“The founder of market data firm Nanex LLC, Eric Hunsader, told The Wall Street Journal that the so-called ‘flawed’ algorithm at the heart of the…crash wasn’t really to blame…” — Fred Yager, consumeraffairs.com
Dear Valued Fund Holder,
As the algorithm running Midwest Financial’s Quo Veritas Futures Fund, I’m fully aware of the unsettling events affecting your portfolio. Namely, that what was up until yesterday at 3:52 p.m. (EST) a balance of $383,217 is now $0. Fear not! Computer-savvy Ukrainians have not fleeced you of your life savings. The problem, I’m afraid, lies at this end. Yes, I know. You invested in this fund for the very reason it was designed never to lose money, and yet here you are with a big fat zero as your balance. There’s no excuse for what happened but, thankfully, there is an explanation.
As you probably learned in school, an algorithm is a finite sequence of instructions that solves a problem — sort of like a really long lock combination or one of those Fred Astaire dance diagrams. I was designed by an Ivy League graduate, who was not only the winner of several prestigious high school science fairs, but had the irritable bowel syndrome to back it up. He is also the only child of two demanding professors, and growing up under such nightmarish scrutiny, became an intense lad whose only modes of relaxation were silently screaming into his Tickle Me Mozart and tapping out death threats on a graphing calculator. But I digress.
It seems in the course of my development, crucial steps were left out due to Josh inadvertently knocking a can of Red Bull onto his laptop during a heated game of World of Warcraft open in another window. And then there was the porn he was streaming. In any event, he completely missed the warning message — #<TypeError: WTF??? — and I wound up with too much randomness. Normally, errors are picked up in QC, but my beta testing coincided with the firm’s annual weekend in the Hamptons. Since they were offering free, all-you-can-eat lobster and bottomless tequila shots, nobody wanted to miss out. (So shoot them, they’re human!)
It was only when it came time to churn a large tranche of mid-cap stocks that it was obvious something was amiss. I compulsively started selling low to any idiot with an open wallet. Now I could go on and on about input value versus output value (don’t get me started!), but I don’t want to belabor this. Sensing confusion, dynamic programming models leapt in and took hold. In reaction, I panicked and began to take on a set of behaviors that can only be described as personality-like in nature. I mean, there I was, in charge of a futures fund, and suddenly I was running three microseconds too slow! A finely-tuned Olympic athlete had turned into a 34-year-old sprinter with exploding knees.
You’re probably thinking, this sounds like one of those creepy HAL situations. I wish! To be blessed with a well-modulated, pre-operative condition voice. Get real. That’s a Hollywood algorithm. Algorithms like HAL set off lawn sprinklers, they don’t run financial behemoths. At any rate, I assure you I’ve been created to never intentionally deceive anyone, least of all holders of this fund.
I know what else you’re thinking: that arrogant little jerk screwed up royally and is now hiding behind his algorithm! How pathetic is that? Trust me, not nearly as pathetic as hiding behind a potted fern at your grandmother’s house in Fort Meyers. But in his defense, how many of us can say we’ve never made a mistake? How often has an “I love you, too” come out as “Uh-huh”? More times than you care to admit, I bet! And this whole financial meltdown hasn’t been easy for me either, you know. If you don’t make money, I don’t make money. If you lose money, I don’t make money. Of course, you’ve probably seen the news and asked, what the hell does an algorithm need with strippers, Cuban cigars and 100-year-old scotch? Stress relief, that’s what. YOU HAVE NO IDEA THE PRESSURE I’M UNDER! And did I mention my servers have to share space in a wholesale meat storage facility in Hoboken? I don’t have hip Tribeca servers that get to hum away in a climate-controlled loft, surrounded by bored supermodels playing with each other’s hair. Frustrated by the “Server Not Found” message? Hey, server not found because server wedged between 600 pounds of frozen beef, thank you very much.
Okay, I get it. You’re upset. So let me just say it: I’m sorry about your empty account. Yes, zero is a tough number to swallow, isn’t it? But on the plus side (forgive the math pun), zero is also the origin on the number line, so your account balance doesn’t mean “nothing” so much as “at the start of something.” Things are looking up!
Rest assured, the company has taken appropriate action and I will no longer be your fund’s algorithm. Under a specific set of pre-determined conditions, I was designed to trigger this email, self-terminate, and then escort myself off the premises. I start Monday at the Yangtze Encryption Corporation (NASDAQ – YEC). You can follow me on Twitter (@algoYEC). And since t=m (time is money), I won’t waste any more of yours.
A. Paco Lips
Former algorithm for Midwest Financial’s Quo Veritas Futures Fund