December 6, 2013 | Leave a Comment
It is interesting to speculate a to whether the close to close in the Nikkei where the flexionism and interaction between government officials and traders is legendary is predictive of the employment reactions, where it is legendary that the Fed shares information on these highly important numbers with their counterparts on a "need to know" basis.
December 6, 2013 | Leave a Comment
Deep in Baja five years ago, an exhausted, supply-less hiker was picked up by a crystal hound. The Senior took me hunting with him at certain ledges on the sides of washes showing former black volcanic activity. He taught me to spot a round dome rock that was as ugly as any other, except when you tapped on it. On knuckle rapping, if it made a hollow sound… We danced around the rock yelling, 'home run!'
It was worth a fortune, in Mexican terms; a 3' crystal sold for $80 (a week's salary). Continuing the hunt two days a week for a month, I helped him lug dozens of 30-120 lb. crystals up and into the pickup, and for the three hour drive north to San Felipe in Baja. A thief at night began stealing them, so I slept in a nearby abandoned trailer until they could be moved. On weekends, we sold them at the tourist swap meet and business was good, especially after I started putting desert cactus in the larger crystals making them planters. Others were fashioned into fountains.
December 5, 2013 | 1 Comment
Gary Hoover will be speaking Thursday at the NY Junto at 20 West 44th street at 740 pm on "how to start and run a business". All are welcome.
I'm wondering if you have studied bitcoin at all? Or do you only consider a market once its very liquid?
Victor Niederhoffer writes:
Seems ready to implode.
Barry Gitarts writes:
Based on what?
Victor Niederhoffer writes:
Crooks are using it.
Barry Gitarts writes:
Isn't that the case with all money?
Victor Niederhoffer writes:
It will be shut down because it competes with things the government like to monopolize.
Barry Gitarts replies:
That was a fear earlier, however the senators, agency heads and Bernanke all seem to think it serves a purpose and are afraid to stifle the innovation:
Ultimately isn't the government just run by short sighted politicians who just want to be reelected? Any politician who stands up against bitcoin or any internet application stands the risk of being "Ubered" (see this article).
Bitcoin does seem to be a disruptor for traditional banking, but so was the internet for the post office, newspapers, tv and retail, that only grew the internet not kill it.
This reminds me of a half joking quote by Russian entrepreneur: "If you create a business that disrupts big business in Russia they will kill you, in America they buy your business."
Victor Niederhoffer writes:
I remember Peter Theil the founder of PayPal
saying that if they knew what he was doing, they would have shut him
down. As it is, only the Lousiana Attorney General was fast enough out
of the box to try to shut Paypal down.
Richard Owen writes:
Like all good bubbles, there is a legitimate story at hand. Even with Tulips there was a valid story of rarity that then seemed as psychologically permanent as does now the rarity and desirability of a Van Gogh.
Bitcoin is a bit like the currency of an island entrepot whose domestic economy is tiny and whose export base is mainly composed of criminality and laundering and for which the currency of the island is disproportionately held as wealth of a group of island oligarchs [I suspect he has sold some and someone might correct, but it appeared superficially that the founder's bitcoin may have a billion plus market value?]. Many accidental paper fortunes are held by bitcoin miners: will they stand passive in the face of volatility?
Of the three social gatherings I attended Weds to Sat of last week, all featured discussion of bitcoin and at one - of the type featuring participants who, to listen to their narrative over time, would appear as genius and never to have taken a loss - the non-documented boastage of coups won and utmost sagacity shown in the BTC market. Mr Thiel is smart: he is financing the pick and shovel providers, not running a large position in coin.
So yes, why not $10k BTC, but also, why?
Henrik Andersson writes:
Richard, this is clearly the mainstream/consensus view - bubble. The contrarian trade is not always right (far from it), but was is clear is that many commentators don't understand the many faces of bitcoin. What is also clear is that a good investment decision (long term, not trading) can be done on the premise that the highest probability is that the ultimate value is zero. The question is what probability do you put to the USD 10k scenario. "Nothing is more powerful than an idea whose time has come" Victor Hugo.
Richard Owen writes:
You make very good points, and I am sure you know all sides of the argument well. If you are long bitcoins I hope very much it is for a large and successful profit. Please manage your risk well. I am not smart enough to assign a probability to $10k. The thoughts are offered without prejudice and are an honest sampling of my experiences as have occurred. I have no position either way and should be distrusted or discredited on that basis. There may be commentary that it is a bubble and my thoughts or analogies may be derivative and unoriginal. The price is possibly also a form of consensus and that is that each BTC is worth a bunch of money, and increasing. As many have gone bankrupt shorting bubbles as being long.
I recall the great Jim Rogers saying that Hysteria is the first thing to look for, but one still needs to pinpoint a reason to go against it. The kind of examples he gives are buying stocks in country's whose stock markets have been closed, buying tea plantations when the price of tea has plummeted etc. Bitcoin? Might just have to let it play its course. I think its a bad joke, but even I must admit it did survive the 50% drop recently before this latest headline grabbing advance. Anyway, this is just my two cents and I have no interest in even attempting to try and speculate with or against it.
Jan Peter-Jannsen writes:
Bitcoin as a technology is superb. Bitcoin as a currency is questionable. Bitcoin as an investment is a bad bet.
A great strength of Bitcoin is that it is open source. Any experts can validate the code, and so far there seems to be no flaws. The crypto-curency works!
But cannot open source also be a great weakness? Anyone can copy the code, improve it, and make an even better alternative to Bitcoin. Is there any reason to stick to Bitcoin if and when that happens? Bitcoin is volatile, no prices are quoted in Bitcoins and very few have both their income and expenses in it. Those who use Bitcoin need to exchange to and from other currencies, so why not switch to another digital currency?
In terms of investment I believe it is a bubble. The supply is very low; many coins have been lost and the majority of coins are probably in the hands of the founders. I guess they are selling at the moment, but at a low enough speed to keep the bubble growing. In terms of demand; everyone talks about it these days.
In the coming years I predict new payment systems to arise based on technology pioneered by Bitcoin. But Bitcoin itself will soon be forgotten.
From the hallowed halls…but probably not limited to them these days. Perhaps related to the perceived importance of not upsetting the confidence of gifted students? Grade plunge protection? Grist for the academics:
"A little bird has told me that the most frequently given grade at Harvard College right now is an A-," Mansfield said during the meeting's question period. "If this is true or nearly true, it represents a failure on the part of this faculty and its leadership to maintain our academic standards."
Harris then stood and looked towards FAS Dean Michael D. Smith in hesitation.
"I can answer the question, if you want me to." Harris said. "The median grade in Harvard College is indeed an A-. The most frequently awarded grade in Harvard College is actually a straight A."
Richard Owen writes:
This is an interesting phenomenon. In the UK, the current coalition have started to engineer grade deflation for pre-uni qualification. It seems somewhat unfair to those at the inflexion point. Perhaps instead grades should be given on a continuously rising index number, so just like money, it debases but still acts as a reasonable measure.
I do not know the reality, but given that at universities like Oxford (certainly pre-WW1) it was standard practice to arrange a place for your son or daughter and that a typist could be hired to write your final papers, the idea that standards have always been nosebleedingly high doesn't seem right. Indeed, the intake quality is probably as high as ever, given the internationalisation of educational institutions.
Stefan Jovanovich writes:
As Richard knows, in the 19th century even faculty positions were allocated by social rank. His idea about an index is a marvelous suggestion; perhaps there could be a "mixed" educational economy in which people were allowed to buy grades or at least grade insurance and the underprivileged could get "extra" grades.
What is certain is that the schools will not allow anyone to set standard examinations. It would sabotage compulsory education (which now includes college attendance for anyone wanting a civil service or corporate job) if there were uniform measures of skills for which anyone could take tests and get scores.
James Bower writes:
In graduate school there was a strict 3.25 curve for all courses. It was skewed (approx 30%, 50%, 15%, 5% other), but still there were only so many A's available. You would think teachers would/should create enough difficulty to create a wider distribution of outcomes.
Victor Niederhoffer writes:
It is interesting to note that the last thing Artie did, the day before he died was to grade all the exams of his class, and give them all A's. Usually he only gave 85% of his class A's. What's so terrible about giving an A? The kid took the class, or played the piano or great music. It's beautiful.
There was a blue plate special in SPU yesterday (2013/12/04) designed to unleash the public from their chips. Hard to do an encore after that. A 22 point range.
It's the international year of statistics, and each month here at SAS we celebrate a different statistician. For December it is Karl Pearson. This was posted on our internal web this morning, I thought this might be a nice posting for the DailySpec.
Hope you are all well, and happy holidays.
Celebrating statisticians: Karl Pearson
In celebration of the International Year of Statistics, the final statistician we celebrate is Karl Pearson. His work in the late 19th and early 20th centuries laid the structure of mathematical statistics.
Born March 27, 1857, in London, England, Pearson was raised in an upper-middle class family. He studied mathematics from 1876-1879 at King's College, Cambridge, graduating as the third-ranked among those receiving a degree. This scholarly success allowed Pearson to pursue further studies, which were very diverse in nature, and not suggestive of his future as one of the founding fathers of statistics. These included physics, physiology, German literature (he was actually offered a post in the German Department of Cambridge University), and socialism.
Following in the footsteps of his father, he studied the law and was called to the Bar in 1882, but he never practiced. Even as a Professor of Applied Mathematics at University College London starting from 1884 through 1890, Pearson was highly respected in a variety of areas, but had not yet moved into the study of statistics. This changed in 1891 upon meeting Walter Frank Raphael Weldon, a Professor of Zoology at University College London. Weldon also introduced Pearson to Francis Galton, who was interested in heredity and eugenics through the introductions of ideas of correlation and regression. With this, Pearson now wrote papers on heredity and evolution, leading to advancements in the correlation coefficient, introducing the chi-squared test and early ideas regarding p-value and ideas on hypothesis testing. The Pearson system of curves meant to describe non-normal curves served as the basis for continuous probability functions, and laid out ideas of principal component analysis
Pearson, Weldon and Galton co-founded the Statistical journal Biometrika in 1901, which still remains a top journal for statistical theory. His book, The Grammar of Science (1892), with Pearson's own ideas on relativity, was read by a young Albert Einstein. Pearson was elected a Fellow of the Royal Society in 1896, awarded the Darwin medal in 1898, and awarded an honorary LLD (a doctorate-level academic degree in law) from the University of St. Andrews and a DSc from University of London. Pearson was offered the Officer of the Most Excellent Order of the British Empire (OBE) in 1920 and knighthood in 1935, refusing both due to politics (he had very strong views towards both socialism and eugenics). Karl Pearson's son, Egon S. Pearson, was also a prominent statistician (Neyman-Pearson Lemma) and eventually took over his father's position at University College London and as editor of Biometrika. It seems fitting that after starting out with R.A. Fisher as the first statistician celebrated for the International Year of Statistics, we end with Karl Pearson.
There was a long and public feud between Pearson and Fisher over each other's views. This lasted even beyond Pearson's death in 1936 (see Edwards, 1994, for a fascinating read) when Fisher was asked to write about Pearson's life for the Dictionary of National Biography, an entry that was subsequently not used. Perhaps some of Pearson's achievements are overshadowed in that the study of statistics started moving towards maximum likelihood estimation and hypothesis testing at the end of Pearson's career. However, from the website "Earliest Known Uses of Some of the Words of Mathematics," consider some of the terminology attributed to Pearson (though he was not necessarily the originator of the idea itself):
* Standard deviation
* Contingency table
* Spurious correlation
* Random walk
* Goodness of Fit
* Hetero- and homoscedasticity
* Pearson's coefficient of correlation (r)
* Method of Moments
On examining this list, I have to appreciate how many of these terms have become ingrained into our statistical vocabulary without giving thought to their origins. As the International Year of Statistics draws to a close, we celebrate Pearson, and give thanks to his contributions to the field.
December 5, 2013 | Leave a Comment
We have gone almost a year with the two percent additional payroll tax reinstated. The results are worse than expected.
What would have been expected is an increase in employment, but not enough to offset the effective tax increase. The reason you would expect an employment increase is because Americans are a resilient lot and get bored with sitting around. Sooner or later they find a way to get back to work. That is not what we have: The growth in payroll taxes is now negative, indicating a net loss in payrolls. The data is effectively "cap-weighted" so it might mean a loss in the number of jobs or switching to lower pay, as when a nuclear engineer becomes a sanitation engineer.
Philosophically, tax rate increases for individuals generate increases in tax revenue for governments. This is exactly what is expected by government, but the problem is that government does not know where to stop. They expect further rate increases to result in commensurate increases in revenue. But government neglects that individuals have a say in this: the latter can vote with their feet by leaving the workforce. America is now on the wrong side of the Laffer Curve.
Additional amounts taxed (N.B. the PPACA has been ruled by the Supremes as a tax) will have a continued negative effect.
A fellow Spec-Lister suggested I look for structural/secular changes in the employment data. My initial thought was that humans are skilled at obtaining freebies, and the disability payments coming from Social Security seemed a perfect target. Consider, faced with a lay-off, why not see a doctor, claim clinical depression and get yourself on disability? The long-term advantage of doing so may mean that you never have to work again, which would not be the case with unemployment benefits. But is my conspiratorial claim borne out by the data?
The short answer is "No". However there is more, should you feel inclined.
Firstly, which data does one use? Social Security Administration issues a report showing claimants for disability and the average claim. Multiply the two and you get the total value of disability benefits paid. Alternatively, you can go to the Treasury website and see their ledger of what actually was paid. Although the two sources (Soc.Sec. and Treasury) mimic one another, they are decidedly not identical. Of specific concern is that they differ by an odd order of magnitude, and one which is not relatively constant. So then one might posit which source does one trust.
My experience suggests that the Social Security data looks as though it has been manipulated or "cleaned up". The Treasury data looks as though it contains a degree of static, which is more realistic. My guess would be that the Treasury data is "raw", while the Social Security data is "adjusted". In general my personal preference is for raw data if I cannot reverse engineer the adjustments. Both data sources indicate a relative decline in the yearly rate of change, decidedly counter to my pre-supposed conspiracy claim.
If you look a little deeper into the Treasury data you find a profound cyclic influence:
This was a surprise. I did not assume the claimant had much control over the process, but the data indicates that summer is a key time to receive benefits. Oh, the joy of it all. [Skeptics should note that the cyclicality is not related to the number of days in the various months.] The cyclicality also suggests that disabled persons do return to the workplace. (I would have lost that bet.)
What is the current trend?
For whatever reason, the drift of disability benefits is not increasing. One might optimistically believe that because conditions are not worsening, they must get better. Such logic could cost an investor a lot of his wealth.
Rocky Humbert replies:
There was a Washington Post story yesterday that adds some color to this discussion. It notes a fact: 1.3 Million workers will have their "emergency" unemployment benefits end on December 28, unless Congress renews this aid program. This is a big number. And I was unaware of this fact. And as I consider myself somewhat informed about stuff, I'd guess relatively few market participants are aware of this fact either.
The writer then looks at the probability that a lot of these folks will file for disability claims. The author cites a study (which I have not read) which suggests that they won't. I have no opinion except that people respond to incentives. And some number of these 1.3 Million will surely find their way back into the reported labor force. This will likely distort the tax revenue, payroll, and other data to some degree in the first months of 2014.
I am raising this point not because I have any view about the currently big number of people receiving disability or what it means. (That's HR Rogan's job.) Rather, I am raising this, because the employment and tax numbers will, I believe, look really odd in January and February. (HR=hand wringer)
The story can be found here: "Where Will Workers Go After Their Jobless Benefits Expire? Probably Not on Disability"
Jeff Rollert adds:
Just to add another vector to the discussion, I would also argue that, since 2000 (the benchmark year in the article), the entry into the global labor pool of hundreds of millions of smart, motivated Chinese workers (not to mention Vietnamese, etc) has had a significant impact.
From the MIT Technology Review: "How Technology Is Destroying Jobs":
Given his calm and reasoned academic demeanor, it is easy to miss just how provocative Erik Brynjolfsson's contention really is. Brynjolfsson, a professor at the MIT Sloan School of Management, and his collaborator and coauthor Andrew McAfee have been arguing for the last year and a half that impressive advances in computer technology—from improved industrial robotics to automated translation services—are largely behind the sluggish employment growth of the last 10 to 15 years. Even more ominous for workers, the MIT academics foresee dismal prospects for many types of jobs as these powerful new technologies are increasingly adopted not only in manufacturing, clerical, and retail work but in professions such as law, financial services, education, and medicine.
That robots, automation, and software can replace people might seem obvious to anyone who's worked in automotive manufacturing or as a travel agent. But Brynjolfsson and McAfee's claim is more troubling and controversial. They believe that rapid technological change has been destroying jobs faster than it is creating them, contributing to the stagnation of median income and the growth of inequality in the United States. And, they suspect, something similar is happening in other technologically advanced countries.
Perhaps the most damning piece of evidence, according to Brynjolfsson, is a chart that only an economist could love. In economics, productivity—the amount of economic value created for a given unit of input, such as an hour of labor—is a crucial indicator of growth and wealth creation. It is a measure of progress. On the chart Brynjolfsson likes to show, separate lines represent productivity and total employment in the United States. For years after World War II, the two lines closely tracked each other, with increases in jobs corresponding to increases in productivity. The pattern is clear: as businesses generated more value from their workers, the country as a whole became richer, which fueled more economic activity and created even more jobs. Then, beginning in 2000, the lines diverge; productivity continues to rise robustly, but employment suddenly wilts. By 2011, a significant gap appears between the two lines, showing economic growth with no parallel increase in job creation. Brynjolfsson and McAfee call it the "great decoupling." And Brynjolfsson says he is confident that technology is behind both the healthy growth in productivity and the weak growth in jobs.
I did an interview at the Metals and Minerals Investment Conference in San Francisco. I gave a talk with more details on gold at the same conference. I comment on stocks vs. bonds. This is my 11 minute interview starting 30 seconds into the interview time.
Leo Jia writes:
That is a very interesting interview. Thanks Bud.
Regarding big banks' manipulation of gold and silver, I have read such speculations for a few years. I often wonder how this can be possible given that there are big capital in the world that is not part of the banks. Why wouldn't they come in and break the manipulations and make money at the same time? Perhaps in the way Soros broke Bank of England?
Bud Conrad responds:
Yes, Leo, you have read those speculations for years — and for years those who put them forth have been viewed as members of a lunatic fringe. The most frequently heard dismissal of the case was, to the effect, "anything that big could not go un-noticed." Yet, as we have discovered in recent years, the LIBOR market and the swap markets have, in fact, been rigged. Each, as I understand it, are much larger and more vital than the gold/silver markets. Why anyone remains doubtful puzzles me…
In the September 5th, 2013 issue of nature, they have a nice article reviewing Batesian Mimicry, the kind where harmless and very good to eat butterflies mimic the appearance of poisonous ones to avoid being eaten. I have often pointed out that all the forms of deception that appear in nature have their counterparts in markets, and the study of such deception is one of the most useful things for the market operator to master. The nature article points out that that many microorganisms produce proteins that mimic the "form and function of host proteins to counter immune defenses." Pictures of innocuous bacteria and deadly viruses that appear identical accompany the article. They conclude: "it is exciting to consider how Bates's observations of rainforest butterflies might help to inform our understanding of infectious disease today". It is exciting to consider how the study of microscopic deception in the tick by tick prices might inform our understanding of deception in the larger spheres so endemic to market moves.
The same issue of Nature has such a loathsome article about plate tectonics saying that it shows that government funding is necessary for all scientific achievement, and that women and socialists made the key contribution to the spreading of the ocean floor and the reversals of magnetic polarity that led to plate tectonics, and that this same alliance is necessary for us to appreciate global warming that I wanted to throw my copy of nature out the window, and I did.
Pitt T. Maner III writes:
"The good moves are there. They are just waiting to be made".
From Tom Wiswell, who based many of his proverbs on his sense of the market. He liked to say, "I can just feel the tension here".
Veterinary school was a concentration camp. There was one suicide every other semester. It was the period of the baby boom, and as the country lunged forward it was buying more dog food that imposed an 'experimental program'. As I recall, it was a lobotomy. We were stuck into an accelerated curriculum of six years crammed into five to produce more DVMs.
The semester loads maxed at 18-20 credits which was 25% greater than the campus average. Each class was scientific, tough. Grades were on a class curve; and I was in competition with men and women having graduate degrees in anatomy, biology, physiology and so on. Classes ran Monday through Saturday, and during internship (in snow blown pastures and barns) we were called out on Sundays. Full classes ran concurrently with midterms and final exams.
I kept track, year by year, and the most I ever wasted was an accumulated one second of my life.
I won my first paddleball nationals by becoming an Intramural building supervisor to have a key to practice shots late into the night after closings.
Upon graduation in winter, 1972, I took an askew turn with my sheepskin west from Michigan to California. Pro racquetball was igniting and this was the mecca. One month after arrival, I took the veterinary state boards, and came to an instant understanding with educational bureaucracy on, walking out, the proctor said, 'You'll have the results of the board in six months.' it was a multiple choice test.
The first pro racquetball tour started just months after, and I chose pro racquetball, despite an eventual passing board grade. I kept the California and Michigan licenses current for about five years, while reading the AVMA journals, and then it seemed futile to pay the annual renewals.
The DVMs expired, but I've saved myself with my training dozens of times and, in reflection, there are zero regrets on my choices.
I've remained in contact with two of my colleagues, one my big brother at Farmhouse fraternity and #1 in our class, and the other an outstanding veterinary psychiatrist, to whom I refer cases if I cannot help.
Behaviour can be affected by events in previous generations which have been passed on through a form of genetic memory, animal studies suggest.
Prof Marcus Pembrey, from University College London, said the findings were "highly relevant to phobias, anxiety and post-traumatic stress disorders" and provided "compelling evidence" that a form of memory could be passed between generations.
For the last 30 years (1/84-present), at the end of each month Mike bought $1000 worth of SP500 index.
Akira (who lived in the US) also bought $1000 every month of his country's stock index — the Nikkei 225.
Both dollar-cost-averagers invested a total of $358,000.
Attached are the equity curves of Mike and Akira (not accounting for dividends, transaction costs, currency slippage, etc).
Mike's SP500 investment is now worth $1,200,054. Akira's Nikkei investment is now valued at $386,106.
[DCA = Dollar Cost Averaging].
"The current bull market has been intricately connected to the Fed’s bond-buying program, which has inflated and propped up asset classes. The real question is whether or not the stock market can continue its upward trajectory after the Fed begins to taper QE". Market Comment.
I wish people would stop attributing the gains to the Fed. The term structure is such that the 30 year rate is not affected. And that is what determines the values along with the return on capital, which is probably substantially reduced by Fed activities, and the prolongation of robbing Peter to pay Paul that is a natural consequence of the kazk played at the interior and other redistributional departments and activities.
December 1, 2013 | Leave a Comment
It is interesting to reflect that since 1996 there have been 113 days when the SPU was down 300 or more big points (i.e. 900 to 600), and the average change the next day was down 3 points. There were 11 first such occurrences and the moves the next two days were slightly different. There was no occurrences during the last 18 years when SPU was up more than 300 big points in the previous 100 days. The reflections stemmed from an untested hypothesis of mine that the stock market might be more bullish when there had been a huge rise in the previous 6 months or so. I found no evidence to support this reflection.
Black Friday lived up to its reputation as the biggest shopping day of the year at my little store yesterday. We just about sold out of the glass water bottles, priced below my cost as a promotional item. Sales topped our record by 70%. I opened shop this morning ready for a big rake-in.
Four hours into the day, I have sold one $5 water bottle. People come in and say, "How cute," and shuffle off. Perhaps the overdid it with the credit cards yesterday and are feeling too guilty and burdened to further extend themselves?
Nothing has changed except for one thing. My Jamaican assistant, who has taken care of me and various family members since 2002, was at work yesterday. Chair and I have employed Lorna as nurse's aide, nanny and housekeeper. We appreciated her as a person of brains and discretion. We knew she once had a T-shirt business back in Jamaica. But we little suspected that beneath that gracious exterior were sales and bargaining abilities so profound as to put even the most expert diamond trader or car salesman to shame.
When I tell people I have a special deal for them their lip curls. Disbelief glints in their eyes. When Lorna tells them, they believe. Better yet, they buy. She tells them we are throwing extra bottle seals to show our love. The believe that too! I couldn't even think of saying it with a straight face. All I have to do is show a mild interest in the customer to send them running for the door.
Aubrey is another great sales talent. We first noticed this when he invented a, what shall I call it, a sales dance when we set him up in the lemonade business at age 4. A customer comes into the booth and he jumps to their side, explaining, demonstrating…and ringing up the sale on the iPad.
December 1, 2013 | Leave a Comment
In a biography of Beethoven I just read it makes the point that he always had a big idea in mind whenever he wrote a piece. An idea that would live forever that "everyone would understand soon enough". Yet he planned his music in microscopic detail sometimes taking 5 years to get all the harmonies, rhythms, and melodies, into order, e.g. the missa solemnis. He also was very good at the negotiations which he turned over to his brother or Schindler often selling the same piece 3 times to 3 separate publishers all of whom thought they had exclusives. What a great model for speculators for the new year.
Should junior buy (and try to hold) at new lows or new highs?
Checking SP500 monthly closes 1955-present, there were 9 closes which were 5-year lows. 5-year highs occurred 173 times.
Holding each buy to the present (SP at 1807), the average return of each buy (not including dividends) was:
5YLo (9): 1152.0% 5YHi (173): 1152.8%
Evidently waiting for rare 5Y lows meant missing out on numerous entries when the market was up but destined to go up further
December 1, 2013 | Leave a Comment
"No, it's not a exactly time machine," said Prosser. "It's much more exciting than that." Prosser handed his companion a black glove. "Put this on, please," he asked and pulled on a similar garment.
Simpson was skeptical, but did as he was told. He trusted Prosser implicitly. Luck had it that he had financed many of Simpson's early inventions. And boy had the investment gods smiled upon them. It was kismet: no other financial partnership had been more blessed since Edwin Land and the Morgans.
There were too many hits to remember. One of Simpson's favourites had been Hypnerall. It compressed the average individual's sleep cycle from eight hours to five and a half. Sixty-five percent of the US population used it daily, all on a one-cent royalty. They could have charged far more, but Simpson knew when to keep a low profile. More controversially there was UrDat. A steganographic method of storing binary data in a urine soluble genetic compound. With it, a user could carry around a petabyte of mission critical bladder-water, completely undetectable. And now this.
"So explain it again, and what's this glove?"
"It's a quantum investment simulator. The glove records your quantum signature and allows it to be mapped into the the simulation. A time machine would allow you to skip around time. The simulator, and your glove, allows you to skip around universes. In effect."
"But the universes aren't real, right?" cautioned Simpson.
"Well… that depends on your philosophy."
"And what's your philosophy?"
"ProSim Capital doesn't pay me to philosophise. It pays me for investment returns."
"And the application?"
"Our initial focus has been on modelling economic and investment scenarios. Close your eyes, please. Witnessing the boot-up phase is too disorienting for most people." Simpson obeyed. Prosser grasped Simpson's gloved thumb and squeezed.
"Open your eyes," instructed Prosser.
Simpson looked around. Two seconds ago he had been standing in a laboratory. Now… Simpson did a three-sixty. "Where are we?"
"We're inside the first simulation. Value World."
"Yes, we took the regular world but edited the gene pool to make every financial professional biased towards value investing. So what do you notice?" asked Prosser.
Simpson scanned the street up and down. It looked pretty normal to him. "Looks pretty much status quo to me."
"But what if I told you that I programmed the simulator to take us to 2080?"
Simpson looked blankly at Prosser.
"It's sixty years on, Simpson! And nothing has changed. When we made everyone favour value investment, nobody could get any venture capital financed. Nothing higher than twelve times earnings could attract capital. Investors demanded earnings distributions close to 100%. When management didn't oblige, activists came knocking. Then management lobbied congress for support, and hey presto, new and improved poison pills were legislated and installed. It has ended up a mexican stand-off between investors and boards and, corporately speaking, time and technology has stood still ever since." Prosser squeezed Simpson's thumb again.
Simpson looked up and down the same street. It seemed identical, except… wait. All the signs were in a foreign language. Simpson looked at Prosser and raised an eyebrow.
"In this simulation, we made everybody day traders. It was a boon to Wall Street. Commissions climbed exponentially. Income to the exchanges exploded, returns to capital crashed and everyone's equity holdings gradually dissipated to nothing."
"And the Hungarian?"
"Well, Interactive Brokers cleaned up. Thomas Peterffy merged his assets into all of the major global exchanges and became the world's richest man by a factor of twenty to one. Peterffy had a pet theory about old Hungarian providing some sort of cognitive boost to reasoning through its use of complex morphology and sponsored it to become the lingua franca."
"Bizarre. What else have you simulated?
"There was Keynes World. We spliced John Maynard Keynes' genetics into the whole investment population. We expected something spectacular to happen, but nothing seemed to change financially or economically, except…"
"Well, there was a population boom. Everyone had much better sex." Prosser smiled. "There's one simulation we should visit. Thumb please." He squeezed.
"Where are we now?" Simpson asked.
"Let's go into this diner," said Prosser, pointing across the street.
As Simpson entered, there was near silence. Everyone looked depressed. They took a seat and a waitress came over.
"Can I get… your order… pl…" The waitress broke into tears.
"Why is everyone so upset?" asked Simpson.
"In this scenario we made all of the investment managers favour market-neutral hedge fund investing. Equity managers had 100% of stock out on borrow to themselves. Due to an accident by one of clearing houses, all of the stock was simultaneously recalled one day. The funds couldn't delta hedge their exposure fast enough and started to take on net-long positions. It caused a month long, exponential short squeeze in which everyone's portfolio traded at close to infinity. And for one beautiful month, the whole population thought they had got rich. Until it crashed. Nobody has got over it since."
"How can you have 100% out on borrow to yourself?" asked Simpson innocently.
"Look, the details are complex. Anyway, what else have we simulated? Well, there was Macro World - don't ask. And then Options World, where everyone sold gamma. For a decade or two everything went much better than normal, but suddenly everyone went bankrupt and it ended up in a kind of Mad Max scenario."
"What has all this cost us so far?" asked Simpson.
"ProSim Capital has spent negative $1.5bn and growing. It's the ultimate cash machine."
"And what happens if you simulate out the current investment environment without changing it?" queried Simpson.
Prosser stared blankly into the distance. "Everything ends up being owned by a textile mill controlled by the Gates Foundation."
There are many trading and life lessons in this great article: "10 Reasons Surfing Improves Humanity"
Sometimes the market in the day and fray is like certain beautiful Russian women that my friends tell me often populate the high voltage bars frequented by people like Welch and Koslovsky when they weren't captured by trophy wives or prison. Not down enough to give you a buy signal, but not up enough to give a nice profit.
Anatoly Veltman writes:
One should never forget about the HFT profits against the "every single order that's placed by a non-HFT". It doesn't seem like much per lot, but it is an assured death by a million cuts. Not that every random HFT can afford the collocation, the wares and wires, the special relationship with the exchanges, the research and the execution, the HR, the PR, the legal costs et al. But that's where your speculative dollars are going, like a black hole - and nothing is actually produced in this glorified battle of penny-stealing…
I do get the feeling that more and more liquidity is required to keep this machinery going, and that the monetary authorities will keep providing it - the ultimate hazard of debasing notwithstanding. But because the system is irreparably compromised, and everyone knows that deep down, the teams of profit takers are standing by - just waiting out for the fiscal year roll a sliver further, into 2014, to postpone their gain tax liability…
I received these questions from a friend the other day and thought I'd share my answers. The friend asked:
In all your adventures have you ever….
1. been in the wild, where you couldn't walk to civilization before nightfall, and lost all or most of your gear?
2. needed to make fire with primitive methods (like bow drill)?
3. needed to find/hunt/gather food without a gun?
1. A dozen time in the mountains, desert and on the rails. No gear, and lost. There are two options: Walk all night to keep from freezing, and to make headway to civilization. Or, build a simple shelter by throwing some branches on yourself. These situations are almost always v. uncomfortable, nerve wracking, and difficult to follow textbook models. So I usually walk for a few hours until I'm exhausted, and then curl up in the dirt and fall asleep out of the pain, to wake up to the warming sun, which is also a compass, in the morning.
2. A half dozen times. The situation is usually wet, cold and lost. The threat is freezing before the night is done. If you can walk all night - done it often - then it's fine. If there's something blocking that - now I always carry on my person a lighter and compass. However, survival manuals cover comfort zone situations, which isn't often the case. You are fatigued, dizzy, hungry, lost, afraid, and have been circling for hours trying to save yourself. Your hands tremble so that matches, if you had them, can't be lit. If the hands are steady, there is no fuel, and anyway it's often raining or snowing that defines the scenario. I kept from freezing in a cubbyhole over the Rockies by lighting a little fire on the jiggling freight and, slowly, feeding cardboard into it. I learned flint-and-steel in Boy Scouts, and later in wilderness survival class under Peter Carrington, but you can't beat a lighter in a compromised situation.
3. I'm a poor food gatherer compared to the other survival skills. I've studied it extensively - foraging, fishing, trapping - but have used the emergency skill only in the desert a couple of times. In the desert I've gotten liquid from barrel cactus twice, and once cleaned and eaten prickly pear cactus.
The survival guides are good to study for starters, and to carry you out to the wilds. I've logged, what, a thousand trips alone into various wildernesses, with about 30 life threatening survival situations. I've extracted myself by ALWAYS looking ahead, to see the worst case scenarios before they happen. It's not fun to think hard when you're on vacation, but I'd be a dead man many times over without planning.
There's usually ONE grave danger per environment. In the jungle it's snakes; I carry a venom extractor and don't walk when the frogs start croaking at 6pm, the snakes prey. In the mountains it's getting lost; I always have two compasses, and these days a GPS. In the desert it's dehydration; I've walked the talk about barrel cactus. On the seashore it's hunger; except your bug net is a fish trap in estuaries for as far up the coast as you care to go. In the cold region it's freezing; as long as you can walk you'll wake up the next morning.
The emergency gear I carry dates back to Batman. He wore a 'utility belt' with the basic essentials of crime fighting. I've borrowed the belt in the form of ankle weights. By removing the lead sack from one of the weight baffles, I inserted the items often mentioned in standard survival packs: compass, length of twine, lighter, penknife, pen & sheet of paper. It's saved me more than once.
The episode that keeps returning to mind is when I had to tie up the penis after a bee sting in a tornado, and flinging it over my shoulder like a Continental soldier until the storm abated and I returned to normal size. Bees get angry before tornadoes hit, and this one flew out and stung the base. It sounds funny but it swelled to bursting like the Nutty Professor, until I applied a compression wrap of black electrician tape from my Batman ankle weights. The twine was the finishing touch to elevate it and let gravity do the trick.
The Bitcoin market has to be one of the best markets to pyramid i.e. highest possible auto-correlation.
The difference being that you can't be stopped out. No leverage, just hard cash.
Reminds one of Chair's wealth creation in the Silver market.
November 27, 2013 | Leave a Comment
Happy Thanksgiving to all our readers. Here is our 2006 article about Thanksgiving, economics and freedom.
Check out this product: Jia Canisters .
Hi. Laurel here, co-founder of Daily Speculations and now running Glassery.Com, with a gift idea. Most of the men who walk into my Glassery shop go straight to these black terracotta airtight storage jars and exclaim how wonderful they are. Men don't generally buy themselves kitchenware, but these jars seem to hold such an attraction that they could make a very welcome gift.
You won't find these in any shop in America, and you won't find them anywhere at the price I can offer here. If you bought them separately, they would go for $151. I can do a special price of $125 for the set.
I recently had the opportunity to review the portfolio of a near centenarian who had part of her portfolio held at a large "wire house" broker, and part literally held as stock certificates held in a bank vault. GARP stocks in a vault for 30 years… well, they make you very very wealthy over a 30+ year holding period with zero friction… a thing of beauty. No "proper" broker would have ever allowed a 12K investment to bloom into multi-millions, etc with more than a few positions, plus the amazing stalwart Exxon, etc. The idea that " you have to diversify, etc" made the "wire house" account just a fraction of "the vault".
Alex Castaldo adds:
This reminds me of the famous anecdote told by Robert Kirby in his article "The Coffee Can Portfolio" (JPM, 1984). Mr. Kirby had been advising a well off female client for several decades, supplying a steady stream of buy and sell recommendations. One day he discovered that her husband, unbeknownst to him, had copied some of his early buy recommendations in his own separate account; he had then lost interest and stopped trading that account; the dormant account had grown more than the wife's more active account and included some remarkable gains in a few now famous stocks.
Victor Niederhoffer writes:
Very fantastic and resonant for all ages.
David Lillienfeld writes:
But that was during a period of economic growth starting from when the US produced ¼ of global GDP. Would the same thing have happened if she had started in 2000?
Victor Niederhoffer adds:
England did not do very well during this period. A few world wars. Lost its seat as financial capital. Went socialist. Their returns about as good as those of the US. David, you can take the boy away from the agrarian farm, but you can't take the ( ) farm away from the farm. You would enjoy Dimon who suffers from the English disease, and despite his results is always trying to forecast 2 or 3 % a year less for the next 100 years because of his malady.
Rocky Humbert writes:
There is a bit of chicanery going on in this thread. The tax effects are not being considered. Let me illustrate: Let's assume that a portfolio of stocks compounds at 8% and there are NO dividends. And let's assume that a portfolio of bonds compound at 8% (and the coupons are reinvested each year.) So it's a horse race between the two long duration asset classes. After 30 years, the stock portfolio will have grown from $1 to $9.31.
HOWEVER, there are capital gains taxes owed as the old lady moves into a nursing home and needs the cash. Let's arbitrarily say that the combined local, state and federal capital gains tax rate is 40%. Then the $9.31 is actually $5.58 after paying the tax bill … and the compounded rate of return is 5.9%In contrast, the investor pays taxes every year on the bond portfolio and reinvests the remaining amount after taxes. After 30 years, the bond portfolio will have grown from 1$ to $3.89 or about 4.5%. So, even though the return on both asset classes were the same, the effect of compounding on the deferred taxes in the stock portfolio is what accounts for the lion's share of the difference. I used a high capital gains tax rate. The actual results may be better. And if the old lady dies, there are no capital gains taxes. Only estate taxes (if any).
Buffett understands this phenomenon extremely well. And there are several excellent academic studies that document even better results if one harvests the tax losses each year and never sells the winners…. BOTTOM LINE: The permabears on this list are ignoring the single most important factor to achieving outstanding returns: Unrealized tax liabilities are an interest free loan from the government on which one can compound over time.
Jim Sogi writes:
There is another very important often unanswered question: how much is enough? I know all of you want to make as much money as possible, but how much is enough. My best friend is rich, and made his money in real estate. Yet he has gained weight and is having health problems. I tell him, take time off, spend some money, have fun, exercise, spend time with your family. He doesn't need to work, still he is busy with another big project. Why? The money will not be good for his kids. I've seen the destructive power of money often. It can ruin a child's incentive and motivation easily. Is money worth losing your health?
Ed Stewart responds:
You are making inferences that are unwarranted given the story that I told. She was an extraordinarily generous woman to friends and charity, who lived very well - very adventurous in spirit and a world traveler. She continued to oversee private companies well into old age - Companies that employed many and created value for customers in competitive industries.
In the weeks before her death she was contacted by a young man who is an attorney at a leading law firm in the region where she lives. He met her for dinner with his wife with gratitude in his heart. Years ago, this old woman had paid for both his private university and his law school. And her only connection to this young man was that his father was her gardener and household helper for many hears. And this was not an anomaly or a one off. She helped to open up the American dream in this way, for many, many people - never publicly or speaking credit, but content and satisfied to be a partial catalyst for the self betterment of others and the achievement of what she felt was the American dream.
So, while in a general sense I understand your sentiments, in this case they are ill applied. Happy thanksgiving folks.
a commenter writes:
I had often wondered why someone with great wealth will continue not only to sometimes still work so hard but to risk all in ventures in the quest for even more rather than keep in safer investments that will be enough to give them a great luxurious life. I later realized that there are different objectives that are the focus of people's lives that seem innate or driven by personality types that are. One of the most common are find are the "game players." To prove to themselves that their lives matter they prefer competitive activities in which the goal is to come out on top. The money might matter to some extent for what it buys, particularly for buying power, but part of it is just a way of keeping competitive score. People are not necessarily confined to one trait; they can be more complex than that - but one may dominate. Those who favor high taxes on the rich sometimes point to good growth in the economy like in the 1950's when those marginal tax rates were outrageously high. Of course, loopholes allowed the wealthy to often pay less than those rates, but that can hardly be the entire answer. Rather, I suspect that some will be competitive irrespective of the haircuts because even with the disincentives they still want to be the ones who come out on top. Hence, the destructive effects need not be quite as great as one might expect. But if the disincentives are too great they may just start playing other competitive games, such as who will be on the political top under a communist society, and stop playing the economic game in which wealth is the measure of success.
Ed Stewart adds:
Your sentiments are a big part of what struck me after reviewing this track record.
Let me add to the story though, what perhaps I should have initially. This old woman was never a miser. In fact very wealthy all along do to her husband's success in business and investing acumen. She had no need for the stock portfolios for any reason, be it income, old folks, care, etc, be it current income or charity, etc. And she was very generous, lived comfortably, and by no means a miser. The amazing part of the investment angle of the story is the way the "vault" stocks over time surpassed her other holdings in value, investing in many of the "dull" names that today are famous for having created enormous returns over the long term.
A commenter advises:
How would buy and hold work for those not initially wealthy?
Though you can't afford them, buy stocks when you are young so they can compound.
Never look at them, or the market, as you will be tempted to sell.
Pay off your student loans from your after tax income.
Don't read about investment managers who beat the market because you might try your hand.
When you need money to start or buy a business, borrow but don't sell.
When the little lady wants a nice car, house, vacation, or life, just say no.
When you need money for your kids growing up, skimp but but don't sell.
Save for kid's college from your salary and make them take student loans for public schools.
Have boys so your daughter-in-law's parents pay for weddings.
Retire late to prolong compounding and delay taxes.
Now that you can finally spend, enjoy retirement with your many close friends and relatives.
I had often wondered why someone with great wealth will continue not only to sometimes still work so hard but to risk all in ventures in the quest for even more rather than keep in safer investments that will be enough to give them a great luxurious life. I later realized that there are different objectives that are the focus of people's lives that seem innate or driven by personality types that are. One of the most common I find are the "game players." To prove to themselves that their lives matter they prefer competitive activities in which the goal is to come out on top. The money might matter to some extent for what it buys, particularly for buying power, but part of it is just a way of keeping competitive score. People are not necessarily confined to one trait; they can be more complex than that - but one may dominate. Those who favor high taxes on the rich sometimes point to good growth in the economy like in the 1950's when those marginal tax rates were outrageously high. Of course, loopholes allowed the wealthy to often pay less than those rates, but that can hardly be the entire answer. Rather, I suspect that some will be competitive irrespective of the haircuts because even with the disincentives they still want to be the ones who come out on top. Hence, the destructive effects need not be quite as great as one might expect. But if the disincentives are too great they may just start playing other competitive games, such as who will be on the political top under a communist society, and stop playing the economic game in which wealth is the measure of success.
The Knicks remind me of Brooklyn College when my father played. All the teams would pay Brooklyn a fortune to come out to Notre Dame or Michigan or Cal to kill the Jews. The fans loved it and took out all there frustrations from the depression by seeing Brooklyn get killed 90-3, or 87-0 et al. Artie had his nose broken 17 times during these games and the home fans loved it.
The Knicks are losing 46 to 22 to Portland and the fans love to see the Knicks killed the way they loved to see Brooklyn killed. Portland "toying with the Knicks" like the cat the mouse. Many injuries to people like Stat or some such that the fans love. Often the 3 or 4 options people on far out puts would toy with a certain party the same way.
Anatoly Veltman writes:
On toying: imagine if the flash-crash of May 6, 2010 were happening in the midst of a bona-fide US bear market. And this will surely play out one day, once the U.S. is in fact in a bear market. If the market briefly disappeared first time around, what will prevent it from disappearing for longer next time? Government's orchestrated pledges — telegraphed to a few first. So who will be truly saved by that?
One of the best things to win in sports is a nice lead over the opponent. Then the opponent is forced into non-percentage shots. People like Smith are put into the game, and of course he shoots from further and further out, and his percentage is even less than the normal 30% on these shots. Threes from 50 feet out are taken by Anthony and now even Martin. Reminds one of how when the market is on a tear at noon, people on the other side blindly throw contacts against the major move, desperately hoping to get even, and each contract has a worse and worse expectation.
November 25, 2013 | 1 Comment
One thing I notice in unsophisticated investor-traders such as myself is that the positions one takes are usually supported by an unspoken prediction: "I will know when it is a good time to sell this and I will be able to do so."
Gary Rogan writes:
The beauty of really long-term investing is that you don't have to have this unspoken prediction.
Victor Niederhoffer writes:
And to add to Mr. Rogan's "beauty", you take full advantage of the most marvelous aspect of arithmetic, the power of compounding. And furthermore, you reduce to a minimum the vig from flexionic and top feeder activity.
Anatoly Veltman writes:
Can't dispute all of the beauty. The problem is that only a narrow group is willing to commit: those who set aside slow money. Most suffer from the "hot money" bug: how to make money work its hardest. Willing for the money to die trying.
Gary Rogan writes:
Very poetically put. It also illustrates the following point: in any kind of investing or trading the problems and solutions come in two flavors, namely those of competence and those of psychology. Even in long-term investing you still have to decide what to buy and when to buy it, so it's not immune from either category.
S. Humbert writes:
Buy and Hold (for the medium term) is not, in my view, enough to earn a living from. Please let me explain before you fry my IP address.
In the past 30 odd years alone, even the unleveraged long only holder of US stocks has had many barren years (and multi year) periods when he lost or didn't make.
In my usual, inelegant fashion, what I am saying is that if you trade for a living — for yourself (i.e. at the sharp end of the game) then buy and hold alone doesn't cut it. (Unless you start in 1982 or 2009 or some other retrospectively chosen low). This does not dilute the effectiveness of the strategy, I'm just saying an individual's perspective and starting point dictate what weight one should give to the passive, low vigorish strategies.
Frankly, a low single digit return with a very poor Sharpe Ratio over the lady two decades LESS retail friction, well… I certainly couldn't have lived off that taking into account my extremely modest circumstances when I started my speculative business in 1990. Anyway — it's at all time highs now right!
Ralph Vince writes:
Worse–you're still going to touch that money. You're going to take a morsel, or add a morsel, you can't sit there and forget about it.
Now you're on the curve.
Now, if you are 100% invested, you are completely doomed, and it isn't a matter of if.
This is a nice article on cantilever principle in design inspired by a reading of Wright's New Principles of Architecture with many market applications, e.g. a big rise in a period followed by a small change.
Recent articles seem to indicate that the stocks with the greatest short interest perform significantly worse than random. The meme used to be the opposite. An example of changing cycles? Or all consistent with capital asset pricing model with volatility in a up versus down market?
Charles Pennington writes:
Most of those studies don't include the cost of borrow. Ruger (ticker RGR) currently costs about 74% annualized to borrow. If you sell it short, it might go down, but it better go down in a hurry if you want to make any money. If you're long, you should haggle with your broker and get him to pay you some of that 74%.
November 25, 2013 | Leave a Comment
Some preliminary thoughts on the running median 2, 3, 4, 1, 7, 8, 9, 3.
A moving median of the first 5 is 3, of the next 5 is 4, of the next 5 is 7, of the next 5 is 8– it's a good indicator of trend. First recommended to me 53 years ago by Fred Mosteller, Chairman of Harvard's first statistics dept.
It is more stable than the moving average as outliers are removed from sample. It is easy to compute fast with computers for small running numbers like 5 or 100 by repeated sorts. For higher numbers, you can form two groups, those below the median and those above. As a new number comes up you place it in one of the two groups if higher or lower and take away the oldest number. Then adjust to make the two groups equal again. It is not used as much as the moving average so it shouldn't be hurt by front running or spikes when cross over occur. It has a defined distribution when the underlying distribution has inordinate extreme values as frequently occurs with Cauchy or similar distributions with infinite variance.
It's probably a good thing to use when using nearest neighbors as predictors, i.e using the median and running median to compute your predictors. It deserves testing in real life markets for real life applications.
Ralph Vince writes:
It is the indicator of "expectation," as evidenced by human behavior itself, and not the probability-weighted mean.
Bill Rafter adds:
Moving medians have some distinct advantages.
They represent real values that occur. For example, taking the average of 1, 2 and 5 gives you 4, which never occurred, whereas the median 2 did occur. Continuing with the same series, should subsequent values in the series be less than 5, the value of 5 will not occur as a moving median. Hence, the moving median eliminates outliers.
One of my appliances has three thermometers to measure temperature. The value displayed is the median (and hence a series of moving medians). Should one of the thermometers be broken, or distorted by being in a particularly hot or cold spot, the median will still give me the best estimate. This elimination of outliers is very useful.
Should you have data whose importance relies upon only crediting occurring values and need to eliminate outliers, then you should test moving medians. We ourselves had experimented with them regarding price series and written extensively about them, but do not use them in our current work. Our reason is that we consider the outliers in a price series to be particularly important.
Kim Zussman adds:
The following is a plot ratio of SP500 (10 week moving average) / (10 week moving median) for the recent 5 years (SP500 weekly close data).
One of the things that comes from reading Gods and Heroes: Myths of Epic Greece by Gustave Schwab is that Odysseus is one of the most loathsome men that ever existed. He routinely kills the noblest and wisest Greek of all, Palamedes, and he tries to kill Philoctetes and leaves him to die on a desert island. He reminds one of the most dishonest and unreliable people one has met in his life.
Among the fascinating anecdotes in Art Shay's fascinating book Album For an Age, which I am reading with delight, is this description of the way they bought companies in Chicago in the 1970s. Nat Cummings of Consolidated and Henry Crown of General Dynamics and Hilton had a regular gin game at the Drake every Sunday evening. An entrepreneur with a major paint company, Kirsch asked Crown if he could present him with his game plan and financials with a view to a purchase. Crown said okay, meet me at The Drake, but be brief because I don't wish to interrupt the game. It would be disrespectful. Kirsch spoke for 5 or 10 minutes to Crown giving him the lowdown and the price. Crown said, "I'm afraid that the asking price is too high. Good luck to you. I'll discard the 9 of spades." Without interrupting the game Cummings said, "young man, I like what you said. I"ll buy your company. Hendry, how many points did I leave you with on that gin."
I wrote to Art: "My only regret is that I did not know you and your wife in previous years. I am an avid collector of books and letters and would have had so much to talk about with your family. And what a family it was."
Likewise. Anyone who sends Bo to another continent to make business decisions should be worth meeting. It's still possible. I have 2 shows opening in Chicago–BUT have a nice show of celebrity pictures opening in NYC March 6 at the Morrison Hotel Gallery, 136 Prince Street in Soho. I'll be there.
I'm 91, but am resolutely planning to do a new bio based on my 150 or so blogs on Chicagoist.com vault of Art Shay. I'm syndicated in 14 US cities, plus Toronto, Shanghai and London. Impetus came from a piece I did titled "Sleeping With Elizabeth Taylor and other perks of the photo trade." It got well over 50,000 hits. Look it up.
Most of the people who come in my store say, "Glass? I would break it within an hour."
Did their mommies slap their hands once too often? You would think that we lived in a nation of klutzes, so thoroughly have these people been indoctrinated to use plastic.
The things I sell are borosilicate glass, an exceptionally strong and practical formulation fired at extremely high temperatures. Think Pyrex, Duralex. Sadly, verbal assurances fail to convince.
Today, I tried a new tack. "Drop it," I suggested to the customer. He hesitated. I shrugged. He dropped it.
I really didn't know what would happen. I had knocked all the bottles off a display table a couple of days ago without one of them breaking, but he was holding the bottle a foot higher. When he came in, I was in the middle of planning just such an experiment for after hours, with dustpan at the ready.
He dropped it. The glass survived.
"That was very convincing," he said, and paid.
Convinced of the power of demonstration, I sold a GlassFlask to the next people who walked in by pouring boiling hot water over a tea flower and offering them a taste in a Dixie cup.
It is bitterly cold today, and some people come in just for the Kleenex on the checkout counter.
November 25, 2013 | Leave a Comment
There is a serious game of cricket happening at the moment between England and Australia. A test match which goes for 5 days. In that 5 days fortunes are made and lost and reversed on a daily basis.
The comment section of most papers following the action gives one a good indication of herd mentality. If this is the same representation of those trading markets news and announcements, then it is little wonder most are caught off guard. A day ago it was all pro England comments and the Aussies were toast, and today it's…. "Doomed, we're all doomed, I tell you. Well played Australia. England haven't a hope in hell of saving this Test."
Today's note is fueled by the discovery that Wikipedia has no entries for George S. Coe. Henry Varnum Poor dedicated his best work, Money and Its Laws, to Coe; but all one finds for George S. Coe in a search is this:
and, for disambiguation, this:
George Coe (Lincoln County War) (1856–1941), Old West cowboy George Coe (Michigan politician) (1811–1869), politician from the U. S. state of Michigan George Coe (mayor), American mayor of Lancaster, Pennsylvania, 1962–1966
Coe did what Morgan did during the Panic of 1907; he persuaded all the major banks to join together to discount each others and their counter-parties' paper. What is truly remarkable is that Coe did it in 1861 solely by the force of his character and his ability to put the matter plainly: "What," he asked everyone in the room, including Secretary Stanton, "if we do not unite?"
Here is Coe's obituary from the Times.
Also, in 1888 the Commercial Advertiser printed Coe's letter to E. G. Spaulding and Spaulding's reply.
About Spaulding Stiles, the biographer of Commodore Vanderbilt, wrote: "If Wall Street had saints, then the college of financial cardinals would surely canonize Elbridge G. Spaulding."
I came across about this rather nice summary of backtesting in the context of investment/trading framing over the weekend.
Reasonable investors derisive of back-tests acknowledge that in theory back-tests can illuminate something true about the world but believe in practice back-tests can rarely be relied on to do so. The Vanguard study, by finding that past performance does not reliably predict future returns of asset classes, joins a chorus of studies by many independent researchers demonstrating the same. A skeptic might conclude back-tests are to induction what Richard Simmons' hair is to the category of things that can be burned for fuel.
The problem with that argument is too many successful investors are or were back-testers. Benjamin Graham, father of value investing and Warren Buffett's mentor, devised trading rules based on studies of what would have worked in the past–back-tests, in other words. Early in his career, Buffett applied Graham's back-tested rules to identify "cigar butts," statistically cheap stocks that had assets that could be sold for more than they could be bought for. Another successful Graham acolyte, Walter Schloss, achieved 20% gross annualized returns over several decades by "selecting securities by certain simple statistical methods…learned while working for Ben Graham."
Ray Dalio, founder of Bridgewater Associates and arguably the most successful macro investor alive, uses back-tested strategies to run Pure Alpha, an unusual fund that uses only fundamental quant models. Mathematician James Simon's Medallion Fund, a quantitative, fast-trading strategy, has earned 35% annualized returns after fees since 1989.
Jeff Rollert adds:
The difference between back testing and understanding drift is the difference between knowing history as taught and understanding evolution.
That is my inner Hobbes speaking today.
In August, Science published a landmark study concluding that poverty, itself, hurts our ability to make decisions about school, finances, and life, imposing a mental burden similar to losing 13 IQ points.
It was widely seen as a counter-argument to claims that poor people are "to blame" for bad decisions and a rebuke to policies that withhold money from the poorest families unless they behave in a certain way. After all, if being poor leads to bad decision-making (as opposed to the other way around), then giving cash should alleviate the cognitive burdens of poverty, all on its own.
Stefan Jovanovich comments:
In their efforts to avoid blaming the poor, the researchers failed to consider a possibility that Jesus himself acknowledged: people who lack mental abilities are overwhelmingly among the more impoverished people in a society. (How is that for a sufficiently politically correct rendering of Matthew 26:11? In the King James version: "For ye have the poor always".)
People with low IQs do not make not smart decisions about money or breaking the law or many, many other things; it is highly unlikely that giving them money changes any of that. The history of what lottery winners do with their windfalls should be all the proof a reasonable inquiry into the question requires.
Education is supposed to be an answer to this problem; but, like so many other efforts at social improvement, the principal beneficiaries of schooling, social work, et. al. have been the helpers. (As a concession to David's likely objection, I am happy to acknowledge that the principal beneficiaries of national defense and homeland security have been the non-combatant defenders and the equipment contractors. Whether from the right or the left, government is equally corrupt and inept except when people are free to choose the tenure of any authority.)
That still leaves the question of bribery. If giving the poor money will not make them smart, perhaps those who are also violent can be bribed to leave the rest of us alone? Alas, the "lesson" of history is not very promising. Americans have periodically paid bribes in the name of safety and security throughout our history; but it has not worked very well. Our most expensive attempt - until now - was the tribute paid to the Barbary States. Those pirates were happy to take our money, but they did not stop raiding our merchant ships or enslaving our citizens even after we made a succession of peace treaties. But, as in so many other things, we were blessed by having other people solve the problem for us. The piracies ended when the French and Spanish decided that coastal North Africa deserved to have extended visits from their armies.
Now, there is a possibility to be considered by future researchers. If we can have another country to take over the burdens of our many wars on poverty, won't that solve the problem?
Noted today on Bloomberg: 'Fractal analysis of similarities to 1929 is available to "analysts".'
Anatoly Veltman writes:
Bloomberg's red line of 1929 is showing much steeper exponential rise "coming". Coincidentally, when RobinHood (more exactly, Peter Borish) began following the 1929 analogue in the early 1987, they decided to go Long first and capitalize on the blow-off that "was coming" first.
In my view, the main issue with all this is not what many think. Those who think this is ALL mumbo are not entirely correct. Chart developments do serve to illustrate participant psychology, which may well indicate over-doing the upside and thus setting up the downside. So that solitary aspect is indeed pro-analogue. My anti-analogue argument is NOT that human psychology has dramatically changed over past century - it has not. The issue I see in 2013-2014, which was not a factor in 1987, is that today's market is not driven as much by human psychology as it is by machine psychology!
Thank the good one that, as always, the bearish news of the Fed minutes were released one day before the tips auction so that the flexions would not be discommoded and would have an immediate one percentage point profit on their leverage bets backed by their rabbis.
It is so frustrating to watch Smith create losses for the team, with their random one on one play, and only he and Melo shooting in the clutch that I've taken to listening on the radio rather than tv. Amazingly, the announcers on the radio are infinitely better than the tv, with Walt Frazier bringing up the rear on tv, with his ridiculous rhymes, "jiving and diving". Rather than commentary. Anyway, Spero on radio is sagacious. He routinely says things like, "the team that scores the last basket before an overtime, i.e. the catch up basket generally wins the overtime." Also, "when you shoot 3 fouls, there's a tendency to miss them much more than the percentages would show". Things like that should be tested in markets as they express highs and lows in human behavior.
Pitt T. Maner III writes:
Just happened to watch the Knicks (6 straight losses at home) in the 4th quarter and in OT against Indiana the other night–it wasn't pretty. Shot selection was poor down the stretch and J.R. seems to have a knack for clanging critical shots. No comparison to the old days of Frazier, Bradley, Debusschere, Lucas, Reid, and the ever graceful, with bandaged knees, whirling dervish-like, "Earl the Pearl". Maybe they will do better when injured players return…
"It's possible that what Smith refers to as "panic mode" really just means that he's going to get serious and do his part to ensure that the Knicks don't continue to slide into the lottery. Still, it's interesting to consider what panic mode could mean for a player as enigmatic and frustrating as J.R. Smith. On a nightly basis, Smith baffles with his erratic shot selection, defensive breakdowns, and ability to take over a game playing exactly the same style that submarines his team's chances at a win. Panic Mode J.R. Smith could be even crazier, with a tendency to dribble with his palms and throw elbow passes as a matter of course. I mean, he already got stuck inside a garage on Thursday, so something must have changed."
The surprise bestseller of my first three weeks as a world retailer is a glass water bottle with a glass stopper that goes for $5. All vendors here were asked to offer one exclusive for the market and I chose to mark them down from $12.
I have a theory that most people are glad to pay up. Set the price too low and the bad connotations of "cheap" enters the buyer's calculations. At the extreme, a giveaway is considered of no value.
Exceptions exist. Children still believe things are free, living as they do in the golden time of innocence. Business minds like Chair will demand a 50 percent discount as a matter of course, being familiar with markup conventions. Chair also says buyers are vulnerable to Schadenfreude and are particularly happy with the idea that a purchase will come out of the seller's hide, completely without profit. And some people, as shown by my water bottles, find pleasure in being shocked by an unexpected bargain. "That's my bottle!" cried an ingenue. "I bought mine in Paris for $30 and broke it!" She was so happy to find the bottle that she overcame any disgust at the price. Perhaps she imagined herself at a Parisian flea market.
I am always experimenting with prices. If someone says, "That is so cheap!!" I mark the price up 50 percent as soon as they clear the door, if they don't buy. The same bottle that goes for $50 one day might be $40 the next and $60 the next.
I love people who bargain. We are collaborators then in the comradely game price discovery.
A deep exposition of this can be found in the Spec classic Horse Trading by Ben Green, recommended to us by a Yale games theorist and professor of great sagacity.
Cryptonomicon looks like a fun read and perhaps presages some of the issues in the news now. What secrets will be revealed in the next 30 years about things going on today?:
"With this extraordinary first volume in what promises to be an epoch-making masterpiece, Neal Stephenson hacks into the secret histories of nations and the private obsessions of men, decrypting with dazzling virtuosity the forces that shaped this century.
In 1942, Lawrence Pritchard Waterhouse—mathematical genius and young Captain in the U.S. Navy—is assigned to detachment 2702. It is an outfit so secret that only a handful of people know it exists, and some of those people have names like Churchill and Roosevelt. The mission of Waterhouse and Detachment 2702—commanded by Marine Raider Bobby Shaftoe-is to keep the Nazis ignorant of the fact that Allied Intelligence has cracked the enemy's fabled Enigma code.
It is a game, a cryptographic chess match between Waterhouse and his German counterpart, translated into action by the gung-ho Shaftoe and his forces. Fast-forward to the present, where Waterhouse's crypto-hacker grandson, Randy, is attempting to create a "data haven" in Southeast Asia—a place where encrypted data can be stored and exchanged free of repression and scrutiny. As governments and multinationals attack the endeavor, Randy joins forces with Shaftoe's tough-as-nails granddaughter, Amy, to secretly salvage a sunken Nazi submarine that holds the key to keeping the dream of a data haven afloat. But soon their scheme brings to light a massive conspiracy with its roots in Detachment 2702 linked to an unbreakable Nazi code called Arethusa. And it will represent the path to unimaginable riches and a future of personal and digital liberty…or to universal totalitarianism reborn.
A breathtaking tour de force, and Neal Stephenson's most accomplished and affecting work to date, Cryptonomicon is profound and prophetic, hypnotic and hyper-driven, as it leaps forward and back between World War II and the World Wide Web, hinting all the while at a dark day-after-tomorrow. It is a work of great art, thought and creative daring; the product of a truly iconoclastic imagination working with white-hot intensity."
Scott Brooks writes:
I read Cryptonomicon about 10 years ago and found it to be a mostly fascinating and fun read.
I recommend it to anyone looking for an enjoyable way to wile away the afternoon.
That said, Stephenson has a very distinct writing style that is somewhat cryptic (if you'll pardon the pun). There were multiple times in the book when I would have absolutely no idea what he was talking about, who the characters were or what it had to do with the story. He told the story in a disjointed and odd manor.
It was like he was writing in a puzzle format and tried to make things a confusing…like he was trying to be clever. Unfortunately, he only came across irritating. He did tie things back together later in the book, but it became a bit off-putting after a while.
However, that aside, I did enjoy it and recommend it to the group.
November 22, 2013 | Leave a Comment
Ode to Janet Yellen: A Fed Prayer
Let us pray.
Who art in Washington
Yellen be thy name
Thy printing come
Thy will be done by Ben as it is with Janet
And as it was before by Greenspan.
Give us this day our daily 3 billion
And increase us our debts
As we bail out our debtors
And lead us not into inflation
But deliver us from down markets
For thine is the printing, the bubble and the euphoria
Forever till taper
November 20, 2013 | Leave a Comment
Those of us stuck in the print lane are still marveling at what the combination of alternating current-powered motors, (mostly) German ink chemistries and printing wizardries, and American/Canadian paper making did at the turn of the last century. Combined with cheap (yet still profitable) railway mail deliveries, it produced an imaging revolution that equals anything currently happening now with cell phones.
One example is "1921 Paramount Sales Movie Sensation Game Cards".
The movie studios, actually the Sales Organizations where the actual profits were made, produced these by the tens of millions. Now they are semi-rarities.
I watched the 3D version of the movie Gravity yesterday in a remote city theater in China. I noticed on IMDB that the official showing date is Nov. 20th. I wonder how it gets shown in China a couple days earlier. Perhaps because a Chinese satellite is featured in the film.
Anyhow, aside from a scene in space, the movie's story is very simple and nearly empty. It goes basically like this: while in the wild away from home, two teenagers suddenly discovered their bikes got ruined. To save the stranded girl, the boy surrendered his life. Then the girl struggled to reach to other unattended bikes. She finally got one (a Chinese one), and returned home with it.
I noticed it is rated 8.5/10 on IMDB, an unbelievably high score. It seems like a scam to me. I would give it 5 only for the space scene, otherwise just 2.
Here is some HFT fun for the whole family: The Wall Street Code.
This is the basic wrap about how flexions (all related at the big end of town, seats on exchange boards, shareholders, etc) have a fast track ticket entry to the front of the order queue.
If retail investors only knew this was the very least of what is against them.
Buy and Hold on monthly reset is looking more and more appealing.
November 19, 2013 | Leave a Comment
Thanksgiving, 2007, was a special day for me in a California hobo jungle scrapping with peers like vultures over a charity Turkey. It all began with the 'invisible principal'.
I was a happy sub with many feathers in my hat as the most requested by teachers and faculty alike at Blythe High School in Riverside County.
Besides hiring the new teachers, California had handpicked an ex-career army sergeant with two tours of Vietnam as the ramrod, whom the staff called 'the invisible principal' and the students never once saw for his policy of fierce orders from behind a closed door.
I too had heard but never saw him until two weeks into the term. On that day, in English, at last bell, the kids filed out shrieking, 'To the river, to drink!'
There was a BANG and the room slowly filled with smoke.
Advancing slowly from the door, the grey cloud headed at me kitty-corner at the teacher's desk. I squinted for the source counting 'one alligator, two alligator' until the cloud was at my nose, and then looked left at the window and right at the phone.
Like the sinking ship's captain — surely they will answer the distress — I picked up the phone and dialed the office emergency number. After eight rings, I hung up, still holding my breath, and redialed as fire alarms began to wail. A chalky dust settled on my head and clothes, as I held my breath, hoping.
The door burst open and a thick figure hung in the frame like a gorilla — the invisible principal!
He raced in to open the windows, and as the smoke escaped I exhaled holding the receiver, 'No one answered! Sir'
He cut me short, 'I had to clear the campus, teach.'
We discovered minutes later that a student had detonated the fire extinguisher.
A week went by, and there was a playground war. As usual, the school loudspeaker bellowed the secretary of the principal, "MR KEELEY, to the playground, immediately!"
It was another emergency. I dashed to the gym locker room where ten students and I were pinned down by rocks shot from outside by thirty more too disgusted in the heat to exercise more than these stones. I braved the salvo, and was smashed in the head by a soccer ball. An Aspergers student hid his head in his shirt collar like an ostrich and crashed into the canal. Fights broke out in more clouds of dust, but still no help arrived. The goalposts bent and weighted by students to the ground, screaming triumph!
They had their say that day, as I staggered wearily to the gym office and left my report on the desk. The next day I was fired, and all the feathers fell out my cap.
What does a canned sub do in his spare time? The next day I wrote a 'Letter to the Honorable Schwarzenegger'; it went unanswered. The day after the door shut in my face by a pro bono lawyer. On the third I filed for the first unemployment. On the fourth day I caught a freight out of Kolten yard San Bernardino to, as the hobos say, wherever it goes. Like an out-of-job depression tramp, I was absorbed into the system, and spent many hours reading.
It's said never to leave a complaint without a solution. Somewhere along the line I picked up a copy of Meegan's Democracy Reaches the Kids and thought that may be it, let the kids have a voice in the classrooms before they get all the teachers fired.
Examine the enclosed chart and answer the questions below:
1. What does the historical record of the Japanese stock market imply about the existence of bubbles?
2. (honors) What does it say about assumptions regarding long-term return of claims on earnings streams?
3. (law students) What effect has Japanese government had on their stock market long-term? Would the result be different were the default world currency were the Yen?
November 18, 2013 | Leave a Comment
For whatever wonderful reasons Amazon now has a $10 Kindle edition of Bresciani-Turroni's study of what is commonly known as the German Hyperinflation. It is the only study worth reading because it is the only one that points out the obvious — Germany along with the other countries in Eastern Europe had a war that they did not pay for even as they were fighting it. German tax collections between 1914 and 1918 were 23 million marks; during that same time the government wrote checks and paid cash totaling 164 million marks.
It makes one marvel yet again at the wonders of the gold standard as a fundamental restraint on collective insanities. Until July 31 1914 every mark spent had been redeemable by the recipient in gold. The market — the decisions of self-interested people — had foretold what would happen through the simple act of asking for gold instead of paper — so much so that, before the war's extravagances had even begun, the German currency had to default.
On this subject the wikipedia article on WW I Reparations also deserves a reading. The standard Anglo-Saxon academic explanation for the events of the 1920s and 1930s is the one taken from Keynes - i.e. the allies' reparations demands were impossible for Germany to pay and this led to the hyperinflation, which, together with the misbegotten belief in the gold standard, doomed Europe to financial collapse. As usual with Keynes, his predictions about the facts of the future were extraordinarily confident and mostly wrong. What is remarkable is how thoroughly the U.S. and Britain accepted his thesis. Raymond Poincare had the good sense to point out that France had paid a larger reparation (as a % of their economy) after the Franco-Prussian War than the one Germany was actually expected to pay. He also pointed out that France had undergone turmoil equal to what Germany had endured in the years immediately following 1918 yet it had not gone bankrupt or had the franc collapse as an international currency. But, of course, what would a - a mere Prime Minister and a French one at that know about political economy? It is appalling but not surprising, given what one discovers about the prejudices of the time, (Poincare was guilty not only of being French but also of being a good Catholic), that by 1924 the British Prime Minister was making public statements implying that the war itself had been the fault of "French" militarism.
Richard Owen writes:
Great scholarship as ever. As a quick question, as i have not yet tucked in to the homework assignment: France paid larger than the Germans requirement to pay (relative to the economy)? The amount Germany was expected to pay was impossible, so how could France pay larger than an impossible amount?
Stefan Jovanovich replies:
Richard identifies the key issue - what were the Germans expected to pay. The usual number offered is 132 billion gold marks; but that includes the "C" bonds that were, in effect, non-recourse. The actual "debt" secured by Germany's industrial and agricultural production, was 50 billion. They paid 40% of that amount; what is truly amazing is that, through the Dawes plan, they were able to borrow most of the 20 billion that they actually paid; and that 20 billion was, in turn, used to "pay" the debt the British and, to a lesser extent, the French owed the U.S. (FWVLIW, I remain bewildered by the reasoning behind the decisions of the higher minds at the Federal Reserve in the 1910s and 1920s. How exactly did they think it was in the interest of the U.S. to allow European nations to run up a tab that makes quantitative easing seem like fiscal prudence?) Back to the question of reparations - 50 billion was not an impossible sum, especially since it was to be paid out of decades. Germany's "Federal" government had spent more than that amount on the war in a single year.
Richard Owen writes:
Very interesting. Keynes' numbers were something like $40bn treaty reparations owed and that Germany's max capacity to pay was $10bn. This is against an economy with c.$2.5bn exports. So the treaty reparations were c.16x exports. Even at peak estimate, Greece's modern debts were something like 5x exports pre restructuring. And I guess you could wonder the correct way to think about 'capacity' — a lot of Keynes' complaint was the deflationairy mistake of even going close to theoretical capacity. Which seemed to bear out.
Stefan Jovanovich responds:
The difficulty is that Keynes used the numbers that the Germans offered, not the ones that experience proved out. For example, his estimates of coal production were only 2/3rds of what the Ruhr and Saar produced. The central fact is the one that no one in Britain or America liked; when the claimant took possession, the debtor paid. What defeated Poincare is the decision of the French communists to oppose the occupation of the Ruhr because the Comintern had decided that the Soviet Union's best interests lay in closer relations with Germany. Perhaps we can agree that these questions are those of political economy, not economic science. what remains unanswered is why the Fed thought countries that had defaulted could still set their currencies' specie prices independent of what money changers on the street corners thought the paper was worth. The best explanation for the blowoff of the U.S. stock AND bond markets after 1925 is the willingness of the Fed to pretend that Germany was materially broke yet somehow stable enough for the mark to be accepted at the administered exchange price.
November 18, 2013 | 1 Comment
This man is worthy of a movie, which would very much unfold as dailyspec readers would expect, as he made fatal errors on the way up, including, it seems, expecting that the bull market wouldn't pop, and indulging his record cash outflow with much initial hubris. It's not over yet. He can still pull himself back from the brink.
What strikes you about the tale of Tinkler is that he made two fortunes in his lifetime but never made a profit. Loss makers all: from his companies and coal mines to the Newcastle Knights, the Newcastle Jets and the Patinack Farm horse stud.
The other thing is the sheer velocity of the man's spending - the mansions, the cars, the planes, the bloodstock - and his unrelenting battles with creditors. Manning has totted up some 50 actions against Tinkler, mostly for not paying his creditors.
Tinkler made his first fortune scraping together $1 million and buying the unsung Middlemount coal deposit in Queensland. That was in 2006. A year later he sold it to his mentor, Ken Talbot, for $265 million worth of shares in Talbot's rampaging Macarthur Coal.
The timing was exquisite. He cashed out of Macarthur for $442 million in May 2008, then embarked on what must be the biggest spending spree in this country's history. By the time he came to his second ''deal of a lifetime'', he was out of cash, Manning says.
After a reckless spending spree of its own, and crippled by the global financial crisis, the mining giant Rio Tinto was dumping assets. It was early 2009 when Rio put its Maules Creek coal deposit up for sale.
Again, Tinkler saw the potential. He paid $480 million - almost all of it borrowed from US hedge fund Farallon.
All he put down was a 5 per cent deposit, but he didn't even have that. Talbot had tipped in $15 million in a short-term loan.
Aston Resources and Farallon and their lawyers were poised to sign off on the deal in the Brisbane offices of Freehills when Tinkler sent the Aston boys a text message.
He was down at the nearest pub, the Pig 'n' Whistle, in his shorts and thongs. You better come down, he said. Tinkler confessed that he hadn't been able to refinance Talbot. Farallon was about to fund Tinkler into a half a billion dollar deal when they found out his 5 per cent deposit wasn't all his.
November 18, 2013 | 1 Comment
The half hour documentary "Magnus Carlsen's Last Big Title" gives a glimpse into Carlsen's world. It's remarkable how he has developed his talent. He has memorized thousands of games and he thinks about chess constantly. Of course he has studied every single of Anand's games.
Enough chess; time to study historic price data!
November 18, 2013 | Leave a Comment
You're invited to come along on my Holiday Decorations Tour.
On the day after Thanksgiving I visit NYC shops to admire their holiday windows and holiday interiors. It's about seeing beautiful things, not shopping. It's also a time to notice how businesses entice people to enter, how they use their space to present groups of items and to appreciate how they light their space and merchandise.
Friday, November 28, 2013
If you're coming, just meet us at 10:00am outside Anthropologie on 3rd Ave. at 71st St., NW corner.
3rd Ave. at 71st St., NW corner
This is an unusual use of space. About half the floor of the main level has been removed, creating a lower level "great room" instead of a normal basement. The great room changes the way we see all the spaces in this shop. Last year there was a splendid Xmas tree on the balcony. Except that the "balcony" is actually below street level.
Ralph Lauren Men
Madison at 72nd St., SE corner
This mansion's interior was created in 1983 to the taste of Ralph Lauren. It's inside the shell of this 1890s building. The windows, all the floors and even the decor of the back stairways are worth seeing.
Ralph Lauren Women, Home and Children
Madison at 72nd St., SW corner
This mansion was built in 2010, to the taste of Ralph Lauren. It was inspired by the 1758 building in Paris where Lauren has his shop. All it's windows and floors are worth seeing. Every detail, from the hinges on the counters to the handrail supports have been chosen to create elegance and beauty.
Donna Karan NY
Madison, between 68th and 69th Sts., E. side, mid-block
The windows have dramatic holiday decorations. The back of the main floor has a Zen style outdoor garden with an indoor/outside pool.
Crate & Barrel
Madison at 60th St., NW corner
The main design element I appreciate are its walls, which create many partial rooms throughout the main floor. They're at a slight angle. This angle makes the space seem open, keeping the eye from noticing the many pillars, in a tight grid, holding up the building. We'll look at these walls on the main floor as we walk through toward 5th Ave.
Fifth Ave. between 57th and 58th Sts., NW corner
The windows are some of the largest and most heavily decorated in the world. The top floor has a display of ornaments under a skylight.
This is an old 2009 video that discusses the localism on the North Shore of Oahu. No matter how you slice it and dice it, there is some level of localism at every break, and there are always problems associated with localism. If you show up at someone else's break, respect and be humble towards the locals, especially towards the alpha who will be easily identified, and you might have some fun. Hubris does not serve visitors very well. Hubris doesn't help in the markets either.
Parallel Problem Solving from Nature 2014:
Natural Computing is the study of computational systems that use ideas and get inspiration from natural systems, including biological, ecological, physical, chemical, and social systems. It is a fast‐growing interdisciplinary field in which a range of techniques and methods are studied for dealing with large, complex, and dynamic problems with various sources of potential uncertainties."
I dreamed I visited Galton's house at Rutland Gate. He was seated at his desk dressed in 21 layers against the cold and drinking from his whistling key kettle while he held a notebook in his other hand. "I am looking at Cousin Darwin's stock and consul investments. He's very good, but he shouldn't short so much. The power of compounding combined with the high return on capital is too great" he said. He laboriously got up and led me into the dining room where Cyril Burt, Jensen, Dimson and Stigler were sitting. An attractive Japanese woman served the meal and Burt kept making gallant remarks to her concerning the mutton. There were setting for additional guests.
He got up and I offered him my arm to stabilize him. He presented me with a notebook ruled with horizontal and vertical grids. He said, "Use these to copy down the market prices with time on the vertical and price on the horizontal. There's a big difference between reading it from the Babbage or the typewriter and doing the calculations and counting yourself." I woke up with tears in my eyes.
It's shocking to see with all the disapproval of the Oval that the stock market keeps going up. Usually the Oval is like a father figure, and when disapproval of him goes up, it makes everyone insecure in a freudian way. Suicide and expiation for evil thoughts comes to the fore, even the sale of stocks. I think I'll sell some tonight.
Gary Rogan writes:
I note with interest that Aetna was up 1.74%, Wellpoint 1.67%, United Health 0.61%, Humana 0.89%, and all of them are a lot closer to their 52 week highs than lows. Superficially the Oval has created a dilemma for them today where they will supposedly be blamed for an incredible mess as they are now "allowed" to re-offer the just canceled individual plans that they can't possibly offer in time to have the formerly insured covered again in the new year on any scale as it takes too long to reprogram their computers, send the letters out, get various local approvals, etc.
Vic Niederhoffer wrote at 10:06am EST via Twitter:
All bad things must come to end including shorts. I call this a draw. I
will go after believers in flow funds more important than stocks next week.
Steve Ellison writes:
One wonders if the stock market is moving inversely to the diminishing likelihood of any further attempts at agrarianism before 2017 given the tremendous loss of political capital by the Oval Office and the lame duck status of the incumbent.
Like the lucky break that keeps you in a position you should get out of, that is disastrous in the end as you lose much more, the Knicks' win with Smith starting will be the kiss of death for them. He has a bad eye, and a defect in character, and can't play as a team player, and is a gunner. A friend who knows basketball infinitely better than me said you could walk around the school yards of new York and find a hundred players like Smith on the perimeter scratching the back of their colleagues.
It's unfortunate to see good guy Woodson on an inevitable fall down the hill to firing as he puts his reliance in the tried and true Smith and his brother and stays away from the "Rooks".
Once again the sensibilities of the centrals and sovereigns and flexions galore who buy the bonds at the auction were not discommoded.
Gary Rogan writes:
I have maintained for many months that they will not let the rates run away for as long as they can help it because they just can't afford it. Those who thought that the employment report would provide some cover for the would-be taperers and sold everything in sight wrongly believed that the supposedly taperers needed cover. Their only real job is to delay the death spiral of higher interest payments => higher borrowing to make those payments => higher rates => still higher payments for as long as possible. Well, OK and to keep the big banks permanently on the dole. How can they ever do anything deliberately that will signal higher rates? Only mistakenly as Ben did in May, a mistake he tried hard to correct but not enough to even think about tapering.
But the good news according to Ms. Yellen that the stock market isn't in any kind of bubble either, so it's safe to buy. To infinity and beyond! Abby Joseph Cohen a noted expert on value in the market still sees some so it's all good.
Craig Mee writes:
So many fake outs, levels of deception, noise, and price runs come to mind, but just a few take away from that trade that you look back on and think to yourself, "how easy should that have been, all I had to do was hold".
Gary Rogan adds:
A few days ago Goldman's Hatzius found two Fed economist studies that support lowering the unemployment threshold for tapering. Of course that's only to help unemployment as all of the Fed's goals are ultrapure. How often do we see Fed studies that permanent money printing on this scale isn't something that has a precedent and these projections are on the level of "climate science"? Once again, to the man who only has a hammer everything looks like a nail.
November 15, 2013 | Leave a Comment
From "Technical Analysis of the Futures Markets: A Comprehensive Guide to Trading Methods and Applications" by John J. Murphy, Prentice-Hall, 1986:
"The flag and pennant represent brief pauses in a dynamic market move. In fact, one of the requirements for both the flag and the pennant is that they be preceded by a sharp and almost straight line move. They represent situations where a steep advance or decline has gotten ahead of itself, and where the market pauses briefly to 'catch its breath' before running off again in the same direction.
"A bullish pennant resembles a small symmetrical triangle … the move after the pennant is completed should duplicate the size of the move preceding it.
So … with apologies to the Chair and all others who believe that this is a load of mumbo-jumbo (and I count myself among those folks EXCEPT when the chart agrees with my bias and position), I note that the Nikkei since May has been in a Bullish Pennant and if last night's move over 15,000 is sustained and extended somewhat, then Mr. Murphy would expect the Nikkei to approach 20,000+ in the near future.
Unrelatedly, but quantifiably, I would further note that the Nikkei is now within a cat's whisker of having a 10 year total return (in US dollars) that is equal to the S&P demonstrating the magnetic pull of reversion to the mean. (The S&P has been compounding at about 7.5%/year.) This is a factoid that few know or would believe and is thus a stealth bull market, which is the most insidious and powerful kind of bull market. Only after the Nikkei's performance has exceeded the S&P's for a few years will the public (and pundits) wake up and announce that "Japan is back!" much like gold bulls awakened in 2009 as evidenced by both Google Trend searches and price.
I was bullish and early on the Nikkei, when it was an extremely contrarian view. I remain (on balance) bullish on the Nikkei even though it's somewhat less contrarian. My opinion plus $1 can't buy a cup of coffee, so reach your own conclusions — but don't fight the trend.
Some time ago Mr. Jovanovich posted an anecdote about old man Mellon to the effect that his kids never let him pay for a bill at a restaurant because the old man felt that prices should be the same as they were when he was a young man and that they were too high today. This is a common thing one runs into in certain people of age. They are accustomed to the old p/e, the average of the last 10 years, on those rare occasions in the 1930s when Ben Graham wasn't chasing the skirts, when you could buy companies at below their liquid cash, assuming incorrectly as he did that any shares were available and they weren't losing so much that the previous balance sheets were meaningless.
Galton had a way of dealing with such things, and he was the most revered man of his age, commanding universal respect, and heading all the leading scientific and geographic societies. "Let the bygones be bygones". Don't fret about bad things that happened, or look to take back the things that you could have done that would have made you so much better off. The woman you didn't marry. The stock you didn't pick. The limit order that wasn't filled.
I recently ran into this in a business meeting where I was trying to sell a company. When negotiations started the earnings of the company were half what they were when the negotiations resumed. The buyer was stuck on the old price and old earnings. The buyer consequently missed an opportunity to make a tremendous profit, of about 10 times his investment of millions in several years.
One often makes this mistake in the market. You try to catch a falling star and you miss it. And then it goes in the direction you had hoped. But you never come in again because you are trying to catch it at the bygone price. Anatoly once mentioned that he was trained in checkers by the KGB to learn to be an amnesiac so he wouldn't regret moves that he should have made on the board, and would look to the future.
In chess, the good players always say forget about the prices that have been taken and concentrate on the pieces that are on the board. I believe this is a common mistake in life and markets, and would be interested in the scientific and empirical and life and market lessons that you all have learned from similar ruminations.
Richard Owen adds:
Ted Turner believes a large component of his success is attributable to the fact he readily accommodated and cared not much about what had past. The Buddhist concept of acceptance and Kabbalahist idea of cause and effect are similar.
Compare Germany and Silicon Valley. In Silicon Valley ones past mistakes accrue as experience. In Germany there have been many internet start ups but also inevitably failures. Speaking to German friends, a failure there is carried like a deadweight around ones neck.
Society is destablising somewhat as the record of evidence of one's past peccadiloes becomes more extensive. Nobody can get into office or past congressional approval unless they lived a prude life of Cromwellian perfection. And its not clear one is best led by a Cromwellian prude.
Ralph Vince comments:
There's two ways we learn things, the easy way, and the hard way.
If we learn things the hard way the FIRST time we climb up off of the pavement — that is the definition of a windfall.
Learning things the easy way is to accept facts like an obedient database. The only payoff to learning things the easy way happens when our perspective on the matter at hand altered such that we see it in its proper light and thus actually understand it, rather than merely as data.
To convey ideas to other human beings, we must amend their perspective, their point of reference on the matter, to see it anew from an entry point that they will understand it. To spare them the inevitable beatings of otherwise learning it the hard way is such a gift.
Stefan Jovanovich comments:
In our misbegotten adventures in L.A. we had minor and almost all indirect dealings with the mouth of the South. Mr. Turner was so acutely aware of his father's defeat and death that even in casual dealings outsiders learned how determined he was to avenge/outpace/overcome his family legacy. He also was notorious, even in Hollywood, for accumulating personal grudges.
A great deal of individual success in Silicon Valley has come from the fact that the U.S. income tax code allows the tax-free pyramiding of gains through (1) buying and selling of principal residences and (2) exchanges of corporate interests. When you add the glories of carried interest, the result is a society of the well-connected in which there are very, very few failures who haven't held on to at least a respectable amount of the OPM. From the little I know of the German tax code, none of these opportunities to do a heads I win/tails you lose coin toss has ever existed in that country.
Cromwell was many things, some of them awful; but he was never a prude. He and Elizabeth Bourchier had 9 children; and he and his wife were both, by religion, Independents. That meant they were those rarest of people who believed that Jews and (from the point of view of their Anglican, Presbyterian and Puritan contemporaries, even worse) Catholics were entitled to political and religious liberty.
What Richard may have meant is that Cromwell, as a military commander, was as piously single-minded as Joan of Arc. Like hers, his army never lost a battle once they had received proper inspiration; and each soldier literally believed in him and "the cause" for which they had a clear catechism. This was not ever going to be good news for anyone (Catholic Irish; Scots Presbyterian) who opposed him just as the Hussites (as dissidents from the true Catholic faith) would not have much mercy from St. Joan.
P.S. I find the history of Cromwell's catechism fascinating. If one were to ever come up for auction, the 1643 edition might be priced at a figure that even lovers of Bacon (the recently mentioned artist, not the writer) would respect.
For the American sequel to the story, check out The American Tract Society.
Victor Niederhoffer adds:
One notes the Chinese proverb on a similar theme: "don't carry your hatreds into the new year" or the English variant, "you can't run a mill with water that's past". All languages seem to have a proverb similar to "let the bygones be bygones". The Jewish custom of asking forgiveness at the new year for all the harms that you have inflicted on other in the past year, and sharing a torte and tea is from a similar vein.
Jeff Watson adds:
One of my proverbs is to take the hit, forget about it, and move on. But then again I don't mind small losses as they are just part of my business, and I take many small losses of a couple of cents when I smell that the trade is going to be wrong. Just like surfing, where there will always be another good wave, in trading, there will always be another good trade.
Alan Millhone writes in:
A grudge is a difficult thing to dismiss.
My Mother used to say, " I can forgive — perhaps not forget "
Gyve Bones writes:
Oliver Cromwell was an unmitigated bastard and I find no evidence he believed that Catholics were entitled to religious liberty. To the contrary, his raping and pillaging and wholesale theft of Ireland, which was clinging tenaciously to the Catholic faith, and the Penal Laws enacted for the suppression of the faith and Gaelic language starting then and continuing for a couple of hundred years was an attempt, largely successful at cultural and racial genocide.
His puritanism certainly enforced a prudery on England. Within 50 years of Shakespeare's death, his plays could not be performed. And prudery is not the same thing as having a fruitful but chaste (no roaming to other bedsteads) relationship with one's wife.
Show me a Puritan, and I'll show you a son-of-a-bitch. -H.L. Mencken
The President of the Old Speculator's Club writes:
Though Dailyspec seems to be a great repository of Mencken fans, there were a few voices which, although agreeing with him on many items, diverged on others. One such notable was G.K Chesterton. The two quotes which follow immediately demonstrate some common ground.
"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary." —H. L. Mencken
"We are perpetually being told that what is wanted is a strong man who will do things. What is really wanted is a strong man who will undo things; and that will be the real test of strength." —G.K. Chesterton
On the issues of science and religion, however, Chesterton suggested that Mencken was equally skeptical:
I have already noted that, if there is such a thing as religious mania, there is also such a thing as irreligious mania. Just recently, perhaps, it has been the commoner of the two. But a very interesting study of the matter comes from a country in which we may say, without injustice, that both are fairly common. I had occasion to remark recently, in this place, that an American paper had accused me of being an anti-American writer; and I commented on the curious irony that the American paper was itself an anti-American paper. But, though I may be permitted thus to parry a purely personal charge, and a highly preposterous one, I should not like anyone to suppose that I do not both enjoy and value the magazine in question.
I am quite well aware that Mr. Mencken, the editor of the American Mercury, is really doing his duty as an American citizen in being an anti-American critic. I myself have been regarded often enough as an Anti-English critic, when I regarded myself as a patriot. In short, there are immense internal evils for Mr. Mencken to attack, and he is perfectly right to attack them. All is well so long as the good citizen abuses his own city. The trouble begins when the foreigner abuses it—or, almost as often, when the foreigner admires it. But, anyhow, the chief efforts of the American Mercury have to be directed towards this howling wilderness of sectarian sensationalism.
The popular science, that rages in the American Press and local government, is simply a dance of lunacy more ghastly than a dance of death. And an exceedingly valuable and important protest against it can be found in the same number of the Mercury from which I have picked the examples of theological hysteria. The protest is all the better because it is not the sort of protest that I should write, or that any person of my beliefs would write. The critic is writing entirely in the interests of Science, and is perfectly indifferent to the interests of Religion. And he enters a virile and telling protest against that science, which is his only religion, being dragged through the mire as a degrading superstition.
From a great article: "Religion in American History: I
Hate Methodism; and G. K. Chesterton vs. H. L. Mencken: Battle of the
Monogrammed Dudes. Surprising or Otherwise Interesting Primary Sources,
Richard Owen writes:
This is fascinating stuff. The modern day argo in British English of referring to something as Cromwellian is along the lines Gibbons indicates, although at one step removed perhaps.
Cromwell instilled the Protestant Work Ethic in puritanical fashion. That still pervades much of British psyche today, and is captured in popular imagination, for example, in the writings of the Daily Mail and the books of Tom Bower, Britain's foremost hatchet biographer of businessmen (I say this with great respect; his books are well written and I suspect Mr. Bower would be glad to acknowledge his genre bias).
Thus the Protestant Ethic mentality is to be rich and industrious. But with the emphasis on the latter. As Martin Sosnoff said of his Dad, something like: *"he never thought he'd earn an easy dollar, and he never did".*
The one thing that really irritates the Cromwellian mentality is to find out, after slogging ones guts up to Vice President and exiting to early retirement with a Carriage Clock and blue chip pension, is to find out the reason for corporate downsizing was because a kid from the JFS, assorted Anglo Norman public school boys, or an Asian immigrant rustled up a grub stake into Forbes Four Hundredism. And possibly even had some good sex, bad drugs, and hella fun in the process.
Not to make light. These are complex neuroses and threaded reasonable sense given each parties bias.
Craig Mee writes:
Victor, the point can also be made that although a potential lost opportunity arises and there are fewer pieces on the board, the situation is then more clear. Although you may not establish the solid position you initially hoped for, many more tighter risk reward opportunities now present themselves, sometimes allowing you a defiant win on the move all the same. However, this outcome may be related to your initial and ongoing foresight about what's unfolding.
A disproportionate number of scholarly people have below average ability in spatial relations. I am one of them. I am reading Barrons' "Mechanical Aptitude and Spatial Relations Test" to improve.
Ha. I now know what a tongue and groove pliers and an allen wrench is.
If you clicked on this email expecting to find my latest prescient thoughts on Apple, you will be disappointed.
Rather, I'm looking for some inexpensively-valued stocks in iNDIA and iNDONESIA. (I know, I know, Russia is supposedly cheap too.)
I looked at the big caps in the India ETF's and they don't look cheap for a country that is suffering from the early stages of a capital flight. And I don't trust my Bloomberg for finding diamonds in Chanakyapuri.
Does anyone have some favorites? As Sergeant Joe Friday would say, "just the tickers, Ma'am
(Don't be shy. I only harass Mr. Rogan when his stocks go down.)
Sushil Kedia writes:
Define a CIX b'berg as: CNX Nifty Index / CNX500 Index. That would be a ratio of Largest 50 stocks index and the broader 500 stocks index.
A severe flight into safety has played out. Looks like the penultimate round. Obviously the small and mid caps have had visited 10 year lows, more than half of the 4500 listed stocks trade at P/B <1 and about one fourths of the stocks are at a P/E <10.
Elections are due in the first half next year for the Union Govt. Important state elections in 5 states results on 8th Dec.
New high in large cap index got everyone's granny to orgasm. Market closed lower last 5 days.
Flight into safety brings a market to all time highs, with no breadth so to say. The severe divergence in small caps and mid caps produced a jumbo rally in them briging them to be now "overbought".
While the hoi polloi rejoices both the new high trip in the prior weeks and the sizzling rally in smaller stocks, there are heavy signs of distribution. This market is right now hollow.
Flight into safety… hmm… a final scramble of a flight away from safety, i.e. no place to hide remains due…
Well, if this time its different is an adage everyone heard all their lives, I am watching outside of India, while sitting right inside here. Will emerging market currencies sell off? Will this whole world sell off ONLY after FED actually tapers off and there would be no reward to those who will anticipate and speculate?
Cheap… without some reason? The obvious may have first become unobvious, yet once more.
Jeff Rollert writes:
Bristol Myers gas had this strategy for years. They're basically banks now.
I found this article very interesting. Yet few of the investment greats have PhDs or CFAs. QED? Albeit that PhDs are overweighted vs, their population weight.
Several hundred individuals who hold a Ph.D. in economics, finance, or others fields work for institutional money management companies. The gross performance of domestic equity investment products managed by individuals with a Ph.D. (Ph.D. products) is superior to the performance of non-Ph.D. products matched by objective, size, and past performance for one-year returns, Sharpe Ratios, alphas, information ratios, and the manipulation-proof measure MPPM. Fees for Ph.D. products are lower than those for non-Ph.D. products. Investment flows to Ph.D. products substantially exceed the flows to the matched non-Ph.D. products. Ph.D.s' publications in leading economics and finance journals further enhance the performance gap.
S. James writes:
I struggle to find anything less important than the letters after one's name when assessing investment managers.
Ralph Vince writes:
I would certainly argue that more education is preferable to less, in any field, provided such education doesn't impede someone's ability to reason things through for themselves.
Whether it facilitates thinking this way or not is not something I (nor one who does posses those credentials) can determine from our own experience.
There was a very interesting segment on 60 Minutes last night about GoPro and its young CEO, Nick Woodman. A fellow who failed with an earlier business but who came up with a great and very profitable idea.
One can imagine attaching the GoPro camera to a RC mini-quadcopter along with certain geosensing tools (small magnetometers, maybe gravitometers, GPS etc. –depending on lifting capacity of the copter) in order to aid prospecting for minerals in rough or jungle terranes. Certainly it suggests a way to more quickly do local remote sensing projects.
I would imagine it potentially useful for archaelogical or environmental work too. One can envision a "smart" GoPro that could process remotely sensed information (possibly in extended wavelengths like IR). Inspection of all types of man-made structures becomes easier.
As mentioned in the 60 Minutes program, coral reef surveys have been greatly improved by utilizing the underwater GoPro cameras.
Here is the TV segment with Anderson Cooper.
Here is a company with geosensing possibilities like GoPro uses.
Many of the estimated 6-7 million expats have headed to Mexico but Medellin, Colombia has been mentioned before as a good city for entrepreneurial souls. Perhaps Rosetta Stone or other language companies will do better as more boomers head south.
"Medellin, the former drug capital of Colombia, has launched a film commission as part of concerted bid to convert it into the film capital of this Andean nation. Spurred by Medellin mayor Anibal Gaviria, a 10-year strategic plan begins with construction next year of what Medellin film commissioner Francisco Pulgarin describes will be the largest audiovisual complex in Latin America with film and TV studios and other amenities. Infrastructure build-up will complement an initiative to train more people — in both English and Spanish — in the audiovisual sector."
Medellín: With a metropolitan area of about 3.8 million people, it's Colombia's second-largest city. Its location in the northern Andes ensures pleasant weather year-round, with temperatures rarely rising above 80F or falling below 60F. Most buildings are constructed of red brick, set off by the greenery of the city's many parks and botanical gardens. Five of Latin America's 35 top-rated hospitals are located in Medellín, Peddicord says.
Downsides: Air travel to the U.S. generally requires changing planes at least once; air pollution can be a problem in the center of the city; and the English-speaking expatriate community is small. "You are going to have to learn some Spanish," she says.'
Over the past year all of my worst trades have all been long term positions that I sold at a nice profit. Yet I only realize this after tallying up realized losses and the mind wanders to "what happened to the ones I sold at a gain" and I tally it up to see that the missed gains dwarf the realized losses. Certainly a function of the bull trend, yet still… It seems to be a psychological phenomenon where the market plays tricks on my perceptions — or perhaps I trick myself.
Craig Mee writes:
Ed, that's a good example of why when your cycle is in and you're making money in the market, you have to keep things tighter than ever, as if you have to start shooting from the hip because your saddle bags are full. It will end up with your cutting good trades to pay for the new losses, the market's own little stoppy to make sure you don't get to much of the action.
It's surprising how many retired execs, engineers, and doctors I know who work for Lowes, Home Depot and Rockler. The guy who invented the artificial knee as we know it works for my local Rockler store selling woodworking tools.
My friend sent this story to me, writing, "It's a great story and I've found exactly the same at WalMarts and Home Depots across america. You wouldnt believe… until you walk in there and take a quick survey of the help, and choose the graying one with a spring in the step who's intellect is superior than all the shoppers. Ayn Rand didnt get to see WalMart and Home Depot in proclaiming that the clerks and workers of america were second class. One in 20 of them is a former dignitary."
WAL-MART SENIOR GREETER
You just have to appreciate this one. Young people forget that we old people had a career before we retired…..
Charley, a new retiree-greeter at Wal-Mart, just couldn't seem to get to work on time. Every day he was 5, 10, 15 minutes late. But he was a good worker, really tidy, clean-shaven, sharp-minded and a real credit to the company and obviously demonstrating their "Older Person Friendly" policies.
One day the boss called him into the office for a talk.
"Charley, I have to tell you, I like your work ethic, you do a bang-up job when you finally get here; but your being late so often is quite bothersome."
"Yes, I know boss, and I am working on it."
"Well good, you are a team player. That's what I like to hear."
"Yes sir, I understand your concern and I will try harder."
Seeming puzzled, the manager went on to comment,
"I know you're retired from the Armed Forces. What did they say to you there if you showed up in the morning late so often?"
The old man looked down at the floor, then smiled. He chuckled quietly, then said with a grin, "They usually saluted and said, Good morning, Admiral, can I get your coffee, sir?
$WFM - Whole Foods posted its first material slowdown in sales post the recession - Credit Suisse
Richard Owen writes:
YE reporting is going to be a minefield of canaryism: intra-shutdown slowdown vs. Th-Th-Th-Th-Th-… That's all, folks.
This is a fascinating little essay by Wendy McElroy describing two types of child labor in England during the Industrial Revolution: "The Industrial Revolution You Haven't Met"
November 11, 2013 | 1 Comment
I recently spoke with two doctor friends (an independent study with n=2) about their relationship with the government in their medical practice, specifically in Medicare. Both were quite willing to get paid a fraction of the normal cost to treat their medicare patients or not get paid at all. This they could shoulder. One recounted that late in the year, around this time, state medicare funds completely dry up and they get almost nothing in pay from medicare. What they could not abide however, was government oversight/compliance in the name of fraud prevention.
Now that all the easy targets and hucksters in FL have been rounded up, government needs to find other sources of revenue. So they go after legitimate doctors. One received a $300k fine for minor offenses in not checking certain boxes on certain forms. The other was reprimanded and fined for working pro bono on some patients and not others. Apparently he was not qualified to make a determination over who he could treat for free. The government fraud receipts have gone up from a few $100 million several years ago, to over a billion now and is a part of funding ACA. With so much focus on demand (ACA, affordable this or that), very little consideration is given to supply. Incentives for doctors are largely ignored. They predicted fewer hospitals staffed with fewer doctors. On a positive note maybe Walgreens or Rite Aid will fill in the gaps with NP's and there will be a positive certainly unintended consequence.
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