It was only 17 months ago when Alan Abelson passed away on May 09 and moved to bear heaven after writing his "Heard on the Street" column for 53 years, during which after reading every one of his columns the collab and I concluded that he had not once been bullish. After the October 19th, 1987 crash, for example, he concluded that with the Dow at 2000 that the decline of 25% was just a (hopeful) start.
I stand by the comments made in Practical Speculation that he did more harm than anyone else in the history of markets by his consistently bearish views while the average stock rose some 15 fold. He was so persuasive and so many followed his bearish views and stayed out of stocks because of them. Thereby decimating the alternative path of their wealth. Furthermore, to add insult to injury he was much too gallant with the collab when she interviewed him in 1999, a predilection which one is told was not limited to attractive former Bloomberg stock market columnist heads.
Since he passed away, there has not been much that he would have enjoyed until this week. As the Dow has advanced fairly steadily from 15000 to 17200 in a typical 10% a year rise. However, almost a correct of 9.5% from high to low occurred this week, and if the Good One could arrange it, the wordful commentator would have been dancing on his grave.
However, I was pleased to see that his spirit lives on in Barrons with some very sonorous and seemingly sagacious commentary in the 10- 20-2014 issue of Barrons. Randall W. Forsyth refers to the Fed "running out of basis points". You see "so called quantitative easing seemed spent… Leveraged speculators, hedge funds as they are called in polite company were hemorrhaging losses on bad bets… that was the setup for nothing short of a paroxysms on Wed morning in the treasury market… in a manner reminiscent of the infamous flash crash of May, 2010… the collapse in bond yields far from being a rally had all the earmarks of a panic - in the opposite direction. Two presidents of Fed banks, from cities on opposite sides of baseball's national league championship series said the Fed might reduce the timing of tightening. A 'bullard bounce' ensued. The new media seems to have adopted the motto of never letting the facts getting in the way of a good story at least in the reporting of Ebola: 'the backdrop remains geopolitical and epidemiological' ".
In other columns Kim Forrest opines "the market is getting to be like a daily soap opera" as Vito Racanelli quotes in The Trader. "It was a low but I'm not sure that it was the low," Forrest says. Other articles pointed to $75 oil and in Market Watch, the lead advisory opinion noted the correctness of previous bearish forecasts and the similarity to the 1997 action. With a Dow 1738 low being a logical target.
There is much of interest in Barrons and they had many articles pointing to bargains galore among the hard hit stocks. However, whenever the market suffers a near Correction (down 9.5% from a high), we must remember the futile efforts of the former wordsmith Alan Abelson who never bought individual stocks, and think how happy he would be with the decline, and how he would remind readers of how happy he has been with his previous and undiminished bearishness.
Anatoly Veltman writes:
Has a study ever been performed on the extent to which his multi-decade biz had proven profitable? If his biz results proved consistent (over a very lengthy period, spanning changing regimes no less), would that of itself be fruit for thought?
Even though one hardly listens to brokers, mine predicted this move beautifully. The market will do what it takes to hurt most. It will get the weak hands to sell in panic and won't let those waiting on the sidelines participate in the bull market. How will the market achieve this? It will go down hard few days in a row, flushing the weak hands out. Those waiting on the sidelines have their bids at 10% off the highs. The market will go down just short of the 10% and will move right back up. The weak hands are out and the sideline wise asses won't get a chance to jump in. By the way, Mr. Saad, did you notice that the best performing account you have is the margin account you forgot all about over the last 6 years. Think about that for a second…
Steve Ellison writes:
One suspects many permabears have successful advisory businesses because they satisfy some deeper longing in their clients than to invest profitably.
October 20, 2014 | Leave a Comment
I thought this article about "How Rebounds Work" was quite fascinating.
And here is an even better link on the same topic with some very interesting graphics: "Where do rebounds go?"
Pitt T. Maner III writes:
Very nice graphics and analysis.
One of the fundamentals of rebounding used to be that you tried to track your opponent while the ball was in the air to see what direction he was going and then you tried to turn your body at the last possible second in order to "box" him out or put a body on him before he got into the rebounding zone. Wide bodies (Wes Unseld, Malone, Barkley-types, etc) were particularly effective in doing so. It took energy and work effort to do this.
The example with Noah shows him going through uncontested–the defensive players turned their backs too early and lost the opportunity to box him out–it looks rather lazy. To some degree it seems that modern pro basketball players have concentrated on areas of the game or specialized to such an extent that the fundamentals are not practiced and are often found lacking.
A fair number of rebounds are made below the rim so positioning by shorter players can make up for height differences (some of those Princeton-Georgetown matchups demonstrated that).
And the really aggressive guys like Rodman, if they managed their fouls well, and scraped and clawed were often rewarded. Rodman was a master at judging rebound distances and "worming" his way to a rebound through narrow spaces. How he ended up in North Korea I don't know…crazed.
Scott Brooks writes:
Rebounds pretty much go to the opposite side of the hoop from where they are shot. That is not a new discovery.
What a coach should pay attention to therefore is where do shots initiate from. That is the key.
Since most of the world is right handed and since most players move in the direction of their dominate hand (thus keeping their body between the defender and the ball), most shots are going to come from the right side (or the defenses left side).
This bit of knowledge is very important, especially at the high school level or lower (it is still important at the college or higher level as well)…….but how to apply that knowledge…..now there's the rub.
Rebounding is more than just boxing out (which is a lost art nowadays). Rebounding is a team effort. I like my guards and forwards that play the toughest defense to guard the opponents shooters if we're in a man to man defense or to play to the "strong side" if we're in a zone (strong side is the offenses right side/defenses left side). I want my defenders to play the shooters tight so that when they do shoot, they can get a hand up high (the closer you are to the shooter, the higher you hand is relative to the shot), and force the shooter to put a little more arc on the ball than they would have preferred.
A ball with a high arc, more often than not, comes off the rim "soft" i.e. it is rebounded close to the rim and is usually rebounded in the paint, whereas a hard bounce will goes outside the paint to be rebounded away from the rim. Soft bounces allow my center and weak side forward to control the rebound the vast majority of the time, assuming they've properly boxed out.
What about the other players, what are they doing?
My strong side guard and forward are the ones usually defending against the shot. If the shot is taken by the shooting guard (sometimes called the "2 guard"), then the strong side forward chip blocks his man (if he's close) and rushes to the hoop in a sideways motion with his back to the baseline keeping his eye on the man he's defending until he gets close to the rim, then he plants his right foot and pivots on it towards the basket with his left foot and body moving clockwise motion.
My strong side guard defending the opposing shooting guard (2 guard), boxes out the shooting guard at the point of the shot and, if done right, neutralizes him 99% of the time, i.e. he will not get his own rebound and is out of the play unless the his team gets the offensive rebound (which will cause me, as a coach to "verbalize instructions in a loud manner" to my team for allowing an offensive rebound).
So what I have is my center covering the middle of the of the paint, my strong side forward covering the left side of the paint (from the defenders perspective) and I've got my weak side forward (my best rebounder) covering the right side of the paint…..i.e. the spot where the ball is most likely to go……and all of them are violently boxing out the opponents.
That leaves only my weak side guard. What is his job.
He is tasked with covering/preventing quick passes across the top of the key from (the defenses perspective) left to right…..i.e. in this scenario, instead of shooting the ball, the"2 guard" does a quick pass the point guard ("1 Guard") who whips it over to the small forward ("3 forward") who then shots. So my weak side defender has to play with his back to the baseline (basically parallel to the baseline) while the keeping the opposing "3 forward" in front of him. (it's another story for another day of what to do if their "3 forward" moves down to low and has to be passed off to my weakside forward). My weakside guard is, therefore, tasked with keeping pressure on their "3 forward" to stop that quick shot if a the quick pass I just described happened. If he does his job right, the "3 forward" can't get off the quick shot and it allows my defense the 1/2 of a second it needs to switch from (their perspective) left side to right side defense.
Back to the original scenario (ball on left side of the defense in the hands of the "2 guard"…….When the shoot is taken (by the "2 guard") , my weak side guard has to chip block the "3 forward", then roll out for the outlet pass. If done correctly, when he gets the outlet pass he takes a few quick dribbles and looks for our strong side guard…..(remember him).
If my strong side guard has done his job right in boxing out the shooting guard (remember I said the "2 guard" has been neutralized from the play) he's got the inside position on the shooting guard. And if the oppossing point guard (1 guard) on the other team is forced to deal with my weakside guard (who now has the ball) we basically have 2 on 1 fast break occurring.
What does a 2 on 1 fast break have to do with rebounding you say? Well, if you do enough of them, then the opposing team has to assign a man to fall back near center court each time they shot to defend against the fast break which means that I have a 5 on 4 rebounding advantage.
The art of rebounding is a team endeavor. A great rebounder is one who is surrounded by a great supporting cast that simply do their jobs.
Yes, you want your best rebounder on the weakside (forward position). This guy may not be the tallest person out there, but he is the most vicious tenacious meanest SOB on the floor. He is quick and he is instictive and has the ability to multitask…..i.e. watching the opposing players and timing his "boxing out" (that's an entire art that we should discuss another day), while watching the trajectory and velocity and spin on the ball to determine where it is likely to come off the rim.
Heck, my weakside forward is usually the smartest player on the floor. I call him my "Floor General"…..but why I can him that and the job I assign to him is an entire discussion for another day.
I've written about this before, but there is a lot more to the strategy of rebounding than what I've just written here. Heck, I've only discussed the defensive side of the equation…..and I haven't even elaborate (although I have in the past) on the subtle violence and mind games that are associated with great rebounding and stifling defense or even discussed offensive rebounding……maybe I'll write about those another day.
It would be good to have the distribution of swings up and down after moves of x % from a "previous" low or high in markets the same way they now do in rebounds in basketball.
Ed Stewart writes:
One thing I wonder about measuring swings is if static points in time (such as the close x days later) are best to measure swings. Measuring static points seem to miss allot of the intra-period variability that might be useful to know about and understand. I sometimes look at the expected value to a point and then the max and min excursion within the period. I'm wondering what better ways there might be to measure a swing that takes into account the variability within the measurement period.
October 20, 2014 | Leave a Comment
Here is an impressive animal fact:
A team of researchers working in Namibia has found that elephants are able to detect rain storms from distances as far away as 150 miles. In their paper published in the journal PLOS ONE, the researchers describe how they tracked both elephants and rain over the course of several years and found the elephants were clearly able to detect rain events from great distances and move towards them.
October 20, 2014 | 1 Comment
Up in the Pantheon of the top 10 pillars who have done the most harm to the wealth of the average person would be Shiller with his average of the p/e of the last 10 years as a predictor of excess. That would be bearish theoretically and empirically about 60% of the time, and would have led to being short during the 1960s and the 80s. Almost as bad is the Tobin q who should be perhaps number 3 in the Pantheon of evil influences on wealth.
One read the biography Caesar by Christian Meir and finds many parallels between the breakdown of the social, political, and economic order in his time and the attempt of the great man to arrest it, which led to his assassination, and our current day break down.
One thing I had never seen before was the fact that "why is it always romance?". Brutus was the key link to the go ahead for the assassination plot. His mother was Caesar's favorite mistress. And it was said that Caesar was Brutus's uncle. She must have been very jealous of Caesar's plan to go to Egypt with Cleopatra et al.
One of my favorite analyses by Meir with relevance to markets is: "When Caesar declared the the republic was lost it was still in existence. When Augustus said it was restored it had come to an end. Yet it is typical of periods of decline that nothing is so predictable as the paradoxical: at such times one must expect the unexpected".
October 20, 2014 | Leave a Comment
I've got to give the Fed kudos (even though I'm not a fan of the tactics). But it should be said that the reasons for the panics were even more ephemeral and contrived.
A whole lot of panic cessation with a few choice words and that's all they were. Good weekend all.
Vince Fulco writes:
Very true, a nefarious thought popped in to my head mid-week that the street would enjoy an injection of supercharged vol just to shake up the players a bit before year's end. Supporting it was a friend at Merrill who indicated the firm widely disseminated a piece on global pandemics two weeks prior. Always plenty of conspiracies on the street of dreams.
October 20, 2014 | Leave a Comment
While walking around the rice paddies with my 3 year old daughter exploring, I came across a lean-to. The rice farmers used it to store things, to get themselves out of the sun, and run their ropes from it near harvest time to scare off the birds from eating their crop.
If you are interested in what products the locals use, the contents of the lean-to gave me some good insights. There was a Japanese made stone for sharpening their cutting knives, a particular brand of water additive for sweetening their drink, and a type of match for burning the end remains of the crop before the next harvest. Farmers here are not known to make a lot of money so to splurge on a imported product from Japan certainly was interesting.
Secondly, some time ago I spoke to a western European guy making great coffee and his own gelato, and asked him, "Why be buried in this area? You could be on the tour bus route and make a lot of money as your product is great." To which he replied, "I feel good just servicing the local community". I then felt slightly guilty by even having mentioned that to him. One year later, I noticed today while cruising on the bike, he has changed his location, and lo and behold, his parking lot in front of the shop was jam packed, and so was his car park opposite (shops don't generally have a secondary parking lot) with buses and tour guides everywhere. A faint grin ran over my lips, as I was obviously surprised. Cash is obviously king!
My branch of the Davis clan began its American adventures through the German export trade. The Landgraviate of Hesse-Kassel was in the business of selling the luxury item of the 17th and 18th centuries - professionally trained soldiery. Current scholars calculate that during this period 7% of the entire population (perhaps as much as 1/4 of the males 16-45) were kept under arms and then rented out to whoever would pay for them. (For the United States today that would be slightly more than 22 million soldiers.) It was a steady trade: the British historian John Childs has done a tally that is quoted in the wikipedia article on the Hessians:
"Between 1706 and 1707, 10,000 Hessians served as a corps in Eugene of Savoy's army in Italy before moving to the Spanish Netherlands in 1708. In 1714, 6000 Hessians were rented to Sweden for its war with Russia whilst 12,000 Hessians were hired by George I of Great Britain in 1715 to combat the Jacobite Rebellion. … In the midst of the War of the Austrian Succession in 1744, 6,000 Hessians were fighting with the British army in Flanders whilst another 6,000 were in the Bavarian army. By 1762, 24,000 Hessians were serving with Ferdinand of Brunswick's army in Germany."
Roughly 30,000 Hessians were sent to North America to help King George put down the rebellion. The first group (16,000) arrived in 1776 to help Clinton and Howe capture New York. They had not, as they had been told in Germany, come to the colonies for fight Indians. Today is the anniversary of the Battle of Pell's Point (Pelham) in which Clinton and Howe tried to cut off Washington's Army as it retreated from the Bronx. It did not work, and the Hessians discovered that being under British command was not particularly good for their health since the tactics used at Breed's Hill remained unchanged.
Somewhere between Pell's Point and Trenton my ancestor deserted; by 1777 he acquired title to 50 acres of yet unsurveyed "Western" land. The amount is how I know that the person recorded as "Davies" was a German and most likely a private who had run away from the Landrave's army; under the first Bounty Act American privates were offered 100 acres to enlist and Hessians 50 acres to desert.
There is kind of a nice but terrifying symmetry in the chart looking at the last two days, with a big red line in the middle.
In candlestick theory when the open and close are the same, it shows some sort of balance between buyers and sellers forming a doji pattern. These kind of things are testable. Also supposed to evidence change in direction when it occurs after a decline or rise.
I imagine in the old days in feudal Japan they would paint their charts for the rice warehouse receipts with a brush and ink while sitting in the tatami mat room in a kimono warmed by a charcoal brazier.
Jeff Watson writes:
This is a good accompaniment to Sogi-San's mention of rice: Dojima Rice Exchange.
Jim Sogi replies:
The Seventeenth Century Japanese rice traders relied on horse riders and runners to get the news of the crops and the buying and selling. To beat the time delay one enterprising trader rigged a series of flags on hilltops to relay the info to him in town so he would have the info he needed to place his orders ahead of the other traders. Definitely our kind of guy!
Jeff Watson writes:
The Japanese taught old man Rothschild a thing or two 50 years before his coup in London. Hail to thee who can get and act on information quicker than the opposition.
When living in Hong Kong, I learned of the story of an early British banker anxiously awaiting on Victoria Peak for signs of arriving ships from London. Apparently , the banker and shipping crews had worked out a flag signalling system. Certain flags signalled that the business news from Europe was good. Upon seeing the "good" flag, the banker rushed to the exchange to get his buy orders in before the ship from London docked. Other flags indicated the news was bad and of course, the baker dumped shares before anyone else had the news. This particular banker went on to found one of the beginnings of a highly successful British merchant bank.
Balzac: "Behind every great fortune, there is a crime!"
Bill McBride published this interesting piece on wage growth in the US.
On the one hand, one might argue that this is a surefire harbinger of inflation. On the other, some wage growth might carry with it some opportunity for increased spending (save? in this country??). Some top line growth would, I'm sure, be appreciated by one and all.
And that assumes that there really is wage growth going on. At best, the jury's still out on that one.
Bill Rafter writes:
Wage growth has not been underestimated. Payroll tax receipts suggest otherwise. The latter do so some signs of coming back from the grave, but absolutely nothing to get excited about.
Regarding inflation, there are two forms of money growth that have to be monitored: that originated by the Fed known as the Monetary Aggregates, and that originated by the banking system known as fractional reserve lending. The aggregates are the Monetary Base, M2 and MZM. The lending data are commercial and industrial loans. The planned growth of the aggregates is designed to limit deflation. Inflation will not proceed apace until you get a growth in loans. So if you are worried about inflation, at this time all you have to watch is the loan data.
Aggregates and loan data are available on the FRED site. Payroll taxes are on the Treasury site.
During the 1946 election season the question was asked "What would Roosevelt do if he were alive?". There were a number of reasons for people to ask the question. The Marxists were attempting to bring true labor socialism to America by staging strikes against the auto makers just as they were converting back to their peacetime businesses, the coal mines (then the only fuel for power generation) and the railroads. Truman was doing his best to help by listening to the Harvard economists who warned against the catastrophe of abandoning the wartime wage and price controls.
After the election (in which the Republicans gained 55 seats and elected Joseph Martin as Speaker - the first one since Nicholas Longworth in 1928), the wags changed the question. It became "What would Truman do if he were alive?"
The answer, which came in 1948, was "buy the farm vote" with the system of subsidies, allotments and quotas that still rules American agriculture 2/3rds of a century later. I owe my career as a formerly licensed adviser to tax cheats to those farm bills and the compromise of 1954 that adopted its form of high nominal rates and massive and obvious loopholes. Rayburn could sell it to the Marxists (who never, ever know how to count), the real estate developers and oil producers while Martin thought the independent business people would be pleased and Eisenhower got his National Defense Highway system that he had wanted for a third of a century.
It's snowing in Hawaii!
The Riddle of the Labyrinth by Margalit Fox is a great book describing the decipherment of Linear B, a Bronze Age pre-Homeric script found originally on tablets in the Palace of Minos on Crete. If that is of interest to you, this book will reward you. For me it was a quick and exciting read. If you are a Sherlock Holmes fan, chances are you will enjoy it.
The decipherment of Egyptian Hieroglyphics was solvable once the Rosetta Stone was found, which contained a translation into Greek. However Linear B looking like stick figures or the runic alphabet, had no comparable Cliff Notes.
But I also found the book an excellent guide for anyone interested in doing research on market behavior. The parallels between the two were uncanny. To decipher Linear B required pattern analysis, counting and frequency analysis before there were computers to make those tasks easier. We have computers to aid our decipherment of the markets, but the process of creating a framework to do the research is the same. A lot of setup and then lots and lots of actual work.
One beauty of chess is that it crosses all barriers. Financier George Soros called me Hobo one sunny afternoon at his Southampton home where we split chess games, each winning with white. I discovered he had studied philosophy, and that philosophers quickly adjourn to hermetic strategies across the board.
Chess engraved on the brain doesn't seem to leave. This is especially true after one practices chess in sports during motion. The only flaw of the greatest board game in history is that the board doesn't have feet.
My jogging partner Bob Baldori and I invented aerobic chess on a Michigan track one day with a point man running a few steps ahead wearing a T-shirt magic-marked on the back with a chessboard and pieces in the starting position. This made it easier to visualize the moves as we ran four miles, and the FIDE should silkscreen these shirts for physical fitness.
However, the grandmasters might require silk screened tuxedos for befitting parties. The last one I played against in a speculator's Connecticut home was Arthur Bisguier who with white gave rook odds and gazed between speed moves out the window as if reading a comic book while telling me his life story.
He defeated a young Bobby Fischer and later served as second to Fischer at many international events. He won three US Open Chess Championships (1950, 1956, 1959), and played multiple-game blindfold exhibitions. He was taught chess at the age of four by his father, a mathematician, and kindly never practiced multiplication tables during our match. He thought it terrible, and was pleasantly merciless, that I had disgraced my father while reading funny books in beating him at chess.
After the match, Arthur dropped me off at an Appalachian trailhead near his home, and I took chess onto the trail in hiking the 500-mile Vermont trail, 500-mile Florida trail, 500-mile Colorado trail through the Rockies, the Pacific Crest trail for 1000 miles along the Sierras, the 1000-mile length of Baja, 1000 miles through the Amazon rainforest, and the length of Death Valley. I never would have survived without the lessons from chess.
The international trade in steam (thermal) coal is a major source for electricity generation. It turns out that the new kid on the block is Indonesia. According to the World Coal Association, Indonesia overtook Australia in 2012 (the last year for which they offer data) as the largest coal exporter. In 2012 the total international shipments of steam coal were 1.142 Billion tons. This is 1/6th of the total world consumption.
According to the WCA, "transportation costs account for a large share of the total delivered price of coal". Here are the import figures, by country:
Total Steam Coking
PR China 289Mt 218Mt 71Mt
Japan 184Mt 132Mt 52Mt
India 160Mt 123Mt 37Mt
S. Korea 125Mt 94Mt 31Mt
C. Tapei 64Mt 56Mt 8Mt
Germany 45Mt 36Mt 9Mt
UK 45Mt 40Mt 5Mt
The figures for India are notable because the country has been importing more and more of all forms of energy. The U.S. Energy Information Agency had a report on the question in August. Here is the section on coal:
Coal is India's primary source of energy (equaling 44% of total energy consumption), and the country ranked as the third-largest global coal producer, consumer, and importer of coal in 2012. Despite its significant coal reserves, India has experienced increasing supply shortages as a result of a lack of competition among producers, insufficient investment, and systemic problems with its mining industry. Although production has increased by about 4% per year since 2007, producers have failed to reach the government's production targets. Meanwhile, demand grew more than 7% annually over the past five years with the rise of electricity demand and lower power generation from natural gas and hydroelectricity as a result of recent supply disruptions. Because power plants rely so heavily on coal, shortages are a major contributor to shortfalls in electricity generation and consequent blackouts throughout the country. Because coal production cannot keep pace with demand, India has met more of its coal needs with imports. Net coal import dependency has risen from practically nothing in 1990 to nearly 23% in 2012. India imports thermal coal for power generation from Indonesia and South Africa. The steel and cement industries are also significant coal consumers. India has limited reserves of coking coal, used for steel production, and imports large quantities of coking coal from Australia.
So, the rupee price on steam coal from Australia is not really very relevant to the question of power generation in India. Mea culpa.
Recalling fondly The Wiz's requirement that posts have numbers, a hand count reveals that the S&P crossed 1850 on 21 days this year since February.
Examining the standard deviation might suggest a trading system or indicator like Mr. Bollinger's to define a range where its not the average or median that is as important as the excursions.
Looks like a little more 1850 action.
After shooting up from below 60, went from 147 in 08 to 33 in 09. Quite a drop. Then back up to the 100 range area.
The hydraulic fracturing process which has lead to a big increases in recoverable fossil fuels is having an interest effect on other resources. Hydro is the Greek root for water and the process is extremely water intensive. In places where water is finite in supply like the western states, water rights are being sold by municipalities at prices 10x those just a few year ago. This is not a new story but an interesting twist. I'd rather own water rights than oil/mineral rights out west and I wonder how long before the h2o commodity becomes actively traded.
We entered a "correction" in Nasdaq: down 10.3 % from high at yesterday's low of 3691. What a great opportunity!
October 16, 2014 | 2 Comments
Soccer is the biggest entertainment sector dwarfing US movies and football by 2 or 3 to 1 and is diffusing to all parts of the world. The average fan spend a few cents in China versus $30 bucks per capita in Singapore so there is much room for growth. While I loathe the game, because of its emphasis on heading as a key to victory, and its low scoring nature, I thought that as the world's most popular sport, I should learn something about it.
An ideal first introduction to it is the book Soccernomics by Simon Kuper and Stefan Szymansky. They apply regression analysis and game theory to analyzing all the nitty gritty of the game, its customers, its coaches, and its starts. It's a Freakonomics for soccer and has many valuable lessons for all market and sports people.
The authors are a soccer writer and an award winning soccer writer and economist. They cover such topics as the mistakes owners make in buying players, the irrational preference for Brazilians and blonds, why big city teams never win, why certain coaches are great, why England can never expect to win world championships. The book is suffused with the kind of thing we are used to from sabermetrics with every aspect of the game of soccer from the length of the pass, the amount of dribbling, to the proclivities on height and width of penalty kicks, the geometric formations that players gravitate to (the triangle is key), to the positions on defense and offense when ahead.
Central to their analysis is a theory of networks where they claim that Western Europe's emphasis on passing, originally developed in the Netherlands has diffused to all other countries . They apply a type of network analysis where they believe that the central nodes of knowledge, those with the most potential branches as arising from the trunk of a tree are most likely to spread and create benefits. Three coaches, John Cruijff, and Josep Guardiola and Arsene Wenger, have been key to the development of quantitative analysis of the right way to play winning soccer.
The book has many economic and sociological asides to explain things such as the rate of suicide, amount of soccer fans, the happiness of countries based on winning and the prevalence of teams, and the mobility of businesses. They claim that soccer is the worst business in the world, run by the worst businessmen. However, now that the revenues of 28 billion are 5 times what they were 7 or 10 years ago, the businessmen, who have a long term horizon, involving wealth as well as income may not be as foolish in their day to day decision making as the authors believe.
The book's major defect is that it assumes you know much more about soccer than the layman might know. Perhaps I am the only person that doesn't know the scoring and results and makeup of the leagues that they write about, but time and time again I found myself completely bewildered by the mechanics of the control of the game by the various associations, and who the players were that every soccer fan hailed as heroes or villains. Also marring the book is that it's written from the idea that has the world in its grip with numerous asides about the defective nature of capitalism and the Republicans. You would think that authors as dedicated and scholarly as these might try to be more objective and write for an audience that contains as much diversity as the billions of soccer fans that make up the game.
There are numerous poignant and humorous asides in the book. One great player asks a reporter, "what team did you play for" and another poses the hypothetical, "What could an economist know about soccer?". And numerous pieces of analysis that give insights into sports such as baseball and basketball where the quantitative analysis of the moves and positions that make up the game (the Yankees just hired 22 statisticians to document each aspect of the game).
The authors believe that the interest in soccer and ultimately the ability of a country and team to win, is based on per capita income, GNP, and history of interest. Much of their analysis is based on a regression analysis that suffers much from the part whole fallacy and a likely inability to predict change with a reasonable degree of accuracy. Similar defects are apparent in their analysis of what they say is the key factor in wining, the payment of high players salaries. Their analysis of the importance of poverty as a factor in allowing kids with no prospects to achieve greatness because they have nothing to do but play soccer 24/7 from birth is much more illuminating and interesting. Of course, since they write from the idea that has the world in its grip they decry any possibility of genetic factors determining who's going to rise and fall in the player firmament.
My favorite chapter in the book is about the training schools that Barcelona has for its young players. It's a model for how to develop good teams. Key to the training are provision of good meals, the development of character in the players, the de-emphasis on winning at an early age, the emphasis on passing above all, the continued connection between their players before and after they leave the ranks of the juniors (Messi comes to eat with the kids frequently), the confident movement of kids from the junior teams to the top team, and the benevolent coaching "similar to a Catholic priest". Apparently this is why Barcelona tends to win the world championships as the games between their juniors and Madrid are quite equal at an early stage.
All in all, the book is an eye opener in the level of analysis that the average team uses these days, comparing very favorably to the type of analysis that we are accustomed to receive about markets. It's great reading for anyone interested in soccer. And it helps to give an uneducated sports person like me a much deeper appreciation for why this game has become the most popular sport in the world, and why it will continue to transcend all others.
October 16, 2014 | Leave a Comment
A nice tour of the court. One wakes up after a 10 hour flight from Munich. Market at 1820. Goes up to 1835. Then down to 1816, then up to 1828, then down to 1818. Then up to 1828. Much volatility and opportunity to be shaken out of positions and opportunity for those with unlimited capital like the banks to profit from weak backhands.
October 16, 2014 | Leave a Comment
Average Max DD : -13.79
Median Max DD : -10.59
Worst Max DD : -48.76
Best Max DD : -2.53
from 1950 to 2013:
Year Start EOY MAX MIN MAX-DD Year Returns%
2014 1848.36 ?? 2011.36 1741.89 -7.40 ??
2013 1426.19 1848.36 1848.36 1426.19 -5.76 29.60
2012 1257.6 1426.19 1465.77 1257.6 -9.94 13.41
2011 1257.64 1257.6 1363.61 1099.23 -19.39 0.00
2010 1115.1 1257.64 1259.78 1022.58 -15.99 12.78
2009 903.25 1115.1 1127.78 676.53 -27.62 23.45
2008 1468.36 903.25 1468.36 752.44 -48.76 -38.49
2007 1418.3 1468.36 1565.15 1374.12 -10.09 3.53
2006 1248.29 1418.3 1427.09 1223.69 -7.70 13.62
2005 1211.92 1248.29 1272.74 1137.5 -7.17 3.00
2004 1111.92 1211.92 1213.55 1063.23 -8.16 8.99
2003 879.82 1111.92 1111.92 800.73 -14.05 26.38
2002 1148.08 879.82 1172.51 776.76 -33.75 -23.37
2001 1320.28 1148.08 1373.73 965.8 -29.70 -13.04
2000 1469.25 1320.28 1527.46 1264.74 -17.20 -10.14
1999 1229.23 1469.25 1469.25 1212.19 -12.08 19.53
1998 970.43 1229.23 1241.81 927.69 -19.34 26.67
1997 740.74 970.43 983.79 737.65 -10.80 31.01
1996 615.93 740.74 757.03 598.48 -7.64 20.26
1995 459.27 615.93 621.69 459.27 -2.53 34.11
1994 466.45 459.27 482 438.92 -8.94 -1.54
1993 435.71 466.45 470.94 429.05 -4.99 7.06
1992 417.09 435.71 441.28 394.5 -6.24 4.46
1991 330.22 417.09 417.09 311.49 -5.67 26.31
1990 353.4 330.22 368.95 295.46 -19.92 -6.56
1989 277.72 353.4 359.8 277.72 -7.56 27.25
1988 247.08 277.72 283.66 242.63 -7.64 12.40
1987 242.17 247.08 336.77 223.92 -33.51 2.03
1986 211.28 242.17 254 203.49 -9.42 14.62
1985 167.24 211.28 212.02 163.68 -7.66 26.33
1984 164.93 167.24 170.41 147.82 -12.68 1.40
1983 140.64 164.93 172.65 139.97 -6.91 17.27
1982 122.55 140.64 143.02 102.42 -16.43 14.76
1981 135.76 122.55 138.12 112.77 -18.35 -9.73
1980 107.94 135.76 140.52 98.22 -17.07 25.77
1979 96.11 107.94 111.27 96.11 -10.25 12.31
1978 95.1 96.11 106.99 86.9 -13.55 1.06
1977 107.46 95.1 107.46 90.71 -15.59 -11.50
1976 90.19 107.46 107.83 90.19 -8.37 19.15
1975 68.56 90.19 95.61 68.56 -14.14 31.55
1974 97.55 68.56 99.8 62.28 -37.60 -29.72
1973 118.05 97.55 120.24 92.16 -23.35 -17.37
1972 102.09 118.05 119.12 102.09 -5.14 15.63
1971 92.15 102.09 104.77 90.16 -13.94 10.79
1970 92.06 92.15 93.46 69.29 -25.86 0.10
1969 103.86 92.06 106.16 89.2 -15.98 -11.36
1968 96.47 103.86 108.37 87.72 -9.31 7.66
1967 80.33 96.47 97.59 80.33 -6.61 20.09
1966 92.43 80.33 94.06 73.2 -22.18 -13.09
1965 84.75 92.43 92.63 81.6 -9.60 9.06
1964 75.02 84.75 86.28 75.02 -3.55 12.97
1963 63.1 75.02 75.02 63.1 -6.54 18.89
1962 71.55 63.1 71.55 52.32 -26.88 -11.81
1961 58.11 71.55 72.64 58.11 -6.23 23.13
1960 59.89 58.11 60.39 52.2 -13.56 -2.97
1959 55.21 59.89 60.71 53.58 -9.17 8.48
1958 39.99 55.21 55.21 39.99 -4.36 38.06
1957 46.67 39.99 49.13 38.98 -20.66 -14.31
1956 45.48 46.67 49.64 43.11 -10.60 2.62
1955 35.98 45.48 46.41 34.58 -10.59 26.40
1954 24.81 35.98 35.98 24.8 -4.42 45.02
1953 26.57 24.81 26.66 22.71 -14.82 -6.62
1952 23.77 26.57 26.59 23.09 -6.85 11.78
1951 20.43 23.77 23.85 20.43 -8.11 16.35
1950 16.66 20.43 20.43 16.66 -14.02 22.63
Max DD is calculated not from max to min , but from equity peak calculated from the start of the year (set at 100). A good example would be to look at 2009 equity curve.
Timed flexionic commentary can be shown in retrospect to be beneficial to the buyers of assets during price advances. This is arguably mostly evident in fixed income and currencies.
I wonder if such commentary is used during periods of declining prices to assist flexionic cultists to extricate from long positions or increase their shorts with preplanned orders.
www.nanex.com may have words to say in future days.
I started paddleball at Michigan State University, switched to handball, and then when rumors of a professional tour and the first racquet arrived in 1970 at MSU, racquetball was the only game.
I had never hit a single anything before enrolling at Michigan State. The first time I walked into the Intramural Building a pivotal mentor swayed me. I heard the crack of ball on wood and looked down into those concrete pits and saw a purple ball– my specialty– any kind of ball, really. They had zoomed at me in the past in all sizes and shapes on house lawns, corner lots, the streets or parks.
The player down on the Challenge Court wore sunglasses under the bright ceiling lights. He carried a dozen purple balls around and around the court in a motorcycle helmet. Leaning in and watching, someone in the gallery complimented that he was Al Moradian, blinded by his own brilliance, the perennial campus champion. After watching him drop-and-hit, drop-and-hit for a few months, and with quite a bit of practice, one year later I stepped into his tennis shoes as the perennial paddleball champion.
The reason is I earned a backhand that Al didn't own. After watching him on the challenge court, I rented from the sports cage a flimsy plastic paddle that flexed like a flyswatter… and practiced. Paddleball suited me because one could sequester in a downstairs court for hours and hit balls, and the shots came back without chasing them off the four walls. Moreover, I discovered that the amount of initial practice directly related to improvement, and flattened out but was effectual. My theory of sports is to practice the weakness, not the strength, and to let the field try to secret their imperfections with various strategies.
Beside practice, the backhand arrived for two other reasons. I took class notes in longhand, as computers were nonexistent, and the flow of the pen across the page from left to right was cross-training. And, I became arm strong and ambidextrous from rectal palpations of hundreds of cows to determine their states of estrus.
I became the Intramural champion at paddleball, racquetball and handball, and in doubles in all three sports. They gave an official green MSU windbreaker for every championship, and in a couple of years I had a closetful. The year after racquetball arrived, the house I was living in burned down and the jackets melted. This was fortunate because studies in Veterinary school were getting tough, and because I never wore jackets even in winter, but bartered them for dates with the Michigan farm girls. Now with a backhand, books, and no girls, my grades and game improved.
After graduation, I took a west turn out of university for the west coast and became one of the first pro players, and the first with racquet and apparel contracts. I simultaneously entered and won satellite pro events right-handed and open division left-handed.
The primary reason was a backhand that became the Golden Era of Racquetball's best, according to the fans and magazines. It enabled me, whereas it was the flaw of nearly every player at universities and YMCA's across the country, and, because of racquetball, at private clubs in the court club boom.
Good morning Mr. Niederhoffer,
In your bestseller, The Education of a Speculator, you wrote:
I need to know what is happening in the markets…I hooked up a music synthesizer to the computer, linked it to the interface between the computer and quote screen, and generated a program that would give a musical summary of the markets. I used piano tones for stocks, strings for interest rates, the cello for short-term rates, and the violin for the 30-year bond. The Japanese yen was registered with the high flute, corresponding to the favorite instrument in Japan, the shakuhachi. The English horn, the French horn, and the Alpenhorn stood in for the other currencies.
A lot has changed since then, particularly in terms of software tools becoming available to achieve this. In that spirit, the "music" in this video has been created by turning market data (prices, returns, volatility, and other time series) into MIDI-format (via our software tool) which subsequently was imported into what is called a Digitial Audio Workstation (DAW). The latter allows users to assign instruments (from a single guitar to a whole orchestra) to those data-sets and turn them into sound.
I created this video as part of my PhD research. The fact that it does, indeed, sound like music with a certain rhythm and timbre (rather than random audio-signals) is exactly what distinguishes my approach from earlier attempts at sonification of market data. In the final step, the resulting "composition" is linked to software which allows the creation of visuals that dynamically respond to the sounds (e.g. the small coloured spectra you see appearing against a backdrop of coloured fog).
The video captures a specific period in finance history. Usually I then ask watchers how they would allocate percentage wise a hypothetical portfolio across stocks, bonds, and cash based purely on this video (i.e. "Don't analyse the video but focus on how it makes you feel; what did it convey?").
What's the purpose of all this? Please allow me to share another quote, this time from Jack Schwager's The New Market Wizards:
"Every market has a rhythm, and our job . . . is to get in sync with that rhythm . . . There's no sense of self at all. There's just an awareness of what will happen. The trick is to differentiate between what you want to happen and what you know will happen. The intuition knows what will happen."
Although some investors/traders have a natural ability to intuitively get a sense for market rhythms, others may need a little help. The investment research method I'm developing is aimed at that: offering a structured, disciplined approach (including advanced software) to train investors' intuitive abilities to sense the market mood in general and its rhythms (i.e. swings) in particular. Massive amounts of data can be efficiently transformed this way to benefit from the whole spectrum of the human-computer bandwidth. Perhaps you're familiar with the behavioural finance concept of System 1 and System 2 of the human mind (e.g. Kahneman, 2011)? Audiovisuals are particularly suited to appeal to System 1 abilities.
Why is this important? Because I believe we have gone way too far in quantifying markets, inspired by the flawed premise of the "market as machine". As a result, what we casually refer to as "the market's mind" has become imbalanced (at multiple levels). Apart from the obvious suspects like HFT, VAR, and flash crashes, monetary policy is also misinformed by this bias. Moreover, we try to understand market sentiment and moods purely analytically (e.g. put/call ratio, bulls/bears spread, etc.) while increasingly repressing our emotions by outsourcing decision-making to algorithms. By distorting the delicate process of discovery it is no wonder we're facing secular stagnation, for example.
Admittedly, this is just my opinion, but should you be interested in the background to all of this I would be happy to send you a short introduction (derived from my thesis + draft paper).
Happy to discuss and clarify.
Chris Cooper writes:
Here is some cool sonification of measurement data from the LHC in search of the Higgs boson.
And a good article about it: "Unlocking Big Data: Lessons Learned From the God Particle".
Jim Sogi writes:
I like the phrase in the article "ski the stock market" using virtual reality goggles. There are few good VR rigs coming out soon. One for the Samsung Note 4. In Dataclysm, Rudder plotted some big data on a scatter plot to get a handle, and in the case of language usage to determine ethnicity, focused on the rare outliers. It was the things people both said a lot and didn't say at all that allowed identification. Black people never say "my blue eyes" and asian women say "single parent family". Only white people say "my blue eyes" and "snowmobiling".
October 10, 2014 | Leave a Comment
Our brains are constantly perceiving the world as more stable than it actually is. Consider this: Every time the light hits your face differently, you look a little different - but people don't perceive you as having suddenly changed into someone else. In fact, they probably don't see your face as having "changed" at all. Without this neurological trick, the world would be a decidedly more confusing place.
But according to a study published this week in /Current Biology/, that mechanism - which researchers have dubbed the "continuity field" - can also steer us wrong, and have us convinced that two totally different faces or forms are the same.
"The brain is creating stability out of what's actually a very unstable system," said David Whitney, the senior study author and a University of California at Berkeley professor of psychology. His lab coined the continuity field term in a previous experiment. In that study, they observed the mechanism by which people meld similar looking objects together.
"When you're watching /Harry Potter/, you don't notice that his plain T-shirt changes to a Henley, for example," first author and doctoral candidate Alina Liberman said. "Your visual system is primed to see things as remaining stable. You have a bias towards ignoring small changes in your environment."
Leo Jia writes:
I wonder if this has to do with focusing of attention.
For instance, if you focus on the nose of a portrait on a computer screen and then the nose changes color or shape, you should be able to notice that. But if in the mean time, the ears changed, then it is hard for the person to detect that because his attention was on the nose only.
Perhaps this is the evolutionary way of using resources efficiently because the brain's processing resource is limited. This must have proved to work well during, say, hunting. Men wouldn't easily lose focus of the rapidly running rabbit because they see changes instantaneously. What men perhaps don't easily see is that a cheetah starts to chase the rabbit from another angle.
In terms of reading the market, the reason I believe we often miss things perhaps has more to do with the fact that there are so many things going on at the same time that our attention can't handle them all.
I know we've done a million studies showing the full moon doesn't predict squat about the market, but tonight's blood red moon full eclipse sure was accompanied by big moves in the market. Do you think a lot of people happened to be up watching the moon and figured, might as well do something crazy in the market? Hospitals and cops both say full moon is a busy time for them.
But full/new moons do influence stock prices theres even a Fed Reserve paper on it.
Jordan Neuman writes:
This full moon coincides with the Jewish harvest festival of Sukkot. I posted on the site two or three years ago that the period actually saw decent gains. The saw about selling before Rosh Hashannah and buying before Yom Kippur had validity. It worked again this year.
October 9, 2014 | Leave a Comment
Something not well in Tokyo.
Pitt T. Maner III writes:
Super Typhoon Vongfong is about 4-5 days out. It's something to keep an eye on to see how it tracks and if the intensity changes downward.
The storm surge could be devastating and winds and rains in the 150 mph range are extremely destructive if they persist and typhoon stays organized near populated areas. 165 plus mph is unreal.
Satellite at present looks like Mitch 1998 in Atlantic.
Strangely it could have an effect in the US by shifting jet stream lower.
Last week while in the DC area I took a visit to Mt. Vernon which I would highly recommend. It is an education into the life of GW the man, and not just the iconic figure that sits on the dollar bill. One interesting thing they have done is to construct images and statues of how he would have looked in his 20s and 30s since there are few portraits from this period. His early life was new to me and it is the story of a young ambitious man, whose father died early leaving most of the wealth to his old brother. GW, though guided by his older brother, was left to support himself and took up the trade of surveying. He learned the terrain of the expanding territories around Virginia and Maryland. He was an excellent horseman and outdoorsman. He began his land speculations at this time, eventually obtaining over 50,000 acres. He joined the British in fighting the French in disputed western and Ohio territories and was a colonel by the age of 23. He was involved with the first shots of that 7 Years War and showed many acts of leadership and bravery. After the war he married a widow of means to begin his life as a country planter in Virginia. This was cut short with the events of the Revolutionary War which occupied the next 8 years of his life, returning home just once.
What sets him apart from the other founding fathers is that he was first a military man, second a man of enterprise and afterward a man of government. He had immense power and was hugely popular, but he chose to leave government for his beloved Mt Vernon. He only had two years to do so before his death. This act of giving up power was his greatest achievement and is one of the cornerstones of our republic today. A visit to Mt. Vernon brings GW out of mythic stature to real life, where I learned about a very practical and able man, who had the courage to take big risks on his way to achieving greatness.
Beauty in the lashing of the tiger's tail
Yes. The way the Fed orchestrates the announcements so that the flexions will not be discommoded, the market will not be weak before an opportunity for incrementing the idea that has the world in its grip, the kind of minutes that are needed when German is weak.
Too many hands on one side of the ship?
Freeze, rain, snow, soil moisture, crops still in the field, next year's crop, silos, quality, hedging, foreign demand, sentiment…There are so many Ag variables to predict. It's complicated, but here is an interesting speculative comment for the Ag followers from Kevin Van Trump's "Current Marketing Thoughts":
There was ZERO "weather-risk" priced into the market, now there are some questions regarding quality and late damage to the crop here in the northern parts of the US, also a few fresh concerns about conditions in Brazil.
We have seen it time and time again the past few years, with the crazy speed of the market and the high frequency players in the game, whenever you get the trade overloaded to one-side or the other severe whiplash can occur in the blink of an eye. Speculators and hedgers alike can NOT rule out a $0.50 to $1.00 rally off the lows ($9.04) in the soybean market. Likewise you can't rule out a $0.25 to $0.50 cent rally off the recent lows in corn ($3.18) or wheat ($4.66).
If you're working a limit and miss the fill by 1//2 a point, and you then go to market when it's 5 away so to get the position on, the price will hit your original order limit. And of course if you don't go to market, you'll miss the trade of the year. You can put your lunch money on it.
Ralph Vince adds:
Variance(x) = a * ExpectedValue(x)^p, where the constants a>0 and p>=0
The various distributions that are classically known occur at certain values for p (e.g. p==2 for Pareto), which is of no consequence but what IS of consequence is that this basic form is where we see so much occur in so many events market-related, insurance-related, weather-related, etc.
Perhaps one for the Department of Deception. Is the following not somewhat akin to moving the line in Las Vegas? Are there not examples of similar activities in other cases? A potential new crime at the millisecond level:
A big hurdle in the "spoofing" case against a high-frequency trading firm is that a jury must decide whether one computer fooling another is a crime, Peter J. Henni…
"The indictment seeks to hold Mr. Coscia liable for trades executed in milliseconds by a computer, including one trade at 4:54 a.m. when he was probably asleep. The spoofing charges may send a chill through the high-frequency trading world because the evidence of fraudulent intent will come from a program that uses rapid-fire orders and does not depend on humans for its execution. So finding that Mr. Coscia engaged in spoofing may come down to a jury deciding whether one computer fooling another is a crime."
Ed Stewart writes:
The indictment describes how Mr. Coscia's programs would enter small buy or sell orders for future contracts that he wanted to have filled. He then placed large orders on the other side of that trade at a higher or lower price to entice others to enter the market on the belief that the larger order would affect the price. Once the price moved so that his small order was filled, the program canceled the large orders. The program would then do the same transaction in reverse by entering another round of large orders that would move the price up or down to allow for Mr. Coscia to exit the position at a profit.
In other words he gamed other HFT traders who were using order book info to step in front of his large limit orders. As if jumping in front of a large limit order should be a protected activity? I would think non-HFT traders would applaud strategy, as it would increase the cost of stepping in front of orders, as the HFT would never know if it was a "spoof" or not. I see nothing inherently wrong with the strategy indeed it might be correcting a distortion itself.
The fact that this is a crime suggests to me that what is "level" to most is simply what tilts the odds in their favor.
Finally Ag Commodities are getting a little break after months of straight down. Coffee up 7%. What was the explanation? Strong dollar dampens ags exports. Note that the yen and Euro are getting a little bounce today too after both being in downtrends for months. They are really driving the yen down.
Jeff Watson writes:
But the question remains…Is Dec corn going to break 3 and are Nov beans going to break 9? Commercial hedging companies sell and deliver if necessary. The selling pressure from hedging companies is a real headwind in your face, even in a bull market. While one has enjoyed a respite from the continual decline in prices, one wonders….has the form changed, is this a bottom, or is this a selling opportunity? For the past year if you sold into strength in the grains and held for a couple of days, you made a very serious return. That's been the form and one wonders if it's changed. I recently got faked out in the grains around an important price point, and left 40% of the money on the table had I cashed in on Friday. Oh well, things could be worse…I'm a terrible poker player, and Ceres is very stingy.
October 6, 2014 | 1 Comment
The book Illumination in the Flatwoods by Joe Hutto, the best book on nature I have read, is a 1 1/2 year chronicle about the connection of a naturalist and artist who lived as a turkey, the most human of birds. It teaches you about the life of humans, the relation between romance and affection, the beauty and artistry of nature, the connections between all things including animals and humans, and how to be part of and leader of a group. One comes away from it with a reverence for the turkeys and Joe Hutto, and many ideas for how to trade the markets better, and live a better life.
Hutto imprinted himself on two dozen wild turkey eggs when they hatched, a thing he has done with foxes, deer, monkeys, waterfowls and many others. He lived and foraged, dreamed about, and protected the turkeys each day, until they grew into independent adults. There's mutual love between them memorialized in such passages as "I have never kept better company or known more fulfilling companionship. Our communications although somewhat abstract is completely satisfying and out interests are identical: plants, insects, reptiles, birds, mammals. We are driven by the same engine, and in spite of our divergent morphology, and intellectual approach, I find that our similarities are greater than our differences." Hutto mixes scientific knowledge and studies about animal behavior with the documentary so that one gets an education about ethology, ecology, psychology, and geology seamlessly and painlessly from a reading.
The Turkeys, spend most of their time on the ground walking on two feet, communicating and sensing like humans, and grow to be close in size to our size. They contain within them the instincts developed from 20 million years of evolution, and all it takes is a trigger from their daily life for them to know exactly the right thing to do. They are totally exuberant and enthusiastic and teach us to enjoy the present moments with gusto. As Hutto says: "They are more alert, sensitive and aware, they are vastly more conscious than I. In many ways, they are more intelligent… Every day I see that the most important activity of the turkey is the acquisition and assimilation of knowledge. They are curious to a fault, they want a working knowledge of every aspect of their surroundings, and their memory is impeccable."
Hutto himself is an admirable person. He is a can do person who loves nothing more than building things, eating a grasshopper along with the turkeys, painting a scene about nature, and picking up a dozen rattle snakes with a garden hoe and transporting them to a new home. I particularly admire his ability to withstand the thousands of insect bites from gnats and Florida black bugs, the constant wetness from perspiration that cause him all sorts of pain and soreness that arise in the day and fray with the turkeys. Yes, this life was difficult, but he notes it was easy compared to his previous imprinting study of water fowl where he lived with them for 6 months, submerged half way in tide pools, with alligators stalking him and his charges 8 hours a day. Without further ado, but recommending the book and accompanying PBS documentary wholeheartedly, I turn to the 15 or 20 things I took away from it that should help us with our trading.
The turkeys are the favorite prey of many animals, and parasites, and have to be very careful from birth that they don't die. As a consequence, they are very serious about learning at all times, and never allow anything out of the ordinary to escape them. While they are exuberant and enthusiastic, they don't have time for frivolity. Like the turkeys, the market person is always prey to disaster, and must not be distracted during the fray.
2. Sense of Place
The turkeys like certain places and will speed up to get to them, and once they get there just relax and admire the beauty and majesty of it. They especially enjoy ponds and edges. The market person has certain landscapes that they should look forward to, and should expedite their passage to them, and take full advantage of their beauty and profits potential.
The turkeys often join flocks of other species, including jays, chickadees, woodpeckers, cardinals, wrens, gnat-catchers. The birds are attracted to the movements of other birds. On occasion, the market person must know that all markets move together. The normal negative correlations don't work. The bid moves in one market carry over to the others. Try to find the mechanism that creates this, but also be alert that one big move can presage another.
Nothing escapes the turkey's attention. Nothing new can happen without them investigating it and assimilating it into their daily life. They won't move on until they understand it. They never forget once they have uncovered it. The market person must be alert to all new things, all unusual moves, all crazy events that cause big moves. For example, on Tuesday, the market dropped a 1/2 % in a minute on news that one man in Texas had contracted Ebola. It was meaningless for its impact on the total economy but the move itself was a preamble to one of the biggest drops the next day in market history.
5. Edge areas
The turkeys loves to forage in areas that are between forests and farmlands, wetlands and drylands, pastures and creeks, pines and oaks. The edge lands are more interesting, provide a better variety of food, and provide more areas of escape. The edge of markets are great opportunities for us. The time between one market open and another open, the moves that occur during and after the fixings, and reopenings, the times that pit markets close and electronic markets open, the times between work and lunch, are all grist for an opportune study and alacritous attempt to profit.
6. Acquisition of Knowledge
The turkey's main business during the day is gaining knowledge. Any object that they haven't met must be assimilated. All new things must be examined by each turkey. The market person should have a wide canvass. He should study science, economic, psychology, politics, and turkeys. Whenever a new relation occurs, whenever a new crazy reason for a market move is on the cusp, the market person must pause to understand it.
7. Fossil Ancestry
The turkeys have 20 million years of evolution to teach them about all things that have ever been life threatening to them. They instinctively know which reptiles are dangerous, which insects are edible, which places they are safe. They rely on instincts leavened by knowledge of the current environment. The humans have fossil ancestries and instincts also. When you feel your color changing, your hair raising, your sense of fear arising, know that your tens of thousands of ancestors are sending you a warning, and pay attention to your instincts.
The turkeys will try to remove any clothing on Hutto that they don't like. Blues are their favorite color, and reds their most hated. Market persons should wear colors that are not distracting to their colleagues, and don't interfere with their quiet contemplation.
9. Skirmish Lines
The turkeys move in a line so that when one turkey harasses an insect but doesn't catch it, and the insect flies away, the turkeys behind it are able to catch it. They maintain that order all the time so that they are optimally formed for the flock to capture the maximum of prey. The humans who trade markets maintain a line of trades so that if the first one doesn't lead to the desired move, the trades right behind it perhaps on a scale down or scale up will do the trick. Similarly, the big market operators can't move the markets by themselves. They form a skirmish line with their colleagues by having meetings where they agree that the market should be down or up, and then go to the old stream media now the new social media to broadcast their views, and make sure that the personages in the line next to them can move the food in the desired direction.
10. Sensory abilities. The birds can detect movement and smells and color to a discrimination level that is almost supernatural. They can spot a hawk at 2,000 feet above. They are always alert and never rest without the protection of cover and their leader. They can smell all their predators and prey and investigate all new things with their beaks. The market person must always keep his eyes and ears open and should never wear headphones or any other distraction.
11. Herding versus Following
The turkeys like to be together at all times. They have numerous calls to assemble. And when they can't see their brothers and sisters they are unhappy and nervous. They never wish to be alone. And yet, they know that Hutto is their mother and leader. They wish and know they should follow him, but he must never do anything that disperses or confuses them. Hutto's relation with the turkeys is similar to many trading mangers, and leaders on a trading floor that I have seen. He stands at the front and reports various ideas and opportunities, and trades that he is doing, and the herd of traders and salesmen follow him in a flock of related activity. Never forget that humans have the herd like tendency of birds in a flock, and as Galton points out the mentality of oxen who will never lead but follow a leader with blind ambition. Okay, that's a start.
Steve Ellison comments:
In point 4 you write: "For example on Tuesday, the market dropped a 1/2 % in a minute on news that one man in Texas had contracted Ebola. It was meaningless for its impact on the total economy but the move itself was preamble to one of the biggest drops the next day in market history."
This is a very interesting example. I suspect the 10-point decline in the S&P 500 after the unemployment report on July 8, 2011 was in the same category. The S&P 500 fell another 130 points in the next month and did not regain its pre-July 8 level until late October. I generally think most news is discounted before it happens, so any market reaction to news is likely to be reversed. However, there may also be cases in which a reaction to news exposes an underlying supply/demand imbalance. Finnegan moves, such as the 2010 "flash crash" and quick recovery (only to have the S&P 500 drop back to the flash crash low 3 weeks later and continue down), may be in the same category.
Jim Sogi writes:
Viciousness. I've heard turkeys can be vicious. I believe trading takes a bit of viciousness. The reality is you are taking money from someone. You may be ruining someone. It takes a certain attitude to do this. It's abstract as you are screened from the other side in anonymity behind the screen. But I've seen the reality of it. A trader needn't have a vicious or a terrifying mien. Take the Chair, for example: he seems mild mannered in person, but underneath there is a drive that makes him a good trader. Please don't take this wrong, I don't mean he's vicious. He's the most magnanimous man I've ever met.
Andrew Moe writes:
I know HFT people who unquestionably take money from someone every millisecond. They are extremely intelligent, geniuses of sciences, seem to be kind; yet they're dedicated full-time to the most direct "taking money from someone" a fraction of an inch behind Bernie Madoff
The only reason they are able to do this is that they provide a necessary function for the market at the lowest possible cost. Perhaps one should take heed of the original brilliant post in this thread and examine the why and the where of how HFT fits into the market ecology. What do they eat? How do they hunt? What do their tracks look like (nanex will show you some pretty pictures)? Do they herd? What are their defenses? When are they weak? The turkeys undoubtedly know all this and more about anything that might be stalking them. Once you understand the predator, it is much easier to avoid being the prey.
Anatoly Veltman writes:
"You are taking money from someone" And do you say the same about someone who is perpetually long stocks?
It's interesting to hear your opinions on the subject. I'll tell you one thing for sure: I know HFT people who unquestionably take money from someone every millisecond. They are extremely intelligent, geniuses of sciences, seem to be kind; yet they're dedicated full-time to the most direct "taking money from someone" a fraction of an inch behind Bernie Madoff.
My 2 cents
The investor's wealth ultimately comes from flows that derive from the real economy such as eventual dividends, buybacks, etc. I would include the return of leveraging equity which is financed by "real" economic activity. This is particularly true when the finance rate is in some way subsidized by state intervention, which is frequently the case.
Trading and speculating -if successful- takes advantage of the money flows of other traders and market participants. Many of these strategies (at least what I am familiar with) are based on the concept of "urgency." My finding is that ideas with persistence are in effect "giving the market what it wants" even if what it wants is mistaken if viewed from an X period(s) of time later perspective, which is where the profit is made.
In the real world there is much overlap, however I see these as two distinct sources of potential return.
If one believes (as I do) that the primary purpose of financial markets to price things (equity, debt, commodities, currencies), it makes sense that there is a competition to set prices and achieve equilibrium (which is never reached). If one does not want to participate in this contest they can hold for very long periods and seek to get the investor's return that derives from the "real" economy and leveraging equity.
My way of seeing HFT is that it occupies the space the floor used to have. They are consistent (the good ones) because they get massive scale and turnover beyond what an individual could achieve trading manually. This is why (once again, the good ones) are so consistent, it is a law of large numbers type effect.
I had the opportunity to invest in such a firm when it was just getting started and the principles were looking for backing. Upon reviewing their business model I felt I could not get a handle on the extreme blow-up risk do to potential operational error. It was outside of my competence level to assess accurately or prudently. I passed and still feel I made a good decision, even though with hindsight the guys were very successful and I would have made a large return. My point in mentioning it is that the great HFT return stream can hide things that are not obvious - particularly operational risk that often appears to be huge (…or at least I tell myself that rather than kick myself for passing).
Andrew Moe writes:
I'm glad the thread lives, and it will hopefully develop in a few directions. But one point I raised was very pointed: I was not implying HFT as a sector. I was questioning the moral aspect of a handful, who managed to place themselves into a no-risk pocket within the ecology. Their only risk is CAPEX committed and personal freedom, should lawmaker flip on them one day. But their conscious choice is to operate daily as nothing more than a tax on all participants.
When Mr. Sogi said "taking money from other human", he merely implied competing (and prevailing) within the risk-taking endeavor–not within 1:1000 day risk of loss.
I used to find when turning off surfing video music and just watching the surfing video, and then playing some other music, it used to sync on the big bottom hand turns or re-entries. It would also close at the same time as some major tube section–I would swear by it–but it was some time ago, and Kelly always drove off the lip harder than anyone… Hard for an Ozzie to say that. It reminds me of how Vic wrote in his first book that "music is designed to end at the hour and that's when the prices get market and the margins and settlements are settled."
"Bitcoin went down."
One efficient markets cliché is making fun of the people who hop around trying to explain and anthropomorphize whenever the stock market goes up or down. You know, Stocks Mixed On Strong But Conflicting Emotions or whatever.
Another cliché is that bitcoin is reinventing modern finance as we watch. So bitcoin prices dropped below $300 yesterday and look at this: "Bitcoin tumbles: are investor's losing faith?".
Analysts are citing a number of factors for the decline: bearish chart signals; ongoing regulatory concerns; large sell orders by some early adopters; and a shift in the supply/demand balance.
There's a sense in which you always want to be the analyst who cites "a shift in the supply/demand balance," though in a larger sense you never do. (Also never be the "bearish chart signals" guy, come on.)
"Some contend that Bitcoin's price is irrelevant and that it does not reflect the virtual currency's true value." Of course, and while the second half of that sentence is true in any financial market, the first half is weird. But that's not a surprise, right? Obviously bitcoin didn't go down yesterday "priced in bitcoin".
October 6, 2014 | Leave a Comment
The KC Royals were a powerhouse in the late 70s early 80s when I was in High School in Kansas City, Missouri (KCMO), Interest rates were at their peaks also. 30 years ago was the last playoffs the KC Royals played until this year. 30 years ago at the start of October was the time the 10 year CMT was at 12.54%. The 10 year has fallen ever since.
Royals are a low budget team, KCMO with teamsters/union mixed with and political corruption history. The town and the team seems to signal the fall of the unions, interest rates, local political cronyism collapse in on itself. Was 30 years ago also signal the end of the narrowing of the wealth gap? Could the rise of the Royals, signal the inverse, the end of big business and banks cronyism, the rise of interest rates, small businesses, wealth gap narrowing again? Or is this a 1 or 2 year fluke? Hopefully I will be around in 30 more years to have an answer. But I will leave a testable question for the reader, "do years where low budget teams winning the playoffs have any predictability for the small caps or markets in general?"
From a lifetime in various sports, there have always been four stages to test any new act for the proven repertoire.
1. Does the new thing work in solo drill?
2. Does it weather practice games?
3. Does it withstand great fatigue?
4. Does it carry through tournament stress?
Thus, any new thing to be added to your sports show is not proven until it wins a tournament. At that point, you may relax and continue to use it to success.
Only about 1 in 10 of my early new tricks withstood the rigors to become a sweet spot of my game. Sweet, because any simple new thing added to a standard act usually makes a dramatic change in performance.
October 6, 2014 | Leave a Comment
So much–once again–for moneyball.
Ralph Vince writes:
Baseball is certainly a game where you truly need at least a 7 game series to determine who is the better team. Unlike, say, football, where in most games, the better team wins, that margin is much, much smaller in baseball, given the nature of the game (truly, a game of inches…and bounces…and breezes, and tiny margins that decide the day).
Don't take my word for it, however. We can compare major league baseball, to say, basketball, where the percentage of time the better team wins, given the nature of basketball vs baseball, is higher than baseball. Here is the data for all 7-game playoff series from 1905-2013:
1905 - 2013
Series Baseball Basketball
1-0 62.7 77.3
2-0 82.7 93.7
3-0 97 100
2-1 71.1 82
3-1 84.6 96.3
3-2 69.8 85.9
So, series 3-2 we see that in baseball, the team that is up 3 games to 2 games has taken the 7-game series 69.8% of the time vs basketball's 85.9% of the time. Clearly, basketball dominates baseball in this metric, and further evidence that the outcome of any single baseball game reflects who the better team is less frequently than most other sports.
Stefan Jovanovich comments:
In baseball the "best" team is the one that actually wins in the post season, not the one that has the "better" stats during the regular season; that is, as the coach said, "why they play the game" and why the game, which can be counted so easily, still eludes the precision that sabermetricians have promised.
What makes baseball relentlessly unfair is that the advantage that "better" teams usually enjoy - home field - counts for the least. Of all the major sports, baseball is the one has the lowest "home field" advantage - 52-48. What makes the game doubly unfair is that the "inches" even out, just as they do in the racquet sports; and the referees cannot easily, as they often do in football and basketball, decide the game.
For those of you who have not read Moneyball, the reason for my snarky reminder of the final score (Kansas City-9, Oakland-8) was that the Royals won the game by doing precisely what Master Beane has argued against - they stole bases and sacrificed - and the A's got their 8th run by doing exactly the same thing.
Google has always given me the creeps. They have an awful amount of information and power and its growing. They are not the only ones.
In the Dataclysm, by Christian Rudder, who owns Okcupid an electronic dating service, he discusses the issues involved in big data. We all give up information in every transaction, when we go on Facebook, do a Google search, buy with a credit card, redeem a coupon. We get value in return, but the big data can be mined in creative ways to find out some very personal information. Facebook data can be used to determine if one is homosexual with an 80% accuracy. Target can determine if a customer is pregnant. Target doesn't want the customer to know that they know she is pregnant, so they put in lawnmower coupons together with the cribs and diapers so the customer will think she is getting the same booklet as the neighbor. Not. Big brother is watching.
In Okcupid data, they can tell a persons race by the language they use. Curiously men view women as being half above average in looks, and half below average, a bell curve. However, when women view men, they only think one in six men is above average in looks! My wife says, well that's obvious…women look at other things in men, not just looks. I guess that's how the ugly old guy gets the megababe.
On the dating site, people filter all the women or men by multiple criteria, however in experiments, they found that people were more satisfied by the experience in a blind date, (without pictures) even when one party was below average and the other above average in looks. Take away: people do not want really what they say and think they want.
Funny factoids aside, there are some big issues in privacy, use of the data. NSA has access to even more data, and recruits top math students to decipher it. What do they do with this info? They are not under the motto, "Do good".
We are basically at the beginning of history. Data is just starting to be collected. Kids now have their whole lives frozen and preserved forever in digital form. That drunken polaroid does not disappear when cleaning out the attic.
The book is annotated with explanations. I'd be interested to hear from the statisticians how this big data is mined. The word counts and graphs a la Tufte (who Rudder mentions) helps to tease out info.
Thailand has been volatile in recent months, the army having been active in the political sphere. The President has been appearing on state broadcasts, offering a carefully worded assessment and hoping to deliver 'smiles over frowns'. A visit to the south west of the country sees the end of rainy season. Here, tourists and visitors are sacrosanct and there is limited risk. Nonetheless, two British tourists were murdered in recent weeks. In past days, two Burmese labourers volunteered guilt, taking the police for a guided tour of their beach-side activities.
The Burmese are gang labourers in Thailand, constructing much of the real estate. They all work in bright pink or blue T-shirts, although I don't know if this is a cultural phenomenon or a way for their gangmaster to keep track. The truck we are using has an engine double the normal power rating: it will grip the road perfectly with ten Burmese labourers weighting the axle, but, empty, comes close to stalling out in second on hills.
It is a Toyota Hi-Lux, the most popular vehicle on the roads, combining utility and capacity with cool: we could almost be preppy Houstoners, crowded at the traffic lights, save for the peppering of scooters around us mounted by three or four family members. You can get the Hi-Lux on the road for BHT40,000 ($1,250) cash. The Thais are a peaceful and friendly people, but seem to change character behind the wheel. We keep to the speed limit over the hills at night, causing locals to attempt two car overtakes from behind us into blind bends. The road death rate is 4x a typical western country and the injury rate an even higher multiple. That you can get a Hi-Lux on finance is probably key to their prevalence. People live in tin-roof shacks but have a brand new truck parked outside. In dress, transport, and smartphone usage, there is little to split locals from westerners.
Our truck's starter motor is flaky and we had to get a push start in the Big C supermarket car park. Locals hear our failed ignition and magically appear to help. The old guy chastises my timing on the ignition, and pulls me out of the cabin. I unthinkingly comply, despite the fact he is in prime position to drive off with the truck.
Supermarkets are still high margin affairs in Thailand: they merchandise in a way that would make Sam Walton proud. In the UK, you have Aldi eating out Tesco's heart, check-out girls have been exchanged for robot tills, and accounting fraud is the only way to turn a decent profit. Here, supermarkets look like they did twenty-five years ago in the the west: fully serviced and doing Univever and P&G's bidding. Taking back margin into your pocket with own-brand products might seem a financially bright idea, but only if it doesn't reconfigure the chessboard to a losing endgame in the process.
The tourist areas attempt, somewhat successfully, to simultaneously cater to the Magaluf and Marbella crowds. One can exit a 'Dusit' or 'Banyan Tree' five-star oasis onto a club-lined street full of drunks and bar-girls. Many ex-pats come here to find love and the exchange rate seems to be roughly one male, ageing, obese, clapped out westerner to one female nubile with single-digit body fat, naivete, and a desire to transcend circumstances. Or at least enjoy some fake Gucci bags and free drinks in the interim. Westerners can fund their girlfriend's real estate activities, which yield 7% net on construction costs. A full-service maid costs BHT10,000/mo ($325/mo). Non-residents can live on an endless cycle of sixty-day visas as long as they exit for a day at the end of each rotation, but only two hundred permanent residencies are granted per year and have very strict requirements, such as fully fluency in Thai. It is perfect for business people with offshore affairs.
It is interesting to ponder how multi-national franchise applications are controlled and reviewed. Putting a Starbucks and McDonalds next door to each other on the town centre 'walking street' probably seems like a good idea on paper, until you visit and realise it is the nexus of the red-light district and that the neighbours are massage shops and ping-pong shows. Perhaps footfall is the only key criteria.
The mafia is involved in much of business. The recent clearances by the army have tried to stymie corruption and the local mayor has been arrested for activity through his family holding company. It's not clear if violence features, more death by a thousand cuts. To get anything done in the precinct you need wheels greased, otherwise your project or business will stall out waiting for correct permissions. Tax-assessments are entirely subjective and can hit arbitrarily. On the other hand, if you have the right backing, you can build a ten story block right up against your neighbours windows and any complaints will be futile.
Everything has a cash clearing price. Bribes are never requested but can be offered unsolicited. The problem being, therefore, that you need to be a local in order to know the going rate. For example, allegedly BHT10,000 ($325) covers a police shakedown, BHT30,000 ($1,000) will get a passport and visa fixed, and BHT100,000 ($3,250) covers one month's protection money for a concrete truck. Recent anti-corruption activities have tried to curtail such methods. Previously, everyone took and everyone paid, and all was in equilibrium. Now, the police, for example, need to make up income and have taken to breathalysing car passengers and fining them for being drunk. A squeeze in the money supply.
October 6, 2014 | 3 Comments
So it's Friday afternoon about 3:30 and I'm wrapping up the day when I get a call from my stepmom Patti.
Apparently, my cousin Veleda who lives in KC has a friend that was coming to St. Louis to see Pearl Jam in concert that evening, but his fiancee' had injured her back and was unable to make the journey.
So he had a couple of tickets that he didn't want to see go to waste.
So I called Veleda and she gave me her friend Justin's phone number and 10 minutes later the tickets had been changed into my name for pick up at the "will-call" window at Scottrade Center in downtown St. Louis.
So, now thanks to the courtesy of Justin (Thank you, Justin), I am in possession of two tickets to Pearl Jam. So now I have to decide who to take.
My wife was sitting with me when all this happened, so the first offer has to go to her. Gwen declined……she is not a real fan of heavier rock….but she did suggest that I take my son, Hunter who is fan of classic rock. Hunter (aka "Boosh") had already seen the Def Leppard/KISS concert earlier that summer and loved it. So Gwen thought he should go.
I called Boosh who was out for a walk in our neighborhood and he was in!
Unfortunately, Boosh really didn't know very many Pearl Jam songs, and there really wasn't time to get him up to speed, so I had him YouTube a couple of songs……..Jeremy, Even Flow, Yellow Ledbetter (incidentally, YL is my favorite PJ song)…….which got him pretty psyched.
We left early since I wasn't sure where the will-call window was. Since we got there early, we found a good parking space just across the street from the Scottrade Center and walked right in. We found the will-call window and got our tickets.
So now, we had to wait to even get into the venue. We waited almost an hour before the gates even opened. But it was an interesting hour.
We people watched.
We saw an odd array of people ranging from middle aged professionals like myself down teenage burnouts dressed in goth gear to emo's, to families with their children.
I was able to sneak a few pictures of the some of the more "interesting" people/groups in attendance.
There was the obese women in a wheel chair sporting a mullet.
There was a guy dressed in green military gear that looked just like Fidel Castro including the beard.
There was the professional guy who looked like he came right from work wearing coat and tie.
There was the mother and son with each with multiple piercings (ears, mouth, tongue, nose, cheeks, eye brows) and their bodies were adorned with tattoos.
However, everyone was very respectful and courteous.
It was not at all like it was in the old days. No one was looking for a fight, no one was yelling or getting obnoxious or getting upset when someone jostled them.
A VERY large heavily tattooed man accidentally elbowed me pretty hard when the line started moving. When he turned to see who had he had bumped, he had a look of concern on his face and words of apology and kindness flowed forth. When I smiled at him and said, "Meh, accidents happen", he smiled back and patted me on the shoulder.
When we finally got to our seats, the Scotttrade Center was largely empty. Far more empty seats than full ones. It was now ~ 6:30 and the concert was scheduled to start at 7:30.
So Boosh and I waited patiently. As people started filling in the seats, we made conversation with the people the around us. Of course, most of the conversation revolved around music and concerts.
Although most of the people around us were in the 30's and 40's (a few in their 20's and a few kids), I was probably the oldest in our immediate area (although there were people nearby that were clearly older than I…..I think I even saw some people that may have been in their 70's). I was asked a lot of questions and told stories of concerts "back in the day".
I told the story about how I had 3rd row center seats for Led Zeppelin back in the 70's and how on the day of the concert my report card came and my parents saw that I got an "F" in math (my one and only F of my entire school career) and grounded me from the concert.
People around us were partying and having a good time.
But there were things that were conspicuously absent.
For one, there were no beach balls bouncing around the concert hall.
Secondly, the room was not filled with the "haze of sweet smelling smoke" that I remember from the old days.
Also absent was the guy next to me saying " 'ere" (I spelled that phoenetically……some of you will clearly understand what that means) as he passed something to me.
We did catch the occasional whiff of marijuana, but only a little bit.
Also, the biggest difference was the Jumbotrons. They were showing the Cardinals first playoff game on the big screens.
Of course, between 7:30 and 8 pm, the Cardinals were not doing to well as the Dodgers dominated them.
Then, at about 8 pm, the concert hall was full and (as we were told by the band), the band was ready to come out and start playing…….but there was a problem…….
At about 8 pm, the Cardinals started a rally. They were down 6 -2 when the 7th inning started…….and were up to 10 - 6 after the inning was over.
The crowd was going crazy watching the Cardinals on the Jumbotron…..and Pearl Jam was just standing by waiting for the inning to end, knowing that they couldn't go out on stage while the Cardinals were staging this major comeback. So they waited and waited and waited. The inning lasted almost 1/2 hour.
When the inning was over ~ 8:25 Pearl Jam came out and started the show.
The first thing I'd like to point out is that, although I am a PJ fan, I did not know as much about their music as the people sitting around me did.
They played 3 songs before I even heard one that I knew. Now, don't get me wrong, the songs I didn't know were still fantastic and I enjoyed them very much.
They hit on almost all of their standby classics. Even Flow, Daughter, Better Man, etc.
The band absolutely rocked the house for 90 minutes and then left the stage. I figured the concert was over except for the encores. I was wrong. They were just taking a short bathroom break (as guess even famous musicians are subjects to the foibles of age and need more bathroom breaks than they did when they were younger).
When the band came back out, it was just the lead singer Eddie Vedder (one heck of showman, BTW) who came out with his acoustic guitar and began the second half of the show.
He played a few songs, including the old John Lennon song, "Imagine". It was very very good!
When the band joined him, they played a few acoustic numbers and then got back to the business of damaging my already diminished hearing capacity with more their hard rock numbers.
They played for another hour and ended the show with a bang.
Then came the encores…….a full 30 minutes of encores.
Of course, they saved a few of their classics for encores. The best song of the night was "Alive". They rocked the house with that one.
And then finally, for the last encore, with the house lights fully up and the entire concert hall fully lighted, they played "Teenage Wasteland" by the Who. Here is my iPhone recording of the final song.
A few other notes about the concert:
The band was incredibly gracious. They took time to read off emails and stories of fans that were going through hard times and dedicated songs to them.
The read off a list of birthdays being celebrated and even pointed out a few people in the audience who were either celebrating something or had just gotten out of the hospital to be at the concert.
One lady held up a sign that said "My 100th Pearl Jam Concert" that made it on the Jumbotron. A few songs later, the Vedder said that he was told that someone in the audience was seeing their 100th PJ concert and wanted to know where she was.
Once she was located, he took about 60 seconds and personally thanked her for her support of the band. Vedder had a bottle of something that he was drinking on stage (wine maybe) and said that he wanted to give this her as a personal gift from him and the band for her support of them……but the women was really far away from the stage.
So Vedder asked the audience to pass the bottle to her. He handed it someone and later we got to see that bottle had made it's way to her.
The band made a point at several times during the show to express thanks to their fans for their loyal support.
And they demonstrated their gratitude by putting on one heck of a show. I can't imagine how redundant it gets playing the same songs over and over again each night. But the band clearly took a lot of pride in their show and overall performance.
At no time did I feel like they were just going thru the motions. Vedder did the job you would expect from a lead singer and showman. Mike McCready did everything and more that you would expect from a talented lead guitarist and the rhythm section didn't miss a beat.
There were only two negatives that I could see. One was expected, and the other was a bit of a surprise.
First, the expected: When a band has a playlist as long as Pearl Jam has, there are going to be a few popular songs omitted.
As we were leaving the Scottrade Center the one recurring theme I heard from concert goers was the absence of the song Yellow Ledbetter. Apparently, I'm not the only one that loves that song.
The unexpected negative was the lighting. I've been a bunch of concerts in my life, but this one had a twist to it.
I recall that the lighting used to be "on the performers", but at the concert last night lighting was "behind the performers".
What this resulted in was the audience being blinded for much of the show. I would say for about 50% - 75% of the show I couldn't really see the stage or the performers. All I could see was blinding lights in my eyes. It was like driving down the highway with all oncoming traffic having their high beams on.
I spent most of the night watching one of the two jumbotrons off the side of the stage just to see what was happening.
Although I'm not sure why they did it that way, I have a feeling it was to discourage people from taking pictures and videos of the show…..but I could be wrong about that.
Regardless, it was a great concert from great showmen. I highly recommend to everyone that if you have a chance to see Pearl Jam in concert you should take it!
Boosh and I had a great time!
And thanks again to Justin Trent for gift of the tickets!
One lesson I am taking from the following article is that randomness is the safest and least damaging method after a series of losses. Of course it is better to have a strategy with an edge. But when you feel threatened or defeated any known strategies could take on a negative edge, so it is better to go random, which always has a zero edge that is better than a negative one. Species seem to have learned this through evolutions.
One other lesson perhaps is that randomness is a great mind opener if one is mindful enough. It is said that failure is an opportunity to learn, so maybe this lesson teaches us that randomness is the door to success.
Many of the choices we make are informed by experiences we've had in the past. But occasionally we're better off abandoning those lessons and exploring a new situation unfettered by past experiences. Scientists have shown that the brain can temporarily disconnect information about past experience from decision-making circuits, thereby triggering random behavior.
In the study, rats playing a game for a food reward usually acted strategically, but switched to random behavior when they confronted a particularly unpredictable and hard-to-beat competitor."
An interesting thought that reminds me of modeling the Genetic Algorythm process. Throw in a random factor that ends up improving the search results.
September 30, 2014 | Leave a Comment
A study by Kora Reddy showed that for a sample of SPY days:
"4th trading day from the last trading day of the month (i.e 25th September 2014 in this month's case) is down and it is quarter ending (in the months of Mar, Jun, Sep, Dec)"
There were 45 instances, and all 45 had a higher close during the following 5 trading days.
For analysis, starting with all SPY days since 1993, we want to avoid overlap, so we pick every 6th SPY close and determine whether or not it had a higher close over the next 5 days.
with higher close next 5 tdays: 45
success rate: 100%
Non-overlapping SPY closes (every 6th):
with higher close next 5 tdays: 863
success rate: 95%
To get a measure of the significance of the original results, we take our "every 6th SPY close" data set and assign a value of "1" for instances that have a higher high over the next 5 trading days, and "0" for instances that don't. Then we take that series of 1's and 0's and randomly pull 45 observations at a time (with replacement) for 1000 iterations.
Random runs: 1000
Mean sum (of the 45 values pulled): 42.77
z of original results (45): +1.55
So if we randomly pull sets of 45 non-overlapping SPY days, we would expect about 43 of them to be successes, i.e., have a higher high over the next 5 trading days. The original results have a z of +1.55 against our randomized runs, so they fall under the common +2 level of significance but are still positive.
To take the analysis one step further, we look at the size of the move from each SPY close:
mean move to 5-day High: 1.83%
Non-overlapping SPY closes (every 6th):
mean move to 5-day High: 1.65%
z of original results (45): +0.81
So, analyzing the size of the Close-High moves shows that, while still positive, the z of the original results is much lower than that obtained by looking at the results as binary, hit/miss observations.
A report out today on the health of Australia's listed companies says nearly a third are confronting the risk of a financial catastrophe.
Analysis of almost 16,000 annual reports by professional accounting body CPA Australia showed more alarm bells were ringing now than during the depths of the global financial crisis in early 2009.
The research, conducted between 2005 and 2013, said the red-flagged companies were exposed to the dual risks of the end of the mining investment boom and an unexpected slowdown in China.
Most of my survival techniques are self-taught on the spot. Once while hiking at 12k' in the Sierra Nevadas with winter coming on, I had to find a way to sleep at night without a sleeping pad. The frozen ground conducted my body heat into the earth and I couldn't fall asleep. After a few hours of trying various positions, I fell into a sleeping tripod in which the knees and right elbow were the only contact points, and of course the toes. Nearly all of the body weight was on the former three, and since the knees and elbow are calloused, little heat was lost and I slept comfortably for many nights before coming out to civilization. I later learned that tripod sleeping is standard among nomad Tibetans who also use the right elbow as one may turn the head away from the heart.
I remembered that today in the hot Amazon on a vast crisp-dried floodplain carpeted with one species of dark green leafed one foot plants that absorbs heat. I was sleepy from earlier drinking river water, and there was no shade. The ground was so hot it burnt my skin through the clothes. The solution was the tripod sleeping and I awoke an hour later able to continue to shade and the river.
September 29, 2014 | 1 Comment
Here are some good proverbs of Tom Wiswell that are very appropriate for markets.
Seize the moment: It may come in the midgame, it may come in the ending, but seize the moment, even if it comes in the opening. There are seldom second chances.
Build well: A good game, like a good house, must have a strong foundation
The Follow Through: Once you get a win you have to know how to execute it, or your opponent may execute you."
Fools Gold: The search for a fool proof system is always in vain.
The Wise Skipper: Start your game with a plan, but always be ready to change course in mid-stream.
A Time for Everything: The good player knows when to play for a win, when to play for a draw, and finally when to resign.
The Unexpected: Unless you are prepared to expect the unexpected, be prepared to expect the unexpected defeat.
Seize the Moment: A passive move is best met with an aggressive reply– or an opportunity may be lost.
A Wolf in Sheep's Clothing: The trouble with a loss is that it usually looks like a win or a draw.
Don't Argue with Success: If you are doing well with your lines and style of play, don't change them. If it ain't broke, don't fix it.
Reckless or Wreckless: the player who moves without a motive is an accident going somewhere to happen.
No Risk Policy is Risky: The player who never takes a chance may be taking the biggest chance of all.
September 29, 2014 | Leave a Comment
I liked the conclusion of this article:
"I predict that if we continue implementing Common Core, average students will drop out of math as early as they are allowed. Even math-bright students will hate math. Tutoring companies will proliferate to serve wealthy families. The educational gap between rich and poor will widen. If we want to destroy math and science education in this country, keep Common Core."
Ed Stewart writes:
In my opinion a lot of the need for "change" is very likely driven by PC motives, which is why when it is looked at logically from a mathematics perspective it makes no sense. My guess is (using an example from article) it was hoped that allowing calculators for everything and allowing an increased use of "cheat sheets" would open up math for more equal distribution of supposed talent.
In terms of pace when I was in school we did have an accelerated math program but one had to test into it with an IQ test. The notion that a curriculum can be designed that can shuffle through all kids to be "above average" is part of the problem. It is a lack of realism.
I strongly disagree with the author that non-college kids are necessarily sent to dead-end jobs while college kids are not. Reality is working in a cube with a degree is just as much a dead in job as others, particularly in the outsourcing era where such work has been massively devalued. The notion that keeping ones hands clean is always better is just a bias. Guys who get involved in a field that actually builds something or is otherwise productive such as Natural resources will be better off vs. a twin of equal ability shuffled through the "college" program. And clearly many who see that opportunity follow this different track. Charles Murray is right we'd be better off admitting college is useless for all but the relative few - making it more accepted for people of even moderate above-average ability to go right into a job for training.
Stefan Jovanovich writes:
The need for "change" in education is driven by nothing more than the same financial incentives that operate in all markets where the customers are not the actual users of the product. Even military contractors have to deal with the fact that at some point the soldiers, sailors, airmen and marines have to use the weapons; and, if they don't work or work well, people get hurt, and then the survivors get mad and resolve to get even. Elementary and secondary public education in America has no such feedback mechanism. No school keeps data on the future trades and incomes of their students; in fact, in the name of "privacy" (that Federal Constitutional right that first trimester unborn children lack but the rest of us have), schools are prohibited from collecting and keeping such data. So, in education, "change" happens not because of any customer demand but because of the incentives it offers to the people who manage and create the changes. Every curriculum change means more money for the creators of the curriculum and, far more important, more paid time on and off time for research studies, training and conferences - all of which guarantee time away from the nasty children.
It does not matter whether or not the change works for the customers; indeed, there is a real incentive for the change to fail because that has invariably meant that more money, not less, should be spent on schooling. (Er, sorry, not "spent", "invested")
P.S. There is no evidence that public "job training" works any better than classroom education in the academic subjects; "job training" is another field where the government pays the money and the customers' feedback is completely ignored. The roughnecks who are getting semi-rich in North Dakota right now learned their trade from the informal apprenticing that comes from having an uncle in the oil bidness.
The next meeting of my NYC Junto will take place Thursday October 2, 2014 and feature Yale Law professor Peter Schuck speaking about government failures and how they can be remedied. All DailySpec readers are invited: Meeting begins at 7:30pm, speaker at 8:00pm. General Society Library, 20 West 44 St, NYC.
The photo of the ice cream salesman has a story behind it. When I took the pic I thought the universal 'hands up' gesture odd until reflection on where I had just come from. Tinga Maria, Peru, on the Amazon River far from civilization doesn't see many gringos, so when I arrived it was as though I was a king. The steamer would have a couple hour layover, so I asked a three-wheel taxi to take me to meet a girl. Any girl, for it had been a long journey. He dropped me at the entrance of a 10' concrete walled enclosure. The door was closed, but the ice cream salesman was near. He explained that since the sun was only half past noon to sundown, the bordello didn't open for a few hours, however the inner guard knew his knock. He tapped a code on the large wooden door, the guard opened, the salesman explained the situation, and I was ushered in. Few working girls had arrived, but a handful were sleeping in their individual rooms lining the inner perimeter of the compound. The salesman pounded on one door, it cracked open, and a girl strong armed me through into a small cubical lit by a single candle. There was romance and conversation as I discovered she was a good student in business at the university and was doing this to pay for her tuition. Later, I paid her $4, and before leaving reached to shake her hand. She giggled shyly and held up a stub in the candlelight amputated at the elbow. She, like many others, had been a farmer and bitten on the hand by a venomous snake, and choose to cut off the arm in the field rather than die. The ice cream salesman was waiting outside the compound, and I thanked him and paid a dollar for this photo, and hence the hands up.
I've been thinking about the importance of the actual day session. Pit close seems to be a moving target these days since most liquid markets trade almost 24/7. With futures there is a relationship to the cash market which must be respected. Also for margin purposes there is specific time/price which the "committee" uses which also must be respected. There is probably a range regarding importance depending on the contract. I would put FX at one extreme where the arbitrary close matters least. For stocks and equity futures, I believe the NYSE, Dax, Nikkei closes do still matter as a reference point. For the softs and metals they too seem more connected to the pits where the close is important.
The sentence passed on Dinesh D'Souza —the filmmaker, writer, and outspoken critic of President Obama—for violating the laws relating to campaign finance, I was horrified to read was the following: "As part of his probation, Mr. D'Souza will also be required to undergo therapeutic counseling."
From Wikipedia: "In the Soviet Union, a systematic political abuse of psychiatry took place and was based on the interpretation of political dissent as a psychiatric problem. It was called "psychopathological mechanisms" of dissent."
Punishment is not therapy; crime is not disease. The Soviets thought that dissent was crime and crime was disease: therefore, with them, dissent was disease. We have not yet reached that point, but "therapy" for illegal campaign contributions is coming uncomfortably close to it.
The hydraulic fracturing process which has lead to a big increases in recoverable fossil fuels is having an interest effect on other resources. Hydro is the Greek root for water and the process is extremely water intensive. In places where water is finite in supply like the western states, water rights are being sold by municipalities at prices 10x those just a few year ago. This is not a new story but an interesting twist. I'd rather own water rights than oil/mineral rights out west and I wonder how long before the h2o commodity becomes actively traded.
Eugene Fama, the University of Chicago investing researcher who won the Nobel Prize in economics last year, once again warned investors against the lure of active management.
"The question is when is active management good? The answer is never," Fama said to laughs Thursday at the Morningstar ETF Conference in Chicago .
"If active managers win, it has to be at the expense of other active managers. And when you add them all up, the returns of active managers have to be literally zero, before costs. Then after costs, it's a big negative sign," Fama added.
He's known as the father of the efficient-markets theory, which says that asset prices reflect all available information; investment managers can never truly get an edge.
Fama dismissed the idea that it was possible to pick the best managers.
"The good ones might be good or they might be lucky. The bad ones might be bad or they might be unlucky. We can't really tell the difference," he said. "I don't know if it would ever make sense, even if the fees were zero, I don't think you'd be better off because you'd be investing in an undiversified way."
Read More Economy weak because of 'stupid' policies: JPMorgan pro
Asked about Warren Buffett's long-term record of picking good companies, Fama said the Berkshire Hathaway (BRK-A) chief actually agreed with his index-based thesis. Buffett said recently he actually has directed much of his fortune to be placed in passive index funds after he dies.
"He's, like, my hero," Fama said. "What he says is, 'I can pick a company every couple years, but if you have to form a portfolio, you're better off going passive.'"
"All the behavioral people say the same thing," Fama added. "In the end, they realize that the game of doing something active is fraught with problems."
Fama was also asked about hedging against big crashes, like what happened to the markets in 2008. Attempting to protect against them, he said, was the unwinnable game of market-timing.
"If you sold when the market crashed, you made a big mistake, and if you saw it coming you're a genius," Fama said.
Gary Rogan writes:
Everything that The Sage deems right and proper will happen after he dies, the charities, index investing, who knows what else. I guess it's no longer politically correct to say "Après nous, le déluge".
The statement "If active managers win, it has to be at the expense of other active managers. And when you add them all up, the returns of active managers have to be literally zero, before costs." is probably mostly correct but given that some active managers are also activist managers it's not completely correct. Also imagine that every single person in the world was an index investor, that would be an absurd situation where nothing in particular but the inflow of new money would determine the price of all stocks. And still, if the average of all managers, aren't some managers better than indexing? At the very least Fama could say that no person is capable of either being or choosing a better-than-average active manager, but he isn't actually saying this.
Bill Rafter writes:
That's a poor logical argument by the good professor. While Dr. Fama may be right that before costs the average return of all active managers must be zero, clearly it is possible (if not likely) that there will be serial winners and losers. Speaking only of the latter, several years ago we were asked to propose solutions to a shop that had managed to underperform the S&P for every one of the prior 15 years. They did not like our proposals and also rejected proposals from other research providers, continuing with their own methods. They are now 0-18 versus the S&P. Since it is possible for some to get this investment "thing" totally wrong, it is perfectly logical to assume that some others have better than average performance with consistency.
In the case of Buffett you might ask: cui bono? His non Berkshire index assets could fill an Omaha thimble. Is it not the same press release as Betfair put out about their fixed odds versus exchange book on the Scots referendum?
A good indicator of an over-valued, or at least fully valued, market: "Insider Buying Dries Up Defying $275 Billion of Buybacks"
On the other hand, if prices are high, why not sit on the cash until they come in a bit? Are insiders not buying in a risk diversification move?
One wonders if insiders are really immune to errors that individual investors make. Individual investors see their neighbors portfolios going up and wish they had owned more stocks and then jump in. In the case of insiders they actually see other directors/executives making a fortune from owning shares. I would have to think that the psychological pressure of "missing out" would be even greater that that of the average guy.
We spend a great deal of time discussing the Great Seasoner but never give due attention to the person who has best understood what Henry Singleton was doing all those years.
Reinvesting cash flows while deferring taxes indefinitely?
44 years ago, the Beach Boys went through a major shift and produced some incredible material. One of my favorite songs of theirs is the antithesis of who and what I am. It is called, "Trader," and blames the decline of everything on the spread of people willing to trade goods and services for the mutual benefit of both sides. Still, I love the song because I am above pettiness, will continue to love it, despite the message. My first summer girlfriend in San Diego, turned me on to this when I was 16, and if you saw her you would capitulate also.
Trader sailed a jeweled crown
Humanity rowed the way
Exploring to command more land
Scheming how to rule the waves.
Trader Trader spied a virgin plain
And named it for velvet robes
Wrote home declaring,
"There's a place
Where totally folks are free
Nourishment fills the prairies and the hillsides
And animals stalk the mountains and the seaside
And fish abound the lakes and birds the skies
Trader found the jeweled land
Was occupied before he came
By humans of a second look
Who couldn't even write their names shame
Trader said they're not as good
As folks who wear velvet robes
Wrote home again and asked, "Please help
Their breasts I see; they're not like me
Banish them from our prairies and our hillsides
Clear them from our mountains and our seaside
I want them off our lakes so please reply
Trader he got the crown okay
Cleared humanity from his way
He civilized all he saw
Making changes every single day say
Shops sprang over the prairies and the hillsides
Then roads cut through the mountains to the seaside
The other kind fled to hide, by and by,
And so sincerely
This song is the antithesis of what I believe, and how I run my life, yet I love it and it will always be on my playlist…maybe for sentimental reasons, who cares. As a side note, when this song was recorded, the author and singer of this song, Carl Wilson was a 20% shareholder in a $150-$200 million dollar value enterprise.
September 22, 2014 | 1 Comment
I think your readers might enjoy this white paper that I wrote entitled "CTAs and Rising Interest Rates: Is the Party Over?" [19 pages]. Also curious what they think about it.
September 22, 2014 | 2 Comments
The webmistress asked me "what can you learn about life from turkeys? You might be able to write one of your 10 things about markets from turkeys" after she read that the book that the documentary My Life as a Turkey was based on. I start by noting the turkey is prey for many animals and has to learn from day one to look and observe and be alert and sensitive to everything in their environment at all times to survive. They become very smart and prone to survival. "Their understanding of the forest is beyond my ability to comprehend".
I wonder offer that male turkeys especially have a fearlessness one would not expect. When I worked for the Chair, one Fall day I was leaving the house and near the end of the driveway, there was a tom with at least 6-8 females. He blocked my way for a good 5-10 minutes until his version of the fairer sex were done in the area with whatever it was. Mind you I was in a mid-sized SUV and gingerly tried to drive around the group, flash my lights, blast my horn to no avail. I was extremely impressed by such bravado and courage as I am a big fan of the underdog. I found similar qualities in the hyena when on safari in South Africa (something everyone should do once). Maligned throughout history, in point of fact, they are like the Swiss army knife of the animal kingdom with both known and somewhat hidden talents (courage, incredible bite strength, great hearing and smell, stamina, running speed, hunting in packs, all around intelligence) all making for an extremely strong survivor in a hostile environment.
I first heard it at an LAX airport strike that had thousands of asking passengers scurrying desk to desk to escape the hive. The strike was an honorable test, not the horror everyone thought. Among them, an athletic man in a tailored suit patiently glided, to avoid the long lines, from employee to employee, to inquire of the carriers to NYC. At first, I thought he was following me until he asked, 'Are you following me?' Whenever I encounter a person who of my habit steps out from the crowd, I am surely charmed.
He was a Wall Street trader with a sports car, doll wife, spoke Japanese… and was about to pivot in life. We ended up traveling together on one of the last flights from the airport and, on arrival at Kennedy, he agreed to accompany me to a friend's trading room. He bowed at the neck only on introduction to the president, and murmured, 'Charmed, I'm sure.' Then he went on to prove his capacity for trading and Japanese in conversation, and that indeed he had had a tryout as halfback for the NY Jets on the traders' field.
He had returned to his NY glory to pull the plug – quit the job, divorce the wife, sold the car, and gave up football in order to return to the west coast to write his version of the great American novel. A month later, he was caught and imprisoned for bank robbery of the San Diego Wells Fargo when the police followed a trail of witness fingers out the bank door, checked the trash bins en route, and pulled out his discarded sailor disguise and, of course, traced the DNA from the false beard to nab him. The charmer spent the next few years in prison playing football and writing.
Charmed, I'm sure is used in either formal or street introductions with nearly opposite meanings. Among the well-heeled it's a warm greeting used in ceremonial introductions. Among the down-at-the-heels by one individual to another the meaning is that they don't trust you entirely yet, and if you screw up once, there's no chance of getting anything out of the deal.
As the years rolled by, and I jumped from fashionable sidewalks to the gutter, and back again, I've tuned into occasions that deserve the term. In sparring with a karate instructor for policemen, he suddenly stopped after what I thought was a missed kick and asked, 'Would you like to see that again?' I laughed thinking the kick had missed, but on looking down his toe marks over my heart covered my white T-shirt. Charmed, I'm sure, he slapped my face while my chin was down.
My first girlfriend stopped after the first five minutes of my first sex to explain, 'No, it goes there. Charmed, I'm sure.
In racquetball at a St. Louis pro stop, I wound up to take a backhand off the back wall and hit a killshot 40' away on the front wall. As I executed the shot, my opponent Ben Colton stood hands on hips in front court without attempting to cover the ball. 'This is for the money,' I scolded, 'Play ball!' He replied that it was his only opportunity to study my famous backup up close, and that it was worth losing the point because the ball would roll off anyhow. He was better than he thought, and lost the game by one point.
Yesterday, an Australian nipper dog bit me in midstride on the shoe instep from behind. It was such an expert move that I stood for moments in awe, and then understood it had dry gulched me, and would do it again. So I squirt mace in its teeth. In the same manner, once hiking the Pacific Crest Trail I nearly picked up a 10-inch long baby green Mojave rattlesnake because it was so perfectly colored and buzzed its tail pleasantly. And then was jolted to realize I was charmed, I'm sure.
In daily encounters you will see the foam head on a glass of beer, and take that instant to ask, am I charmed, I'm sure?
September 21, 2014 | Leave a Comment
This is a short video about quantum computing. I was drawn to the simple explanation of a complex idea and there seemed to be many potential market lessons or at least gaining a new vantage point.
1. There is more than one complimentary way to view something.
2. If you participate you can't know what would have happened if you didn't and vice versa, particularly relevant for size.
3. Intrinsic randomness of superposition allows observations without a probability distribution. Still wrapping my brain around this. An example of ever changing cycles? Or something else entirely? If there is no probability distribution how do you define outcomes of events?
4. Quantum correlations are richer in describing interactions. This idea seems ripe for trying to understand the complexity of market interactions.
5. Attaining perfection is hard, maintaining it is impossible.
6. Viewing quantum computing affects the results, perhaps in the same way talking a position does.
7. How did you get that result? I don't know is the right answer in quantum computing. Do it yourself so you can understand. Don't trade what you don't understand. don't blindly follow someone else's "system" perhaps there are others…
I agree that the quantum-collapse idea has broader applications to life in general. Danilov & Mogiliansky, many years ago now, used the collapse concept to talk about Tversky's famous quotation, "Preferences are not read off of a master list, but are constructed in the elicitation process." QM discussions have a tendency to go off the rails very quickly, and to attract sophists & cranks. But superposition and measurement-disturbances are, in my opinion, relevant and common to quotidian life.
1 = duality
2 = contravariance (the math.DG kind, not the math.CT kind), on trees
3 = I don't understand what this means either, but we can clearly reason about the unknown without attaching PRECISE probability numbers to it.
4 = I would guess no. Quantum correlations can have negative intersections. But someone here could find out: just allow your covariance matrices to take on complex values.
5 = set of measure zero
6 = talking or taking a position?
P.S. If someone finds complex numbers arcane or silly, I'm happy to share a few bits of perspective.
Mr. Isomorphisms writes:
Just checked the video and revised on Wikipedia and a little googling. I don't think 3 is an accurate statement. Quantum states are expressed as waves which can be added together. Lots of things in the normal world can also be expressed as finite-energy functional spaces. But I don't see where the video said there is no probability distribution. Nor is superposition "intrinsically random". Superposition is just adding things together.
If you check the Wikipedia page for quantum probability it says that outcomes of events are basically defined in the normal way, except since it's a complex space the i=-i equivalence shows up and screws with things.
OK, someone asked for my ideas on clarifying complex numbers. Here's my attempt for those interested:
- First the physical intuition. Electricity travels along power lines. If the transmission efficiency is 1 then the consumer gets 100% of the power produced at the generating station. If the transmission efficiency is sqrt(-1) then all of the energy from the station goes to heating the power line and does no useful work.
Now the maths.
- The usual numbers are annoying because signs "jump" from + to - with nothing in between. google.com/search?q=klein+j+invariant+whirling+upon the top video shows something else with only very specific points matching up, but instead of showing us only the actually equivalent points it shows us the whole movement, as it were — which is only posible in a smooth space. Complex numbers let us watch what's happening "in between" negative and positive.
- That's why e^i pi = -1. Nothing more special than that pi is halfway around a circle that goes from positive to negative, circling back to positive.
- View the complex line as a line and an angle âŸ³. The angle replaces the usual concept of sign. All of the arithmetic on complex numbers works basically the same as regular arithmetic, except that you also take the "angle" (the "amount negative or positive") into account. If you multiply two numbers you need to add their "angles". (In finance, "angle" means "correlation".)
- So I generally think of the complex multiplication happening just on the unit disc, i.e. everything is equal magnitude but has different signs (and fractions of signs). Then I do regular multiplication second.
- However it's impossible to tell -i from +i. (-i)^3 == (—)i == -i So that has to be taken into account.
- Complex numbers don't require any changes to your metaphysical worldview, because they can be represented with real numbers. The matrix representation is on Wikipedia and it looks just as "half-negative" as (num)*(num)=-1 does.
- You can derive trigonometry from complex numbers. In other words the arithmetic induced by adding sqrt(-1) to a number system, matches what people figured out from plane triangles.
- For those who can use R (or don't mind logging into cloud.sagemath.org, opening a cloud terminal and typing R), run the functions in https://gist.github.com/5a30e61fb305ee52cff . That instantiates a "plat" function, basically like python mpmath's cplot except Cielab colours are psychologically superior to RGB.
You can "plat" polynomials like this: plat( Z, function(x) (x^2+1) * (x-2.3) )
Then red is positive, green is negative, and other colours are somewhere in between. Size is indicated with brightness, but there's nothing special going on here that you can't see in a regular plot.
I believe playing around with simple (and not-simple, if you can think of any) functions in these "plats" will give anyone (a) a better understanding of those functions, and (b) the feeling that the complex numbers are not scary or weird.
tl;dr. The complex numbers just let us look in-between positive and negative. More advanced: if you want to envisage a complex variety, then an idea I had recently is to animate the plat with a parameter that traces around the unit circle (all possible "signs" fed into the function).
The "worse" version of a parabola moving from +1 to -1 to +1 would be it "flaps its wings" with in-between being a flatline at 0–not very parabola-like.
Jonathan Bowers writes:
I'll agree that I may not have articulated my understanding of superposition very well. In the video they show a coin flip since it also has two outcomes, but emphasized that while the coin flip has a probability distribution quantum computing does not. Perhaps that means that the distribution is always changing or unstable or when or how you measure it changes it.
Mr. Isomorphisms writes:
I think it's just a superposition (convex combination) of 0 and 1. Same concept as a screwdriver if it could be any mixture of orange juice and vodka. You probably have a small range that you consider "screwdriver" but what if there was a word that meant "anything that's 100% orange juice, 100% vodka, or anything in between". That's a convex combination of oj and v.
All government, in its essence, is a conspiracy against the superior man: its one permanent object is to oppress him and cripple him. If it be aristocratic in organization, then it seeks to protect the man who is superior only in law against the man who is superior in fact; if it be democratic, then it seeks to protect the man who is inferior in every way against both. One of its primary functions is to regiment men by force, to make them as much alike as possible and as dependent upon one another as possible, to search out and combat originality among them. All it can see in an original idea is potential change, and hence an invasion of its prerogatives. The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable, and so, if he is romantic, he tries to change it. And even if he is not romantic personally he is very apt to spread discontent among those who are.
-H.L Mencken, The Smart Set (December 1919)
Stefan Jovanovich comments:
That voters once turned out in much greater numbers than they do now is true. But those better days were times when the franchise was limited so voting was like balloting in takeover battles for corporate control; the voters for both sides had direct stakes in the outcome. That direct stake on the outcome continued after the franchise was expanded; with that Jacksonian revolution patronage also expanded. The stakes for voters remained very real. Those same rules still apply but now they are limited to the significant campaign contributors; for their interests who gets elected still matters. But for the millions or hundreds of thousands of voters who show up for elections there is no individual interest that is furthered by their ballot. For them voting is a completely ritual activity. Many people know this and choose not to bother. The fact that so many continue to vote is what is truly noteworthy. One can take the turnout either as proof of people's faith in democracy or as confirmation that politics has nothing to do with logic. Mencken would say "both".
Last night just before going to bed, my iPad prompted me to update the operating system. So I did it without hesitation - Apple had built my trust through past experiences. This morning I found the iPad is dead - the update failed miserably. I then tried to restore it by connecting it to a computer, but had no luck. I searched and found news articles reporting large scale failures worldwide. It affects all iPads, and iPhones (if you have one, please don't update yet!). Problems appear not only with the update process, but also with loss of personal data and overall usability. Reportedly a lot of devastated people complain in social media.
Is this the beginning of the end of the iFervor?
"Success in the opening can lead to a weak middle game, and finally defeat in the ending". Tom Wiswell, proverb, 20 in "During the Game" from edspec. The story of Friday, September 19th in markets and many others.
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.
September 19, 2014 | Leave a Comment
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."
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.
September 17, 2014 | Leave a Comment
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.
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.
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