A pipeline contractorI ran into a pipeline contractor I have known for years and we were chatting and I asked about his jobs. He said things are slow and jobs he bid he got beaten badly by others at bid openings. All the jobs he bids are union/prevailing wage that with all benefits included comes out per hour per worker at a staggering 52.00 !! The stimulus is geared towards roads and bridges etc that mandates that wage per hour. The little average contractor will never see a penny of the stimulus money. If I built homes and paid that high wage you could never sell it as the total price you would final out including land and all materials.



 In my local paper the last two mornings is bad local economic news. The other day in my area R&J Trucking out of Boardman, Ohio laid off 36 drivers up the road from Belpre at their local hub. Then International Converter in Belpre shuts down and 45 jobs are lost and in this morning's paper Eramet near Marietta, Ohio lays off 110 workers out of 330. I note oil at $40 today and gas prices dropped a dime today in Belpre.

The news attributes oil decline to less usage. This makes sense with all the lost jobs to truck drivers and individuals who drove their autos to work. I wonder if a formula could be developed to correlate lost jobs nationwide to the decline in oil price?

Phil McDonnell replies:

A trucking company should be more profitable because of lower gas prices, not less. They should be able to lower prices, if necessary because of their own reduced cost and this should stimulate demand and allow them to hire more people.

The fundamental point is that any model of the economy that took into account oil prices would only work for a certain part of the business cycle. At some times the higher price of oil is a tax on the economy which slows it down, so oil prices and the economy move inversely. At other times a drop in oil price serves as a reflection of the fact that the demand is reduced because of reduced economic activity, so oil and the economy move down together. This latter reality is what we are facing today.

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



 Bernie Madoff is all over the news and other than the recent suicide of an investor who lost it all for himself and family and a few named high profile celebrities most of us don't have a face or name of the many victims as yet. As a Christian, I have been praying for Madoff and for all those he swindled. Last week my Sunday school teacher of several years left our church. The class voted to have me take over for her. Tomorrow as part of our class discussion I am going to poise the question of how the class as Christians feels towards Mr. Madoff and how they feel towards his victims? Mr. Madoff will have to live with what he has done. I fail every day, and not really my place to judge him. My heart goes out to all those who invested with him out of total trust and that he was getting them fantastic returns. Perhaps in that situation one turns a blind eye towards asking too many questions that perhaps the SEC should have been asking long ago about his firm?

James Lackey writes:

Probably because very few know the very rich or the closed society that lost all. I am ignorant of that clique but inquired around its six degrees of separation.

Its not schadenfreude, but relief to traders. Men that risk for a living know it's impossible to profit without risk and max drawdowns some 100% above advertised, which is the get the joke of the year as the entire Sharpe ratio risk management diversification was a scam and we all knew it. There was never any oh how can they do it, they must be so smart. Why can't we figure out how to profit on 90% of days, never lose much and have stable returns?

That is the silence of the lambs. Most are guilty, except the Specs, who talk only about losses and are always very upfront. We take very high risk, and that was a bad word for years. We were made fun of… "you're going to blow up"…

Well, you'll never profit without taking risk. You'll never know its a panic until you're in it, and if you stop yourself out at every whiff of a panic you're guaranteed to never make a dime over a decade. Now they know all the low risk returns were a scam.

Now back to speculating for a living.



 Of late I notice a lot more people walking carrying bags or wearing some sort of backpack. These are not joggers or people simply out walking. These are displaced/distressed individuals. What I noticed is that all have no coverings for their hands. I approached my local lumber yard who sells lined jersey work gloves for $1.59 a pair. After some discussion and telling of my intent I purchased 50 pairs at $1.00 a pair. I keep some in my truck and some in my car and when I see a barehanded traveler I give him a pair. All are appreciative and give me a smile — which makes it all worthwhile.



 Just watching the nightly news and one area near Boston has one town 30% without electric power and those with power are stuck at home. One lady was interviewed and commented on how lucky she was to have her 13" TV and had no idea what else to do if no power for it!

People have forgotten how to read, play Chess and Checkers, Dominoes, card games, engage in conversation.



 The market contest on Friday, December 5th had all the elements of the greatest contests played out in our favorite sport or war. The Lakers versus the Celtics playoff or the Memphis Tennessee NCAA championship, or the New York Giants win over the Boston Patriots or the Tiger Woods - Rocco Mediate or Roger Federer - Rafael Nadal match of this year — or from previous years, the Ali - Foreman boxing fight, the Giants versus Baltimore Colts Super Bowl, or the Dodgers - Giants pennant playoff. The Borg - McEnroe match, as does the battle between Achilles and Hector in the Trojan war, comes to mind. (I would be interested in some nice additions to this list).

It had everything. Magic and disbelief. A beautiful exposition, climax, and resolution. A complete recapitulation of the range of the previous week, a 8% move in the four climactic hours, 880 to 813, in just one day, an earth shattering opening of down 3%, the fourth such 3% or more in five days, a buildup of tension with the worst employment report ever, the lowest oil price in 4 years, the lowest bond yields ever, all following by a day the backdrop of the NBER finally calling it a recession, retail sales falling off a cliff, and news that the automobile bailout was going under and over, the steady drumbeat of negative reports and news, building up to a climax when Hartford forecast better earnings and rose 100%.

The resolution of the climax occurred in the last hour as if following a script from a great story or symphony with the market rising to the week's high, very near the magic 900 level that it started the week at. One should note "that with long term interest rates at 3%, ceteris paribas, the value of mortgage assets held by banks has to have risen by 100% from the levels of a year ago when 6% long term rates were the norm. This has to counterbalance the increase in default rates to a large extent, and increase the return from holding mortgages so that they're much more attractive than most say they are. This has to be counterbalanced by the acceptance by the populace of an industrial policy program by the US, as if the public servants are a better steward for our money than the hedge fund managers, and investment advisers. And the idea that spending on building roads and computerizing hospitals, and making public buildings use solar power, and have grassy knolls and bicycle racks (as Henry Gifford has limned) is a better use for creating jobs than what would have emerged from allowing voluntary exchanges and incentives to take their course. I can only sit back and say, "what a great game it was" after pointing out that the decline in interest rates has to be remarkably bullish, and I predict a Lobagola move back up.

Alan Millhone adds:

On Friday I noted the Market was up even with dismal job reporting. I heard something about a job lost in the US every five seconds! I hope we see many more up tic Fridays as the US economy improves.

You show many comparisons based on battles in sports, the ancients, etc. Makes me think of our national Checker Tournament of 2007 held in Vegas at the Plaza Hotel. The Master's group battled all week back and forth on round points and on the final day of play it boiled down to Dr. John Webster of N.C. and Lubabalo Kondlo of South Africa fighting for the lead. After the last round was played and the smoke cleared we found that both men had the same match points. The referee was Tim Laverty and Tim keeps most meticulous hand written records all week of the player's scores. After careful mathematical calculations it was determined Lubabalo won the Masters and the ACF National Championship by one honor point! Another thin skin of the finger example.

Edward Talisse remarks:

Lower mortgage rates are a boon to the homeowner but a nightmare for the banks. The banks are all short refinancing options as rates move lower and reinvestment options are limited. The banks make money where they underwrite new products. Also, loan assets are on accrual basis rather than mtm so until the securitization markets reopen, its tough to lock in gains. Lower leverage will cap ROE, so if we move back up, it won't be the banks that lead in my view.

Craig Bowles writes:

2008's rallies have come after basic materials and energy have become the weakest sectors and that happened on Thursday when viewing short-term growth rates. Interest rates have shown a lot of relative weakness to stocks, so can move up a bit without being a problem. One fundamental change is inflation indicators have fallen earlier than in the 1973-75 recession. Generally, economists are focusing on economic negatives but none is talking about the positives of low prices. There aren't many economists around who talk up Austrian economic theory anymore which is probably why they all focus on stimulus to support prices rather than the positives of less inflation and declining prices.



 Tonight I sit at my computer and hear the wind outside moving my wife's wind chimes. It is a very cold evening with snow on the ground and ice on the roads and walks and a good night to be at home. I have been to downtown Cleveland on nights like this for football games and have seen poor souls sleeping next to heated grates on the sidewalks or under blankets and newspapers on the park benches. People look the other way so not to have to acknowledge them. Many will say they are there by their own volition. I just visited my fridge and find it so full I can barely close the door!  I was recently at our local Bob Evan's Restaurant and inside the door they have a tree (through the Salvation Army) that has tags with names of needy children on the branches. Vickie and I always take a couple of tags and buy a gift for a deserving child. This Christmas season many a child will have nothing under the tree (or even a tree) to occupy their time on cold winter nights. I cannot save the world, but can bring some cheer through taking some of my own time to buy a gift or two for those much less fortunate than I. I have a nice warm home and a clean bed and my cupboards are full to the doors with food. One can reason that many are in a bad way due to drugs, drinking, smoking, gambling. But one needs to take the time to reflect on how one is blessed in so many ways. I consider time in my own life a very precious commodity and do my best to manage my time and do some good in any way I can each day. Tomorrow after church we have baskets to deliver to our shut-ins. I will take the time to deliver some baskets to our local nursing homes where many there never see anyone other than the staff on hand during the year. The sands of time stop for no one and one day the silver cord will be loosed for all of us. So take the time and see how you can do some good over the holidays and any time during the year. The time will be well spent, I can assure you.



 A snowy and cold night here in Belpre, OH and I've been thinking about what it takes to excel and gain that all-important edge in any endeavor. Recently Alexander Moiseyev of Dublin, OH competed and won the Gold in the first ever Mind Sports played in Beijing. Alex is our current Three-Move Restriction World Champion in 8×8 English-style Checkers. Players came and entered from all over the world and rounds were played all week. Players had to make and submit hand written notations of their games played after each completed round. Players of Alex's caliber use the vast literature on Checkers which goes back to the 1500s to locate obscure lines of play to introduce against unsuspecting opponents. Or the player will find an improvement to published lines and use that when the opportunity arises. This "springing" of improved play in a game is called a "cook" in the parlance of the game. Players today have programs with six or 10 piece databases that will analyze billions of possible combinations of moves. Recently Dr. Richard Beckwith (also on the USA Beijing team) came down from Cleveland for Thanksgiving at our home and spent the night. He pored over my Checker library during his visit. We played four games and we both wrote down our games. He is a top Master player and I know he will review our games when he gets back to his home. Top Master players look over and study all the past games played that they can amass in their own manuscripts.

A carryover to the market exists from Checkers in that the astute Market player keeps detailed notes of current and past performance of stocks in order to have well organized and easily accessible notes for research. Chair recently commented on DailySpec how the late Richard L. Fortman had a massive index file of games that he could easily refer to for game annotations. "Knowledge is Power" and the well-organized person in anything will over time develop and maintain that ever important 'edge'.



 From The London Times:

Richard Fortman: draughts master

Fortman: he took a keen interest in man v. computer draughts contests

Richard Fortman was the most prolific author in the history of draughts, as well as the game’s leading annotator since 1946, a world champion at postal play and a master player for 70 years. Bob Newell, the doyen of internet draughts editors, called him “the last of the legendary checkerists”.

Richard Lee Fortman, known as “RLF” to all enthusiasts, was born in Springfield, Illinois, in 1915. At the age of 15 he was introduced to draughts — called checkers in the US — by his father, a telegraph operator who used to play the game to keep himself awake during lengthy shifts.

For a year father beat son mercilessly, but once the teenager had acquired a book from the local library — Chess & Checkers, written by the chess master Edward Lasker — and studied it assiduously, the tables were turned for good. “Using dead men’s brains” was tantamount to cheating, according to Fortman Sr, and their playing sessions came to an abrupt halt.

At that time Springfield had a thriving chess and checkers club, and under the tutelage of Harland Richards, a state champion, Fortman made rapid strides. After coming third in his first Illinois state tournament, in 1933, he performed creditably in a practice session against Edwin Hunt, a world title contender, in 1934, and established his master status in 1938 by winning the Trans-Mississippi tournament.

Playing in all 26 Illinois state tournaments, he won six, the first in 1950 and the last in 1978, and invariably came in the top four. More significantly, he made creditable showings in the masters section of the 1948 and 1958 US national tournaments, and in 1973 and 1983 he was in serious contention for inclusion in the mighty US team that slaughtered the UK and Ireland contingent in the third and fourth international matches.

Despite these achievements, he was to find greater fame as a postal player. George Bass, a renowned exponent who regularly played as many as 500 games simultaneously, was the first to make Fortman aware of its esoteric charms, in 1934, and he quickly found it invaluable for developing his analytical powers and encouraging the exploration of original lines of attack and defence.

Disappointed by a 1-0-11 draws defeat in a match for the world postal championship with Alf Huggins in 1964, Fortman persisted, and in 1986 finally attained his goal. Demonstrating the tremendous scope of this branch of the game, in which players have 72 hours to formulate their replies and access to extensive libraries, in 1990 he heavily defeated Dennis Cayton, a most worthy challenger, 9-0 and 7 draws to retain the title.

Proving that success in one field does not invariably lead to success in another, he also defeated the world crossboard champion, Derek Oldbury, 5-3 and 16 draws in a series of postal matches played around this time.

Remarkably, it was as an annotator that he was to find his true niche. He made his first contribution to the literature in 1935, and followed it with a highly valued series of monthly articles in Wood’s Checker Player in 1938-39, he established himself at the forefront of this field with his annotations to the 11th American Checker Association tournament games in 1946.

He provided annotations for a host of national tournaments staged by the American Checker Federation, several world championships, at which he was often the referee, and many of the inter-district postal tournament booklets. In 1954, 1956 and 1958 he singlehandedly annotated the postal matches between the US and Great Britain, and in 1973, 1983 and 1995 he repeated the operation for the crossboard matches contested between the US and the UK and Ireland. He also made extensive contributions to all the leading magazines of the day, including Elam’s Checker Board, California Checker Chatter, Midwest Checkers, Keystone Checker Review, the 6th District Newsletter, The Square World and English Draughts Journal.

Developing a remarkable indexing system, he managed to attain the demanding standards expected of an annotator by Oldbury: “He must be combined historian, essayist, psychologist, philosopher and prophet — and it were well he could play draughts too.” Moreover, he blended all these talents with entertaining storytelling and a capacity for relevance.

A close friendship with the celebrated Dr Marion Tinsley, one of the leading mind-sport competitors of all time, had an integral part to play in Fortman’s life, and spanned the period from 1946 until Tinsley’s death in 1995. While Tinsley “mined gold nuggets” from Fortman’s vast collection of postal games and correspondence, he benefited enormously from their extended practice sessions. Soon after one particularly bruising encounter in 1981 he went on to win an important tournament in a breeze — “After Marion, anything’s easy,” he remarked.

Like many draughts players, Fortman had a more than passing interest in chess, playing at a competent level and acquiring a library of about 300 books, mainly dealing with the game’s history and great players. While granting the sister game complete respect, he was, however, quite willing to challenge any chess players who chose to pronounce inaccurately on draughts.

When one famous English chess writer suggested that losing a game of draughts did not involve the same sense of personal loss as losing a game of chess, Fortman was aghast. He pointed out that some of his losses were still painful 50 years on and, tongue somewhat in cheek, declared that he “played chess for fun and checkers for blood”.

At the first Computer Olympiad staged in London in 1989, Chinook, programmed by a team led by Jonathan Schaeffer, at the University of Alberta, arrived on the scene, and quickly gave notice of its great ability. It was evident to Fortman that the days of the analyst and postal player were numbered, but he was philosophical about it. Recognising that such programs were a vehicle for demonstrating the beauty and profundity of draughts to a completely new audience, and would guarantee its future as a game and intellectual art form, he took a keen interest in the short-lived man-machine contests, and accorded Chinook due credit for its achievements.

Interestingly, Fortman’s seminal opus, Basic Checkers, played a crucial role in the landmark match between Tinsley and Chinook, staged at the Park Lane Hotel in London in 1992. The seven books in this remarkable series marked Fortman out for immortality and won the praise of players of all standards. Naturally, it was not perfect, however, and a dubious variation found its way into Chinook’s opening database. Cue the opening victory for Tinsley in his crushing defeat of the silicon monster, and thunderous applause from the spectators.

As an interlocutor for the professional blindfold exhibitioners Newell Banks and William Ryan in the 1930s and 1940s, Fortman realised that any attempt to make a living at the game would be precarious at best. For him, it was a hobby, which he miraculously fitted in around his work — as a warehouse foreman for the Panhandle Eastern Pipeline Company in Illinois — and family commitments. He was essentially an amateur, requesting only expenses for his work; the beauty of the game was its own reward. “A good game of checkers is like a great building — every brick fits right into place and, when the architect has drawn his plans correctly, the finished product is something to admire and enjoy,” he said.

With the advent of the internet, Fortman’s voluminous letters gave way to e-mails, and in his last few years he confined his contests to cyberspace. Of master strength right up until his death, he was always a most dangerous opponent

and, more importantly, regarded by the entire fraternity as one of the all-time greats.

He is survived by Faye, his wife of 58 years, and their son and daughter.

Richard Fortman, draughts master, was born on February 8, 1915. He died on November 8, 2008, aged 93.

Victor Niederhoffer writes:

I was doing a hand study of what happens when a trade hasn't worked recently, and would be bullish or bearish, but this is contradicted by the exact similarity of today with the gestalt. In doing it, I read about Richard Fortman who just passed away at 93 and was the greatest annotator of the game, and postal champion. There was a reference to his great and ingenious filing system which enabled him to annotate all games perfectly. I realized that the hand study I was doing was very similar to the manuscript work that all good checker players did with various variations off trunk, and computer updates from Chinook from the good old days. No doubt that the exacting game of checkers is a very good training for market systemists.



I note the Market Mistress has settled in for the night at DJ 7552. With 1,000 homes destroyed in California of late and then remembering Galveston and New Orleans, I had a thought. It seems to me that over the long haul houses and cars (well, maybe not cars anymore — at least US built ones) used to fuel the economy in America. The US economy over time (next 4-6 years) will improve (note I did not say recover). As a builder/remodeler it appears to me that lumber/plywood stocks/futures would be a good bet for the long haul. However, I do not hold any of those stocks and this is only my 'gut' feeling.

Steve Ellison remarks:

I got a newsletter yesterday from a real estate agent in Reno, Nevada saying that 50% of recent sales in the area have been either short sales or foreclosures.

Mitchell Jones writes:

When you say "maybe not cars anymore, at least not U.S. built ones," your premise seems to be that the present difficulties of the U.S. auto industry provide us with information about underlying economic realities—to wit: they indicate that other countries are somehow intrinsically better suited for auto manufacturing than the U.S. (Even if that is not exactly what you had in mind, it is a premise which is often encountered nowadays. So bear with me).

My view, however, is that in a system of floating exchange rates calculations of comparative advantage tell us nothing about the underlying realities of goods production. In recent years the dollar index has fallen from the 120s down to around 70, then has risen back up to 89 or so (and presently has the potential, based on the ongoing enormous injections of liquidity, of falling close to zero in a hyperinflationary blowoff…). What, in such a context, can we infer about which countries are best suited to manufacture one thing as opposed to another?

The answer, to put it bluntly, is not a darn thing. We need a monetary unit that is firmly linked to reality, via convertibility to a precious metal such as gold or silver, in order for the underlying facts, the absolute advantages one nation intrinsically has over another, to manifest themselves in calculations of comparative advantage and, thus, to bring about a reality-based international allocation of capital. Without convertibility, what we get in the short run is malinvestment on a planetary scale, and in the long run what we get is a global financial conflagration.

That long run, for those who haven't noticed, is here right now.



 At some red kettles you will now find a credit card machine so you can charge your giving. This is innovative in our troubled economic times.






 Just took a pick up load of aluminum gutters and fascia cap we tore down from a recent garage add on. Aluminum brought only 20 cents a pound. Also took three bags of cans which brought 35 cents per pound. Recycling center I noted is closed Saturdays now and when I left, there were only two other customers on their lot.



 I note they are having a 50% off sale on all suits and shirts, etc. (gift cards and shoes excluded) this Saturday. So if you need a new set of 'threads' this sounds like quite a sale if you have one of their stores in your area.

Jay Pasch writes:

A nice 50% off sale to go along with an -85% sale price on the stock over time, back to 12/1998 highs by the looks of things…



hot soupEarlier today I was at Beechwood Presbyterian Church to help with "Souper Saturday" held the last Saturday of each month. The church opens up its kitchen and dining room and volunteers come from various churches in the area on a rotating basis to help serve those who come to dine. The tables were set for 60 and those chairs were all filled with people in the area who walk in for a monthly free meal. I also asked and found that 55 dinners were 'to go' and they ran out of food tonight or more dinners would have been packaged. As last time I helped, I worked the dessert table and it kept me busy serving cookies, cupcakes, and cutting various pies. I was in the back of the room and from my vantage point could tell that those who came were hungry and enjoyed a hot meal. A blessing was given before the meal and after that no other items of any religious nature were invoked. Those who came could come and eat and leave when they were finished. It did me good to help serve tonight and made me thankful for all I have in my life. I also noted that there were many more people tonight than the last time I helped as a volunteer.



xmasNext to the Belpre Post Office is one of my favorite stores, Dollar General. They sell a little bit of everything and sell at a fair price. They have a nicely stocked rack of various greeting cards for all occasions for two for $1.00. I noticed today they have in place a nicely stocked rack of Christmas cards! Likely the upcoming Christmas shopping season will be terrible for retailers.

Anyone have any figures on the TV home shopping networks?



I wonder, in the next few months how many car dealerships around the US will fold up their tents? On a trip today, I noticed a fellow dressed as a clown in Hilliard, Ohio holding a sign offering "FREE RENT." An obvious sign of a struggling economy. I was moving in traffic and could not stop to get one of the flyers he was holding in my other hand.



A MillhoneMy Blackberry was busy today vibrating as the many market-related emails came through, but dangerous to read while driving! After I left Belpre this morning for my 523 mile trek, I was noticing gas prices, and the cheapest I saw was outside of Lancaster, Ohio (birthplace of General Wm. T. Sherman) at a Valero station, 3.39 per gallon. Traffic was heavy today with 18 wheelers as I traveled across Ohio and approached Indiana. Looks like the new football stadium is completed at Indy. They call it "Lucas Oil Stadium." Any of you know the story on the name? It would take oil profits to build that massive stadium that can be seen way out of Indy! Leaving Indy a billboard caught my eye. I have seen this fellow and his business on billboards around Indy, but today his ad was different. It advertised Sycamore Chevrolet, and showed the usual photo of Dennis Meng (the dealership's owner), but today with his photo had a statement attached that read, "I stake my reputation on each and every 'reconditioned' [that word concerning cars has always bothers me] car that we sell from our lot." Car dealers and politicians always make promises along those lines. Illinois State Police were in unmarked cars today hidden, behind overpass bridge pillars to run their radar. I always run with the traffic, which was moving along at 70 plus today.

Traveled down 57 for about 90 miles, and now in my room in Marion. Had a nice Mexican platter up the street before settling into my room. Likey I won't have TV on this weekend, and will concentrate on my Checker game tomorrow and Sunday. Read a posting just now that Riz is going to quit the trading game. I might suggest taking up Chess or Checkers — that will challenge you as much or more than the Market Mistress ever dreamed.

N. Petit reminisces:

…We crossed Ohio, the three states beginning with 'I'…



A MillhoneIt has been a busy three weeks with Lubabalo Kondlo of Port Elizabeth, South Africa a guest in our home for a week then we traveled together to Medina,Ohio for the yearly Ohio State Checker Tournament (3- move restriction) . Lubabalo tied with Michael Homes for 3rd and 4th. place with Alexander Moiseyev (3 move World champion) and Ronald " Suki" King (reigning GAYP World Champion) tied for 1st. and 2nd. A couple of points separated these four GM players. Somehow I managed 7 points in the Master's division and managed a draw with Alex and Lubabalo. Not an easy feat for an average player as myself. We had entrants from Mexico, Barbados and South Africa and many US States represented in the A and B group of players.

The following week began a 24 game match for the " Free Style" World's Title (held by Tommie Wiswell of Brooklyn till his retirement). On Monday King and Kondlo signed the match contract and play began about 10:30 AM that day. Play each day was 9-1 and 2 till ? 4 games per day. I was chosen and honored to be match referee and watched the players to make sure they made their 24 moves each hour on their clock and I recorded the moves as did the players. 23 draws were played and on game 24 Kondlo could have played another easy draw but decided to reach out and play a line that goes into the Pioneer opening and lost. He had nothing to lose as 24 draws guaranteed the title for Mr. King.

Lubabalo and myself packed up and left for Belpre Saturday night after the film crew finished up their interviews. Yes a crew from Thinkmediastudios of Mayfield Heights were on hand for the Ohio Tourney and filmed players and did individual interviews and then stayed on for the match and were in the playing room set up for most of the week. They plan on making a documentary on the game and will travel to Barbados and South Africa to interview Ron and Lubabalo and show the contrast in the two players. Ron lives a good life in Barbados and Lubabalo comes from a disadvantaged setting.

Belpre BaptistWe got to Belpre Saturday night around 11 PM and unpacked the car and then got up the next morning and took my Mother to Church. It was Africa day at Church and we sang an African song and had the two missionaries my Church sponsors on speaker phone and Lubabalo really felt at home that day. After Church my Mother took us to lunch. We took her home and at 1:15 Pm we left for Cleveland and the 8:15 PM Browns Vs. Steeler's game. We stopped on our way up and picked up Ron King at the Roadway Inn in Medina and headed North. In Cleveland the match sponsors , Evergreen Uni invited the three of us to a 'tailgate party' . Ron nor Lubabalo had ever been to such an event prior to a game. In fact this is the first pro football game either has ever witnessed. After the tailgater Ron had a seat with two of the sponsors and Lubabalo went with me to our season ticket seats that my late Father begin buying over 20 years ago. Lubabalo had a great time at the game and could not believe the crowd. After the game we met Ron King outside of the stadium and left Cleveland at midnight. We dropped Ron off at his hotel and made our way back to Belpre by 4:30 AM (short night) for me.

Today I took Lubabalo back to Columbus Airport for his long flight home. Hope to find another sponsor for him next year for our yearly American Checker Federation National Tournament which will be GAYP ( Go-As-You-Please) which all of us remember growing up as make your first move as you wish. We had breakfast together this morning and he asked me to have a prayer for our food and for his flight. Vickie and myself really enjoyed having this brilliant 35 year old man in our home and hope to have him vist again sometime.



A MillhoneSeptember 8th to 13th in Medina, Ohio I will have the privilege of being the Match Referee for a 20 game match between two fine gentlemen of color, for the "Free Style" World's Checker Title (held by Tommie Wiswell of Brooklyn, N.Y. for many years till he retired from the game and relinquished his title). Ron 'Suki' King of Barbados has held this coveted title for 19 years now. His opponent is from Port Elizabeth, South Africa by the name of Lubabalo Kondlo, who through the sponsorship of Vic and Laurel was able to come to Vegas twice last year to first win the ACF National Championship and then come back and win the WCDF World Qualifier and the right to issue a challenge to Mr. King.

While these two men play each other for the week I will watch the clock they use and will record the moves they make. Both men exhibit the highest level of sportsmanship and make my job almost unnecessary! Lubabalo will arrive in Columbus, Ohio a week before the match and will be a guest in my home and will have access to my Checker library and be able to relax and sleep off any jet lag.

Lubabalo emailed me today and will be on national TV in South Africa before he leaves for America. He has no computer nor Internet (too poor) and walks 10 miles each way to a Somalian grocery store once a week to use the Internet cafe' there to keep in touch with me.

And you thought you have it tough at times! LOL



CartA friend of mine bought 10 hot dog carts for an initial investment of around $65,000. He employs a crew of young girls that wear clothes more suitable for the beach. He parks the carts in the right of way on the highways, and his stands always have a steady stream of business, regardless of the weather. He's reluctant to mention just how well his venture is doing, but I suspect that he's making a nice income from the carts. When he first started the business, there was quite a bit of negative publicity in the local press due to the offense that certain segments of the population have regarding beautiful women in bikinis selling hot dogs. He regarded the newspaper publicity as good advertising. Since no laws have been broken and he has complied with all the numerous regulations, they can't kick his carts off the corners. The free market will always fill a need or vacuum, and there seems to be a need for bikini clad girls manning hot dog carts in Southwest Florida. As a side note, our local police seem to be very good customers, and eat a disproportionate number of hot dogs for lunch. Now, only if a good BBQ place would follow suit.

Allan Millhone wrote:

I see on the news that a bikini barista in Belfair, Washington has been closed because of the scantily clad women serving coffee. Down the road in another town one drive-through remains open and partrons like the concept of the women wearing 'pasties' as they serve up coffee. Creative marketing or simply exploitation?

Jim Rogers takes it one step further:

I'm sure it offends the sensibilities of some, but various businesses have tried this kind if tactic in the past (e.g. there was a topless hair salon when I lived in Las Vegas called "A Little Off The Top"; no, I never tried it, since my dome has been topless for quite some time). Most of these businesses get put down under the auspices of health code ordinances. However, that usually takes long enough for investors to get decent returns.

George Parkanyi extends:

You know, that's not a bad idea for Paulson to move some of that mortgage dreck. Twenty cents on the dollar and the surface area. It works. We'll call it Securitized Hooters — SHooters for short — featuring at each kiosk "blonde traders" and a hot photo-shoot cut-out of a lingerie model we'll call, say "Fanny May" (giving it a more wholesome farmer's daughter twist). Jeff, I think you've solved the credit crisis.



 Last week I took a tour of Skagway Alaska (home port of the Klondike Gold Rush), and Seattle Washington. What struck me about the two towns was the boom to bust cycle still seems to be replaying itself 110 years later.

Skagway, now population of 800, became a boom town of about 10,000 in 1897,  when gold was found in Yukon in 1896.  The trip up that mountain into Canada was the stuff of legends, as was the city of Jack London fame.  Canada mounties required nearly a ton of supplies to be allowed entry into Canada.  Of course a railway was built to help.  Knowing time was of importance, the tracks were only 3 feet wide versus regular 4 and it was designed to have special engines built for the tracks and mountains.  It only took 2 years to build, but by 1899 the rush was over.

Likewise viewing the skyline of Seattle, full of cranes, and taking a tour of the city with Starbucks, WaMu, Amazon, Boeing and MicroSoft all seeming to have hit their peak.  Several of these were part of the cranes problem, and Starbucks didn't have a crane but a new big hole in the ground for a new headquarters planned before their cutbacks. I couldn't help but wonder if the rush of cranes in the skyline to build the multiple new skyscrapers isn't equivalent to the rush to  build a train track in the 21 century. However, the difference is perhaps the investor and the markets bear the brunt of the boom to bust cycle nowadays, and they do so much better and more efficiently than the inflows/outflows of population, eliminating many hardships that where suffered by the average individual 110 years ago from such a blow to a town.   Is this similar to the forest crowding out the saplings and the rush to new heights bringing risk of catching stronger winds and more lighting strikes?   Perhaps another simile, besides a record height, being hubris. Too many cranes in a cramped space signal too much competition  for space and a boom to bust transition. Dooming the economics of the buildings in that area, taller and bigger or not. Are there studies on such phenomena? 

Alan Millhone reports:

Last week in Vegas we stayed at the Vegas Club on the 16th. floor. End of our hall way was an exit onto the fire escape and a platform and railing that revealed a terrific view during the day and at night. During the day there are cranes everywhere and close to our hotel was a crane being used for the addition to the Golden Nugget Hotel/Casino. One evening they were pouring ready-mix concrete (over $100.00 per cubic yard in my area !) and the trucks were lined up far as one's eye could see ! (Ed.: approx. 12 cubic yards per truck).



BullIn Damn Yankees the hero leads the hapless Washington Senators out of their losing streak by trading his soul to become the much need long ball hitter they need. If I were to play that role with my friends on this site, and all those who read the column, I would remind them that when things look really, really bad, that is the time to buy. I would remind them of the Rothschilds' advice, both the founders and John, that the time to buy is when things look hopeless and there's blood on the street. Such a situation occurred this week, with oil looking as if it would never go down, and the Fannie-Freddy duo looking like imminent bankrupts. Everything fell in place, with all major indexes including Tel Aviv, falling below round numbers, and truly disruptive moves following the Bernanke testimony, to 1201 on the S&P, both within the day and the next morning in England, to say nothing of a 2% drop in one hour from 3:00 to the close on Tuesday night. You have to hand it to that diabolical evil hand, the weak could not even bear to look any more, let alone hold or add to their positions. We've gone pretty much the longest in history without a reasonable multi-day maximum or a couple of up days in a row. How much more of a silver platter do you need, and how many Lolas must you resist to come back to the Lorie, Dimson, triumphal kind of view?

Alan Millhone concurs:

BellYesterday was something to behold, and for all Americans to build upon, with oil dropping $10 and the DJIA up almost 300, its best rise in three months.

There is still some more dust to settle, for instance IndyMac, but all will shake out in due time and we will get back to business in the US.

The late great GM of Checkers Tom Wiswell once told me he liked to eliminate the negative and accentuate the positive. His admonition holds true in all facets of our lives.

Vince Fulco wryly notes:

Perhaps this is what is needed to maintain the overnight lows earlier in the week:

Pakistani Investors Stone Karachi Exchange as Stocks Plunge : The Karachi Stock Exchange 100 Index fell for a 15th day, the longest losing streak in at least 18 years, prompting hundreds of investors to walk out of the trading hall, throw stones at the building and shout slogans against regulators.

But how do you stone a distributed set of server farms and fiber optic communication links?

Sam Marx remains cautious:

Martin Zweig concluded from his studies that bear markets quite often end with a violent move upside. We had a good move yesterday but, in my opinion, it needs more of a move on the upside in the next day or two to be considered violent. Four things came together this week to cause this 276 point upmove: the SEC made shorting financial stocks more difficult, the Dow was slightly below 11,000, Sen. Obama's campaign took a number of hits, because of changes in some of his positions, with much of the criticism coming from his closest followers (the New Yorker cover did not help either) and President Bush took a stronger stand in favor of offshore drilling. A short squeeze will occur if this rally continues.

On the subject of the Yankees, the last All-Star Game was played in the 85 year old Yankee Stadium yesterday. The stadium will be torn down this year and last week Tab Hunter, the star of Damn Yankees, was 77. Time moves on.



Just came home from Columbus, OH Airport and outside of Athens, OH on Route 33 a roadside billboard ad caught my attention. The large billboard featured a stately home covered with a red brick veneer and a steep roof (likely 12 on 12) and black dimensional shingles. The company advertising is Schumacher Homes and the home featured (my estimate) would be around 5,000 ft2. Now for their ad: They are offering to make your house payments for a full year! Now, all of us know there ain't no free lunch and somebody will have to pay for the year's worth of mortgage payments, right? Most likely scenario will be that the payments for the first year will be built into the mortgage and either will lengthen the loan or make the payments higher when they ' kick in' after the first year. It is creative advertising — flawed though the concept may be.

Vitaliy Katsenelson adds:

I saw a Jeep commercial advertising $3 per gallon gas for a year (limited to 12k miles) if you buy a new car. I guess automakers are using similar tactics to try to sell gas-guzzlers.

Jeff Watson recalls:

I remember telling my wife that the real estate market was hitting a top when I saw signs everywhere, offering mortgages for 130% value with no income verification.

Adam Nelson explains:

I think these sorts of gimmicks are a way for the builder to offer a discount without lowering the house price (which would thereby officially lower the price of the houses they sold to your neighbors as well). Because appraisals are made in part via property records or MLS sales figures which don’t include discounts structured as something given in addition to the house, the builder hopes to preserve the valuation of the other houses by giving this kind of sneaky discount.



A MillhoneIn my area there has been a shoe repair shop in the same location for decades. Originally it was named 'Meintels'. They retired and it was taken over by a family named 'Haddad', who have operated it for 30 years. Since high school I have always worn Florsheim shoes and boots and like to keep same polished and use heel and top 'taps'. In years past they were metal and now are of a hardened plastic material. Over the years when taking my footwear to Haddads the owner would give me a tag and tell me to come back the following Thursday for pick-up.

Now things have changed … The other day and recently when I take my shoes there they do my work, polishing, etc. while I wait. The owner tells me they have lost 'market share' due to throw-away shoes made of rubber soles, etc. Haddads is the last remaining shoe repair shop left in my area. " Gus's " was the other and it is now closed.

Sitting there waiting I observed everything in the store; the old glass display cases, various colors and lengths of shoe laces, many colors of Kiwi shoe polish, etc. Two products brought back memories of a time past in my life… CADET shoe enamel and BRASSO brass/metal polish. In the 1960's I went to Fork Union Military Academy in Fork Union, Va. While there we had to keep our shoes to a high mirror shine ('spit shine') and our dress uniforms had a brass buckle that had to be kept tarnish free with the use of BRASSO. Military school was another time in my life and perhaps another story sometime.



VN _ AubMy first encounter with Victor Niederhoffer was through this Daily Speculations website. I had known of Victor by reputation through various columns written about him and his books. I began to send contributions to the website back in 2006 and they were published. I sent a personal email and shared this with him. I told Victor that what struck me was the common admiration we had for our fathers that he wrote about in his book. He replied and told me that he would be sending me an autographed copy of The Education Of A Speculator. When it arrived I opened it and on the front of page 1 is the inscription:

To Stephen Leslie in honor of our fathers. Victor Niederhoffer

This was the beginning of a relationship that I regard highly. So to honor our fathers I am sharing this. I hope that those who visit this website remember their fathers on this most very special day. I know Victor and I will.

Alan Millhone recounts:

AlanMy Mother is 86 and gave me a nice Father's Day card. My Wife gave me a nice card as well and so did my Daughter for Father's Day. My Brother is 12 years my junior and I sent him a card.

My own Father passed on in 2003 and I only wish that today I could have handed him a card as I did for so many years in the past. I noted with interest how the late Tim Russert visited his Father as best he could and I could tell he was a loving Son. Harry Chapin wrote a song many years ago about being too busy and your children growing up before you realize it. There are some of us who had their differences with their Fathers, but in the end you only get one real Father. Time is passing all of us by, make the best of what days left we all have.

Happy Father's Day to all of you.

Jeff Watson adds:

My father was, is, the most important role model I ever had. He shaped my character, and always encouraged me to think outside the box. He never doubted me when I embarked on my career in speculation. Education was very important to him, just for the sake of learning, and he insisted that I attain the highest level possible, which I eventually did. I went over to his house today, presented him with a nice card, and gave him a new "Big Bertha." Contrast that with my son, who I love dearly. He got up at the crack of dawn, and left for the other coast. I got a text message telling me he was over in New Smyrna Beach FL, surfing. No mention of Father's day, no nothing. I'm forgiving, seeing all he has gone through, but, needless to say, a bit saddened. 



Alan Millhone"Mister can you spare a dime" was a song during the Great Depression. I was chatting with my Mother this afternoon and we got to talking about the long ago torn down City Building in Parkersburg, W.Va. It was a stately structure and the restrooms were down a steep set of concrete steps in the basement. In the 50's we could catch the bus from Belpre to Parkersburg, but that trip cost a dime each and we would simply walk the bridge instead (map).

In the basement of the City Building were the toilet stalls, and on the doors were coin boxes and you had to pay a dime to use the toilet. Well in the 50's I was much younger and much smaller and I used to crawl under one of the doors and unlock the toilet for Mother and myself to use. It would be nice to have one of those coin operated doors in our museum now, but all are long gone to some landfill.

Next door to the city building was a S.S. Kresge and I remember their nice lunch counter and they also had two coin operated toilets in the back of the store. Kresges is long gone too, as are most of the downtown businesses. The Mall ended the downtown shopping.

At that time most dimes in ordinary use were Mercury Dimes and contained 90% Silver. Those days are long gone as well.



Victor1) With a good heart I mention, regardless of whether one was long or short, but from the standpoint of the dispassionate observer, the Osbornian man from Mars, or the O'Brianesque or Ferberesque all-seeing eye, it was beautiful the way this holiday week ended. Completely the opposite of the Easter holiday as is natural, and with total fright of a repeat of the French Bank inside trades on Washington's birthday. The memory of the terrible beginning of the year, and predictions of the Palindrome and Sornette, and the weekly old timer, and what happened in the last June to July comes to mind. Who could have the courage over the weekend except those who trade all markets without commissions and make money 95% of all days by marketmaking to the public, and enjoying borrowing costs of less than 2.5%. It's a perfect recap of the year, and a warning that only the strong could possibly withstand giving the public a chance to lose so much more than they have any right to lose. And today's action was so similar to the meaningless Employment number of January 3. With a rise by a gnat's earlash preceded by a run of two grand terribles. Everything is designed to deceive, and prevent the weak among the public from capturing the full differential of 6% earnings return plus 6% growth, compared to 3% on Treasuries. There were so many beautiful touches. The four down opens this week following five up opens last week. the down 50 this week in S&P after up 40 the previous week. the fake decline of the ten year below 115 and then back up to 116, a situation repeated endlessly over the last months, but each time with gusto and real sincerity. And the weak closes on Thursday and Friday followed by down down to surprise, discombobulate and ruin the vacation of all those who like to fade it.

2) The sight of a commercial space on the southeast corner of Fifty-third and First, long ago the Mayfair restaurant, not rented out for five years on the grounds that rents will go up and they should wait, reminds me of the builder who doesn't work overtime to get the rents, and those who buy the two year but not the 10 year, on the idea that rates could go up. But how much do they have to go up over the subsequent eight years to equal the total return of the 10 year, and, similarly, how much do the 10 years have to go up 10 years hence to equal the 30 year? It's terrible to see.

Alan Millhone adds:

The second part got me to thinking about collecting rent after hours. Years back a renter offered me their rent in cash and I did not have a receipt book at hand. Later I told my Father of this and he told me to never go anywhere without a receipt book in the car. People will pay you at odd hours and always be ready to accept payment! Goes with the territory of having rentals. Nowadays I always have a rent receipt book in my home, car, truck, warehouse office, and never miss the opportunity if presented to take rent when presented.

Phil McDonnell extends:

PhilWould you buy a business to earn 6% a year?

The long term growth in stock prices seems to be a fairly consistent 6% per year over the long term. Of course it can be quite variable in the short run. However this is only part of the story. The earnings of a company with a PE of 16 represent about 6% return per year. Part of this is is kept as retained earnings and thus is already a primary constituent of the growth in share prices. But part is distributed as dividends. Historically this has averaged about 3% per year.

As Dimson, Marsh and Staunton and the earlier Fisher Lorie study demonstrated about half of the return to investors came from dividend reinvestment and half from simple price appreciation. On the face of it the math does not seem to work out. 6% from growth and 3% from dividends seems to be only a third from dividends not half. But the real story is that the growing dividend stream and the very significant benefits of dollar cost averaging work out to half of the return.

Dollar cost averaging is simply the idea that if we have a steady income stream from dividends, salary or bonds then we buy more shares at the market lows and fewer at the highs. Thus our overall share cost is below the average price of the market. The Dollar cost averaging effect really is a very effective timing tool that works. The only thing requires is a source of income.

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



On TV Rick Steves says there are two kind of travelers, "those who travel heavy and those who don't." He always says to lay out all you plan to take on your bed and cut that by half! Note American Airlines now charges $15 for your first piece of luggage. Oil hit $133 today. At what oil price will the airlines ground their planes? My best friend owns three mall restaurants and one of his workers today commented to us that mall foot traffic is noticeably down.

David Hillman recounts:

I just rented a vehicle for a one-way, one day drive of 300 miles in region. Yes, there are variations market-to-market and pick-up/drop-off locations do matter, but the #1 club "discounted" rate for the full size vehicle I rented was $99/day. For either a compact or economy, $157/day. It seems they've picked up on something. Hmmmmmm…. 



I just now honked at Officer Davis as he tries to direct the crush of traffic at our local Belpre Starfire that is still selling gas at 3.62 .

Down the street Speedway and Kroger gas lots are empty as they are now 3.89/3.99 and finally , 4.09 for premium . I say finally because the news media has pushed hard for 4.00 gas in their reporting for the Summer driving season.

Now I see talk of a second stimulus package !



Several years ago peanut butter prices went through the roof. I simply quit eating it for a time till the price fell. I ate a lot of rice in Korea while stationed there in the Army. At that time people in the villages had out houses and the 'honey dippers' came through on Saturdays to bucket out the human waste and loaded it onto a large truck. When the honey dippers came the streets cleared! The waste they collected was taken somewhere to be spread and dried and later used on the fields for fertilizer of rice. Monday in Columbus, OH I ate at a favorite restaurant of mine, Polaris Grill, and had spicy Havana Mahi and rice and black beans and a nice sauce and veggies. I can see our own local Chinese carry-out having to boost prices soon due to rice increases. As with peanut butter, I will cut back on my rice consumption if necessary.



I have been partially invested in Canadian Royalty Trusts for 2 years that have returns above the risk free rate.

Does anyone have any opinions or insight into this type of investment?

From what I've read their high return rate seems secure as long as oil is above $50/ bbl.

Alan Millhone gives a quick assessment:

Oil above $50 ?  I suspect you are safe for decades! 

Stefan Lewellen replies:

I know nothing about Canadian Royalty Trusts, but I can recall many instances in the past where a seemingly "risk-free" investment offering high returns has actually led to heavy losses.

One must remember that as the price of oil drifts higher, the economic story behind developing alternative energy sources becomes more and more compelling. These projects may not make any economic sense at $50/bbl, but at $150/bbl they may be quite profitable. At some point, such substitutes (or some other new development) will reduce the demand for oil – and oil prices will decline appropriately. Whether this happens in six months or twenty years is anyone's guess, but the fact that there is some non-zero probability that prices will fall below $50 makes this a strictly risky investment (in my opinion). If the probability of low oil prices is extremely small relative to the return premium over the risk-free rate, this could still be an excellent investment – but I'm not sure I would classify it as an investment of the risk-free variety.



Crew RaceProper preparation: Went to a boat race at St. Andrews recently and saw the senior crew rinsing and washing their boat one hour before game time. They said it adds a small fraction to their time and gives them pride. The importance of getting everything in place and order for your trading day, with every little thing, and every little extra and everything prideful is underlined. John Wooden's first meeting with his players where he teaches them how to wash their hands, and put on their socks, comes to mind.

Playing for keeps: Federer is having the worst start of a season ever, not getting into a final in his last six tournaments. Before he started competing for real, he played a series of exhibition matches with Sampras, and each went three sets into extras. He obviously was fooling around, trying to keep it interesting and this kind of "customer's game" is hard to extinguish — even the memory of it is odious for competition. How many times does a market player put on a reaching trade, for the fun of it, or just take a roll of a dice with a small edge after a series of big wins, and how often does he end up like Federer this year?

Pat EwingHall of Fame: Patrick Ewing was inducted into the Hall of Fame yesterday, and certainly Doc Greenspan would have been a better choice. His grotesque and sullen disposition, his outside game that prevented any rebounds, and the general aura that he created for the team during his last eight years there must have had much carryover effect on why the Knicks are still the world's worst. Sort of like the residue of the bridge player on the take-no-prisoners brokerage house that recently saw a 90% decline in stock price.

Success factors: The Memphis-Kansas game illustrates a myriad of truths about markets. First, the little things that were done wrong made the difference between success and failure. A Memphis player argued with the referee and saw Kansas score an easy basket while he procrastinated. How often does one argue with the floor, or the counterparty and lose much more than he would have by calling it a day? If litigation is involved, know that the legal costs in the typical court case are far greater than your net expectation.

KansasLittle things: The game decided by little things and letting up with Memphis ahead by nine with two minutes to go. It reminds me of days like today where the market was way up as of 1:00 or 2:00 or 3:00 and everything was grand for the bulls, the sun was shining, the water was beautiful (a la Memoirs of a Superfluous Man) and then one minute after the close, the market had dropped 2% from its three month high, a 20 day high, which, incidentally, took the longest to realize of any in the last eight years. One also notes that Chalmers seems to be the best thief in recent memory, and his four steals meant the difference between success and failure. Specialization in one market, one part of the day is often sufficient to give one the victory.

Steve Leslie adds:

I am reminded of the saying "G-d is in the details." This is generally attributed to Gustave Flaubert, who is often quoted as saying, "Le bon D-eu est dans le detail." Others have used this quote, such as Michelangelo and Le Corbusier. Paradoxically it is quoted by the architect Ludwig Mies Van de Rohe as "The Devil is in the details." Interestingly Mies and R. Buckminster Fuller are credited with the saying "Less is More." If one wants to get a healthy dose of attention to detail, watch a pit crew at a Formula One race. It is true poetry in motion. They can fuel a car and change tires in less than eight seconds.

Rodger Bastien comments:

I would agree that the difference in the Memphis-Kansas game was preparedness. The sequence leading up to the three-pointer by Chalmers that sent the game into overtime was badly mishandled by Memphis coach John Calipari and he knew it. You can't afford to overlook anything lest it cost you the game and it was evident that he didn't make it clear to his kids just what to do in that situation (which was clearly to foul to prevent the three-pointer). What's more, an immediate timeout should have been called with two seconds remaining in regulation — again, coach's fault. Reminds me of the poor judgment I too often demonstrate in fast market conditions…

Tim Hesselsweet suggests:

Be aggressive. The passive play of Derrick Rose, who advanced the ball beyond midcourt then promptly passed and ran to stand in the corner, diminished one crucial source of leverage for Memphis. Rose destroyed Texas's 1st-team All-America PG Augustin in the regional final and took advantage of UCLA's guards by penetrating to either score or draw additional defenders and find open teammates for easy baskets.

Alan Millhone notes:

Sean KempSaw on the news a current NBA player has 10 children by eight women and has not paid his support payments to any of them. Not a good example for any young athlete who aspires to greatness in basketball or anything else ! This player might get into the "Hall of Shame."

Nigel Davies assays:

There are two different forms of preparation here; technical preparation and psychological preparation via ritual. Washing the boat is technical whereas John Wooden's hand/sock washing would have been mainly ritual, which is not to underestimate its importance. Rituals provide valuable triggers to enter a particular state of mind.

At the chessboard both are used. For example one might study an opponent's games and/or prepare a particular variation (technical) before going to the board at a prescribed time (e.g. five or 10 minutes before the start), carefully filling out the score sheet, cleaning one's glasses or some such (all mainly ritual).

Good preparation includes proper consideration of both of these. And one of the main strengths of experienced players is that they often have their preparation routine well worked out.

J.P. Highland offers:

JuventusEuropean soccer is played in a way that guarantees the cream always comes on top at the end of the season. The winner is the team that obtains more points after a long 38 game season. The only problem with this system is that it leaves almost no chance for surprises. Real Madrid and Barcelona have won most championships in Spain, so have Juventus and Milan in Italy and Manchester United and Liverpool in England.

American sports are more socialistic, impose salary caps, revenue sharing, give a chance to bad teams to draft before winners and have a playoff system that gives a higher probability of having a winner th product of randomness by inviting underdog teams that are graciously called wild cards that can later become champions like the New York Giants.

Speculation is closer to the European system. You can get lucky some days and reap a good reward but in the long run the lack of sound money management and a strict trading plan will put you out of business.

Clive Burlin recounts:

I took an introductory flying lesson recently. I was shocked at how much checking gets done before you roll down the runway. While the instructor was going around the plane checking the propeller, flaps, gas, tail, etc., I was thinking to myself "you know, if you did half the amount of prep before putting on a trade, maybe your results would be a bit better." This thought was totally reinforced once inside the cockpit where the pilot sat with this long check-list seemingly checking every button and switch there was. A few more checks before take-off and we were barrelling down the runway.

Scott Brooks recalls:

Some years ago, I was listening to an interview of several NBA players and the focus was on Patrick Ewing. One thing all the players agreed on was that Ewing was cheap. He never picked up any tabs. Don't know if it's true or not, but I found it interesting that the biggest personal matter that they all agreed on, and spent a inordinate amount of time talking about, was his "cheapness."



In 2010 census workers will go back to using a pencil and pad for their census-taking! The hand-held information taking units failed to collect information accurately. This weekend I will record my checker games with a spiral steno pad and pen. Vic and Laurel recommend stock traders keep a handwritten manuscript for later reference. Some of the older ways seem to work OK in today's fast moving world of technology!



I leave tomorrow for Marion, IL and a yearly Checker Tournament I attend there each year. Gasoline in Belpre yesterday was $3.16 for regular. Word must have leaked that I will travel 500 miles tomorrow to Marion as I just now noted that regular around town jumped to $3.25! Note oil at $105 as I type and gold up $11 to $911 (bad number!) Gold and panic are 'hand in hand' partners.



Old ShoesI was in Sunday School last week and the church door buzzer sounded. Door was unlocked, but the poor fellow at the door did not know this. I went to the door and found a distressed looking fellow, probably early 30s, shabbily dressed, wearing shoes that were barely on his feet. He carried a plastic bag that likely contained all he owned. His English was extra poor. He told me he needed a pair of shoes. The Salvation Army is not too far from our church and I gave him directions. Looking back I should have taken him there. I asked him if he was hungry and he nodded his head that he was. I gave him some cash, he thanked me and went off towards Sally.
Some will say they would never give anyone a ride anywhere, nor give a person like that money as he should get a job like the rest of us. I used to judge in that way, but don't anymore. I am far from perfect, but have compassion in my heart for those living on the streets. Yes, many suffer because we don't know who is legit and who is scamming. Sometimes you have to step out and take a chance and help someone in need. If I had the money I would establish a pantry/clothing center and a soup kitchen to address the visible increase of street people in my area. Some will call me crazy, that bothers me little. 

Ken Smith adds:

You were right to provide assistance. Not necessary to give a large sum, but give enough that your heart tells you it was right. In Seattle street bums are a nusiance and one never knows whether the money will go for booze or a sandwich. It's easy to get around this. Carry a pocket full of quarters or half-dollars, according to your means, and give to anyone who asks.

I was giving a dollar to a fellow with a territory adjacent to the entrance of a book store. I don't go to that store so often the dollar would break my bank.

Then a substitute was at the site, using the territory on the guy's day off. She and I talked about Toynbee and during the conversation the guy's name who owned the territory came up. Her face flushed red at the mention of it. She told me the fellow had treated her badly and more or less told her to stay off his territory. That was confirmed, as she had spoken to the staff in the store about it, asking them to intervene. Since then I have ignored the guy. Strange that a guy in sad circumstances would not have empathy. You'd think the circumstances would nurture sympathy for a fellow sufferer.



The New Orleans Katrina disaster was made worse for many victims by the ineptness of FEMA and premeditated 'foot dragging' in non-payments by insurer State F@rm. They intensifed the suffering. I know a couple personally who live in Petal, MS who had one heck of a time getting settled there with property damage and the same in Gulfport on a condo loss.  It seems to me today that insurance carriers want us to have the best policy known to man in place and pay top premiums, but don't ever turn in a claim for fear of being canceled for using that policy.

N.O. resident Gibbons Burke replies:

Other factors which 'intensified' the suffering after Katrina:

1) Drunk armed bands of looters and miscreants roaming the city shooting at one another, police, rescue workers and ambulance teams working to get boats in to evacuate patients from hospitals. The fact that 'mere anarchy' had been loosed upon that City delayed the response because would-be rescuers had to return to base to get flak jackets and ammunition. A friend who stayed for the storm said it was "like Mardi Gras with guns" - a big party scene. Another had to use lethal force against looters in our neighborhood, and came under fire while in an air boat on the way to rescue an infant from a flooded house in a neighborhood near ours. He turned two would-be looters into a rescue squad and got over 40 people stranded in flooded homes to evacuation points, including our 92-year old neighbor.

2) An indecisive governor Blanco who would not give the President specific authorization to go in with the military to help out. She was playing politics and not wanting to cede control of her state to the Feds.

3) A mayor of the City of New Orleans who was holed up in a Hyatt Hotel room overlooking the Superdome, afraid for his life to go down and provide leadership to his people. Contrast this with Mayor Schiro who was on the scene and very present during and after Hurricane Betsy in 1963.

4) A large proportion of the population displaced by flooding did not own their residence. They suffered no real estate loss, and so there was no basis to recompense them, other than providing housing allowances to stay in hotels and then finally trailers for the next couple of years.

5) A state with a reputation for corrupt practices meant that (in contrast to Mississippi) they had to do handstands (and had to hire an external contractor to handle the distribution of funds at $250mil. to get federal relief money. Contrast this with a functional state government in Mississippi where the federal relief money was obtained and distributed relatively quickly.

My personal experience with State Furm was they dealt with me quite well - fronted me a couple of grand cash two days after the storm; another neighbor down the street also was treated well by State F@rm. The one insurer whose name was consistently mentioned as being difficult to deal with was Allsgre@t.



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.



1040Many had some good returns last year and will be paying the piper on tax day. Many of those same have not had such good returns this year and will be digging deep to pay those taxes from last year. Vic and Laurel have commented in the past on the consequences to the market in general around tax day. I wonder how such stats stack up on a down first quarter after an up year.

Alan Millhone replies:

I had pondered that point. Traders needing cash on tax day might dip into their securities accounts for dollars they need to pay Uncle Sam. Might be a good time to carefully watch the market for some good buys. My late father used to take any deduction that might fall into the gray area. His thought was, take the deduction, and if questioned, pay the money/penalty. That way you had the use of that money to make more with.



Motor HomeLunched today with a couple that owns an extra nice motor home. In the past they have made several nice trips in it. Today they commented that they have a upcoming trip to their son's home in Jacksonville, FL and will take the car instead. The motor home has a one hundred gallon tank and diesel fuel to fill it is $4.17 per gallon! They indicated they will use the motor home 'some' this Summer for 'shorter' trips. I am sure the motor home industry is hurting as a result of fuel costs.

Bill Rafter remarks:

I tried to short some WGO (Winnebago) recently and could not borrow the stock.

Ken Smith writes:

Motor homes are a common approach to living on the cheap. Not too cheap, though. One can own the vehicle but must rent space in a trailer park, pay for hookups to water, sewer, electricity, phone. KOA provides free wireless Internet, has beautiful grounds, swimming pool, small store on premises with dry food stocks.

A sizable population has always lived in trailer parks; KOA is not representative of such housing. I would stay at KOA for extended periods of time; could live there nicely for total living expense of $1000 a month. But I am not a bachelor — can't make this decision autocratically.

Can live on California Coast, near Smith River, Crescent City, beautiful setting. Just give up high living, settle down to quiet, simple life style. Ride around the area on your bicycle. Fish on the river, surf on the ocean.



Last year we had our ACF Checker Nationals at the 'Experience' at the Plaza Hotel and Casino in Las Vegas. We had a poor black fellow come from South Africa (due to fortunate sponsorship by Vic and Laurel) and enter and win the Masters. I took him to the Plaza "Lucky Seven." We ate there a couple of nights. Lubabalo commented one evening that he could not believe that if he walked by the buffet any hour of the night that the food was always there! He told me that if such a buffet were available in South Africa people would come and line up for miles and the food would be gone and that would be that with the buffet!



Chick fil AWatched the market soar today as the Fed cut rates by 3/4%. Now the news tonight is full of political commentary by the pundits. This country is in serious trouble and the press is engulfed in picking apart someone's speech that he made today. Be ready for real estate to plummet and for some big builders to fall this summer as the subprime mess further unfolds .
The economy should be what everyone is addressing as it is affecting all of us and our cost of living. Yes our next President will have some input on what direction the USA goes, but our weak dollar, fuel costs, food increases across the board (especially eggs, milk, bread) should be our biggest concern.
I know one company that is bullish on our local economy: Chick-fil-A. They have been in our local mall for 12 years and are currently demolishing a closed Ponderosa and will begin constructing a free standing all-brick unit, with inside playground and drive-thru, that will employ 60-90 workers. People have to eat. My best friend owns the mall unit and will own/manage this one as well and it will be closed on Sunday. Chick-fil-A is an interesting story — owned in total by one family.

Steve Leslie writes:

Chick-fil-A is a real American story. I liken it to Dave Thomas, the founder of Wendy's. Entrepreneurs should read Truett Cathy's autobiography as well as some of his other books. He is a devout Baptist philanthropist and just a wonderful man and a great American. My stepson worked as a camp counselor in Georgia for the Cathy foundation. I can't say enough as to what an inspiring figure and icon he is.

On the business front, I recently saw an interview with Dan Cathy, Truett's son, who now runs the organization and he mentioned not surprisingly that they are aggressively expanding into China and Asia. On a marketing note, I think this is pure genius — a cow holding a placard with their slogan "Eat Mo Chikin."

Dan Costin adds:

Went through South Carolina a couple of weeks ago, subsisted on Chick-fil-A and Maurice Bessinger's barbeque. Both manage to antagonize various portions of the population (Maurice likes to display literature about alternative interpretations of Civil War outcomes in his stores, and flies a big Confederate flag) but you just leave your own values at the door and go in to enjoy the good food. Not unlike visiting foreign countries with different belief systems.



I was at Lowe's this morning getting a new electric range for one of my apartment units. Picked out the one I wanted and told the clerk to go get it. Another customer was there and was going to get a dishwasher. He had his car and no way to haul it. He was standing beside me and asked the floor worker how much to deliver to Mineral Wells (Lowes store at Pettyville) about four miles away. The floor worker said $60. I spoke up and told the customer that I had my pick-up out front and would deliver for him for $40. The floor workers looked surprised at my offer. The customer took me up on it, I delivered, got my $40, gave him my construction business card, we shook hands and I left for Belpre with my stove still on the truck!



If our local Waste Management gets its way they will get a tariff hike for local residents of 47% (why they did not ask for an even 50% baffles me). The company is seeking to increase its rate from $25.30 a ton to $37.30 a ton. This, in turn. will increase construction costs in my area for any debris removal from new home/remodel or commercial work. They are also requesting the elimination of an existing 5% discount to commercial, industrial and municipal customers making full payment within five days of billing.



CigarsNote the recent cigar show in Cuba where thousands attended from 40 countries (sans the USA). Last year a box of fine Cuban cigars sold there for $828,000! A lot of money to go up in smoke. Over the years I have been around some cigar smokers and most seem to share a similar demeanor. Joe Schwartz, a master checker player from Florida, carries a bag full of cigars to chew upon when playing in a tournament, but I have yet to see him light one. Our daughter used to live in Charlotte and on occasion going down that way we would top in Statesville at J.R.'s. The entire back of the store is dedicated to cigars of all descriptions and cigar humidors, etc. I don't smoke but always enjoyed venturing back into that huge room to see all the cigars they stock. Some years ago I was in London and was looking for something special for an old friend back home. I walked into a tobacco store and asked the manager what I could buy for my friend back home and he replied, " Cuban cigars." I bought a pack and took them back home for my friend. Herb was really pleased with my gift. Cigar smoking, I hear, is on the decline.



"Liars figure, but figures don't lie" was one of my late father's favorite expressions. Just saw that the median home price has fallen 4% in the past three years and new home sales are the slowest in nearly 13 years. I suspect OPEC will announce the same production levels and gasoline prices will go up another dime till it reaches $4.00 a gallon at the pumps. Also I notice a lot of carpetbaggers are crawling out of the woodwork offering to 'help' those who are losing their homes. With the influx of tourists pouring into the USA with empty suitcases, the Euro might become a secondary currency in America. Our Dollar is of little value in most of the world. My favorite saying? "In G-d We Trust, all others pay cash."

Kim Zussman extends:

All big declines start as small declines
Most small declines are reversed

Most small declines are reversed
Except the ones you buy

Most big advances test neutral
Except the ones you hold, which reverse

Stocks drift upward over long periods
Except those in which you have overplus to invest

Declining periods are shorter than advancing periods
But when you focus on your P&L time stands still

Free markets work best
But not without the Fed put

Human capital is the best investment
Outside of commodities

Stocks and real estate are the best investments
Until you notice how well they do

Bull markets start the moment you decide never to invest in stocks

Success in what matters scales inversely to IQ and directly with charm

If you aren't laughing at yourself then you don't get the joke

Unlike women, chicken is unappetizing when anatomically correct

Trading success is the vector sum of {thorough research}+{strict discipline} in positive luck-space

Bald people would give anything for hair
Hairy people will do anything to get rich
Rich people will pay anything for love
Love is the main cause of hair loss



Our new Mayor, Mr. Mike Lorentz, was interviewed today and announced that tomorrow morning at 9:30 PM Presidential contender Hillary Clinton will be at Belpre High School to deliver her message. My little town of 9,000 has never had a Presidential hopeful ever visit. Her husband was in Marietta,Ohio (11 miles upriver from Belpre) last week to campaign for her.

I graduated from Belpre High in 1966 and know the auditorium well and wonder how many they can fit into that room? Doors open at 8:00 PM and I can only imagine the crush of people and news media that will be there. Belpre is but a little dot on the map, but history will be made there tomorrow morning. On another note, Michelle Obama will speak tomorrow at Ohio University in Athens, Ohio (about 30 miles from Belpre).



 Freemasonry has a long history in the United States. Many of our founding fathers, including Washington and Franklin, were Masons. Freemasonry traces its earliest origins from the masons who built King Solomon's Temple. The guild of masons started a ritual that has been carried down to modern times. The actual people who built the great works were known as Operative Masons. Since there aren't too many Operative Masons around anymore, during the Age of Enlightenment, Freemasonry decided to admit other members who weren't in the trade. These non-professional masons were known as Speculative Masons. The Masonic Fraternity admitted only men who were thinkers – men who would add to the general knowledge of the world. To many men joining the fraternity, the purpose was to gain more knowledge and inspire self improvement. Lodge meetings were full of fruitful discussions where they observed, sought, examined, contemplated and meditated on new facts or knowledge by experimenting and analyzing with what was already known. They exchanged that knowledge with each other, much of it in allegorical form.

Lodge meetings were roundtable discussions where participants were given facts and asked questions, drawing them into speculations. As always, the important issues of the day were speculated upon. The main purpose of this exercise was to improve speculative thinking. Newly raised apprentices and members were not immune from questioning, being forced to use their minds in a speculative manner. The intellectual give and take at those meetings drew outstanding minds towards Freemasonry. In fact, Benjamin Franklin modeled his Junto Club after the lodge discussions. He wanted to associate with speculative men who wanted to pursue knowledge and discuss it in a passionate manner.

Lodge meetings were a place where men learned to subdue their passions, and the discussions were very civil. There was no need to shout down opposing viewpoints, in fact they encouraged disagreement. Disagreement, as well as a well as a clever, well-reasoned rebuttal, was a highly prized commodity. The Freemasons recognized that one man glimpses the truth only partially. But, by speculating with others, one can see more aspects of the truth of any situation — if one will listen with unbiased respect and eager curiosity to hear another's point of view.

Ken Smith writes:

My perception is it's a businessmans' outfit. Not known for divergent opinion. On the other hand, a local group calling themselves Blue Masons accepted working people. I know this because a telephone company installer came to the house once wearing a lapel button which I inquired about and it turned out it was identifying the young fellow as a Blue Mason. He invited me to put in an application upon learning of my interest.

I did not do that because my history includes things quite unusual in regards to character profile, employment history, and other pertinent information, all of which generally dooms my applications for just about anything. I found I can be a member of political parties quite easily, they accept applications accompanied with money from just about anyone. One other thing about this, I found myself on DailySpec!

Alan Millhone remarks:

Old time Masons were operative in the fact they actually did masonry work as well as being a member of the Masonic fraternity. Today's Masons are speculative in that they no longer lay the stones and apply the mortar, etc. I have been a Master Mason, Belpre Lodge #609 F&AM, for about 30 years, and my father before me belonged for over 50 years as did my grandfather and his father.



RoofWe had another terrible wind storm that lasted all night. This morning when I left my home I noticed trash cans blown about and tree debris everywhere. I also noticed some shingle tabs on one street that came from some person's roof ! Another roof in my town had shingles standing straight up from the wind gusts over the night. Different sides of a few roofs showed similar damage as I drove around town today. The market was closed today for President's Day, but the wind last night did not know that fact. I wonder if the wind affected the shingles in a similar way that massive buying and selling unsettles the market? Many of the roofs have been installed for several years and one would think the shingle adhesive under each shingle would protect them. However this morning it was evident that if enough force is applied (to the roofs and the market) that something has to give way. The wind came from many directions all last night and looks for weak points on the various roofs to exploit and find that weakness in their armor. Shingles are laid out and installed in a pattern of 5" intervals of exposure. If one has too much exposure in the market chaos can ensue. The better roofs I noted (30 year or more are more wind rated) stayed put. Similar to weaker stocks huddling together for protection and hoping for the best. Research on which roof to use and if 15# or 30# roofing felt is to be applied over the roof deck or if 'ice guard' is to be used can relate to the market and the careful research one undertakes to determine which stock or group of stocks to put in one's portfolio. Locating the best roofer or the best stock broker is critical unless you are skilled enough to make your own decisions on roofing and investing in the market.



DrowningThis afternoon I had an insurance agent I know well, and have worked for, call me to go look at some wind-damaged apartment buildings (the roofs); a total of 70 units. The buildings are all located in close proximity and are two stories in height. The current owner bought the units after managing them for many years. He now has many empty units after evicting many drug dealers and rent non-payers. He is hoping to get all the units rented and not spend a penny on any of the buildings for a year in order to build up a reserve fund. I think he bit off way more than he can chew ! He has insurance but he is already into a battle with the insurance adjuster. On one property the adjuster wrote him a check for $300 and never saw the damage. I will prepare him an estimate and he can battle it out with his agent and adjuster. I can tell that the owner is not too handy and will have to hire out most of the work. To me he got into something without seeing the whole picture. In my case I know a little about real estate and rental property and know precious little about the stock and bond markets. Goes back to 'know your subject well' and then hope for the best!



GoldOne of the best gold stories from the 1970s was when Arthur Ashe beat 19 year old Bjorn Borg in the WCT tournament in Dallas and won a solid gold tennis ball worth $33,000. Ashe kept it and it wasn't too long before gold was selling around $800 dollars an ounce and the ball was worth close to 1 million dollars.

Jeff Watson reminisces:

I bought a lot of physical gold back in 1979-80 and my position has been underwater ever since. My gold-bug friend told me that I'm finally making money in the gold market, as it's taken out its old highs. I explained to him that with inflation, storage and cost of carry, I'd never get out from being underwater. Luckily, I still find looking at and feeling the actual gold to be rather invigorating.

Alan Millhone agrees:

Yep, nothing like feeling the heft of a roll of Maple Leafs in ones hand.. I knew an old barber years ago from Middleport, Ohio who went West every year to prospect on his vacation and made enough each trip to pay for his expenses and his vacation. He was a coin collector as well and he is long gone, as is his fine collection. 



TeaIn my local Sunday paper is a half-page article about the benefits of drinking hot tea. January is National Hot Tea Month. Hot tea is believed to improve the heart, reduce cancer risk and help the skin. Tea is supposed to have better health benefits if heated (I like Constant Comment). The heat helps transfer the antioxidants in the leaves to the water.

Locally our Tim Horton's handles 10 different teas. Our local Panera Bread carries 10 types of Republic Tea. In my area we have Mother Earth's Foods that carries 200 herbs in bulk that can be made into tea. Vic and Laurel like Fauchon Tea. If hot tea does in fact help the heart, this in turn would improve circulation, helping the brain function more efficiently and thus you think better and make better trading choices as a result.



McDonaldsJust caught on the news that Mc Donalds will add a 'coffee bar' and make more dramatic changes to their drink menu than they have in the past 30 years. I enjoy their Bravo coffee and am sure I will enjoy the drink additions when they reach my area. Mc Donalds is apparently still setting the pace in many areas as it was also announced that Starbucks now plans to make changes.

Sam Marx adds:

Although Starbucks gets a different niche of customers, this not good news for Starbucks .

A coffee bar and wi-fi at McDonalds, then Starbucks really has a problem.

Adam Robinson reflects:

I've always believed that the ethos of a corporation pervades, DNA-like, throughout all manifestations of the corporation, however small the "cell." If you want to discover the values of a company, you can look anywhere, from its choice of stationery down to the cleanliness of its floors.

Back to Starbucks. It was telling for me regarding the company's values that, living as I do five blocks from the former World Trade Center, I was shocked that in the days following, when rescue workers, many of them volunteers, flooded the area to begin cleanup, the local Starbucks was selling bottles of water. I'm as much a capitalist as anyone, but the outrage this opportunism occasioned in the local community, and subsequent bad publicity — Starbucks quickly reversed its policy and began handing out bottles for free – rankles to this day. The positive publicity it could have garnered by donating the water to relief workers would have more than paid for the negligible profits "sacrificed."

Ray Kroc was fanatic about cleaning his stores, and making everything perfect. Moreover, McDonald's franchisees are a powerful force for innovation and market research. I doubt that Starbucks has any such credo. And were I a fundamental investor, I'd bet on McDonald's in the race with Starbucks.

Ryan Carlson adds:

A worthy read about McDonald's is Ray Kroc's Grinding It Out. My favorite passage:

The key element in these individual success stories and of McDonald's itself, is not knack or education, it's determination.  This is expressed very well in my favorite homily: 'Press On: Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.'

Henry Gifford dissents:

Starbucks and McDonalds offer entirely different products in terms of the cultural experience they sell.

On Broadway in Manhattan, two blocks from me, there is usually a homeless person "working the door" at the McDonald's, opening the door for customers and asking for spare change. Once McDonald's put a guy with a bow tie there to open the door for free, but that didn't last long, and the homeless guy is there every day. Also, the workers in McDonalds don't hesitate to stand around and chat and ignore customers.

At Starbucks a block away I've never seen a homeless person "working the door," (nor at any of the other stores nearby), I don't see homeless people sitting there, and the workers have a spring in their step.

Jim Rogers counters:

As someone whose first career was in the hospitality industry, I can state that McDonald's moves markets in more ways than one.

The difference in demographics, however, is a present condition and certainly not a necessary condition. McDonald's has always put its eggs in two baskets: families (especially those with small children) and value. In the past, their offerings were weighted more heavily on the family side of the spectrum. Now, thanks to a number of cultural shifts (including those driven by Starbucks), McDonald's has realized that they can capitalize on the public's perception of additional value. Before, it was all about quantity (the Super-size phenomenon). Now, it's about quality (better coffee, more aesthetically pleasing decor, fresher menu items). In the past 24 months, the majority of McDonald's top line revenue growth has been driven by menu items at the top of the price scale, especially new salad offerings. There are a couple of interesting points that McDonald's has embraced: the masses (or at least a historically large percentage of the masses) will pay for quality, and design makes a difference. It made a difference in attracting the kids thirty years ago, and now it's making a difference as it re-attracts adults (with or without children) with Wi-Fi, coffee, and more pleasing decor.

Marion Dreyfus opines:

Whatever the relative merits or demerits of the individual loci, the Starbucks habituee will not 'descend' to the perceived downmarket of McD's, which is a brand-association drummed into our consciousness by millions of ad messages over decades. The food may be better, the prices definitively so, at McD's, but the smart set will not cotton to the overbright, plastic-dominated perceived lower-ranking environment of kid-friendly McD's.

The escalation of prices for a simple beverage to unheard-of stratospheres is one thing that has, to date, ensured the rarefied perception of Starbuck's as being compatible with the upward-striving status-jumper.

So unless McD's radically alters its branding, the trendoids will find it distasteful to step lively in those swinging doors, even if their coffee tastes more acidic and sets them back more by a factor of twice or thrice the McD's coffee.

Ken Smith comments:

Ronald McDonald is five blocks east of me in Seattle, a short walk downhill a ways. Property they have is also just a short walk uphill to Childrens' Hospital. Parents can stay at Ronald's place while visiting kids, many with cancer. Ronald's facility is commendable for its architecture. One can have nothing but praise for Mr. Ronald, whose plastic body is standing out front of the facility, smiling with welcome. Kids love him.

Vitaliy N. Katsenelson analyzes:

SBUX stock is transitioning from 'growth' to 'value' investors. However, it is not cheap enough for value guys. At least not yet. Also, with current news cycle it will likely see the other extreme of its valuation. In the not so distant future it will probably have to rationalize its store base, close some underperforming stores and slow its growth expansion.

Jim Rogers notes:

Fast-food restaurants, due to their staffing policies, are much more likely to employ legal immigrants than you might think. The biggest offenders in the food world for using illegal labor: high-end restaurants, because they lack the institutional oversight and back-office support to adequately check a lot of prep cook and porter staff applications (and some are simply dishonest). If you're looking for a trade opportunity in the event of some strict anti-immigration policy, short higher ticket restaurant groups.

Scott Brooks writes:

McDonalds will have to work hard to overcome their persona. They have cultivated that image for a long time. I have often joked (with an air seriousness to it) that one of the greatest inventions/innovations of the 20th century was the McDonalds Playland!
I absolutely hate the food at McDonalds and will move heaven and earth to not eat there. But my kids like it. So when the wife needs a break and the kids want to go play, I'll take them to McDonalds, buy a few Happy Meals and let the kids play and eat.
Actually, they don't so much eat as graze. They play, come back and grab a few fries and bite or two of their burger/McNuggets and go back to playing.
As much as I don't like the food at McDonalds, they are an incredibly innovative company that I respect immensely. And with their distribution chain and the demographics of America changing, don't underestimate what McDonalds is capable of.
That clown may look stupid, but underneath there is a shrewd businessman!

Nigel Davies ponders:

I'm just wondering what the real appeal of McDonalds is and what really gets people in the doors.

I often eat at McDonalds during tournaments because there's usually one around, probably they won't poison me and if they do (and I live) I can sue them.

On the other hand my five year old son much prefers the relatively civilised atmosphere of Pizza Hut, so much so that I can use the 'Would you like to go to McDonalds for lunch?' gambit as a threat. Now it turns out he quite likes pubs that do food, but the big thing here was getting him in the door and outside his comfort zone. Now he does miss the balloons but there again he's taken a liking to turkey.

So it seems to me that a lot of this is down to parental choice, the main driver here being cost. Of course most parents are going to be struck by severe pangs of guilt should there be even a whiff of a rumour that the food served up is unhealthy. So with BSE (Mad Cow Disease)/cholesterol etc appearing on the horizon, it was inevitable that McDonalds would take a hit until it overhauled its menus and image.

In this respect I see the coffee/WiFi as being a really clever means of making them look like Starbucks and feeding off the modern, trendy and healthy image of the coffee house chains. But are they a 'competitor'? I really don't see it, and I don't see a Starbucks denizen suddenly switching to McDonalds because of the cost. To me it looks more like an image thing to get the old customers back in the doors.

Julian Rowberry submits:

Starbucks never really caught on here in Australia. Its brand name and attempt at exporting US culture is a tad brash for the local market. Plus there's already a vibrant cafe scene. The Maccas Cafe has been here for years. It's aiming at the fast and convenient 'healthy eating' market that companies such as Subway feed on. Not branded wanker latte drinkers.

Alston Mabry recounts:

Burger KingAt Burger King the other day (I'm not a big fan of fast food, but I am a Coke addict, and my dogs love the burgers on the dollar menu), I hit the drive-thru, and when I pulled up to the window, the Latina there said they needed to cook the burgers and would I mind pulling into the parking lot in front for about three minutes (they know their cooking times). No problem. I don't mind waiting in the car because I always have a good book to listen to, this time Adventure Capitalist. I'm listening away, and the pooches are quiet in the back, when I notice it's been almost ten minutes. So I go back through the drive-thru, and there is a young guy at the window this time. I start to explain, and he thinks I'm placing an order. His English is good, but he is obviously from Mexico or Central America. I show him my drink and the ticket and he gets it and starts rattling away in Spanish with the staff. I realize he is the shift manager. He comes back, apologizing profusely, and explains that they accidentally gave my food to somebody else who was also waiting, that they will cook fresh burgers for me and that he will bring them out to me personally. I think he was worried that I would be angry, but I wasn't at all. We park again, and a few minutes later he appears with the food and apologized otra vez.

The point of the story is this young guy. He was a good-looking kid, maybe twenty. He was running the show, working hard on his English, taking reponsibility for the results, apologizing for mistakes and personally delivering the goods. And here was Burger King providing the structure for him to be successful. Not a dead-end job at all, not for this guy. I was very impressed.

Scott Brooks adds:

I had an funny thing happen in fast food to me in about 1985. I was a manager of a Taco Bell, putting myself through college. We had hired a new girl who had previously worked at Burger King. It was her first day and I had her working the drive-thru.
The drive thru "dings" with her very first customer. She says into the microphone: "Welcome to Burger King, can I help you." I thought it was pretty funny, she thought it was pretty funny, but the guy in the drive-thru began laughing hilariously.
But he placed his order and pulled to the window. The reason he was laughing so hard? It turns out he was the guy who owned the Burger King where she used to work.



My morning's paper shows a photo of Michael Chertoff at a conference on the REAL ID. The ACLU is against it — not surprising. Personally I feel any new type of license should also have a couple of fingerprints along for the ride.
A week ago I took my 16 year old nephew to the Columbus, OH airport for his trip back to Florida. That morning I went online and printed his boarding passes. We got him to the airport check-in for Southwest and the man at the counter asked him for his ID. My nephew told him he was 16 and did not need one. The counter man for the airlines agreed and processed him for his flight!
Congress passed the REAL ID law in 2005, but the effort has been delayed by opposition from states worried about the cost and civil libertarians upset about what they believe are invasions of privacy. A key deadline would come in 2011, when Federal authorities hope all states will be in compliance.



CornI have had many blessings in my life to learn and grow. One area that I've been exposed to since I bought my farm in 1999 is the economics of farming. What I've learned over the years, I've learned through osmosis, simply paying attention to what was going on around me.
Recently, the young man who owns the farm north of me approached me about helping him farm his own land. They've been renting it out (to another farmer) for nine years, and now he wants to farm it himself and make some extra money now that he is entering manhood.
There are several reasons that he needs my help. He can't read. He's illiterate. You'd be surprised how difficult something can be when you don't know the "code" (the written word). There's no one else to help him. He's been beaten down (psychologically) his whole life and now he's 21 years old and trapped on a farm out in the middle of nowhere. He can't even go anywhere because he can't get a driver's license because he can't read and no one will help him study for it. So one of the first things we'll undertake is that I'll help him get his drivers license.

But let's get back to farming….
This young man and I have spent a lot of time together over the years and this past week was no exception. We've been driving around going to local farm coops, the local FSA office, local banks, and to talk to other farmers, gathering data and information so that I can help him to become a farmer.
Here's what I've found out about corn.
There are many types of seed corn that you can use. Prices range from as little as $45/bag to over $300/bag. The huge difference in price is in how the corn has been genetically altered. The more expensive the seed, the more things it is immune too, as well as being resistant to many various types of herbicides.
We settled on a seed corn that cost around $115/bag. Quite a bit more expensive than the $45/bag seed. But actually, if you want to grow a real crop with the $45/bag corn, you'd have to spend so much money on different sprays that the price differential isn't much.
Each bag will plant about three acres of land, assuming 38" rows.
Here's what you have to do:
In March, you disk the ground smooth — assuming you didn't do it in the fall, which is actually a good thing to do, allowing the snow and moisture to break down the soil and the water to seep into the soil.
You then spread fertilizer. In this area, on this type of soil, a good mixture is 18-46-60 (N-P-K). This will cost around $44/acre.
Next, you spread anhydrous over the land at a rate of about 120 lb/acre. This runs around $0.41/acre for the anhydrous and $0.01/acre rent for the tool bar, for a grand total of $0.42/lb which works out to be $50.40/acre.
Then, when the soil temperature exceeds 50 F, you will plant the corn. This is usually done in the second week of April or later. When you've planted your corn, you now need to spray. You'll do a run of Atrozine spray mixed with cutworm spray. This will cost around $14/acre.
Here is where speculation really begins. If you plant too early, you're taking a chance on having your corn come up and then getting hit with a late frost, possibly killing it. So maybe it's better to wait to plant. But there are problems with that too. If you wait, then the spring rains come and you can't plant because the fields are too wet, and by the time they dry, it's possibly so late that your corn will be doing its main growing during the dry season and won't get enough rain during its crucial "tassling" stage — when the corn is tassling, it is absolutely crucial that it gets water.
Of course, these spring rains hold problems for the farmer who got his crop in early and didn't get hit with the frost. You see, in the spring, rain has a tendency to come in large amounts and all at once. It is not uncommon to see rainfall levels of 5+ inches in a week, sometimes in only a few days. Just as not enough rain can cause problems, too much rain causes problems.
In the bottoms, where the land is the most fertile, moisture gathers. The creeks fill up and sometimes spill over the banks. The higher ground drains all its moisture onto the bottoms, too. This causes water to accumulate in the bottoms. And in these areas of accumulation (large puddles or overly wet muddy areas) the crops won't grow.
So you not only have to beat the frost, you have to beat the rains and then the dry season. If this ain't speculation, I don't know what is!
But let's assume that you got your crop in succesfully. What you have to do now is check on your fields at least once a week to make sure that everything is going well.
In our area, we have problems with grasses and broadleafs, especially fescue grass. I'm pretty certain that cockroaches and fescue are the only things that really would survive a nuclear explosion. So the farmer will have to spray again, this time with Post, which runs around $6.50/acre. But if there's a break of fescue, the farmer will have spray Round-up again, which will cost another $25/acre.
So if you add all this up and figure in all the different things that could happen, here's what you come up with.
$38/acre for seed (figuring in a few different "extra things")
$94/acre for N-P-K and Anhydrous
$20/acre for spray
For a grand total of $152/acre just to put a crop in. The farmer in question has 133 acres of bottoms. So it will cost him $20,000 just to put the crop in.
Now, keep in mind that we haven't even added in the cost of fuel, which is quite substantial. Our best estimate is that it will cost around $5,000/year for fuel to put the crop in, take the crop out, and deliver it to market. So the cost for 133 acres is $25,000.
Now, keep in mind that it also costs you around $25/acre to spread lime on the ground — but you have to do that only every 3 - 4 years on aveage). But I think we've got enough "fat" built into the expenses above to safely assume that lime will fit in these numbers.

If you think we're done now, you are mistaken. What's missing? Does the farmer need to hire some help? Possibly on a small spread like this the son and father working together may be able to do it themselves. But they may need to hire some help. You see, when it comes time to sow or harvest, there is a very limited window to get things done. What if the fields are wet for a week, then dry out, but a heavy rain is forecast in two days? You may have to hire some help to get the crop out in such a short period. So you need to account for some possible cost for hiring some help.
What about bad things happening? You need crop insurance, too. Sure you can go solo and hope for the best — but, losses hurt you more than gains help you! This is especially true of farming. You're better off insuring your crop and giving up some profit so that you can ensure that you don't get wiped out. Frost, hail, disease and pests can wipe you out. It's always best to give away a portion of your profit to ensure that you don't get wiped out.
Further, we have to take into consideration the cost of equipment and the cost of repairs on that equipment. Farm equipment is really expensive, but luckily, my friend has most of the equipment already. But, unfortunately, it's old and will need a lot of repairs. You simply can't believe how things break on a farm. Farming is really, really hard on equipment.
As an aside, when I was planting my own foodplots, I would spend 3 hours repairing equipment for every 1 hour actually spent sowing. That's on the high side, but you get the idea.
Now, on top of all of this, the speculating farmer has to further speculate with grain prices in the futures market.
Right now, in my area (as of last week) corn futures were trading for $4.10/bushel at the local grain elevator. The elevator operator even told us his spread on the deal (I don't know if that is normal or not). He's selling the contracts for $4.60/bushel on the exchange and buying from his farmer clients for $4.10. I simply don't know enough about grain futures (especially at ground level) to know if this is a good deal or not, but my gut tells me that that's a pretty high vig to pay.
So let's say for the sake of discussion that paying help, insurance and repairs is going to run this farmer an additional $5,000/year. A grand total of $30,000 to plant 133 acres in corn, or just under $226/acre.
Now, lets look on the profit side of things.
First, to just break even, assuming that he gets $4.10/bushel, he'll need to bring to market just over 55 bushels/acre. Believe it or not, that's not to hard to do.
Realistically, this farmer expects to get around 125 bushels/acre on average. Now, note the phrase "on average". Some years, he'll get far less than that. We just had a bad year on my farm this year. My bottom land is right next to his, so our bottoms are basically the same, and we got 80 bushels/acre off my place. So it's fair to say that he'll end up with an average annual range of 80 - 150 bushels/acre.
At 125 bushels/acre, and assuming he'll get $4.10/bushel (of course, we have no idea what grain prices are gonna be in the future), he'll gross around $68,000, which will net him out a profit of $38,000 for 133 acres. Not too bad!
But if we look at the ranges of 80 - 150 bushels/acre, we find that he could get as low as $14,000 in profit to as high as $52,000. That may not seem too bad, except when you take into consideration that he could easily get $100 - $150/acre rent for that bottom land, thus guaranteeing a profit of $13,00 - $20,000/year.
Also, most farm land has some sort of government subsidy attached to it. The person who actually does the farming is the one who gets the subsidy. This amounts to around $10 - $25 acre (more or less depending on the land and circumstances).
And keep in mind that in order to get that guaranteed profit (by renting his land), the farmer has to do absolutely no work whatsoever. So, on the margin, his true profit (profit from work - profit from no work) is much less, since by renting out their land and taking the risk free profit, he could free himself up for other, potenitially, more profitable endeavours.
Why would anyone want to rent the land? Farmers who rent a lot of land usually own a lot of big time equipment and farm a lot of land. Their profit margins are smaller, but they make up for it on volume.
But in the case of my neighbor, he sees this as an opportunity to make more money and springboard himself to bigger and better things.
Now, it may look like being a farmer can be very profitable. Well, it could be. If you're saavy and understand the land, you can make a good profit. But it doesn't matter how good you are, if the weather goes against you.
Plus, since grain prices have gone so high so quickly, you may be thinking that there's a lot of profit potential. There is, except that the other costs of everything listed above are going up proportionally, such that the profits available to the farmer are not really growing that much. Actually, the farmer makes a higher profit when grain prices go up quickly (assuming he can sell some contracts) but the providers (of seed, fertilizer, lime, equipment, etc) haven't yet raised their prices. And make no mistake about it, the providers are raising prices to soak up the extra profit now available from increased grain prices.
Times like this (fast rising grain prices) are great opportunities for farmers. However, there is a much darker flip side to that coin. What happens when grain prices go up real fast, then providers raise their prices, and then grain prices go down fast? That is disaster for a farmer.
Now, if all that weren't enough for the farmer to live through, he still has to become an actual speculator, out in the futures market.
You see, $4.10/bushel is a great price for corn, but the farmer can't sell his entire crop since he doesn't know how many bushels of corn he'll actually produce. So he'll sell some of his crop now, and some later. Many farmers sell 25% - 30% of their average crop (which is around 125 bushels) as long as it's no more than 1/2 of their low end worst crop (which is 80 bushels).
So to do this math, 80 bushels X 133 acres = 10,640 bushels of corn, and 125 bushels would be 16,625. So this farmer would sell no more than 25% of 16,625 (4,156 bushels) but would do no more than 5,320 bushels (50% of the 10,649).
Now, future contracts are sold in 1,000 bushel increments. So this farmer would sell either 4,000 or 5,000 bushels at this contract level. So let's say he sells 5,000 bushels at $4.10/bushel. He has locked in $20,500 of revenue, assuming he can deliver.
As the season progresses and he gets a better feel for how his crop is faring, he may decide it's prudent to sell more contracts. Hopefully the price will have gone up, but you simply don't know.
You see, if he's having a good season and growing a good crop, that means the supply of grain will be good…..and the price will usually go down, so the contract prices will go down too. If he's having a bad or off year, the supply of grain will be less and the prices will be higher, but he'll have less crop to sell.
A good scenario is for our farmer to have a good year while other farmers are having a bad year (because things like drought can be very regionalized). However, a bad year is just the opposite — our farmer has a bad year (say a regional drought) while other area's are doing great!
Of course, the goal is to have your first contract be the least profitable contract you sell all year while having a banner year! But hey, isn't a scenario like that the dream of every speculator!

D. J. Kadrmas remarks:

Anything is better than listening to a boss, even gambling on the weather. Some small farmers have outside jobs, but I notice they usually quit them quickly. The wives, now, that is a little different.

Alan Millhone writes:

E-85In Ohio around Columbus there are currently 50 gas stations that offer E-85 alternative fuel (if your vehicle can use it) at 30-40 cents less per gallon than conventional fuel and it is helping the environment. In the summer in my area we look forward to having fresh picked corn on the cob from from Reedsville, Ohio, along the Ohio River. If the E-85 takes hold the big boys will buy up all the locally grown corn for this fuel.

Michael Ott explains:

This is a common mistake. Corn on the cob is sweet corn. Corn made from ethanol is field corn. They are not the same thing, and the price of one has little to do with the other. Sweet corn is much more expensive than field corn because it is sold in smaller units to mostly retail customers. Field corn is sold in massive quantities to industrial producers, like many other commodities. A farmer gets a much greater return on sweet corn, but the market is much smaller and usually local.

Scott Brooks adds:

The article I wrote is about what Mike refers to as "field corn". In my area we call it "feed corn." Sorry for not being more specific about that. Most of the field/feed corn in my area is used for animal feed. Unlike delicious sweet corn, feed corn is definitely not very tasty, no matter how much butter, salt or pepper you put on it.

Also, keep in mind that the economics of growing and selling corn that I presented pertain to my area, northwest Missouri. The economics are different in other areas. For instance, whereas we expect to average around 125 - 150 bushels/acre, certain areas of Iowa can average 250 bushels/acre. I don't know what the input cost are to sow/harvest corn are in Iowa.



SnowflakeI was leaving our local Kroger's grocery this morning and noted a man and his son running through the parking lot toward their vehicle. The father commented that his son was attempting to catch some snowflakes (about two inches on the ground here in Belpre OH today and a blustery wind). I remarked that maybe the boy should catch them and put them into an album! The man looked at me oddly for my remark. Each snowflake has its own unique composition and no two are the same. I wonder it this carries over into picking stocks? Traders chase after stocks and hope to be able to hang onto the good ones and not have them melt before their eyes. Snowflakes are fragile and stocks can be as well!



I was at my Greek friend's home this afternoon looking over some 'back of book' Greek stamps and his wife Kiki came into the room with a Greek drachma (now obsolete). She is making bread and was placing the coin in the loaf for good luck. They go back to Greece on occasion and have commented on how prices went up when the Euro was introduced. He sold a piece of property over there and had the funds from that sale placed in a Greek bank account. When he wants some of that money he has it wired to his USA account. He loathes the Euro when going over there with his US Dollars, but likes wiring money from there back to his US account. I told him he could not have it both ways!



CookieDecided to order out tonight from our local Dragon House for my daughter and her three boys and the wife and me. After dinner my nine year old brought me his fortune cookie and asked if I had a pair of scissors.

He held the cookie while I snipped off the cellophane covering. He then asked me to read it to him and it said: DO NOT GIVE A MAN A FISH, BUT TEACH HIM HOW TO FISH.

Reminded me of something early on that Dr. Dorn once told me about Daily Speculations (when I was first introduced to the site by Vic and Laurel) about "meals for a lifetime."



Bohn's HandbookThe other day I added another book to my library: BOHN'S NEW HANDBOOK OF GAMES COMPRISING WHIST, DRAUGHTS, BILLIARDS, Philadelphia, HENRY F. ANNERS 1855.
This hardbound book contains 110 pages and lists and describes many games that are totally foreign to me: Whist, in four parts, Piquet, Quadrille, Ecarte, Cribbage (knew that one), Boston, Quinze, Pope Joan, Vingt-Un, Put, All Fours, Speculation (found this to be a card game), Brag, Roulette, Hazard, Division Loo, Backgammon, Draughts (same as Checkers), Chess, Billiards, Russian Bagatelle, American Bowls and a few others.

In its day this book was important to have on one's parlour table in one's drawing room to entertain family and friends before the advent of television and video games and the Internet. Looking through this book I see challenging and mentally stimulating games. Man has advanced and yet lost many things that made a family unit in its day what it was.
It is also interesting how the writers of years gone by described a game, for instance: "Draughts it should be remembered is purely a game of calculation, and as such craves wary policy."



UrnIn a recent AARP Bulletin I noted a "Final Farewell" article that reminded me of Yankee ingenuity. More and more Americans are choosing cremation, which costs about $2,500, compared to more than $6,000 for a conventional funeral (plus burial costs).

Some funeral homes are offering balloon releases and wine-and-cheese parties as options that are "less of a funeral and more of a celebration." The Cremation Association of North America projects that by 2025 more than half of all decedents in the US will be cremated (I will be among those).

A funeral home in my area bought a vacated branch bank that had a drive-thru and remodeled the building. They now offer a meeting place after the funeral (for a price) for the family to gather. No drive-thru for viewing, as was being done in Florida some time back, for those too busy to go inside!

My best friend is Greek and some years back his father passed away and all those who went to the grave site were invited to their restaurant for dinner. Greeks celebrate death in this way, I learned.



CountingEverywhere I go, everywhere I turn, I am beset by people who believe this is the time to get out of the market because it looks bad. They have many reasons for feeling things are bad. The latest is a spate of forecasts based on inefficacies of the central banks, solar spots, and likely changes in pessimism. I would urge those who have given up the quantitative approach to come back to their roots, realizing the following:

 1. When the market looks bad, it is more bullish than when it looks good, e.g. after a series of down weeks.

 2. When there is a 10% a year drift, you have to overcome above a 1/2 point a day drift for each day that you're out of the market. If on average, you're out of the market for 60 days, while things look bad, that's 2% you're giving up.

 3. In order to time the market you have to find a time to sell and a time to get out. If you time it by getting out when the market moves X% below a Y day moving average, and get in on the reverse, you'll have the worst of all worlds quantitatively.

 4. When the market is down, of course the news is going to be bad. But is that good or bad for the future? I don't believe the news is worse now than it has been on other occasions where the market is down 5% in two weeks or so, and if it were worse, I don't know if that's bullish or bearish, except for what happens when such occasions occur without regard to any Monday morning quarterbacking.

 5. The forecasts by the big houses of up 10% to 15% based on the differential of the earnings yield and bond yield have been extraordinarily accurate on a prospective basis over the last 15 years as witnessed by the work of the Spec Duo and Mr. Downing on this front.

 6. If you return 14% a year for 10 years you'll end up with 2.5 times as much money as if you grow by 4% a year, and five times as much after 20 years, And that's the underlying compound interest factor that makes the differential return models work. That kind of difference is impossible to beat on a 20 years (or a one day) basis with consistent trading. Keep that in mind as you consider stocks versus bonds.

 7. Especially toward the end of the year, reversals are most prevalent and predictive, with work on individual stocks often showing that those down the most in the last quarter are up significant double digits in the first part of the next year. Is it time to get them now, or to wait until things look good?

 8. After years like 1907, which this year is so reminiscent of for some sectors, what happens the next year?

 9. When considering the hornet's net of worries that the stock market has been exposed to each year over the last 100 as we have documented on Daily Spec, are these troubles that much more significant? And if they are, have they been discounted, and what happens when troubles are more or less than usual relative to the market move? A quantitative approach here would be apt.

10. The market's been more volatile during the last two months in terms of ranges and big moves in an hour than ever before. Is that good or bad?

Before giving up the quantitative approach for a cyclical view of bull and bear markets and hoping that you can time them, I would encourage a little counting.

Alan Millhone remarks:

MoneyIn 2008 I will come into some money (not exactly sure how much) and plan on opening a growth fund for my two younger grandsons (ages 8 & 11). This is money I would not normally have on hand. I have been reading all the Daily Spec postings and learning about the Market Mistress. There is no better place in the world to live than America. Yes, this country has a lot of problems, but what country doesn't? If you have no faith in our economy then you need to crawl into a hole. American has always recovered and rebounded and opportunities will always abound for making money in the land of milk and honey. What other country can change Presidents and keep going strong without missing a beat? Victor's posting makes a lot of sense and is excellent food for thought. Currently bank CDs pay around 4.75% to 5%. There is a lot of turmoil at present and likely always will be. We all know that a new President won't be able to change all that much. So we forge ahead and work with the tools at hand. I am a dyed-in-the-wool optimist with respect to investing in America.

Anatoly Veltman extends:

GoldI am a die-hard value seeker myself and Victor makes a point dear to my heart. There is one caveat, that I feel is applicable to the current environment. We (more to the point: equity markets) have enjoyed the longest period in modern history, of (at least, we were told) subdued inflation. What if that changed? Then operating margins would suffer.

I got the hint that something is going amiss when my indicators on XAU, GDX, ABX, NEM all flipped into down-trend a week ago, while the same Gold Cash and Futures gauges remained in up-trend.

I scretched my head; then PPI and CPI came out and it dawned on me: traders in-the-know held on to the bullion, while getting rid of their ownership in operating concerns! And the Fed will have a job cut out for them, to reign in inflation's ugly head.

Now, since I feel a lot of the Gold Stock move has occured (gosh, GDX is down 21% in a month!), I'm trying to get short stocks that haven't fallen as much yet. Also, Gold should correct somewhat. And Platinum traded $1,529/oz record this morning, not far off my calculated $1,552 target — it should technically correct $300 for starters. Beyond that, I wouldn’t be surprised if it eventually dropped two-thirds of its current price.



When I was about eleven I was in the car with my mother's father and we noted a person going through my small town with a suitcase in hand. Grandpa looked over to me and remarked, "There goes one of Hoover's Tourists." Grandpa then briefly explained the Great Depression and all those out of work and many who (like this person) became transients. Today in traffic I saw a man with a backpack and he appeared distressed. In his hand was a sign reading "CHAS. W.Va." Of late I have noticed an increase of people walking with pull-along bags and/or backpacks traveling through my area. I feel in the last six months displaced people have increased in number.



Of late I have received several emails wanting me to borrow on my home, which happens to be a brick duplex. I live in one side and rent the other. The rented side pays all my overhead for living in my side. It is not a mansion, but it is paid for and mine. Home equity lines of credit are okay if used responsibly, just like a credit card. In Vegas they give you chips to gamble with and you feel it is only play money you are using. If you were using your own cash you would be more cautious when making bets. Now is a good time to play close to the vest.



Alan MillhoneTo be totally safe and protected from exposure you would have to avoid the market altogether. Or like me, not have any rentals and thus I would avoid all bad renters. Trading and real estate gets into our blood and there is a certain thrill or 'rush' in dabbling or being immersed! Also in many of our cases it is all we know. I watch the market, but I am not savvy enough to be a investor.

Janice Dorn adds:

To be totally safe and protected from exposure, one would have to be dead. Even then, one wonders if there is safety and protection from exposure. The most common cause of respiratory illness is breathing. So- do we all stop breathing? Move to a high mountain area to get "better air" and then risk other challenges to our body, mind and spirit?

Life is about risk. Life is risk. We risk from the moment we come into this plane. There is risk in everything. The challenge is not to avoid risk, rather to embrace and manage it. One of my favorite verses:

There once was a very cautious man who never laughed or cried.

He never cared

He never dared

He never dreamed or tried

And then, one day, he passed away and his insurance was denied.

For since he never really lived, they claimed he never died

Jim Sogi marvels at the day's events:

At 9:00am the White Knights ride in, save the situation after the huge  drop late yesterday. That was quite a move. Do they plan this kind of thing on purpose for dramatic effect? Or is just to squeeze the the last few drops of blood out? What a rinse. They obviously knew ahead of time.



I will be interviewed by two ladies named Jess and Bren about Checkers and my being President of the American Checker Federation. They host a program on sports called "Beyond the Balls." I am to be called at 6 PM MST 12/12/07. They are in Fort Collins, CO at KRFC 88.9 FM. You can hear the show live at krfcfm.org. The 'listen' link is on the left side of the page.



The bond move the last three days is down three full handles from 117 3/4 to 114 3/4. That's the greatest three day move down before a FOMC meeting in history, I believe (my data cover only the last 94 FOMC meetings from 1996). The closest contender was March 17, 2003 where a decline of 2 3/4 occurred. The bond market must not like price controls.

Anatoly Veltman writes:

Both the up-swing (to 12/4 118′22 high) and the down-swing (to 12/10 114′12 low) were on reduced Open Interest, allowing me to play reversals with greater impunity. O.I. tipped covering: it meant that fewer stop-loss orders have remained resting; a factor that substantially cushioned risk for the near-term value-picker. More interesting, both reversal trades were obvious to me in real-time; and the slight O.I. data lag was not hindrance.

The top was a double-top in price of the 10-year (and a secondary top in all Treasuries, from 2-30year); while O.I. displayed Bearish Divergence.

The ensuing chart decline was symmetrical to November's chart rally (the chart “symmetry play” piqued Victor’s interest on 12/4), and pointed to low-volume, thin chart space all the way down into the 114 handle. At the minute 114′12 traded, for 10 consecutive futures sessions O.I. cumulatively slid over 100,000 lots (10% of the exchange total)!

So, .25 on Fed Funds and .50 at the discount window — or any other combination, plus “all-important” Paragraph Three FOMC mumbling — the trade here is technically solid. My analysis is performed discretionarily in real-time; I suspect 21-century black boxes execute these trades quite ahead of me, unfortunately!

Carlos Nikros adds:

I suspect that lots of fixed income securities just became substantially longer in duration last week, as well, necessitating the usual hedging and pruning.

Andrea Ravano observes:

I think the fear factor that pushed bond prices to their limit is fading. If we consider yield moves instead of prices we get the following picture :

Mat./1week ago/Yesterday/Difference

2 Yr. 2.87 3.20 +0.33

5 Yr. 3.28 3.60 +0.32

10Yr 3.93 4.18 +0.25

The data along with the collapsing spread between Tips and vanilla Treasuries points to a "normalisation" of the bond market to pre-subprime panic levels.Which, of course, does not mean one should not be worrying about inflation in the long run, but short term wise, the move in bonds might be explained with year end book squaring and the end of the worst in the sell off of the stock autumn bear market move.

Alan Millhone remarks:

I wonder how many other UBS types will fall victim to the subprime debacle before the dust finally settles? May be a long and cold winter for builders/investors/developers. Investors look to the Feds to step in to stabilize. Fed intervention to me looks like a form of price controls, much like price freezes and rationing in the Second World War.

Victor Niederhoffer offers a postscript:

One can now see what the purpose of the four point drop in bonds in the previous three days before the Open Market meeting was: to vigilantly control the Governors from overly inflationary activities.


Barry Gitarts adds:

The equity sell-off today at 2:15 was almost expected to happen as it did when the Fed cut rates last time. What's unexpected was that the market kept going down and did not stage a turnaround at 2:30 - 3:00 pm. Maybe it became too obvious and the daytraders with their one hole located at 4:00 pm got cornered. Maybe the market will resume its upward course tomorrow after feeding the big fish today.



ClockThe recent loss of Master checker player Gene Lindsay could be a wake up call to get our affairs in order. Mr. Lindsay left a handwritten will that is now being challenged to some degree in a Tennessee court. Gene loved checkers and has left 50% of his estate to the American Checker Federation, 10% to establish a permanent International Fund, 10% to the WCDF (World Checker Draughts Federation), 10% to the Tennessee Checker Association and 20% to a young lady Gene raised. He never married and had no children.

Gene had 35 or so apartments and other assets and those will be liquidated and then the money pooled and distributed. I had my local attorney draft a pro se paper that the ACF will file to protect our interests. I may have to hire a Tennessee attorney (I live in southern Ohio) and I may have to personally appear in Court to watch over our 50%. Some of Gene's language is being questioned. 

A person can never have things in perfect order, but our best effort needs to be made to reduce later problems for family that is left to defend questions like I described in Gene's will. Just a reminder that all of us are mortal here on Earth and all of our days are numbered. I do my best to try and do some good in some way every day.



PawnI was at a pawn shop today looking at a couple of safes. The place was super busy and the owner ran out of cash while I was there and had to run to the bank for more greenbacks. I overheard one conversation where a fellow pawned some guns for $1,000 and in 30 days he owes $1,200 to redeem his pawn ticket. Business must be good, as the owner drives a new Maserati convertible. At one time years back I had considered a pawn shop and still have forms from the ATF for handling firearms. I have a good working knowledge of coins, stamps, rifles, handguns and other things of value. A pawn shop is somewhat dangerous and you have to give the local police a list every day of what you take on pawn. Always a chance some items might be stolen and you will have to surrender them if proven to be another's property. I guess the guy is entitled to such usurious interest rates for the risk he takes. I will always remember the classic black and white film The Pawnbroker, starring the late Rod Steiger.

Henry Gifford remarks:   

In New York City the government looks out for the consumer by passing laws that limit the interest rate pawnbrokers can charge. Thus there are approximately zero pawnshops in New York City. Hooray for the guy in Ohio charging whatever people are willing to pay!



Case closedToday at 2 PM was my day in Court for the eviction of the ketchup bottle renter. Last night I walked by his unit and noticed the door was unlocked and my penny was missing. (Missing penny? Yes, old trick I learned to see if someone was back or not. I put the penny in a carefully positioned way between the door and gasket and it falls when the door opens and cannot be replaced in the same way.) I had our local police come by and go into the unit with me to inspect the interior. This way the renter cannot say I took anything he had there of value (however, if of value I am sure it came from RTO [Rent to Own], Rent-A-Center, etc. and would not be his). The interior looked like the debris field of the Titanic and a good yard rake would be useful to begin the clean-up process! He took a few things, had a pile of things near the entry door, but I suspect he ran out of time last night and abandoned taking anything else. I took photos of everything and will have our attorney file a civil suit for damages against him. He may not have anything now, but might someday and the judgment will show up, unless he takes BR at some point, a risk one takes. I will have a contractor friend do the estimate (this avoids any conflict of interest in the eyes of the Court). So now I have my unit back… Oh, and he left the door key on a green tote for me to find so the only sad thing I have to report is that the upside down ketchup bottle was gone when I entered the unit.



Paul BrownJust got home from watching the Browns win over the Texas Titans in a kind of 'back and forth' game and the Brown's home crowd became a factor (probably not a fear factor) but the noise reminded me of the old Brown's Stadium some years ago. My brother and his 16 year old son were up from Florida for Thanksgiving and we decided to go to the game together today. We had two tickets and traded for three together on the 20 yard line and just 5 rows up from the field… Awesome. Much effort was made by both teams, but home field advantage was a big plus in my opinion.

I note quite a bit of discussion on starting up one's own business. You need to be like a football team/coach and know your territory, playing field, be familiar with your playbook (just like a stock traders hand held manuscript) and be totally familiar with your opponent (just like familiarity with the stocks you trade).

We traded our seats three times with street ticket sellers. Suppose you could liken this to dumping bad stocks for better positioned (better seats) stocks? We took our time looking over various tickets that were offered to us. Much like one would pour over statistics, etc. before landing upon a stock to buy. We took along a diagram (from Internet) of the playing field so we knew where offered seats would be if we chose to buy. A little bit of before hand preparation paid off and we ended up with good seats and had a great time. We profited by taking our time, much as one would in looking over financial statements, etc. of a stock before buying. My late father used to say, "Plan your work and work your plan".

Drove from Cleveland to Columbus, had a great supper at Polaris Grille. My Brother has a plane to catch in the morning for a meeting in Birmingham. Dropped him off at an airport hotel and his son and me headed back to Belpre.



I had a great Thanksgiving at my Mother's today. Later in the day we put up our tree at my home and our daughter and her three boys helped. Boys are 8,11,22 . The 11 year old (Solomon) is something else. Taking this year Saxophone at school, loves Checkers, plays sports, loves to read, and I taught him tonight how to tie a double windsor knot .

We had pizza tonight and were all in the living room chatting and I was discussing taking out our TV's and I could see Solomon listening to every word spoken. He finally spoke up and said that cable for the TV is a 'want' and not a 'need'. He further commented that the only real needs are: food, shelter, clothing. Quite a statement coming from an 11 year old .



ReadingOur church and my Sunday school class are collecting 700 books for children and teens, as poor families have only one book per every 300 children — staggering! If children don't have the opportunity to learn to read when small they will never have the reading skills to read Vic and Laurel's fine books or anything else. Most of us have hundreds or thousands of books in our homes. I have over 600 books on checkers alone. I have a good checker friend in Temecula, CA who has over 20,000 books in his home! About 2,000 on the game and the rest on everything else you can imagine. My parents taught me to read at a very early age and I have benefited from that early training/learning all of my life. Just as I have from all the varied postings on this site. I may not understand everything written, but can read everything easily.

Abe Dunkelheit adds:

"In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time — none, zero." [Charles Munger in: Poor Charlie's Almanack, 2nd edition, p. 6]



Orange CoverallsFrom my small part of the globe (Belpre, Ohio) I can see the economy getting tighter for many. The ketchup bottle remains on the counter in an inverted fashion. My being-evicted renter (Nov. 30 at 2:00 PM is the eviction court date) has not been back to the unit for a month. I can tell because I put a penny in the door when closed in a certain way, so when the door is opened it falls and I know he has returned. My new smoke detector was hanging over his bedroom door (I can see this through his curtainless window); now it is on the bedroom floor. In Ohio, there's nothing I can do till I get him in court and he is evicted by the judge — then I get the unit back that day. The other night I noticed a late model Cadillac with Texas plates in front of his door and a 'donut' spare in place on one of the car's rear tires. I called the police to come and check the car out and found that my being-evicted renter gave his key to his cousin from Texas and let him move into the unit! Nothing I can do, even though the rental agreement is in the one person's name only. The police ran the Texas plates and 'rousted' the fellow as to why he was in the unit. I was standing there and he told the police and me that his cousin gave him the key and that he had no place to stay (homeless). The young fellow even apologized to me for being there! Then last night a deputy sheriff drove through the property and I asked him who he was looking for and he told me (fellow I am evicting). Guess he was a 'no show' in court for underage consumption and resisting arrest a time back. Things have gone from bad to worse for this young man. That evening he came back onto the property with another fellow to pick up the Texas cousin at my unit and I called the police. They arrived and took the fellow away in cuffs. The fellow from Texas is broke, no place to stay. Being-evicted renter may appear for his eviction hearing in prison orange coveralls. I see the economy tighten for people I rent to, and, comparing notes, other rental property owners have similar stories. Real estate is still a great investment — but not for everyone!

Henry Gifford remarks:

Interesting lesson for all in your rental headaches. I had some good, some bad tenants until I started using a broker to find tenants. They found only good ones. People with more time than money scour the classified ads, while people with lives use a broker. It's the best filtering mechanism around.

I had a tenant rent his mailbox to a drug dealer who stabbed me in the chest, and he's still in the apartment. When I was an active landlord, a really "clean" eviction case flew through the NYC courts in about a year if uncontested, longer if contested, which basically meant showing up. Sublets to non-payers could take a couple of years, with of course huge legal fees that cost more per month than several other tenants were paying. You have it easy out there in Ohio!

Ken Smith notes:

In Seattle a rental house can have up to 12 occupants, if I am correct on this. So when a renter is short of money he can advertise for people to share his domicile. Renter has the lease and can sublease. There are ways out of being evicted if willing to share. Place across street from me once had 12 occupants, all moving in to assist with the rent after the original lease holder lost his job. They moved in incrementally. First one, then a couple, then a mom with two kids, etc. 



A nice quote I want to share (not sure who wrote it) -

Be kinder than necessary, for everyone is fighting some kind of battle. Life isn't about waiting for the storm to pass, it's about learning how to dance in the rain. 

Many of us are fighting our own battles with the Market Mistress, real estate and rental problems, etc. One thing we can do on Vic and Laurel's site is to listen to each other's problems and offer sound advice when warranted. Football is back and forth for control of the playing field just as the market is back and forth for many attempting to gain control of the big board. I look at 'dancing in the rain' as learning to cope with the many troubles facing us today.

Misan Thrope writes:

This is a hodgepodge of separate quotations: "Be kinder than necessary" is attributed to J. M. Barrie 1860-1937 (the author of Peter Pan), "be kind, for every one you meet is fighting a great battle" is attributed to either the greek philosopher Plato (427 BCE - 347 BCE) or (more likely) Philo of Alexandria (20 BCE - 50 CE) depending which web site you believe. Finally "life isn't .. dance in the rain" is from an anonymous source. A good example of Internet junk that gets transmitted like a virus through repetition and random recombination of disparate elements. 



VNThe importance of practice in music can't be overstated. There are hardly any musicians of great competence who took up their study after the teens, and most have been practicing intensively since the age of seven. The problem is that most people hate practice, stop at an early stage, and waste their time when they do this. Michelle Siteman in her magnificent book, "The Pleasure and Perils of Raising Young Musicians " has a chapter "Practice Makes Perfect " in which she gives 10 techniques for improving the quality and quantity of such practice.I have received completely positive feedback from musicians who have read this book that the techniques she suggests are ingenious and useful. I believe the have universal value, and I will try to apply the lessons from Ms. Siteman's chapter to improve the practice of trading with a few of my own practice techniques from racket sports thrown in. This is a subject that has received much too little attention as practice makes more perfect in every field including our own, And this would apply to any trader despite his natural proclivities and abilities. It is common to think that a quality for greatness in a field is to love to practice it. But Vladimir Horowitz, Glen Gould and many other musicians, including Beethoven, hated practice when they were young, but they were able to conquer their aversion, usually with the aid of a firm parent who applied some of these techniques. Presumably the head of a trading team should insist on practice regardless of the qualms or machismo of some of those whose recent track record is good, or believe they were to the manor born. Emulate Pablo Casals and Yehudi Menuhin, who practiced eight hours a day, every day of their lives.

It's not enough to say: practice trading. Most people don't know how to do it. And most are bored while practicing so there has to be something that makes it interesting. Musicians handle this by mixing in some easy beautiful pieces with the scales, finger exercises and and arpeggios.

1. Group activity. One universal technique for making practice more interesting is to make it part of a group activity. Somehow those who play instruments in orchestras stick with their instruments to a much greater extent than piano, and this is why many impartial observers suggest that orchestral instruments are better for a child to play than piano, because they stick with it. Practice sessions for traders should be in groups.

2. Money rewards. And what follows from this is that monetary rewards are a great motivator for musicians to practice. Some parents make their kids pay part of their lessons with their allowance money. This has a very salubrious impact on the efficacy of practice. Group trading practice should have monetary rewards. It's amazing how many of us will stoop down to pick up a $5 bill.

3. Record keeping. Record keeping is an important part of a good practice session. A systematic account of what has been learned and what the goals are is always helpful as a foundation. It's also helpful to be able to review the mistakes and winning forays that went into a successful trade.

4. Parental presence. All musicians find it boring to practice alone. Having a parent around to observe reduces boredom. If it's important enough for the parent to insist the child do it, then it's also important enough for a parent to take an interest. The same would apply to a trading manager, who all too often leaves the trading practice to the subordinates without taking an interest in it.

5. Proper logistics. Practice should be at a certain time, and a certain place and there should be good lighting. That way there's no chance that a session can be missed because of a conflict in schedule that arose because the child or trader didnt know that it was scheduled for that day and time. A proper environment without sibling or other traders squawking that they are hungry also improves results.

6. Consistency. Practice every day is essential. The markets are always changing, and after a day or two all the skills begin to detiorate. I once practiced squash every day, 365 days a year, for 10 years. A trader should practice trading each day, or if a hiatus ensues, should practice steadily for a number of days before entering into the fray.

7. Read books about the techniques that other great musicians used to improve their techniques. What worked for them probably would put you on a path that has at least been tested. Eschew the techniques of traders that were not successful, for example the boy trader.

I would be interested in ideas readers have on improving the training and practice of traders.

Larry Williams adds:

Larry WilliamsI have always thought mastery is a largely the function of repetition.

Obviously you have to repeat the right things. Today's great home run hitters all have instant access in the dugout to videos of their last time at bat to review and repeat the right techniques and stop the wrong. Many scoff at paper trading — sure, it is not as emotional, but still provides valuable lessons.

Chris Ledoux won the world bareback riding championship with very few rides in actual rodeos. He was so banged up he practised on a bucking machine (also wrote a good song about it) to prevent further injury and shocked all the bettors who had never heard of him as he accomplished his gold belt-buckle dreams.

Jim Sogi suggests:

Jim SogiMy Karate teacher said, "What is the best practice and training for fighting? Fighting. You can run all day, you can do 1000 sit ups, 1000 push ups, 1000 sprints, and 1000 punches. But the best practice is fighting with an opponent. "My father once said, " The only difference between a small case and a large case is the number of zeros behind the 1."

You can read 1000 books about trading, study data for hours, but the best practice for trading is trading. Even if you do small size, which is best for practice, it keeps your wits sharp and emotions tough and keeps you in the game.

Keep a place set aside for only trading, always ready to go, 24 hours a day without having to clean up, scoot others away. Same with music practice. Have a set aside place or room for music with all the instruments just ready to walk in and pick up and play, even for 10 minutes before dinner. Pretty soon it becomes a habit.

Allen Gillespie takes it further:

Scales and etudes and pieces played with different bowings, speed, rhythm, etc. Breaking down a passage into shorter component parts. For example, if there is a long passage of quickly played 16th notes, first practice with separate bows for each note, then two on a bow, then three, etc. then change the rhythms from just 16ths notes, then just play the key notes from the scale so the ear hears where the passage is headed as many of the notes are fillers, understand and anticipate the pattern. Learn to play by ear. Finally, Always Play/Practice Musically (i.e. even when practicing the notes do not forget to include the crescendos, etc.)

For the trader,

1) Imagine as many scenarios as possible.

2) The distance between lows or highs or between lows and highs might give an indication as to the key

3) Some notes/days are more important than others

4) Trade smaller during times of practice

5) Test different combinations of variables - first separately then two, etc.

6) Despite all the practice, sometimes the best performances are not straight from the page

7) Finally, trading is an emotional game, so play with passion and remember there is always a low note and a high note and many notes in between.

Sam Marx reminisces:

Practice is important and in my sport in high school I practiced quite a bit but always felt that I had a limit because of physical limitations. I was 6 ft. tall but my hands were below average for my size. I couldn't get a good grip on a football or palm a basketball.

Once I was seated at a dinner table next to Bart Starr, former Green Bay QB. That man had huge hands. I have no doubt that enabled him to better control the football and made him a star. Another time I was in close proximity to Gil Hodges and I noticed that he also had huge hands. I believe he was a first baseman. I could just picture him with an oversize glove catching balls or scooping up grounders that would be missed by the average infielder.

A friend of mine was an excellent boxer. His arms were extremely long, also, his head was smaller than it should be for his size. He could just move around his opponent and jab him silly while keeping his head tucked behind his shoulders. Standing up with his arms dangling on his side I thought he looked like a chimpanzee. He had no desire to become a professional boxer but I've seen professionals in the ring with those characteristics. Kid Gavilan comes to mind.

On the options trading floor I noticed that some traders could hear trades from across the pit. Their hearing was acute.

Practice is important, but don't dismiss physical and mental ability, especially abilities in the 3 plus sigma range.

Don't tell your kid that he can accomplish anything if he practices enough. Offer this advice only when justified. Tell him he can greatly improve with practice but don't offer false hope of attaining the impossible. It can be frustrating if you're not in the 3 plus sigma range in the field you're practicing in.

Nigel Davies recalls:

David Bronstein once advised me to prepare for tournaments by studying chess at the exact times the games were scheduled. And I understand that Vladimir Kramnik took this concept one stage further by solving endgame studies (particularly demanding work) during the last hour of such studies. The last hour of a playing session is known to be the most critical, with most games being won or lost at this time. And it does seem that he got the better of Veselin Topalov at this point in the games.

Easan Katir mentions:

I spent one recent Saturday evening at the Hat and Hare Pub in the basement of the Magic Castle, with two accomplished card men, Aaron Fisher and Tony Picasso, discussing their art. Aaron instructed, "to improve, perform at any opportunity, for anyone." The club was full. He said, "C'mon, let's find you some people." So he rounded up a spontaneous audience comprised of three giggly young things, and gave this amateur the opportunity to perform modestly baffling illusions.

Live performing, live trading. No solo practice or paper trading like it. Mind sharp. Managing audience expectations, unexpected reactions and distractions. The joy of good execution. The thrill of conquest. The glow of accomplishment.

Much theoretical study, counting and practicing correctly precedes such moments. For trading I suppose the advice "perform at any opportunity" could be ambiguous enough to become a way to diminish one's capital, unless one adheres to tested guidelines for what constitutes an 'opportunity'. It works for me to transfer these skills to trading.

Evan McKeown writes:

John McEnroePractice is such an important topic. I have always believed that if you do what you love, and love what you do, then success will eventually come your way. Success itself means different things to different people.

I am a 5.0 tennis player, and love playing tennis. No matter how much I played, or practiced, I never was able to reach a level much higher. Notwithstanding my dedication or love for the game, I have enjoyed other success by meeting wonderful people that share my enthusiasm and we enjoy our weekly matches. John McEnroe once said he hated to practice, so, instead, he played in doubles tournaments. John had one of the best net games in tennis which is unusual today thanks to his devotion to being a doubles player as a substitute for practice.

I am a trader. Once again, I love what I do. Trading is not a job, it is a way of life, my passion. I trade every day, and practice every day. Practice for me, comes in many different forms. Just as in tennis, there is on the court, and off the court practice time. Off the court (or ticker screen) I stimulate my mind with financial literature. The best book I ever read, and the only book I ever read for a second time, is "The Education of a Speculator." This work of art should be required reading for any college finance class. Long before this book made me any money, it first saved me thousands. Years ago, when a perfect storm of events had collapsed my portfolio and nearly had me on the verge of ruin, I sent an email to Vic and Laurel for some word of encouragement after the market had crashed through a 200 day moving average, financial condition in the market that is not unlike the one we see today.

To my amazement, Vic and Laurel wrote me back with a few simple words that inspired confidence. Not so much advice, as it was knowledge on how to handle adversity. I not only made back the 50% that my portfolio had declined, I ended the year with a 27% gain. That email changed my life forever. Instead of placing a sell order and taking a loss of half my assets, I took the pearls of wisdom and made the most of the opportunity.

Thank you Vic and Laurel, for sharing your knowledge and experience of the markets, for being an inspiration for common everyday traders such as myself, and for taking a few moments and write such an inspiring email that changed my life forever!

Pitt Maner III says:

Many years ago I went for 3 days of tennis lessons at Nick Bollettieri's in Brandenton, Florida. An evaluation was done of each player's ability and then we were separated into groups and sent out to practice for about 5 hours each day (with a lunch break at mid-day to watch films of Agassi playing). Thank God it was not in the dead of summer, but at 80 or so degrees it was still quite brutal for moderately trained weekend warriors.

One of my teachers was a former Rhodesian paratrooper named Ian who picked up very quickly on my poor footwork (even for a 3.5 or 4.0 player) and tendency to "float" or not properly set my right foot when hitting a backhand. The school also emphasized the need to follow through on strokes and to keep hitting the ball deep and allowing for sufficient height of trajectory over the net. In other words give yourself a margin of error and don't try to hit winners all the time from the baseline–play it a bit safe and wear your opponent down.

The tendency of beginning tennis players love to hit winners even at the expense of hitting several poor shots and losing games was discussed. Players were taught to recognize the importance of swing points (ie. 40-30 or deuce or 30 all) and to be more aggressive at 40-0 or 40-15. At the pro level students were shown film of Agassi running Lendl and not finishing off points right away if Andre could get Lendl to "lunge" one more time and thus exert more energy. Tennis warfare by attrition.

Tennis at the highest levels was indeed a different game then what I imagined or had gathered from watching Borg and Conners on TV or reading about in Tennis magazine.

On the adjacent court one could watch the 10 year old Anna Kournikova practice with her coaches under the vigilant eyes of her Russian mother. The tennis school had a quite rigorous schedule for the kids–lots of running in the morning, tutoring–school, weightlifting, and hours and hours of hitting tennis balls. At the time Anna said she loved to play tennis and did not mind the practice. We watched as she played practice games in the afternoon against boys her age or slightly older.

At the end of 3 days my toenails were breaking off from my swollen feet (note to file–never come to a tennis camp with new tennis shoes!) I had experienced my first and only time with tachycardia after running side to side "suicides" on the court. My game had been broken down and I was now playing like a sorry 3.0 player and not able to incorporate or integrate all the intensive things that had been taught. There was a German banker who said he worked 60-70 hours a week at home and came to the camp for "relaxation"–masochism at its finest!

But the lessons were learned and not forgotten and months later my tennis game improved and my appreciation for the game greatly expanded.

Steve Scoles makes another point:

An important requirement of successful practice is getting proper feedback in a timely manner — touching a hot stove teaches you pretty quickly not to do it again. Markets, because of their probabilistic nature, are really horrible at given this kind of feedback. In investing and risk management, the short-term outcomes are often  unrelated to the quality of your decisions and it may even take years to be proven "right" or "wrong". I don't think this is a new idea to the world of trading, but I have always found playing poker to be a good way of practicing dealing with the probabilistic nature of markets.

Poker has several similarities with investing with some key ones being:
- imperfect information
- probabilistic outcomes
- emotional involvement is in play as money is on the line and your failures and successes can be monitored & commented on by the other players.

The advantage of poker over the markets is that the decision-outcome relationship is usually more analytically simple to learn from and thus the feedback loop is a lot better than what you get from the markets.

Three things that I have found poker helps you develop that can be carried over to the markets are:

1) to learn and internalize how gains and losses are really probabilistic outcomes rather than successes or failures;

2) to improve your ability to evaluate decisions on a basis other than the outcome;

3) to improve your ability to maintain emotional stability through the various ups and downs.

Jim Sogi makes his second remark:

In Japan the Sumo wrestlers live a strict regimen of diet and training. They avoid emotional upset that might affect their appetite. This is like trading. It has to be approached as a competitive sport. Physical training, proper sleep, good food, avoiding drugs and alcohol are necessary during the trading week to be in top shape when in the fray. If something upsets me or I fall out of training, the trading can be affected.

Alan Millhone follows up:

I will speculate that the Sumo's do not watch much TV nor hear any negative news while in training ? Mental discipline in Sumo, trading, board games,etc. is critical. When I attend any Checker tournament I get my rest, eat properly, no TV when on the road. Mr. Sogi is correct that being upset is a big deterrent to functioning properly in any endeavor. Staying focused is Job # 1 and critical to proper performance. The avoidance of drugs and alcohol holds true in any event we pursue. 



MechanicI send the wife to the mechanic's shop. She is interested in people's lives. People love to feel important. If a mechanic has kids, we are in for cost on the parts and labor. If the guy is interested in the stock market we get a flat rate as she drops, "My husband loves cars. He had a race car, but he never has the time to come to the shops any more because of work."

The last three good mechanics I found, actually the wife found and they later became our good friends. Turns out the dad of my six year old's classmate is a national champ drag racer. I didn't get the chance to meet him until a birthday party. By then he already knew our life story.

Point is, never go into a mechanic's shop and act like you know what you're talking about or talk price price price. More often than not I talk to the mechanics and say, "Hey, while you have that apart shouldn't we change this or that part too? Of course they say "Yea, I would, but all anyone cares about is how much this is going to cost today."

Alan Millhone adds:

As a builder/remodeler do I drive to a prospective client's home to give an estimate in a custom newer pick-up or an older truck? If they see me in a new truck will they think I am very successful (never knowing my truck payment book is 12 inches high!) or will they feel I am charging too much, to be able to drive such a nice truck? Or do I drive a truck that looks like it has been well used on many job? I do have a nice Rolex I bought years ago, but prefer my Timex wrist watch, so I wear the Timex for all estimates and most of the time anyway. Perception is 100% of most things in life. 

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