I came across about this rather nice summary of backtesting in the context of investment/trading framing over the weekend.

"Fool's Gold:Why most back-tested performance histories are bunk, and how you can identify the ones that probably aren't" :

Reasonable investors derisive of back-tests acknowledge that in theory back-tests can illuminate something true about the world but believe in practice back-tests can rarely be relied on to do so. The Vanguard study, by finding that past performance does not reliably predict future returns of asset classes, joins a chorus of studies by many independent researchers demonstrating the same. A skeptic might conclude back-tests are to induction what Richard Simmons' hair is to the category of things that can be burned for fuel.

The problem with that argument is too many successful investors are or were back-testers. Benjamin Graham, father of value investing and Warren Buffett's mentor, devised trading rules based on studies of what would have worked in the past–back-tests, in other words. Early in his career, Buffett applied Graham's back-tested rules to identify "cigar butts," statistically cheap stocks that had assets that could be sold for more than they could be bought for. Another successful Graham acolyte, Walter Schloss, achieved 20% gross annualized returns over several decades by "selecting securities by certain simple statistical methods…learned while working for Ben Graham." 

Ray Dalio, founder of Bridgewater Associates and arguably the most successful macro investor alive, uses back-tested strategies to run Pure Alpha, an unusual fund that uses only fundamental quant models. Mathematician James Simon's Medallion Fund, a quantitative, fast-trading strategy, has earned 35% annualized returns after fees since 1989.

Jeff Rollert adds:

The difference between back testing and understanding drift is the difference between knowing history as taught and understanding evolution.

That is my inner Hobbes speaking today.



 One thing I have been considering lately from an investor's perspective is the power of consumer brands.

What is the value of a well known brand? My inquiry is motivated by a few different angles, but I think what has most stimulated the question is my study of a a "prestigious" company that has been growing by purchasing OTC medicine-type brands from the major consumer goods and drug companies.

At face value it seems like a great strategy. The shorter term economics look favorable. Yet, when I look in my families medicine cabinet, I notice my wife buys almost exclusively store brands when it comes to things like cold medicine, etc. It only takes choosing the low cost option one time to realize that the store brands (Costco, Walgreens, Roundy's etc) work just as well as the higher cost name brands.

Will the familiarity of an old brand have staying power that can allow for an above average roe over time, or are they wasting assets? How long can reputation last when the underlying reality is not particularly distinguished?

A family relation of mine owns a fashion design/women's retail business. One discovery this person made in the manufacturing process (working with contract manufacturers) is that the big names in mainstream "luxury" goods often have completely average quality or only slightly above average quality in terms of material and construction. The desirability factor is almost 100% psychological - what other people will think, a giffin good type effect. This might seem reasonable with regards to items people use to create their public persona or to establish a sense of status. But what about consumer staples? It seems like a much tougher sell. I know that when I go to Costco, I instinctively grab the store brand and am very rarely disappointed. When presented with two very similar, low risk options, even a 50 cent difference can feel significant at the moment when one must reach for an item off the shelf (or maybe I am particularly cheap?)

So the question is, how to evaluate brands in a competitive, relatively uniform (in terms of quality) market. When are they worth investing in over time (in terms of long-term roe?) I see two big things:

1. Need for reliability/high trust in product (condoms vs. hand soap)

2. Items that signify status (LV logo vs. generic)

To bring things to a specific context, I am presently evaluating if the company Prestige brand's (PBH) strategy of buying "known" but relatively mundane brands will have staying power over time (say next 15-20 years). The short term economics look good, but what about staying power in these competitive markets where stores have an incentive to sell their proprietary brands?

Any thoughts are welcome.

Russ Herrold writes:

 Historically Sears also historically perfected the 'Good, Better, Best' model of offering several lines at varying price points.

That brand has huge value, at least out here in Flyover Country.

Jim Wildman adds: 

Good, Better, Best has been adopted by John Deere as to their lawn equipment as well. 1xx series are cheapos, designed to compete at the low end with the Craftsmen and MTD's. 2xx are better, but still not what one thinks of with a Deere. For those you need the 3xx series, which are what I grew up with as a kid.

Easy to tell the difference once you know where to look as well (pressed metal vs cast pieces, bolted vs welded, etc, etc)



 This article in the New Yorker seems to be making a splash "The Software That Builds Software".

Software that builds software is as old as the second day that the first piece of software was written. The second day, because coder (what we may now call a 'programmer' or a 'developer') realized that the computer target could do some of the work, deterministically, without typographical error, faster, and in some axes of metric, 'better' than a human can, and started to build tools.

And so tasks are delegated to the computers to perform

I am and have been active for years in a project which uses computers to building and test software, to ensure NEW software conforms to coding conventions for portability [1]. The testing computers are geographically disbursed, and it is unlikely I will ever physically see any of them that I do not own. Some do not not even have an independent physical existence, but rather exist 'virtually' inside other hardwareThey retrieve 'source code' from a distributed version control system. The article mentions 'git' and 'github', but we use another older variant. They are controlled by a textual and webbish control and status display interface [2] called a 'buildbot'

For this piece, to get some graphics, I just 'told' the control interface, via a text command, to start a job; I could have done it graphically, but I can touch-type much faster than I can move around a website with mouse-clicks:

lsb_bb> /msg lsb_bb force build app-checker-x86_64

and it acknowledged the request, and will assign it to a specific machine perform (there are several identically capable machines in that stable, and the software does 'load management' to assign it to an available 'worker' slave unit

11:35 =orc_orc> force build app-checker-x86_64 11:35 =lsb_bb> build forced [ETA 7m35s] 11:35 =lsb_bb> I'll give a shout when the build finishes

and as it build it updated the display [3], and keeps a viewable log of the process [4]

A few minutes later, the 'master' of the 'buildbot slave' tasked with the work 'told' me the work has been completed and that the test had succeeded:

11:42 =lsb_bb> Hey! build app-checker-x86_64 #91 is complete: Success [build successful] 11:42 =lsb_bb> Build details can be found here

This is not at all uncommon or magical, although it can be difficult to get 'right' in the usual case. Think of Mickey Mouse in the 'Fantasia' film. Those mops can get uppity [5]

I am not all that clear, beyond the 'gee whiz' factor why the article cited considered this remarkable. It just seems 'normal' to me.



 I came across these articles today, thinking about and researching what the health care system is going to look like, now that the Affordable Care Act is being rolled it.

I formerly considered the 'health' part of my long term portfolio design a sector to emphasize, anticipating the bulge of the baby boomers turning into net health care 'over'-consumers, and in line with the long term move in the US economy to over-weight the health services sector, and the formality of that sector over the last fifty years to make sure a structured income stream is flowing into it without interruption

The article and the trail it leads to, point out that part of the healthcare delivery system is laying an 'allocation' formula, or 'curve' of who will get what level of care, over the span of their statistically projected lifetime (which 'manages' 'demand' for resources, rather than letting 'more free' market approaches prevail work) [1] [2]

I am not so sure that the sector was perhaps not 'too' successful, causing the emergence of a political will to put it under control of the central planners, and so ending that reason to over-weight it

1. "The "Complete Lives System"-why so little comment from the medical blogger world?"

2. Prioritized lives



 It has been a while since the dailyspec discussed the potential for mayhem in the Straits of Hormuz. So far, the greatest threat to American interests has come from our own Navy. It has been nearly 4 years since the USS Hartford collided with the USS New Orleans. The "accident" injured 15 sailors; the repairs to both ships cost over $100M.

The folks at StrategyPage just reported some of the details of the accident report:

1. There was no one supervising the sonar operator when the collision occurred

2. The sonar operator was not, in fact, looking at his screen at the time but talking to a fellow crew member

3. The ship's navigator was not plotting the ship's course but "doing something else, while listening to his iPod"

4. The officer in charge failed to raise the ship's periscope to scan the horizon before the ship breached the surface

In total there were 30 errors in procedure.

Chris Tucker writes:

Complacency and sloppy work are very difficult to control after they have taken hold of a work group. The proper place to kill them is in early training. People who are responsible for large numbers of other peoples lives and/or for highly valuable property need to be trained in active vigilance early in their careers. Unfortunately, safety is a boring topic to most — it lacks the intrigue of the higher mission, it lacks the luster of fancy technical gadgetry, and because it is something that has to be practiced with diligence day in and day out, at all times, it is difficult to keep at it.

But safety and its execution is absolutely essential to any complex operation. Organizations and systems that require precautions have to inculcate a culture of safety and then impress it into their people regularly. It can never be treated as a one off training item and then checked off as completed, it has to be pressed, again and again and drilled into the subconscious so that it comes automatically. Active surveillance, much like active listening, is a skill that requires practice to master.

I suspect that in the crossing of an active shipping lane like the Straits of Hormuz, that submarines use active sonar, but I have no idea how frequently they ping. Probably on the order of once every two or three seconds, much more than that and there is insufficient time to capture reflected signals without interfering with them. The point is that an operator, especially at a time that requires extra vigilance — like surfacing, needs to actively direct his attention to his equipment and scan for threats at least once every three seconds.

While this sounds easy enough, it requires a great deal of will and energy. Distractions constantly compete for attention and need to be reduced. Again, training is the only way to control this and create an environment that rewards attentive execution of duty and punishes the creation of distractions and sloppy behavior. I suspect that if the navy chose to drill procedures in vigilance and active surveillance as often as they train for emergencies or attack maneuvers, the frequency of these incidents would be dramatically reduced.

P.G writes: 

Excellent stuff on complacency, but "culture of safety" might be too strong a goal for any place in the military. It's true that the Navy is the service where war most closely resembles peace. Most naval ships in WWII saw only a few hours of combat over the years' duration. Day-to-day operations were quite similar to peacetime ops, with the environment (including friendly ships) being the principal enemy. But the few hours of combat were the whole point, and it seems to me that safety must not be so deeply ingrained that it cannot be easily discarded when the necessity arises.

Paolo Pezzutti writes: 

Western navies nowadays are dealing with decreasing budgets, changing operational scenarios and threats, issues in recruiting and retaining the professionals they need. All these factors are tightly linked. The level of ambition of naval forces is questioned in terms of requirements and capabilities needed. The threats is different from what it was at least two decades ago and attention is growing mainly for maritime security tasks. Hard to justify expensive investments to develop complex and futuristic weapon systems. For sure maintaining the fleet efficient and effective is tough at times when navies are struggling not to reduce numerically their fleets below critical thresholds. Recruiting highly skilled professionals and most of all retaining them is also critical. They need to find a motivating environment that meets their expectations. Innovation and technology are allowing the reduction of manning on board ships and submarines in order to achieve the compression of operating costs. This is also introducing risks because each member of the crew has more tasks than in the past to perform and no redundancy. On the job training and management of emergencies are issues to deal with. More focus over the past years is on modelling & simulation to train crews ashore although any sailor knows that these solutions cannot fully replace experience gained at sea. Some have questioned the extent of manning reduction that was envisioned as acceptable only a few years ago based on lessons learned developed on new constructions. The quality of training is key as days at sea spent each year tend to decrease. Incidents are the expression of this situation. Training concepts and processes have to change and adapt rapidly to this environment. As budget and personnel decrease, this is the challenge of this decade. 

An interesting sidenote about, "Stick close close to your desks and never go to sea, And you all may be rulers of the Queen's Navee!":

The object of Gilbert's satire is not so much the person of publisher and politician W. H. Smith as the system that in essence de-professionalized command positions in the British armed forces, and promoted those with wealth and political connections rather than military ability. Thus, Gilbert was in effect attacking the long-standing aristocratic tradition of purchasing commissions. Instead of "serving a term" as a midshipman (which was the conventional route leading to officer status and ship's command), Sir Joseph has taken a strictly political route to the Admiralty.

Russ Herrold writes:

A former officer (here: identified as JG) from the US Navy who served in submarines inter-lineates replies to the article you linked to:

Sub commanders are under a lot of pressure to keep their sailors from leaving the navy (JG agrees). But the long periods submarine sailors spend away from their families creates pressure to get out and take a civilian job close to home. (JG agrees) The submarine sailors are very capable, and highly trained, people. Getting a better paying civilian job is not a problem. So sub captains try to keep the crews happy. That often leads (JG: Bull Shit!) to lax discipline. (JG continues: just lax discipline with this command)

Interestingly the article's remarks about generally available better substitutions employment were not addressed in the initial comments back to me; in following up privately, JG thinks the author is over-stating the substitution opportunities …

But then that makes for a more urgent article, then, doesn't it?

Chris Tucker adds: 

My whole point is that these people are professionals and should be behaving like professionals. They are in positions of responsibility and need to act as such. There is a tremendous amount of self validation that comes with knowing that you know your business and that you act accordingly. People that understand this arrive at work with their heads held high and don't just talk the talk but actually walk the walk. They don't feel entitled to anything unless they've earned it themselves. This is the kind of behavior and path to self esteem that needs to be engendered. It is not about safety, per se, probably a bad choice of words on my part. It's about being a professional, about being an expert. And about wanting to be those things. It's about knowing what needs to be done and doing it properly, correctly and without fail.



 Any doubts about Apple under Tim Cook being different than the Apple under Steve Jobs are gone by now. Apple capex is up, there's a swing in production back to the US, and there have been at least one "significant" software disaster. Now come the reports of changes in the product cycles and product introduction schedules. Apple hasn't shied from cannibalizing its products in the past, so I don't this it will pause from doing so now. I'm wondering at what point does the smartphone market go generic? Conventional wisdom is that with the Chinese now buying smartphones, the market will only expand. Perhaps. But are the Chinese prepared to pay the premiums for smartphones as Westerners have? That's a problem not just for Apple. Then again, I've yet to walk into an Apple store that wasn't packed. Even during the recession.

"Rumor: Apple to debut 4.8" 'iPhone Math' device alongside next-gen iPhone in June"

Henry Gifford writes:

When I bought my phone the guy in the store (in New York City) told me the US Federal government subsidizes every mobile phone in the US to the tune of $600, limit once per person per two years, thus the two year contracts.

Subtract $600 from the price in China and the price is quite similar to the US price.

Russ Herrold replies:

Yeah, counter clerks will say almost anything. The truth is more commonplace. Some subsidies exist, nominally for low income folks but the people PAYING FOR that subsidy are … [hint: go read your cell phone bill closely] all the other telephone users. This is a good article about it.



The difficulty of getting back in once you have sold in stocks is underlined vis a vis the buy and hold strategy, as well as the fate of short selling, as well as timing— by the fast 50 point move in stocks today.

Gary Rogan writes: 

It seems like generally speaking one should either trade, as in being in and out "often" or buy and hold. Buying and holding except for periodically being out or short seems to be what Victor is addressing, and I have always been suspicious of "market timing". All it takes is getting it wrong once, and you are in a hole that's expanding for a long time.

I'm still curious how Victor was so sure there would be a deal.

Anonymous writes: 

What was the effective date of the STOCK Act to ban congressional insider trading, I wonder. As a staffer, one could have slapped the emini around harder the Khan brothers squash ball.

Victor Niederhoffer replies: 

Let us hope that the profits from such activity were sufficient to assuage any such desires for a few days.

Russ Herrold writes:

The dance is a re-run and in prior seasons, the cliff is avoided. Sitcom writers can re-cycle plots endlessly.

Kim Zussman writes: 

It's the binary conundrum of markets:

Buy the rumor / sell the news (or buy the news)
Buy and hold (or sell and sit)
You can't time the market (but some can)
Stocks beat bonds (except for the last decade)
Printing presses lead to disaster (which may not come in our lifetime)

The President of the Old Speculator's Club writes in:

I heard a Congressman speak recently and have to admit it was an enlightening experience. Traditionally, members display a certain amount of restraint when speaking of colleagues with whom they find grievous fault. In a refreshing departure from good manners, this gentleman took the gloves off and bluntly stated that a goodly number of his fellow representatives are less than bright. The word "clown" came up several times and "stupid" might have been slipped in.

Although he artfully avoided specifying individuals or party, I couldn't help but believe that he, like many in the "beltway", had come to the same conclusion: the arrival of the Tea Party contingent has been nothing short of a national disaster.

Unsurprisingly, the congressman's public and scathing view is shared by the current establishment elite. (It's dangerous to out there and speak your mind if what you say is out of step with the conventional wisdom.) His case is provided with added cover by a host of recently published and similarly themed books ("It's Even Worse Than It Looks", Mann, "Do Not Ask What Good We Do", Draper, "Beyond Outrage", Reich, and "The Party is Over", Lofgren).

However, the "fiscal cliff" isn't a maiden making her debut. We've had two relatively recent encounters with her; so her charms, though formidable, are familiar. Her appearances in '91 and '95 were just as awesome and, as expected, so compelling that one of the parties bit into the proffered apple. Unfortunately, the fruit, which is bitter and often fatal, is the produce of the tree of Folly. On this most recent visit, though, she is confronted by a group so naive and simple that her blandishments have gone unrequited.

In any event, it's apparent that the respect (whether real or faked) House members used to show each other, at least in public, has been thrown over for a newer, more aggressive, in-your-face approach. Long gone are the clever and informed debates which provided a rich mix of facts, history, and truth. It seems important to figure out why this has developed and if, in fact, a functioning government is still possible.

If one studies what the House has been in the past and what it has evolved into, it's impossible to overlook that this body has lost, or given up, much of it's power and authority. The growth of the executive branch (the Imperial Presidency) is one factor. Back in '96 the congress and the president worked long and hard to create the first welfare reform package. Contrary to forecast of terrible consequences, the new programs worked well.

Yet, in one day, an Executive Order by the current president re-established the old, failed programs. Another assumed power has been the declaration of war, and the most recent threat: unilaterally raising the ceiling on the debt.

While the Executive Order has been increasingly utilized to usurp powers constitutionally granted to the House (and Senate), the greatest loss of power has been though Congress' voluntary abandonment of authority to "regulatory agencies."

Figuring that some issues were just to tough, complex, or time consuming, the country has had foisted upon itself the EPA, FDA, TSA, USDA (with 20 sub-agencies within it), the Dept.of Commerce (with 17 sub-agencies), Dept. of Defense (with 32 sub-agencies) and the list goes on and on. Each agency is staffed by unelected individuals, many with their own agendas, who dictate new regulations that possess the force of law. It's understandable that so much work has to be delegated, but to give it to agencies that are unanswerable to the body that created them is inexcusable.

Then, of course, there is "party discipline." Sam Rayburn of Texas, Speaker of the House for many, many years, gave each incoming freshman representative of his party one piece of advice: "If you want to get along, go along." And they did. Those that didn't faced many difficulties: in committee assignments, in getting their legislation to the floor, in receiving party re-election funds, and they'd be high on the list of targets should redistricting become an issue.

Unfortunately, this approach worked, and worked well. As a result, many constituents found that the views they wished their representatives to promote in D.C., took a back seat to the views favored by the party leaders - many of them from different parts of the country with substantially different interests and goals. The "house of the people" became a house held hostage. Matters reached a new low in representative government when the other party adopted the same process.

Then 2080 rolled around and enough citizens, aggravated at the apparent unresponsiveness of their representatives, threw them out and ushered in the Tea Party. A delicate balance has been disturbed and the Dysfunctional Couple, used to newcomers adjusting to them, failed to realize that these clowns - these yahoos, actually believed in what they'd declared. Whether they win or lose, prevail or fail, their chances for another re-election are small. But for a brief period they have served as reminders that doing the people's business is serious business and that a promise made is a debt unpaid.

For a brief period this collection of vagabonds has added a dose of virility to a confederacy of eunuchs.

As to the President's actions in the recent negotiations, he did nothing, offered nothing…he arrogantly summoned everyone back to D.C. Most came back assuming he had a proposition - he didn't - even CNBC's John Harwood was a little taken aback at the presumptuous gesture. Some time back I suggested I was all for giving this guy everything he asked for - and then letting him perform as he has suggested he would. He has received almost everything; now it's time to lead. This from a guy who, in his short term in the Illinois senate, voted "present" on over half the bills that went through. He is structurally averse to taking a position - preferring, instead, to demonize his opponents.

So, first time at bat, he (and his faithful followers), are hand-wringing over what roadblocks the GOP will/might place before a debt ceiling deadline is reached. It's time he quit talking and started doing.



 Is there a reason to use PayPal rather than a direct credit card disclosure to a Credit Card accepting vendor? Yes. The CC accepting vendor may be wholly unknown to you, and could potentially be a front for 'harvesting' CC and all one's other information needed to forge your identity online.

True story: there appeared an online vendor that Google's Shopping feature 'found' that purported to have in stock and for immediate shipment an unreleased product from 'pointing device' manufacturer Wacom. I was dealing with their engineering product team, and at the time in question, they checked for me and confirmed that no authorized shipments had occurred to any authorized sales agent.

The order form for an entity with no physical office and no phone number was most comprehensive in gathering personal details for the CC authorization and shipment, of course. This was in the back of my mind, and I concluded not to proceed to provide such information to the 'seller'.

By using PayPal, one adds a intermediary to avoid disclosing CC details — number, expiry and CVV — to a potential gateway agent to identity theft, and also gets a guarantor to the transaction (PayPal) who actually has existence and does not hide contact information from its patrons.



 I am researching and reviewing my contact with hats over a not uneventful life. I am considering their value, their uses, their symbolic significance, the great people I know who have worn them, the hat corporation of America I bought as my first trade, the hat that Tom Wiswell always wore to prevent sunburn and cover up baldness, the hat that Shane wore that made him an icon, the hat that the accountant in Monte Walsh wore that Hat Hendersson just couldn't resist noting was just right for a pistol shot, the hat that I wear now to show my respect for those previous, the man I called Hats H.  because he always had a million different conflicts of interest while working for us. The importance of a hat outdoors in the West to shield from rain, sun, and the elements. Et al. What value do you see in hats these days? What anecdotes? They seem to have gone out of style because of the automobile. You don't need protection from the elements any more. Also they're hard to store. How do they relate to markets?

Alan Millhone writes:

Mr. Millhone

Dear Chair,

I remember well the hat Tom wore. The ball cap I wear has a board on it (see picture). The Market trader might wear such a hat to remind them to look ahead and make the right moves (trades).





Sam Marx writes: 

On the subject of "Hats". I am reminded of the aversion that John F. Kennedy had to hats and the picture that has stayed in my mind, since 1961, is of his carrying and not wearing his hat at his inauguration. I believe it was his attitude that caused the downswing in hat wearing in the U.S.

Tim Hesselsweet writes: 

 Seems like a good example of ever-changing cycles. The hat has been making a comeback for the last several years. Kate Middleton has become a popular figure and she frequently wears hats. Upscale department stores like Saks now carry a large selection of hats as well.

Alston Mabry responds: 

Yes, but…mens hats are a different dynamic:

Look at this photo of mens hats at a Liberty Rally in Columbus Circle, 1918, and mens Hats at the Horse Races 1920s style, and 1950s Men with hats.

Scott Brooks writes: 

When I graduated high school, the guy who measured my head for my mortar board said, "Young man, I've been doing this for 35 years and you have the biggest head I've ever measured".

 As a result of my freakishly large cranium, hats rarely fit me. I wear one from time to time, but only out of necessity, and occasionally for functionality.

Necessity is when I need to keep my bald head from burning in the sun or freezing in the winter or dry in the rain. Never under estimate the insulating and protective qualities of hair.

Functionally is because I need a hat when I hunt to keep the sun out of my eyes when I'm scanning for game, peering through my scope to place the cross-hairs on the shoulder of my intended quarry, or placing the aiming pins of my bow in the middle of said quarries chest cavity.

I avoid hats otherwise as I can rarely get one big enough to fit. If I wear one too long, it gives me a headache. Therefore, when it comes to trading, if you see me placing a trade while wearing hat, fade my position as I'm likely making a losing trade because my mind is clouded by the hat that is squeezing my brain all to tightly.

Pete Earle writes: 

I wear a hat, and have for seven or eight years. When I began to wear one, I expected to be lightly razzed by friends; that not only didn't deter me, but never occurred. Instead I've received unexpected compliments, and over the last few years other have seen a higher frequency of hat wearers in Manhattan, Washington D.C., and even when I'm down in Auburn and Atlanta.

Christopher Tucker writes: 

The grandfather of my best friend from college was one of the kindest and most sensible men I have ever met. He was a traveling sales rep for the John B. Stetson company. The man always had the best (the absolute BEST) hats.

GAP Capital comments:

 Born and raised in Chicago, so "hats" remind me of only one person…Dorothy Tillman!!!

Anton Johnson writes: 

"By some accounts, Christopher Michael Langan is the smartest man in America……….he has a fifty-two-inch chest, twenty-two-inch biceps, a cranial circumference of twenty-five and a half inches–a colossal head, more than three standard deviations above the norm"

Esquire article on "The Smartest Man"

Alan Millhone sends another photo:

Here is Tommie Wiswell with his trademark hat tilted back.  Might also been used to keep
overhead light from his eyes while he focused on the many boards.














Russ Herrold writes: 

 I am traveling, and so cannot conveniently post, but I placed orders this week for a new Stetson, a couple of Fedora designs, and some other … I forget …and have in my car, for the conference I am at this weekend, easily 5 or so, which I use both for their protection of my head from the cold, and also so I can 'do some branding' work in the community the conference represents (I also have other 'branding' in my clothing, and appearance), such that people I deal with, who don't know me by sight, can recognize me anyway.

Marion Dreyfus adds: 

I think I am fairly well known as a hat person, and have been since I wore unusual chapeaux /to synagogue and school when 12 or 13.

Aside from style and stating an individualistic aspect, I think a hat harks back to a gentler, more mindful age, perhaps 100 years ago. It also keeps the head, inside of which are all these excellent ideas and scenes for a better tomorrow and a niftier evening today, comfy-cozy. Hats also show, oddly enough, respect. Hatless men in the 1970s were declaring their freedom from the mindfulness of suit and hat, and perhaps we are the poorer for having abandoned hats.

They also keep milliners in funds, and milliners I went to grad school with in the early 90s were aghast at the drop in hat-wearing citizens, alleviated only by temporary crazes or fads that fade as swiftly as they arise.

As a biker, for me, even mild days produce a breeze when one is on that leather seat, and a hat prevents sunstroke and sun in one's eyes as well as too much wind over one's head.

In the Orthodox world, wearing a hat connotes one is married, so it may be foolish of me to wear hats, because i communicate a status I do not currently entertain. But i do like the fashion and focus statement being made by wearing a lid, many of which, actually, i create myself.

Finally, one can maintain a superior air of mystery in a hat, which is impossible to the same degree in a hatless state.

Alan Millhone adds:

What really amazes me on hats are the clods at football games I attend who don't remove their head cover when the National Anthem is played.

Ken Drees muses:

 The baseball cap trend: rappers wearing the caps askew, wearing caps with logos of designers and companies, wearing caps for status/advertising, caps as gang signal, wearing caps in restaurants/indoors, wearing hoodies in lieu of caps, caps as fashion, caps on backwards, caps with brim curved just so, it all has to do with being cool. Lebron James wears Yankee cap to Indians games–it's all about me, fool.

Gary Phillips writes: 

"Wearing a cap backwards is a baseball fan tradition that started with Yankee fans. It wasn't because they liked Yogi Berra, either. The Yankees and Red Sox have a century-old rivalry. A group of young guy Yankee fans, around 1980, took the train up to Boston to catch a couple of games. Boston fans are loud and boo other teams. The young Yankee fans were seated in front of loud Bostonians. The New Yorkers didn't want to start an altercation, but made statement. Those guys turned their Yankee caps around backwards to show the Bostons that they were Yanks fans and proud of it."

Anton Johnson writes: 

On baseball's rally cap superstition:

"A rally cap is a baseball cap worn while inside-out and backwards or in another unconventional manner by players or fans, in order to will a team into a come-from-behind rally late in the game. The rally cap is primarily a baseball superstition."

And hockey's Hat-trick.

Victor Niederhoffer writes:

It would be nice if this worked in the market. But then the adversary could always tell if you were weak or strong, especialy if signals could be reflected from the hat. I was surprised to see that in all the uses for hats I have collected, including flopping the rump of your horse, and fanning a fire, and collecting water from a stream or the rain, I did not see many variants of using it as a signal to get a cab or alert a Native American that a interloper was near, or to collect bets, or to conceal a salt shaker. This latter is particularly effective in the west because to ask a man to remove his hat is akin to a date with boot hill. 

Gary Phillips adds: 

 Surely not a hat, barely a cap, let us not forget the kippah or yarmulke. The Talmud says that the purpose of wearing a kippah is to remind us God is the Higher Authority over us. He alone is Lord of Lords and King of Kings. When we pray and worship with our heads covered, we are saying that we are in total and complete submission to the will of God Almighty now and forever.

I was recently in the hunt for 2 of the crocheted variety for my 2 and 4 year olds to wear to school. My elder son demanded that the kippah be white with a blue Magen David. The synagogue gift shop was unable to fill our order, so I turned to a higher authority - E-bay. As J. Peterman would say, it is 6" in diameter — one size fits all. Handmade in Israel with a *very small* fine stitch. The yarmulkes are from Israel and are made by people who have made Aliyah; low income and handicap people, generating income to make a living.

I grew up and observant Jew until I had my first taste of bacon and blondes, and I never looked back. However, I now find myself lighting the candles, saying the hamotzi, and making Kiddish on Friday nights… Nice.

Jim Sogi writes: 

 A hat is essential in Hawaii to keep off the sun, rain and wind, to keep glare out of your eyes, and at night on the mountain for warmth when it gets cold. There are different hats for different situations. A baseball cap is good all around since it keeps the sun off your face, stores easily, can be worn in a car and is cheap and stays on in a brisk wind. A good brim hat is good to keep the sun and rain off the back and shoulders as well. A nylon hat is light and can be washed. A waterproof rain hat is good for extended rain, and a light nylon brim is good for hot sun. A small brim bucket with a strap is worn in the water while surfing to keep intense sun at bay for hours in the water, and to stay on in the surf. A knit or fleece watch cap is good for boating at night or sleeping in the cold. A helmet is good for sports to protect the skull from boards, rocks, trees and impact. The Original Buff is an adaptable piece that can be worn as a hat, scarf, or facemask. A balaclava is good for winter conditions and can be used as a hat, or face mask in windy conditions. I must have 20 or more hats.

As with all equipment, each type of hat is specialized for specific conditions, and there is not one that is good for all conditions. As with markets, its good to have specialized systems and rules for the differing conditions or cycles and no one rule is good in all conditions but must be tailored to match the expected conditions.

Rudy Hauser writes:

I do not wear a hat indoors with the exception of trains and planes or if there is no good place to put the hat. If there is a draft from air conditioning it helps to keep me from getting a headache. But more important is that unless I just want to hold my hat in my hands there is no good place to put it. I prefer to read, not hold a hat. I once made the mistake of putting a Panama hat in the overhead rack in a plane. The motion of the plane bounced it around enough to ruin it. That gives me little choice but to wear it. If I have a hat without a brim, such as my winter hat, I can a do take it off aside from trains which are not that warm.

Bill Rafter adds: 

 Glare, particularly from lensed overhead lights or high-hat floodlights can cause headaches and eyestrain. That can easily be counteracted by wearing a baseball cap or other large-brimmed hat indoors. I have kept one at my desk for decades.

For years I noticed that whenever I saw a certain actor & director, he was always wearing a hat, even indoors. Then I saw him entering a food emporium at a ski area and he removed his hat. I immediately understood why he always wore one — his particular baldness aged him at least 10 years. So his vanity choice was either a wig or a hat, and he chose the hat.

Hats indoors also provide a level of anonymity for those who do not want to be recognized in an airplane or robbing a bank.

My first "real" hat was a Homburg, which was required for one of my college jobs: pallbearer.



 Have you ever noticed how those who have done you the most wrong, or those who loathe you the most, when they come onto hard times will often come back to you asking for assistance. This often happens to me with former colleagues. I can't always differentiate between whether the colleagues are in such bad straights that they will go to their most unlikely and ill wanted savior, or whether they wish to take their worst enemy down with them once more before they finally go under. I believe it is a variant of rats deserting a sinking ship. The British Navy and I believe all navies have a standard order from their captain "every man for himself " when the ship is sinking. And there is doubtless maritime law about when it is legal to put the captain in chains, (albeit this is somewhat a different situation). I believe the idea has many market implications, especially when markets have gone to the nadir like last week, but more important is how to protect your life in such situations I think.

One finds that there are only 25 suicides a year at Niagara Falls these days, and The Golden Gate has much more, but one can't speculate as to whether the sight causes the suicides or whether people with suicide on their mind tend to go there to do the deed. As for market moves, they must cause many more such catastrophes but again whether the person seeks out the opportunity or the opportunity causes the action, or both, it would be hard to unravel and a quantitative study of the types of moves that induce same would be helpful for saving lives and profits. 

Russ Herrold writes:

I've had this happen a few times. I think the reason is that the former colleague or friend is sufficiently 'intimate' with the weak spot that their former friend had, and so can 'get past your guard' more easily.

Factor in some perverse pathological character trait, and they may even feel justifies in taking advantage of someone they feel has 'done them wrong' in the past. Indeed, it may be that there was an intent to deceive (conscious, or latent) from the onset of them approaching you, 'the mark'.

The best approach is to probably to buy the lunch, but to keep one's checkbook firmly locked up.

Polonius: (to his son)

Neither a borrower nor a lender be, For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry.

Hamlet Act 1, scene 3, 75.77

and later


This above all: to thine own self be true, And it must follow, as the night the day, Thou canst not then be false to any man. Farewell, my blessing season this in thee!

Laertes: Most humbly do I take my leave, my lord.

Hamlet Act 1, scene 3, 78.82

The thought expressed by Vic is that there should be some heightened sense of gratitude if one is dealing with a moral person and 'offering the hand up' and a hand-out. But Twain echoed the Bard on this topic as well:

If you pick up a starving dog and make him prosperous, he will not bite you. This is the principal difference between a dog and a man.

- Pudd'nhead Wilson

Steve Ellison writes:

 When my children were 5 and 3, we hiked across the Golden Gate Bridge. There had recently been a freak accident in which a small child had somehow fallen through the small gap between the bottom of the railing and the sidewalk to her death. There were plans to replace the railing with one that went all the way down to the sidewalk, but the work had not been done yet, so I was keeping a close eye to make sure the children did not go too close to the railing. While my attention was diverted in this direction, I was almost caught off guard when the 3-year-old climbed on top of the one-foot high barrier between the sidewalk and the speeding traffic.

T.K Marks writes:

I, too, have walked across that bridge on numerous occasions. I'd walk over to Sausalito and take the ferry back. A spectacular stroll. One is still struck mid-span by the ease at which a despondent person could reach their goal. The curiously low railings prompt one to macabre thoughts. Who was the civil engineer involved with this project, Derek Humphry?

Stefan Jovanovich answers:

 The answer is Charles A. Ellis. Joseph B. Strauss did everything he could to claim credit for it (Strauss was to architects and engineers what Douglas MacArthur was to the Army and Navy - even when he was wrong, he was right - just ask him). Ellis reworked Strauss' initial proposal for a cantilevered suspension bridge - which would have been the mating of the Forth bridge with a ropewalk - and produced the design one sees today. Ellis did almost all the actual work - the calculations required for the computation of stresses, the specifications, contracts and proposal forms - singlehandedly, working non-stop for 2 years. After Ellis completed the work but before the final designs were submitted to the Bridge District's Board for its review and final approval, Strauss fired Ellis. There was no mention of Ellis in any report by Strauss, including the final report upon the bridge's completion in 1938. Ellis was the equal of Louis Sullivan, and like Sullivan he spent half his working life in total obscurity, unable to get any further commissions. Moisseiff gets credit for the development of deflection theory; but, as events proved (see "original bridge" section of Tacoma Narrows bridge), Ellis was the person who fully understood the necessary relationship between span length and flexibility. He is literally the father of the modern suspension bridge and the engineering theory behind it.

Bill Rafter comments: 

There was a psychology professor that published a study showing that the vast majority of Golden Gate jumpers took the leap on the side facing the city (facing East) rather than the ocean (West) side. The article then attempted to theorize why this might be the case, and he concluded that it was an attempt by the jumper to say goodbye one last time. Nice thought, but it totally ignores the reality that it would be damned hard to jump on the ocean side as that pedestrian walkway is almost always closed.

It must be particularly interesting to be on the bridge when one of the big carriers goes under, as they have to time it with low tide to clear.



 In a survey of doctors on a website I follow, 80% of responding doctors answered no way would they allow their patients to email them.

This was the response I posted:

To the 80% of responding docs who say "No way": If you wonder why many patients develop major hostility to doctors' office procedures and to doctors themselves, and why the public is happy to stay silently on the sidelines while the government and insurance companies take over control of doctors' working lives, could it be that doctors (who for 100 years had control of their practices and refused to make them patient-friendly and efficient) have failed to enter into the 21st century? And regard it as perfectly acceptable to impose inefficiency, frustration and wasted time on patients by not letting them communicate with the doctor but requiring them to make an office appointment (probably 3 or 4 hours with travel to and fro, long office waits, etc) for every question or matter?

I see nothing wrong with a doc charging for email or telephone time. Those patients wishing to use email or telephone should be willing to pay the time charge, regardless of whether such charge is covered by insurance. But if our profession continues to lord it over patients by refusing to allow them what every other profession and all of modern life does, doctors will deserve what they get in the way of government and insurance oversight and regulation.

Charles Pennington writes: 

Chiming in, that is a pet peeve of mine. What other profession won't take email? Lawyers, dentists, accountants, etc. all communicate by email, of course. Doctors make it even worse by making you communicate with them only via a voice-mail maze that begins with "If you are a physician, press 1; otherwise, your call is very important to us so please remain on the line…"

Russ Herrold comments:

I'm with the doc's here.

When the tears are flowing, everyone says they are willing to pay, but without getting into the business of FIRST AND AT THE ONSET, having a Retainer Agreement, unilateral right to draw it down upon presentation of statement, Mandatory Arbitration clause, deposit for fees in the Trust Account, all one does is lay a background for a fee dispute complaint or malpractice counterclaim to a suit to collect those fees. It's not gonna happen as a general practice. The doc is caught between the rocks of patient desire for immediacy and convenience; the professional obligation 'not to miss' something that in hindsight seemed obvious; and the fact that insurer reimbursement for web and email oriented 'treatment' lag.

Having had poor service (breaches of patient confidentiality, outright prevarication by nursing staff, and failures of delivery of test results repeatedly and after specific instruction) in the care of a wound, all since May of this year, from the standpoint of the patient, I want there to be a formal paper trail (not email; not call center notes in some database, forgotten and closed; not some other ephemeral media) … a well drafted letter explaining the issue, a file CC, and a cc to the supervising agency (hospital system privacy officer, nursing board, 'authorized provider' certification entity), and an equally formal response (or in its absence, proper escalation on my part).

Unreasonable, I know, but progress is made on the backs of unreasonable people.

The same goes for lawyering. If a client cannot keep and will not pay for an office visit, or meeting at other venue of their choice, to permit the open-ended probing that proper representation requires, they won't be MY client very much longer, as I cannot properly represent them.

Alex Forshaw writes:

The fact stands that interacting with doctors is a pain in the ass from the second you enter the door. They do not face nearly enough competition. There is no bigger beneficiary of protectionism in the entire country. The lack of competition has meant they face no evolutionary pressure. I hate "socialized medicine" as much as anyone but US doctors are as much culprits in their own demise as the tort bar and all of doctors' other favorite bogeymen.

George Zachar adds: 

In my conversations with doctors, I've been told the potential legal and regulatory liabilities risked by patient email contact are vague and large, leading them to simply shun the practice.

Phil McDonnell writes: 

Regular email is not a secure medium. Privacy regs hamper a Doc's ability to use email. Most will call you on the phone and/or write a letter with results. That is why expensive software with encryption is required that often the smaller practices cannot afford.

Gordan Haave responds: 

Sure that's what they say. But it's BS. How is the fax or telephone somehow more secure than email?

If the issue is confidentiality, why is it that Lawyers will email you but not Doctors?

There is one other group that won't send emails: The IRS.

I am in the middle of a personal and business audit, and you can't email the IRS. It's very inefficient.

To me this is just further proof that Dr's collectively are not the saints they claim to be, but rather just a cartel that uses wildly inefficient systems to extract rent's from consumers.

Dan Grossman writes:

I am surprised that a few otherwise highly astute Speclisters so easily accept doctors' excuses for refusing to permit email. As a service to the medical profession and to our country (and in time for inclusion in the President's speech tonight as a new regulation under the Patient Protection and Affordable Care Act), I have drafted and present below a few simple groundrules that a doctor can require a patient to accept as a prerequisite for emailing him.

"A Patient wishing to email Doctor must indicate his acceptance of the following:

1. Complex or detailed matters require an office visit. This email is for minor procedural, scheduling and prescription renewal matters.

2. Doctor will attempt to look at reasonable numbers of emails as time permits but because of his busy schedule cannot commit to read or deal with every email. Any information Patient wishes to convey with certainty must be conveyed by other means.

3. Emails are not secure and should not include sensitive personal information. They will not necessarily be presevered or included in Patient's medical file or record.

4. Patient agrees to pay $20.00 for each ten minutes or part thereof Doctor spends reading or dealing with emails from Patient, regardless of whether the amount is reimbursable to Patient by his insurer. Medicare and Medicaid Patients unfortunately are not eligible to use this email since such programs do not permit email charges. (Doctor regrets this and asks that you please take up such inefficiency with the Government rather than with him.)"

With regard to 3, doctors or their office assistants can instead spend 15 minutes setting up free encryption, as others on the List have already pointed out.






 Assume that only daytraders are left trading. Assume they all enter in direction of recent moves sometime after open. One would believe that they try to maximize profits by trailing or waiting til near close to close position, then on close close position and pull orders. What would market result be? I am guessing something like today's price action might result. It is difficult to verify this, but perhaps the assumption is not too far off or just a case of fitting the theory to the facts after the fact?

Jeff Sasmor asks: 

Are you talking about human daytraders or robot daytraders?

I doubt human daytraders have much effect on anything these days. Isn't it so that something like 3/4 of volume is robots trading about 100 stocks?

Jim Sogi replies:

The "robot" trader needs to be defined. There are human system programed execution bots, and perhaps a few "intelligent" trading systems which do not have pre-programed systems, but rather gather current info, process that, make a quick rule, test it, and trade on it, but I strongly doubt it. There might be market making algorithms which might be classified as bots, but I doubt they are making directional bets all day long looking for legs. IB has some entry algo's such as VWAP and I think a few more algos for order execution. Seems on the 5-6 flash crash some skirts were lifted with a glimpse into some order spamming systems which would have to be automated at that speed. You and Russ might be best to say what is out there and what is possible and I sure would appreciate what might be possible.

Russ Herrold comments:

 Yes, real time adaptive and intuitive systems are to some degree possible and exist– consider robotic market maker assistant algorithms, that are permitted to 'fly themselves' with no-one with sentient hands on a 'dead man's' switch, assuming so long as the market stays within known parameters [some of these gone haywire (or simply unimaginatively constrained) clearly could have been 'goaded' into playing on May 6]

I took the open question to be tested to be a restatement of the buy (or sell) at close, and to sell (or buy) at open, [perhaps biased by an anticipated mean reversion 'bias' to decide which way to lean, as a first extension].

As I recall we've had posts on this in the past here, and I was just going to run a couple of simple scenarios through some back testing and do some 'binning' or anticipated 'regime changes' based on the a look-back of 'scheduled news' calendar.

The market making algorithms that could be classified as Bots have performed well, all day long; other times, they fall off the tracks wildly as well. Thus the need for that 'dead man's switch'. The question becomes, can one train a few 'turtles' to spot regime changes that a bot cannot, at a low enough cost to pay them to 'play the video came' in shifts and cover a trading day.

Concerning what you said about how "IB has some entry algo's such as VWAP and I think a few more algos for order execution. Seems on the 5-6 flash crash some skirts were lifted with a glimpse into some order spamming systems which would have to be automated at that speed"…

The data response feedback loop rates have long since gone beyond the limits of a remote link and having an electron crawl back and forth. Local computers in a data center are competing with one another, and the trick at this point may simply to predict how the battle will progress, grab hold, and hang on for a ride!

I am set up to test it fairly readily, and that ZH listing seemed promising. I rather hate to publish my personal culling screens rather than to use one explicitly in the public domain, as I invest some effort 'sharpening' how I look at data and would lose the benefit of the effort by floating that personal symbols list.

Ken Drees comments:

The motorman–someone drives the train, someone slumps and the dead man's switch kicks in. The Taking of Pelham 123, the great movie from the 70s, not the butchered remake, was telling about an operation–a good sleuth can sniff out your footprint and catch you as you sneeze unknowingly. Gesundheit!

Robots all have humans in charge and humans are chained to their human condition and flash speed just makes a human's mouth open on occasion and then they do something emotional. We are now into the area of advanced human overload error–flash crash redux will not be hiccup. 

Russ Herrold replies:

I was approached a few years ago by a couple of vendors on the design of such feeds, and the meta-tagging to be added. An XML delivery is easy to parse with existing Open Source tools, about which I wrote a couple of years ago.

Just as one of the themes of this list is 'ever changing cycles', it seems to me that another 'ever changing scales' having fractal repetition of patterns as one 'zooms in and out' (a la Mandelbrot). Interestingly, the site includes a 100 page Word document of capsule reviews of 'The (Mis)behavior of Markets', for those of you who have not slogged through the whole work… the takeaway being that the bots can play for the penniescompeting against one another, without a lot of analytic skill perhaps; while the humans still can play in longer time frames, again (perhaps) with the benefit of deeper insight.

It is a Brave New World, every morning, and perhaps the trick is to adapt and swim with the flow of what one cannot control, and to stand firm when one can make a difference.



 I'd like to thank whoever it was that first recommended David Aronson's wonderful book Evidence Based Technical Analysis. We are finding it so useful that we are buying a copy for every employee (only three of us so no windfall, David). This book is so solid and well-written that it should be a must-read for everyone doing anything with statistical inference. It has already led to some changes in our research process that should make our results more robust.By the way, reading this site is certainly increasing my bill at Amazon. Henry Clews' book is the first thing that I read after joining the list (wonderful!), and I just received Tufte's "Visual Display of Quantitative Evidence".

Russ Herrold writes:

You're welcome! I received a 'review copy' through David, courtesy from Wiley. The book is thought provoking, educational without being obnoxous or intrusive as it instructs, and well worth the read.

Ken Drees writes:

There was a book thread posted a few weeks or so back that will maybe be archived in a different place on the website for quick review of spec's best book recommendations. I too have picked up some great reads from here.



Its good to classify cons into big and small cons, the degree of complicity of the victim, the use of confederates, and ruses versus bait-and-switches. The market would rate at the top in all of these as is readily seen, especially the use of confederates, and baits-and-switches. I am particularly gullible and an easy mark for cons. Recently, with Aubrey I had the pleasure of being victimized by a nice con at a fair. It was the medium sized con of a basketball game with the player having to shoot into a basket about 20 feet away and 10 feet high, with the basket a little smaller than normal. The only way to get it in is apparently to shoot at so high a vertical angle that the ceiling on the game precludes. The prizes include huge 4 by 5 feet whales and dolphins which I thought would be just the thing for Aubrey. Okay I asked the operator how much it would be to win one of the whales. He demurred. It would be so expensive I am ashamed to say. " How about a hundred i said ? " well, I'll have to ask my boss. " The operator said.

He had a conference with several confederates. And then came back to me with a positive shred. "Bring the kid over and we'll make him a happy camper". I pay my money and then I go to bring Aubrey over. The game is still there, but the big prizes have all disappeared. Only a stuffed Finding Nemo is there.  Worth about 1/3 of the prizes I had in mind. "Which one do you want, kid?" Aubrey chooses the Nemo and the man tells him "kid you tried so hard and so well that I am going to give you a prize". As Aubrey walks away holding the Nemo bigger than him many bystanders ask him what he did to get such a prize. " i tried so hard they gave it to me as a reward ". The stages in this con, starting with a rigged game, relying on my desire to get a special deal, bringing in a confederate, then switching the reward are all too familiar. And it is very helpful in thinking about the market to go over these steps I think.

Pitt T. Maner III comments:

I found a nice overview with table of scam types. Elderly are often the main targets.

The success of many attacks on computer systems can be traced back to the security engineers not understanding the psychology of the system users they meant to protect. We examine a variety of scams and “short cons” that were investigated, documented and recreated for the BBC TV programme The Real Hustle and we extract from them some general principles about the recurring behavioral patterns of victims that hustlers have learnt to exploit.

We argue that an understanding of these inherent “human factors” vulnerabilities, and the necessity to take them into account during design rather than naively shifting the blame onto the “gullible users”, is a fundamental paradigm shift for the security engineer which, if adopted, will lead to stronger and more resilient systems security.

From Understanding Scam Victims: Seven Principles for Systems Security , University of Cambridge.

Victor Niederhoffer expands on his remarks:

Part of every big con is the final touch where you make the victim frightful to ever demand restitution,or better yet, ready to put in more money to really get the full advantage. It was a nice touch for the operator to praise Aubrey so highly and let him hold the Nemo with such pleasure that for many many times the amount I paid, I would never have demanded a return to the bigger prize.

Rocky Humbert writes:

The cup is half full: If the objective of The Chair's exercise was to bring joy and happiness to his son, then perhaps this was not a "con" — as Captain Nemo was both larger than Aubrey, yet not so large that his father had to drag around an eight-foot-tall stuffed bear for the rest of the day. After all, the eight-foot-tall stuffed bear had unknown risks including the inability to see oncoming traffic when crossing the street perhaps resulting in the demise of both Bear and Chair.

Jeff Watson comments:

Back in my [adventurous] youth, I ran across a husband wife team that were travelers. Their con was simple and was a beautiful work of art in it's simplicity. The lady(dressed to appear rich and very well coiffed) would drive a brand new Caddie Convertible into a gas station, get a fill up, then would start looking around frantically for the 3 ct. diamond ring she "Lost." while going to the bathroom. She'd enlist the help of the pump jockey and would spend a good 15 minutes looking for the ring. She left very distraught with a note with an address and phone number to the jockey that if the ring were found, there would be a $3000 reward, but please don't tell her husband and only call at a certain time. An hour or so later a ragged man would show up walking through the lot. He'd buy a soda then would show the pump jockey the nice ring he just found. After a little wheeling and dealing, the ragged looking man would walk out with the contents of the register, the pump jockey had the ring and thought he was going to make a big profit. The ring was paste, the address and phone number were all fakes, but the money they made was real serious cash, especially for the 70's when they would regularly pull the con twice a day and average $500 total.

Victor Niederhoffer comments:

What is the market application of Jeff's Cadillac story ? The market applications of the Nemo are that the market has many big up days to lure you in, then you try to buy it on the cheap the next day. At first it doesn't hit your limit so you raise it a little. It doesn't go there so you end up paying near the high ofthe day, or like yesterday, it finally goes down a few points to hit your limit. While this is going on, a tip to a TV or news is given that the market looks great or that his former employee really lost money on that deal et al, and that makes you even more enthused.

You put the position on and then your broker calls you when it goes down. You don't have enough margin in your account. But if you sell within next 10 minutes, he's arranged with his manager not to have the computer extricate you at 1040 the way they did on the flash crash day. Finally, you don't have to come up with more money because you just lost all your margin so you don't have to tell the other half about the tragedy, and the manager gave you an extra special deal by not having the robot take you out ruinously because of your special friendship.

Thomas Miller comments:

Regarding Chair's last paragraph:

Forcing a quick decision under threats and intimidation then showing they are really trying to "help" you is an old scam similar to the "jury scam" I didnt know brokers learned this so well. 

Big Al comments:

On a trip to Europe with a friend, after high school graduation, I started talking to a German merchant marine guy who was traveling with his CentAm wife and kids back to Germany. This was back in the Iceland Air/Air Bahama days, when the cheap flights went through either Rekyavik or Nassau. So we talked for an hour or two during the Nassau layover and then on the plane. When we got to Luxembourg, he hit me with the story about not having money for the bus trip with his family, blah blah blah, and we "loaned" him $20 apiece (I insisted my friend participate - more embarrassment). Then he gave us his address (yeah, right) so we could let him know where we ended up and he could then send us the forty bucks. I still remember the street address: 1 Jahnstrasse. Ha ha.

Watching the bus pull away, I knew we'd been had. He used the technique of familiarity and friendliness, and my obvious yokelhood, to get the money. At first I was really angry and embarrassed, but after a while I almost felt grateful, because the guy taught me an incredibly valuable lesson about myself and about the con and he charged me only $20 for the experience. Cheapest, most effective education I've ever had in my entire life.

And on street cons, I've been targeted enough times to know the pattern: First, the con uses a simple question to make contact with the mark and **get the mark to do something**. It can be just, "May I ask you a question?" Or, sitting in a car with the window rolled down, "Could you come closer? I can't hear you." Then, after the mark has offered compliance, the con hits him with an intense, rapid-fire story - "My husband kicked me out of the house and took my credit cards and I need a room for the night but it's eighty dollars…" - and tries to maintain contact and control and also confuse the mark, until the mark may hand over the money just to break off the engagement.

One way to have fun is start giving it back to them: "Oh that's so terrible. That happened to my sister once, but she was better off without him anyway. The police can help - just let me get your license number so they'll know who to talk to when they get here." It's funny but very consistent how angry they get when you start lying back to them.

Ken Drees recounts:

I just asked my daughter if she remembered the mouse I won for her [at a fair].

"Oh yes, 'mousy', where is he?"

Oh I threw it out years ago when you got tired of him.

"Why did you do that, he was my favorite all time stuffed animal ever, he had a red coat and black whiskers…."

I just turned and slowly closed the door. 

R.P. Herrold responds to Ken's story:

From time to time, we 'clean house' and we find the black trash bags, presently carefully tied closed, up in the attic; from time to time, I am instructed to 'get rid of that clutter' as the now grown kids 'will never use those again'.

The Brio trains, the metal Erector set, the cast lead soldiers and molds, the Duplo blocks, the stuffed animals, Lincoln logs, the McGuffey readers, the arrow and ax heads collected in the fields, have all fallen to head of the queue for disposition over time

Stuffed animals were in the dock this past weekend. At that point, I usually carefully re-tie the sack, set it to one side for a moment, and then find a new hiding place for the bag in question after her attention turns to other matters. But a grandchild's mother and the child were delighted with the animal figures from my preservation efforts, even if my spouse was not pleased to see 'those old things' again

A few weeks ago, the Brio train set moved in with a gransdon infatuated with rolling stock and were 'new' again; The Erector set, the melting pot and molds, all gone (not to return with current day safety rules — choking hazard of the nuts and bolts, heavy metal fumes). I am on the lookout for a replacement McGuffey (that friend of books that taught me to read upstrairs in a quiet room as the adults 'talked' downstairs), so I can 'seed' a room for young visitorsThe flints and shaped stones? I was not atuned to their disposition occurring; a 'sharpie' sweet-talked a sale for a pittance from a elderly family memberwhen 'cleaning up' prior to closing down a house before sale. That lot of childhood treasures also carried out the door the minnie balls I dug from the earth at GettysburgEntropy won a round that time; I know we'll battle again.

Jason Ruspini comments:

Forgot who said that cons work because people want something for nothing. Clear implications for naive technical analysis here. See, it's easy, you can get rich by extending straight lines.. just keep one eye on your laptop while at the driving range.

To the young person who had a query about what to do with his trading system, at least he tested something, but perhaps there is some laziness there. Unhealthy to think of one system as your "ticket" even if it looks good. Better to find a good place to work where you might actually learn something new.

Stefan Jovanovich comments:

In the good old days of the 1970s the favorite panhandle con in downtown SF was to be a crazed Viet-Nam veteran. Since I spent half my life in those days lurking outside office buildings waiting to ruin some suits' day by handing him a summons, I got to hear every pitch going. The only way to escape was to do the "crazed killer wanting to go back" routine. "Hey, man, can you help me out; I was in the Nam." "Yeah, me, too, and Brother, am I glad to meet you because we got to go back there NOW!!!!! and finish the job."

Like Big Al's artful sympathy, it worked every time; but the reaction was more fear than anger. The con artists did not want to spend any time near someone who was so obviously crazy - for real.

Gregory van Kipnis writes:

The con that almost got me the first time I encountered it. It repeated itself 4 times over the intervening years.

I have deduced that the mark has to be a distracted businessman, walking alone midtown near the major hotels, hopefully someone in NY on a business trip.

In NYC, about 15 years ago, walking cross town early one evening, lost in thought, I was nudged by someone coming from the opposite direction. That was followed by "Jeez, you knocked the food out of my hand. Don't you look where you are walking". There on the sidewalk was a spilled plastic container of takeout food from the all too familiar corner Korean greengrocers.

I thought for a moment to review the memory playback of the contact and responded, "But you bumped into me."

He turned angry exclaiming he was on a short break from work and I ruined his dinner and I bumped into him and I should pay for the loss.

I started to reach for my wallet, then hesitated sensing a con, and said "No, you bumped into me."

He got belligerent, put his face close to mine and with intensity and a shaking body said he was angry and he ought to take me out. I stepped aside, hand on wallet again and started walking saying "there is a greengrocer around the corner. Let's go in and I will buy you a meal."

After a barrage of invective he leaned down to scoop up the spilled food. I continued on my way with a shaken feeling followed by euphoria when I realized I foiled a con.

I few years later the same thing happened. It was a different person different neighborhood near the St. Regis. This time two people. As soon as he spoke I said "bull shit, you did the same thing to me last month". He tried again to intimidate, but I just repeated the response. The engagement ended. They scooped up the food.

The third time, same guys same neighborhood near the Penninula, they just pulled the same stunt on a couple. He was reaching for his wallet. I yelled from across the street that it was a scam and he should walk away. Lots of hesitation followed on both sides. To my amazement the mark paid anyway.

The fourth time, same guys, I swerved just in the nick of time and yelled "you are still at it huh?" No response.

Whenever I see a food stain on the sidewalk with a few strands of noodles scattered about, I smile — the tell tail sign of the aftermath of the con. You would be surprised at how many there are.

Rocky Humbert comments:

An important distinction between this con and some of the other cons is that this one preys on the mark's sense of duty/charity versus the cons that prey on the mark's sense of greed.

One ponders whether being victimized in the pursuit of selflessness is any worse than being victimized in the pursuit of selfishness ? For example, was Madoff's theft from charities more heinous than his theft from plain old rich people ?




 One was recently asked, how do you spot a hoodoo when you are in or dangerously close to their presence? I would say that their past record of failures is a good starting point. As is their ability to talk a much better game than they play. Also, their attempt to impress you with the trappings of success, ( a conference call with their five principals is a usual gambit). Not to be disregarded is their locus of operations, often from a ephemerally built recreational area where permanent lodgings and such things as pianos are not availalbe. The inclination to befriend you and flatter you is also a clue. But how can this be quantified, and how can we learn to avoid them? What should you do when you've met a hoodoo? I've always taken to burning my shirts, especially if they've hugged me as they ofen do. Dare I ask the question of whether there are such things as hoodoos or is it a figment of random numbers? No, that would be too mind boggling. But please help with your insights.

Alan Millhone writes:

Some years ago my late father and me were enlisted by Banque Worms to take over a failing condo project in our area.

The developer met us and after I shook his hand I could smell his pungent cologne on my hand for the rest of the day. He had a lady friend assistant who wore a see through dress with precious little underneath if the sunlight caught her profile just right. When I first met him I could see " carpetbagger " across his forehead.

He was a genuine "slicky boy" right out of South of the 38th Parallel.

People like him wear a lot of bling and cheap after shave. Usually have a woman at their side as a distraction.

They are long gone. Our crew finished the job.

Stay vigilant and wide eyed. 

Pitt T. Maner II adds: 

hoodoos at Bryce CanyonFortunately, I associate the word "hoodoos" with the past leader of my university (UF) geology field camp, Professor of Geomorphology, Dr. Robert Lindquist, who was an expert on the formation of hoodoos in the magnificent Bryce Canyon in Utah and knew of the locations of many wonders in the West–original survey markers left by Powell, dinosaur bone and gastrolith graveyards, amazonite on Crystal Peak and ancient lahars in South Park, Co. A geologist's geologist who looked like he had stepped out of the 1800s.

As for the other definition, there was a person who once recommended Enron, Freddie and Fannie, and several other long ago bankrupt companies and who was so consistently wrong for awhile that it was almost uncanny. If one had just done the opposite. It was a good education to lose money at an early age though on hoodoo picks. Better to lose and learn using your own thought processes–at least there is a sliver of hope for improvement. 

Russ Herrold writes:

I might add that to view a person's bookshelves (even ones only in public areas) or even books in the process of being read on a table, or to note the absence of such, in each case provide a window into the mind of that personis to me a 'tell'.

Alston Mabry writes:

To see something clearly, it can be helpful to study its opposite. Recent list discussion included one of my favorite anti-hoodoos, Richard Feynman– intelligence, curiosity, enthusiasm, creativity, generosity, joie de vivre.

Russ Herrold adds: 

This certainly may work for when to exit or what to avoid. My brother also seemed to have a uncanny ability to leave the party, when things were getting hot… too hot… right before the cops came and arrested everyone. His friends started following him. However, the same may not be true with when to start a party. As a kid I remember people would fight for a seat next to me during a math test. If I did not like them I would pull a Goldman synthetic and write down some wrong answers, to be corrected latter in secret. It has been my experience in investing that the surest sign of a Hoodoo is willingness to copy someone elses system or trade and yet have no idea why they should expect it to work. There seems to be floating around hundreds of billions par value of formerly AAA paper that now only worth hundreds of millions that seems to prove that these Hoodoos are extremely common, if not the most common Hoodoo around.

Nick White writes:

Perhaps the most difficult aspect of detecting hoodoo-ery is to discern the difference between the genuine actions of the bona-fide dealer versus the pretense of the hoodoo (who - come to think of it– may well be bonda fide, too, but just cursed. Let's call these poor souls benign hoodoos versus their more malignant bretheren).

I think the sure tell of a malignant hoodoo is that their most effective lies will be those very closest to the truth…yet there lies their very advantage over us, and requires some street smarts to know the difference. Perhaps the foil is to know and experience for ourselves the difference between ambition and aspiration. The Stoics made this sort of distinction to help them in their quest against self-hoodooery: Ambition was vulgar, akin to avarice, full of scheming and accompanied by a very lowbrow, keeping-up-with-the-jones mentality. These sorts of feelings were to be put to death in oneself moment-by-moment through Stoic practice. Aspiration, on the other hand, was considered more noble, civic and had the connotation of dilligence, discipline and a bent toward giving a world-class performance simply for the sake of excellence as a way of life. Therefore, perhaps we might say this kind of vulgar ambition is the giveaway quality of malignant hoodoo-ery? Applying this little rule-of-thumb might constitute the foundation of an early warning system.

However, before any of us jump on the moral high horse and consider themselves "aspriational", the Stoics further stipulated that it required very great self-knowledge to even know the difference between these two values, let alone to declare oneself in one camp or the other. Even then, the Pyrrhic victory was assured– if you felt yourself to be truly humble and aspirational, you were most likely hopelessly ambitious and required greater training to cure the very need to make such statements about oneself.

Jeff Watson adds:

Nick, you made the most erudite explanation of hoodooism I've come across in a long time. One might wish to consider the partial hoodoo which affects 95% of the population. With the exception of a few good trades and the ability to be a good father, I'm a world class hoodoo, among the best. I won.t deny this because that would be a folly, and total lie as I can make money but my personal life is a train-wreck. I won't get into the Faustian aspects of all of this, but it is there. Hoodooism comes in many ways, shapes, and forms and I've seen and done them all. Hoodooism is like the old adage that history doesn't repeat itself but it always rhymes. The hoodoo that the chair describes isn't enough, the one you have to watch out for is the one that makes money on a regular basis, he's the danger.. He might steer you onto something good, but there is always a price to be paid, and the price is not always what you expect and not the currency you wish to pay..

George Parkanyi writes:

This whole notion of hoodoos frankly I find rather uncharitable, and burning one's shirt after a tainted hug smacks far more of superstition than science.

Now not hanging around negative people I understand. Some just wear you down with their negativity, and you do have to cut your losses at some point. But to classify those who have tried and failed into their own undesirable caste is unfair and a vast oversimplification. People run into difficulty for many reasons– failed relationships, health problems, sometimes just honest mistakes. My experience has been that people have far more to offer than what appears on the surface– regardless of their circumstances.

I wander past homeless people– ostensibly life's greatest "losers"– sometimes as I go to work, and when I really think about, I'm awestruck at how they have managed to survive all this long– with absolutely nothing, through harsh winter conditions. How do they do it? Clearly, they have skills that I don't. One time I gave a not only homeless but also legless man $10. He didn't ask for it. I just walked over and gave it to him. Here he was on the front lines at the very edge of humanity, representing on my behalf one of the worst possible circumstances that I could even imagine for myself and somehow I was drawn to him. When I gave him the money, he beamed at me with this smile of pure joy, looked me straight in the eye, and cried "God bless you!" To this day I will never forget that blessing, because at that moment there was a seismic shift– I actually physically felt it– in my understanding.

In the lands of the dispossessed, I don't see hoo-doos at all. I see potential teachers.

As for people who befriend you only because they want something from you, the best I think you can do is make your own decisions on to what extent and level you wish to engage. If you enjoy their company or there is something about them that you like, go with it, but don't take risks that would seriously jeapordize your business, family, and other relationships. Not everyone is genuine, yet not everyone's on the make either– and some people are absolute gems. To be completely distrustful will cut off a lot of wonderful experiences. To expect too much of people or to be overly trusting will set you up for disappointment, or worse.

It's like trading really. If you diversify your relationships you have less risk and less volatility. If you concentrate your relationships, you have more risk and more volatility, but perhaps a bigger payoff in the intensity of love and friendship. You have to figure out the right mix for you. The interesting thing about relationships is that that while you're investing in others, they're also investing in you. The more relationship value you create, the more relationship value you (and others) will also accrue. I can't quantify it, but I think there is a real multiplier at work there.

Last point. If you're not confident enough to engage or deal with a "hoo-doo" without fearing harm to yourself, then perhaps you should worry less about the "hoo-doo" and examine your own fears. What difference should it make to you if have a conversation, dinner, or even a business deal with such a person (however defined)? In what sense would that make you a lesser person or cause you harm? It may or may not, but I think its a good question to ask.


Jeff Watson comments:

George, it would behoove you to read up exactly a hoodoo is before writing such an elegant, misguided essay. The essay was great, almost fantastic, but missed the point. I can say this because I'm a hoodoo and proud to admit it. Not all hoodoos lose money in the market and in life and divorce. Some lose through gambling drugs, going for long odds, begin too easy with short odds. I lose my money by staking unreasonable ventures, loose women, and bad ventures. Not a lot of misadventures but enough to affect 11% of my bottom line. Add that to my losing trades, my 30 dependents, and I have a big nut to make every month. Nothing like the Chair, but still significant. There should be a place in the hall of fame foe us grinders who knock it out every month for years…That's gotta count for something.

Duncan Coker writes:

On the topic of hoodoos, when I am performing a task others can either help me perform better, have no impact, or lead me to perform worse. A hoodoo would would reside in that last category. I am not so concerned about their motivation or intent, just their impact. With my favorite fishing comrade, we actual raise the level of our game so to speak, so an inverse hoodoo. We share information on the flies that are working, fish caught, good spots on the rivers, ( after a small bit of subterfuge of course for good measure). We have a good rhythm of leap frogging each other up the river, alternating the good stretches, not spoiling the water ahead for the other. Plus the general level of conversation or lack of it fits well with the day allowing us to focus on the river and landscape around us. In a pinch we can count on one another. I recall one day I slipped and snapped my fishing rod while at the same time managed to lose my fly box and all flies and watched it float away into the fast current. My friend saw it all and after a few jibes, offered to share his set up, and we took turns the rest of the day. We landed my rainbows that day.

But I have fished with hoodoos as well. One guy we nicked named Trigger. He was so nervous and jerky casting and moving around the river we thought he had an itchy trigger finger and thus the name. He could destroy a beautiful fish laden stretch of river faster than anyone I have seen, with sloppy casts, poor retrieves and a general disharmony with the environment. And he liked to talk, talked way too much. So just being around the guy brought my fishing down and took away my rhythm. Plus, he had the very real affect of spooking any fish near us. They must have known he was a hoodoo as well. One day was enough with Trigger.

Nick White comments:

Actually, I wonder if the null hypothesis is that we're all natively hoodoos…with only will, practice and a life record to help us refute it?


George Parkanyi responds:

Humanity in the aggregate, and individuals all, are - maybe flawed isn't the best term - let's say limited, at any given point, by the sum total of our experiences and our genetically born underlying capabilities and pre-dispositions. Most of us I would think have far more potential than we ever actualize. As infants and children, we start out gang-busters, absorbing everything - especially information and ability most pertinent to our survival. It is primarily a world of exploration for us at that time, underwritten by the support of those that take care of us in the early years. We're all about curiosity and imagination. As our thirst for knowledge and experience leads us to new experiences, we also begin to develop routines and habits, which enhance efficiency and conserve energy, but also help us re-experience that which we have enjoyed or that have worked in our favour before. The filtering begins, and the type and nature of recurring experiences that we seek increases. Habits take form, even at a young age. The continuously developing habits, I believe, progressively and increasingly compete with our desire and ability to pursue new experiences. At certain points in life, we even choose massively pre-packaged experiential templates (e.g. marriage, career) as well, which hugely filter and channel our future experiences. Ultimately, we (not all of us, but a large portion) reach a point where there is no further desire to seek new experiences that are outside our past experiences. Our habits completely define us. As we age, we also begin to lose the resources, particularly health and energy, with which to pursue and expand our overall life experience.

Perhaps a hoo-doo is simply a person that can or will not go to the next level, and finally settles for habit being the determinant of his/her future experiences. Perhaps they give up on the pursuit, or are ultimately distracted away from seeing or imaging that next level of experience beyond the point that they have already reached (which point would be different for each person), and never even think to look toward the horizon of their life again. All I know is that habit is a very powerful force, and ultimately I think it overwhelms us.

John Holley comments:

"Amen, JT. Sorry I made you burn a shirt that time I hugged you at the Mets game, Vic!" KD

Just to show I put my actions where my mouth is, I will share with the list that I recently have read two very important books that have shaped my life thus far. Both are shared favorites, highly insightful, and forever giving and common amongst the Spec Listers:

1) Memoires of a Superfluous Man - A.J.N. (via Vic)

2) Five Lessons: The Modern Fundamentals of Golf - Ben Hogan (via my Dad, also Kevin Depew's fav golfing book)

These books are on my top ten list. If you haven't read them then do it. In fact read them over and over again.

Other than G-man's speech in Atlas, the 1 thing I hang onto that Lack shared recently in a post regarding his Father that would get you out of being a Hoodoo is appropriately going to be number twenty six.

26) “If you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater his effort the heavier the world bore down on his shoulders—what would you tell him to do?” " To Shrug." Shrug, bare more. Your mind can handle it.



 The Secretary problem, i.e the optimal number of applicants to interview for a secretary job before quitting would seem to have much applicability to the time to come into the markets these days. How many extremes should one wait for in a day before coming in one way or the other, and what is the expectation for such strategies?

Jordan Low writes:

Is it just a coincidence that 1/e is close to 0.38 or the ratio used for Fibonacci time and price projections in technical analysis?

Rocky Humbert writes:

Steve Landsburg recently wrote about a variation on the Secretary Problem. He noted that "an anonymous math department chairman reports on his own strategy for cutting down on the [interview] workload. The math professor believes that one of the most important determinants of a successful career is luck. So each year, the math professor randomly rejects half the applicants without even reading the folders. That way, he eliminates the unlucky ones."

I suspect that there may be a market analogy in this admittedly sarcastic observation.

Phil McDonnell wonders:

Is it a coincidence that Fibonacci believers always seem to use the rhetorical form of: Is it a coincidence that (fill in a single observation) came close to (fill in selected Fibonacci value)?

Russ Herrold replies:

I do not think there is a co-incidence– the human mind tries to order data, and Fib sequences crop up everywhere. It is natural to do a 'trial fit' just as the eye tries to estimate a fit for a curve [and thus the reason for ready transforms as normalization, log, 1/exp and the like in running a regression– scaling often permits identifying the 'noise' and getting a 'good enough' solution]

Doing the math, of a run of repeated application of any two integers (seemingly separated by whatever distance, although I have not done a formal analysis or proof), the series seem to converge to a Fib set reasonably monotonically after say five rounds for low integers.

I ran into Fib numbers, learning the run time pass estimates for the IBM sort-merge algorithms in in the late '60s, and it appears that Knuth found them in sequential pass sorting as well. I seem to recall a childhood cartoon called 'Donald Duck in Mathmagic Land' where that quackish fellow pointed out that golden spiral, and the perfect rectangle 



1. Can anyone come up with ANY justification for retail parties' engagement in High Frequency Trading?

Russ Herrold writes:

Sure. First would you mind please:

1. Carefully defining: High Frequency Trading

2. Explain if you consider the taking of profit from a market to constitute an adequate 'justification'.

Bill Rafter writes:

Let me deal with them in reverse order:

If a market is inefficient such that a profit can be made by doing a trade to capitalize upon the inefficiency, the trade performs the simultaneous jobs of creating liquidity and reducing inefficiency (and making a profit).

Given that, it makes no difference whether the trading is high frequency or not high frequency.

By the way, I have no dog in this hunt, being a long-only equities trader who tends to hold for a minimum of 2 days.



The fitbit--a popular self tracking toolThere is a very interesting article in the NY Times Magazine on quantifying how one's life is spent. Perhaps some nuggets in there applicable to trading:

Humans make errors. We make errors of fact and errors of judgment. We have blind spots in our field of vision and gaps in our stream of attention. Sometimes we can’t even answer the simplest questions. Where was I last week at this time? How long have I had this pain in my knee? How much money do I typically spend in a day? These weaknesses put us at a disadvantage. We make decisions with partial information. We are forced to steer by guesswork. We go with our gut.

That is, some of us do. Others use data. A timer running on Robin Barooah’s computer tells him that he has been living in the United States for 8 years, 2 months and 10 days. At various times in his life, Barooah — a 38-year-old self-employed software designer from England who now lives in Oakland, Calif. — has also made careful records of his work, his sleep and his diet.

A few months ago, Barooah began to wean himself from coffee. His method was precise. He made a large cup of coffee and removed 20 milliliters weekly. This went on for more than four months, until barely a sip remained in the cup. He drank it and called himself cured. Unlike his previous attempts to quit, this time there were no headaches, no extreme cravings. Still, he was tempted, and on Oct. 12 last year, while distracted at his desk, he told himself that he could probably concentrate better if he had a cup. Coffee may have been bad for his health, he thought, but perhaps it was good for his concentration.

Barooah wasn’t about to try to answer a question like this with guesswork. He had a good data set that showed how many minutes he spent each day in focused work. With this, he could do an objective analysis. Barooah made a chart with dates on the bottom and his work time along the side. Running down the middle was a big black line labeled “Stopped drinking coffee.” On the left side of the line, low spikes and narrow columns. On the right side, high spikes and thick columns. The data had delivered their verdict, and coffee lost.

Riz Din comments:

Interesting article. I've tried a few tracking experiments such as strict calorie counting, but it gets really obsessive because it is such an active process (I carried a little pen and pad around with me for a month). At present, logging activities such as time spent doing activity x, foods eaten, exercise taken, etc, has a strong reflexive element as the act of measuring interferes with the normal course of affairs. Even tracking tools on smart phones require a manual input element, which will distort affairs and can burden (as well as enlighten) the mind in many ways. On the upside, this is all great when you are striving to achieve a set goal over a short period of time, just less so when you are just getting on with life and want feedback on yourself. Because of this, I think data driven living will really take off when the data is collected passively and can then be reviewed periodically. I can imagine, for example, a technologically wired up house filled with sensors that silently logs your whereabouts and activities and produces a monthly report.

My favorite realizations from tracking exercises are that I tend to overweight recent experiences, and also that I am often caught in repetitious cycles. Another key benefit is that list keeping/tracking serves as a kind of photo album of memories: I've kept a booklist (in Google Docs) of all books read over the past five years or so, with a simple five star rating system, and by filtering to see my favorites I am able to see what type of person I was and the type of person I may be becoming. All very interesting.

Russ Herrold writes:

Here is an interesting read for those interested in a life ruled by numbers:

"Ubiquitous self-tracking is a dream of engineers. For all their expertise at figuring out how things work, technical people are often painfully aware how much of human behavior is a mystery. …"

This is not specifically applied to numercially driven trading or investing, but the emphasis on accurate and contemporaneously generated records mentioned in the latter pages of the article resonate with what our aspirational selves may seek to attain in the financial markets:

- trade from numerically validated setups ['Past results may not be indicative of future results' vs. 'History does not repeat, but it sure does rhyme a lot']

- do post-analysis on what worked, and when a plan was followed, and when it was not ['If you cannot put a number on it, it is an opinion, not science']

- Kelly criteria for binomial trades; Optimal-F for N-way position sizing; with the known problem of non-Normality of financial markets 



I am wondering if anyone out there is familiar with a trading opportunity called by some, the Goldman Roll. As it has been explained to me, there is a large numbers of long-only commodity funds. As a given contract that they hold long, say oil is coming due to expire they need to sell that one and then roll into a long position in a further out contract. This creates a very definite trend in the spread that can be exploited. Sell the near one short and buy the next one out. As the roll transactions are executed the Far minus the Near spread has a very predictable and smooth rise. It is claimed that this phenomenon has not be widely recognized and thus remains in existence thus far. Any comments out there on this claim would be appreciated.

Dr. Aronson is author of Evidence-Based Technical Analysis, Wiley, 2006

Nick White comments:

Goldman Roll? More like market roll!

This has been around as long as futures have existed and is nothing sinister. However, as some here were actually around when modern exch. traded futures began, I shall defer to them.

You can maybe get some clue as to roll direction by looking at open interest depending on the contract, but it's not always a good guide. Worth bearing in mind that people hold offsetting positions and much also depends on commercials vs specs etc.Also, if it were that easy to make money, it wouldn't exist…

Michael Cohn writes:

There is index money invested in commodity Indices and a plethora of ETFs. For example, USO or UNG. These commodity ETFs hold futures and there is a need to roll the contracts in a somewhat predictable way although there is now more flexibility as to day. This long exposure always has to sell the near and buy the far contracts. It is fairly easy to see the amounts involved…

David Aronson replies:

Goldman Sachs

Yes, I am on the lookout for all of these creatures. But kidding aside for the moment, are you saying that the claim that such an opportunity exists is on par with sightings of Big Foot? i.e., it's nonsense?

Russ Herrold writes:

It is a safe statement that there are and will always be 'unknowable unknowns' out there in the woods, and that the 'Absence of evidence is not evidence of absence' (but rather sometimes, just a statement that we cannot prove a hypothesis with our current tests and tools)

If I had a Bigfoot in my basement that laid gold bars, I would never reveal that secret, and take great pains to keep that 'trade secret'.

If I had engineered a winning strategy, I would certainly consider sowing disinformation and negative results and disinformation, to lead people seeking to reverse engineer my results, down into blind allies.

I think as a careful investigator, all we can say is: We do not know of a public proof that such exist.

By co-incidence, I am wearing a tee shirt today of a Unicorn, feasting on roast leprechaun, and as she takes knife and fork to her meal, the magic rainbows are let out.

Ken Drees adds:

The idea of taking advantage of a robotic function (mindless ETF doing its monthly maintenance) makes sense; once you notice the ripoff, wouldn't a hunter now wait for the fox?

Tom Printon writes:

I used to fill the GS roll in the coffee pit. Locals typically positioned themselves one to two days ahead of GS. When and if profitable was usually good for few tics, but one had to have size on to be worth while. Off the floor trader's vig would be difficult to overcome.

Paolo Pezzutti adds:

This reminds of "The Night Of The Long Knives" also called Operation Hummingbird. It is interesting how the market was "prepared" for this event that occurs after an impressive up leg. We will see if the event will be able to trigger more volatility. It will say a lot about this market.



 Given the current mortgage rates and the fall of the housing market, I want to purchase my first home. Since I am stationed at Fort Hood in Texas, I have been doing heavy research in the Killeen / Harker Heights area. I thought I would ask for some advice. I spoke with Tim Melvin about this earlier, and he mentioned that I should never pay more than 10 times the annual rental rate of comparable houses. Does anyone else have any other good valuation metrics like this or have any knowledge / advice that would help me out as a first time homebuyer?

Legacy Daily replies:

I have found 10x to be used in two cases:

1. High house prices relative to rent — get one to cool off and think more clearly about an investment and do additional homework 2. Low house prices relative to rent - get one to jump in without thinking clearly on a "bargain" investment without doing any additional homework 

Some initial questions worth clarifying:

1. Is this a home or a leveraged investment? a. home — ignore rules like this and find the best place to live, raise a family, pursue happiness… b. leveraged investment — do enough homework to be confident enough about the decision to ignore all general rules.

Assuming investment:

2. What is the holding horizon? What future plans could interfere with that holding horizon? 3. What is the appreciation potential for the country, state, county, city, town, neighborhood, subdivision, this property…? I have not yet been able to come up with sufficient justification to buy for income alone when it comes to residential real estate. 4. What segment of rental market would the property (subdivision, neighborhood, town, etc.) attract? Is that the segment one wants to serve? Real estate agent needed to rent? 5. How predictable is the income stream? How would economic booms/busts affect it?
6. What are the worst case scenarios? What could go wrong?
7. Financial analysis — P&L, tax impact, financing options, downpayment flexibility (very illiquid), initial estimated repairs, etc. 8. Legal analysis — zoning issues, easements, property title issues, locality department issues, neighbor issues, etc. etc.

Couple additional points:

1. Decent real estate attorney representing one's interests can save from numerous headaches (especially true in foreclosure/short sale cases). 2. Avoiding a buyer's broker saves one money, gives additional negotiating room, makes the seller's broker more willing to work extra hard for the deal. 3. Inspections are money well spent, even if one does not end up buying the property. 4. The market is generally very efficient (yes even during this recession). Why has the property one's considering not sold yet? etc.

I hope you find this useful.

Jim Rogers writes:

The rule of thumb I've heard used is 1% of sales price should be equal to or less than comparable monthly rent (that's a little more aggressive than Tim Melvin's measure, especially when you factor in the mortgage tax shield). I'd say, use either and stick to your guns.

Sam Marx replies:

Don't trust what the real estate broker says about a house's value or price. Do your own research.

Try to find prices of recent sales of similar houses in same neighborhood.

Check with the local banks to see what houses they now own and what are their asking prices.

If you can go to foreclosure sales, do it, not to buy a house but to get an idea of what the market in houses is and remember those prices when negotiating with a broker.

I don't recommend buying at a foreclosure unless you're experienced at it.

Don't be shy about making offers 25-30% below asking price when dealing with a broker.

Watch for estate sales, the heirs are motivated sellers.

I don't know your area, maybe it's reached a bottom, but in FL, housing prices are still too high. The stock of St. Joe Land (JOE), FL's largest landowner, was 69 a few years ago — now it's 15.

Phil McDonnell advises:

 Buying a first home can be a frightening prospect. It should start with a realistic look at your needs. How many bedrooms and baths do you need now and in the future? If your life involves one or more women strongly consider the extra bath. If you have the skills a fixer upper my be of interest.

I frequently advise my Realtor wife on the statistical aspects of our local real estate market. Pricing in this market is especially tricky. It is a declining market but that also means buyers have much more negotiating leverage. To measure your local market ask a local Realtor for the latest stats on number of homes on the market and number of sales in the last few months in your area of interest. For a normal market this is about a four month supply of homes at the current monthly sales rate. In this market it is running about 10 months of inventory per home sold. Hence the declining prices as sellers compete. One should consider staying out of the market until the inventory show signs of declining. However do not be fooled by a one month decline in local inventory. Buyers in the Seattle area are negotiating prices an average of 4% below asking. Get the similar number in your area.

As a buyer in this market it is best to view the prices as a price distribution. Suppose we have ten houses in your area. But only 1 will sell in the area in the next month. Clearly it is most likely to be the one that offers the best value on a relative basis. The other nine are over priced for these market conditions. By staying on the market for another month they will probably lose something like 1% in value per month.

There is an old saying in real estate. One should buy the least expensive house in the neighborhood. Generally this is true. After numerous regressions on homes it can be said that among comparables the most important single factor is square foot of the house. For the best resale find out which area has the best schools. Even if you do not have kids the people who ultimately buy your home may have them and it will help resale in the long run.

Check out all the government mortgage deals and tax subsidies. They are offering a tax credit of up to $8,000 for first time buyers. 30 year fixed rates are below 5%. The military may offer even better deals. Remember the $8,000 credit is only paid the following year via a refund so you do not have it to use as a down payment. It is more beneficial the smaller the house you buy. I saw a recent home sold for something like $80,000 in Killeen. The $8k represents 10% on that home, but only 5% on a $160k home.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008

Henry Gifford adds:

Home prices, in general, are still falling in the US, therefore waiting will probably bring lower prices.

As property prices fluctuate, one sign of high prices is easy loans. Times when prices are better tend to be times when loans are hard to get, with of course reasons for this relationship. But, as an affiliate of the military, there are sometimes special deals available to you that are not available to other people, which means you can be one of the few buyers out there at a good time to buy. Some of these loan deals only exist on paper now, as the price limits and interest rates make them impractical, therefore nobody talks about them, but because they are government programs which get updated slowly, and usually out of sync with the market, they can be really good deals at times. Therefore there may come a time when you can get both a good price and a good loan.

Buying near a military base involves risk of base closure (I owned a whole bunch of houses near a base that closed) or downsizing, and since you're in Texas where there is lots of land, upsizing the base won't put much pressure on prices - people will simply build more houses. Perhaps you can ask around inside the gates to get a feel for this.

Buying and selling property involves large costs for brokers, taxes, title insurance, etc., which penalize short term ownership, meanwhile you can get transferred to another base at a moment's notice, which puts you in the position of being in a hurry to sell. If, instead, you buy a commercial property, you can own it as long as you live, with far less management headache, which makes owning it while living elsewhere more realistic than renting a house to someone.

Phil McDonnell responds:

I think the truth in this statement is based on a defect in the way people perceive value. Suppose the average home in a neighborhood sells for $500k but yours is worth $400k. Then if the average goes up to $600k the innumerate masses will think that all homes have gone up $100k not the 20% they really should have. When they do this the $400k home appreciates by 25% not 20%. In other words people add when they should multiply by a percent increase factor.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008

David Hillman writes:

Another part of that defect is focusing on the value of the improvements v. the value of the land.

Some years back, a close friend bought a lousy house on a great piece of property in the best neighborhood. Even though it was a prestigious address in a 'branded' area, he got a deal on the property because the house was so undesirable. The plan all along was to demo the house and built a new one to suit, which is exactly what he did. He had realized the land was worth perhaps 90% of the true total value of the property before the new construction.

Many county auditors, etc. have searchable tax records online with the assessed values of land/ improvements parsed out. One might use that to figure a reasonable estimate of market value of land v. improvements. Don't forget the old saws apply….'land, they're not making any more of it'….and….'location, location, location.'

Bill Egan writes:

In the last 10 years, I have bought three homes and sold two. Did not plan to, but that's the way it worked out due to job changes. Sold both houses in < 1 week for a profit despite forced timing. We were not in subprimeville, either, and the last sale was 2001 before the real estate madness.

My wife and I kept resale value in mind because you never know what can happen to you. We made sure we bought homes that were average to excellent on the following criteria:

  1. School quality
  2. Exterior appearance and interior layout — good and normal
  3. Quiet, safe neighborhood that looks good
  4. Reasonable size (3/2 or larger)
  5. Likely demand due to commuting routes/distance to jobs

For example, I was working at a biotech in NJ from 1999-2001. We bought a 3/2.5 in a newer development, nice neighborhood in Burlington County, right next to an average-quality elementary school. However, the area was less horridly expensive than the homes closer to Princeton, where I commuted to. There was strong demand from people priced out of the homes closer to NYC/Princeton.

Rich Bubb replies:

1.  look at the neighbors. C-L-O-S-E-L-Y… look at the state of their domiciles (even getting "invited-in" for a look see if at all possible), and the state of the upkeeping… especially the immediate next door folk. You might end up living next door to your own personal nightmare. Believe me, it is Not Enjoyable. Even after almost 20 years. Thankfully everyone else on the entire block is somewhat more sane and respectful of their neighbors than my nextdoor nightmare. Or to put it another way: you might get the best deal that no one else could stand…

2. if you really know somebody in the real estate biz (my sister is an agent), have them look around for you. she got her daughter's family a fabulous deal in a great neighborhood. Or to put it another way: sometimes real professionals Do Know what they're doing.

3. look long at the deal, bid low for the deal (Game Theory might help a little here, here is a cool intro), then be prepared to walk away… even if not doing the deal means you'll have to go back and start the whole search-etc process all over again, and don't put pressure on yourself or let anyone pressure you into buying. My wife was not prepared to walk away from her last car purchase. She still got a good vehicle, but she could've strengthened her bargaining position by uttering the words, "Let me think about it." And then purposefully heading for the door. We went outside and argued between ourselves about leaving. She *wanted the vehicle*. It cost her almost $5k more than I wanted her to pay.

4. Consider the cost of long term ownership. I mean, Really figure it out… what's the cost of x, and y, and z, and can you afford it if those costs all hit at once.

5. Tangentially to #1 above, if there'll be kids living next door… would you:

(a) invite them in?, or

(b) chase them away?, or

(c) start scouting for really out-of-the-way burial sites?, or

(d) let them borrow your most deadly power tools?

Just mentioning this as my siblings and I were the 'b-c-d' and almost always the Never-more-than-once 'a'. And the neighborhood's less-than-model parents would often let their barbarians-in-training train at our place… Or to put it another way: your neighbors' kids might have fiends, er friends, worse than they already are…

Hmmm, karma might really exist…

Russ Herrold adds:

A anonymous blogger, 'Benjamin.Publicus' on Thomas Paine's blog  had this this observation:

… The author lives in a community that is (or was) at the epicenter of the mortgage crisis. The developer aggressively marketed the homes to young, first time home buyers, many of whom renters. No money down, own instead of rent, mortgage payments the same as the rent, etc, etc. The development was started in 2001, so the first wave of 5 year ARM's hit in 2006.

…and it goes on from there.

I have spoken to that author (and a couple others) about contributing to DailySpec, but he has been busy.

Dr. Herrold is Principal of Owl River Company, a high-end Unix consultancy

Rich Bubb adds:

As mentioned previously, my sister is a real estate agent. following are her comments on home shopping & buying.

Get a Real Estate Agent to represent YOU as a BUYER. Sign a contract as such. Tell them what YOU want.

There are surely things important to you that you would like to have in one of the biggest investment decisions you will make.

TAKE NOTES of likes/dis-likes of each home you view. re: Basement, Garage, Four Bedroom, Square Footage, LOCATION. I stress location because it can make or break the satifaction of your purchase.

Drive through the neighborhoods you are considering at different times of the day to see what the atmosphere is.Pay attention to the neighbors up keeping of their property. Schools?, established neighborhood?, new additions? child / adult ratio?
Comparison shop, don't just jump at the first home you look at just because you can afford it. Ask your agent to provide you with a CMA (a market analisis of a surrounding area - 5 mile radius ).

Get pre-approval from your lender, look at homes a bit higher than your range and offer LESS - the worst that can happen is, they will say NO or counter-offer and you may wind up with a nicer quality home.

BE Strong in making the decisions of your offers. Be prepared to give and take.

Then BE PATIENT thru the purchase process which seems like it takes forever because we are a see it, buy it, want it now, kind of people. It is a process that is in place to protect you. re: CLEAR TITLE

Again, don't just settle for a home, get as close to what you want as possible.



The knowledge contained in textbooks is simply not at all unique. There's no practical or ethical reason to knuckle under to the publishing industry and pay $150-250 per text for knowledge which is readily available for free elsewhere. Many people just copy or download the textbook for free.

Russ Herrold replies:

Hogwash. If so, use those free sources alone. The act of taking steps to obtain and use the publisher's source data confirms that value exists.

It is a denial of reality to assert a right to be the 'free rider' (as the torrent users do by their actions) on the backs of those who do not violate copyright restrictions. To me, it does seem to be an ethical matter, that the torrent users are on the wrong side of. It is certainly wrong as a matter of law.

As a practical matter, starve the publishers of sales, and they will raise prices higher still for legitimate users who cannot in good conscience be using 'stolen property'.

Jeff Sasmor adds:

My wife has worked for two different publishing companies that published college textbooks, and she once told me that one reason that the books are so expensive is because they often don't sell a lot of them due to copying. In years past teachers would copy sections of the books and hand them off to students (or the students would copy the books themselves), and now digital copies make it even easier.

People don't attach much value to the publishing process, they don't want to pay for it, but there is value added. The whole system (like many others) is very messed up.

Adam Robinson predicts:

Perhaps it is time to rethink the viability of textbooks regardless of price. I speak of their pedagogical value here, but in any event they will go the way of encyclopedias, swept aside by collaborative contributions a la Wikipedia. I got through Wharton having purchased only a few textbooks first semester my first year, after that I realized it was cheaper, and more effective to master the material, simply to go to the library and digest the assigned chapters on my own.

Distinguished former intern Chris Hammond recounts:

I'm finishing my PhD in math, and I have recently needed to learn techniques from a different area. I tried to learn everything by reading papers. However, each paper would focus on one aspect of the theory, leaving many questions unanswered. I worked very hard to resolve some issues on my own, not learning until later that it was done in some other paper whose existence I was unaware of. Further complicating things, one of the most important references was in French. I finally stumbled across what seems to be one of the very few textbooks (perhaps the only one) on this subject. Had I found this earlier it would have saved me so much time it makes me sick to think of it. I would have gladly paid a hefty price for it, if it was not available through the library.

Stefan Jovanovich reminisces:

I stopped following the internal fortunes of the publishing business more than 35 years ago when my Dad and I had one of our more spectacular disagreements. My brother Peter is the expert. He worked with my Dad until they lost control of Harcourt Brace Jovanovich and then he worked for McGraw-Hill and Pearson. My few comments about profitability and publishing being a "hits business" come from what I know about the history of the business in America and Europe. The inescapable economic logic of print and press runs has not changed since Gutenberg: you lose your shirt on the first copies and make your fortune on the last ones. That is the reason "free" copying has always been such an attractive proposition for the copier. Before they turned to semiconductors the citizens of Taiwan were masters at book piracy; and, as I noted recently, Thomas Paine went from being a lover of America to something quite different out of bitterness over the lost royalties from all the pirated copies of Common Sense.

What my Dad and I argued about was about "tail fins". My thesis was that publishing was only profitable for the publisher when there was a technological breakthrough that lowered unit costs of production by orders of magnitude - the original letter press, the steam press in the 19th century, the combined revolution in inks and paper-making and machine binding after WW II. The publisher could surf that wave of lower and lower unit costs as long as the public perception of what the fair price for a book or newspaper or magazine was still tied to memories of what prices were before the technological breakthrough. But, when a publisher found himself raising prices instead of lowering them, it was time to admit that the party was over. My Dad thought I was out of my head for saying that, by the time of Nixon's reelection, even the caterers had gone home. He thought the new imagining techniques in printing - particularly the ability to reproduce photographs - were so exciting that they would create a new generation of textbooks. My smart-ass reply was that they were tail fins.

After that time, whenever Dad came out to California and needed to see an author or look at a business opportunity, I was happy to see him and help him out by acting as his on-call chauffeur; but we never talked about his company or its profits again. We did speak briefly about the business one last time, when Robert Maxwell made his takeover attempt. My mother and I thought the wiser and safer course was for him to take the money and run rather than sell PIKs and put the company permanently in hock. That was the last serious conversation we ever had; thereafter, discussions were limited to the state of his health and the chances for the Giants to win another World Series.



In a gentler day, Charles Dodgson ("Lewis Carroll") wrote a conversational essay:

Eight or Nine Wise Words About Letter Writing

He anticipates all the modern conveniences of word processing, email, and describes a system for keeping a file copy, and generating a precis and index of correspondence of various type. He also has a foreshadowing of practice I usually attribute to Harry S Truman after HST incautiously sending his letter to critic Hume (my statement of the practice follows):

Write freely, to organize ones' thoughts, and to capture and spend the emotion, but then place the draft in the top desk drawer to age a bit before sending.

I see 78 'composed' but unsent email in my 'pending' folder. Most will never be seen by the recipient I initially started writing them for.

Back to the Dodgson quote:

Another Rule is, when you have written a letter that you feel may possibly irritate your friend, however necessary you may have felt it to so express yourself, put it aside till the next day.

Vincent Andres adds:

French diplomat Talleyrand was doing that with some of Napoleon's letters. In some cases, 2 or 3 days later, Napoleon asked, if it was not sent, to destroy the concerned letter…. and was quite happy it was still doable.



KeysJust caught a clip on the nightly news out Oakland, CA way that many people renting homes are finding that the property owners have not paid their mortgages and now they are told they have to move. One example is that the bank offers the renter $2,500 to move out at once and turn in his keys. Other banks send out letters telling the renter that the bank now owns the home and rent is now $10,000 per month! I question the legality of that action, but most renters cannot afford good legal counsel, get scared and move. The banks for the most part will not deal with the renter in any way.

Russ Herrold explains:

An old and well known landlord's trick: In a kinder and gentler day, one could usually strike a deal with a delinquent tenant that if he was out by sundown on a Saturday, you would not adversely report him to the local rental credit reporting agency, and there were a couple cases of beer with his name on them down at the 'beer dock.' Stupid banks in Calif had to drive the prices up for everyone else..

George Parkanyi muses:

This seems counter-productive. If I just inherited a property that had a cash-flow, I'd be grateful for the cash-flow. If I repossessed from the residents, maybe I'd look for a renter to create cash-flow while I figured out what to do with the property. Are there not property management companies that do this sort of thing for a living? Might someone not want to start a rental business by taking distressed properties off panicky banks' hands and finding suitable tenants — and then sell the properties off later at a handsome profit when the real-estate market finally turns?

Alan Millhone replies:

George comments about taking over distressed property and find a renter to stay here till the housing storm subsides. To do this one must have liquidity and then gird one's loins for the downturn in the housing sector. For how long? That is the magic question.

I noted last night along our main drag a new tenant moving into a former Allstate Insurance office that closed due to lack of business. The new occupant has hastily painted notices on the windows that a tattoo parlour is soon to be there! On our Kroger's lot is a new strip mall of five connected buildings. Three have been vacant since they were built over a year ago and the two that are there are 'cash till payday' lenders.

There are many empty rental units around Belpre and one fellow I know dropped his rent in order to fill one unit. He built them new a couple of years ago and the mortgage is killing him as he had one unit vacant for over seven months.

Another fellow I know torn down an older house on one of his properties and built a two story , two bath, two bedroom, double garage, duplex and grossly overbuilt the entire project, sparing no expense. He needs $800 plus utilities per side for rent. Now his construction loan had turned into a monthly payment with nothing coming in and he is hurting. When he was building I asked him what he thought he would have in the new duplex? He replied $100,000. I then replied for what part of the complex? He later told me he had overbuilt and had over $150,000 in the units.

My point? Rental property is good in good times and okay in bad times if you have little going out in a monthly payment, taxes, insurance to the bank. Now is a tremendous time to pick up cheap property, IF you can tough it out till the economy improves.



I am currently reading "Get Everything Done and Still Have Time to Play" by English life coach Mark Forster.

He has some interesting and original ideas. For example he prefers the use of must-do lists over to-do lists, and gives an exercise to develop the necessary will power.

He says time management is really attention management, and that we have a limited amount. It is impossible to give more than 50% of one's attention to more than one thing — though many try — and balance is to be achieved by delegation or reducing the number of objectives.

He provides a critique of popular methods using a fable of a princess and a luckless suitor who has inherited a business, who tries each system in turn and finally seeks solace in the pub.

Notably, and this is a good example of his original approach, he does not believe in prioritization (except in crises) and points out that there is some sense in choosing low priority tasks to action, so that they are dealt with long before they become a potential crisis.

In summary, he writes about quality of action and strength of resolve, and is not formulaic.

Russ Herrold adds:

A long time ago, when I was drowning in paper, I found Stephanie Winston's TRAF|S system on a couple of pages of her book "The Organized Executive" (Norton, 1983) and have been using it, and teaching it when consulting, ever since.  As it has been passed by with later writings by her (not so concise, not so focused), I see that Amazon has it for a penny used.

I do a five minute presentation (a bit of 'acting') with sight, sound, and humor to give and set the lesson on its use. I do this with others who are drowning in issues who seek my help, to give us a common vocabulary and problem solving rubric. The beauty of this little system is that one never touches an issue more than three times before resolving it. Nothing gets lost.



I've been casually participating in Yahoo!'s predictive markets — search engine buzz popularity — and gaming mechanical investment and trading strategies there for perhaps 18 months, but with renewed interest the last couple of months.

There are clear methods to 'cheat' the tool with classic pump and dump' and confederates, but I put that aside, as it has been useful to give me a venue to sharpen my 'perl' "counting" skills and to get more familiar with XML (Extensible Markup Language).

The market simulator uses an XML RPC (Remote Procedure Call) mechanism (full API details at the web site cited) whereby one uses computer retrievals through a virtual web view, to buy, sell, get holdings details, and to read market statistics. The results of trades, or market data are returned in the highly structured form of XML, which is well suited to further computer driven parsing.

The last few weeks, I've been pursuing a 'chase the best dividend yield' strategy, and moving up in the rankings; writing a 'momentum move follower' is on my docket. As part of this, I have written a full series of scripts to check for newly 'IPO'd symbols, to review the efficiency of my portfolio, and the potential top performing peers alternative available for switching into. The computer suggests the trades, but I can over-ride it.

And so, even though it was contrary to a profit maximizing approach, I added equal buys of the remaining primary contenders a few weeks ago — $100 each; the 'buzz' in search engine returns has moved them all a bit (1st column is the current dollar 'value' of each holding)

[herrold@couch xml]$ ./ | \
     ./filter-holdings.php -gt 2 | grep PRIMARY
58 DEMPRIMARY CLINTON 173 0.34 295
128 DEMPRIMARY OBAMA 149 0.86 117
173 REPPRIMARY MCCAIN 231 0.75 134
[herrold@couch xml]$

I should have bought McCain hard when Romney left the race. There is no way to short. Ah well.

But each week, my tools have rejected the sentimentalism I used (in undertaking small 'positions' for a bit of blood in the primary gamesmanship) as none was in the cohort of the 'best yielding'. One of my script watches for 'laggard' holdings to 'cull' from the portfolio; each week, I have ignored its counsel on the PRIMARY markets, where it wanted me to sell all.

But this week something different happened:

[herrold@couch xml]$ ./ >
[herrold@couch xml]$./expected_div.php > yield
[herrold@couch xml]$ cat yield | sort -n | tail -20 > top_twenty
[herrold@couch xml]$ ./ > all_holdings
[herrold@couch xml]$ ./spot_laggards.php
[herrold@couch xml]$

** I was not scolded about holding DEMPRIMARY OBAMA **

Very curious, as I have been since I undertook it. Turns out OBAMA is in the top twenty 'yielding' investment opportunities.

That made me look at where the 'buzz' was, as reflected in 'market cap' (col 1).

[herrold@couch xml]$ ./ | awk {'print $3" "$1" "$2'} | \
     sort -n | grep PRIMARY | tail -5
[herrold@couch xml]$

Assuming a left to right continuum (HUCKABEE is in the grid, PAUL seems orthogonal in many ways; I list then as the counts appeared), there is an amazing buzz on the left (not overly surprising; for the last week, the R side is McCain's to lose), and an evenly divided 'electorate'

Amt        Cume
1749814        1749814        HUCKABEE
2493690        4243504        PAUL
14557726    18801230    MCCAIN
<<- median     20227053     ->>
2891712        21692942    CLINTON
18761165    40454107    OBAMA

Offered for what it is worth — I have already voted absentee, so it won't affect my 'real world' actions.



SignsPolice and government officials seem to feel there is a legal distinction between rights and privileges. For example, driving is frequently referred to as "a privilege, not a right."

Despite having attended Harvard Law School (maybe I was asleep during the privilege discussion), I am unable to follow this distinction for such a basic means by which one is able to get around in modern society.

Especially for this liberty-oriented site, I would think driving is clearly a basic human right, like free speech or walking or s-x. Subject to reasonable regulation perhaps like having to take a driving test, or not having been convicted of drunk driving. But it seems to me everyone who complies with this reasonable regulation has an absolute right to drive.

While I would be wary of questioning such a favorite phrase when next stopped ("Officer, I think you are playing with words: Driving is obviously a right, not just a privilege"), is there some distinction here that means something or is it just officious silliness?

Russ Herrold replies:

tFrom ancient memories, formerly rights/privileges had differing meaning, but there is a line of cases post-Reconstruction, keying off the 14th Amendment's application of federal Constitutional limits upon the states ('Privileges and Immunities') at the federal Supreme Court. That line whittled away to nothingness the former [Founders'] distinctions of States Rights vs Federalism, and with it, the judicial need for a way to distinguish and dis-agregate rights from privileges. 

J.T. Holley writes:

I was taught by my father (a truck driver) that it was a privilege to drive on Interstates! They were built by the "Gummit" and maintained by the States. Now where I'm from anything dirt or gravel is your own and is a right.Don't know if anyone has every written or spoken of roads but to be observant you can see the straighter the road the more a privilege, the curvier the more a right! I guess out West it's a little different? If you go through rural Virginia you see wavy roads that meander. Most visitors ask "why is it so curvy?" The reason is that they go along property lines. Those lines can't be violated, and if so then it is a privilege to do so, but if you remain on your own property then it's a right to do so!



I'm looking for a book or paper that will help me think about trading and building trading systems from a fresh perspective. I am not looking for a trading book. I am looking for something that tackles a big question in a big way.

Three examples:

  1. In his notebooks, Da Vinci tackles learning to draw by thinking about and exploring straight lines (linear solution).
  2. In The Timeless Art of Building, the author integrates art, flow and aesthetics into architecture (gestalt solution).
  3. In Notes on Programming, Alexander Stepanov talks about knowing when a program/function/algorithm is correct (correct solution).

I have found that the way to get better at what I do is to choose a path, incrementally improve until the delta improvements become too small too matter (or be interesting), and then find a new path and start the process all over again. The book I'm looking for will help me find a new path.

Russ Herrold writes: 

In scanning this piece, it refers to TAOCP by Knuth,

1. Knuth, Donald E. "The Art of Computer Programming," Volumes 1-3 Boxed Set, 1998 Addison-Wesley Professional (1998), Edition: 2, Hardcover, which I too have used for years (decades) as my polestar (I have a set for the office and a set for home); but times change, and my coding partner has convinced me that I also needed to look more broadly, and see more modern approaches. As he spent over a decade attaining his Computer Science PhD, and teaching along the way, I tend to listen to him in such matters. Also the code inside are an expression of "the software engineering techniques [which he, Bill Pippin] used to control program complexity [as Stepanov also mentions early on]. Those techniques extend the implementation work done as part of [his] doctoral dissertation, "Optimizing Threads of Computation in Constraint Logic Programs," in particular by demonstrating a non-trivial instance of the single-tree pattern, whereby all singleton types are parameterized and then stratified by their binding pattern.

If you think: "wow, that sounds dense", and you read C++, take a moment and read the headers and the code. Bill recently wrote a roadmap to reading it.

The 'single tree' and its (relentless) application to the problem and space we are addressing (exploring the conflicts between the theories trusted by fundamentals investors, and the practical results observed by technical traders in reality [a favorite topic of this list] — Bill and I each started as Nixon Era Economics wonks in Washington DC, in the era of the now forgotten religion of Chicago School monetarism) is a really _big_ and non-trivial system. But perhaps not a formal work per se. Yet…

Each of the following either looks at a 'big question' area, or apply a method to solve a non-trivial (big) question. Reference to trading and investing are tangential.

2. Skiena, Steve S. "The Algorithm Design Manual" 1998,and 3. Skiena, Steven "Calculated Bets" 2001. The first is a more contemporary yet sound algorithms (tying to the mention of provably correct" solutions) work (with a fine bibliography), and the latter just plain thoughtful and fun.

4. Cormen, Thomas H "Introduction to Algorithms, Second Edition" 2001. This is the modern leading work on algorithms, but appallingly dense; I recommended the Skiena works first, as I find them more approachable.

5. Hofstadter, Douglas R. "Godel, Escher, Bach: An Eternal Golden Braid." It is one of those books one should take a month to read, and which has delighted me with new insights for twenty-five years each time I re-read it (another delightful bibliography).

6. Aronson, David R "Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals" 2006. Not as to trading, but it applies scientific method in thinking about our trading beliefs.

7. Mehrling, Perry "Fischer Black and the Revolutionary Idea of Finance" and 8. Black, Fischer "Exploring General Equilibrium" 1995. This delightful pair being what I feel will be the reference biography, and the last work, as to unanswered questions, of this major 'counter' taken from us too soon.

This personal library inventorying tool has finally solved the desire I had for a tool to feed an ISBN, letting it gather and retain the rest. Also recommended.

Sam Humbert adds:

Perhaps too obvious to mention are the Tufte books. I got a lot out of his first book, The Visual Display of Quantitative Information, and sequentially less from the later volumes (much as I found food for thought in the Expert's first book Dynamic Hedging, but less in his later writings).



A few weeks back, Spec Dean posted a link to some nice BBQ reviews. That got me thinking about travel plans, and then it made me want to make myself a little map of BBQ festivals and competitions and what not. Then that kind of grew as I did more research, and it expanded beyond BBQ at times, and it's still a work in progress, but it may provide some use and inspiration to others wanting to hit the BBQ trail in 2007.

Alan Millhone comments:

In my state of Ohio, I don't know of any barbecue gatherings. Let me know if Ohio is added to your excellent map. I noticed recently along route 33 from my home to Columbus a new barbecue restaurant at an exit for Logan, Ohio. It has been built with a green metal roof. I also noticed a large stack of wood ricked up at the back of the restaurant. My daughter for some years lived in Charlotte, N.C. and I visited "Smokey Bones" and "Sonny's Pit Barbecue" on a couple of occasions. Your map is excellent and I enjoyed looking at it. I saw a segment on TV a few days ago interviewing the creator of "KC Masterpiece" barbecue sauce (# 1 in America) and he now has a restaurant to serve up ribs, etc. coated with his secret recipe sauce — only in America.

Russ Herrold adds:

In my state of Ohio, I don't know of any barbecue gatherings.

There is the annual Jazz and Ribfest at Columbus along the Scioto River.

Finalists over the years based in Columbus include: City BBQ (started at a location in the 2000 block of W. Henderson Rd.) is my personal favorite and it's in an easy driving distance. Others include: the Damon's chain (started here by some folks who also ran a local financial recovery collections firm); the locally started Hoggy's chain (their third location at the corner of Fifth and Grandview Ave. is about 1/2 mile from my office); and the Knotty Pine (one location on West Third, near Ashland), which was a long time favorite, but as noted in a review:

The Knotty Pine originally opened in 1935, and was taken over by new ownership five years ago.

The change was not for the better as they lost their fire for barbecue.

One of my children lives in Memphis (ask for Eric at Bar-B-Q Shop), but he is married to a St. Louisian, and there are regular wet vs. dry rub debates.

The location down on Rt. 33 near Logan is just one of many in southeastern Ohio — go down Fairfield Co. Rd. 86, and a couple others are waiting to be sampled.

Charles Pennington offers:

I lived in Columbus for 12 years, so I wanted to chime in on a few barbecue topics covered by Russ Herold.

City BBQ on Henderson Road is a wonderful place. I stalked the restaurant before it opened, rejoicing that good barbecue might be arriving. I thought I was their first customer, but the owner, Rick Malir, denies it. I went through long streaks of eating there almost every day, either for lunch or dinner. I like the chicken, but really the brisket is probably what they do most distinctly. Credit me for their offering of green beans and Brunswick stew. I lobbied for these intensely. They also have good macaroni and cheese.

Damon's is a chain, and I don't think it's as good as the best non-chains, but still it's very good, and much better than the option of eating something that's not barbecue.

Hoggy's is also good, but not as much to my taste as City or even Damon's. It places more of an emphasis on a mustard-based sauce that isn't to my liking. Often it's a little too loud in there too. The barbecue restaurant should be more like a sanctuary for contemplation in my opinion.

Some recommended Columbus non-barbecue restaurants, if you must: La Chateleine on Lane Avenue (ask to meet Gigi as part of the experience, and listen to the sounds of Salvatore Adamo, Gigi's favorite, in the background), Katzinger's deli (I prefer it over New York delis.), Schmidt's Sausage Haus, the Gyro Shoppe.

A note on New York barbecue: Really the best in New York is Dinosaur Barbecue, which is way west of Harlem (646 W. 131st St. New York, NY 10027). It has very, very good food and surprisingly low prices for Manhattan. Before I got reading glasses, I once misread the check as $83, and started to fill in a tip and sign the Visa receipt, until my dining companion alerted me that the bill was actually $33. $83 seemed very plausible for the amount of food we had eaten and also taking into consideration the Manhattan location. However, this place is not really a sanctuary — it's a bit boisterous. It's a spinoff of the original location at Syracuse University, a loud campus hangout.

Scott Brooks adds:

On the theme of BBQ, I would like to throw into the mix a small midwestern BBQ chain of restaurants, Bandana's Bar-B-Q. I know we usually don't go for the chain stores, but I believe this one is unique

It started locally in St. Louis and became so popular that they began to expand. They are now in several cities throughout Missouri and Illinois.

They serve BBQ as part of a lunch or dinner platter and you can get either at any time of the day. I always get the lunch pork platter. It is more than adequate to fill you up … I usually can't eat it all. The lunch platter comes with a lot of BBQ, two side dishes, and two big pieces of garlic bread. With the dinner plates, you get a third side dish.

The food is consistently good at all stores. They smoke the meat and let you add sauces to your taste (which is what I prefer). All their sauces are good, however, I prefer to mix a few sauces together as follows:

About eight parts "Sweet and Smokey" sauce with one part each of "Spicy" sauce and "Hot" sauce, ending up with a tasty sweet mixture that has just a little bite to it.

The original sauce that they are famous for is mustard based and has a unique flavor … but I'm not fond of that one (although many people are).

I like to go eat at the Bandana's in Columbia MO, where they know my name, or the one in Arnold MO (a suburb of St. Louis) right at highways 55 and 141 where my best friend's wife is a server. I always sit in her section … she is a great server. If there were a spec list for servers, she would be the Chairman … she's that good!

If you get a chance to eat at the Bandana's at 55 and 141 in St. Louis, ask to sit in Sharon C.'s section. Tell her Scott sent you!



Reading Sartre's La Nausee, I came across a wonderful "counting" sentence:

"Three o'clock is always too late or too early for anything you want to do." (obviously untested and his opinion)

Is there such a dead time or point in the trading day to which it's more advantageous not to do anything? In the six and a half hours of the NYSE, does there exist a slice of the pie that is such an apex?

Looking at things, it's nine thirty to lunch, then lunch to three o'clock (bond market closing), and three o'clock till closing. Any hypothesis stick out at ya'll? How do you divide the day? What statistical tools should be taken into consideration?

Furthermore, can you break up the week, month, or quarter to find a dead spot that's too late or too early for entry?

Food for thought.

Russ Herrold comments:

Reading Sartre's La Nausee, I came across a wonderful "counting" sentence:

"Three o'clock is always too late or too early for anything you want to do." (obviously untested and his opinion)

Is there such a dead time or point in the trading day to which it's more advantageous not to do anything? In the six and a half hours of the NYSE, does there exist a slice of the pie that is such an apex?

I think of it differently — there are better times for some strategies, as a trader, than others within the pulse of a day.

Any hypothesis stick out at ya'll? How do you divide the day? What statistical tools should be taken into consideration?

Let's go to the track, and lean on a rail for a few days. The horse to watch: An ECBOT future, and only on non-major scheduled news days. The methodology: Counting track conditions with a tally sheet for a month or two. The stopwatch: five minute intervals (I have my computer on a weak tone sound every minute and increasingly stronger ones at the five's and quarter hours to remind me to look up and rate the market when I do this). Observations are in New York time.

Taking the notation of conditions, and doing reduction of the patterns after several days, I find this:

8:30-9:25 'pre-open' light volume, often scalpable, but also with no material liquidity if one ends up on the wrong side of an exogenous event (most of the news issues at 8:30, and so a gapping move play is often available)

9:25-9:30 'at the post' untradeable

9:30-9:50ish 'from the gate' choppy and not overly tradeable until all the underlyings in NY are both open and have finished running the market and are easily reachable overnight resting LMT and STP orders

9:50-11:50 'around the first stretch' trending and mean reversion plays will often emerge (about 1/3 of the time), or if not, range bound movements will grind up a player seeking to trade — a 'three strikes, you're out' approach works well here

11:50-noon, noon-13:00, 13:00-13:30 'on the back stretch,' see 'Feeding Time for Giants' discussed on this list last June (9-Jun-2006: A Cyclopean Workshop, also read more here)

Eminently playable — The chair's comments about mid-day loss of liquidity, and my observations at the time have covered this time frame already (watch the volume)

13:30-15:00 'coming into the far turn,' similar to 9:50-11:50

15:00-15:45 'down to the wire' as people realize the day is drawing to an end, and wind up intra-day or assume overnight positions before the 'rush hour' about to occur

15:45-16:00 'at the finish,' very hard to trade well as liquidity is bleeding off by the second (watch the volume)

16:00-16:15 'back at the paddock,' earnings of an index component will often move the futures, and laggards with resting LMT or STP can be picked off (watch the order book for such plays)

Similar patterns with different time bands exist on the FTSE100 (Z.FUT.LIFFE), the DAX (DAX.FUT.DTB), and the Aussie SPI (SPI.FUT.SNFE), for which I maintain tallies.

Furthermore, can you break up the week, month, or quarter to find a dead spot that's too late or too early for entry?
Well known dead spots are standing aside from using such time based expectation plays in front of major scheduled news; other trading approaches exist in their stead — setting up LMT's on either side of historical gap ranges to enter a post-Fed meeting announcement and to trail up an exit waiting for the peak of irrational exuberance worked well in the last year, but that play has been dead now for a while.



Interactive Brokers certainly leads in a number of areas. In contrast to recent articles about hacking online brokers, IB tells me they have never been hacked successfully.

Russ Herrold replies:

The casual advice about problems-solving which the IB frontline representatives offer is not compatible with CISP grade practice, in my experience. Informal assertions of “never hacked” are perhaps comforting to a layman, but should not offer real piece of mind, nor assurance to the receiver. “An absence of evidence is not evidence of an absence” of issues. Define a published process, and sell SLAs, and I will listen more carefully. Computer and network security is not an attainable Platonic absolute; it is the process of risk identification and reduction. I taught a course on networked host security in a limited context of “Hardening Linux” last year, and left the course materials online.


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