As the baseball playoffs begin next week with teams still alive or at least home field advantage being at stake this late in the year, I've considered what makes a good team or player over a period of time or a season. The colloquial term for the highest talent is known as a 5 Tool Player. This is a position player (non-pitcher) who possesses singular athletic and intellectual talent allowing them to hit above average, hit for power, run for speed (in the field and running basses) and the more defensive attributes, throwing arm and fielding.
I see today that MLB's statistical team has found the 8 five tool players for this season. It is a simplified yet seemingly important way to view a period of time arbitrarily. As they state:
"Let's lay out the rules. We identified the following five Statcast™ thresholds as stand-ins for the five traditional tools, and sorted by only the players who have had at least three qualified recorded data points in each of the five areas. That's not the same as being above average for an entire season, but that's not the point; we want to see the players who are blessed with the capability to do these things at all, and three times over six months didn't seem too much to ask."
Hitting: Batting exit velocity of ≥ 110 mph
Hitting for power: Home run distance of ≥ 425 feet
Fielding: Route efficiency of ≥ 98 percent
Throwing: Throws of ≥ 85 mph
Running: Top baserunning speed of ≥ 21 mph
The Statcast™ "Five Tool Players
I disagree with certain aspects of what they were measuring. Exit velocity seems more tied to power than straight hitting but I digress. This rationale seems important for viewing individual markets and the speculator population.
What traits create the Five Tool Speculator?
Commodity fallout has put a lot of pressure on Glencore recently. Their CDS spreads have widened greatly over the past few months.
For the spec-listers who are of the commodity bent, how may this distress affect commodities?
Not that Glencore is involved, but when Lumber hits a 52wk low Thursday and new home sales were up 5.7% in August, released on the same day, I wonder if company specific problems are causing the dislocation.
Of course China is slowing. But I am more interested in Glencore.
I remember the 80s real estate boom. There were systems for buying no money down. Flipping real estate. There were 10% months. People leveraged investments. People bought with balloon payments. Then Volcker started tightening. Imagine having Treasuries at 14%. Lots and lots of people went bust, got caught. Lots of foreclosures. No more financing. No one could refinance at 17-24%. The long term average interest over the millennia is something like 4-6%. The cycles are very long. The Fed tightening cycles continue for quite while.
Paul Marino writes:
This was from March but has stuck with me since and sort of guides my thoughts on rates. Basically, Bernanke doesn't expect the Fed Funds rate to rise back to its historical average of 4% in his lifetime. That is a long time at low rates and basically non-existent inflation for that to occur.
July 31, 2015 | Leave a Comment
Paddy Power, the Irish/UK bookmaker, has their current odds for the 16 election. With Hillary leading at evens odds and presumably she will stay close to this over the next year when will market participants react to her beating the drum on raising short term capital gains and how may that play out to benefit flexions and DC real estate in the guise of wealth redistribution?
Stock Trader's Almanac 2016 sneak preview:
ONLY SIX ELECTION YEAR DECLINES GREATER THAN 5% SINCE 1896 Presidential election years are the second best performing year of the four-year cycle, producing losses of greater than 5% in only six of those thirty years. Incumbent parties lost power in five of those years. Five losses occurred at the end of the second term. FDR defeated Hoover in 1932 and was re-elected to an unprecedented third term as WWII ravaged Europe. Election year 2016 marks the end of the incumbent party’s second term, increasing the probabilities of a weak year.
He changed his profession because of the St. Louis distributor.
Charles Pennington explains:
A helpful colleague alerted me that the business about the "St. Louis distributor" starts around minute 44:00. Short story is that Simons found himself the owner of a computer company of some sort in St. Louis, then was faced with having to have meetings with the "distributor from St. Louis", which he finds distasteful.
Stefan Martinek writes:
Some interesting parts:
28:30: "Trend is an anomaly in data"
29:30: "There are no elaborate equations, some sophisticated math in the area of the last part – how to min. volatility of the whole"
It would be great to see a track record and run it against some benchmarks.
Paul Marino writes:
Thanks for the video, Rocky.
Is it bullish or bearish that he wasn't chain smoking cigarettes throughout? Has he quit? I find it fascinating how people smoke when it doesn't compute with their life like doctors, firefighters, billionaires.
Anatoly Veltman writes:
It seemed half-way through Jim pulled something out of front pocket, and then (I speculate) came an editorial cut. Is your query due to personal experience? I, for one, wouldn't ask that on this site, although I was awestruck with the same thing in this clip.
I had the good fortune to sit on Jim's right shoulder during a five-hour (you immediately know it was ethnic Russian household) lunch. I was so uncomfortable because I haven't had one puff in 30 years so I asked, "Jim, I thought American males didn't smoke?" Jim didn't take more than two seconds to repartee: "you know, you're right on the whole, but the lower classes still do". Later he was less apologetic: "I just enjoy cigarettes too much to stop". I'm a little dumbfounded in this clip Jim credited his dad with bankrolling his investment debut. Can someone pinpoint the minute Jim commented on Madoff? I missed the sound bite.
Paul Marino writes:
I had heard that he was a chain smoker for decades, still smoked as of last summer.
Not trying to demoralize him, I smoked for years myself, it is a tough habit to break, but in New York you're surprised by the type of smoker as I had mentioned earlier plus the city's war on tobacco, sugar, etc. At $13 a pack I guess you need to be a billionaire or doctor to afford to smoke these days here.
You could always tell when Simons was at a math department tea by the smell of cigarette smoke. No Smoking allowed in university buildings, but who is going to tell that to the guy who built the place?
June 23, 2015 | Leave a Comment
I was looking at this interesting take on the CAPM as it pertains to mutual funds from Stanford University over the weekend. They used mutual funds for their study but I found it promising that they use a fund's fee changes in the study.
We propose a new way of testing the validity of an asset pricing model. Instead of following the common practice in the literature which relies on moment conditions related to returns, we use mutual fund capital ﬂow data. Our study is motivated by revealed preference theory: if the asset pricing model under consideration correctly prices risk, then investors must be using it, and must be allocating their money based on that risk model. Consistent with this theory, we ﬁnd that investors' capital ﬂows in and out of mutual funds does reliably distinguish between asset pricing models. We ﬁnd that the CAPM outperforms all extensions to model, which implies, given our current level of knowledge, that it is the best method to use to compute the cost of capital of an investment opportunity. Perhaps the most important implication of our paper is that it highlights the usefulness and power of mutual fund data when addressing general asset pricing questions. Mutual fund data provides insights into questions that stock market data cannot. Because the market for mutual funds equilibrates through capital ﬂows instead of prices we can directly observe investors' investment decisions. That allows us to infer their risk preferences from their actions. The observability of these choices and what this implies for investor preferences has remained largely unexplored in the literature.
June 20, 2015 | Leave a Comment
As I continue on my arduous journey for selecting and also constantly keeping traders at their A-game, I was wondering if Vic, Brett or others on the list have any experience with how Sports Psychology could be used with Traders.
A competing athlete goes through pretty much the same psychological challenges that a trader goes through…and I was wondering if any research had been done on this subject.
Mental training helps athletes perform more consistently, find the zone more often, keep a winning streak alive, and learn how to think well under pressure. Or, as one sports psychologist put it, mental toughness is "the ability to consistently perform toward the upper range of your talent and skill regardless of competitive circumstances." As psychologists debate the roles of genetics, environment, and learned skills in determining mental toughness, they do agree (along with athletes and coaches) that high levels of mental toughness are associated with athletic prowess and success. In fact, mental toughness (or "grit") may be the defining factor between finishing at the front of the pack and not finishing at all.
Any thoughts from Specs would be welcome.
Victor Niederhoffer writes:
One would turn to Galton as one should on most areas involving human faculty. The key to athletics success is the sports gene. A key to trading success is intelligence. I would also look to the circle of friends, colleagues and influencers that a prospective employee has. Is he benevolent or a hoodoo. Beware of the hoodoo, and stay with the ones that create benefits for those associated with them.
John Netto writes:
Sushant. I would read Market Mind Games by Denise Shull. It's excellent and will be a nice resource on your journey. Good luck.
Ability to learn from and then put losses behind them. The inevitable mistakes being made are then analyzed, learned from, improvement sought, and then move on without negative baggage and lament about what could have happened.
Longevity. Injury, early retirement, or large losses do not afford one the ability to succeed.
Independent thought. A Zen like ability to follow one's own methodology and ideas in a non-conformist fashion, yet to balance with the ability to absorb appropriate outside information
Simple hard work. The will to stay out on the field longer than anybody else. Think Jerry Rice, Marcus O'Sullivan, Patrick Kane, Michael Jordan.
Brett Steenbarger writes:
Frankly I think the best writing on the topic is your account of your racquetball career. I agree that mental toughness is important, but all the toughness and repetition in the world won't be helpful if a person is working on the wrong things. I continue to find that good trading makes for good psychology just as often as the reverse.
Larry Williams writes:
The mark of all greats is the ability to come back from behind.
Hernan Avella writes:
From Handbook of Sport Psychology. Gershon et al.
"Personality traits like dispositional self consciousness, reinvestment and trait anxiety have been associated with predictors of performance failure. Research has also demonstrated that giving athletes practice at dealing with the types of attention demands that performance pressure induces can reduce sill failure when the stakes are high. Also, that preventing athletes from acquiring the type of explicit knowledge that pressure may exploit to begin with may also help to quell the negative effects of stress at high levels of performance."
Paul Marino adds:
I had a long discussion today with my father regarding choosing the humble person over the boisterous kind of person in any of of life's dealings, from the dry cleaner or barber to your doctor or broker. I tend to get less agitated around the humble and have an easier time speaking my mind. If my physician was loud I might not tell him as much about my life and habits as I should. It's what works best for you that counts, like in any system, trading or otherwise. "Know thyself" may be the best known and least used maxim of all time.
At what point in the day do stocks reverse direction? The Chair mentioned after lunch. In theory it should be when there are more buyers than sellers, or the momentum of buying over whelms the downward pressure of sellers. Traders, like many other organisms, tend to move in herds, or try to follow. Whether it follows through to a reversal, like just now, or whether it is a head fake prelude to further drops is important to distinguish within one's time frame. It is important to catch the turn at the cusp rather than after confirmation when it is probably too late to capitalize efficiently. The data can signal those points in real time but there seem to be about 3 or 4 things or more going on at once in terms of forces at work or data streams to consider and factor in. It seems also to be a computational capacity problem and data flow issue. That's why I've always thought a 3 dimensional approach would be helpful.
The other big problem is to weed out the big trend days and not get caught under the falling knife. One thing I use to try weed out those trend days are the 10:1 updn signals that Marty Zweig talks about as signals, but not in the same way.
Kurt Sprecht writes:
Untested on my part, but if the morning has been somewhat variable (i.e., no large increase or decrease at the open which holds in a tight range), there often is a reversal during the Eastern time zone lunch hour. My apologies for lack of specificity or corroborating data.
Paul Marino writes:
My insomniac tendencies have noticed liquidity changes at the 3am euro open for S&P globex. Really starts at 1 am but by 3 is when it gets over 5k volume per 5 minute bars as Europe opens. An anonymous smart speclister had mentioned a couple months back the different openings in the FX throughout the day. I concur and see it in the S&P too. 1 am, 2:30 am, 3 am, 8 am, 9:30 am, 11:00 am, 1:30 pm, 3:50 pm, 4:05 pm, 8:00pm.
Paolo Pezzutti writes:
I find Paul's observation very relevant and I have noticed that at least some of these time of discontinuity have regularities. The activity picks up some minutes before. There may be predictive value in it but likely very short term.
In response to "traders move in herds": You have the herd, yes, but then you have the cliff. More and more "optimal execution" algos for firms running large money are actually designed to spot the short term herd and use that to get into positions in the opposite direction. I'm under the impression that this has become extremely prevalent in equities, and is the main cause of much of the new normal price movement characterized by many traders as having "lack of follow through". I've recently used the understanding of this characteristic in my own design of algos with good success. (I am a discretionary, short-term hedge fund trader and newly turned quant).
There is a lot of variation between markets. As we know, futures and equities are very different beasts. Even between equities there are large distinctions. In the less liquid stocks I like to accumulate intermediate to long term positions in, I have found that the algorithms that exist to exploit small orders (what appears to be Market makers blocking competing orders) and accumulate position algorithms are extraordinarily stupid. The only issue for the trader is, if you note this and take advantage of it systematically, it is almost certain to be some form of criminal act. As we have seen, the manual trader is not allowed to exploit or beat the dumb algos of big firms. One other thing I have found is on certain days it seems that relatively small aggressive orders can change the trend of the day as (it seems) some algos look for others to establish a bottom level that amazingly they then seem to defend and even accumulate from. Note this is not really short term trading stuff, more notes I've made when buying my list of stocks.
This trader has the questionable habit of buying at the highs and selling at the lows to see what kind of (paper) is around. I've never been able to follow the herd, instead I try to re-direct it in my market.
A recent post by Tim Melvin noted that Baltimore may be a shit hole, but it's our shit hole. That of many of us on the list. Even if we no longer live there, we identify with it. The glory of Fort McHenry. The commanding of Johns Hopkins. The ignominy of Bankruptcy Tower. The notoriety of Payoff Row. The poverty and lack of hope for a better life in some places in the city. And of course, The Block. Once two blocks (go figure), it's now not even one. Maybe that's the effect of being right next to the police HQ. Add in a dysfunctional education system in the city, the three decades of the departure of industry and the conversion of the town to a bedroom community for DC (in part), and you have a shit hole. I'm sure that some (many?) may contest that conclusion, but try contesting the elements leading me to it.
In the 1960s and early 1970s, if one were to hear a screaming crowd at Memorial Stadium, 33rd Street, Baltimore, chances were good that it was Sunday and the Colts were playing at home. The stadium was usually sold out. It was the era (the "Diner" era—and the Hilltop Diner really did exit, across Reisterstown Road from the Crest Theater—providing relief from the infernal Baltimore summers—and Barcelona Nut Shop) when Colts season tickets were inherited and valued as much as a car or a prized bottle of Lafite or Mouton. It was the golden era for the Orioles, but they did not commandeer the attention, the love the Colts did.
But all of that changed in 1979, specifically June 22, 1979. Edward Bennett Williams had just bought the Os and was complaining about the lack of enthusiasm (and attendance) by the good people of Baltimore. Maybe the team should move to Washington. Lots of interest in DC. and it took forever to drive back to DC. By his chauffeur. The BCPD tailed him once and clocked his trip as 45 minutes, not much more than from York, Pennsylvania (Birdland North) to the Grey Lady of 33rd Street It was the night of the birth of "Orioles Magic," which eventually had an accompanying song (until "You can do magic" replaced it for when relievers entered the game in a tight pitching situation during the early 1980s).
So 1979 wasn't shaping up to be a great year for the Os. Until June 22, 1979. On that night, in the bottom of the ninth, with one on, Doug DeCinces homered to left field. Anyone in the stadium that night will surely remember it. The roar of the crowd was deafening, and the stadium didn't really begin to empty for at least 15-20 minutes after then. Carley Eckman's call (I was listening on a transistor radio, not unusual for someone in the bleachers, not far from the orange and black "Here" flag) was memorable, too. Objective calling of the game flew out the window that moment. The entirety of the Orioles team greeted DeCinces at the plate (for DeCinces, the hit became, at least in part, redemption; it's hard being the position successor to a baseball legend, the "human vacuum cleaner" aka Brooks Robinson), making for an award-winning photo. The next day, a Saturday, that HR was the talk of the town. The following Monday, discussions around the water coolers and over coffee included at least some mention—and often much more—of the HR. 1979 wore on, and the Birds flew high. No one expected much of that team. There were few dominant players, and it was the rare season when Jim Palmer was out of sorts during the season. The World Series that year found the Os against the Pirates, losing in seven games with the final one at home. It was the last time that a visiting team won the series in seven games.
The night of May 29, 2015, also a Friday night, may go down as the renaissance of Orioles Magic. The game was a hard fought pitchers' dual. Gonzalez had pitched a good 8 innings for Baltimore, giving up only one run—earned. Going into the ninth, the score tied, at 1-1, Darren O'Day, a journeyman pitcher who had become the Os middle relief/setup man, came in, proceeded to give up back-to-back hits and promptly loaded the bases with no one out. A situation pregnant for a hit and an RBI to take the lead. But that wasn't the script that was followed on that Friday eve. What followed were two strikeouts and the final out of the inning, a grounder by Elmore to Machado for an unassisted out at third. O'Day had thrown 24 pitches that inning. 24 (or was it 25?). One inning. That's a lot of pitches. For that final out, the crowd was on its feet and the Camden Yards reverberated with cheers and stomps. The bottom of the inning found Os on 1st and 3rd with 2 down. JJ Hardy, an infield specialist with a batting average south of .200 (Orioles faithful will recall Mark Belanger as having somewhat better production at the plate, which isn't saying much), strode to the plate and promptly hit a single to left field. It was all that was needed. Somewhere between 1st and 2nd, after the winning run had been scored, the Os mobbed Hardy as the sellout crowd registered its approval.
The night felt like that of June 22, 1979. One of those days when many in Birdland can recall where they were when DeCinces homered. Will the Magic reappear? The excitement? Hard to say. Let's revisit it in a month. This year's Os are hardly dominant in just about any position on the field, save maybe Zach Britton as a closer. Jimenez is having a good year, and compared with 2014, a great one. But that's about it. And the Os are in 3rd place in the AL East as a result. One game under .500 and one game behind the Yanks. Who ever would have thought that a third of the way through the season the pace would be set by a team one game over .500. At least the Birds have the best home record in the division. So the team has its work cut out for the next three months—not to violate the first rule of holes for the next month as it gets its act together and the, in a reprise of last year's performance—rise to the top.
We've had some discussions recently about the decline of baseball in the US, and yes, the sport has had its troubles. But it's always managed to find a champion and grittily renew its place in the national entertainment firmament. Babe Ruth, Cal Ripken.The sport is shaking off the self-induced haze of the steroid era. And the helicoptering of kids doesn't auger well for a rebirth of the national pastime, which has indeed become passed time. As the country struggles economically with a recession possibly looming over the horizon, with dysfunction in DC and political sex scandals seeming to be the order of the day (I don't recall them being this common, but maybe it's like FDR's wheelchair, no one ever reported them)—the latest being inappropriate touching by the pre-political life former Speaker of the House (does it much matter that it was pre-political life?)—it must have been some serious touching to merit a $3+ million payoff—the country needs to rally around something. As President Snow observed, hope is the only emotion stronger than fear, and while complacency is the rule on Wall Street for the moment, there's some fear being voiced by those with memories of times before ZIRP, of times when interest rates actually ascended, not declined. Memories of the early 1980s. With deflation the concern du jour of the NFL if not the BEA, it may be baseball's time to shine again.
So, in Baltimore, is it Orioles Magic, 2015 edition? We'll see. As for the moment, it's to be savored. Go to war, Miss Agnes! Let's go Os!
Stefan Jovanovich writes:
This notion of baseball's "decline" is entirely a construct of the Fairness Police. There is now, in fact, far greater "diversity" (sic) among the players of Major League Baseball than there ever has been; the only problem is that the darkest-skinned players are more likely to be Cubans than American blacks. Measured by money paid to the players (baseball, unlike football and basketball and hockey, does not have a hard salary cap), valuations for franchises, television revenues, ticket sales, and concession revenues, these are the best of times. And, regarding the play itself, Buck Showalter is right: "this is the Golden Age".
Paul Marino writes:
Here is a great video of the great player for the Buccos, Andrew McCutchen, making some little kids' life last night when playing in San Diego.
Would love to see Pitt make a run at playoffs again, but in a tough division with the best organization in the league St. Louis playing .660 ball, almost a clean + .50bps win % over entire MLB.
I hated the fact that the Giants had to play Pittsburgh for the wild card; they have a wonderful ball park and a really great organization and they are all around good guys. So, clearly the plan for this year is that the Giants beat the Dodgers outright and the Bucs have their wild card game on the road.
Having your loyal fans cheer for you can be a tremendous handicap when it is all or nothing. The Giants have been lucky to be the road team in their "Big Games". The last 4 times they have won the World Series - 1954, 2010,2012,2014 - the deciding game was in the other guys' park. The one time it was at home - 1962 - they lost even though they had Willie McCovey at bat and the winning run on second base and he absolutely smoked the ball - right into the Yankees' second baseman's glove.
I read a terrible story about why children are abandoning baseball from Forbes based on a WSJ story of same title.
Stefan Jovanovich comments:
Baseball was never the "default" sport for young children. The ball is damn hard and a good one has always been expensive enough to be worth stealing. It was the sport for "grown-ups" that you could hope to play when you got big enough to keep up. Until then, you would play catch with your family adult (thanks, Mom) and use a tennis or rubber ball to pitch and hit with your neighbor/brother/sister, using the barn/garage for a backstop. It took years of those repetitions before you could even hope to play well enough to keep up with the men and have it actually be baseball. The game flourished in all the places where men played the sport and let children join them. That is why it still flourishes in all the places where men and their children play it together for fun– the American Southeast, the Dominican, Cuba (although that is dying), South Korea, Japan. Little League was baby-sitting and adults pretending to teach the game instead of simply showing how it is done out on the field against each other.
Paul Marino writes:
This story lends no credence to the fact that southern states play baseball year round vs more northern regional leagues and the population disparity between the two. Baseball is a regional sport on all levels, pro on down vs football and basketball which are national sports.
Also, this article makes no reference to global, specifically lat-am baseball which is a religion in places such as Cuba, DR, PR, etc. last I checked Puerto Rico is part of the U.S. Unless they default on their munis. Plus immigration will lead to a generalized balance in players against the author's "the Great Recession no-baby meme" which has had us all feel poor as humans since they state red the meme. I can tell you my family and friends in their 20-30s are having babies, just a little later in life.
The article would have been more relevant to US if distinguishing the lack of African Americans choosing basketball and football over baseball. White kids will always play baseball at one point or another out of love of the sport or parental pressure to do something where you can't get too hurt.
Stefan Jovanovich replies:
If Paul means that baseball is "regional" in the same sense that hunting/shooting is "regional", I agree. But the notion that "white kids" will play baseball at one point or another because of "love" or "parental pressure to do something where you can't get hurt" seems to me very far off the mark. No one in their right mind "loves" baseball; it is so relentlessly demanding that it has minute-by-minute failures. There is no room for the fantasy of "we are the champions" that football (American and world) and basketball allow. The best teams in baseball have won-loss records that would disqualify them from the Champions League or the basketball or football playoffs; and the home-away advantage is trivial (52-48%) while, in the other sports, it is nearly overwhelming. It is like chess; you either have the addiction or you don't see the point.
None of this says anything about the game's popularity as a spectator sport. People now love going to professional baseball games more than at any time in the past because: (1) compared to basketball and football ticket prices, it is still a very cheap date, (2) it is like visiting the old amusement parks like Elich Gardens - you can stuff yourself silly while walking around and you don't really have to watch the game, and (3) unlike almost all the other public spaces in American cities the parks themselves are not dumps. Coors Field in Denver, which is a delightful place to see a game even if the altitude makes the game itself seem like a parody, is the 3rd oldest baseball park in the country. Only Wrigley and Fenway are older.
Paul Marino adds:
I should clarify "love" as in the love a child has for a player and that gets them interested in playing, the other love is the kind I had where I played for 15 years and got into the minutiae of the game over time.
April 19, 2015 | 1 Comment
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.
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.
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.
"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
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.
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.”
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:
Thus, 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.
I 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.
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