm Kennedy Associates, which places portfolio managers and analysts at hedge funds. “When you have one computer playing against another, you could end up with something resembling the flash crash.”

Of course, no matter how good Steve's A.I. software becomes, we suspect it will never be able to match the returns of his former SAC team because it will always lack one critical component, namely the ability to call up Dell insiders and get a sneak preview of quarterly earnings...now, that's real 'talent'.

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ebworthen's picture

What is "BTFD" in binary again?

hedgeless_horseman's picture

 

Hey, Steve, see you in Marfa?

http://www.zerohedge.com/news/2017-01-10/time-has-come-first-zerohedge-s...

 

 

Markets: Andrew Rosca, Writing and deploying your own trading algorithm

Prometheus is a Titan in Greek mythology, best known as the deity in Greek mythology who was the creator of mankind and its greatest benefactor, who stole fire from Mount Olympus and gave it to mankind.

Soon, we'll all be algo traders.

“When you have one computer playing against another, you could end up with something resembling the flash crash.”

What about when there are millions of us!!!

Bwahahahahaha!

TahoeBilly2012's picture

The road to the JEWISH SHANGRILA....ohhhh who can wait, after all the Hollywood prequels and so on.

Let's please offshore all these fucks and we can create an unknown NON Hollywood ending together!!

 

hedgeless_horseman's picture

 

I do understand the desire to go back to a time when chalk girls in short skirts (hired for their talent) changed the stock prices by climbing a ladder.

However, that ain't gonna happen, and folks still gotta sell their cattle, pigs, milk, etc.

Best to at least try to do it on a somewhat more level playing field.

The truth is that when things get exciting, modern algos are probably safer and easier to manage than a two-dollar broker, maybe cheaper, and definitely faster.

Rich Stoehner's picture

010011010010100110110100110101011001011001011101

conraddobler's picture

If a crash happens on Wall Street with no humans there to lose all their money did it really happen?

2_legs_bahhhhhd's picture

Yes it did, the money will vanish, but this way they have no one to pin it on.

Evil motherfuckers

Semi-employed White Guy's picture

I'm sure he wasn't guilty of insider trading. It was just another Cohencidence.

Jäger's picture

Oy vey- there's no way Steve's paying retail prices for traders!

Frito's picture

Blue Horseshoe loves Anacott Steel

peterk's picture

i laughed at that one !! cool

2rigged2fail's picture

"has never been shy about offering up his opinion on the lack of real trading 'talent'"

 

AKA insider trading, selling your mother to get information, killing the 99% with said insider information...I may even be successful if i paid off the right people, maybe?

NoPension's picture

He should just buy a seat in Congress.

Insider trading is perfectly legal.

Gasbag's picture

the only AI this guy needs is J AI L

Dragon HAwk's picture

Eight people playing poker,  no matter how smart they are, they can't all Win

  Same with Computers playing the market

illuminatus's picture

Oh no, not a flash crash!

NoPension's picture

He paid a fine.
Haha!

Squid Viscous's picture

Stevie C- another one of "those nice folks next door"

- hat tip to David Irving

Jäger's picture

"Denial"- another Hollywood bust the goyim wouldn't bite on.

2rigged2fail's picture

Cohen AI = Always illegal

Jäger's picture

He can't find the 2-4% "American Psycho"-caliber sociopaths he needs to destroy middle class America? Oh no!

user2011's picture

Wall Street and traders has been leeches of society. They deserved to be unemployed and taste the fruit they created.  

kiss

Jäger's picture

if it wasn't for Ben and Janet and the Fed they'd all be reduced to pimping their wives out for rent money

 

black rifles are cool's picture

“When you have one computer playing against another, you could end up with something resembling the flash crash.”

No, when you have one computer playing against another, you could end up with the SPU's at 29,999.

dlfield's picture

This sounds like a terrific way to lose extreme amounts of money.  Fantastic.

Schmuck Raker's picture

I feel like this is a step in the right direction, as the logical extreme is for these cunts to have no other person to scapegoat. Maybe that's just me.

buckstopshere's picture

All algos rely on historical data.

The more you study history, the more you can anticipate how the algos will respond.

hedgeless_horseman's picture

 

All algos rely on historical data.

Horseshit. 

BorisTheBlade's picture

Not on historical data itself of course, but on historically observed patterns, which are derived from yes, historical data (even if very fresh):

Cohen’s Point72 Asset Management, which oversees his $11 billion fortune, is parsing troves of data from its portfolio managers and testing models that mimic their trades, according to people familiar with the matter.

hedgeless_horseman's picture

 

An algo can be programmed to trade based on many types of data.  For example, I program it to buy 100 shares of XYZ stock every time the price of bond 12345ABC7 goes up 0.5%.  No historical data whatsoever.

DirtySanchez's picture

Arrogant jew weirdo.

Cheated, bribed, and stole 20+ billion fucking dollars.
Got caught with his dirty little jew fingers in the cookie jar, paid a massive fine, and agreed to stop ripping off defenseless old ladies for a few years.

Now the greedy disgusting jew needs to blame others because his thieving jew business model can't be used at the moment.

scv's picture

if he knew what ai was,
he would retract the garbage spewed

Baba Yaga's picture

What if the AI decides that gold is vastly undervalued? What if AI realizes that certain securities are vastly overvalued. What if the AI goes all Mr Robot and crashes the worlds markets? What if Al Tech exposes the fraudulent system for what it is? Wishful thinking, I know.

Mithera's picture

NEWS FLASH

Tyler Durden developing A.I to replace talentless commentators.

Sledge-hammer's picture

Wow, he paid a $1.8 billion fine?  I guess it is just a cohencidence that (((Mr. Cohen))) did no jail time and still has an $11 billion fortune.  Gee, I wonder what kind of great talent he utilized to conduct his insider trading and amass a multi-billion dollar fortune?  Can a computer do better at insider trading?  I am not a finance guru, so I have to ask.  With jews you lose.

mkhs's picture

Listen schmuck, the capo always gets ten percent.  Capiche?

BitchesBetterRecognize's picture

Not one bit surprised by Cohen's statement, coming from a well known market rigger - he'll replace Yellen for an A.I. if he see it fits his fucking agenda... 

 

Trump has no fucking clue the kind of rotten double motherfuckers he gathered for the treasury............... unless of course Trump himself wants a piece of the pie - remember: his wealth & business are mainly intertwined with the Banking system, so he needs to keep pumping that motherfucker until it breaks...  

swampmanlives's picture

"Talent" as in people who can litterally predict the future or people who have major connections for inside information. The former is impossible and the latter is illegal.

Megaton Jim's picture

Pretty typical sleazy member of (((The Tribe!))) There is a reason they are the most hated people in  history!

Mena Arkansas's picture

"Speaking at the Milken Institute Global Conference last May, Cohen said"

This must be the meeting where all the tribal criminals like Milken and Cohen share best practices for lying, cheating, stealing, swindling and otherwise fleecing the goy.

peippe's picture

He should just plant his ass in a chair & watch 2001.

The HAL 9000 gets born in Urbana Illinois & then all hell breaks loose later & some spacedude has to clean it all up/power it all down.

The End.

Wait.I get it now, history repeats itself, technological over-reach followed by an Icarus-like failure & rebirth/re-attempt at Godhood. :)

I'll sleep well tonight.  

peterk's picture

If hes such a  GOOD TALENTED TRADER,  and made 11 billion + ,  WHY DOES HE NEED  a computer managing his money now?

did all that talent just disappear.?

 

Computers can never better a trader.... for the very simple reason that its not HUMAN.

 

Blankenstein's picture

Besides being a criminal, he is gross and creepy.  Yuck

mishamayor's picture

Automation has nothing to do with A.I.

A.I. it is something that has human ability TO LEARN on mistakes and improve itself while automation is just stupid execution of program code based on patterns.

whatisthat's picture

I would observe the subject of this post is dependent on nature and extent and capability of software and programs which may not achieve desired results.