Quant Funds: The Tower of Babel

Those running quant funds are using very sophisticated models to predict markets and programed trades to take advantage of those predictions.  The experts use mathematics, engineering and physical science; some are experts in chaos theory.  Ordinary day traders now have access to web cites that allow them to develop their own trading programs that resemble the best the quant folks could put together as little as ten years ago.  The goal?  To keep the human decision making to a minimum.  Well the past few months have taught the quants a thing or two about hubris.  First, the quants themselves mimic each other.  The community of quants is very small and inbred.  The effect is that the movement of the program trades together frustrates the programs assumptions.  Second, the quants met some trade conditions that fell outside of their assumptions.  The effect was a liquidity crunch.  And third, and most important, the quants found out that a human must, in the end decide when stop the automatic program trading in light of market conditions.  A quant could not, as hoped, just sit and watch the trades unfold.  This meant that human discretion was back in the picture and, horrors, it was often untrained and unexperienced.  A quantum physicist is no stock trader.  The quants remain optimistic:  They are buys changing the formulas to account for this year's events so they new formulas will be "perfect."  Yet another story of the overreaching of humans.