The Principles of Financial Interferometry
About ten years ago I fell asleep in the mid afternoon and woke up to see to a rainbow taking up about 60 degrees of the sky outside my balcony door which is on the sixteenth floor the balcony rail is 45.02 meters from the old concrete. From my vantage point I was able to see the entire spectrum descend to ground level and the cancellation as it went.
I worked that proof in high school and have not looked at it since and none of what I was observing seemed possible so I went in and ran my head under a cold shower until it hurt and went back and took another look.
There was no question about it I was definitely awake. I was not having that strange dream where I can’t wake up.
I of course took the lift went outside and walked into it, it is surprising how close you can get before it all collapses and when you are standing in it is well down right disturbing, and by disturbing I mean like something out of a Salvidor Dali painting.
This however brought me to a very practical understanding of the interference of light or more specifically the true scope of the wave equation and how to apply it to the question of solving the interference patterns formed by financial data.
The Problem at hand
Unless you have been living in an alternate time line you would be aware that the western financial system has been having its problems of late. What you are probably not aware of is the fact that if you take the exponential R squared value of any sovereign debt issue you care to mention you will get a value of 0.98 or greater.
In other words the law of mathematics have taken over and not even Donald Trump can legislate them, though he will try, and none of it will work.
The US debt doubled under Obama with only cents in the dollar borrowed created in new GDP this will not end well for all concerned. This is what happens when you engage in futile wars of conquest and give your self a tax cut and artificially low interest rates and lose on all fronts.
Psychology has nothing to do with it, this is just nonsense peddled by second rate, mathematically talent less hacks who have tried nothing and are fresh out of ideas.
The truth is the market goes up because people are buying it and people are buying it because it is going up and the same goes on the down side.
That’s the long and short of it, it is a simple exponential function with the output feeding back into the input.
Anyone who tells you its all to do with free will is using the word free in a way I am not familiar with, it isn’t free you have to pay up to play, and from that point on you are along for the ride.
Despite the Feds best efforts no none had an infinite amount of money and therefore the system will have its limits, which at present have to be measured using scientific notation.
Markets are by definition are an elastic medium and will therefore if taken literally are also behave like damped coupled oscillators and nothing more. When Money goes in the integral becomes divergent. When then money is taken out the integral becomes convergent.
Money is inherently exponential, which is the basis of and is proved by the compound interest rate function and reality. Any attempt at process control (monetary policy) that does not take this into account is doomed from day one. Many examples of this can be found around the world to day.
The Euro springs to mind as yet another classic attempt to cobble together another half baked fiat currency without a political union or centrally regulated bond market. That allows interest rate price discovery to act as a damper on spending, which also has to be measured using scientific notation.
This should be your first clue that something has run amok.
Given that Laplace is nothing more than the indefinite integration of the same function, using s instead of r as the variable. It stands to reason that any thing compound interest can do Laplace can do better.
Or to put it another way if in doubt let Euler figure it out.
Most economic and financial theory’s work just fine up until first contact with the real world, and will usually fail one simple question.
Can I please see your observations? Most people cannot remember what the market did the day before yesterday let alone twenty years ago. Observation and calibration are the basis of all reliable science.
The simple facts are that when observed in any detail financial markets turn out to be nothing more than telecommunication networks that transmit price and volume information at close to the speed of light.
Therefore they will obey the mathematics of the propagation of information from a central location. ie: Schrodinger’s Equation and Young’s slit experiment.
They will display interference patterns, which cannot be seen let alone solved using the prices recorded in the Cartesian plane, especially when calibrated in terms of the Roman calendar and the base ten number system.
These are the real Millennium Bugs.
Why are we using a two thousand year old method of observing and calibrating time in a modern speed of light financial network?
We are simply using the wrong scalars and completely ignoring the Z plane.
When common sense tells us that the observation has three co ordinates.
- The time of the Observation.
- The price at the time.
- The Volume of securities traded.
Any solution is going to take the form of a function that accepts three inputs.
Therefore if we are looking at this in two dimensions through unsuitable diffraction grids and scalars we cannot expect coherent results.
What we seek is the impulse response of the system so we can deduce the transfer function that will stabilize the system.
With out this equation any financial system that goes off the gold standard and has to be deregulated to cope with the oscillations this creates is as doomed as the Tacoma Narrows Bridge.
That’s what happens when you turn off the dampers in any structure built by human beings and the financial system is no exception. As someone I met who lived through the German hyperinflation said to me “when one generation goes off the gold standard the next goes on the soap standard.”
Accurate calibration is at the heart of the problem we are simply using the wrong co ordinate system and scalars.
Markets are to all intents and purposes nothing more than wave functions that propagate through a telecommunications network.
Money is a wave function that has both real and imaginary parts that cannot be seen the Cartesian plane.
The Three Laws of Financial Interferometry
1. A price at rest will remain at rest unless acted upon by a external monetary force
2. A price in motion will remain in motion unless acted upon by an external monetary force.
3. For every transaction there is an equal and opposite transaction.
A price at rest will remain at rest unless acted upon by a monetary force.
Unless somebody buys or sells a security its price cannot and will not change the bid and ask may change but the price is by definition the price of the last time it traded and as such is an instantaneous value.
It has no duration in time, prices are artifacts in time they do no actually exist, all you can ever know is where they were at some point in the past.
They also do not exist in the future, regardless of what you real world experience may tell you, in a bidirectional auction (Dutch auction) the price of something depends on if you are buying or selling and how much of it you have to move.
So they do not exist in the continuous temporal real time as we experience it, in other works they have no real component and only exist on the imaginary axis.
Therefore a price will only change when someone applies a force to it either by buying it or selling it in real time.
A price in motion will remain in motion unless acted upon by a monetary force.
For a market that has begun to move all that is required for a trend to form is that there is a bulge in the volume above the long term average to get it moving.
This is how the new money enters the market, this is the applied force that sets the trend in motion and causes the market to jump to a new shell in exactly the same way an electron changes its orbital.
The speculators then keep trading it in circular trades of ever increasing or decreasing prices and leverage and eventually start to take money out of the system, this represents a slowing of the circular motion of the wave as it collapses in on itself.
Essentially what happens when people start to take money out of a speculative market is that it is the same problem you face when trying to pin down the location of an electron just as soon as you try and measure is it somewhere else, prices are no different.
As the prices change the market leverage changes depending on the direction of the trend. That is to say as the market goes up the leverage of all the speculative positions in the market goes up.
This is the spring force that is the restorative force that brings about the change in the major trend direction, in an attempt to reach equilibrium and a steady state solution as profits are taken out, and the inevitable profit loss distribution curve of a near zero sum game evens itself out.
In a leveraged market this process is highly exponential especially on the down side as the margin calls go out and a cascade collapse take place, this is the real reason markets collapse not because of panic selling but from a lack of new buyers because the system has reached the limit of new money available in the hands of the suckers investors.
For every transaction there is an equal and opposite transaction.
If you buy something in a zero sum game then sooner or later you must sell it back to the market. So there are always two sides to a trade, with one for each leg of the transaction and each side of the transaction, there is always a matched pair of a long and a short
These two components both simultaneously move with respect to time from the beginning to the end of a transaction they are of equal and opposite magnitude and force and cancel out leading to a convergent integral.
When all the transactions in a market are integrated together they must always also converge to zero and if they don’t, then your version of the financial universe is broken and will soon be going through the DT’s like America system is at the moment.