Quants

A reader left a comment that made reference to quants-quantitative analysis. My first exposure to quants was when I was in college. In the summer of 1987 I worked at Lehman Brothers in San Francisco. Elaine Garzarelli was starting to make a name for herself, she might be the most famous stock market quant out there (if you say not that is fine, not really the thing).

She has some sort of econometric model that expresses things like interest rates, sentiment readings, stock and market valuations and so on. If I remember correctly she has 12 variables and the model, accounting for all variables produces a score that either leads her to be bullish, bearish or neutral. Oh, all of the variables are weighted differently and over time the model gets tweaked.

This sound simple to you? Me neither.

As a kid, and as a rookie in the business, I was very intrigued by this especially because she pretty much called the 1987 crash.

Shortly after I discovered Garzarelli, she started to be less right. I haven't really given her, or quantitative analysis much thought since the early 1990's. No doubt the field has evolved for the better but the risk I think I see it the potential to lose the forest for the trees.

I am in no way saying it can't work but I am saying that intuitively I find it difficult to rely solely on a numerical model. I certainly don't have the acumen to construct and invest around something like this so I would have to rely on someone else's model. Relying on someone else is not bad, it is how I make my living, but I would want the person I rely on to take in more things.

No doubt I am over simplifying this but I do try to make things as simple as possible.