the broadmoor in Colorado SpringsOne would hasten to recommend the Broadmoor hotel in Colorado Springs where my daughter Artie just graduated Phi B. Kappa from Colorado College as one of the best hotels I've been to along with a few European hotels with similar geological grandeur. The view of Pike's Peak and the lakes and the botanical gardens and 3400 acres on property and the infinity swimming pool, and the fine dining along with its illustrious history with the Penroses and the Palmers with their combination of dashing entrepreneurialism (he sold out to Kennecott Copper at 25 at the high after a 25 bagger, and then used the money to make the hotel the best in world at time with many Maxfield Parrishes and great architectural elements. Where are the Penroses of today one may ask, and how have they lost their incentive to create.

Not too good on the he barbeque there but the Colorado lamb was very good and the three golf courses of Michael Nichols, Trent Jones, and Palmer were about as heavenly as a golfer could wish with a big fairway mountain course. 

Dean Davis comments:

The golf courses are nice too, but beware the thunderstorm (w/ lightening) coming over the top of Cheyenne Mountain (home of CMOC). The siren system can give one quite a start during a back swing. I remember that we were there the night when Princess Diana died.

Nearby, an interesting collection of Golden Trout (not listed because I think they are protected) for viewing at the old school tourist trap Seven Falls.

Pitt T. Maner writes:

It is a wonderful place to learn historical geology and about Florissant Fossil Beds [14 page PDF]

For me, a trip to Cripple Creek for ice cream after a week of UF geological field work was a highlight. Not too far away is Skyline Drive which is on a feature known as a "hogback"–many car ads have been filmed using it as backdrop. One of our class assignments was to measure this section with a Brunton compass (for strikes and dips) and measuring rods (to determine true formation thickness). Once over the top of the hogback you had a view of the penitentiary from the hard white caprock of Dakota sandstone.

Beautiful area …

Phil McDonnell adds:

The Broadmoor is a classic resort. Their Sunday brunch is one of the best to be found.

I would second Mr. Maner's suggestions having seen all but the hog back. Cripple Creek is especially interesting because it was where Penrose and Tutt had their mine. I highly recommend the mine shaft tour and the melodrama at the live theater in town.

The Air Force Academy is just north of there. Pike's Peak is one of the few mountains where one can actually drive to the summit. When I went to the summit, it was snowing in July. Nearby Cheyenne Mountain has NORAD or the Stargate in the basement.

Ralph Vince writes:

I'll second (or triple, or quadripple) the Broadmoor and what Phil says abut the Sunday brunch. It's like the Grand Canyon, or Yosemite. You haven't really experienced America till you've tasted it. 



 For a great Christmas movie, try The Lion in Winter. Probably best after the extended family has gone home. Katherine Hepburn and Peter O'Toole — all you might need. But the rest of the cast is so good, too. Just the exuberance and the machinations. The Great Man theory of history, packed tight in an old castle. If it's been a long time since you've seen it, it's worth watching again.

Dean Davis agrees:

I second this. The supporting cast includes Tim Dalton and Anthony Hopkins, too. All in all a fine film with some mature themes.



 Just got in from a basketball game at Ohio University vs. Lamar. Noticed the basketball coaches wear suit and tie. The baseball managers wear the team uniform. The majority of football coaches dress casually (except Tom Landry). I wondered why the difference in dress among these three sports?

Victor Niederhoffer adds:

And what is significance of the terrible millhonian fact that 99% of the people in any mid-level restaurant these days are wearing black? Is it the consequence of a lagging response to a recession — a harbinger of a deep pessimism, of a boat about to capsize, a conventicle of worship for the higher blackness in our midst, a signal that stocks are still not invested with much of a risk premium, or whatever cultural straws in the wind are you seeing of this subdued nature? And what does it mean?

Dan Grossman replies:

1. On the coaches, it's much colder outside on the football field and easier to dress warmly in casual clothes. A suit and overcoat would look ridiculous.

2. In the restaurants, dressing all in black signals the maitre'd and staff you are someone not to be trifled with. You are more likely to get a table without a reservation, or a faster/better table with one. Black says you are from town, perhaps even an artist, writer or in the fashion industry, not from the sticks or the burbs.

Dean Davis writes:

Supposedly black is a slimming color. Perhaps those that frequent comfort food restaurants like those found at the mid-price level have something to hide. I have heard that the quality of diets slide in poor economic times.

David Wren-Hardin writes:

Baseball has a longer, and more recent, history of player-managers. Pete Rose was, I think, the last one. Football seems to reflect the average dress of the time. Back in the fifties, all men wore suits. It may look formal to us now, but the suits were probably pretty standard, not the same as Pat Riley's Armani suits, for example.

As our culture has become more casual, so has the football coaches' dress, especially since they are outside. I think they may even be prohibitied from wearing suits. I recall a coach last year (Jack Del Rio?) who wanted to wear a suit to honor his father, and either had to get a waiver, or paid fines.

You can see similar dress cultures in trading. Traders associated with banks tend to dress more formally than traders in hedge funds. In my current firm, wearing jeans and t-shirts is an expression of pride. If I wear khakis, everyone wonders where I'm going after work. At my last firm, a European owned group, we never wore jeans, and if the bosses from Amsterdam were in town, we wore suits.

Essentially, it seems to have settled out where if you deal with customers, you wear a suit, and if you are a trader, you dress down. The more powerful/profitable you are (or think you are) the more you dress down.

To make it more personal, does how we dress affect how we trade? If I'm more formal, am I less prone to risk-taking? If I'm dressing down, am I more relaxed and making better decisions?

Steve Ellison shares:

That has been the case at MIT for years. From Fred Hapgood's 1993 book Up the Infinite Corridor: MIT and the Technical Imagination:

In his time Ernesto Blanco has designed robot arms, a lens for cataract operations, steerable catheters (that can navigate inside arterial branches), a microstapler for eye surgery, a stair-climbing wheelchair, a forklift truck, film-processing equipment, high-voltage transmission line connectors, a helium pump, and a raft of devices for the textile industry — from pile stitchers to faulty needle sensors. So he has earned the right, which he exercises, to dress his barrel chest and ramrod carriage in rich blue blazers and snowy shirt linens, silk ties, Italian leathers, and flawlessly crease flannels. In this he faces against the winds of fashion at MIT, where an Armani suit suggests not success or achievement but a serious problem with self-esteem, a lack of confidence that the product, the work, will be adequate to win the desired rewards. The psychology expresses itself as a fashion paradox: at MIT you dress up, you dress for success, by dressing down. So in this sense Blanco is like a banker who wears jeans to work; he is good enough to wear what he likes, and what he likes is Fifth Avenue.

Phil McDonnell comments:

The black-is-slimming meme has been around for several years. The older Seattle Grunge look may have spawned an idea that casual is good and, perhaps more importantly, colors that blend in are good. Some time ago I ate at one of the nice Google restaurants and did a quick Galtonesque count of the number wearing black. It was nearly 100%. I was the exception. Many of these young people are from India, China, Russia and elsewhere so it is not just California. In some circles they say that gray is the 'new black'.

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



I am a reasonably knowledgeable baseball fan (read a lot of Bill James) but have always wondered about the following very basic question:

Batter hits a line drive, but he is out because he hit right at a defensive player. Is that predominantly luck, a few feet left or right and it would have been a hit? Or has the defense correctly positioned its player and the pitcher correctly pitched to the batter to make it likely he would hit where the player is? I realize it's not 100% either way. But is it, say, 75% luck? Or 75% that the defense has correctly positioned itself and the pitcher correctly pitched to make it come out that way?

Phil McDonnell replies:

P McDThe game is played both ways. The batters try to aim for holes in the defense. The usual infield holes are between 1st and second, up the middle and between the 3rd baseman and shortstop. The outfield holes are the left center gap and right center gap. It is rather easy to hit a ball exactly where you want in a soft toss to yourself. The real problem is when the batter is facing a 90 mile an hour pitcher with maybe a little break on the ball. The key is to time the swing so that the bat hits at exactly the right angle. Sometimes batters just miss.

It is sometimes said that football is a game of feet and inches. If that is true then baseball is a game of millimeters. For example a ball hit squarely on the widest part of the bat will generally result in a line drive. But if the ball hits a little high then it may result in a fly ball or even a simple pop out. A little low and the batter will ground out.

Pitchers know that batters rely on timing the swing in order to hit the ball where they would like it. The key pitching counter strategy is to vary the speed of pitches. There is no pitcher in the major leagues who does not have a fast ball and at least one other off speed pitch. Changing speeds is the key to good pitching.

Pitch placement is also essential to good pitching. Generally most pitchers will throw fast inside and soft away. This forces the batter to read the speed earlier than otherwise if he is trying to place the ball by timing his bat angle.

Sometimes the fielders get into the act as well. The second baseman and shortstop will often read the catcher's signals and signal each other as to who will cover second base and who backs up if there is a runner on 1st. In this situation the batter will try to hit 'behind the runner' aiming for the hole between 1st and second. The double play 2nd to short to 1st is slightly more difficult than the short to 2nd to 1st. The reason is that shorts and 2nd basemen are always right handed. The guy at second has to turn his body in order to make the throw back to second with the shortstop covering.

The defense knows the batter will try to hit behind the runner and counters. The pitcher will tend to pitch fastballs inside to make it hard for the batter. The shortstop will probably play closer to 2nd to take the throw. This frees up the 2nd baseman to field a wider range.

There are statistical services that teams buy which analyze where a player is most likely to hit the ball. Usually it is shown as a scatter chart on a baseball diamond. Ted Williams was famous as a player who would predominantly hit to the right side of the field. Consequently several teams came up with the Williams shift, where they left only one outfielder and one infielder on the left side of the diamond. Initially the shift worked and Ted struggled a bit. But he finally demonstrated the fatal flaw in that defense by successfully bunting toward 3rd base which had a gaping hole.

In any one at-bat using these strategies only gives one a small edge, maybe 10%. The average player bats maybe 500 times in a season and there are nine players, so about 4500 chances in a season. On defense there are about the same number of chances for a total of maybe 9,000. But as in trading and gambling, over time a small edge adds up to a winning strategy.

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

Dean Davis adds:

On the two youth teams I coach we move our players into spaces where they have a greater chance to make a play depending on the pitch I call. For example I'll signal the right fielder to move in and to his left when I am pitching a right hander at the belt, but off the plate (away). That results in many outs from weakly hit fly balls to right field that would otherwise be singles that drop in. Sometimes we luck into a grounder hit through the hole that the tight right fielder can throw out at 1st. I build a defensive game plan around the tempting pitch that is hard to hit well.

Ken Drees writes:

In early youth leagues we were coached to check out the third baseman's position. If a right handed batter simply turned himself somewhat towards third base and opened his stance towards left, he could aim a hit down the line or in the hole depending on the 3rd baseman's position. This also gave the batter a better chance of making it to first since it was the 3rd baseman or left fielder against runner. The 3rd baseman had to field and make the long throw over to first and beat the runner. This was versus hitting the ball up the middle, where pitcher, second baseman or short stop seemed to be covering and the throws to first were more manageable.

This technique is erased as you go up the ladder, but it does help early players get some action if they seem to always be hitting straight into the defense. It also helps to eliminate hitting into easily turned double plays.

Rodger Bastien responds:

It's my view that it's mostly fortunate for the pitcher that the batter hit it directly to the fielder, with an assist to the defensive alignment, in some cases. In most instances, a batter is trying to simply make solid contact when facing a pitcher with outstanding stuff. When facing a pitcher who is struggling or faced with an at-bat that dictates situational hitting (i.e. man on 2nd no outs, need to hit to the right side to advance the runner) the batter is more likely to attempt to hit the ball somewhere specific. The defensive alignment plays a role due to the positioning of the fielders that is based on the advance scouting that each teams does which determines each hitter's tendencies throughout the season. Like so many things, this part of the game is more of an art than a science.

Laslo Minks remarks:

My belief is that it’s pure luck. You want to hit line drives, usually up the middle. And a good hitter goes with the pitch, you pull an inside pitch (if you are right handed) to left-field and an outside pitch to right. You want to hit it just over the infielders heads, but it is ridiculous to think that you are, for instance, trying to hit around the shortstop. The point of trying to hit line drives is that the horizontal velocity is the fastest and therefore most difficult to field. You hit line drives regularly and you will have a good batting average. You play the odds. If you hit it right to the shortstop or second or third baseman, that is just bad luck. Anyone who says differently is overthinking it.



J RobinsonWhat can we learn from baseball that is applicable to markets?

In looking at how to hit for Aubrey, I focus on posing and gaining potential energy by moving the back foot back or lifting the right foot up before hitting the ball. Also holding the head directly at pitcher, and the trigger point. Also following through the ball with the bat following it on a line before snapping up. I don't know anything about baseball but all this seems applicable.

Please augment. We have quite a few experts on baseball who read this site and the All-American also.

James Lackey replies:

They don't teach you to lift your foot up anymore when you bat. You use a wide stance, and you pivot your back foot towards the pitcher and snap your hips. Some teach you to pivot your back foot on the ball of the foot, with you front foot on its heel while swinging, and you end the swing with your feet pointing to the pitcher. My son's 11-12 year old hitting coach had a hard time retraining my kid. He cut a 1" piece of PVC pipe the length of his shoulders made him stand over it and do a zillion swings to get his front foot down before he could snap his hips. We were all taught to keep your elbow up, use a narrow stance and step into the pitcher.

J.P Highland comments:

Being able to choose the pitchers we want to face gives us a great advantage over baseball hitters. The Nymex's pitching rotation is my favorite. They like to intimidate batters with lightning fastballs but their stuff suits my swing, as opposed to the tough off-speed pitches ES has mastered that have victimized me so often.

James Lackey adds:

My kid was born with a cannon. I knew it at age four when he threw me a hardball. By 10 he could throw from the fence to the catcher. He was a good pitcher at 12, but his coach would always yell at him over the top when he lost control.

Now what I do not quite get is that his football coach yells at him at practice to quit throwing a baseball. It's how quick you release to give the defenders a chance to attack. My son explained to me how it works, but I still do not get the mechanics.

The only good thing to report is I have never been his football or baseball coach only dirt bikes. So naturally he loves team sports.

Tim Melvin writes:

I'm not a much of a pitcher as I have a noodle for an arm and always have, but in the excellent baseball book featuring John Smoltz and Mike Mussina we learn that speed, location and deception are the keys to successful pitching over time. I am not just talking about power speed either. The Nolan Ryans are the one off Soros and Buffets of the baseball world. The ability to vary speed and move the ball around are the key to long term success.

I shall leave you all to draw you own market conclusions as there are many that leap to my mind.

Scott Brooks comments:

Good pitching isn't about overpowering batters and striking them out, it's about throwing the ball so that the batters make bad contact, and then letting your fielders do their job.

Stefan Jovanovich writes:

 Albert Pujols does both old and new school. He has his right foot turned 45 degrees towards the pitcher, the right knee bent slightly, the hands held back and high (at the top of the strike zone), the right shoulder held above the left, with the bat vertical. When he unloads, the left foot and hips do a quarter turn, the right shoulder drops slightly as he throws the bat at the ball, and the bat stays level to the ground for the full travel across the plate. In 4 days against the Giants he made one bad swing: when Matt Cain threw him a 1-2 slider down and away. He absolutely ate Barry Zito alive even though Zito now has game back and had no trouble at all with the rest of the Cardinal lineup. Theoretically, you could throw him changeups and curves down and away; but, when Lincecum tried it, by the 2nd at-bat, Pujols was hitting doubles down the line in right. It was like watching the Yankees try to pitch Williams inside (with his long arms and height, he should have been vulnerable) and watching him take the ball early and park it in Ruth's pavilion. Yo-Yo Ma with a pine bow.

Pitt T. Maner suggests:

This article which I quote from was interesting in light of an optical illusion I had seen a few days earlier on the internet. Many years ago I had read stories of knuckleballers who had pitches where even they themselves were not sure of the ball's pathway to the catcher's (often oversized) mitt.  This story has a bit of that mysterious, "unhittable" pitch reminiscent of Plimpton's April Fool's hoax:

"DiFelice grips the ball across the seams, like a four-seam fastball, and tilts it so his middle finger rests along the red stitching. He squeezes the ball with his middle finger, raises his index finger and throws it as he would a fastball. The result is confounding: The ball spins like a fastball and moves like a slider, and the optical illusion it plays on hitters allows him to get away with throwing an 82-mph pitch the batter knows is coming."

And here is the optical illusion (best illusion of the year in fact).

How would you learn to hit such things? Would you need to learn to selectively ignore information coming from your eyes?

Phil McDonnell writes:

Lifting the front foot high does not inherently add energy to the swing. If you think about it lifting a foot straight up adds potential energy only in an up and down direction. The point of a baseball swing is to drive the ball in the horizontal direction. Any energy from the foot lift is orthogonal to the intended swing and does not add any power.

The real reason for the foot lift is that it enforces a good weight shift. When the foot is lifted all of your weight is on the back foot by necessity. This allows the weight to start on the back foot and shift to the front foot. The weight shift adds power to the swing by starting the twisting motion of the body and the hips. Fundamentally the power is generated by the centrifugal motion of the bat. The center of that motion is the twisting of the hips and body.

There is another subtle but important aspect to batting. That is the need to have a good follow through. The key is the hands. If you do an imaginary swing with your hands you will see that when you fully extend your left hand in a follow through that your right hand cannot stretch out nearly as far as the left (for righties).

This compels two types of follow through motions. The first kind is simply to break the hands. The follow through continues with only the left hand still holding the bat as the right hand is released. Reverse for lefties.

The other type of follow through involves a roll of the wrist. Basically the right wrist rolls over the left as the bat passes to the left of the body. The object of either finish is to keep the bat moving even after it is in contact with the ball.

The one follow through technique that is bad is to keep both hands on the bat without a roll. If you try it you will see that you get a hitch in your swing just about when the bat handle passes your body.

One little known, but good exercise is to simply swing a light bat 50-100 times with your left hand only. The left hand is an important hand for guiding the bat. The left tricep is the important muscle for this motion. This exercise is best started pre-season because it often leaves the tricep sore after the first few times.

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

Jeff Watson adds:

 With much ado regarding the merits of different pitching styles, and the physics of different type of curves, knuckelballs, fastballs, and sliders, I'm surprised that nobody has brought up the pitches of Gaylord Perry and Joe Niekro. Perry allegedly did wonders with a spitball, and when the heat came to tough for him to bear, he replaced spit with Vaseline. Perry was constantly hounded by umpires his whole career, and had to develop different methods for hiding his illegal substances after the 1968 ruling regarding wiping the mouth before a pitch. The spitball was one of those pitchers that made the ball seemingly disobey the laws of physics, and was hard to hit. Perry and pitchers of his ilk had deceptive moves down to a science, and whether they threw a spitball or not, the batter was never sure. The market has shown similar characteristics in the past and present, where following the rules is winked at. Certain reports are released early by officials to their friends, and nobody really says anything. Naked short selling was allowed until it was apparent that there would be a possibility of the whole financial sector going to zero. The market players just had too much of an advantage over the public and the rules had to change, much like they did in 1968, and much like little things like the height of the hill being modified from time to time. Even after the rules are changed, in baseball and the markets, people still try to cheat. Niekro was caught red-handed by the umpire after he was searched for an emery board, and it flew out of his hand onto the field. That was one of the classic moments of baseball.

Stefan Jovanovich responds:

 Niekro used a piece of emery board to scuff the ball so he could get a better break on his curve. That was what he was throwing away when he was caught. Perry used perspiration from the back of his neck to load the ball so his sinker would have more drop. (He would take off his cap and run his pitching hand over the back of his head and down to adjust the top of his jersey). Baseball, being like the SEC, had and still has elaborate rules that are utterly useless in terms of actual cheating on the mound. For example, the pitcher cannot go to his mouth while standing on the mound (automatic ball to the batter; balk if there are men on base); but he can still walk off the mound and lick his fingers all he wants. However, since saliva doesn't work nearly as well as sweat (which is much heavier because of the salts and dries more slowly), the anti-spit rule itself is pointless. The spit ball was outlawed was the one where the spit the pitchers used was loaded with chewing tobacco.

The idea that pitchers used vaseline is a media urban legend. There is no question that the stuff could be useful; but you would need a towel boy with soap and a basin of water that you could go to between pitches so you could clean off your hands. However, since the batters - who are always looking for an explanation for their inevitable failures - never figured this out (not being particularly concerned about hygiene), Perry and Early Winn and others always made a great pretense of using it. Perry still does; but you can hardly fail to notice the twinkle in his eye whenever he gives his seemingly evasive answer to the latest interviewer.

In my next life I want to hit against the pitchers on Dr. Phil's team. Everything he wrote is wrong. The knuckleball wobbles because it has no gyroscopic balance. It has no gyroscopic balance because it has no spin. The pitch is thrown with the ball held by the nails so that when it leaves the hand there is no friction with the skin. The trick is in holding the ball with the nail of the thumb; that is the part of the grip that defeats most people. (This is why nuckleball pitchers are fussier than manicurists about their nails; they want them trimmed so that they perfectly fit the curve of the ball.) The pitch is called a knuckle ball because when you have the proper grip the knuckles all stick out on the pitcher's hand. That also makes it instantly noticeable so there is no deception whatsoever about what the pitcher is throwing. If the ball has any rotation at all — even the magic reversible one from the "sail effect of the seams" that Dr. Phil has discovered, then the pitcher is in for a world of hurt because the pitch becomes a batting practice fastball (think Tim Wakefield pitching relief against the Yankees in the playoffs). All the other pitches Dr. Phil mentioned — the palm ball, fork ball, split finger — do have spin; they have to because the pitcher has to control their location. The knuckleball and the true 95+ mph fastball are the only two pitches where the pitcher can say "here, hit it" and not worry about where he or she throws it. (Some day some bright woman is going to learn how to throw a knuckler!) What the palm ball, fork ball, split finger all do is change the velocity. By holding the ball against the palm or jamming it down between your fingers, you lose some of the whip from your release. The circle change has the same effect; by holding the ball with all 4 fingers, you lose speed while keeping the same arm action. The cut fastball that Pitt posted about earlier is different; it is like the screwball. You are throwing the pitch with the same speed as a fastball but with a different rotation.

Phil McDonnell remarks:

 Curve balls really do curve. There are many proofs of this but the simplest is the center field TV camera where the resolution is too poor to show the spin, but the curvature is obvious. If the viewer cannot see the spin then it is difficult to explain how it can be an optical illusion.

Basically the curvature comes from the spin of the ball. The easy way to remember is that the direction that the front of the ball is spinning is the direction of curvature. A pitch that is thrown with a right to left spin will curve to the left. A pitch that is thrown with a down and to the left spin will break low and away.

The spin exerts a small orthogonal force on the ball as it speeds toward the plate. This force is governed by Newton's equation:

Force = Mass * Acceleration

Note that the last term is the acceleration not the speed of the sideways movement. The ball actually curves at a faster and faster rate. Thus the most deceptive part of the curve occurs right at the point where the batter swings.

The knuckle ball is a bit different. The idea of a knuckle ball is no spin. What happens is that the seams act as little sails that catch the passing air causing curvature in one direction or another. Naturally the seams also cause a very slight rotation of the ball until the another seam comes around. The effect is that the ball begins to curve one direction and then as the seam changes it actually begins to curve in a new direction. From the batter's perspective the ball can appear to wobble. Other times it can fly off in one direction or another in a strongly curving manner. Even the pitcher does know what it will do. The knuckle ball is not the only grip that results in no spin. Others can be the fork ball AKA split finger fast ball and the palm ball.

Another deceptive use of these no spin pitches is that they can be thrown just like the pitcher's fast ball. If the batter has previously timed the pitcher's fast ball then he will likely start his swing based on that timing only to be fooled by a ball arriving slower than expected. So even if he is not deceived by the wobbles of the ball he may be swinging too early or need to hold up his swing and lose critical power.

In many ways these change up style pitches are reminiscent of the deceptive action of the seemingly dead market last Friday which suddenly exploded to life in the last seven minutes of the trading session.

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

George Parkanyi comments:

In pick-up ball where it's pretty easy to hit, I choose the direction I want to go by adjusting my back foot. If I want to hit to the opposite field because I'm being played to pull the ball, then I'll drop my back foot further away from the plate, which turns my torso to slightly lag my swing and "point" the direction of my "power" through to the opposite field. If I want to hit to center I line up parallel to the plate, and if I want to pull the ball, I move my back foot closer in toward the plate. If you connect well with the ball, it will go in the direction of your set-up. Against a professional pitch, I think I'd be happy just to touch the ball — perhaps even just to see it.

Dean Davis writes:

The most critical thing you can teach Aubrey is to avoid moving your head forward (toward pitcher) in the process of moving from a loaded position to the striking the ball. This is often the result of a hip shift which moves weight to the pitcher side of center (this destroys a hitter's power). The timing of hitting a baseball is difficult enough without ceding an advantage to the pitcher by destroying his stereo-vision by moving your head forward.

If you can get him to solidly place his stride foot slightly closed (closer to the near edge of the plate than the back foot), before he starts his swing (done by merely rotating the back heel low to the ground until pointing away from the pitcher), you will avoid him having to relearn the swing when he gets to a select/traveling/high school team later in life.

The Texas Rangers pitchers are taught to throw the circle change where they are attempting to "throw the O" (the circled index finger & thumb) at the target (pushing the index finger down to close the O at release). This means that their middle three fingers are are pointing at one of the dugouts as the shoulders are square to the target. That exaggerates the screwball spin and drop. Index finger should lay across the seam.

I teach my pitchers (age 11 & up with longer fingers) to have the same grip (floating the the middle finger off the ball if possible, substituting the ring finger for stability), throw it like a fast ball (the hand is more behind the ball when coming over the top) and emphasize the index finger pressure through release. They get the same screw ball action and drop as the major leaguers (to a lesser degree). When thrown by a righty to a righty (or lefty to lefty), it is a devastating "out" pitch (thrown on a X-2 count). My pitchers love to see the hitter "corkscrew" into the ground trying to make any contact.

Here is an interesting interview with Mike Basich (gave up record breaking HR to B Bonds) about how pitchers cheat (he names names!)

Steve Leslie contributes:

A great lesson that one learns from baseball pertaining to the markets is in the area of hitting. There are many different types of hitters those who are contact hitters for example and those who are home run sluggers.

Many consider Ty Cobb the greatest hitter in the game. He had a lifetime batting average of .367 over 24 seasons. This is the highest career batting average in the major leagues. He also had 724 doubles 295 triples and 117 homer runs. Through that whole period of time he had but 357 strikeouts. He also stole 892 bases. With the exception of his first season in the majors he never batted below .300 and his peak performance was in 1911 with 248 hits and a .420 average. He also held the batting title 12 times with 9 in a row. Ty Cobb forcused on what he did best which was hit the ball, put it in play and as a result of this dedication maintained a productive career that lasted a quarter of a century.

After his retirement, Cobb was a very wealthy man having been advised by executives and others in the Detroit area how to properly invest his money. He went on to invest in stocks and was a major stock holder in the Coca Cola company.

The lessons for the investor is that success in the markets is a lifetime pursuit. It is showing up for work every day and dedicating onself to the task at hand and utilizing the particular skills and they have been blessed with. Ty Cobb had a very productive and successful career because he concentrated on what he did best and he did it very well. Year in and year out .

Phil McDonnell admits:

Yes, I did pitch for Cal in the PAC-10. We actually won the conference when I played although only slightly due to my minor contribution. Since that time I coached about 50 kids in Little League. Of those, five players were drafted into the Major Leagues for a total signing bonus of about $5 million. Somehow that does not seem random to me.

The wonderful thing about the markets and baseball is that everyone thinks they know all about it. There are many ways to skin the cat. Perhaps I can arrange some batting practice against one of my ex-players next time they visit the A's or the Giants.

With respect to the back foot weight shift, we can do a simple thought experiment. Lift your back foot into the air and try to swing. Did that swing feel powerful? The fact is the weight shift from back to front occurs whether you are conscious of it or not.

The fingernail ball is something I have never taught. However I have never had to pull my starter for a broken cuticle, nor have I ever needed to smuggle an emery board out to the mound for emergency fingernail repair. I have coached the circle change. It is an excellent and easy to learn off speed pitch. My technique is to circle the two fingers in an OK sign, the the three remaining fingers are used to throw a weak pitch. The spin is the spin characteristic of a screwball (curves to the right). But the pitch does not curve because the spin is too weak and the speed is too slow. It is simply an off speed pitch.

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

Stephan Jovanovich replies:

Heck, Dr. Phil, with my eyesight I couldn't tell you from one of your former prodigies, let alone see the ball. I stopped playing ball at 18, after I went to the Phillies organization pow-wow and met the three catchers they already had in the system and compared the sizes of their hands to mine. The only talented pitcher I ever caught blew out his arm in AA in Odessa; he was from Guatemala, and he had the same stuff Mike Cuellar had. He would have been a marvel. I know enough about the bonus baby mania baseball went through to be unimpressed by the "about $5 million"; it is one of those factoids that is like Clinton's 100,000 new cops - wonderfully round and purposely vague. Hell, even with my puny hands and Molina family footspeed, I was offered $10,000. If you want to post your stats and the stats of your magic kids, I will be more than happy to eat crow and buy you and your camp followers each a bottle of bourbon. Until then, let's call it a draw. You still don't know anything about hitting, but there are few people who do. As for pitching, I would still recommend to the List that they send their kids to Dean's camp, even if his players have never been offered a stick of chewing gum by a scout. He knows far more about this than you or I do, and he lacks your cocoa puffed ego and my bad temper. Neither is a good temperament for teaching people. But - last shot - the most important reason to trust DD (listen up, Lack!) is that he clearly has no interest in any of the kiss-ass rituals that have turned so much of "organized" baseball at the junior level into a game of "my daddy knows your daddy" (out here in the Bay Area it has become even worse than it is in soccer).

Phil McDonnell suggests:

Lifting the front foot high does not inherently add energy to the swing. If you think about it lifting a foot straight up adds potential energy only in an up and down direction. The point of a baseball swing is to drive the ball in the horizontal direction. Any energy from the foot lift is orthogonal to the intended swing and does not add any power.

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

Charles Pennington demurs:

Potential energy does not have a "direction". Why do batters start with the bat held up high? That's potential energy that ends up contributing to the kinetic energy of the swing, when the bat is low.

Let me add that the pitcher lifts his front foot in an effort to throw the ball fast in the horizontal direction.

Stefan Jovanovich notes:

Randy Johnson did it — at age 45. He became only the sixth left-hander in baseball history to win 300 games in a career. And, like Teddy baseball's final game and last home run (at his last at-bat), it happened while the world was looking elsewhere — before a tiny crowd on a rain-sodden field. Pure Brueghel.



 As a doctor and researcher, Hans Rosling identified a new paralytic disease induced by hunger in rural Africa. Now the global health professor is looking at the bigger picture, increasing our understanding of social and economic development with the remarkable trend-revealing software he created. Why you should listen to him: Even the most worldly and well-traveled among us will have their perspectives shifted by Hans Rosling. A professor of global health at Sweden’s Karolinska Institute, his current work focuses on dispelling common myths about the so-called developing world, which (he points out) is no longer worlds away from the west. In fact, most of the third world is on the same trajectory toward health and prosperity, and many countries are moving twice as fast as the west did.

What sets Rosling apart isn’t just his apt observations of broad social and economic trends, but the stunning way he presents them. Guaranteed: You’ve never seen data presented like this. By any logic, a presentation that tracks global health and poverty trends should be, in a word: boring. But in Rosling’s hands, data sings. Trends come to life. And the big picture — usually hazy at best — snaps into sharp focus. Rosling’s presentations are grounded in solid statistics (often drawn from United Nations data), illustrated by the visualization software he developed. The animations transform development statistics into moving bubbles and flowing curves that make global trends clear, intuitive and even playful. During his legendary presentations, Rosling takes this one step farther, narrating the animations with a sportscaster’s flair. Rosling developed the breakthrough software behind his visualizations through his nonprofit Gapminder, founded with his son and daughter-in-law. The free software — which can be loaded with any data — was purchased by Google in March 2007. (Rosling met the Google founders at TED [Technology Entertainment Design Conference].)

Rosling began his wide-ranging career as a physician, spending many years in rural Africa tracking a rare paralytic disease (which he named konzo) and discovering its cause: hunger and badly processed cassava. He co-founded Médecins sans Frontièrs (Doctors without Borders) Sweden, wrote a textbook on global health, and as a professor at the Karolinska Institut in Stockholm initiated key international research collaborations. He’s also personally argued with many heads of state, including Fidel Castro. As if all this weren’t enough, the irrepressible Rosling is also an accomplished sword-swallower — a skill he demonstrated at TED2007. "Rosling believes that making information more accessible has the potential to change the quality of the information itself." Business Week Online



 As a marathoner, inflammation from overuse of muscles is a part of the territory. While this generally is a short term inflammation process, I thought a couple of evaluations common to runners of this process could have analogies to the markets. Exercise and strengthening is generally a form of creative destruction. You cause minor tears in the muscles to promote growth. And blood flow and cash flow to risk or non risk taking would appear on the surface to have similar effects to overall health.

First a few general rules I use as to when to not run or stop your exercise routine:

1. When there is a fever present, sore inflamed muscles with a fever, produce counter productive exercise, increase the muscular weakness due to flu. An in some cases can cause permanent damage to the heart. A systemic failure can reverse the creative destruction process.

2. When overuse such as during a marathon, where you hit the wall, causes massive damage. However, much healing and increased blood volume can be achieved by mild running before the pain recedes and while you are still weakened.

3. When the pain causes your form to deteriorate, to the point of causing other injuries. Minor tendon swelling can often be run through, with the exception of the Achilles. But tendon pain generally is a sign to look for the cause. The usual first cause is a worn pair of shoes. Many committed runners have a difficult time accepting the advice to stop running, simply because it alleviates the symptoms, without finding the underlying cause of the inflammation.

4. When inflammation is caused by something foreign to running, say a car accident, cancer etc.

Second, when it is good to use ice versus heat to improve the healing.

Ice is good for inflammation caused by pooling or coagulation of the blood. Because it decreases the blood flow to the inflamed spot. This would include inflamed tendons, sprained ankles, or an achilles injury. Whereas heat is good for muscles that are "knotted" because it increases the blood flow. This would include torn muscles or tense shoulder blades or neck muscles.

Dean Davis responds to point 3:

This is seen often in baseball pitchers, where general fatigue, a twisted ankle or some other distant physical insult, causes a change in the pitcher's form such that it leads to a devastating injury in the throwing shoulder, wrist or elbow. Compensation that destroys good form is a constant worry for the pitcher.



How many things are there in baseball, the swings, the runs, the cycles, the signals, the deception, the consistencies, the standings, the All Stars, et. al., that are directly relevant to trading and could make us better?

Allen Gillespie replies:

I grew up a Braves fan and unfortunately after watching them win many pennants but only one World Series over a decade of dominance I can say this: there is a significant difference between championship teams and good regular season teams.

This is andedotal, but their one champion team I think won close to 30 games in the 9th innings. Spec lesson: never give up, keep it tight, and focus in the clutch. 2) The Braves have always had deep pitching — which helps in the regular season, but in the playoffs things change as teams shorten rotations, and so the Braves were always a bat or two short in the playoffs. Spec lesson: play the late months (Nov, Dec) — more offensively than the long season months. 3) Champions, even when they loose during the season, rarely get blown out because there is too much pride. While I have never been a Yankees fan, Derek Jeater did earn my appreciation when I saw him in some meaningless game during the season hustle to catach a fly while crashing into the stands on the 3rd base line and busting up his face a little to make an out.

Tim Melvin expatiates:

First, it is a long season. Although you have to play to win every day, no team ever has. Winning 100 out of 162 is considered a mark of greatness. A trader who wins 60% of the time day in and day out will probably also reach greatness. There will be losing days in the market as well. Shrug them off and learn from them. There is another game tomorrow.

Swing for the hits. the home runs will happen on their own. Sluggers who routinely swing for the fences every at bat may hot a lot of home runs. they will strike out a lot as well. Good hitters look to make solid contact knowing that the home runs will come when the conditions are right. a fastball inside or a curve hanging out over the plate. The major concern is to put the ball in play and advance the runners. In trading the objective should be to make good trades. the home runs will happen on their own when the conditions are right.

Focus when the play starts.
Baseball players seem to stand idly around between pitches. But watch how they focus once the pitcher steps on the rubber. Once you hit they key to enter the order, it is time to pay attention.

Situation matters. It is okay to steal second in the third with no outs and no score. In the 8th with the game tied and two outs it is usually not such a great idea to waste the potential winning run. A bunt early in the game with the bases empty and a three run lead does not make a lot of sense either. But in the ninth with a runner on first, no out, a tie and the top of the order coming up, its time to lay one down. If the markets is making new lows several days in a row, it might make sense to buy big on the long side. if it has been making new highs, maybe not so much.

Sometimes you just don't want to pitch to the guy. If a power hitter is up, a base is open and the game is on the line, it might make sense to just walk home and face a less powerful hitter. Sometimes, the small loss is the best one if it appears powerful forces could cause your trade to go strongly against you.

The game is not over until the last out.
Keep playing. baseball is riff with stories of 5 run comebacks in the ninth. So is trading. Stay focused and look for the chance to rally.

Defense matters. Ask the Texas rangers. You can play powerful offense but if your pitching and defense callow the opponents cheap runs, it is hard to be a winner. If you have large winners combined with large losses all the time, it is tough to win over time.Not every team will win the World Series. Only one will. But a winning record and playoff appearances fill the seats with fans. Not everyone can be the best trader at every time, but you can be a winning trader.

If you can steal the other teams signals, or just figure them out, you have an advantage. In the market you can gain one by being aware of what large successful traders and investors are doing. Thanks to COT reports and sec filings, it is easier for investors than ballplayers!

What position are you playing and what is your role? Pitchers and catchers are involved on each and every play. Fielders have to watch every play but are only involved when the ball is hit their way. The designated Hitter is only involved three to five times a game at most. Short term day traders are in every minute of every day. Macro oriented traders only when the markets move towards their entry points. Longer term investors only when conditions are exactly correct for entry. Knowing what you are trying to achieve and what style fits your strengths can be critical to your success.

It takes more than one person. Ask Barry Bonds or Nolan Ryan. you can be the best ever at your position but if the team around stinks it will be hard to succeed. in trading I think this goes beyond just the coworkers and analysts you might work with and take advice form. our team is those people we surround us with, bounce ideas off of, celebrate wins and suffer losses with at the end of the day. Our team is our family, friends and confidants. I do not think anyone can be successful without having the strong network of friends with them along the way. It is like being a pitcher with no team. you cannot just be good, you have to perfect as any ball put in play is a run. Pretty damn lonely even if such a perfect person were to exist.

Be ready when called on. Recently jay payton of the baltimore orioles went 5 for 5 as a late inning pinch hitter. it is a big reason the Birds are winning right now. Same with the bullpen. Even when market conditions are not right for your type of trading, stay sharp and focused. You never know when a late inning rally puts you in a position to come off the bench and drive in the game winner. Markets and games can change in the blink of a surprise fed announcement or a three run homer. be ready.

There is more to life than baseball. You must practice your skills, study your opponents and work hard. But it helps to be able to relax away from the game and enjoy other endeavors as well. Same with the markets. Study learn, anticipate, but take the timeout for books, music, friends, family and all the other things that actually make life so damn good. Maybe even take in a baseball game once in awhile…

Dean David adds:

In hitting it is important to let the pitch thrown determine what type of swing you offer. As an example, Rudy Jaramillo teaches hitters to try to hit outside pitches to the "opposite" field. Frequently this approach results in a firmly struck single, where attempting to "pull" an outside pitch will result in a weak grounder the opposite way or a "pop up". It appears that this is lost art early in the season as many hitters look to bolster power numbers by pulling every pitch without regard to its location. Strategy for the pitching coach would be to pitch away to hitters that have yet to demonstrate a willingness to "go with the pitch". This is an addendum to Mr. Melvin's comments about the importance of singles.

Jeff Watson comments:

In baseball, one must always be on the lookout for a pitcher who throws a spitball, a 3rd base coach who steals signals, and a batter who uses a corked bat. In trading, one must look for the same type of behavior.

Alston Mabry notices:

Some similarities between baseball and markets:

Random events are interpreted as meaningful: "Have you noticed how many times you see the guy who made the last out on defense be the next guy up at the plate?"

Talking heads use meaningless stats to produce commentary: "Rodriguez is hitting .243 for the season, but on the road against left-handed pitching, he's only .218."

Lots of fresh data produced every day.

Quants taking innovative approaches see some success, e.g., Boston.

People will, in fact, cheat to get ahead.

The public gets tapped to support the infrastructure.

In the long run, the better teams steadily increase their lead over the poorer teams. In the short run, e.g., the playoffs, "anything can happen."

Phil McDonnell writes:

Some years ago I coached my son and daughter' teams in baseball and softball respectively. In particular one phenomenon noted was that there was a king of the hill effect. We recall that king of the hill is the game where one kid stands on the top of the hill and all the others gang up to bring him down. Then a new king emerges and the gang has a new target. Needless to say no one ever remains king for long.

In my Little League days the effect was the same. Aware of the king effect our team somehow managed to lose every single pre-season game in every year I coached. Naturally one took the opportunity to mention it to every other coach in the League.

On opening day we made slight adjustments to the line-up. Somehow we managed to win 7 out of the first 8 games - yes, every single year. We played about 16 to 18 games each year so that was about the mid point of the season. Usually about then people started to try to figure out the standings. At that point the season got a lot tougher. Coaches would know that we were on top and invariably we would only see the best pitcher on each team. The only advantage that our team had in the latter part of the season was that my batting order simulation model was getting smarter because it had more statistics on our players as the season went on. My estimate was that the model gave us about a 1 to 2 run edge in every game and the average number of runs was about 6 so this was considerable. Still somehow we managed to come in first or second every year, but the headwind from the king of the hill effect made it much more difficult.

The parallels with the top trader or money manager each year are profound. When a manger is on top two things happen. First his style or technique becomes reverse engineered and his trading space become more crowded. Secondly the king of the hill effect is at least as strong in trading as in baseball. If one was number one last year then literally everyone else is out to get you. Literally the other managers and traders cannot afford to let anyone stay at number one too long. They would lose all of their accounts to the top trade. So they have no choice but to gang up to survive.



 I was recently reading commentary on the question "is the Fed already behind the curve?". The Taylor Rule model was used to assert that the Fed has not cut far enough. The commentator used an approximate recent GDP growth rate of less than 1%, excess capacity and trend in core inflation to state that the Fed Funds rate should be nearer 1%. Quite alarming, it seems to me. What is your take on the Taylor Rule?

East Sider replies:

The Taylor rule works beautifully… in retrospect.

It requires precise estimates of things that are not observable — GDP trend, GDP slack, inflation — so it's useful only for ex-post criticism, not ex-ante policymaking. IMNSHO.

Another argument is often made based on 2 year treasuries trading nearly a full percentage point through 3% fed funds, with analysts saying this means "the market" is looking for the Fed to cut rates to at least 2 percent.

Professionals have wearied of pointing out the credit difference between an overnight unsecured interbank loan, and the perceived security of a liquid obligation representing the full faith and credit of the the US govt.

Comparing apples to apples at the front end of the curve - fed funds to two year swaps - it turns out Bernanke's shop may not be all that much of a laggard.

At Friday's close, overnight funds were roughly 20 bp higher in yield than 2 year swaps. Interestingly and counter-intuitively, that's spot on the one year moving average of that spread.

The market is certainly leading the Fed, but not by the scary-sounding distances usually cited. 



Dean Davis notes an interesting study of the earnings yield, bond yield differential as a predictive variable.

Conclusion: The yield gap - the difference between the stock market earnings yield and the long term bond yield - can be interpreted as a simple measure of the yield spread of stocks versus bonds, or a relative long-term rate of return of stocks against bonds. By using the definition of returns, I derive a dynamic accounting decomposition for the yield gap, where it is positively correlated with future stock market returns and negatively correlated with future dividend to earnings payout ratios, growth rate on future equity earnings and future bond returns….



 I spent some time reviewing the DS site and the discussions of deception. I did this after noting that the upcoming featured article on Wikipedia is a piece on one of the most amazing deceptions in the history of chess, "The Turk." Apparently many of its age were drawn in by the fake computer/machine, including Charles Babbage, Fredrick the Great, Catherine the Great, Edgar Allan Poe, Benjamin Franklin, and Napoleon Bonaparte. The ruse was made all the more credible by the construction that allowed the cynic to look through the cabinet and the fact that a Hungarian grandee, Wolfgang von Kempelen, was its creator and sponsor. There were vocal critics, however, the machine continued to attract attention as long as it remained on display in Europe.

The Turk was purchased by Maelzel and brought to America, which allowed Poe to create an account. It is interesting to note the skepticism and fascination in the following passage by Poe:

"What shall we think of a machine which can not only accomplish all this, but actually print off its elaborate results, when obtained, without the slightest intervention of the intellect of man? It will, perhaps, be said, in reply, that a machine such as we have described is altogether above comparison with the Chess-Player of Maelzel. By no means–it is altogether beneath it–that is to say provided we assume (what should never for a moment be assumed) that the Chess-Player is a pure machine, and performs its operations without any immediate human agency. Arithmetical or algebraical calculations are, from their very nature, fixed and determinate. Certain data being given, certain results necessarily and inevitably follow. These results have dependence upon nothing, and are influenced by nothing but the data originally given. And the question to be solved proceeds, or should proceed, to its final determination, by a succession of unerring steps liable to no change, and subject to no modification." 

How many times do market operators take for granted that some function of the market is beyond being gamed, a mere logical extension arising from "certain data" and the ensuing calculation? Might the artifice we see be constructed to allow for examination, but concealing the kernel of deception? Might sponsorship of the esteemed be the final cog that turns the deception to its highest degree?

I saw many of the items at work in the late 90s in the OTC market as large bids or offers were flashed by proprietary traders on Instinet creating the perception that a natural buyer/seller was available in size. The ensuing stampede would generate the desired profit courtesy of the deception. 

Nigel Davies adds: 

A book has been written about the history of the Turk. The idea of human intervention in 'machine' decisions was echoed by Kasparov's 'hand of god' accusations during his match with Deep Blue. But now the focus is on humans receiving machine help, signifying that there's been a turning point during the last decade. 

Victor Niederhoffer adds: 

Turk in its modern incarnation is somewhere on 42nd street with Pillsbury playing inside it and another checker midget champion. I believe I may have played against it in the 42nd street freak shop that Larry Ritter wrote about in some of his NY stories, next to a great former pitcher.

Alan Millhone:

Was this the checker playing automaton that was at Eden's old Musee? 'Ajeeb' was another one that appeared for some years at Coney Island and you played against it for a dime a game. Samuel Gonotsky reportedly played inside of 'Ajeeb' for some time as well as other checker players. Pillsbury was a terrific 'blindfold' chess & checker player. Branch Rickey loved checkers as well as Christy Matthewson. You can find a little information on 'Ajeeb' in William T. Call's long out of print Vocabulary of Checkers. The art of playing both games 'blindfolded' is another interesting story.

I quote Mr. Call on page 12 of Vocabulary of Checkers. He describes "automaton" as follows:

A lay figure that apparently plays the game mechanically, the moving arm being operated by- but the ethics of the pastime forbid details, because of the harmless pleasure the public finds in telling how it is probably done. The impassive attendant, when pressed for an explanation, gives rapid vent to something like the following: 'The board is sensitized by that the move you make operates a corresponding change in the power of the piece controlling the square reflecting the correct reply.' Ajeeb, Mazam, Ali, and Akimo are the names of some famous automatons.

Recently Durgin's Single Corner, by E.A. Durgin 1894 was sold on eBay for $13,000.00 becaue this little book belonged to Baseball great Christy Matthewson and he signed his name inside of the book showing that it was his.

Checker's is deep in history and dates back to the Egyptians.



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