I was going to comment right there, but I realised that since I look at dKos very infrequently it'd be better to put it here.
It struck an interesting chord with me, because as you may be aware some of those proprietary algorithms were developed by people with connections to MIT. I was an undergrad there at the boom time of LTCM and there were a number of leaks of the algorithms around campus. Now, unfortunately, none of those leaks could be confirmed in a deep manner. Even more unfortunately, everybody and his dog on campus who had seen them said they contained some fundamentally flawed assumptions, notably about the possible range of certain conditions.
The thing is, whilst times were good, they did make money and I'll happily bet there is at least one major hedge fund using the old LTCM algorithms if not unmodified, then certainly still vulnerable to the same boundary effects.
Hm, not a cheery thought.
I can well believe that the algorithms doing the rounds were flawed in their assumptions, as that is what brought LTCM so close to collapse. They discounted the "flight to quality" phenomenon during the 1987 Asian currency crisis, so got caught heavily betting the wrong way.
I find it reassuring that even Nobel Laureates and former deputy governors of the Federal Reserve and Big Swinging Dicks from Wall Street can get it terribly wrong sometimes. If the world were entirely predictable to the right formula, it would take the fun out of markets.
