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Tuesday Topsight, July 29, 2008

(Especially terse edition)

• Feel the Power of the Dark Side: New term of the week: "Dark Liquidity." This is the practice of trading large quantities of stocks with as little public notice as possible, in order to avoid having the trade shift the markets. That this practice exists is a bit discomfiting, but what's even more fun is the emergence of something of an arms race between dark liquidity trading systems (so-called "dark pools") and groups trying to gather market intelligence. New Scientist elaborates:

In an effort to find out what's floating in the dark pool, so-called "statistical arbitrage" firms place small orders to probe how much stock a pool conceals, and its going price. [...] Instinet's NightHawk system uses probabilistic analysis to create what Balarkas calls "thermal maps" of where the dark stuff is. For any firm to reveal precisely how these algorithms work would amount to commercial suicide, he says. But what works in the favour of these dark aggregators is that their orders are legitimate, so they can afford to probe for larger amounts of stock; statistical arbitrage firms, who may not actually be interested in bulk buying, need to minimise their expenditures.

Dark aggregators -- the ones assembling dark pool trades -- are in turn changing the way they assemble and communicate the trades, in order to spoof or fool the analysts.

• China's Lament: I occasionally get asked as to why I'm not inclined to see China as the leading international player in this century. Some of this is based on work I've done for various clients, but an article in the Washington Post this past week offers a good summary of some of my reasons.

A Long Wait at the Gate to Greatness details some of the environmental, economic and (especially) demographic problems facing China. One quote in particular spells out the depth of the problem.

When my family and I left China in 2004, we moved to Los Angeles, the smog capital of the United States. No sooner had we set foot in southern California than my son's asthma attacks and chronic chest infections -- so worryingly frequent in Beijing -- stopped. When people asked me why we'd moved to L.A., I started joking, "For the air."

Worth a read.

• Future Web: On Friday, August 15, I'll be on a panel at Adaptive Path's UX Week event, speaking about the future of the web browser. The panel will be based in part on work I did with Adaptive Path last year on this very subject. Bonus: later that afternoon, Bruce Sterling will be giving the closing keynote for the event.


Air quality from air pollution was bad in London and in US cities in the 1950s. London fog of 52 killed 14,000 over 2 weeks.

The air problem in china is not a good thing but economic growth happened in UK and USA in the 1950s and 1960s in spite of the pollution and as the air pollution was moderated.

China should be around the current US level in 2020 in terms of energy sources for electricity. 50% from coal. 25% from hydro, 10% from renewables, 10% from nuclear, 5% from natural gas. The most polluting small coal plants will be shuttered and the larger coal plants will have more pollution limiting tech.

I believe that China's birth rate and number of children is under-reported and undercounted. the official numbers are comparable to Thailand.

China should attain sufficient wealth to deal with the aging population. Plus the average of 45 in 2050 will be manageable with improved health to keep people more energetic at higher ages.

China is at 2700 gdp per capita now and with currency increases and continued growth should catch up to Turkey in 8-10 years.

One thing to look into would be the PORTAL Alliance, setup by the major owners of the Federal Reserve. They setup a 144a "exchange" on the NASDAQ. I imagine that's where a lot of activity is going on.


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