Thread by @modestproposal1

I like to say that the only persistent anomaly in markets is human behavior, plus whatever the hell Medallion is doing.

“What you’re really modeling is human behavior”

At least for the early part of the fund’s success, they figured they were systematically taking advantage of human emotions manifesting itself in somewhat predictable ways

As time went on, they seem to rely much more on non-intuitive signals, so it’s possible behavioral elements are no longer the driver.

But I find it interesting given their non finance backgrounds a) they cared the source of the signals b) they believed they were behavioral

Non-intuitive signals being the source of outperformance after Mercer and Brown joined is misrepresenting consistent with the comments from More Money Than God. Doesn’t mean there’s not a behavioral element, but seemingly harder to pin down.

https://twitter.com/modestproposal1/status/676196283850321921?s=21

An under discussed aspect, sticking with human behavior, is that Simons believed in the models, but did not think they were infallible. Multiple times he overrode the system.

“Our job is to survive. If we’re wrong we can always add later”, Simons said during August 2007

When Genius Worked: “LTCMs basic error was believing its models were truth. We never believed our models reflected reality — just some aspects of reality”.

How human is Simons? How hard is the behavioral aspect of markets?

1) early on in the funds life Simons calls up saying the chart of Gold looks good. And kept calling to add to it.

2) in Dec 2018, at the market lows, he called his money manager to ask about putting on shorts