The SEC recently released a statement which says that a lawsuit is being brought against two brothers who were running a penny stock scam. The way it worked was like this: the brothers touted a stock picking robot that could predict with amazing accuracy which stocks investors should be getting into. Meanwhile, behind the scenes, the brothers were making deals with penny stock promoters. For a fee the brothers would push a specific stock as if it were the pick of the robot. Investors would rush in, promoters would cash out, and the investors would be left holding the bag. The appealing part of this story is obviously the fact that tons of people decided to throw in with a robotic advisor. We’re so conditioned via the popular media to view robots as hyper geniuses with super-human potential, that the word “robot”automatically bestows upon us a comforting sense of superiority. However, that’s not the real story. For the past 150 years there has been an ever changing technological aura with which scamsters and quacks can ply their malevolent trade. Mention “science” in the 50′s, “computers” in the 80′s, or “genetics” in the 90′s, and you automatically had the world’s ear. In that sense this is an old story wrapped up in the lingua franca of the present. What is actually the truly interesting part of this story is the feedback loop that’s being generated between technology, buyers, and sellers. It would seem that the financial world is finally reaching its own singularity. The confluence of technology and its effects on the financial markets is quickly approaching the point where no credible predictions will ever be possible. As both investors and promoters increasingly rely on technology to identify and propagate profitable areas in the Market, a self-sustaining feedback loop is being established. Market crawling spiders take advantage of inefficiencies which trigger real world action on the part of human investors which in turn change the market dynamic to once again give the spiders room to roam. Throw into the mix the hucksters (knowingly so or just naively conceited) and you have a system that is constantly in flux as it responds to its own ever changing dynamic. This is like physics’ three body problem maxed out on performance enhancing drugs. For the less scientifically inclined, it’s a problem without a solution. We’re not quite there yet, but the day of financial singularity is already visible with the naked eye. Meanwhile, maybe you should think about getting into real estate or whatever precious metals will be needed to buy the Ipad 27.
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