Apr

19

 Yesterday was the anniversary of the tragic 1906 San Francisco Earthquake (Mag: 7.8 EQ)

Dr. Lucy Jones, a USGS Seismologist (@DrLucyJones) tweeted an interesting fact surrounding the aftermath: "The greatest growth [earthquakes] in Los Angeles was the ten year period after the 1906, while San Francisco shrank"

This has my mind racing on trading ideas for testing. If you figure Earthquakes as single financial instrument and SF & LA as two separate markets with similar securities and something like security volatility as earthquake magnitude (my first guess approximation, there are probably better indicators, perhaps security liquidity.) Which of these would you think are worth testing for similar outcomes:

Various Central Banks maneuvers- Perhaps we're seeing it now as the US Fed unwinds and ECB picks up QE.

WTI vs. Brent

S&P vs Dax or UK or Asia

Currencies- take your pick.

Not a commodity expert so hard to decide there. I would consider gold but it seems universal.

Would love to hear of your thoughts and please feel free to call me out for Ballyhoo.

Enjoy your weekends.

Best,

Paul

anonymous writes: 

 On or about the 8th March this year I posted a piece on the site that may help clarify your initial thinking on what to test.  ( if you want it sent direct to you please advise ).

Amongst much else, there are two types of waves involved.  So called P -  and S - waves.  ( Wikipedia has a reasonable description of both ).

They P waves travel in the direction of the energy propagation whereas the S waves ( or shear waves) travel in a perpendicular fashion.

One starting point is to consider P wave as movements within and between the same type of markets ( SPU, DAX, NIKKEI) and S Waves as subsequent/coincident moves into unrelated markets. 

The key is that P waves show up first on the seismograph. There is no Mount St. Helens eruption without a P wave but there are plenty of P waves without Mount St. Helens eruptions.

One reads much about the precursors to major things/ events/ phenomena.  They almost invariably focus on only one side of the distribution (ie the crash scenario in markets). I believe the trifling ( yet cumulative /additive) information available in research papers should be used for predictions of melt- ups AND melt downs, not merely the downside.

Paul Marino replies: 

Thanks for the quick response, will certainly track down your post. I totally agree with you at the one-sidedness of looking for the crash as opposed to the melt up and its ramifications elsewhere in the system.

I'm looking at it from the SF side where things stabilized and grew and the calling signs for fut growth there were reinforced by the "event" moving along to the other markets. As Vic says a forrest fire clears the underbrush for future growth and a firmer ground.

I see it as a value with growth opportunity in the initially affected area, SF, and not so much looking for future crashes although you could hedge/pair against the trade by going against whomever is along the fault line thereafter as an idea. 

anonymous writes: 

What grew in the 10 years after the San Francisco earthquake (God's work) and fire (largely the work of the stupid U.S. Army) was construction, development and population in Los Angeles, not "earthquakes". Los Angeles largely owes its pre-eminence in California to the effects of that boom and San Francisco's literal downfall. 

Pitt T. Maner III writes: 

Related to the San Francisco discussion, I wonder how the recent dramatic changes in depth to groundwater in some areas of California might change the odds over time.

1.

"Researchers proved that the Hayward Fault, which stretches through largely populated areas in the East Bay as far south as Fremont and as far north as San Pablo Bay at Richmond, actually touches the Calaveras Fault, which runs east of San Jose. There is an estimated 14.3 percent likelihood of a 6.7 magnitude or greater earthquake along the Hayward Fault in the next 30 years and a 7.4 percent chance on the Calaveras Fault, according to the U.S. Geological Survey. "The smooth connection between the two faults means that an earthquake could quite easily break both faults at the same time, making for a substantially bigger and more destructive event," said Roland Burgmann, campus professor of earth and planetary science and co-author of the study. "Deeper in the Earth, we find small earthquakes that clearly define where the connecting fault is.""

2. Average time between ruptures


3.
A interesting list of earthquakes in California

Feb

1

Just as Daily Spec is starting to present financial data in sports-statistic-like terms, Bloomberg has announced that it will use its analysis tools on sports.

Robert Smythe asks:

Can someone explain briefly the chart at the top of the page? What do these numbers mean? USB?

Alex Castaldo says:

These are the price moves in S&P futures and in Bond futures on the given day. (Sorry about the ugly abbreviation USB, the full word US Bonds did not quite fit the allotted space). In each case the nearby futures contract (currently March) is the one we use.

The price change for bonds is quoted in points and thirty-seconds of a point, as is traditional in Bonds. So for example on January 12 bonds rose by 1 point and 20/32, and this is shown as +1.20.

As Paul Marino notes, the whole thing is inspired by sport scorecards that show the recent wins/losses for a team.

The four colors are based on who wins and loses on any given day. A Red ink day is when both Equity and Bond investors lose, while Green is when bond and equity prices both go up. The mixed cases are: a warm orange color when the environment was favorable to those who take equity risk but unfavorable to those who avoid equity risk (i.e. bond investors), a cool blue when stock prices went down and bond prices went up (sometimes called a flight to safety or flight from risk day).

We hope you find our calendar interesting.

Oct

4

Robert L. Bacon lives! As always. Look at how many respectable NFL teams have QBs who didn’t start much in college. Less chance for injury and longterm gains if you have the talent. Joe Flacco, Mark Sanchez, Eli Manning, et. al.

I could expand a little on it; this Sports Illustrated article from Peter King reflects on the subject better than I can. The form is moving.

“I count six passers 25 or younger — Ryan, Flacco, Sanchez, Stafford, Trent Edwards of Buffalo and Green Bay’s Aaron Rodgers — as players with exceedingly bright futures. Ten years ago, the only sure thing under 25 was Peyton Manning … and the draft class of 1999 (Tim Couch, Akili Smith, Donovan McNabb, Daunte Culpepper, Cade McNown, Shaun King) was on track to be awful, even with McNabb and Culpepper in it.

I can think of a few reasons. Colleges are a better incubator for pro quarterbacks today, in part because they’re playing more pro-style spread schemes (and the NFL is copying some college spread stuff too); the NFL is using more shotgun snaps too, and that allows young passers to see the field more clearly on passing downs. There’s also been a lot of cross-pollination between college and pro football recently.”

Jul

20

I often say you can't appreciate one market without taking into consideration the backdrop of impacts and effects of other markets. No better illustration of that than last week's action. Here are some indicia:

TA-25 / VIX tableThus, Tel Aviv 25 broke 1000 and VIX broke 30, both for the first times since Mar 16, a nice four month anniversary.

Oil had its greatest one week drop in history, down $16 from from $145 to $129. Its previous record decline was $9.60 in the week ending Nov 30, 2007.

The S&P had its first up week of the previous seven, after spending the longest time in the last 25 years without a reasonable X day maximum.

Bunds, down 1.27 points on Friday 7/18, had their second greatest decline in history, exceeded only in Dec 2001. Corn dropped 20%, and most other grains and metals fell at least 10% on the week.

In short, there was a complete changing of the guard, and fulfillment of long frustrated dreams across the board. What other highlights did I miss?


Vince Fulco looks at the foreign policy scene:

Speaking qualitatively, if we change the term "frustrated dreams" to "frustrated pursuits", the extreme hardening of Iranian and Western positions the last few weeks with the then bolt from the blue US actions to meet in Geneva over the weekend and establish some base level of diplomatic representation within the country constitute a promising, albeit fragile reversal of trend.

Paul Marino adds:

Much as Vic and Laurel believe Fed members and the like have access to the information three days or so before reports are released, someone, somewhere knew the US would sit down at the table with Iran, albeit briefly and deadlocked. Oil knew of this well ahead of time. 

Jul

27

The White StripesI start out every year in my 401k with 75% S&P Index fund and 25% cash. I wait for major down days to redeploy the rest of my cash. My first five percent buy move was in the February selloff and I'm doing so again this morning. I try to deploy all my cash by year-end. With investment restrictions due to the bank I work for, I am limited in my speculation, but this system has worked well for me over the last five years.

After reading the site for years I'd like to share my favorite song to play on market days like yesterday: We're Going To Be Friends, a great Beatlesque tune by The White Stripes. This song to me represents the greatness of what is around the corner in life and the markets, for those who appreciate the beauty of continued learning. I listen to this during any market downturn. I just can't tell if the market mistress is Suzy Lee or the teacher. Anyway, I am optimistic. 

J.T. Holley adds: 

 The last Friday of the month is 401k day across the land in most plans. Such a sweet day today for the public to enter!

I like to strum a six-string and sing songs to my kids like I was Raffi. But when I have spare time I pretend I'm Jimmy Page. Jack White of the White Stripes is truly a genius, a producer and musician (not just guitar). They don't come along too often like him. He pretty much does all of this on his own, with the help of a single drummer.

Icky Thump is their newest album and the Icky is one of the best singles on the album. Reminds me of Led Zepplin.

White also produced Van Lear Rose for Loretta Lynn a few years back and helped her win a Grammy. Unbelievable, ground-breaking music.

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