September - 2014
 S&P -1.60
 USB -1.13
 S&P -1.00
 USB +0.08
 S&P -1.00
 USB -0.24
 S&P +8.30
 USB -0.08
 S&P -5.40
 USB +0.01
 S&P -10.90
 USB -0.08
 S&P +5.30
 USB -0.17
 S&P +1.90
 USB +0.03
 S&P -12.10
 USB -1.14
 S&P -0.60
 USB +0.09
 S&P +15.40
 USB -0.03
 S&P +2.20
 USB -0.03
 S&P +10.90
 USB -0.07
 S&P -0.80
 USB +0.28



 1. There is always a web of market interconnections, but the problem is that the web is always changing.

2. You should never try to make money the same way two or three times in a row.

3. The worst mistake a person can make in business is to get in over his head. Had I held the 7 or 8 largest investments I made, each one a 6 or small 7 figure expenditure, most of them would have made me 9 or 10 figures. The next worst mistake a person can make in business is to pursue a lawsuit when a reasonable settlement is in the cards. Comparable to this mistake is to get in business with disloyal or untrustworthy partners.

4. I am reading The Tyrrany of Experts by William Easterly and each page has new insights as to why the common man, the lowly man, when left to his own devices can improve his well being through technology, innovation or trade. The opposite side of the coin is how technological development from an authorian dictator can lead to trampling of natural rites and ruination. The story of the hard work that led to the prosperity of the immigrants on Greene street in Greenwich Village in new York is particularly inspiring and warrants a visit to that street.

5. The Story of Mankind by Hendrick Willem Van Loon written in 1922 is a great unbiased history to read to your kids.

6. The bonds have been down 14 days in a row or so on a 3 day basis, and they are due to go up.

7. The grains are at a series of 20 day low below constructal numbers and are worth a buy.

8. On option expiration day, the markets will revolve from one round number to the other in order to create maximum churning.

9. The book Principles of Chemistry by Michael Munowitz is the best science text book I have ever read, and I wish I could turn over the trading business to my colleagues and spend a few months educating myself by reading it and his companion physics book.

10. My colleague Gene Epstein to whom I turned over the moderation and selection of the New York Junta which I ran for 30 years has been improved vastly by his supervision. However, he doesn't like the kind of speakers that I get who teach people like me with so much more to learn like George Meegan on how to walk 12 years in a row or Gary Hoover on the story of retailing or Ian Bagley on the heroes of New York.

11. The part 3 of Atlas Shrugged which one saw last night is very inspiring and true to the message of "living for oneself and not as a sacrificial object". The portrayal of the politicians is true to life, and the heroic messages that the producers in Galt's Gulch give to Dagny are timeless and inspiring. Galt's speech is done very well, and there are exciting visual effects of trains and trees and abandoned factories. It starts nicely with Galt refusing to be part of a employee owned business where everyone shares what everyone makes. 

11. I would hypothesize that anyone who bought an index fund of companies with the name video or game within it, would have superior market performance the next 12 months. The moderator of our site likes to invest based on what's hot for millennials, and her performance including several 5 baggers like Tesla, and Netflix has been exemplary. Had I followed her guidance, I would be a wealthy man.



As rates begin to rise towards a more normal level in the years ahead, what do you think will happen ? What are the implications for money managers using futures? I wrote an article last Spring entitled  CTAs and Rising Interest Rates: Is the Party Over?   [19 page PDF].





 Some of the largest wooden vessels ever built were designed as throwaways. These "disposable ships" were built in Canada to be sailed to Britain where they would be broken apart so their timber could be sold. Cargos of oak and pine were subject to an import duty of 275% of market value. There was no import duty collected on ship hulls and superstuctures.

Any comparison of these tax dodges with the current popularity of disposing of U.S. incorporation is clearly subversive. No patriotic American would ever do anything legal to avoid the tax on foreign earnings being landed on American shores.



 I found an interesting article about the town near Lookout Mountain and Ruby Falls: "Chatanooga's Gig: How  one city's super fast internet is driving a tech boom"

Like Atlanta they have a very nice aquarium and offer a fun downtown area to visit on the way to hiking in the Smokies. But this attraction of venture capital and entrepreneurship was news to me.

"The city is one of the only places on Earth with internet as fast as 1 gigabit per second – about 50 times faster than the US average. Despite Big Cable's attempt to block the Gig's expansion plans, money keeps flowing into Chattanooga"


"The fibre-optic network uses IntelliRupter PulseClosers, made by S&C Electric, that can reroute power during outages. The University of California at Berkeley estimates that power outages cost the US economy $80bn a year through business disruption with manufacturers stopping their lines and restaurants closing. Chattanooga's share of that loss was about $100m, EPB estimates. The smart grid can detect a fault in milliseconds and route power around problems. Since the system was installed the duration of power outages has been cut in half."



 How to Criticize with Kindness: Philosopher Daniel Dennett on the Four Steps to Arguing Intelligently:

In Intuition Pumps and Other Tools for Thinking — the same fantastic volume that gave us Dennett on the dignity and art-science of making mistakes — he offers what he calls "the best antidote [for the] tendency to caricature one's opponent": a list of rules formulated decades ago by the legendary social psychologist and game theorist Anatol Rapoport, best-known for originating the famous tit-of-tat strategy of game theory.

Dennett synthesizes the steps: How to compose a successful critical commentary:

1.    You should attempt to re-express your target's position so clearly, vividly, and fairly that your target says, "Thanks, I wish I'd thought of putting it that way.

2.    You should list any points of agreement (especially if they are not matters of general or widespread agreement).

3.    You should mention anything you have learned from your target.

4.    Only then are you permitted to say so much as a word of rebuttal or criticism.

If only the same code of conduct could be applied to critical commentary online, particularly to the indelible inferno of comments.

But rather than a naively utopian, Pollyannaish approach to debate, Dennett points out this is actually a sound psychological strategy that accomplishes one key thing: It transforms your opponent into a more receptive audience for your criticism or dissent, which in turn helps advance the discussion.



 Joseph Heller invited Puzo and Updike to steeplechase where you get 50 rides for a 0.25. He told them how when he was a boy growing up in Coney Island he'd wait near the finish for the old people to come out, and ask them for their unused rides of the 50 they didn't take. In the current, Puzo went through the revolving barrel and hurt himself and they all sat on a bench and talked about their terrible publishers and agents, and the decline of the book business, and their kids wasted time on television. As they left after a few hours, some kids came up to them. "Hey mister, can I have your tickets?". There were 47 left.

I played raquetball on Sunday at the central park courts, where 53 years ago I won three national tournaments with my father watching. I was good in those days, and the only way I could get a game was to play my opponents for a quarter hitting every shot behind my back, or if they were really good, hitting it through the legs. I challenged some guys to a match, and they told me they would only play me their backhand against my regular game. I jauntily refused and challenged a 70 year old guy to a singles game. He was ahead 11-6 when he hit one to my backhand and I ran to cover it, and for the first time in many tens of thousands of matches, I fell hard on the back of the head. The sound was so great that the players 4 courts over rushed over to see if I had lost consciousness. When I got home, I mistakenly told the perfect wife about it, and she looked at me and said "should we use heroic measures tonight to wake you up if you don't wake up". I said "No, just take the money, and put it in index funds, and marry someone much younger".

Pitt T. Maner III writes: 


Hope your head is OK and you recover quickly. Sure that the doctors on the site have told you to be careful with that type of injury. At 70 you are considered just a kid in Palm Beach…

I have not heard from Mr. George Meegan lately [recent junto speaker and world traveler] but he is in the news in New Zealand.

Tomorrow an anniversary date recognized in New Zealand (where it is already the 18th).

"1983 - British adventurer George Meegan finishes a six-year long walk from the southernmost tip of South America to Prudhoe Bay, Alaska; covering 30,605 kilometers (19,021 miles)."

Thursday, September 18 - World - NZ Herald News



I have been spending a lot of time researching GDP construction and it's history and this will be a part of my book that will be out in about 6-9 months. The basic issue is that "how" to measure an economy is a difficult thing. Very difficult. There were many competing theories on it in the first 1/3d of the 20th century. Modern GDP was constructed to serve the purpose of measuring the potential output of the economy for the purposes of conducting WW2. It has since become standard around the world as the only way to measure the economy.

The issue is that it does a very good job of measuring things in the short run. However, it can't take into account the "quality" of economic activity in the long run.

For example, under GDP 100 guys digging ditches and filling them in again are seen as better for the economy then 75 guys doing productive work and 25 guys staying home and taking care of their kids.

Likewise, 100 guys getting paid to destroy productive capital and kill people are seen as better for the economy then 50 guys working in 7-11 and 50 guys taking care of kids, painting, and playing the guitar.

GDP assumes in essence that people are rational actors and that if someone is being paid to do a job that it is by definition productive activity. However, with government that is not always the case, and with zero interest loans for wall street that is not always the case either.

There is a lot of chatter in public about why wages are stagnant and the average person isn't better off than they were 20 years ago despite the rise in GDP. The answer lies in GDP's accounting for War and other government expenditures, as well as the much more complex issue of how the banking/finance industries are reflected in GDP (you would be shocked at the answer to this most likely, but it is so complex I still don't fully understand it myself).

Stefan Jovanovich writes:

I remain amazed at how easily our political economy dismisses the pure waste of warfare and its effects.

Ed Stewart writes: 

Interesting points anonymous and Stephan. Anonymous, I look forward to reading your book.

Your ditch digging example is an easy one to see but when you start using that logic - what about the tax preparation industry that exists do to an ultra-complex tax code? There are many other examples. Many aspects of the regulatory state might be best considered a jobs program for the reasonably intelligent in the way that ditch-digging is a jobs program for physical laborers.

I had a realization a while back. We might be better off if we could shut down all of the fake work and specific social programs that actively harm productivity, that provide bad incentives (more kids = more $$$), and then just pay a basic annuity to all adults (privatized as a property right) to set a floor on living standards. Make it tradeable and you have an easy mechanism to transfer citizenship, etc. Citizenship is worth something why can't be buy and sell it, and why don't we earn anything directly from it like a dividend stock or bond.

Stefan Jovanovich writes:

Ed (and anonymous also) may be going down the path that my grandfather first set me on back in 1950s. He said that the Wobbly idea about "one big union" was hopelessly naive (he had been in his early 20s when he and grandma joined the IWW), but there was at the heart of it one very good idea - markets work brilliantly for consumers aka people who have the ready but they don't work nearly as well for "jobs". He had started mining when hand drills and sledgehammers were used to create the holes for the dynamite. (He told me that he even worked on one old and stupid mine in Southern Illinois where the owner still used black powder; he said he was young and stupid about politics but not about mining. He worked that job until he got his wages and then took the train to Chicago where he found a job working on what became the Navy Pier.)

He thought the Marxists had it backwards; the last thing you wanted was for the government to own anything and have permanent workers. They would inevitably become worse than even the most naked capitalists because they would never, ever have to stand the test of the market. You wanted competition and prices in everything; BUT you had to have everyone who accepted those rules be able to share in the prosperity they created. In his day miners did that sharing by literally passing the hat for sick and disabled workers and for burial expenses (for the children as much as for the miners and their wives). The idea of a "one big union" was that the hate would be passed for every person who was in the United States legally (which was everyone back in the day when people were freely allowed to come here if they passed the entry test for communicable diseases).

When he asked him about Bismarck's "social" programs, which were the model the American Progressives used for their "reforms" (sic), he just laughed. "You mean the laws that guarantee that every gymnasium graduate has a job telling everyone else how to behave?"

He would have agreed with Ed that even citizenship was a property right that people should be free to buy and sell. What he wanted attached to that right was the annuity claim to have the hat passed. And, he thought everyone - Rockefeller included - should have an account. "It is the only way to prevent people from thinking they need to make distinctions between the people who "deserve" to have the hat passed and those who don't." Sooner or later, he told me, the preachers will want to get their hands on the money and say it came from God. "But what about the communists and the socialists?" "Same thing, only they will say it came from Darwin."

The man has been dead for more than half a century, and I still miss him nearly every day.

Ed Stewart writes:

Very interesting, Stefan. It makes a heck of a lot of sense to me. I would love to read more if your grandfather or anyone else ever mapped out the idea further.

Stefan Jovanovich responds:

Ed asked if anyone had ever mapped out the Wobbly idea of one big union. The answer is "yes" - every time someone sits down and calculates what is spent on "poverty" and the parts of public health that do not deal directly with quarantines, innoculations and other direct measures against communicable diseases (in other words, almost all of the "wellness" spending). The most recent effort was this one:

"This week, the U.S. Census Bureau is scheduled to release its annual poverty report. The report will be notable because this year marks the 50th anniversary of the launch of President Lyndon Johnson's War on Poverty. In his January 1964 State of the Union address, Johnson proclaimed, "This administration today, here and now, declares unconditional war on poverty in America." Since that time, U.S. taxpayers have spent over $22 trillion on anti-poverty programs (in constant 2012 dollars). Adjusted for inflation, this spending (which does not include Social Security or Medicare) is three times the cost of all military wars in U.S. history since the American Revolution."

"Federal and state governments spent $943 billion in 2013 on these programs at an average cost of $9,000 per recipient. (Again, Social Security and Medicare are not included in the totals.) Today, government spends 16 times more, adjusting for inflation, on means-tested welfare or anti-poverty programs than it did when the War on Poverty started. But as welfare spending soared, the decline in poverty came to a grinding halt. How can this paradox be explained? How can government spend $9,000 per recipient and have no apparent impact on poverty? The answer is that it can't. The conundrum of massive anti-poverty spending and unchanging poverty rates has a simple explanation. The Census Bureau counts a family as "poor" if its income falls below specific thresholds, but in counting "income," the Census omits nearly all of government means-tested spending on the poor. In effect, it ignores almost the entire welfare state when it calculates poverty. This neat bureaucratic ploy ensured that welfare programs could grow infinitely while "poverty" remained unchanged."

Grandfather, being clear-sighted, knew that you could take all the money spent on the officially poor and divide it up among everyone - Rockefeller included - and eliminate poverty tomorrow; but, that would offend everyone who wants vices to be illegal and everyone (usually the same person) who wants official helping to be a sinecure that can be passed down from generation to generation just as parsonage livings once were. These are my words but his thoughts: "The snobbery of the caring classes will always win."



In an article today about Pimco they disclosed that they prefer holding bond futures as opposed to cash bonds. The logic being that since futures only require a good faith margin they can deploy excess capital into higher yielding shorter term corporates for the interest payments. The futures positions are used primarily to capture any price movements on bonds. They hold a $63 billion position in 5, 10, 30 year futures which I calculate represents roughly 11% of the open interest and every quarter they would need to roll 630,000 contracts.

Jonathan Bower writes: 

One of the huge trades I remember them making many years ago on the floor was selling 30-50k out of the money puts on US and TY. They did this several expirations in a row. The rationale was they could capture the premium and if the market went down they'd take delivery at their line in the sand. Perhaps it is an efficient way to put on size at a target level.



 There is good news in the nuclear patch. The US Nuclear Regulatory Commission (NRC) approved a new nuclear power plant design. It is GE-Hitachi's Economic Simplified Boiling-Water Reactor (ESBWR). Barring a few procedural hoops, GE-Hitachi's design is officially certified.

It's a big deal.

GE-Hitiachi can now sell their reactor to any qualified buyer in the US. Once certified, the design can be used to make unlimited number of reactors without additional regulatory review.

Internationally, NRC's certification is the golden seal of approval. Sovereign buyers know the certification means the design and equipment is safe and reliable.

For all practical purposes, there are only two reactors that have earned NRC's design certification. The other is Westinghouse's AP1000.

Today, utilities can go to the reactor store and buy an off the shelf reactor. They now have a choice between a boiling water reactor and a pressurized water reactor. No matter which they chose, it will seem expensive.

A new ESBWR or AP1000 will cost owners approximately $7.5 billion per copy (this is opinion, not fact; it varies by location). This hefty price tag limits the number of potential buyers.

New regulatory framework.

An easy way to understand NRC's certification process is to consider commercial airplanes. When Boeing or other manufacturers design a new airplane, they must submit their design to the FAA for their analysis and approval. Only after the FAA approves the design can Boeing build planes for unlimited number of airlines.

A decade ago, the NRC changed their regulatory process to mirror the process used by the FAA. Now the industry needs only to seek approval once so they can build many.

Builders must also seek site approval. That process has also been modified. After site approval, a utility can build any reactor they choose as long as it has been certified.

The site process also mirrors FAA's process. For example, FAA must also approve new airports. After approval, any certified plane may use the airport.

Reactor market.

Other than TVA restart project, only two utilities are building new reactors. Four AP1000s are under construction in Georgia and South Carolina. More have been announced. Many more have been shelved.

The current market is not the US or EU - at least not yet. The current market is China, India and oil producing regions. For example, Saudi Arabia is going "all in" on civilian nuclear to displace domestic oil consumption.

Internationally, nuclear power is far cheaper than most alternatives. When a nation is forced to import hydrocarbons, most pay a price that is indexed to oil. When those hydrocarbons (oil, natural gas, coal) are used as fuel for a power plant, the cost of electricity becomes prohibitive.

In Saudi Arabia's case, nuclear can easily pay for itself in five years (plus or minus). If oil prices increases, the payback is even faster.

Here is a bonus. No western nation will criticize another country if they choose to build a nuclear plant using NRC-certified technology. Even Iran could build an ESBWR or an AP1000 without much objection.

Good news today.

There are many winners today. It is hard to find a loser. The regulator delivered as promised. The market has a new choice. It is easier for utilities and nations to buy new nuclear technology.

To add frosting to the cake, ESBWR and AP1000 technologies are neat. Both are next generation designs, which take advantage of passive technologies. There are fewer moving parts. The plants are safer, more reliable and economic. Every backyard should have one.



 I live in a very safe neighborhood, but tonight, I was attacked.

Indulge me as I explain and muse at the same time…

As many of you know, I am not a real trader/speculator like most of you. I believe the road to riches comes via riding the tortoise. I eschew the hare.

Managing risk within in a portfolio is paramount to success. If one can lessen risk, one, slowly but surely, gets ahead.

But there are some risks that you just can't account for. Things that unexpectedly come out of nowhere and knock you for a loop. Things that, no matter how hard you try, you just can't account for them happening.

I had just such thing happen to me tonight. I was out for my nightly walk in my very safe south St. Louis county neighborhood. A neighborhood far removed (25 miles) from the riots that happened in Ferguson a few weeks ago or the crime that occurs in north St. Louis city or East St. Louis.

I was walking my usual 5k route. It has the right mixture of hills and level paths that weaves through my subdivision and neighboring subdivisions. As a matter of fact, on this pleasant September night, I was enjoying the cool fall feel of the night while talking on my iPhone to Professor Haave…

…when it happened…out of nowhere…I was attacked.

The attack came swiftly and silently. I never heard a thing

One second, I'm walking, chit-chatting with Gordon, and the next second, BAM, something cold cocks from behind, right in the back of my head. For a second, I saw stars.

I was hit so hard, that went flying forward, almost knocked over. But I was able to right myself.

Having grown up in a rough neighborhood, I've been in this situation before. I quickly regrouped, turned my body sideways to decrease the "body area" available for another strike from my unseen enemy, brought my head in close to my body to protect it from further blows, raised my arms up in a defensive position ready to defend or strike.

Just as I was turning, I saw something zip over my head, and figured that my attackers were throwing something at me and missed. I braced for another blow as I searched for my attackers…

No second blow came. And no attackers were to be found…

As I'm processing my surroundings, I'm also talking to Gordon, basically saying, "what the crap just happened? I just got smacked in the back of my head." I can hear Gordon talking to me, but I'm not really listening…my mind is reeling and my senses are on high alert

As all of this is happening, my mind is processing the data that is available…

1. Silent attack (check)

2. Swift attack (check)

3. I saw something that went over my head as I was turning back towards my attacker(s) (check)

4. That something that went over my head landed in the tree right in front of me (check)…wait…what? NO CHECK…

Then it hit me…….even though it was very dark, I could see something up in the tree about 3 feet above my head. It looked like a blob of some sort. Wait…..that's not a blob….that's an owl!

Then it all made sense…I was just attacked by an OWL. Yes, a freakin' OWL just attacked me in my safe and secure riot free neighborhood. And to reiterate, I wasn't just given a love tap by this owl…oh no…it hit me in the back of my head so hard that it almost knocked me over. I saw stars!

I announced to Prof. Haave what had happened, and turned my iPhone on to the camera feature and got this picture of the culprit.

So, now I'm back home, with a knot on my head and a headache to match. I've got some minor scratches, but nothing too bad. I'm probably going to take a shower and go to bed shortly……and dream about ways to account for the risk of potential future owl attacks.

Of course, why stop there…My neighborhood is lousy with squirrels…..and as we all know, squirrels are Imps of Satan. Evil little beings that chew up my ceder roof shingles. I hate those little tree rats.

So do I account for the risk of squirrel attack. If so, how? What about opossums? Those things are mean. And let's not forget about the skunks.

How do I account for all these risks…?

Or, maybe…I'll just not worry about it. You can't account for all risks. And some risks aren't worth accounting for. Sometimes you just have to put up with the headaches caused by rare owl attack.
Yeah, that's it. I just won't worry about the things that really don't matter that much.

However, I do have a headache, so owl have to take some aspirin before I go to bed…but I'll hang around and write more if you can sparrow a moment for some more bad puns.

Sorry those puns were kind of fowl.

(I'll show myself out.)



Interesting study, though the numbers are small.

"Study Says People Smell if Someone Has the Same Political Beliefs as Them"

Scott Brooks writes: 

You can also tell a lot about people from the shoes they wear, their clothes, the kind of car they drive, and how many bumper stickers they have on their car. 



The Betfair Sportsbook is paying out a substantial six figure sum on the NO vote three days before the market closes, fully confident that the Exchange will once again be the most accurate barometer of a political vote…

The moves comes as the £8.6m Exchange market remains vehemently in favour of a NO vote at 1.27 (1/4 and a 79% likelihood), despite opinion polls predicting a much closer result after the votes have been counted on Friday. Over 85% of the total volume traded is in favour of a NO vote.

Several big individual trades continue to come on NO, with one customer staking £55,000 and another backing it for £27,000 on Sunday alone.

There has been little sign of the YES vote gaining any traction with political bettors, trading at 4.5 (7/2), and the average size of bet placed on this outcome under £80, in comparison to the £465 average bet for the NO vote.

Betfair's Naomi Totten said: "Political bettors have often favoured the Exchange as their choice of betting platform and it has historically provided an accurate prediction of political outcomes. Paying out early on our Sportsbook is testament to the esteem in which we hold the illustrious track record of our Exchange.



 One attended a lecture By Malcolm MacKay, author of Impeccable Connections, about the rise and fall of Richard Whiteny, who was the face of the stock market during 1920-1936 before going broke pegging the stock of a distillery in New Jersey whose game plan was to sweep the nation with apple jack after prohibition was repealed. Whitney spent 3 years in jail and had the entitlement that one often sees among the white shoes whereby when he was in trouble he'd go up to his worst enemy on the floor and ask him, "spot me 250,000 on my face" for a few months as I'm behind on some debts. He had 15 outdoor servants and 5,000 acres on his hunting estate in short hills so often he was in debt. He believed in free enterprise and thus was assured of getting bad press but he deserved it, as he showed no remorse for all the millions he embezzled. Fortuitously he embezzled so much from the NY Yacht Club that they had to sell their adjacent property to the Harvard Club where the lecture was held, and where the present author was not on the losing side of the lead up to the Nationals there for 10 years. He jauntily walked into the US steel pit on black Thursday and bid up the shares of all the blue chips thus temporarily stemming the tide of black Thursday so that stocks closed down only 3.5 %^. His brother ultimately paid off all his debts, and knew of his transgressions but was advised by the senior Davis law firm not to bail out a wrong doer as he might be an accessory to the crime.

Whiteny always wore his Porcelain pin and got some good hits on the prison baseball team playing first base. The wife came back to him after his mistress left him shortly before he entered Sing Sing where he was called Mr. Whitney, and the prisoners stepped aside when he passed. He ultimately tended a farm in Mass, and started a mail order orange company in Florida which he kindly offered at cost to his Harvard classmates on his 50th reunion book. He was the bond broker for the Morgan Bank interests during his heyday.

One should add that I had two distinguished guests with me, the father of market psychology, Mr. Brett, and Mr Siskind, the king of real estate deals during the last 50 years. Brett wondered whether Mr. Whitney had bi-polar disease and Donald Siskind noted that his personality was very similar to many of the real estate developers of the the previous generation. I would note that he reminded me of Peter Peterson who would throw out memos on the floor on the understanding that the servants would pick them up and transcribe them. It should be noted that Peterson once told me that Lorie liked to call him whenever there was a new joke, and didn't hesitate to do so during the Oct 19, 1987, crash interrupting Peterson from a board meeting.



 I now recall that Victor once mentioned that Charlie Munger wrote about him in his book, but I had forgotten about it, and it was a surprise to see Victor's picture and a very complimentary commentary about him and "Niederhoffing the Curriculum" in Poor Charlie's Almanack.

The book is not new, it's from 2006 but I find it worthwhile. Some day I'll resolve the cognitive dissonance between Stefan's experience-based opinion that Munger is evil and the relatively useful book in which he doesn't appear to be.



 I saw a great true documentary on the Discovery channel a few weeks back and it seemed to have some market lessons. It was unique in that there was actual film footage of an accident taken by the passengers/victims themselves.

It started out innocently enough with 22 tourists going on a sunset whale watching cruise on a double deck 60 foot sightseeing boat. The sky was ever so slightly overcast with slight rain. The 22 passenger/tourists were filming themselves and showing their excitement. A few in passing mentioned the weather with one man saying to his beautiful wife maybe we shouldn’t go, I am a bit nervous. The sexy wife said, oh stop worrying (sexy broker offering some stock in a slightly down market?). The captain now exits and gives a small speech and says, oh don’t worry about the weather, I have been doing this for 35 years (your broker saying great market buy any dips and don’t worry), enjoy your sightseeing trip and whales. Now the film footage shows the excited people on board looking forward to seeing the whales as the sun sets.

Unfortunately the whales hang out by an island where the seals hang out and where the great whites also hang out. The weather unexpectedly became a bit worse, the captain made an error and a black swan ensued whereby the boat overturned–all of this was filmed by various passengers. Most of them fell into the water and were panicked. They stuck together for some time and then one had his leg taken off by a great white and the ocean filled with blood attracting a feeding frenzy of great whites, which the experts commented happens 100% of the time. But something happened that the experts have never observed-all of the great whites left the area to make room for the boss a 35 foot great white who had the entire feeding ground for himself (like the markets making way for a great whale, central bank or the like?).

This great white ate the woman who told her husband not to worry as she clung to a giant buoy (actual footage showed this gruesome scene). Even now with coast guard helicopters above, the currents became to strong and people were drifting away. They were close to rescuing 1 chap but were 1 minute too slow as the same great white took him. All told, 3 people were killed and many injured. Sometimes you just don’t know when the markets will do something completely unaccounted for or unexpected in ways that no one imagined.




I continue to await lower oil prices. It's been a long wait. But I've enjoyed following the innovation in shale oil and gas drilling, and fast expanding oil production, especially in Texas.

Maybe the notes below will be of interest to Daily Speculations readers.


The Short Shale Oil Investment Horizon

Shale oil production is booming across Eagle Ford and Permian Basin in Texas. Lower taxes and regulations, and quick drilling permit approvals speed the process. In a recent post Riding Down the Cost Curve: Shale and Oil Sands Extraction, I noted Eagle Ford production continues to exceeded projected production.

A Motley Fool post dated May 2014, noted that Eagle Ford production started with just 358 barrels of oil equivalent a day in 2008 and: "Today, Eagle Ford output now tops one million boepd." The author further tells readers: "And based on projections by Benteck Energy, production is expected to surpass 1.5 million boepd by 2018."

Well, welcome to 2018! Eagle Ford production is now projected by Energy Information Agency to hit 1.5 million a day this month. Horizontal drilling and hydraulic fracturing has brought the nearby Permian Basin field back as well, with production rising through 1.7 million barrels a day.

U.S. shale oil production that the Energy Information Administration had predicted just a month ago would slow by 800,000 barrels a day in 2015, it now predicts will rise 1 million a day, to reach a total of 9.53 million (though being off by 1.8 million barrels a day in just a month suggests at least the second decimal point in EIA's prediction is optimistic).

Shale oil skeptics claim the shale oil boom is unsustainable, and maybe these skeptics influenced EIA projections. Shale skeptics note that new fields play out quickly and many are barely profitable. Shale pessimists think investors are being taken for a ride.

Shale oil enthusiasts argue that this same short life of shale oil wells allows shorter time horizons for investors, making shale plays uniquely sustainable and predictable. The billions invested to reach down to massive deep water reservoirs require many years to break even and turn profitable. Success with deep water investments off the coast of Brazil, Ghana, or Nigeria turn on continued high oil prices a decade into the future, and just as important, depend upon stable governments a decade into Brazil's, Ghana's, and Nigeria's future.

Shale oil operations are much less expensive, requiring just millions and paying off costs then returning profits to investors in just a few years. If oil prices fall off a cliff next year, shale oil drilling will quickly slow or stop until prices recover.

Smaller initial investments allow hundreds more small firms to launch shale oil operations, plus encourages a range of experimental innovations to improve yield, lower costs, and speed production. With shorter investment horizons and less uncertainly, shale oil drilling draws in more marginal operators. The most efficient producers are making lots of money, but less efficient producers keep operating. Marginal shale oil operations that require, say, $90 a barrel oil to survive, can keep drilling with oil prices at $95, since short-term hedging can lock in a similar price for a few years.

So the race is on for shale oil operators to ramp up across the many U.S. shale oil fields, applying newly advanced expertise to yet unexplored fields. Last Tuesday at the Kansas State Fair I talked with a farmer from Salina who from time to time over the years had earned $4 or $5 an acre for oil and gas leases. No firms had yet drilled, but he enjoyed the extra cash. After some years with no leases, a small firm recently offered to lease his land, but this time at $185 an acre.



 Argentinian malbec has been showing up at great prices under ten, and its a good wine. The Argentinian pesos is dropping through the floor. Official rate is 8. Last year I got 10 peso exchange down there at any restaurant or store by paying US cash. Probably could get close to 20 now. That's a nickel to the dollar! There would be good travel deals there. Its a beautiful country.

"Argentinian Devaluation Seen in Offshore Peso Gap: Currencies"

I think its making their wines super cheap. I like them better than the Cali cabs which I'm pretty sick of due to their artificial flavoring.



 Check out this beautiful new book: The Book of Trees: Visualizing Branches of Knowledge

It's tempting to consider information visualization a relatively new field that rose in response to the demands of the Internet generation. "But," argues Manual Lima in The Book of Trees: Visualizing Branches of Knowledge, "as with any domain of knowledge, visualizing is built on a prolonged succession of efforts and events."

This book is absolutely gorgeous. I stared at it for hours.

While it's tempting to look at the recent work, it's critical we understand the long history. Lima's stunning book helps, covering the fascinating 800-year history of the seemingly simple tree diagram.

from a very good blog post review of the book



 Shades of Galton….


In his fourth-floor lab at Harvard University, Michael Desai has created hundreds of identical worlds in order to watch evolution at work. Each of his meticulously controlled environments is home to a separate strain of baker's yeast. Every 12 hours, Desai's robot assistants pluck out the fastest-growing yeast in each world, selecting the fittest to live on, and discard the rest. Desai then monitors the strains as they evolve over the course of 500 generations. His experiment, which other scientists say is unprecedented in scale, seeks to gain insight into a question that has long bedeviled biologists: If we could start the world over again, would life evolve the same way?

Stefan Jovanovich writes: 

The absence of time's arrow is fascinating. The "fittest" compete in a world where the rules are constant and invariable - "meticulously controlled" - while everything we know says that the rules are always changing in ways that even we brilliant humans fail to predict. Still worse for the purposes of experiment, the rules sometimes instantly and violently, even as they obey all of our entirely predictable laws of physics.

Ralph Vince comments: 

This has nothing to do with "fitness," and everything to do with randomness.

Take X scenarios. At each discrete point in time, they branch into one of these X scenarios, such that after Q discrete periods, you have X^Q branches.

Your "expectation," (not in the classic sense) is the sorted median outcome (whereas the classic sense expectation is the probability weighted mean outcome, and I contend that in the limit, i.e. as Q->infinity, they converge *).

About this sorted mean outcome (at QP0, in the paper this thread pertains to) there is a vast region of similar-outcome branches. It sounds to me as though this experiment has lass to do with evolutionary "fitness" and more to do with artifacts of expectation in finite time.

I am working on a proof of *, but working on it with respect to continuously-distributed outcomes (as opposed to discrete "scenarios") as well as continuous(though fininte) time, rather an discrete increments of time to Q.

It is a struggle.

Mr. Isomorphisms adds: 

This may not be what you're looking for in proving *. But the other day I worked out that you can exploit the "soft max" identity (seen in tropical geometry and elsewhere) to get analytic formulae for the median, third-from-top, etc. (only with log base ∞) which might get you where you need to go.

max = log_t ( t^a + t^b + t^c ), t going to infinity

min = log_t 1/( t^-a + t^-b + t^-c ), t going to infinity

second_max = max( {a,b,c} - max({a,b,c}) )

With recursion you can get all the way to the middle. (Now since we've turned the median into a continuous function we can take derivatives, which I haven't simplified or played around with since I realized one can do this. But I don't think that relates to your * — just hoping the method would.)

Steve Ellison comments: 

Regarding Shane's original question, yes, there is a phenomenon known as evolutionary convergence. Isolated areas with similar conditions often have similar life forms that developed independently. For example, cacti originated in the Western Hemisphere, but there are plants that originated in Eastern Hemisphere deserts that also store water and have spiky exteriors.

Gary Rogan writes: 

Clearly there are niches in the environment, just like there are in the economy, the market, the arts, sports, etc. It seems self-evident that a species that thrives on a Pacific island is likely to be different from a species being able to survive in the Arctic or at the bottom of the ocean. Not having "a single, cannibalizing species inhabiting the planet" only speaks to the niches in the environment not some complicated problem with evolution.

Ralph Vince adds: 

Perhaps we DO, in effect, have one, cannibalizing species, depending on how broad the field of view of our lens of examination.. How many animal life forms on the planet have but one eye? "Evolution" having eliminated that not-so-robust construction in all earthly environments. Is our notion of "species," which we believe to exhibit a vast array of life forms, only show us carbon-bases life forms with, at most, five senses. In that sense, is a penguin so much different from a scorpion from a human being? The notion itself of "food chain," with such biochemically similar life forms, is, in effect, an exercise in cannibalism. 

Gary Rogan writes: 

Since the evidence points to life arising or being successfully introduced to Earth just once, it's not surprising that we only have carbon-based life forms. And just because a scorpion shares a lot of genes and proteins with penguins doesn't mean they are of the same species, simply based on the definition of the word: to be so classified they'd have to be able to interbreed. I'm now no longer sure what the point is, but hopefully "descent with modifications" is not in question.

Ralph Vince clarifies: 

My point simply put, is that I don't find "evolution," or "Survival of the Fittest," an adequate model, i.e. a panacea for how life arose and differentiated (to the restricted sense that it has) on earth. I find it too simplistic of a solution, believe there are likely many other explanations (all of which are, in a limited sense, true, similar to the wave/particle properties of light) and am interested in any other explanations (there is not a debate here, aside from one which I don't believe you ascribe to of "Fitness" being an explanation for all life on earth).

For example, (to the best of my knowledge) every living thing seems to fit somewhere into the food chain. Perhaps there is an overriding-yet-undiscovered mechanism requiring this as a license for life on earth? (And if not, why not? A stupid question, unanswered, is still an unanswered question. I believe evolution seems to explain so much that we use it to explain where a different mechanism may be the driving one, yet, occluded by the seemingly-obvious-to-us explanation of "fitness"). Evolution is a powerful explanation, but it does not explain everything.Not that I have a problem with "fitness" as a driver here — clearly it is, so I am not at odds with you there (though I am not so sure life was introduced on earth only once, again, viral and fungal life is a difficult leap from living cells). So I simply wonder of what other driving mechanisms are at work here that we are unaware of.

Gary Rogan writes: 

Ralph, as it's generally hard to prove a negative, especially in open-ended complicated situation, I can't argue that there are other forces at work. As for fitting somewhere on the food chain, all carbon-based life forms eventually get weak and if not eaten at that point die. Weak or dead concentrated proteins and other valuable chemicals present too rich and too easy a food source not to be consumed by something, so this particular point doesn't instill a sense of wonder in me, but perhaps there is more to it than meets my eye.

We should keep in mind that on the average over any appreciable number of generations every existing species or otherwise categorized collection of biological creatures has almost exactly one descendent per individual, otherwise within a short span of time the group's mass would exceed that of the planet or conversely disappear. Therefore available resources present arguably the highest hurdle on the success of species, but as Hamlet said, "There are more things in heaven and earth, Horatio, than are dreamt of in you philosophy."

Ed Stewart writes: 

Speaking of the food chain, I think the concept of the tropic level has some serious application to the markets, as I the chair documented in his first book. Might be particularly good model to analyze the impact of various stimulus measures - what level the stimulus directly stimulates, then who feeds on that level directly and indirectly for investments opportunity.

anonymous writes: 

There are no marsupials above the Wallace Line above Australia. Below there are the myriad odd and strange life forms in Australia. It was a function of geology creating distinct eco zones and separate paths of development of life forms.



"NBA Hawks GM Ferry Takes Leave After Luol Deng 'African' Remark"

My friend wrote to me the other day, "I Wonder what the Politically Correct element is in the markets. What are we not supposed to notice in order to preserve the current order."

I suspect there is a meal for a lifetime in this statement.



 From Borrow: The American Way of Debt:

While Ford may have pushed cars, he never pushed debt. Ford so loathed the sapping of freedom that debt represented for him that for most of the 1920s he refused to sell his cars on financing plans, and in the process nearly bankrupted Ford Motor Company. His hostility to finance, coupling an anti-Semitic hostility to Jewish bankers and a mechanic's hostility to anyone who didn't make anything, hobbled the company. That Dick could get a job at General Motors, which believed in debt wholeheartedly, is largely a testament to Ford's hostility to consumer credit.

In the 1920s, Americans, both borrowers and lenders, discovered new ways to finance consumer credit, and, of course, it was only the beginning. Debt was everywhere, and its ubiquity was made possible by changes in finance, manufacturing, and law that had occurred after the First World War. High interest on consumer loans had long been illegal in the U.S., but around World War I, progressive reformers, seeking to drive out loan sharks, pushed states across the country to raise the legal interest rate. Now able to lend money legally, at rates which could be profitable, new consumer finance industries sprung up overnight. The legal changes coincided with a new generation of cars and electrical appliances that were both expensive and mass produced. The installment credit allowed manufacturers to sell these new wonders at a volume, and consumers could afford them because of the easy monthly payments. What ultimately made all this lending possible was that lenders could now, for the first time, resell their debt.

Stefan Jovanovich writes:

This is very bad history. Henry Ford disapproved of debt, but he had no problem with his dealers offering it. Where Ford's stinginess really hurt was his failure to offer financing to his dealers to allow them to finance their inventory. That is what GMAC did. Sloan had the wit to insist that GMAC be truly separate so that the brand managers could not channel stuff. The explosion in debt in the 1920s was not in consumer debt at all. It was in producer and public finance.



With all the talk about history, one should note that the markets had a historic move last week. Bonds went down 9 of 10 days, a total of 4 1/2 points, the last 6 days in a row something they do only once a year. Crude and the grains and gold and silver are down about 10% in the last month. The stock market is still at an all time high relative to the fixed incomes even after declining one % last week. People forget that bond yields are determined by expected inflation at a time like this, and that gold has nothing to do with international tensions and corn has nothing to do with the size of the harvest. What a time for great macroscopic trades, and level thinking.



 Two top NFL running backs are in the news.

I wonder if a mental health component will be found to be associated with these cases? Repeated hits to head at RB position? PTSD and concussions… actual physical evidence of brain damage?

Forces are much higher in the NFL (Mass x acceleration) these days — brain matter being pushed back and forth (sloshed) by collision contact at almost all positions over and over in game and at weekly practices– regardless of helmet used and whether its head to head or not… special teams on kickoffs and punts being particularly risky plays.

The Peterson case involves child discipline vs. child abuse issue.



 Marty Hogan's Power Raquetball was a 1978 paperback large book I got for 25 cents at a library book sale. It shows Hogan hitting a racqetball under a speed gun at 142 mph, and even shows Keeley with a shaved head playing in a match trying to psych out his opponent. It shows Keeley losing to Hilecher, on the floor as his taunting fails.

There are lots of conditioning exercises and routines in it. Here is a wrist strengthening exercise: with palm down, arm extended, get a double sheet of newpaper, hold it by the corner and start to crumple it with one hand only. Try and crumple the newspaper sheet into a ball the size of a raquetball. This exercise uses all the fingers and is better than simply squeezing a ball. Do it twice a day.



 Elections were held today and votes cast. Reinfieldt by most accounts is a good prime minister and statesman, but paradoxically the lure of change for change's sake appears to be in the works–the pendulum swings and pieces are rearranged on the chess board. A country of 10 million with a certain amount of world-wide influence…

"Sweden's Politics":

Sweden's election: The eight-year itch

The centre-right government of Fredrik Reinfeldt has been a great success, yet voters may well eject it in favour of the Social Democrats

FOR a decade Sweden could plausibly claim to be Europe's most successful economy. Anders Borg, the (formerly pony-tailed) centre-right finance minister since 2006, likes to trot out numbers for his time in office: GDP growth of 12.6%, a rise in gross disposable incomes of almost 20%, a budget moving into surplus and a public debt barely above 40% of GDP. These figures not only outshine Britain and the euro zone; they also eclipse America.



I wrote this article and thought you might all be interested: "Authors Must Be Marketers".



 The contagious and pervasive influence of video on our popular culture and markets is highlighted each year by the Video Music Awards held for the 31st consecutive time on Sunday, August 24.

The influence runs the gamut from the extensive time our kids spend with video compared to other pursuits to the spate of billion dollar deals and hundred million user apps that are reported daily these days.

Considering that the demographics and spread of video are ripe for epidemic growth, it seems like an appropriate time to consider how our market activities can be influenced by video.

A good place to start might be the following 10 interactions with markets that the recent awards ceremony elicits.

1. The VMA video of the year was won by Miley Cyrus and accepted by a homeless man who is wanted by the police.

The investment implications are that we should buy the grains to feed the homeless, buy the brics that are in troubles, buy fixed income of Spain and Italy and Greece and Portugal, and other weak EC countries.

Redistribution is the meme for the next year.

2. A cursory look at the video game and video music industry shows that the customers are young and growing and diffusing to all countries. All the major internet platforms are seeing more traffic to these applications. The customers are young and have a life expectancy of say 40 years more than the average customer for a product. This means that repeat business which is always more profitable should be feasible. The spate of acquistions in this space, the latest being Amazon's buying of Twitch and the emphasis that all the device makers and search engines are placing on making their equipment compatible for videos shows that the most knowledgeable and most successful companies in the world see this trend continuing.

The obvious implication from the VMA's is to buy the video stocks. Regrettably they're all up a google this year, but the growth rate trumps value any time. The top video stocks are Electronic Arts, Activision Blizzard, Take Two Interactive, Vevo, and Game Stop. The weather gauge is so good that I believe I'll buy them myself.

 3. The most useful words… are small. All the big stars of the Video world and other world have one word names. There's Bey, Iggy, Sia, Miley, Eminem, Lorde, Avicil, Ariana, Kesha, Usher. Does the same dynamic hold for companies? Are the best companies, the ones that are most exciting, most useful, perhaps most profitable, one word companies.

I found 124 companies on the S&P 500 with one word names. Corp, LLC, and Inc were not considered as words. The average performance of the 124 companies was 9.1% in the first 8 months of the year, a hair above the average of 8.0%. For the rest of the 176 companies with two word and more names. A suggestive difference but not a significant one as the average deviation is 5 percentage points. Hats off to the best one word S&P 500 performers: Alco, up 60%, Nabors, up 60%, Mallinckrodty, up 59%, Micron up 56%, Allegran, up 52%, Delta, up 51%, and Harmn, up 44%. 

4. There is a stampede of interest in video music. Vevo, a joint venture of Sony and Viacom, for example, has 6 billion downloads a month, up 50% from last year. Interest in video is spreading like wildfire. Who will profit from this? Most of the videos are being watched on Mobile. Who will profit from it? During the gold rush, the popular wisdom with some truth in it is that the suppliers of materials and apparel like Levi Strauss were the ones that profited, not the gold miners themselves. Who are the platforms, the suppliers, that will profit here. Perhaps Facebook, and Google, and the distributors of the music will be the best buys. 

 5. The more one learns about the video music field, the more respect one has for the movers and shakers at MTV. They are not only at the hub of all that 's going on in the field, but they make the trends. Each year, they have another innovation, some of them quite revolutionary. The latest was that they had multiple screens, and multiple feeds going for the VMA. Now, everyone will have to have two or more mobiles and TVs going at all times including the shower. Their latest trick was to have a team of translators on hand to make all the messages about the VMAs fit for mobile.

One looks back on previous VMAs and notes the prescient way that they showed same sex kissing, nudity, and many other aspects that became the be all and end all of popular culture. Their latest VMA's spread the meme of the importance of family with Bey holding the child and kissing the husband, and of course the idea that has the world in its grip that the purpose of life is to take care of those who have less, and to redistribute the wealth and trophies to the homeless, and to make policing less violent and more in tune with the neighborhoods they cover.vIt's no accident that Angelina and Brad announced their marriage right after the VMA. As always the trends were set and popular culture follows.

Okay, we know that popular culture is set here. How does it affect our market activities. Let us buy family friendly stocks, like Bed Bath and Beyond and Disney for starters.

 6. Why is it that video of all kinds is up 50% year to year with a typical statistic being that interactive streaming logs 35.5 billion streams in a current quarter versus 25 billion last year, or Vevo being up 50% to 40 billion downloads a quarter versus 25 billion? The ease of communication from mobile as opposed to a fixed location in a home or a car is the difference. Also, the ability to download contributions from everyone in the world versus a few producers who are responsible for the fixed communiques. We're living in a mobile world, with the know hows and ideas of each individual available for the masses. It's a communications revolution in the new millennium comparable to the industrial revolution in the 19th century.

7. If you can't beat them, join them. The populace demands video. The DailySpec is a meal for a life time that is not with it. We need video here. We are looking for a attractive video personality that knows enough about markets to encap one of the daily spec contributions or Brett's each day in a 2 minute focused and interesting fashion. We'll pay a reasonable amount, and the personality and we will become relevant and modern and diffuse through the masses. Note: One would like to thank a Director of Marketing at MTV, Ms. Joyce Kwon, for alerting me to the importance of video, and the excitement and influence generated by the VMAs.

8. We only respond to video these days. Until the tape of Rice beating the wife surfaced, or the beheading of the reporters was aired, there was no outrage. We're wired to respond to images of things. With all the video apps, the only way to spread a meme these days is through clicks and forwards. All bid individual moves in companies can be accelerated by videos as in the recent Apple announcements of the new Ipods and countless others. 



I am reading more and more about use of statistics to predict human behavior. We saw it in athletics, but we also know gugl and fcbk use it extensively. Target and most retailers rely on it and use it, and so do dating sites to glean users preferences, whether they know it or not. Credit companies use it. It's big business. But it's not very out in the open because most people find it incredibly creepy and invasive. Yet they continue to use FB, Gugl etc. Where is the line of privacy vs. prediction vs. voluntarily disclosed info and the use of it, the aggregation of the data, sales of data, use of data? It's a new world and there needs to be a discussion about it. There a some very talented statisticians on this site I know. Market data is used as a predictor of price action and people's preferences or habits. I am sure there is other correlated info out there that predicts price action. The question is how is that data, and what data is it that predicts price movement?



 The hot hand is a topic garnering renewed interest. (Chair has previously mentioned the shortcomings of some of these behavioral studies).

So maybe Alabama-born guard Andrew Toney, a Philadelphia 76er, did have a hot basketball hand–I'd like to think so. It would make a good follow-up interview and book topic.

At any rate, a link to a "hot-handedness" study was found mentioned on Jordan Ellenberg's blog (an Orioles fan by the way and author of a new book entitled How Not to be Wrong: The Power of Mathematical Thinking. Under his August 16, 2014 comments Ellenberg writes: "New 'hot hand' paper by Brett Green and Jeffrey Zweibel, about the hot hand for batters in baseball. They say it's there! And they echo a point I make in the book (which I learned from Bob Wardrop) — some of the "no such thing as the hot hand" studies are way too low-power to detect a hot hand of any realistic size."

1. Here is the link to the paper and interesting comments from links found via Brett Green's homepage, Assistant Professor at UC-Berkeley (Haas School of Business).

2. from another article on the topic:

Zwiebel says the earlier researchers were too quick to conclude that the belief in a hot hand was evidence of a cognitive or behavioral mistake. Most likely, what's really at work is not so much a mistake but an "equilibrium adjustment" around the hot-handed player — similar to the kinds of equilibrium adjustments that occur in finance and economics.

The behavioral camp jumps too quickly to the conclusion that almost all sports fans and participants are under a dumb illusion that there are hot hands," Zwiebel says. "They have jumped to that conclusion because it fits their story that everyone is making cognitive mistakes and that these mistakes are extraordinarily pervasive.

3. The existence in basketball of the hot hand was discussed by Harvard researchers at a recent conference and in a Boston Globe article: 

With the Harvard graduates able to know the position of the players on the court, they could see that players with recent success in shooting were more likely to be taking shots from further away, facing tighter defenses, and throwing up more difficult shots. "They were more likely to just jack it up," Ezekowitz said. "Shoot more often."

So the researchers controlled for these variables—and found what players and fans have long believed: The hot hand does exist. At least a little. According to the new research, players enjoying the hot hand are 1.2 to 2.4 percentage points more likely to make the next shot. Not exactly en fuego, but still.



 What are your favorite podcasts?

Some of mine are:

Dan Carlin's Hardcore History and Common Sense - quirky commentary on history and current events

Freakanomics - by the author of the book 

99% Invisible - looking at design elements or things behind the scenes (like the tile pattern in the floor of the Atlanta Hartsfield International Terminal) 

Several from the How Things Work web site, and Stuff You Should Know site

Truth for Life with Alistair Begg (conservative pastor from Ohio)

Several Red Hat (my employer) specific including the DG Show which is two senior architects discussing general technology with a serious bent towards security.

I use Pocket Cast because it syncs across multiple Android devices and allows variable speed listening

Marlowe Cassetti adds:

I like to catch the podcasts from Porter Stansberry (on iTunes &

Some other podcasts i listen to:

The Data Skeptic 

In Our Time with Melvin Bragg 

The Skeptic Zone (they did a three phase interview with me) 

Monster Talk 

Skepticality : The Official Podcast of Skeptic Magazine 


Oh No Ross & Carrie [ ]

No, I'm not a podcast addict, although my wife has a different opinion.

Big Al says:

The one not to miss is EconTalk [ ]



Do any of the sports bettors on the site (Jeff?) have a sense of the following:

Scottish Independence is a binary event, thus the simplest to balance your book. You should therefore be able to make a dutch book?

Further, if the odds don't reflect the real probabilities, in theory, speculative money (or the bookmakers proprietary money) should balance them back up.

But, for uncommon events which involve a high percentage of public money, for which prediction is relatively difficult and unproven, do the odds generally manage to find equilibrium at the true percentages perceived by educated bettors? Or are they sometimes set to balance the money flows?

So for Scotland: if English will "emotionally" bet No, and Scots bet "Yes", and there is a 10:1 population imbalance, will the odds overstate a No?

More generally, say, could Manchester United odds (who have a huge number of world fans versus other football teams) generally be tight relative to the real odds, as "smart money" is insufficient to balance the emotional money? Or is this a sufficiently deep market for proprietary accounts?

Chris Cooper writes: 

Relating it to the practice among American sports books, the overriding concern is to balance the money flow. Thus it is possible to make a dutch book, considering the variations due to location and randomness. I'm not sure how true it is today, but in the past the Las Vegas lines for games involving Los Angeles teams could easily vary from the same lines elsewhere, especially as it gets close to game time, due to the proximity of the cities and thus the money flow.

The lines also vary depending on emotional factors or being public favorites. For example, as "America's Team", the Dallas Cowboys used to command an unjustified perception leading to perhaps a point difference in the spread. Again, the book is just trying to manage the money flow…if it gets too out-of-whack, they will normally try to lay off some of the action.



Grains, from Jeff Watson

September 11, 2014 | 1 Comment

 One must note that the grain market is on its contract lows. 6 months ago, the mention of $5 Dec wheat would have gotten you laughed out of the room, and we're almost there. Same thing with Dec corn closer to $3 than to $4. Nov Beans blew through the $10 the other day and hasn't looked back yet. The gravitational effect of the nearest buck in the grain markets cannot be over-emphasized. Furthermore, the fundamentals like country movement, crop size, carryover, demand, and a few other things support the lower price theory. When beans were at $10.75, I joked that when they got down to $10, I would probably not want to own them at all. Same thing with $5 wheat.

anonymous writes: 

I have very few kernels of knowledge on the grains. But, hidden in Jeff's note I think are some essential points that apply to markets. First, the power of sentiment/positioning and the force of the subsequent shift or reversal of the same. Second, while moves often take time to develop when they do the move is often faster and farther than expected. Third, the momentum in prices that can be generated and the signaling indicators within those price changes and levels. Fourth, the fundamentals and/or perception thereof and the confluence they might have with other supporting factors. Fifth, how does the psychology and risk around such a situation develop and best be handled in terms of adding, cutting, reducing, etc..

Prospectively we might ask what other markets might display similar conditions now to the grains a few months ago?



 The book The Power of Habit by Charles Duhigg, a journalist, is about the formation and the neurophysiological basis for habits and how to change them. I've been interested in this since I was younger. My essay to get into Reed College was about the neurophysiological changes in the brain of the Buddhist monks who meditate for hours everyday. It would take another 25 years before experiments shed any light on this subject. I've also followed behavioral psychology and thought there must be more to it than behaviorists documented.

Apparently the Basal ganglia, a primitive organ in the brain responsible for reflexes is changed when habits form. Habits form on a behavioral feedback loop where there is a cue, a routine and a reward. The habits are subconscious. There is no simple solution because habits are created in a complex environment. It's not always clear what the cue, the routine, or rewards are, and often they're not what first appears.

The author talks about simple habits, experiments with brain damaged patients, about alcoholism and AA, and habits of organizations. Everyone who reads the book wants a simple answer and cure to change their bad habits. It's not that simple. One has to look to see what the cues are and what the true rewards are. The book was a good read, and well documented with notes and sources.

Alston Mabry writes: 

The Power of Habit is a very interesting book. I would recommend, along with it:

Willpower by Roy Baumeister and John Tierney and The Brain That Changes Itself: Stories of Personal Triumph from the Frontiers of Brain Science by Norman Doidge M.D.



 Just about a year ago I sold all of my McDonald's stock after dining at multiple locations in the course of a 2000 mile road trip. Basically I tried most of their new menu items and found them to be disgusting and out of touch. I note today they reported terrible same store sales and the stock has done poorly since I sold.

It might be just one example, but I think Lynch was on to something when he suggested that it is a good idea to sample the companies products that you invest in. In my opinion, McDonald's badly needs a new CEO and strategic direction. Regardless, I will be sampling the food on this year's road trip, and hoping for improvement.



 There's lot you can learn from watching this last week at the US Open.

1. Never rule out the 'impossible'. Have to backtest, but never has a 1 and 2 seed lost in semis to two double digit seeded opponents.

2. At same time, champions do what champions do after a series of bad results — the grand empress of tennis had a big win after poor results over the entire year. Sooner or later they always find a way to get back to the top. It doesn't come cheap. She worked her ass off all year and summer following Paris and Wimbledon.

3. Cilic is an example of how working hard and staying committed to improving oneself can eventual topple the game's best. An inspiration to anyone outside the top three. Perhaps a warning blow. Federer conquest aside, he had Djokovic on the ropes at Wimbledon and let him off. He learned from that.



 Satyam Shivam Sundaram.

These 3 Sanskrit words together, have formed one of the most quoted and misunderstood treatises of ancient Hindu wisdom. Taken one at a time the three words mean Truth, Basic & Beautiful respectively. The root words for each of these words is Satya, Shiva & Sundar meaning Truth, Basic/Basis, Beautiful respectively. In this statement however each word ends with the suffix "am" (prounced as "um" as in gum) that basically is the conversion of any noun into the active entity. This phrase/sentence thus has only nouns and each is the active entity!

Since Sanskrit is one unique language that does not require any rules of syntax, we can translate the original in six different combinations, as follows:

1. Truth is Basic hence Beautiful.
2. Truth is Beautiful & hence Basic.
3. Basics are Beautiful & hence True.
4. Basics are Truth & hence Beautiful.
5. Beauty is the Basis & hence True.
6. Beauty is Truth and hence the basis!

Is there any contradiction? Well, if there are any felt by any, we can recline on Ayn Rand who surmised, "….check your premises". One of the several ways in which the premises can be checked and contradictions removed, that one may take all the six meanings together.

This list is a place where scientific approach to seeking truth prevails. I would be keen to hear from any who notice any contradictions in these six translations and of course from those who can wrinkle out and eliminate any contradictions to help establish a basic beautiful truth about truth, beauty and the basics.



 I’m not a fighter or a lover but these happen to be two of the four methods used in handling at least 100 street fights over the years. 90% of them have occurred in third world countries, but the techniques are as effective on the Bombay waterfront as NY Harlem. These are the four primary reactions available to normal citizens who go about their days and are suddenly confronted.

FIGHT – The general reaction to fight requires knowing how to or, at least, facing a weaker opponent (unlikely). The first rule of street fights is to grab an equalizer, a stick, bottle or rock. Don’t bluff a fight without expecting to be called on it.

To illustrate, a month ago after a night snack a man stepped under a lamplight and began screaming obscenities at me. Normally I would walk away from this, especially since there was no robbery attempt, however there were children nearby and it would have set a poor example. So, I handed my ankle weights and backpack to the kids, and stalked the man out the light who backpedaled and stumbled into a heap. It was as if a wind blew. Two weeks later, I was assaulted with a ring-neck tackle by a stevedore and had to fight on the street of Iquitos. Luckily, he fell into a familiar wrestling move and was beaten.

FLEE – The best practice is to have the fleetest feet around the world, assuming no guns are involved. It doesn’t matter how many thugs there are, if you can sidestep or outrun them it’s usually the best practice.The other afternoon on exiting a house of soiled doves, I was then surrounded by four young men with theft on their mind. I pulled off the end of my thumb with sleight of hand, and walked out the astonished circle. A few nights ago on exiting the cinema, two dirty men popped out an alcove as if from a movie in heavy jackets with hands in their pockets on a 95F evening. I sidestepped them into the street where they didn’t follow. It’s always a good idea at night to walk away from sidewalk alcoves and into streetlights.

TALK – 80% of my confrontations end after a few words. Most solo thugs dread conversation with a grammatician.

Yesterday I was attacked by three youths brandishing sticks on the Rio Amazon beach, and simply growled at them, ‘You don’t want to do that,’ and they left. The night before, a man with a butterknife closed in as I entered my hostel, and I stuck my hand in my pocket and stood steadily at arm´s length and replied, ‘Are you ready?’ It was a gamble he didn’t risk knowing what, if anything, was in my pocket. (In this case, Mace.) A single question had prevailed.

HOPE – Most victims stand mute and shocked when accosted by a thug. This is what every mugger bets on, so if you can have mentally rehearsed and kick into one of the foregoing three methods –Fight, Flee, or Talk - your chances of escaping unscathed with your wallet are high.

 I’ve acquiesced a few times when ‘outgunned and outnumbered’. In one instance in Venezuela two men thrust warning jabs with machetes in my ribs and legs, and I just asked them to leave me bus fare. Another time, in a boxcar I let two tattooed men rob me of little as they motioned toward the open boxcar door of the 40mph train that the option was to jump. After they took my billfold, I gave them cucumber & tomato sandwiches and we became more friendly. They gave back my shoes that had my bankroll under the insoles.

My personal methods in fights are the same as animal surgery, to begin with the most conservative and escalate to the most extreme. One knows in a sentence if talking is going to work, probably not. I never use hope. I flee 2 of 3 times even if I think I can overwhelm the opponent because fighting is dangerous in high numbers. However, on every third situation I hold ground and fend off or attack in order to maintain a mental and muscle memory for the struggle.

You don’t have to be Captain America to have a straight backbone. One of the best things you or your youngster can do is to take a martial art class to gain confidence. The best are wrestling and Aikido. In any case, the four fighting methods of Fight, Flee, Talk, or Hope are the same. And, as my old wrestling coach used to say, mentally rehearse the move a hundred times before you try it on the mat, and then a thousand times on the mat before you take it to a tournament. A fight is just another day at a tournament.



 One of the nation's largest grids is PJM Interconnection. Pepco Holdings' native territories are exclusively within PJM's borders. Exelon's native territories straddle PJM and a neighboring grid, but most of their assets are located within PJM.

Today, PJM's independent Market Monitor announced a potential problem. If the Exelon - Pepco merger takes place as planned, there could be a market problem.

In a report to the federal regulator, who needs to approve the transaction, Monitoring Analytics, LLC claimed, "The transaction should not be approved based on an incomplete record, or without taking steps necessary to protect the public interest in competition."

IMO, this will be resolved. Exelon will negotiate with the Federal Energy Regulatory Commission. Like Duke Energy (DUK), Exelon will give up something for FERC's approval. But the merger will become more expensive.

This will not be Exelon's last hurdle. In addition, more expenses are likely. If there are too many, the merger will not take place.



 This book is an enjoyable compilation of studies that are so dense with fruitful analogous studies it is hard to share them all. The book is Behavioral Mechanisms in Evolutionary Ecology Published by University Of Chicago Press.

There is an interesting study in the book involving benefit optimization in birds' foraging behaviors relative to varying probabilities of success in various patches that are foraged in. Which is evolutionarily optimal: the benefit maximizers, the imitators, or the do nothings?

Also there is an interesting one about how to respond to signals when there is a varying probabilities of correct interpretation and/or response (studying frogs). I'm skeptical of the field studies, but the models and reasoning for them is nevertheless insightful and speaks to any one who has a love of economic thinking.

Dylan Distasio writes: 

Here is an interesting article about pigeon behavior:

And here is the abstract of the study

Whereas humans are risk averse for monetary gains, other animals can be risk seeking for food rewards, especially when faced with variable delays or under significant deprivation. A key difference between these findings is that humans are often explicitly told about the risky options, whereas non-human animals must learn about them from their own experience. We tested pigeons (Columba livia) and humans in formally identical choice tasks where all outcomes were learned from experience. Both species were more risk seeking for larger rewards than for smaller ones. The data suggest that the largest and smallest rewards experienced are overweighted in risky choice. This observed bias towards extreme outcomes represents a key step towards a consilience of these two disparate literatures, identifying common features that drive risky choice across phyla.

Orson Terrill comments: 

"Pigeons and humans showed remarkably similar patterns of risky choice, with both species showing risk aversion for low-value rewards and a tendency towards risk seeking for high-value rewards."

Is what underlies the strategy of acquiring deep in the money long dated calls in speculative stocks (SolarCity, Tesla…) and selling nearest dated calls in those same stocks essentially dealing to self selecting risk seekers paying the highest premium? Often it looks reasonable to get back your principle within the first year, and then another 6 -12 months of risk premium as income. The reserve requirements and added costs of frequent options exercises to see how much the return is reduced by those could be a deal killer…

Carder Dimitroff asks: 

How do you do this profitably for SCTY? How deep and how long?

anonymous comments: 

There are experts here that can answer this better; I don't have the real answer. This is in the context of the thread…. trying to deal to the most risk seeking individuals. The idea is to make it as much as like a covered call portfolio as much as possible, but reduce the cost of owning the shares by owning a deep in the money long dated call, with the minimum volatility premium, and subject to the belief that the income from selling near dated volatility can repay you over the duration of the longer dated call. This would suggest the longest dated possible, and probably a strike around half of the share price.

As an example: last week the cost of the 40 strike Jan 16 calls relative to the cost of the 70 Sept 12 calls. Would have put you at ~4% gross for the first week. It's not hard to imagine that after slippage, spreads, and transaction costs that it is possible to recover the cost of the long dated call in ~70 more weeks of selling nearest dated calls. However adding how much, and what, are the portfolio opportunity costs from needing to deliver on those short dated calls sold, and tax issues, make it look iffy at first blush…but it seems like there could be something there.

Even now there might be a $170 credit on selling 12 days (weekends are real) of upside risk from the Sept 20 calls against the the $3500 cost of the 40 strike in Jan 2016. Then you have to repeat the near dated selling; if you brought in $170 on ~21 of the 41 12-day periods leading up to Jan 2016 there would be a break even (gross). That seems like that is a large enough cushion to consider what may be left after taking the total portfolio approach to mitigate taxation, spreads, commission costs, and what return that is against the all the assets involved to implement…



 All Harvard and Yale would have to do to increase their endowment by 2 billion a year, would be to dollar average, putting all their money into index funds or Spiders on a once a month for 12 month basis over the next years, and eliminate 99% of their fund managers.

Russ Sears writes: 

One of the hardest things to do is to get someone to see they made a mistake because they did not have a broad enough vision or face all the the important facts, when they did have a well thought out plan but based on a narrow approach.

Kahneman's "what you see is all there is" needs to be expanded, to include the stubbornness that comes with it. This is the real danger of modeling. A good scientific model can help you overcome your emotional biases, but models are not perfect. Admitting that the models are not reality and letting yourself adapt when they are not accurate representations of what is happening is critical. This is why I believe in "counting" except when there is a liquidity crisis.

Basing performance on a Sharpe ratio has several problems / efficient frontier has several problems that it is blind to. First, it does not consider liquidity and accounting risk. Second it is exposed to modeling error on hard to model assets. And third it is exposed to execution risk or timing risk due to over-managing "exotic" assets.

A nice accounting scheme, can make certain assets almost guaranteed high sharpe ratios for the short term. Ask Gordon about how this worked with Federal Home Bank Loans and insurance companies. But same can be said about most real estate and other illiquid assets.

Second, the models assume correlations are constant and that there is no auto-correlation within the time periods. But if any asset is exposed to runs on the them, such as home ownership, then these are not valid assumptions. Structured assets are highly exposed to this risk. But so are banks and cash value insurance companies.

Finally, those that are blind to WYSIATI risk are those most susceptible to the news. Buying high because they hear how great others are doing. And then sell at the bottom because they hear how the others made a mistake. Further, most organizations that are void of valid self examination of leadership have many second tier leaders looking to say "I told you so" for any investment outside the norm, whatever that norm may be.

I have sat through many efficient frontier presentations where the conclusion was always the same; invest more in illiquid assets, invest more in assets that are impossible to model right, and invest more in exotic assets which I knew management did not have the guts to buy low and sell high.



 I am sure you have seen and heard the story of Benjamin Franklin's 13 moral virtues, but here they are as a good reminder for all of us:

TEMPERANCE. Eat not to dullness; drink not to elevation.

SILENCE. Speak not but what may benefit others or yourself; avoid trifling conversation.

ORDER. Let all your things have their places; let each part of your business have its time.

RESOLUTION. Resolve to perform what you ought; perform without fail what you resolve.

FRUGALITY. Make no expense but to do good to others or yourself; i.e., waste nothing.

INDUSTRY. Lose no time; be always employ'd in something useful; cut off all unnecessary actions.

SINCERITY. Use no hurtful deceit; think innocently and justly, and, if you speak, speak accordingly.

JUSTICE. Wrong none by doing injuries, or omitting the benefits that are your duty.

MODERATION. Avoid extremes; forbear resenting injuries so much as you think they deserve.

CLEANLINESS. Tolerate no uncleanliness in body, cloaths, or habitation.

TRANQUILLITY. Be not disturbed at trifles, or at accidents common or unavoidable.

CHASTITY. Rarely use venery but for health or offspring, never to dullness, weakness, or the injury of your own or another's peace or reputation.

HUMILITY. Imitate Jesus and Socrates.

Stefan Jovanovich comments: 

Two grunts from the peanut gallery (where everyone is still unhappy about seeing the end of the Fed's career):

1. The maxims were written as a scold for his son William, who was Royal Governor of New Jersey at the time (1771) and hardly needed lessons from Dad about how to get on in the world. (He could have used some help later on when the Revolutionists threw him into their improvised jail; Franklin literally turned his back on the man and never spoke or wrote to him for the rest of his life. This matters because it is only through the efforts of his grandson that the autobiography was published.

2. One of Twain's early hits was his essay on Franklin's autobiography; it was not a favorable review but it was wildly popular when it was first published in 1870 (of course, these are the same people who voted twice for Grant so what can you expect.) My favorite line in the Twain essay is this one: "His maxims were full of animosity toward boys." They were and are.



This story [about the first demonstration of anesthesia at Harvard] has many of my favorite things in it, including Harvard's ability to pull the wool over the eyes of its alumni and pay its fund managers 100 times as much as the average professor, not taking into account that there is no sales cost, no symmetry of risk, and no taking into account the normal random variations in performance which would always lead to some doing better and some doing worse. But more importantly it causes one too reflect on how he should change his views over time, be open to new things, and be humble, and appreciative of the young and unaccredited. What revisions of your thinking have been helpful, and what should we do so as not to decry things of value.



 Dedicated to the upcoming Gary Webb biopic, dir. by Michael Cuesta and starring Jeremy Renner. KILL THE MESSENGER comes by way of Webb's own first-person report in his book, DARK ALLIANCE.

Evocative of policiers such as the 1982 film starring Sissy Spacek and Jack Lemon, MISSING, and the iconic ALL THE PRESIDENT'S MEN, KILL THE MESSENGER announces its aim right from the gate, which is perhaps its only misstep. Kill the messenger tells us too much, too soon, since we are all familiar with the Greek-tradition from which that phrase hails. Famously scripted by Shakespeare in Henry IV (1598) and later in Antony and Cleopatra (1607). Prior to that, a similar sentiment was heard in Sophocles' Antigone: "No one loves the messenger who brings bad news." Messengers with bad tidings from the war front breach the invisible code of conduct, where commanding officers were expected to accept and return emissaries or diplomatic envoys sent by the enemy unharmed. UnKumbaya warrior leaders, of course, never got the memo. Ancient messenger job definitions often failed to add that the job description had unexpected short-range expiry dates.

Reporter Gary Webb, from a tiny provincial newspaper in a minor media market, becomes the unrelenting target of a vicious delegitimization campaign by larger sibling newspapers and the thin-lipped octopus of the federal government operating under dubious justification. The clandestine op was never supposed to have emerged, and it is perplexingly layered and dark, at every level primed for plausible deniability from prying eyes. The pushback, steely and implacable, drives Webb from job and family and to isolation and despair as he exposes the CIA role in arming the Contra rebels in Nicaragua by a Tom Clancy-like black ops to fund rebels via moving unthinkable quantities of cocaine. One kingpin in a grand jury admits to selling more than $1 million a day, of hotel rooms rented solely to stash unmanageable ceiling-high mounds of cash. Though the Agency covers its tracks, confident they are above investigation, as who would dare?, they mount their entrepreneurial cash-only business importing and selling crack: "The powder's for white-folk. It's too pricey for our market," says one dealer.
The fallout, as clips from the 1980s demo—several showing Maxine Waters and other activists of the time, and today–is an epidemic of crack users among the inner cities, in America's black communities. What seems a novel aspect is that even the drug dealers pushing tons through the ghettos do not have an inkling who or what is behind the importation and distribution network. Even they seem flummoxed by the scale of the op, and by its 'sponsors.'

People 'disappear.' Witnesses melt away. Identities sift out of existence.
The exemplary Renner heads a stellar cast in a tautly scripted, tightly packed thriller of how one reporter's diligent reportage of the drug phenomenon of the 1980s was a deliberate, unsanctioned project of Langley, Virginia. Drugs for money for unseating the side the US chose to kick.

The action is as cinema verite kinetic as possible, with major kingpins in jail (Andy Garcia as Norwin Meneses), billionaire 'farmers' leasing their fincas to gun-toting drug processors and flight drops, DC insiders and a host of side players: Ray Liotta, a shadowy character seen in dusky partial light, remorseful but uber-cautious John Cullen; and a sympathetic but stressed, loving wife, Anna (Mary Elizabeth Winstead, empathic in a painful, equivocal role). Curvaceous Paz Vega is underutilized as a top drug-lord's svelte, impossibly gorgeous, scarily manipulative babe, Coral Baca. Michael Sheen is again outstanding (watch him and Lizzy Caplan in "Masters of Sex") as driven, reluctant government deep throat, Fred Weil. Oliver Platt the great plays the tough editor of Webb's home newspaper.

Webb tries to keep the home-fires burning as his life is everted like a Glad Bag in the town dump. The sudden star cub earns his spurs, briefly incandescent in a field laden with hidden and overt landmines.

Most Americans wondered why all of a sudden a crack epidemic burst all over the news; now we know. It was engineered and massaged by lawless Big Feet who needed lots of do-re-mi to fund their pet contras. In the event, millions of young men and women died. Millions of minority kids spent their youths out-smoking their educations and incomes and career aspirations.

The late-comer rival papers and the murky men behind the grey suits and unsmiling faces unsheath their silent threats. One way or the other, how does one lone man stay the course, navigate between ominous antagonists eager to shoot down all those inconvenient 'truths'?

What is deplorably worse, it is all based on a true story. We felt the way Renner/Webb seemed to feel when we were investigating the "suicide" of Vince Foster, Hillary's quondam lawyer, or more, found in peculiar and impossible circumstances in a DC park. Found with an attaché, first full, then empty, with an office first full, then empty. We felt hunted, every moving light at night a threat and a fear. Every window an invitation to a magnum.

How, by the way, does one classify TWO shots to the head as a "suicide"? One is dead after the first shot; any second shot would be impossible.

We vacillate: Is this an anti-patriotic, anti-government exposé depicting the corruption of our investigatory agencies? Or a chapter that needed to be told, damn the consequences?

More than a thriller. Gritty, compelling, fraught with betrayal. Oscar bait.




George Meegan, who walked around the Americas for 12 years and holds the record for the longest walk, will be speaking at the Junto this Thursday at 7:00 pm.

The meeting will be held at the Mechanics Institute at 20
West 44th St between 5th and 6th avenues in Manhattan.

All are welcome. 



The emphasis is always on "free" when it should be on markets. Markets are the miracle of human invention– the one thing that we do than other creatures, event those more intelligent, skilled and long-living, have not bothered with. Markets only exist where 2 things occur at once:

1. People, by force or common acceptance, have outright ownership in what they are selling

2. Buyers have either money or good promises to pay money that the sellers believe they can use for payment when they become buyers

Markets are never "free" - there are always rules from the king, the viceroy or the legislature, as enforced by their minions, that dictate the conditions under which buyers and sellers are allowed to meet. And, most certainly, the king, the viceroy or the legislature, enforces through their minions the monopoly of the government over the question of what can be used to pay taxes. And, most certainly of all, there are always taxes. Commerce is always bent; but, even so, it is more liberating than anything else people do to each other because it assumes that each person is, as Friedman, put it "free to choose".

I wish/pray (depending on the day's preference) that the Libertarians and their allies would abandon their prohibitionist/abolitionist manias about absolute freedom (no borders, no armies or navies, no copyright laws, no legal tender, etc.) and simply become the party of "more" markets. The American labor movement only began to grow freely, without government enforcement, when Samuel Gompers persuaded others that their demands should be simple. "We do want more, and when it becomes more, we shall still want more."



There is often a tell. In retrospect of course. This time the tell was the hang seng up 2 1/2% on some seemingly ephemeral service survey, presumably doctored. How did Hong Kong know that there would be a Russian settlement? What other tells were there.



The Shipibo are an indigenous people of the Amazon rainforest who live in the 21st century while keeping one foot in the past millennia. Many traditions are still practiced such as ayahuasca shamanism, and the females in their colorful decorative clothing singing old songs are popular shamans at the Iquitos lodges.





















 I'm in Chicago for a few days to attend to some personal business matters. I'm sitting in hotel lobby when a part of three very loud men sit down at the table next to mine and began to discuss the previous evening's Chisox game. I couldn't care less about the Chisox, mind you. Not my team. But when one of the three fellows observed that "Baltimore is just having a lucky year," I calmly looked over at the fellow and asked, "A lucky year? Really? Why do you say that?"

"It has to be luck. Look at their players. There's no A-Rod there. No Jeter. They're over-performing. It's just luck." "You mean like last year was luck?" "Yeah, like that. Last year, Baltimore was lucky too." "Do you think Baltimore is always lucky?" "For the most part, sure. It's not in the big leagues that Chicago is. Or LA. Or New York. Or Cincinnati."

That last comment burned my ears.

"You're from Cincy?" "Yes, yes, I am. 3rd generation P&G." "So remember the days of the Big Red Machine." He smiles and responds, "Yes, yes, I do. Johnny Bench and Sparky Anderson? Yeah. Those were good times." "Do you remember the 1970 World Series?" "No, not specifically. Was there something special about it?" "The Big Red Machine was in that series." Another smile. "Yes, yes. I remember now. They were."

"Do you remember what Sparky said about that series?" "No." "Look it up. Something about dropping a paper plate and being thrown out at first." The image of Annie Savoy lecturing Nuke LaLoosh on the importance of lizard eyelids to success in baseball forms in my head. "Sparky Anderson?" "In 1970, Brooks Robinson played 3rd based while Orange Crush, the 1970s Orioles, systemically took apart the Big Red Machine." "OK. I guess Baltimore had a good 1970 season." "Y'think?" "But there's no way the Orioles can be as good as their record suggests. No way. How can they possibly win games like that without the players?" "Easy. Pitching, defense, and an 'Earl Weaver Special.'" "What's an 'Earl Weaver Special?'" I was getting up to go to a meeting and finished paying my tab. A waiter came over, smiled at me as he laughed and said to the fellow, "An 'Earl Weaver Special' is a three run dinger. I grew up by DC, and we heard about them all the time. Everyone in Maryland did." I looked at this very confused Reds fan, and said, "Buck's for real, and so are the Orioles. Orioles Magic is back. Get used to it. This is a team that's going to remind people of how the Birds flew high in the 1960s and 1970s." "But they're just not that go—" "They're for real. Get over it." At that, I got up and the waiter, clearing dishes off the table, smiled at me. I gave him a thumbs up. He laughed, and I walked off to go to my meeting.

I grant you that every team is entitled to its due. And those who know me know all too well my passion for the Birds, dating back to the time I got laryngitis as a 3 year old screaming about a Jim Gentile home run. But the reality seems to be that sports teams in Baltimore don't get much respect. The Os this year are the real deal. They don't just win. They create runs. They persevere when the pitching staff is having a bad outing. They cover for one another, and while Machado (before the injury) and Hardy aren't quite Robinson-Belanger, they're getting close. Is Brian Gaussman a Jim Palmer? Not clear yet. How about Chris Davis? Few teams could have handled having their heaviest hitter go into the swoon he did and handle it as well as the Os did this summer. And I don't mean teams just in 2014.



 Friends in Japan tell me there are going to inflate big time and expect stocks there to rip to the upside.

Charles Pennington writes: 

I'm going to bet with Larry. Japanese stocks (as sampled by etfs like EWJ [large caps] and SCJ [small caps]) are trading at around 1 times book value, 4 times cash flow, and 14 times earnings, and that's going to look attractive when free money gets thrown around. Rocky made this point in early 2013 right before a big rally, but what he said then is still true.

anonymous writes:

One of the largest economic myths is that Japan has been in economic cellar.

John Floyd writes: 

DXJ is a good way to play as it takes out the exposure of being long the Yen, should the Nikkei and USDJPY indeed go up. On a timing issue I think there are 2 key points to take in:

1. Structurally, unlike previous announcements and moves since the late 1980's the current move to end the economic malaise is much more entrenched and has wider breadth both from political and social support and the actual measures being using (the 3 arrows). Remember it was the stated intent of the BOJ in the late 1980's to deflate the stock market, they succeeded all too well.

2. Cyclically, Japan's economic growth is likely going to be lower than the BOJ is forecasting while inflation is also going to be lower than they think. However, it seems that the BOJ will not be revising its economic forecast until October and it will be sticking to its policies till then, but is likely to have increase QE prior to year end.

Gary Rogan writes: 

I don't understand how it's possible to to predict the effect on the Japanese stocks of this one factor. Earlier this year Japan raised its consumption tax from 5% to 8%. Last time anything like this happened was in '97 when it was raised from 3% to 5% and caused the economy to slip back into a recession. I don't think Larry believes that recessions matter for stock prices, but that's an arguable point. Also, Japan as an export economy cannot afford to inflate the cost of its exports, so you gotta believe that the price of Japanese stocks in dollars can't rise too much assuming there is anything like a recession or just economic doldrums. Someone mentioned hedging the yen exposure, and that may be the way to go. I'm also concerned that China is getting out of hand with the US walking around with a "Peace Now" sign. I any case, a single-factor analysis seems like something too simple for this situation.

Edward Talisse writes: 

I lived in Japan for a long time. It is very tough for non yen based investors to make money in Japanese stocks. The Nikkei tends to rise only when the yen depreciates, so any rise in stock gets offset with currency losses. Japanese stocks are all about corporate governance issues rather than financial metrics. Shareholder activism is rare and companies are usually loathe to reward shareholders with dividends or buybacks.

Obviously anything can happen. Last year N225 was up 57% and Yen was down about 30% and I am sure many are happy to have banked net 27% …but it was still below the S&P which returned 32%. Personally, I am routing for a big win in Japan and I hope the people there succeed. It just tough to make money. If you believe in the reflation story, it may be easier to just short the Yen and forget about stocks. Shorting JGBs should be avoided. All the bonds are domestically held and the BOJ buys whatever the MOF issues.

Lastly the story put forth here that Japan did not or has not suffered a lost couple of decades is at odds with my experience. There are people sleeping on the streets in Tokyo just like in NYC and senior citizens are in a deep pinch due to a lack of income on their savings.

Charles Pennington adds: 

Everybody hates the yen!

I was surprised to learn that the yen (as of July) is 24% undervalued based on the Big Mac Index.

anonymous writes: 

That makes sense, range has been -30 to 0 for past decade or so, and from semi recent travels on comparative basis the cost of hotels, coffee, noodles, etc. has not really changed much in 25 years, real interest rates have been comparatively high.

Alston Mabry writes: 

And at the same time, the surprising thing is that New Zealand is more expensive than Japan.

Peter Tep writes:

Wait until you see prices here in Australia. You will easily spend $20 a meal for a basic lunch, whatever cuisine have you and a drink. Dinner runs double that sans vino.

Public transport costs here are stupid as well as the parking costs. If you were out of town and were Parking in underground park for corporate lunches etc, you are looking at $30/hour.

Personally for me I travel some 15kms to work on the bus which costs me about $12/day. Mind you wages here are running higher I suppose with baristas (coffee makers) earning some $20+/hour. Friends of mine in the 20-30 age group pay $150-300/week in rent for a room in trendy inner city suburbs.

Just perspective for those interested in on ground prices!

anonymous writes: 

Peter, Thanks for the rundown on Australian prices, but they don't sound expensive compared to Silicon Valley.



The total risk in a trade can be deconstructed as the sum of market risk, process risk and idiosyncratic risk wherein each risk element originates respectively from the trade, the process of trading, and from the trader. This is akin to the idea that any observation has only a partial perspective if the focus is only on the observed. A complete perspective will incorporate the observation process as well as the observer.

The same trade of entry in to an X quantity at a Y Price with an exit at Z price when undertaken by any two different traders or by the same trader through any two different trading infrastructure has different risks.

Given, estimations of probability distributions for process risk are similar to those used in operational risk and are less easily believable and the distribution for idiosyncratic risk close to being conjectural / randomness, most of the time any discourse on risk amongst traders ends up focusing only on price or market risk.

Is systematic trading the answer to eliminating idiosyncratic risks borne out of the trader? Can the total amount of risk be reduced for the same expected return level or one is only modifying the type of risk from idiosyncratic to a larger process risk? Or is it that systematic trading trims down both the left as well as the right tails of returns distributions?

This thinking can be tautomerised to ask a deeper question: Is there ever a reduction in risk feasible or it is always a modification of the type of risk? If a money management overlay, whether self-monitored by a stand-alone trader or by an elaborate risk-management department, is eliminating the idiosyncratic risk borne out of a trader in discretionary trading approaches, is there an advantage that while the left tail is aimed to be trimmed the right tail is left intact? If total risk never changes, is there an unaccounted for expansion of process risk that the risk management systems will end up following the Peter Principle?

While good risk taking is what analysts, strategists and commentators also do as traders do, it is the skill at avoiding bad risk taking or winding up a risk-exposure that is going bad that separates traders from all other market-citizens.

While all bad risk taking can be avoided by actually doing nothing and holding on to the theoretical cash, the moment one begins to even trying good risk taking, the skills at avoiding bad risk taking must come along.

Finally for now, if the value of risk at a moment is unique to each individual, firm, system, approach yet its historical value (focusing only on the market risk as explained earlier) common for all does it all boil down to "to each his own"? The right combination of good risk taking skills and avoiding bad risk taking skills is then as idiosyncratic as each trader is?



 I have read about these top five regrets of the dying, and have wondered whether they might apply to myself.

I wonder whether people are all that similar. I observe vast differences amongst people, not only from individual to individual, but more importantly from groups to groups. There can be endless ways to group people: by social status, economic status, life style, fundamental belief, spirituality, sociableness, sensibleness, courageousness, risk tolerance, consciousness, and etc, falling under the normal bell curve with the majority of the people near the mean of each distribution. People near the mean of one gauge might be at the outlier of another gauge.

It is also not difficult to imagine that the answers to each of these regret questionnaires also fall under the bell curve. So the top answers are nothing more than a representation of the people close to the mean. Should one care to be normal? Or when they say, "I wish I'd had the courage to live a life true to myself, not the life others expected of me", should one simply say to himself, "I should have the courage to have my own wishes, not the ones most others had"?



 I have much to explain, yet little time to give exact data, much less test a hypothesis. I have been working for a living for the first time since I joined the spec list. I will use the definition of work as per the tax code and my ability to deduct the costs of doing business. Trading is an amazing business opportunity defined by the tax-code or our latest definition of a good business, revenue/employee.

Today is the day to check in after reading, "financial story from Bo". I had to log in this A.M. after reading that post to my daughters last evening. Why isn't that post lit up with comments? Why in the world is economic mobility between class in the USA a good question? It does not pass the Lack S Side street view of the world B.S. test.

I will edit and submit my diaries, re-education of a salesman/street trader asap. I have bought and sold many tangibles from the age of 11 until I was hooked on trading paper. Supply and demand of any item in the zip code you trade is well known by all traders. Consumers, biz to biz or retail are grossly misinformed by the vast amounts of free data from the interwebs. Branding is and will remain what it always has been, the first shot for a trade/sale. The most loyal customer will bolt on price, attitude, availability and probably the most important quality today vs 20 years ago, ability of the customer service. The demands of all customers are unrealistic. I have read the quotes here on the Comcast thread months ago.

A couple quick notes: The profits share of most any sale in many industries to the man on the ground/ revenue are remarkably similar per unit. The best business is of course paper with recurring residuals and fees. If one didn't care, know the risks to the clients or have the ability to handle stress, it is a great business. That is why most here trade or manage paper for a living. Everything else is by unit, service contract and time/revenue= XX basis points payout. I crack up at the different pay plans, bonus structures that I am pitched. I show them the table and their reply to my objection is, "you're looking at it the wrong way".

Lastly, my feet hurt! It's easy for any of us to work easy 55 hour week (+5) homework= 60 The norm seems to be 65+5 or an average of 70… No big deal 6 days a week, 12 hours, a quick sandwich grab, off Sunday. The wife is working until her medical leave. She takes on the AM kid shift and takes them to school. I have, after 4 months off the trading screens, found the ability to sleep in til 7AM and be at any shop by 8am. This enables daddy to be with it 8-11pm for the kids' homework.

I learned a new skill, the ability to listen. Sure that is what sales is all about. No, I am talking about listening to my kids. After homework, we talk for a couple hours. They are very happy as daddy isn't always looking at a computer or a phone. There are not enough hours in a day.



 An article by El-Erian believes that you fail to realize that there is always an unrequited and unanticipated reason for a market move. The question you are asking is incapable of falsifiying as it is descriptive and retrospective rather than predictive. One wonders if you are still suffering from the new normal disease. An acquaintance with the triumphal trip of Dimson, Marsh, Staunton would convince you that the 500,000 fold rise since 1899 in the index was not due to unusual anomalies related to expectations but was due to the return on capital of 15% and compounding. Such a compounding is particualry alluring during times when the earnings price ratio and the return on capital are so much greater than the long term interest rate as would be consistent with theory and the Fed M.O.



 Belatedly ran across the quirky, gently humorous, wonderfully directed indie, ROBOT & FRANK–from 2012.

Produced in part by Galt Niederhoffer, this film offers any viewer from the neonatal to the nonagenarian an unfolding, unpredictable, often charmingly gentle, smily movie experience.

Frank Langella plays aging second-story man, Frank, with his specialty stolen jewelry "by the ounce." He has served several stretches inside, as they say, for a modest variety of thefts, shambling around his increasingly messy home in the outskirt woods of rustic Rye, NY. The rest of the world is electronically savvy, though Frank sticks thoughtfully to his Ludditism, happy enough to avoid all the modern paraphernalia if he can plan his next heist on paper. His two children check up on him often, mindful of his lapses into forgetfulness. He insists he "is joking" if caught in a senior moment.

It played quite briefly, but is now available on NETFLIX, should you have a spare hour or two when you'd like to be delighted, laugh, and admire the great Frank Langella in a role he plays to perfection. The memory-lapsing father/thief receives a sometime gift from his son, Hunter (James Marsden): A robot 'butler' who is programmed to look after Frank, in part to relieve Hunter of his weekly 10-hour round-trips to check up on his father, and loving daughter Madison (Liv Tyler), calling in from Turkmenistan. Stubbornly, not obviously, the father stops resenting the "space-helmeted" short robot as it dawns on him how useful a powerful aide can be. Soon the odd companions try their luck as a heist team.

Jeremy Sisto as town sheriff, Peter Sarsgaard as voice of the appealing robot, boutique store owner Anna Gasteyer in a hilarious hairdo — the film occurs "in the near future," a caption informs us at the opening credits. Susan Sarandon manages to subsume her politics in a sweet (and eventually surprising) role as town librarian.

Not a word of 4-letter animus. No CGI. Beautifully directed, as if the indie were a full-fledged studio offering. Nearly every scene has a lesson to impart on helping the infirm, or not intruding on others' autonomy, plans going awry despite best efforts, with a ripple of ruckus and a chuckle as we consider this improbable Crutch Cassidy & the ceramic-helmeted kid. It did not stay around in theatres very long, mysteriously, but it's a great rental, Netflix flick, or party backdrop. Like honey-laced applesauce and oatmeal in winter, it's a comfort film.



Questioning the Hawthorne Effect: Light Work"

The data from the illumination experiments had never been rigorously analysed and were believed lost. But Steven Levitt and John List, two economists at the University of Chicago, discovered that the data had survived the decades in two archives in Milwaukee and Boston, and decided to subject them to econometric analysis. The Hawthorne experiments had another surprise in store for them. Contrary to the descriptions in the literature, they found no systematic evidence that levels of productivity in the factory rose whenever changes in lighting were implemented.

Stefan Jovanovich writes: 

No one who has ever owned or run a factory (guilty on both counts) believes that you can somehow game productivity. Workers, even if they are also profit participants, will ration their work effort, not out of class envy, bitterness or any of the usual Marxist explanations but simply because they want to have enough energy left at the end of the day to go shopping or play softball with their friends and they know that tomorrow they will have to get up and do it all over again. The people who put in conspicuous extra effort are dangerous: they are brown-nosers who aspire to middle management, and they encourage owners/managers to believe that they need hierarchies of oversight instead of simple, hard rules - don't lie and don't ever ship stuff you wouldn't buy yourself. No labor union can tolerate such a system: it leaves nothing for the shop stewards to pretend to do.



 Your body is a planet. So where is the ego?

90% of the cells within us are not ours but microbes. Likely in the Amazon the figure is closer to 99%. The rest of the lives in you are seen with a light microscope: the human skin is not a desert but covered with microbes, many others thrive within our mouth, dental streptococcus, the nose is a rainforest, the intestines an oases, mites nestle in the eyelashes, a few of the fleet host athlete's feet fungus, viruses loiter inside nerves, the lawn you mow on your head is enjoyed by flea or lice, and the strangest are the hoboesque pieces of DNA that infected ancient humans and still make up about 8 percent of our genome.

Even the body cells such as leucocytes, sperm, eggs, heart muscle, autonomic neurons, and photoreceptor cone cells of the eye may be classified as harmonious bugs.

Do microbes have consciousnesses? Certainly, though they are rudimentary, more like what we evolved from before stepping out of the trees onto solid earth.

The human eye without a microscope can only see objects larger than one-tenth of a millimeter long. Given the right conditions, you might be able to see a human egg. Gazing down at those tiny objects, you stand on the edge of a world of creatures invisible to the naked eye. Inside this strange land microbes live their tiny day to day lives – wake up, eat, communicate, move, and respond.

Over the billions of years on this planet these microbes have adapted to fit their environments. They are remarkably diverse organisms living in fresh and salt water, on land, in the air, and on or inside other organisms. As you read the microbes march, there are mutualisms, parasitisms, battle lines are being drawn, and help is on the way from every direction.

No wonder we have collective unconsciousness.

Living with all these microbes in people is easy if you maintain health, a positive attitude, keep busy, strive a little each day, and opt to be kind.

The last census shows about 100 trillion inside you. We are composed of multiple individuals many of whom alertly believe they are selves. This is why I could never understand conceit. It's nice to stick in the pocket the theory that each is an individual, however my definition of self includes the legions I'm made of.
Is so hard to grasp that you are the ringmaster of a circus?

The self is especially as distinct from the world and other selves. It is the conscious that most immediately controls thought and behavior, and is most in touch with external reality. However, I believe myself is composed of micro-selves that must be dealt with by logic, whip, barter and trial-and-error.

This flies in the face of the psychological definition of self, religious and political views, however if you invest in a microscope and look, it must be admitted that…

The next time you pull on your shoes realize you are a walking ecosystem.



 How many of the rich were in the lower quintiles like What's App which recently sold for 18 billion to Facebook and the owners were on food stamps the previous year. Is that bad for a society to provide such opportunity and for the mobility between classes to increase or should we be like England where once you're in one class you can never move to another.

Richard Owen writes: 

I am unsure if its really true that class barriers exist to any greater degree in the UK than the USA, other than perhaps in the mind or money of the classes themselves. A bit like Mr. Cosby's riffs to African Americans: don't perceive barriers for yourself. As my friend staying at the Knickerbocker club and being variously harassed for his attire, decorum and guests the other week reported "a certain strain of New Yorker could surely teach the British a thing or two about snobbery." Sure, we have a Conservative government with a disproportionate number of Etonians in it, but when one becomes Prime Minister, one tends to reach for trusted friends and fellow travelers. And being an Etonian is not a vote enhancer. Annunziata Rees-Mogg was asked to reframe herself Nancy Mogg for the purposes of election PR. The USA does not seem short of its own political dynasties and classes.

Ralph Vince writes: 

The chair's example of WhatsApp I believe is the exception more so than the rule.

The churn at the higher stratas sees parties leaving unexpectedly. Those arriving, arrive slowly, believing they will be there forever.

Vast sums of money are lost in a day, a minute or the blink of an eye. You see this principle play out at the baccarat tables and the markets. The new arrivals, the beneficiaries of money-begetting-money for protracted periods, often generations. 

Mr. Isomorphisms writes: 

Regarding the very long timetables, I admired both the diligence/ingenuity of Gregory Clark and The Economist for publishing that the surname "Micklethwait" has enjoyed a run of good luck, when its chief editor is John Micklethwait (graduate of Ampleforth College, and later Oxford). Miles Corak also earns a mention in that Economist piece. A short list of Americans from expensive high schools includes Dan Ellsberg, Charles Coker, Thruston Moore, Glenn Close, Adlai Stevenson, Cosma Shalizi, but not Dan Einhorn. 

Stefan Jovanovich adds: 

If you do any serious searching of genealogical records, you discover 2 things:

1. Longitudinal searches of census data by county locations, including the immediately adjacent ones, show limited "social mobility" because the people who stay where they are born and whose children stay there are largely content with their lots in life. This is one reason America scores better than Britain in the 19th century; the people who stayed in Britain were ok with their lives where as, in America, nearly everyone was moving around, even if many of them eventually came back to "home".

2. The people who leave are the ones who become very rich, by local standards, or flat broke or need to get away from the law. The very rich tend to move to the places where they can be with their financial equals (so the Rockefellers abandon Euclid Avenue Baptist Church and become Episcopalians in New York) and the flat broke know they have better chances getting help from distant relatives than from local ones (a great deal of the Northern migration of freed slaves and, even more so, their children follows that pattern). The need for people to get away from the local sheriff hardly needs explanation.

The Harvard study deliberately ignores #1 and #2. "We assign children to commuting zones based on where they lived at age 16 – i.e., where they grew up – irrespective of whether they left that CZ afterward." The study also makes no adjustments for relative costs of living as a discount factor in gauging incomes. A child who migrated from Charlotte to San Jose gained 50% in gross income during the study period; but he or she gained no wealth with the added income compared to a child of lesser social mobility who stayed back home.

There is one other fact of human nature that you learn from reading the ancestry searches people have done: Everyone with any pretensions finds a way to trace their ancestry back to European royalty, even if the parish records stop 300 years or more before the connection is made.



I just stumbled across this and simply could not help myself:

"Not everything that can be counted counts, and not everything that counts can be counted." — Albert Einstein

anonymous writes: 

You can replace the word "count" with "value", and it still works. Or one can replace it with "say" or "mean". As you try to fit in other words, the sentence starts to tell us that whatever we think we know can be so strange to us. Perhaps this can ultimately be rephrased by Lao Tzu's words: "The Tao that can be spoken is not the eternal Tao". 



 Dearest Scotland,

In only days you can choose to cleave yourselves from our United Kingdom. We sit one of the five or six greatest nations and mightiest economic powers on this earth: wedded together in a marriage begun almost three hundred years ago. Please don't end our great union together.

As an Englishman and Welshman, I feel great love for Scotland. As a child I would travel from Liverpool to holiday in the beautiful Welsh Ogwen valley. I would be abroad but at home. I would travel to the wonderful Fort William or idyllic Skye: refreshed and energised in my own nation state. I would no more wish to see this separated than the Lake District carved out and floated off into the Irish Sea.

As in every great marriage, both man and woman take occasion to think: "Did I make the right choice? Am I better or worse in this relationship? Am I fulfilling my potential or being taken advantage of?" And it is good to take stock.

So what have we achieved in our centuries long union?

Together, did we not build the world's greatest empire, bestow it with all of our verdant statecraft and know how, then set it free?

Together, did we not fight off Napoleon, in ships commanded by the Earl of Dundonald?

Together, did we not underpin the defense of the first world war? Would you now deny our United Kingdom a great man like Field Marshal Sir Douglas Haig, who so valiantly led the British Army? At the Somme and Ypres, at Amiens and Arras, would you have us separated?

Together, did we not fight off Hitler, the greatest evil the globe has known? It was Monty and Patton versus Rommel: the three generals everyone recalls from that most vicious of wars. One third Scottish! What great debt do we owe to 1st Viscount Montgomery of Alamein? Would you deny him us?

Together, did we not pioneer industrialisation? Medicine? Enlightenment thought? Scotland is eight percent of our headcount. But in prestige, in know-how, in capability, in pride, it is so much more.

Your countrymen have led us seven times from around fifty prime ministers: a big overshoot relative to your population weight. Do not deny our United Kingdom your capability and leadership. Did you not give us James Ramsay MacDonald? A man who changed the British political landscape forever? Who set the political scene for all that was to come for the labour movement?

Mr. Darling has argued from security and risk. And he makes strong points: the currency, the volatility of oil, the curmudgeon of the European Union. But I say - of course Scotland can be great and secure alone! It is a great country! But let us be greater and more secure together.

As with a marriage, one partner makes complaint and the other responds "we've got it great, why are you carping?" But that is not the right response. They want to hear "I love you, I need you." Scotland, we love you. We need you.

Mr. Salmond talks about NHS privatisation, about Trident, about the Bedroom tax. These are important issues. But they are issues of today, not tomorrow. They can be solved and soon. The decision of independence is forever. It is binding. We have not yet had our great generational challenge. Our World War One. Our World War Two. It is yet to come. But it will. Would you have us face it apart?

Our biggest trial so far has been the financial crisis. We have come through it together arm in arm.

The Royal Bank of Scotland: Fred Godwin's bank. Its equity was almost wiped out and stood vast relative to your GDP. Its assets were at great risk: they dwarfed Scotland's GDP. But we got through it, together.

Why was the Old Lady of Threadneedle trusted throughout the world during the crisis? Because of her centuries long history as a great central bank. Her name respected because of all of our collective credit and productivity. Without Scotland, without your prudence, she is less. Without Scotland, our United Kingdom is less.

But you ask: is Scotland just mistreated property? Can't she get on better alone? Just like a marriage, sometimes you crave freedom to forget all ties and run. But just like a marriage, we can discuss and negotiate. Do you want more devolved powers? Let us devolve more powers. Do you want more freedom and leeway? We can give you that. We can perfect our marriage over time. But like a marriage, each obeys certain restrictions for the mutual good and insurance of all.

And in this decision, let us not discount Mr. Salmond's vanity. He wishes to go down in history as the man who brought Scotland glorious and independent. He wants to make his personal history by tearing up our great communal history. Scotland is already glorious, is already independent. But she is also part of our great union!

Mr. Salmond gave us his final question, what he says it all comes down to: "who decides?" for Scotland.

When the UK negotiated the great post war settlement at Versailles, Scotland was there, deciding. Alone, her voice would be quieted.

When the United Nations Security council was formed from the top five powers on earth, Scotland was named to it. Alone, her voice would be excluded.

When the UK joined with the USA to stymie and defend against communism and the cold war, Scotland was there, deciding. Alone, she would be muted.

In a world where the USA is dominant, the BRICS are growing, where the international scene is as complex as ever, would you cut Scotland from its might within the UN, the IMF, the World Bank? At peace and at defense?

Stay with us Scotland. For you are a great nation. But together, we are one of the very greatest of all!

David Lillienfeld replies: 

A very nice love letter. Please permit me to play devil's advocate for a moment (I have no interest in the outcome of the vote, seeing merits in both sides' arguments).

Dearest England,

I do so appreciate your most recent missive. I cried throughout my reading of it with those sweet memories of days past, when the future seemed boundless. Then my German mother noted that one needs to keep one's head at such times and be frugal and focused on what is best for oneself. I had to keep reminding myself of her comments while reading your wistful note.

You list our accomplishments in the past. They have indeed been great. But, dear England, let's be honest. They are in our past. We are no longer spring chickens, you and I.

But now I find myself the scolded, battered spouse. You've taken my dowry and spent it, and on what?! Estates in and around London. Military adventures in parts of the world in which we had no business. At least you had the good sense not to arm your police.

And those wonderful vacation homes in America. You did a fine job of ruining that effort. All I asked was that you build the house there. Maybe a modest estate, even. That's all. Nice and simple. But no, first you insist on taking those nice people in Africa and take them to work on the estate. They didn't want to be there, but you insisted. Then you bullied France. She was so much fun before you did that to her. You know I've a sucker for French accents, dear. But no, you said, I have to make that estate pay for itself, so you had to tax, tax, tax the hired help. Haven't you learned yet that exacting money from people at gunpoint, even if it is legal, is hardly endearing? Oh, England, when will you ever learn. You manage to mess up so much once you've succeeded with your plan. We were poor once, and you managed to beat the Dutch and the Spanish at their own game. And you looked so regal in doing so. I was so proud of you, dear England, so proud. So now we're left with that island in the Atlantic and its gaudy pink beaches and those shorts which men have the temerity to show off their legs. Well, I never!

At least you had the good sense to send those felons off to that island down under. That was one of your inspired moves—something you haven't had in a while. You left them to fend for themselves, and see? They created a nation all by themselves.

And that empire of yours—the one where the sun never sets. I didn't want an empire, some of us like the night. We used to have so a good time after the sun had set, before you filled ever hour of the day thinking about that damned empire of yours!. You had to send me our son, the one who had nothing more worthwhile than issuing a new version of the Bible, to get me to stay in the family, and I went along with it despite my better instincts. United would be stronger, you said. For a while, you were right. But I caught on to your ways, England. You couldn't even decide what your religion would be at first. When you finally did decide, it wasn't mine. And my favorite clothing—those kilts, my favorite instrument—the bag pipes. You've always pretended to like them. And when I celebrate cultural achievements, where are you? Sunning yourself in Spain. You know I'm too fair for that—I'd burn if I did that. Do you drink any of my libations? I spend so much effort and wait years before it's ready to drink. No, you go for the port. Edinburgh now feels so unwanted when you do that. "Scotch on the rocks" to you means taking some of my best creations and putting him or her in that tower of yours down in London. Really, dear, what were you thinking? That I would welcome such treatments? And that gin you favor. Your people had so much of it that you created a set of laws just to control the drinking. A lot of good that did you. They just switched to beer instead! Not something I made, but beer. Honey, if you wanted beer, you should have married Germany. Mother was right, you are incorrigible.

Now let's go back to my dowry. That oil. You can't seem to keep your hands away from it. I keep telling you not to push, but you do. I wouldn't mind if you spent some of it on me, but like I said, England, you've wasted it. The that gambling on Persia pay off? I grant you that it did for a while, but once again, you managed to make a mess out of success.

And if I so much as mention any of this to you during those few occasions you let me talk, there's little I get besides a slap. So now I sit in my lawyer's office, working on the divorce papers. I'll serve you with them just as soon as I can. You know, England, I went to the bank yesterday, and they told me that you had assumed the mortgage, but you cut off my credit line. And my access to the checking account!. Did you think I wouldn't notice? Do you think this is a way to tell me that you again want to waltz with me through those omnipresent formal gardens of yours. Haven't you realized I have an allergy to roses. If you hadn't taken my wealth all the time, I could have afforded the allergy shots at the doctor's office. No, you said, better to spend on some fast aircraft that no one could afford to fly. I know, you said that getting the French involved would help matters. Well, dearie, did it? Not much.

Well, England, I could go on and on. That nasty man Marx for instance. Not Groucho. He was American. No dear, I mean Karl. He wasn't funny at all. Don't you realize how many people died because of his drivel.

You'll be hearing from my attorneys, Dodson and Fogg, soon enough. And they've warned me that you'll try to drag this out so long that no one will remember what the case is about. England, you better set yourself in because I'll remember.

It's time for a divorce, England, time for me to salvage what remains of my dowry, time to get the bankers to look at me and realize that I have wealth, too, time for you and the rest of the world to see me for what I am—proud, able, with lots of resources and a rich heritage.

Good-bye England my my love. Maybe next time, you can get that bard of yours—yes, Shakespeare—to talk about Scotland some time rather than England all the time. And get it straight, dear. No sex is because you're English. Did you hear me English. It's you, not me. It never was me. So say "No sex please, we're English." You'll have to speak to Foot and Marriott, but given the result you got from Shakespeare—after you promised you'd speak with him about that line of his you know I can't stand, nothing changed. I wasn't the problem England. I never was. You always did have problems raising your flags. especially when we in my castles and not yours. You said you could change, learn, be better. Well, how much does it take to raise a flat! And then your promises to change? That's the problem England, there's never any change outside of appearances. Even haggis. You kept telling me I made a great dish, and you kept drinking that infernal gin of yours to wash it down.

So England, I'm sure you'll come out on top some how. You always do.

As for me, I need to see my lawyers. They keep telling me I have quite a case. And they keep suggesting something going on between you and America. They call it a "special relationship." Really, England, how could you? It will all come out in court in due time.

Just realize England, we're done, au revoir, and all that. Maybe you can get America to take it, but won't. Not anymore. I need to finish this letter right now any way, before my haggis overcooks. I have to eat lunch before going to the tailor. He's made me a whole set of clothes using Harris Tweed to wear just for our divorce case. Assuming you decide to make it a public affair. For your sake, England, I hope you come to your senses and realize that it's over. It will be so much easier for you to let go.





 What can be learned from the ice bucket challenge–the challenge task itself, how it has spread, why people enjoy watching it, and how when you search for "ice bucket challenge" on YouTube the next suggestion is "ice bucket challenge fail". The ice bucket challenge fail video reminded me of a stop-stop order that has skidded out of control and exits much worse than expected.

Jeff Watson writes: 

Patrick Stewart has a most elegant way of handling the ice bucket challenge. This meme is transferred similar to a way the Chair described years ago.



 Something happened to me today for the first time in my 27 years in the financial business.

I had some prospects that were coming in to sign paperwork and do business with me, but who cancelled their meeting at the last moment.

When my assistant followed up with a phone call, they said that they were not interested in moving forward.

Now, that's nothing new. I've had hundreds and hundreds of people decide that we weren't a fit.

But this seemed odd to me. So I called them.

I spoke to the husband and he kind of hemmed and hawed around until I finally told him to just come out and say it.

He said, "We decided not to do business with you because you're a Mormon and they don't believe in Mormonism".

He went to say (rather rambling) that it may have sounded bigoted to say that but it really wasn't. That they really liked me and thought I was the most skilled investment adviser that they had met with and were ready to do business with until they found out I was a Mormon, blah, blah, blah, blah.

So, this was the first time in my 27 years in the business that someone has come out and told me that they weren't doing business with me because of my religion.

Now, I'm sure other people have come to that same conclusion but kept their reasons to themselves, but I thought it was interesting this guy actually had the gumption to come out say it.

Ironically, I am not only not offended. I'm not even bothered by this. Actually, I'm relieved.

I feel like I dodged a potential bullet with these people. I mean, who wants to do business with people so small minded that they base decisions on such trivial matters as this.

Unfortunately, we live in a world where being a bigot or racists or any other negative moniker of the such is like having the scarlet letter branded on your face.

I believe the world would be a better place if we actually encouraged people to be open about their beliefs and biases.

For instance, this whole EEOC thing is massively stupid. I'd like know which companies are biased against races/religions/sexual orientation/etc. I'd like to know which establishments don't want "blacks" to patronize them.

I want to know who the small minded bigots are so that I can avoid doing business with them or investing my clients money into their companies.

I'd embrace a world where it was legal to have a sign out in front of your establishment that said, "Mormons are not welcome". That way I can avoid patronizing your establishment…..or said another way, I can avoid helping you create profit.



 I took part in the Chicago Triathlon. One of the highlights was witnessing american enterprise at its best. It's a very efficient system working for a piece of the aspirational consumer disposable income. The evangelizers (using their own but also academic research in psychology) increase the popularity of the sport through the media outlets and the elite athletes. At the top level the message is about health and self-improvement. Quality of life is so high these days, that we crave for activities that simulate physical struggle. They also disseminate technical views and advice, which by definition are in favor of newer and more gear. Every part of the sport gets highly specialized, horizontally and vertically, following the professional circuit. It's a matrix of time (training, pre-competition, competition, post-competition) and technical component (nutrition, recovery, gear, literature, tourism). Every component gets subdivided more and more to create diversity of demand and add new lines of businesses. At the end of the day everybody is happy.



Hi, perhaps you could put on the spec list that I have a entry level job opening for a quantitatively orientated trader to (eventually) work our evening shift.

Contact is: R. G. Niederhoffer Capital Management, Inc., 1700 Broadway, 39th Floor, New York, NY 10019. Email: info at



  Capitalism lessons are costing me a quarter a day.

One week ago, a little boy with a hangdog expression sat next to his father lemonade vendor wishing he had something to do. He was sorting leaves on his knees to sizes to pass time. I bought a lemonade, and asked the child the cost for a leaf. 'A quarter,' he countered brightly, as his father looked on amused.

The following day he was waiting, though the time of my walk varies by three hours. He had created a vendor's table from a 3' plank on the ground with a wider assortment of leaves. I bought another for 25 cents.

This is out on a jungle path where pigs wallow, hens with 27 chicks cluck, everyone has bare feet, sleeping dogs lie, no electric, ice or running water, a body eats on six-bits a day, fingernails and lawns are cut by machete, a piece of material has value, and there are no beggars.

The third day, three vendors with three boards offering new varieties. I bought one shaped like a maple leaf from a new kid, claiming I couldn't afford more.

The fourth day a strange thing happened. There were five venders between the age of 6-9 years, and one was a girl who was scrubbing her leaves with a brush and water. I bought a clean one.

The fifth day, the vendors had learned to balance the planks like trays on their palms and carry them aside me until I bought one. The sixth day repeated, as the market seemed saturated with kids and innovations.

Today, after I bought a freshly scrubbed mango leaf, a señora rushed up and whispered in my ear, 'You know the leaves are worthless. It's just a child's game.'

'Nonsense,' I answered. The child's game is capitalism. Who knows what tomorrow may bring? They may become the most successful vendors in the village with the capitalistic habits that work is rewarded, the best product sells, wait patiently and the customer arrives, curiosity, innovation, a healthy balance of intellectual and emotional quotient, an even-keeled mind, split-second decision making, the ability to handle uncertainty, loss and success, adaptability, and there are no prerequisites.



 One key finding is that some foreign car companies demand the local manufacturing facilities and dealerships to only source parts through the brand company. Through this scheme, the investigation said, those companies managed to achieve abnormally high profits.

Well, cars have been very expensive in China, many with 2-3 times the prices in the US. For many years, I have been puzzled by why this is the case and who actually take the money. Undeniably, various taxes in China are very high, but those do not suffice for the huge price differences.

Now this finding seems reasonable to explain the mystery.

The question is how they could be doing this from the beginning?

The absence of a useful legal system is cleanly an answer. But there are more hidden issues people often choose to ignore.

1. The state regulations provide foreign car companies with basically two choices: a) sell imported cars and pay substantial tariff; or b) set up local manufacturing and sell locally produced cars and pay less tariff. Choice b) obviously is more preferable to foreign car companies for their high-volume models. But the condition for b) is that they have to form local joint ventures with Chinese companies. To any successful foreign car company which is fully capable of designing, providing manufacturing facilities, manufacturing and marketing their own cars, this provision clearly means a brutal cut into their profit. Why would they joint-venture with local idiots who surely have strong political liaisons but know literally nothing about cars? So then limiting parts sourcing became a genius business strategy for them. The argument is very sound: to ensure the best quality of their cars! The local JV partners have little problem accepting it because with however high cost they know they could use their political ties to force higher prices onto the consumers.

2. Cross-border trades have always been extremely restricted in China. In the case of importing cars, only the extremely few with strong liaisons can obtain licenses. And again, the imports carry very high tariff. The rationale for this restriction that has long been planted into people's mind is that it protects national enterprises (implying the meaning that it is good for everyone in the country).

Now lowering prices should be a good thing for consumers. But it comes not without a concern.

If parts selections are not strictly enforced, qualities are certain to suffer. Would elite Chinese consumers trust Chinese products? No chance!



 "He was a degenerate gambler. That is, a man who gambled simply to gamble and must lose. As a hero who goes to war must die. Show me a gambler and I'll show you a loser, show me a hero and I'll show you a corpse." -Mario Puzo

Rishi Singh writes: 

This reminds me of Ed Seykota's remark to Jack Schwager in the beginning of Market Wizards 2 that the reason Jack blew up is because he wanted the market to tell him when to stop trading.

I spent some time with Ed at his place in Austin a few months ago. Remarkable soul who is on a crusade to change the way we feel about feelings.

Stefan Jovanovich writes: 

Puzo knew something about gambling from experience; he was one, to the point of degeneracy. His knowledge of war was a bit more limited; by the time he got to Germany the war was over. He served as a public relations officer for the air corps. Those who haven't, give tours.



 A while back in "the good ol' days", a list commentator (way back pre-crash) quoted an article "Mistakes of Investors" appearing in Ticker Magazine back in 1908. It seems a good time to reprise it:
Avoid inside information.

Never make an investment on enthusiasm or excitement.

Use your own judgment.

Pay for info rather than getting it for free.

Consider earning value and market value. The man who buys real estate looks to the enhancement of value more than to earnings.

Don't lose confidence. The investor hears rumors of impending disaster, which, if he would reflect upon, he would see would have no effect on his security. This applies to bank runs.

Stay away from names. (Even then there were touts and promoters.) No high sounding titles can make it a success if it lacks the true qualities of success itself.

Don't put too much reliance on advertisements, especially red paints.

The losses through mining investments (not tech) are greatest. Beware of promoters who have no reputation to lose.

The greatest mistake is one of pessimism and doubt. Never let your mind fall into that chasm. Do not think because you have lost money in one investment that all are unsafe." The posting continued with an observation about among article in that first issue, by Roger Babson:

"The most interesting article to me in the first issue was by our old friend Roger Babson, written in 1908 about bank loans. He says that when the proportion of loans to investments gets too high it's bearish and when it's too low, it's bullish, but on a time series basis for all banks, and cross-sectionally between banks within a year. He gives yearly figures from 1860 to 1906 to verify his point and then shows how the panics of 1873, 1894, 1890, 1893, 1898, and 1903, were accurately forecast by the ratio.The key ratio he uses is 50% loans to assets, which was 'In 1873, the ratio of loans to resources first exceeded 50%. Consequently a panic occurred by the spring. Another panic occurred in 1903. Again the western farmer came to the rescue and owing to bountiful crops, the recovery continued until 1897 when interest rates exceeded 2200% a year.'Thus, Babson preceded Boltan Tremblay, Colonel Ayres, the bank credit analyst, the fake doctor, and many other greats in relying upon these credit ratios more than 100 years ago. It's overdue for a test again today."

Jeff Watson writes: 

Here's the kind of statistics the old grain traders used back in the day. When you think about it, not much has really changed. This period covers the 1904-1914 cash wheat CBOT receipts for 1904-1914.



 Let those of you who follow the news alert us if the humorous agrarian grandmother leavens her talk with any epatez the rich or similar anti individualist things.

Richard Owen writes: 

The consistent theme in reportage on central bankers (and their patrons) at the moment seems to be their benignity and attractiveness.

The Fed has a sweet but worldy wise grandmother. Mark Carney is assessed for his suave, tan, and similarities to George Clooney. Rajan is admired for his John le Care father and good looks that have put the 'sex into the Sensex'. Abe was painted in superman costumes replete with bulging red underwear.

It's as if they going to bring us off with gentle palm and sweet nothings.

Kora Reddy writes: 

I don't see any edge in the week (weekly returns) after Jackson Hole for $SPY (up by 13/21 with avg 0.11 %, less than the drift of ~ 0.2 %) while $GLD up 8/9 (avg 1.5%, the last symposium was a hole with a weekly loss of -0.2%), $TLT up 10/12  avg 0.94%)

ps: avg % includes the losses as wellfor convenience of others (from here)

end of jackson    the following mon/tue ( if holiday)
24-Aug-13    26-Aug-13
1-Sep-12      4-Sep-12
27-Aug-11    29-Aug-11
28-Aug-10    30-Aug-10
22-Aug-09    24-Aug-09
23-Aug-08    25-Aug-08
1-Sep-07      4-Sep-07
26-Aug-06    28-Aug-06
27-Aug-05    29-Aug-05
28-Aug-04    30-Aug-04
30-Aug-03    2-Sep-03
31-Aug-02    3-Sep-02
1-Sep-01      4-Sep-01
26-Aug-00    28-Aug-00
28-Aug-99    30-Aug-99
29-Aug-98    31-Aug-98
30-Aug-97    2-Sep-97
31-Aug-96    3-Sep-96
2-Sep-95      5-Sep-95
27-Aug-94    29-Aug-94
21-Aug-93    23-Aug-93



 One had a loss today and found it appropriate to go back to Wiswell to see if I can improve in the future.

We have losing days, drawing days, and winning days, and not every day is a losing day, and not every day is a drawing day, and although we may not like it, not every day is a winning day.

The real trouble with making our moves is that we don't know if they are good or bad… untill we have made them.

The good player loses without an alibi, wins with grace, and draws with a smile.

Don't strive to be brilliant, do not scorn simplicity. There is simplicity in the highest flights of all art.

To study the strong players is to learn how to play, to study the weak players is to learn how not to play: to study ourselves is to learn how to play the game of life.

I suggest you study your great victories a long time, and study your great defeats twice as long. You may well learn a great deal more from the latter.

Never let the fear of striking out get in your way.

Many games are won by the art of judicious leaving alone of pieces and men. This negative habit often develops into a win.

Good players do not complain about their lack of opportunities. They are good, in most cases, because they go out and make their opportunities.

Many a draw is lost for the simple reason that you did not ask for it– at the right time.

I seldom use the word impossible regarding chess and checkers. You will see just about everything happen on the board.

The art of playing is not only to make the right move at the right time, but to leave unmade the wrong move at the moment of truth.

Success in the opening can lead to a weak middle game, and finally defeat in the ending.

Playing much, suffering much, and studying much… these are the three pillars of learning.

Common sense wins many games, but there are positions where it would actually lose, and it will take uncommon sense to win or draw. You must decide when uncommon sense must come to the rescue.

The search for the right move while you are playing is helped by the research you have done before playing.

The good moves are all there— waiting to be made: all you have to do is sort them out and put your hand on the right pieces and move them to the right squares. Yet some of the greatest master have made serious mistakes in carrying out this "simple" transaction.

Andrea Ravano writes: 

Great ideas Vic. I've often been confronted with poor performance, and the most difficult part of it is looking straight at yourself in the mirror and saying to that innocent looking person "you are wrong". Admitting ones own errors is the beginning of rebirth, just as realizing that your win at the backgammon board was more then the consequence of unusual dice statistics over your calculating power. 



 I find surprising things unbelievable until I can find a mechanism to explain them. In this case, my idea is that people who must be surrounded by noise to think are always above a steady state. They must run their thinking mechanism 24/7 (including dreaming at night) or lose consciousness. Hence their minds have 'forgotten' how to return to silence, and I fear this carries into death. The proof in chess is Bobby Fischer who hated to play noisy chess, while most of his opponents played better with it, as he beat them.

The metaphor in nature is the strangling fig tree that supports the host tree until the former dies and falls, leaving just the fig. Many studies also show that people, at least in the US, are unable to be alone with their thoughts. They freak out without their phones, tvs, radios, computers, etc to constantly distract themselves. So they never have the time to process what they already know about stuff and happiness. All the while being bombarded by the opposite message, that stuff does bring happiness, from the media that they can't turn off.



 While the Dow climbed 16 points today, an old man pulled out a wood stool, as he has at 9am for thirty years, hoisted a handcrafted umbrella, stuck a two-foot plank on his lap, and gestured to the first customer. I stepped forward with a pair of jogging shoes to resole, and as he worked explained that in USA it's cheaper to buy a new pair than to get these underhauled. A barefoot señora holding a pair of sandals clicked her tongue, and stuck a finger in a rip in my shirt as I read today's news. The cobbler finished my repair in thirty minutes, and offered the shirt off his back – my size – which was a bargain since it saved me a trip down to crime infested Belen for a used one. The señora quickly sewed the rip in my shirt, as the man fixed her sandals. Then she conjured a shirt out her purse like a rabbit, and handed it to the cobbler for the repaired sandals. I paid $3 for the shoe repair, $2 for the shirt, and the señora offered a massage at her room across the street. It cost $4, and I walked out lightly on new shoes with a newspaper under my arm that the cobbler had thrown in to sweeten the one stop shopping.



 The erudite and esteemed historian of ours raises the question what can we learn from ancient Rome. Richard Epstein [cv ], believes that almost all that is good in our own law comes from Rome. Nock believed that only classics should be taught in college because everything good and bad happened in Rome and Greece and all we have to do is learn from the mistakes. I have always believed with Nock that the stock market will do whatever it has to do to increase agrarian reform, i.e. whatever will create a easier flow for reduction of social power and increase in the palindrome type of state. I often follow that line in my own trading. Do you believe Rome, Caesar, the two wolf men et al the Greeks, have things to help up with our investing?

Stefan Jovanovich writes:

Eddy aka our daughter Nora had the great good fortune to study Art History at Cal Berkeley while doing the requisite training in molecular and cell biology that would enable her to go to the wikipedia school of medicine at UCLA. She had the even greater good fortune to discover Andrew Stewart and make certain that she took every one of his classes. This left Eddy with the handicap of having the closest thing to an Oxbridge education one could get in America; Stewart was a kind, clever and relentless tutor; he even forgave her at graduation for abandoning a career in art history for the dubious privilege of wearing progressively longer white coats.

My apologies for the long-winded preamble; I am attempting to explain where I got my answer to the Chair's question. The "Greeks" of the Hellenistic period, not the classical one, are the people from whom we should take our lessons about finance; for they are the people who established the patterns of trade - grain from Egypt, Crimea and Sicily, manufactures from the Eastern Mediterranean, spices and clothes from West Asia, etc. - that endured in spite of the Roman's preference for military-industrial pillage. 

Dylan Distasio writes: 

 Today marks the 2000th anniversary of the death of the emperor, Augustus.

If our esteemed historian would be so kind, I was hoping he might provide one of his favorite books on either Augustus or ancient Rome in general.

Stefan Jovanovich replies: 

Karl Galinsky's "Augustus: Introduction to the Life of an Emperor"

His discussion of Augustus as a politician is the best description of how "Rome" actually worked politically that I have ever read.

Pete Earle adds: 

Ironically, this was published today as a 'Think Piece' by the Adam Smith Institute: "Currency Reform in Ancient Rome". In it I look at four obscure emperors and their efforts (as well as their fates) with respect to shoring up the denarius as Rome entered its "Age of Inflation".



 Is coffee good for you? A recent study seems to imply it is good for the liver:

Coffee is one of the most commonly consumed beverages in the world. Its health benefits including improved overall survival have been demonstrated in a variety of disease states. To examine the association of coffee consumption with liver disease, a systematic review of studies on the effects of coffee on liver associated laboratory tests, viral hepatitis, nonalcoholic fatty liver disease (NAFLD), cirrhosis and hepatocellular carcinoma (HCC) was performed. Coffee consumption was associated with improved serum gamma glutamyltransferase, aspartate aminotransferase and alanine aminotransferase values in a dose dependent manner in individuals at risk for liver disease. In chronic liver disease patients who consume coffee, a decreased risk of progression to cirrhosis, a lowered mortality rate in cirrhosis patients, and a lowered rate of HCC development were observed. In chronic hepatitis C patients, coffee was associated with improved virologic responses to antiviral therapy. Moreover, coffee consumption was inversely related to the severity of steatohepatitis in patients with non-alcoholic fatty liver disease. Therefore, in patients with chronic liver disease, daily coffee consumption should be encouraged.



 Tom Hanks created a free app that is number one in the app store right now that makes your ipad etc sound like a typewriter because "everything you type on a typewriter sounds grand, the words forming in mini-explosions of SHOOK SHOOK SHOOK. A thank-you note resonates with the same heft as a literary masterpiece," he said.

It may be time to get that Big S&P pit radio up and running…or something that can turn volume i.e flow into rhythm.



 "How to Be Prepared for a Secular Stagnation" by Mohamed A. El- Erian

A bad agrarian reformed always comes back.

Stefan Jovanovich writes: 

"Economists know how to beat secular stagnation. There are really two sorts of policies here according to Summers: prevention and cure. Policies that stimulate productivity growth and raise labour-force participation build in buffers against the zero lower bound by boosting persistent investment demand. Such pro-growth policies are uncontroversial in the policymaker world, even if they are politically difficult to implement."

It would be cruel and possibly racist and certainly totalitarian to find where Hubert Humphrey and Augustus Hawkins' minds came from and then impose a Carthaginian peace on the places and ideas. But it is tempting. The idea that enterprise can somehow through "policy" be connected to employment is the soft socialist fantasy of the modern world. There are no "policies" that stimulate productivity growth; there are only ideas and their applications through machinery and process that allow people to do things better, faster and cheaper. And the "cheaper" invariably involves substituting software and equipment for labor.

"Pro-growth policies are uncontroversial in the policymaker world" precisely because the only growth in employment those policies create is more jobs for policymakers and the Keynesian knock-on effect that comes from their spending money to go to conferences.

Shaw really did have it right
. The problem with the undeserving poor is that they have even greater requirements than the people who accept the market values for their skills and services. What makes those casualties of "secular stagnation" so attractive is precisely that their greater requirements involve perpetually more funding for the people who know they can fix the problem.


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