Use Deep Learning to Beat the Market

Using Deep Learning to Beat the Market has helped some people to become instant billionaires.

Before we are going to use it to predict future prices, you might be asking, “Wait does this work? Are you sure this is gonna work?”

JP Morgan, Morgan Stanley, all of these big banks, and all of these big hedge funds, like Renaissance Technologies, are using some kind of algorithm to predict future prices. Will they share it with you? Definitely not, because that is their profit. They all keep their algorithm secret of course.  They are not going to share it, so the answer is yes, it’s possible. There are millions of variables out there and you can get a greater than 50% return if you do this the right way.

People like Robert Mercer and David Magerman.

David Magerman beat the market with deep learning
David Magerman at his estate outside Philadelphia

“The ultra-wealthy of today differ from the ultra-wealthy in past eras in that they have, a lot of them, no stake in the infrastructure of society,” Magerman said. He’s seen that their wealth does not depend on the health and stability of the country. In fact, they get rich on volatility and instability.

Organizations that track who spends money in politics have noted the same thing. Sarah Bryner, research director at the Washington-based Center for Responsive Politics, said “hedge fund wealth is a sort of recent phenomenon, at least in the campaign finance world.”

“It’s not like you’re working for [big banks such as ] Chase or Wells Fargo, in a very well-regulated and huge industry” with obvious policy aims.

High net worth individuals aren’t like that at all, she said. “With Mercer, we don’t really know much about why he’s getting involved.”

Mercer’s company, Renaissance Technologies, employs a select group of people who are seemingly capable of making money from nothing.

Mercer is not a finance guy; he is a computer scientist. But his research developing speech translation programs through pattern recognition can apparently also be used to discover obscure patterns in the financial markets and make an enormous fortune — as he and his team have done.

Renaissance became what some believe is the greatest hedge fund ever by looking down its nose at the methods of people actually trained in finance.

Renaissance is made up of people like Mercer and Magerman — trained in computer science, physics, mathematics, and statistics. Instead of poring over prospectuses and profit and loss statements, they apply their sciences to the data that affect markets. It’s called quantitative analysis, and they themselves are known as “quants.”

The truly awesome money machine at Renaissance is a private fund called Medallion, which is only open to Renaissance employees. According to a Bloomberg report, “Medallion has pumped out annualized returns of almost 80 percent a year, before fees.” Even in a bad year, it churns out more than 20 percent returns.

“The people I worked with were great scientists. I mean, we could have solved a lot of important and interesting problems if we’d worked on different things. Instead, we made hundreds of millions of dollars,” said Magerman.