Rajaratnam Hedge Fund Gumshoes Will Yield To Data Mining Soon

In what could be described as a “spectacle of all out rabid ‘alleged’ greed” the unfolding trial of Raj Rajaratnam was highlighted today with the wiretapped telephone coversations featuring Rajaratnam’s giggly voiceŒ joking about the private inner doings of companies he would soon trade on. To be sure the wiretap tapes are the critical weapon of choice in this case. It needs to be said that the fact that is commendable the SEC and US Attorney’s Offices are willing to step up and prosecute these historically difficult insider trading cases. It appears to be a way of doing business in many hedge funds. However, based on reviews of new papers by expertsŒ in the skyrocketing field of data mining, within the next 5-10 years the technology in this field, predictive analytics as well as machine learning will be so advanced that insider trading with few exceptions will be a thing of the past. The reason is, detection will be too easy. Prior allegations of insider trading of hedge funds were met with arguments that their windfallsŒwere a result of luck or skill. However now, the SEC is using computer software to sift millions of records of electronic trading known as blue sheets which are attached to the stock exchange reports. They also check league tables listing which investment banks or lawfirms advise on the deals. What they are looking for are unusual correlations or connections to trade and the technology is advancing along with advances in computer power. The investigation of Rajaratnam did not start with data mining. However it did begin with an identification of suspicious trades where the timing of those trades was thought to be highly improbable to be based on skill or luck. Obviously, until the insider trading predictive analytics are perfected to the point where such trades pop up most of the time they occur, the governments gumshoes will be essential in deterring this crime. The market for these products is robust, in the billions worldwide and the data mining industry is expanding into diffierent fields, especially medicine and science (see my second blod www.FutureVigil.com). The advances in the field cross over into the different segments of analysis, however. So assuming I am correct in all of this, what it means is that the field of play will be set to balance and the markets will work more efficiently. What I cannot understand is this: if data mining and predictive analytics are so refined, how come they can’t be used to halt the flow of heroin into our country?