Jul

18

You must see this movie.

People lament the decline of the print news media, the victim of computer culture. The trading floors of the exchanges have also had a sharp decline in the number of floor traders who populate the floor, as the trading business is being increasingly facilitated by computers. In 1992, there were 10,000 traders on the floors in Chicago, today there are only a few hundred and 95% of the volume is electronic. James Smith, the producer of "Floored," the movie, examines the life of past and present traders both off and on the floor. He discusses the culture, environment, wins, losses, personalities and future of traders, past and present. He pays close attention to the struggles the ex floor guys are having without the edge that the pit gave. He examines the character of the players involved, and lets them reminisce about their floor days. He compares and contrasts the differences between local traders and computer traders. He interviews ex floor traders trying to make it on the screen. He pays particular attention to the off floor lives of traders and gives them a free reign in telling their stories. The stories are great as everyone that was successful in the pit has a great story, and ego to boost. The movie has many great shots of the action in the pits a few years ago and today. Many of the floor traders don't realize that they're subjects of the forces of natural selection, just like any other creature in nature. One of the interviewees said that a big difference between watching the pit and watching a screen would be equivalent to watching an entire football game on TV or just watching the scoreboard. This, and many other observations bring clarity, and numerous trading lessons that might be useful to anyone interested in trading. Also interesting to note is the obvious lesson in humility that is learned by ex-denizens of the trading pits. "Floored" is 87 minutes long, and can be found in its entirety in 8 segments, here.

(I highly recommend this movie to anyone interested in trading, futures, trading floors, etc. It's a 150 year old way of life that's sadly disappearing very quickly.)

Incidentally, for what it's worth, there's still some floor action in the cattle and hog markets, which have resisted the encroachment of electronic trading to some degree. Also, many options are still primarily traded by open outcry.

Jul

15

winnings from a NL Poker gameStocks are much like no limit these days… you have one or two 10 minute bars to decide to go all in risk all or fold.

Vince Fulco writes: 

Phenomenal observation. It's a function of fake liquidity. You've got to pick your spots wider and expect the reactions to be more severe in both directions. I read somewhere the other day the theory that folks are pricing in too much tail risk. Is this what happens when an economy is built on sand?

Jeff Watson writes:

Interesting comparison of stocks with no limit poker. While the risk of ruin approaches 100% in NL poker, I wonder what the risk of ruin would be in the stock market, especially with short term trading. I suspect that it would be higher than one would expect, with the vig, mistakes, and just being wrong factored in. 

Jim Lackey writes:

No…anyone is capable of "not taking risk" and to see people brag about not losing is hilarious. No profits either, at least none to brag about vs. some indexing. To make real money you have to take real risk. Period. End of story. 

Rocky Humbert comments:

How return is related to risk is a subject worthy of extended discussion, and I don't have the time to launch that thread right now.

However, I want to note that Fama has backed away from his early work that pioneered the model that the two must go hand-in-hand.
I for one do not accept the proposition that one must take large risks to have large returns and this distinction is a key difference between gamblng and investing.

This is a fascinating subject… I hope others will contribute. I have a plane to catch.

Jeff Sasmor comments:

"To make real money you have to take real risk period end of story." Yes!

Isn't the ultimate metric whether or not you make money? If you are good at scalping the E-mini SP on a 5 min chart and make money doing that then IMO it trumps the issues of risk and vig. Personally and IMO, and I know that most here will disagree (except maybe Jim) scalping has the lowest risk albeit with more vig (vig is pretty cheap these days at $4/round trip for the Emini SP and since one Emini SP ~= 500 SPY it's much less vig than the ETF). I don't even factor commissions into my thinking anymore.

But longer time frames are more comfortable for most people - and yes the vig is proportionally less but one downside among many is that you're much more susceptible to your own emotions about getting out of a losing trade (or a winning one) - and that's an additional term in the vig equation.

With computers (Skynet) running the show these days you can get your "head handed to you" no matter what time frame you're using. They seem to love chaos and high volatility, sort of like the Shadows in the old TV show Babylon 5; or for real sci-fi nuts - the eddorians from the Lensman space opera series. Or for others: think of computerized Sith.

Jul

1

I wonder in the "civilized" world if it's possible to really own land. Land that cannot ever be taken away from you by the state. Land that is under an Allodial Title, and can't be confiscated, taxed, subject to easements, or condemned. If the state can take your property, then you really don't own that property.

Stefan Jovanovich writes:

The Fifth Amendment of the Federal Constitution is supposed to take care of the property rights problem that Jeff identified: "nor shall private property be taken for public use without just compensation". Note the use of the word "just"; the Constitution allows "reasonable" searches and seizures" (4th Amendment) because it presumes that anything searched or seized can be restored (this was in the world before drug raids).

But for "takings" the Constitution requires justice. But, this was in the age when lawyers understood the difference between war powers (which are the sole domain of the Commander in Chief after a formal Declaration of War by Congress) and executive responsibilities (under which the President is responsible for carrying out the determinations of Congress).

The whole idea of "police" powers is a modern invention that allows Zoning Authorities to pretend that they are engage in acts of war– which, come to think of it, they are.

One last snark: one of the delicious ironies of the decline and fall of publishing in America is that the victims– the NYT, in particular– are the very people who have undermined their very special Constitutional monopoly property rights. Wal-Mart has no special privileges; but the publishers do under Article I Section 8. ("securing for limited Times to Authors and Inventors the exclusive Right to their Respective Writings and Inventions). It took almost a century of support for the judicial fiction of a "living document" to hold sway, but the Sulzies managed it. They huffed and puffed and produced the Digital Millennium Copyright Act and, as Annie Hall once put it, "Oh, well, la-di-dah." At least, their real estate still appears to be worth something– unless, of course, there is further zoning change.

Jun

29

"The Road to Serfdom" is one of my favorite books of all time. It is also on the bestselling lists because of some media mention. Here is a great version of the book in cartoon fashion, very suitable for children of all ages.

http://mises.org/books/TRTS/

And speaking of McChrystal, one of my favorite places to surf in the world is New Smyrna Beach, Florida. Best wave in the state, funky beach town vibe, very cool, mellow tropical paradise. It also has more shark bites than any place on the planet . It's a rather disconcerting feeling when I'm out on the water and realize that I'm not at the top of the food chain.
 

Victor Niederhoffer comments:

About McChrystal and the good surfing versus the sharks reminds one of selling premium or buying the big downs.

Pitt T. Maner III writes:

And Jeff's odds are not too bad. Last fatality in the cooler waters off the Brevard/Volusia Co. area was in 1934 despite 339 documented attacks in the 1882-2009 time frame. Benchley unfortunately got us all thinking negative thoughts every time entering the water in the early 70s… as did a co-worker in the early 90s who had a shark nip story.

Map of Florida Shark Attacks

Jun

27

Among the things a father has to do with his son is make him a hero at amusement parks, play catch with him, teach him how to deal with old, young, girls, boys, teach him to survive, teach him how to use tools, play games that will provide lifelong benefits, and take him to the track. I took Aubrey to the track tonight and he told the bus riders that daddy's horse lost, but it was winning at the beginning but the number 9 came from behind to beat him". I was very impressed and he said when I asked him whether he wanted to go back to the baseball game or track more, he said " i want to go back to both". I was impressed with the whole thing, and yet Artie's wisdom that " all gamblers die broke was running through  the mind. The spectacle at The Meadowlands is rather pathetic. They're losing 30 million a year or more, and each year attendance declines, and the purses decline.

About 1500 people came to the track on this beautiful day and in the comparable days when Derosa and I used to go it was 20000. The quality of the 1500 that were left was very high, and they knew more about the game than almost all market speculators that I knew. One of them was telling me that the trainers cant make money with these 8000 purses, so every now and then, all the favorites lose on a coalition and the trainers make out big with the exacta and pick 4. My goodness, this was rite out of Bacon, and shall we say, the squeezes and inflexionic trading that goes on in our field. The tracks have given up on selling handicappers picks, as the 1000 attendance isn't enough to support it, but the post and sports eye have at least 8 handicappers each who rate each race. Considering the average handle on a race of 10000, that would seem like a concentration of forces in a field with a low return to scale and effort. The erudite analysis of Dave Brower on each horse in each race in the program is very reminiscent of the experts I hear on TV when I am in a hotel and need prices.

I like this typical sentence one of 110 for the day. "Machs tenor. Makes third start off the bench here, and this is the spot to take a shot, draws the pole and trust me, he's better than he shows." Amazingly pithy and deep for each race. When Brower's horse wins, the announcer congratulates him. There are helpful operatives all around the track showing us how to use all the machines. But I opt for the old fashioned teller and he has a belly laugh when Aubrey says to him "x on the 4 hours to place". It's one of about 5 tellers left there with hundreds of computers taking all the meager remaining bets. The sports eye has 20 tells for each race, ranging from average winning dollars, percentage, in the money, beaten favorite, strong stretch, good trip, favorable post position, hot trainer, first or second recent race after layoff, favorable driver change, won last race and stays in same company, second recent race in same class after dropping, superior mudder, blocked in last race.

If only the level of analysis in markets was half as good or half as tested. There were dozens of patrons following simulcasts that were being screened and they screamed as the race progressed and the emotions were so much the same as the thing that Jeff and I and so many others on this list saw in the pits, and no prisoners and life and death passed so fleetingly through the rings.

Thomas Miller comments:

I was in Atlantic City a few years ago and was walking through the large public bus waiting area that serves the casinos. 99% of everyone there waiting for the lonely long ride home and looked dejected and sad staring blankly into space, It was eerily quiet, with almost no conversations taking place. They had obviously lost what little money they had for the week. If you ever fear for Aubrey becoming a gambler, take him for a stroll through this area (it's probably still there). Your father's wisdom is played out in real life on a daily basis. These people play an important role for the casinos like many market players that slowly churn through their accounts paying for the upkeep of the mistress.

Ken Drees writes:

NYT: Reasons for the Decline of Horse Racing

I am up too late tonight posting this–going to pay tomorrow.

I am in the lost generation that never knew horse racing. The only touch I got was from my grandmother who would call us on derby day morning and read us the odds and the names over the phone. We would tell her to bet the horse for two dollars and she would—how I don't know, and it didn't matter because we never won.

At least we watched CBS wide world of sports who showed the major horse races with some built up punchiness since we had skin in the game.

Ralph Vince comments: 

I don't know HOW anyone can approach ANY risk-opportunity in life WITHOUT having been steeped in "The Track," and all it's (now-evident-to-me-market-relevant) b.s., the list of such which would take the better part of today to catalog.

I was fortunate that my father and uncle's were so swarming-crazy about such things. Railbirds at the top of the lane, where the roar of thoroughbreds coming out of the last turn induced an unforgettable euphoria with each race….

"If you go near that window I'll break your g.d. arm," I remember my uncle reminding me at least a hundred times. (I shouldda listened).

As a little boy, there were three, really BIG days, Christmas, "The Opener," (where the Indians, playing their first at-home game mandated you cut school) and the first Saturday in May — the latter, being the biggest. To go to Churchill Downs for that was nothing less than a pilgrimage to the high temple of life itself.

To go there, on any other day and see firsthand the contrast of the high temple, transformed into Podunk Downs on a Wednesday afternoon, in the middle of dumpy L'ville, taunts a boys imagination and makes him realize that the entire episode, the magnanimity of it, is all in people's heads –as with everything.

Jeff Watson Comments:

I grew up at the track from the age 8 or so. I learned everything the hard way paying a very steep vig. I quickly learned to only bet 1 or 2 races on a card trying to find that elusive overlay and still usually lost. Luckily I discovered Bacon, Cohail, and a few others that made my daily deposit shrink just a little. The smells, cigar smoke, the body odor, the spilled beer, torn up tickets, the touts, the losers, the winners, lost dreams, every human emotion is amplified 200% at the track. As a kid, I learned that if I had a good afternoon at the flats, I could make it to Maywood Park by the 3rd race to bet the sulkies at night. We always found accommodating adults to get down our action. I usually went home a little poorer, but much wiser learning many things. There were so many indicators at the track, and I learned at a very early age when to throw out the chalk, which was perfect training for the pit. In fact, learning when to throw out the chalk was probably the best lesson I ever learned that I could use throughout my life. Electronics has done to the track what it has done to the trading pits and I feel very bad about the disappearance of a way of life. There's nothing like hearing the roar of the crowd of 25,000 people while the thoroughbreds are thundering towards the finish line, neck and neck. OTB and screen trading just don't cut it for sheer excitement.

Jun

25

Today, I opened my cable bill and had a heart attack, as the bill had doubled. I use my cable for TV and as a backup fro my internet, with FIOS as my main internet source. For the past couple of years (since I hate to pay retail), I've been playing Comcast and Verizon off against each other in order to lower my bill. In my case, all of the little extras from Comcast went away today and I was faced with a whopper bill. I called the local rep, wasted 20 minutes with her and got nowhere, except for her comment, "That's your tough luck that your bill went up and if you want to use FIOS, go for it." I asked for her supervisor, who told me that since my bill was so cheap, they didn't really find profit in customers like me.

By then, I was fuming. I decided to pull a page out of my grandfather's playbook. I went online, and looked at the company officers of Comcast, looking for the name of the assistant to the president. My late grandfather told me long ago that there's no way a common person can talk to a president of a large company, as he has about 20 people to keep you away. I called the assistant to the president, explained my case, also telling about the rude treatment from the lower support staff. He said that they would get back with me later on today. Much to my surprise, the president of Comcast called me to apologize, take care of the over-billing, and throw in a couple of extras. He told me that he listened to the tapes of my earlier conversations with the support staff and was embarrassed by my treatment, and personally assured my rates would not go up, ever.

That was amazing, but the real lesson here is: If you have a problem that needs quick resolution, never try to talk to the CEO. They simply won't let you speak to him/her. Instead, talk to his personal assistant or executive secretary and politely state your case. They will listen and are readily accessible.. Remember, the assistant and executive secretary have the same power of the CEO in day to day operations of most organizations. They will also be glad to hear your problems.

Jun

25

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

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

Pitt T. Maner III comments:

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

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

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

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

Victor Niederhoffer expands on his remarks:

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

Rocky Humbert writes:

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

Jeff Watson comments:

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

Victor Niederhoffer comments:

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

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

Thomas Miller comments:

Regarding Chair's last paragraph:

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

http://www.fbi.gov/page2/june06/jury_scams060206.htm 

Big Al comments:

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

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

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

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

Ken Drees recounts:

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

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

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

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

I just turned and slowly closed the door. 

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

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

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

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

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

Jason Ruspini comments:

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

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

Stefan Jovanovich comments:

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

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

Gregory van Kipnis writes:

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

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

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

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

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

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

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

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

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

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

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

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



Rocky Humbert comments:


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


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



 

	

	


	
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[When it comes to the war on terror,] we need to show the world in absolutely clear terms not only what we can do, but that we are willing to do it.


Unfortunately, there are far too many people in this country who are under the mistaken impression that [people everywhere] want the same things we want, and respond to the same set of incentives that we do, or respond to the same set of values that we do.


They don't.



Yet, we naively apply our "higher standard" to them. I almost hate to say it, but this is akin to the animal rights wacko's who actually think that they can give rights to animals. You can't give rights to anything that isn't capable of understanding them, or who is incapable of handling the responsibilities that go along with those rights…..let alone reciprocate and respect your (our) rights.


You have to deal with an animal at the level of that animal.


Laurence Glazier comments:


Is this not false logic? The mentally handicapped have rights which they may not understand. The rights of the human fetus are the subject of fierce debate. One could argue that the propensity of humans to wage war is a form of projective identification to avoid facing the moral question of the abuse of animals. Those that have resolved the latter issue in their own minds are not noted for forming battalions.


Moreover referring thus to the level of animals is unfair to animals which are less violent than humans.


In the UK animals have limited rights and there are frequent cases of conviction for cruelty to animals. Progress is slow in this area as we are still in the secondary cannibalistic era.


Jeff Watson writes:


The 9th district court in California gave Dolphins (Porpoises) the right to sue the Navy. Somehow, the rights of animals were being denied when the navy was training them to place limpet mines on ships and other tasks. Animals have rights, in fact, those rights should be extended to spirochetes, and they should be able to file a class action suit against the makers of penicillin which is the Zyklon-B of their species..Never mind service animals, the labor board ought to look into their working conditions, no pay, and hazardous duty. Equal rights for seeing eye dogs! As for slaughterhouses and eating animals, we need, as humans to go back to foraging for roots, berries, and lichens in order to protect the dignity and rights of our bovine and porcine citizens.


Kim Zussman comments:


Does it make any sense for the species at the top of the food chain to debate hunting (cultivating, slaughtering, farming, taxing, etc) its lessors?


What if we were somewhere in the middle: "Well, they ate our children again. But really, they deserved to die; in order to feed and perpetuate more successful species. And in any case the Good Book says we were put here for that purpose…"

 


Jeff Watson writes:


One of my favorite places to surf in the world is New Smyrna Beach, Florida. Best wave in the state, funky beach town vibe, very cool, mellow tropical paradise. It also has more shark bites than any place on the planet. It's a rather disconcerting feeling when I'm out on the water and realize that I'm not at the top of the food chain. http://tinyurl.com/49wgkf


	

	


	
Jun

	
22

	

	

	
I've been following these various notes on sports and trading for a couple of weeks now, and I must confess that I don't understand what the underlying theory is. Although I as a lifelong sports fan and a student of the market, I can't even imagine what the connection might be.


For example, why would have it been bad for Federer to lose today? Does it have something to do with his being the favorite? Would a loss by Federer damaged Wimbledon as a capitalist enterprise? Does such a loss indicate less certainty in the world, triggering fears on the part of a world looking for certainty? Is a singles match a more powerful indicator than a doubles match? Why should a first round match at Wimbledon matter more, for example, the golf's U.S. Open?


Are some sports more indicative than others? For example, soccer would seem to have more fans world-wide than tennis; does soccer have more of an effect? If a country wins a world-cup match, does that presage a rise in the winning countries stock market?


Does the market get bullish when NY teams win? Is this something to do with flowing testosterone? Can one be a Red Sox fan and a bull at the same time?


 


Jeff Watson comments:


Alan, to coin an old pjrade, "Follow the money.": The fix is in in many more sports than you;d realize. In basketball, a point shaving scheme of three points can mean millions of dollars. Boxing,,,,,,I won;t even mention, College sports are particularly vulnerable due to the financial pressures of students and the deep pockets of fixers, Whatever, you have to assume for the worst and hope for the best.


	

	


	
Jun

	
21

	

	

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


Alan Millhone writes:


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


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


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


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


They are long gone. Our crew finished the job.


Stay vigilant and wide eyed. 


Pitt T. Maner II adds: 


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



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


Russ Herrold writes:


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


Alston Mabry writes:


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


Russ Herrold adds: 


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


Nick White writes:


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


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



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


Jeff Watson adds:


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


George Parkanyi writes:


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


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


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


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


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


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


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


 


Jeff Watson comments:


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


Duncan Coker writes:


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


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


Nick White comments:


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


Thoughts?


George Parkanyi responds:


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


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


John Holley comments:


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


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


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


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


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


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


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

	

	


	
Jun

	
14

	

	

	
 I've been re-reading Daniel Duane's excellent, Caught Inside: a Surfer's year on the California Coast. The book describes the author nearing 30, caught in a dead end job, constantly reminiscing about his youthful forays into surfing and the beach culture. With great courage, he chucked his career, girlfriend, most possessions, and moved to Santa Cruz for the sole purpose of surfing every day. The book chronicled his year in Santa Cruz, starting out with the wrong board and wetsuit, and eventually becoming a dialed in surfer, at one with the sea. Along the way, he met a professor who had the magical ability of predicting exactly where a wave would break and always managed to catch the wave of the day. The professor became a guru of sorts, a mentor and buddy, and helped him on his spiritual quest. He also taught him the finer points of surfing and helped him with his style.


The professor was a Joe DiMaggio type believing in the economy of motion which he applied to his surfing, An undertone of the book, very apparent when re-reading, is that as he got better in his surfing, his thought processes became more coherent, less rambling and more linear. This book is a great read for any surfer, and is an essential read for those who want to learn about the life that ends at the shoreline. Someone once told me, or I read it or saw it in a movie, I can't remember where, "There's two kinds of people in the world. Those who live at the beach and those who don't." Such a true statement on so many levels.

	

	


	
Jun

	
9

	

	

	
Socks on the handsI believe the absence of routine may be a critical factor in creating failure. All the distractions, including the physical and mental act of taking phone calls is enough to throw a game off. I liked to do very normal things throughout a tournament, as I reached the finals, and I would recommend that for a trader. Whatever you do, don't use the hands and mid level organs before you play.


Nick White comments:


I also hold that routines are essential to success– no doubt about that. But is there some wisdom in allowing for the fact that life throws the odd curve-ball? Are there circumstances whereby following a usual routine will get one badly hurt or killed (market or otherwise)? What ought to be done when a personal disaster strikes 2 minutes after one has placed their largest position and it then gaps half a percent against? What principles of training facilitate adaptation to the wild rather than adaptation to the expected?


One society in history seemed to grasp this - the Spartans. Their routines seemed to emphasize preparation for both the expected and predictable, as well as to develop faculties, skills and resources to deal with that which was difficult to prepare for…in other words, to build up so much personal and corporate redundancy in capabilities that there was very little (bar hubris) that could steal the victory.


Jeff Watson writes:


 Whenever I am in any kind of competition, trading, poker, surfing, whatever I try to follow the same script., In poker, for example, I pick up the cards the same way every time, look at them once and leave them face down on the table. I handle my chips the same way every time and time my reaching for the chips do it in the same manner. I keep the same vacant look on my face and time my eye blinks. I keep conversation at a polite minimum as tremors in a voice can give away tells. I wear a high collared shirt as I don't want a pulsing jugular to be seen. I have several other proprietary methods to minimize any tells and other methods to create false tells. still, according to one of the ex-world champions of poker, I have less tells than anyone he's seen, but the tell I have makes him able to read me like a book. From past results, I believe that he's telling the truth.


Nick White asks: 


Can tells in a closed-form game compare to tells in a wild environment? If one lost a comparably ruinous percentage of bankroll in the market as their poker game, would the displayed tells be the same? Or concealment easier? 

	

	


	
Jun

	
4

	

	

	
 Harry Browne's book  about why the best laid investment plans go wrong has a very precise and useful chapter on how to evaluate forecasters starting with keeping records of the actual forecasts, when they were made what the price was, and what transpired. These are usually very different from the humble self evaluations "we erred on calling the high in silver" we said 1080 but it was 1065. A hilarious review of such is contained in edspec.


Jeff Watson comments:


To me, the value of forecasters, pundits, touts, advisors, mavens, etc lies in the opportunity in fading them. When one says that everyone in the world should be short t bonds, I look at the other side. When a guy rides a motorcycle around Europe and says to buy German stocks and forget about them for 5 years, I take a look at the other side. When the newsletters and blogs tell you to do one thing, the move has already happened or else they're talking their book or gambling. 


Kim Zussman comments:


Years ago, the late Louis Rukeyser published a newsletter which listed picks of various market experts either interviewed on Wall $treet Week or profiled in the letter. Each issue had a running return for each pick, as well as the average - which was usually very good.


I noticed once in a new issue that a stock had been dropped from the list of recommendations, with a note to the effect "manager no longer covers". Also noticed the bad return for this stock had been removed from the running total average. Had you bought all the recommendations, your results would definitely have been worse than reported!


There is a similar problem with extrapolating stock index data from over 30 years ago, before indexing was widely available / utilized. Think of how difficult it would have been to own 500 stocks of the SP500, in correct proportion, adding and deleting simultaneously with the index. This may be an "indexation premium", which ought to be gone by now.


	

	


	
Jun

	
2

	

	

	
 A visit to a New Jersey Gas Station sparks many sad reflections on dead weight loss and its impact on the current position. One sees lines of 20 cars waiting for gas at the stations as gas attendants amble about filling the cars. The cost in wasted time, the alternatives of productive work that could have been done by the attendants and customers in other fields is never seen the same way a dead weight loss impacts the reduction of consumer and producer surplus and other interferences with the natural order of things.


How much of the current malaise comes from such dead weight loss? Many trillions of dollars have been spent for the benefit of the flexions and their clients by the interior folks. This money has been allocated to areas that are green and organized agrarian in input. Yes, the money has been spent and used to buy assets from the above. And there is certainly the dead weight cost of the administrative involved.


But at what cost? Who would have spent this money? How were incentives to start businesses and hire workers and buy things that are useful in the day to day fray affected by this? What rational expectations come into play as to the ultimate impact of these expenses when they have to be paid back? What are the dead weight costs involved, and what goods have not been bought, and what investments in stocks have not been made because of this?


A visit to an ice cream store outside of Kira's graduation ceremony at St. Andrews in Middletown told wonders. They make a very good banana almost as good as Cones. And their peach has as much fresh peach as I've had the pleasure of eating. But they tell me their business is down considerably this year, and they cant figure out why. The owner does a nice job of making balloons outside to keep the kids happy. How many others are in similar predicaments with no explanation as we morph into a European style struggle?


Rocky Humbert writes:


One has sympathy for The Chair as he sits in a long service station queue and laments the NJ no-self-service law. And, as the early summer sun beats down upon his countenance, his thoughts evidently turn to Dead Weight Loss. Since I've started regular daily exercise (including checking my oil and pressure) I've paid more attention to live weight loss and proffer the following alternative hypotheses/observations:




1. New Jersey has some of the lowest gasoline taxes in the nation. Gasoline in New Jersey costs as much as 40 cents per gallon less than Westchester County, NY. I frequently fill up my gas tank on the NJ side of the George Washington Bridge; and perhaps the Chair's queue is attributable to the arbitrage of high gasoline taxes in surrounding states– rather than the NJ no-self-serve law.


2. The NJ Turnpike is a toll road with limited access. There is scant evidence to suggest that off-highway service stations have longer queues and/or poorer service in New Jersey than in other self-service states. Former Governor Corzine proposed an elimination of the self-service ban in 2006– and it actually ran into popular revolt: "I'm not against a lot of things, but I don't want to pump my own gas. It's part of the Jersey identity. It's our thing," said Rose Maurice. See this article.  


3. New York State and Connecticut both permit self-serve gas stations, however, they both require full service on certain highways. Having had an unfortunate brush with this business, my understanding is:


(1) the number of drivers who leave without paying on highways is much greater than on local roads.


(2) The throughput for a WELL-RUN busy full service station is actually higher than for a self-serve.


(3) Post-9/11, it is believed by Homeland Security that full-service highway gas stations provide a platform for surveillance. Your oil-soaked, slow-moving, non-English speaking gas jockey may actually be a highly-trained FBI agent checking your car for emissions from a concealed nuclear/biological/chemical weapon.


4. Our local town Shell station has four pumps. Two are self-service. Two are full-service. There is only one attendant for the entire station. The full-service pumps charge about $.20/gallon more than the self-serve ones. The station has maintained this model for years, and it suggests that there must be demand amongst the Chanel-clad soccer moms in Land Rovers and the very-important-Dads (in Brioni suits) not to soil their clothes while pumping gas or checking oil. In this example, the full-service pumps are a profit-enhancer, since the attendant would be there anyway.




5. During a recent visit to Switzerland, I observed that many gas stations have NO attendants and are open 24/7. One simply inserted a credit card, pumped gas and drove away. One should note that (due to taxes) gas in Switzerland is still massively more expensive than the USA, and it is unclear whether the absence of any attendant results in lower prices or higher profits (or both). I suspect that I would feel uncomfortable if there were NO attendants at a US gas station — on a deserted road — at 3:00 am … and the pump isn't working right … and a car filled with four youths and twice as many tattoos pulls in front of my car … and …. involuntary and not-so-politely relieves me of my wallet and luggage. I guess that's another sort of dead weight "loss."


There is no question that the NJ law introduces dead weight loss. However, the Swiss model (at the other extreme) introduces other costs (such as theft, liability risks, soiled clothes, spilled fuel etc) which are difficult to quantify.


While personal choice is usually preferable , my point is that things are almost always more complex than they appear… And policies need to consider an accurate cost/benefit analysis for the world that we actually live in - not a world that we wished we lived in.



Jeff Watson writes:


A prime example of dead weight loss is when a truck makes a delivery to a distant point and has no cargo to bring back to the warehouse wasting time, fuel, and labor. Wal Mart has engineered out much of the dead-load waste and has increased efficiency of its shipping fleet. They have automated their ordering, delivery schedules, and shrunk the number and size of their warehouses, as they consider warehousing a waste of inventory, space, time and labor. Now, with their "Just in time" ordering and shipping, they are able to use their trucks as rolling warehouses, cutting costs in so many ways and passing along the savings to the consumer. They engineer every step of the production of a product, from the manufacturing to the time it leaves the store. Wal Mart's business model is to be admired as they have introduced many products at low cost to people who otherwise couldn't have afforded them.


In addition to their main retail, Wal Mart has taken only 15 years to become the largest purveyor of groceries in the world because they applied their revolutionary methods in dry goods to the otherwise staid food business. The naysayers decry Wal Mart, but I salute them as an example of a company that took a page from Hank Reardon. Walmart is having it's moment right now, and will until something or someone comes along with a better business model. Never fear, there will be a better model, there always an evolution in business as long as man is allowed to be creative and earn a profit with minimal government interference. To those who complain that Walmart is decimating the business of Main Street, in 1920 the A&P Tea Company had 25% of the retail grocery business because it was light years ahead of the general stores of the day with the modern supermarket concept. The populists and anti-trust people took a careful look at A&P but thankfully never broke the company up. Other businesses should salute and try to emulate the way Wal Mart reduces costs, provides careers, brings a good assortment of products to market, and earns the shareholders a good return on investment.


Jeff Sasmor writes:


When I first moved to NJ from southern CA in 1996 I used to get into trouble with the gas station attendants because without really thinking about it I kept trying to operate the pumps myself. Now after being used to the attendants for so long, when I get gasoline in another state I just tend to sit in the car for a while waiting for the attendant till I remember that I have to do it myself. The attendants are nice to have if you don't want to smell like gasoline; and perhaps it's better not to have pregnant ladies handling gasoline pumps and breathing fumes. OTOH, the attendants end up breathing a lot of gasoline fumes. I recall when I was a youth (pattern recognition subroutines running in my brain just fished up that courthouse scene with Fred Gwynne from the great film "My Cousin Vinny") they used to wash your front and rear windows and check the oil on your car. Ah. My wife's car doesn't even have an oil dipstick anymore….



The great Fred Gwynne …


Jeff Watson replies to Rocky Humbert:


Rocky, I know I used the term differently than how the economists use it. However, on the ground floor, the truckers use the words "Deadhead, dead load, dead log, or dead weight" interchangeably when referring to the loss experienced when driving with an empty trailer. Aside from excessive DOT regulations, the aforementioned is the biggest complaint of truckers as it eats into the bottom line, at least the ones I talk to who are non-Teamster. The union drivers don't worry about such things as empty trailers and bring a whole new subset of inefficiencies and extra costs into the equation.


Jeff Sasmor writes:


I don't think that the queue is a function of the presence of an attendant. That's an assumption that may seem natural (like a policeman directing traffic slows things down). I've not seen it in practice. Traffic in and out of gas stations is lumpy.


It's not demeaning to women– I can't imagine why anyone would want to get that smelly stuff on their hands if someone else does it and the cost is the same. And for preggos who want to keep away from things that are toxic (even if the exposure is infrequent and small) not pumping your own gas may be a good thing. And you can stay in your car in the rain and when it's cold out.



Personally I like having the attendants.


Sri Viswanath writes:


I liked your idea and explanations of dead weight loss… In my market experiences some observations that have warranted pin pricks include (fat specialists claiming to smooth order flow, short skirted well-heeled quaffed FX brokers, account reps talking about how they can get you special margins, analysts of rating agencies, mortgage brokers with outdated actuarial tables (see Bacon), derivative structured product specialists trying to sell libor cubed or some mathematically elegant swaps). All apologies to Hicks and Mr. Marshall.


It is amazing that the whole market structure can function given its oligopolistic government based subsidies (a la Citi etc) in excess of a lil' lagniappe. One case of classic deadweight loss is charging for exchange prices. Is this ecosystem capable of being quantified of such costs?

 


Easan Katir writes:


Charging extra to know the score at a baseball game would not sit well with fans. Somehow, the market fans are more docile and pay up. 


Craig Mee Agrees:


You say one case of classic deadweight loss is charging for exchange prices. I couldn't agree more. Isn't this a form of "restraint of trade"!


	

	


	
May

	
26

	

	

	
RabelaisSince Nock and Rabelais are two of my favorite role models of all time, it makes perfect sense that Nock would write a travelogue/social commentary titled A Journey into Rabelais's France. I just finished re-reading it for the nth time, and always find something new. I won't go into specifics, and will let you be the judge.


Here's the book online.

	

	


	
May

	
4

	

	

	
ant holeI always had a special kinship with ants, having made and observed colonies as a kid. I performed many behavior experiments with ants and learned a lot. In college, we used to boil ants to extract the formic acid they use as defense. Ants have ideal defense mechanisms since formic acid is better than any tear gas or mace for incapacitating an attacker. I used the formic acid in many nefarious experiments and research. Another thing to note is that the collective works best with the ants as they are single minded, and it is my hypothesis that the collective only works for those who live life through ritualistic behavior.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MOTU.


Douglas Dimick adds:


Here in China, there is the "anthill" dynamic developing among university graduates who can only find low-paying work (2000 RMB per month). Graduates are renting rooms in apartments and living among collectives of similar fated new-to-the-market job seekers. See this China Daily article.


Riz Din writes:


Ants have an interesting relationship with aphids, treating them as a living food source to be farmed. Also, there are more of them than we think. Apparently they make up 15-25% of living terrestrial animal biomass.


	

	


	
May

	
3

	

	

	
 I recall reading somewhere that 18% of the US oil comes through a terminal in the Mississippi delta down river from New Orleans. If shipping can't get through because of the oil slick, would oil and gasoline prices not go through the roof?


Disastrous earthquakes around the world, aircraft-stumping volcanoes, man-made environmental disasters… makes you wonder how long we can keep taking these torpedoes in these economic conditions…


The short side in equities suddenly looks attractive (but not attractive enough to forego really tight stops). The long side in grains and sugar perhaps also. The times they are a changin'.


Jeff Watson adds:


They're expecting that if this thing doesn't get capped, that the clockwise currents in the Gulf will ultimately be putting an oil slick on my front yard. Still, the gulf is a pretty big place and 200,000 gallons a day is not a lot of oil, especially since only a percentage of it actually makes the slick. I'm not worried about any environmental damage, and will accept whatever happens. The bright side is that the tourists stop coming.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MOTU.

	

	


	
May

	
2

	

	

	
Live CowsJust made some killer BBQ sauce: tomato sauce, Worcestershire sauce, molasses, brown sugar, cinnamon stick, garlic salt, liquid smoke, chili powder, rice vinegar, Jack Daniels, fine chopped onions, clove powder. Soak braised ribs for a couple hours before heating in the oven or over coals. Oh my gosh, "Broke da mouth" as they say in Hawaii.


Jeff Watson adds:


If you were to sauté the onion and garlic in butter instead of oil, the chemistry dictates that the onion will be sweet instead of bitter.

	

	


	
Apr

	
18

	

	

	
 Spending a little time in the "Sports Brokerage" industry in my youth, I learned to appreciate the services the bookie provides. He acts like a clearing firm, inserting himself between the trades. He acts like a market maker, pushing the line this way and that in order to keep the order flow even and balanced, yet at a level where it will see maximum trading. He assumes market risk between trades, and has to hold one side before he gets an order on the other side, or has to lay it off. He ensures that you will get paid and assumes the risk that he won't get paid on every bet. A bookie will sometimes provide credit, much like a brokerage firm will. For the amount of vig you pay a bookie, the whole transaction is risk reducing and value adding to you. His reputation depends on an image of fairness and not welshing and it is much safer getting large action down with a bookie than with an acquaintance. With an established bookie, you know you'll get paid on Tuesday or pay on Tuesday depending on the time of year and schedule you establish for the P&C.


Vince Fulco writes:


Said bookie could neither take up a forced collection in the neighborhood to then re-establish his operations nor make intentionally lame or kill a horse he was taking action on without repercussions. Perhaps we're just seeing the pendulum begin its swing hard in the opposite direction.


	

	


	
Apr

	
16

	

	

	
Notice how the volcano, the GS charges, earnings season, and all things come at an inappropriate time, just like the big San Francisco Earthquake. What will be interesting is the manner in which the market digests the news and might offer predictive value.


	

	


	
Apr

	
16

	

	

	
icelandic volcanoVolcanoes appear to shift grain prices when they are Mt. St. Helens-Krakatoa size, or the ash plume and the deposit covers significant amounts of arable land . Some cold weather grains such as barley, rye, and oats like the cooler weather with the tropicals suffering accordingly. The grain market seems to be yawning over this eruption so far. Lack of initial movement in the grain markets over a catalytic events is pretty common, like when the Russians bought most of our crop in 72-73, or when Chernobyl blew up. It took a couple of days for the market to react with Chernobyl, and when it happened, the action and reaction was the most violent ever in the history of the grain trade. The wheat market during Chernobyl was much like an earthquake, with many aftershocks for weeks after, even after the apparent damage was priced into the market. The nearby spreads were like tectonic plates crashing into one another for at least a year after Chernobyl, as late as early 1988 in my opinion.



Chris Tucker adds:


From wiki, why volcanic ash clouds cause flights to be canceled or rerouted:




Volcanic ash jams machinery. This poses a great danger to aircraft flying near ash clouds. There are many instances of damage to jet aircraft as a result of an ash encounter. Engines quit as fuel and water systems become fouled, requiring repair. After the Galunggung, Indonesia volcanic event in 1982, a British Airways Boeing 747 flew through an ash cloud that fouled all 4 engines, stopping them. The plane descended from 36,000 feet (11,000 m) to 12,000 feet (3,700 m) before the crew could manage to restart the engines.[16] In April 2010, many flights across the United Kingdom were cancelled as National Air Traffic Services closed airspace due to the presence of volcanic ash in the upper atmosphere from the eruption of the Icelandic volcano Eyjafjallajökull.[17] As a result of the eruption, significant flight delays also occurred in other parts of Europe.[18]




Victor Niederhoffer comments:


The eruption is canceling flights. Is it good for grains like in the previous 10 centuries?


Pitt T. Maner III writes:


CNBC just reported that this particular volcano erupted about 200 years ago and kept erupting for 2 years (need to verify this).


Past geological performance is no guarantee of future results.


A lot would seem to depend on the volume of ejecta, the particulate size (time aloft), duration of eruption as noted, and carrying currents and other meterological parameters and timing of events during year. So the percentage and total volume of ejecta into the upper atmosphere from the Icelandic volcano as it relates to the 20 or so other active volcanoes would be useful info—so far the volume seems relatively small.


During the time period this volcano last erupted (as Mr. Tucker discussed) it was unseasonably cold in 1822 in the US. Whether that would be related to volcanic activity requires a lot of investigation (and more data) and may not be possible to determine. Its, however, an interesting coincidence.


1) From a 1985 Lakeland Register article  in which a researcher went back into old archived National Weather Service records:


"First the West Coast and then the east were hit by cold weather in 1822 and 1828, respectively, the latter frost killing cotton, corn and citrus."


2) And per the New York Times (1879)  some people built a shanty in the middle of the Hudson River in the winter of 1822. Prodigious amounts of wood were used to keep warm.


3) Translation of Icelandic obsevations  from 1820s. Ash fall resumes in June 1822. 1822 is like last week in Iceland!




The eruption in Eyjafjallajökull began in the evening of Dec. the 19th, 1821. At that time people spotted fire up on the glacier. In the morning they could see a white cloud above the glacier that stretched ever upwards, slowly darkening, ending as a thick plume of ash. As day turned to night, the plume lessened for a while, then grew again, this time with lightning and thunder. From the 21st to the 27th the ash fall was mostly steady, most of the time in a NE-ly wind and the west part of the glacier became black from the ash. Ash fell mainly around Ytri-(Outer-)Eyjafjöll and in Eastern Landeyjar. West of the glacier rumble could be heard and rivers grew greatly in volume. A glacial flood broke forth to the north-west into R. Markarfljót and filled the valley between Langanes and upper Fljótshlíð. [Literal translation would be inner-Fljótshlíð.] Grass meadows of the farms of the farms Eyvindarmúli and Árkvörn flooded, with livestock saved at the last moment. Fragments from the glacier were spread all over down to the sands west of Steinholt and took uo to two years to melt down. The ash fall was reduced greatly with the new year of 1822, but rumbles and crackles continued." Ash fall began again in latest June, mostly under Eyjafjöll. The eruption finally ended in the beginning of year 1823.




Chris Tucker adds:


It seems to me that the last six months have produced an unprecedented (at least in my minute experience) amount of seismic and volcanic activity. Almost as if someone has turned up the burner on the ring of fire. This is a very interesting interactive map  of recent seismic activity. I recommend clicking on the "See Large Screen View" button in the upper right corner. I wonder what it might portend. 

	

	


	
Apr

	
13

	

	

	
Here's a great article on how the carry of around $1.00 in July 2011 CBOT wheat could cause farmers and elevators to store more wheat, affecting [storage capacity for] corn and beans when the harvest comes in and a possible resulting glut.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MOTU.


Michael Ott writes:


Do you have any idea of the amounts of wheat involved? I ask because of all the farmers I know, just one has planted wheat and will hold on to it. Therefore, is this going to be widespread enough to have an impact on markets? Or is it a small factor that won't matter much, given the massive volumes of commodities involved?Granted, I'm in Iowa, which isn't exactly wheat country, so my sample might not be representative.

	

	


	
Apr

	
13

	

	

	
earth and moonArecibo, located in Puerto Rico has the largest radio telescope in the world. Its primary use is to listen for extra-terrestrial signals among other things. Next week (April 16th-18th), they're mixing things up by firing up the dish in transmit mode on 432 Mhz, aiming it at the moon and giving the small ham operators a shot at doing a little Moon Bounce (Moon bounce, or EME, is where you bounce radio signals off the moon and back to earth and carry on a conversation via the moon).


There should prove to be a pile up of immense proportion as this mission is geared towards giving the little guy a chance to do moon bounce  and there will be about 300,000 guys trying to work the station. I won't participate as I've worked plenty of EME in my day and need to give someone else a chance to score this rare chance. Still, for those with police scanners and a decent homemade yagi antenna pointed at the moon, you should hear a helluva conversation in CW with occasional directions in voice SSB. I will listen to the operation but won't feel left out as I already got my fix of extraterrestrial communications, working both the International Space Station and Shuttle for a nice Quinella this week already.


Most people don't realize that there are hams on every shuttle mission, and there are always hams on the International Space Station which makes for some exciting radio work. Too bad that Ham Radio is a dying hobby, but that's a topic for another day.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MOTU.

	

	


	
Apr

	
9

	

	

	
 The human body after a certain age (25 - 30 - 35?) doesn't take impact quite so well as it did prior to that age. My desire to jump or tumble or fall is diminishing by the day. Pain seems to hurt more and recovery time is increased. I think this phenomenom is a function of how many blows you took when you were younger/immortal/bullet proof.


What I mean is this: Had I know then what I know now (i.e. how much my knees/ankles/back would hurt today), I probably would have done things differently. But alas, my  athleticism fooled me into thinking that I was destined to play professional sports someday so I played hard and threw my body into every scrum, pile up, oncoming blocker, went across the middle and jumped to my full ability to catch every high pass, blasted through every catcher guarding home plate and took every hard charge to draw the offensive foul that came my way.


Unfortunately, athleticism does not make one aworld class athlete. High jumping for the college track team my freshmen year was the end of the road for me (well, except for church ball, and pick up games here and there).


The Bottom Line is this: The aches in my 46 year old body outweigh the adulations from the former glory days of my youth. Those days are but a memory, but the aches, unfortunately, will likely never go away.


Jeff Watson notes:


Being no stranger to skateboarding, skateboarders, and skateparks, I will note that the helmet issue is a very contentious issue with the skaters. I tried insisting with my son on wearing a helmet, which was a battle I quickly lost. especially for the freestyle casual skating. His excuse was that he never saw me wear a helmet while skating or riding a bicycle, for that matter. Plus, the peer group pressure was just too great for me to overcome. However, almost everyone wears helmets when they are lucky enough to find a pool, bowl, or good concrete drainage ditch to skate in as the danger level is moderately high. Personally, I still skate decently and quite often at the age of 53 and I always wear a helmet, as I learned that from the school of hard knocks. 


Pitt T. Maner III writes:


Having had bad wrist injuries in my family I would worry a little bit about that too. It's a balancing act though with being too overprotective and letting kids learn the risks themselves. My worst accident was falling out of a tree and breaking my arm. A memorable learning moment was shooting a BB gun at the ground and having it richocet right back between the eyes.


At age 8, started thinking about safety after that. You don't forget stupid mistakes like that. Better to learn with a BB gun then with a .22. You wonder though how my dad's generation survived– sending up home-made hydrogen balloons with Roman Candles, playing around with any number of electrical circuits, Windhurst machines, transformers/electrical coils, making thermite "bombs" to burn holes in the asphalt street outside, making home-made wine from Scuppenong grapes with occasional explosion of bottles, shooting at each other with BB guns, shooting guns in general, slingshot accidents, riding unruly ponies, high pressure German steam engine toys, playing with massive M-80s and other potent fireworks from Texas and on and on. Wild Indians and Mad Scientists at work.


	

	


	
Apr

	
3

	

	

	
Mike D'Antoni

"The Knicks never lead, falling behind 4-0 in a sign of things to come" in losing

118-90 to Portland on March 31. What can we learn from that?


Pitt T. Maner III writes:


If the Knicks were a portfolio of stocks it might be best to start trading them for younger players who put forth effort and play defense. It's a bad sign when statements are issued that accept this type of poor play as a natural event. One can imagine what Maurice Lucas  or Bill Laimbeer  would have done to players trying to dunk over them or drive down the lane for easy layups. If you are putting a team together it is best to get players who hate to lose and know how to box out and play defense and basically intimidate the opposition. "We had no energy at both ends of the floor," D'Antoni said. "When you do that against a really good team that is trying to solidify everything they do in the playoffs, there are going to be nights like this. We didn't switch [on defense], we didn't talk, we kind of just looked around. There were balls we didn't go after. It wasn't a good effort."


When you think of the Knicks in better times you think of Willis Reed playing on terrible knees  to win the 1970 NBA championship — there you had it: sacrifice, teamwork, team defense, accountability, professionalism, precision passing and a hunger to win. And very good announcers to add to the drama  and excitement. A quote attributed to the late Red Holzman, the coach of the Champion Knicks: "On a good team there are no superstars. There are great players who show they are great players by being able to play with others as a team. They have the ability to be superstars, but if they fit into a good team, they make sacrifices, they do things necessary to help the team win. What the numbers are in salaries or statistics don't matter; how they play together does."


Well, it could be worse — look at the Nets. Interesting though that they are moving to Brooklyn and may have a billionaire Russian industrialist as an owner.


Jeff Watson adds a corollary:


In 1969, the Chicago Cubs were in first place all season long. The beginning of Sept, they had a 84-52 record and were a solid five games ahead of the NY Mets. By mid-season, the Cubs were already getting ready for the series, and they even wrote many songs about them. The Cubs choked and lost 17 of their final 23 games while the Mets went on a tear with a 23-7 record, overtaking the Cubs and ultimately finishing eight games ahead. The Mets ultimately went on to win the World Series, while the Cubs quickly regained their status in the cellar. Still, Chicagoans love the Cubs, win or lose, as there's nothing like a good day at Wrigley eating hot dogs, peanuts, Cracker Jack, and plenty of beer to wash it down.


Jeff Watson, surfer, speculator, poker player, art connoisseur, blogs as MasterOfTheUniverse.

	

	


	
Mar

	
30

	

	

	
 This time each year, a growing excitement envelops me as baseball season is ready to start. Every spring, I get transported back to my youth and a certain contentment washes over me. Baseball is such a good sport. While many say that baseball is past it's prime, and compare football, basketball, and NASCAR attendance figures, the naysayers just don't know. After all, they write poetry about baseball and one would be hard pressed to find any poetry written about those after-mentioned sports . Casey at the bat was the quintessential baseball poem as it included every human emotion wrapped up into a neat little package. There are many good trading lessons in "Casey at the Bat."


Casey at the Bat - The Original Poem


Ernest Thayer wrote the poem in May, 1888.


It was published in the San Fransisco Examiner on June 3, 1888 under the byline "Phin".





	

	


	
Mar

	
29

	

	

	
This is my old standby recipe for an easy BBQ sauce that can be knocked out in a couple of hours and is very easy to make. It is rather sweet, with a distinct kick, and goes very well on pulled pork, ribs, sliced pork, beef, chicken, turkey, and sausage. It makes an incredible BBQ spaghetti, and goes great in BBQ beans.


4 cups ketchup

2 cups dry white wine

2/3 cup honey

1/3 cup dark molasses

4 tablespoons cider vinegar

4 tablespoons lemon juice

2 tablespoons sugar

2 small onions diced very small

4 minced garlic cloves

1 teaspoon Coleman's dry mustard

1 teaspoon ground cumin

2 tablespoons Worcestershire sauce

Dash favorite hot sauce to taste

Salt and pepper to taste


Saute onion and garlic in pot until soft and translucent. Add all other ingredients and cook over low heat (stirring occasionally) until thick. Salt and pepper and hot sauce to taste. The finished sauce can be strained or used "as is."



Jeff Watson, surfer, speculator, poker player, art connoisseur, blogs as MasterOfTheUniverse.

	

	


	
Mar

	
22

	

	

	
 Here's a great article  on how a cure for scurvy was found in the 18th century and the knowledge was lost early in the 20th century with disastrous consequences.


One wonders if there are any parallels in the markets and if any necessary market knowledge is lost over the years.


Here is another descriptive account  that is well worth the read.

	

	


	
Mar

	
22

	

	

	
 I do reckon I found a gem of a BBQ place and had to go all the way to Fairfield, CT to find it. A good friend, and fellow spec, took me there to prove the Northeast has BBQ that will stand on its own — and he was right. He was quite apprehensive in trying to score a good fix of BBQ, as I'm known for being very tough to please and rather discerning.


Walking into Wilson's (1850 Post Rd, Fairfield, CT) our senses were immediately assailed with the sounds of good music, the sight of tasty food, a funky atmosphere, and very helpful and cheerful employees. Before the food was even discussed and ordered, I had that sixth sense that told me that this would be good. We stepped up to the counter and each ordered a slab of St. Louis style ribs (dry rubbed), and several sides. My companion had sides of beans and slaw, and I had fries and slaw. Wilson's served a lagniappe of homemade cornbread with each order. They provided three different BBQ sauces, a Chipolte, a Carolina Vinegar, and a Sweet/hot sauce. I wasn't taken by any of the sauces, but my companion enjoyed the Chipolte sauce very much with his initial taste test. Our food came very quickly, and we dove in with gusto. The slabs were extremely meaty, tender, and juicy, no dryness at all. I didn't use any sauce, and really enjoyed my ribs as the bark was to die for, and made the meal 100% enjoyable. Anytime one doesn't need any sauce with his ribs means they hit three sevens and the proverbial jackpot paid off big. The sides were awesome, the fries being A+ in taste and quality. The slaw was rather drab, and I suspect the owners preferred to make a bland slaw as to not overpower the meat when used on the pulled meat sandwiches. Anyway, the slaw was a perfect counterbalance to the wonderful taste of the meat. I looked at the beans my companion ordered, and they looked and smelled delicious, being homemade with several different types of beans. The cornbread was especially notable, made from scratch, moist, and with the right amount of salt to give it that Southern zing. I was pleased that Wilson's offered sweet tea. Their sweet tea was the real deal, and would be home anywhere in the South. They offered unlimited refills, which this sweet tea deprived person took full advantage of. All in all, it was wonderful to eat at a BBQ place where it was obvious that the food was prepared with a lot of love, and the staff takes their BBQ seriously. Additionally, the blues cranked on the Jukebox instantly transported me to Greenville, MS — another place and another time.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.


Charles Pennington weighs in:


I heartily agreed with MOTU about Popeye's, but I dissent on Wilson's. I've been there a couple of times, most recently with my wife. We got indifferent service, prices about three times that of a good Southern place, and mediocre food. Also they won't even give you a fountain coke with ice — they'll only let you buy a 12 ounce can if you're nice. It's also small and has not very good seating. There is a place called Bobby Q's in Westport that is pretty good, and there are plenty of places in Manhattan that are fantastic, though expensive. Bottom line though is that whenever I head down South I'm bowled over by the quality, low prices, and plentitude of the 'cue. Most recently I enjoyed Shane's in Atlanta. It's a chain, but it's great.

	

	


	
Mar

	
21

	

	

	
I strongly recommend The Gamblers Book Shop for all things gambling related. This site grew out of the old Gamblers Book Club in Vegas that I loved so much. The range of literature is amazing.

	

	


	
Feb

	
26

	

	

	
I'm looking for some new/better ideas on how to calculate the vig in ETFs, versus the vig in futures, versus the vig in the physical.


Bill Rafter replies:


Not all ETFs are taxed identically. Specifically the inflation-averse would be warned that GLD is set up as a grantor trust and not as a 1940 Act fund. Profits in GLD are taxed as collectibles.


This points out that "structure matters". For example if you own an ETN (note) rather than an ETF (fund) you are subject to counterparty risk. Some people have chosen to gloss over the distinctions and refer to them all as ETPs (products), and that homogenizing tends to mask the counterparty risk. For example, LEH had issued a few ETNs whose owners are now waiting in line with all of LEH's other creditors. Barclays is the counterparty on INP (ETN representing India), which presumably would be okay. But why take the chance when you can buy EPI, the Wisdom Tree offering which is a true ETF?


How do you find these things out? Read the prospectus, something very few do anymore.


Nick White writes:


Deep and mysterious are the secrets that one can behold if they are willing to brave the legalese, break out pad and paper and delve into these sometimes fantastically structured products.


Rocky Humbert comments:


There were/are a whole load of those ETNs out there — additionally, the IRS issued a ruling about a year ago that changed the tax treatments for the currency ETNs. Currently, some of the narrower futures are under scrutiny by the IRS, and some foreign (unregulated) futures don't qualify for Section 1256 at all. Another example of the hazards of the ETFs are also the changing CFTC rules regarding position limits — which caused the UNG and USO to diverge from their NAV. At one point the UNG was trading at a 19% premium to NAV. If one is short the ETF, one cannot redeem the position, so there is no theoretical limit on how far the premium could go. In contrast, if you buy the ETF at a discount, you can always redeem it and close the arbitrage to the underlying. 

	

	


	
Feb

	
20

	

	

	
grainThe USDA issued the preliminary 2010 crop report,  which contained no surprises to the grain trade. The grain markets are holding steady today and are yawning at the report. There is nothing in this report that will affect prices on the upside unless demand increases, country movement slows, or some type of crop disease infects the crop. Anyway, the big grain companies have had their estimates for two weeks and their summaries tend to be more accurate than the USDA's report.


Roberto de Vries asks:


“The big grain companies have had their estimates for two weeks and their summaries tend to be more accurate than the USDA’s report.”


That’s nice to know but what I wonder is what the markets trade upon, the companies' estimates or those from USDA?


Jeff Watson replies:


The grain companies are as secret as the CIA or NSA, and the grain companies will always make a profit. The key to trading the grains is not to look at what the USDA's or grain companies' estimate of the crop is, but whether the grains are cheap or expensive. Since the supply of grain and amount of grain for sale is reasonably well known, half the job is already done for you. The tough part is deciding whether you are right or wrong and staying on the same side of the insurmountable forces of the big grain companies who always seem to be on the right side of the trade. Same thing the Palindrome says. Works the same way in the grains or any other market.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.

	

	


	
Feb

	
19

	

	

	
a geomagnetic storm on earth due to solar activityThe NASA site spaceweather.com has a prediction of 25% chance of geomagnetic storms at mid-latitudes in the next zero to 48 hours. The chance at higher latitudes is 30%. Recall that geo-magnetic storms have been linked in an Atlanta Fed study to stock market weakness in the nest few days following the event especially if accompanied by Coronal Mass Emissions.


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


Jeff Watson writes:


Years ago, I looked at the correlations between solar activity and markets using the solar flux, A index, J index, and K index, and Sunspot number, and couldn't find anything offering predictive value. The only correlation I could make was the total solar output with grain prices, and my conclusions were suspect, to say the least as many other factors were in play. A great solar storm,on the level of Sept 1-2 of 1859(which blew out the telegraph system world wide) might be bullish on chip makers and other electrical component providers, plus would be very bullish on metals. However, a solar storm of that magnitude could possibly wipe out our digital communications, computer system, and internet, for a long time.


Yishen Kuik comments:


I'd never heard of the 1859 storm before. A little more recently, the Toronto Stock Exchange was halted by a solar storm in 1989.

	

	


	
Feb

	
17

	

	

	
 I cannot count the number of times my trading was going along really well, then all of the sudden, wham… all my profits were erased in one fell swoop, one bad trade. In retrospect, I got arrogant, and decided, because of my invulnerability, to assume extra risk which became my undoing.


Despite many decades of trading, I still occasionally get a b**ch-slap from the mistress of the market when I get excessively confident. In my own case, this seems to happen when I have many trades on and all are solidly in the black, or I've had a real good run. I get a sense of invulnerability, hubris, and that's my own personal kryptonite. At least I can recognize this flaw, and it hasn't reared its ugly head in a few months. Usually when my normal balance between my offensive and defensive game goes out of whack is when I get killed. Now I have a system in place that identifies when I'm about ready to go on tilt. The system hasn't kicked in yet, so maybe I'm learning something.


When I was coming up, an old grain trader told me that "Hope" is for losers. I used to get stuck in a position, and hope it would come back, and it usually would not. In fact, my friends saw me hoping for an improvement and were fading me all the way down. It took awhile, but I learned that hope won't bring the market to your favor, but hope will make you go bankrupt. Finding people full of hope can be a gold mine for you, provided you play it right. Seeing a person "Hope" for his position to improve enables another person to get additional clarity on what the market is going to do….at least in my case…..but I like fading losers. The converse is that I don't mind or take it personally when people fade me when I'm wrong.


Luck is just wrong. I don't believe in luck, and if it were to exist it would be a zero sum game. Is a person who wins the lottery lucky, or is he just part of the statistical distribution? I like to think of luck as an offspring of statistics and probabilities. There is a probability for every possible occurrence in the universe, and things just happen without any mysticism involved..Some gamblers like to have lucky rabbit's feet, or other talismans. I like to sit in position to those guys in table games. Some guys like to brag about their lucky streaks and I listen carefully. I like to observe their streak, and at some point, start to fade them, a little at first before I really press. Sometimes this works, sometimes I get my butt handed to me on a silver platter, it depends.


My favorite are the superstitious, as they believe that some mystic power controls their destiny. Evidence of any kind of lucky charm raises my curiosity and I try to observe that person for any fade clue. It's tough enough to pull money out of the markets. The emotions of hubris, hope, and luck make it near impossible to make money. These emotions are akin to having a horse player bet the his idea of an overlay, only to lose, and hear the lament, "Boy, I wish there were just one more furlong." In horses, as in the market, and life, there is not one more furlong and do-overs aren't allowed.


Kim Zussman replies:


How about this definition of luck: 


From Merriam-Webster:


1 a : a force that brings good fortune or adversity b : the events or circumstances that operate for or against an individual


2 : favoring chance


3. Favorable or unfavorable outcome which was not caused by skill, effort, or actions taken.


I purposely left out "ability", since some large fraction of ability is genetic, and one can only obtain good parents by luck.


Janice Dorn writes:


Self attribution bias applied to trading posits that traders attribute good results to skill and bad results to bad luck. This is a common bias that underlies the inability of many to admit they made a mistake.


Rudolf Hauser writes:


Kim's definition of luck is a good one but I disagree when he writes "I don't believe in luck, and if it were to exist it would be a zero sum game." There is no question that ability, persistence, preparation and work in general are needed to take advantage of opportunity, but luck also plays a part. So much of what we do involves interaction with other people and some depends on being in the right place at the right time. The geologist or anthropologist who is traveling somewhere and happens to notice some clues that will lead to a significant discovery is the beneficiary of both his or her skill and good the good fortune of being alert (not luck –or is it if you were just doing something else at that time and so missed what you otherwise would have notice so you had bad luck) and the luck of being in the right place at a time they had the experience to take advantage of the opportunity.


Or what about the person who takes a job in a local company that just has a product about to take off and ends up making a super salary and seeing the stock he purchased in the company rise and make him rich whereas if he had done the same in another town with the same skills and hard work doing much less well because the people running the company in and industry with no such product line and whom he had never meet were bad managers and ran the company into the ground? Sure he or she did not have perfect foresight and the ability to evaluate the thousands of people one interact with and predict how will interact with them over a lifetime–but then who does?


There is no question in my mind that a person who does not fully apply themselves is not likely to be able to take advantage of what good fortune of opportunity presents itself but there is also no question that luck plays a major part in life. And it's not just genetic– if you were born in a country in perpetual war and poverty your changes of a good life are much less than if you were born in the U.S.A. Or what about the Jewish children born in the 1930's in Germany or central Europe rather than the U.S.A. or being born in either place in the 1960's? Was that there bad luck or a failure of keen judgment and hard work on their part if they died in Hitler's gas chamber? What about the person who contracts a disease and dies from it when a cure would have been available had he gotten the disease a decade later? Was that something he or she could have prevented or just bad luck?


Kim Zussman adds:


I know a guy who is a retired contractor/developer, who "came from Germany with $20 in his pocket" and is now very wealthy. He developed a number of commercial and residential properties.


Why so successful?


1. He happened to like to work outdoors, was good with building, and good at commanding laborers

2. Was born charming

3. Was lucky to have lived through three decades of atypically high appreciation in real estate


Had any of the above three been missing, especially #3, he would not been as successful — maybe even a failure. I call that luck.


You can say the same about stock bulls in the 90s, oils and railroads in the past — all kinds of bull markets and bubbles, without which the great moguls and flops would not be. Not to mention war heroes who survived to tell the story, as opposed to those who took equal action but were silenced.


Economic society is pretty much zero sum over short periods, if you add all the give and take together.


Russ Sears writes:


Much of what we call luck is really the skill, effort and actions taken by others and given to us by the generosity of those most successful.


This would include living in a free country.


Further, much of this skill, is willingness to take actions and give effort where the difference between success and failure often hinges on the smallest thread. A thread so small, that even the most skilled, those putting the most effort can not be assured that any fruit will be borne. But one where the skill lies only in putting the edge in their favor.


This would include parenting and trading.


Finally, much of what looks like incredible luck is compounding of these skills over time and history.


However, to anecdotal throw a wrench into the "no such thing as luck" I have a relative by marriage, that won 2 lotteries. One a $4.3 million jackpot in MO state lottery, by entering one ticket a week. The other a half million Reader Digest sweep-stake, by answering the junk mailer. But she would like to remain anonymous.


The untold story however, is how the money tore apart her family. Luck or curse, I leave it to the reader.


Jim Sogi writes:


 Chinese proverb 


Good Luck Bad Luck!


There is a Chinese story of a farmer who used an old horse to till his fields. One day, the horse escaped into the hills and when the farmer's neighbors sympathized with the old man over his bad luck, the farmer replied, "Bad luck? Good luck? Who knows?" A week later, the horse returned with a herd of horses from the hills and this time the neighbors congratulated the farmer on his good luck. His reply was, "Good luck? Bad luck? Who knows?"


Then, when the farmer's son was attempting to tame one of the wild horses, he fell off its back and broke his leg. Everyone thought this very bad luck. Not the farmer, whose only reaction was, "Bad luck? Good luck? Who knows?"


Some weeks later, the army marched into the village and conscripted every able-bodied youth they found there. When they saw the farmer's son with his broken leg, they let him off. Now was that good luck or bad luck?


Who knows?

 

	

	


	
Feb

	
12

	

	

	
Father talking about his daughter (triggered by whether she should charge for shoveling people's walks, or do it for free):


No kid among my daughter’s friends or my wife’s students has ever worked for pay (except maybe at camp), but they have put in vast numbers of entirely pointless community service hours in places like Guatemala and Costa Rica, entirely ignorant of the whacked aid economics of sending 14 year olds to “build” houses in rural communities in the Third World. My daughter and her friends are rapacious — not as capitalists, however, but merely as consumers. Once my wife mentioned to someone at one of the DC private schools that this was not an effective way to help people in the developing world, and that as far as she could tell among her private school students, they understood perfectly well that this was crazy — the response was almost exactly, “Well, it’s really about our kids, isn’t it?” The take-away by the kids was, they understood that the economics of it were whacked — and that the priority was that they have a good “experience” doing good things for poor people. In the end, their community service was just another form of consumerism.


To the extent these kids have been educated in the ethics of production — it is entirely an ethics of therapeutic production, the helping professions, in which they are extending assistance to those not in their privileged positions, for which they merely happen to get a paycheck that appears mysteriously from some third party. It teaches them inequality, to start with — the inequality that goes with the patronizing condescension of the expert who ministers to the masses (there are indeed experts; but what I refer to here is not expertise, but the sensibility of expertise, which is a sensibility acquired long before and independent of whether one has actual expertise; my kid and her friends have the attitudes, even by the teen years). It also teaches them that payment comes from third parties, not the party to whom one provides the “services.” It is not the equality of market exchange among freely consenting equals. It is not any kind of market production at all. This is a very big problem when that is the in-training of the next elites, because what we call capitalism is as much sensibility as sense.


My kid’s problem is not to learn to do good things for people. She knows how to do that and understands too well the sensibility of it. My daughter’s biggest need is to learn how to negotiate in a straightforward way, a business-like basis, in which she will not presume that because she’s a nice kid and this isn’t a ‘real’ market transaction, she doesn’t need to do a good job, or that she is somehow a rapacious little profiteering scamp if she thinks she should get paid. Learn that it is okay to negotiate to a deal. You have no idea how hard that concept is for kids raised in a purely pro-bono environment. They are scared to make an offer or bargain; it seems low-class and grasping.


Jeff Watson writes:


As a kid, I was constantly berated because I realized the value and utility of money at a very early age, yet everyone turned to me as the lender of the last resort. When someone wanted to borrow five dollars (a princely sum in 1967) I was more than glad to lend the money provided the debtor paid $6 at the end of the week. At that time, I had around $200 floating around on the street, with a big Greek kid who collected on commission. Many a time, I ended up in the principal's office, the debtor, his mother, and the principal hammering me and threatening me when he refused to pay. I was careful, not doing business on school property and after school hours, but these people were not only trying to avoid the interest, but to bust the trade altogether. Since I had the high moral ground, I spoke my piece about bad parenting, welshing, and the bad lessons taught by not paying one's bills. Still, I ended up in detention and had to get my father involved, as none of these transactions took placed on school grounds or on school time. My dad had a Svengali way of getting me out of trouble, and it was business as usual. Still, I had many deadbeats, surrounded by their overprotective mothers, who refused to pay. Somehow, my Greek cohort would find their bicycle, ride it to Madison Street, and sell it for substantially more than the $6 owed us. In all honesty, we took our rightful cut, and put the rest in an envelope and sent it to the deadbeat. We kept a list of deadbeats, and sold the list for a song to the neighborhood bookie, who was glad to get such information early. If you think it's tough making money as an adult, making money as a kid is twice as tough… It's not the making money, but the collecting money over the shadow of overbearing parents. I tried to be a different type of parent… I let my kid take his lumps, and when he cried due to getting ripped off, taught him that he just had a learning lesson. Since he got ripped off, he learned to think things thorough. Since then, I have financed several of his businesses, such as DJing, Notary Public, crab trapping, shell diver, buying and selling surfboards. While he hasn't gotten rich, he knows the key to retail is in buying correctly.


Adam Kretschmann remarks:


Too bad one of the kids parents wasn't a lawyer. A juvie record for usury and theft might have helped you recognize the "value and utility" of the law as well as the dollar.


Jeff Watson replies:


In Illinois in the 1960s the usury rate was ~45% thanks to Sears Credit. Anyway, if any adult messed with me in a legal sense, they would have city inspectors crawling over hsi house and business, before their mortgage was called. My dad and grandfather always insisted in a call provision in a loan, just for certain unexpected contingencies with intransigent borrowers. I feel no empathy for people borrowing money, as they walk into it with both eyes open, and their promise to pay it back is more than a promise, it’s a covenant.


Russell Sears adds:


I remember well the few times I spent hours shoveling a sidewalk for a negotiated price of $5, only to be handed a quarter or a buck. It is hard for a kid to argue with a old miser. But it was easy to watch him become snowbound the next big snowfall. Word spread quickly.

	

	


	
Feb

	
9

	

	

	
Brain Basics: Brain Damaged Investor from Inside the Investor's Brain by Richard L. Peterson


According to a 2005 Wall Street Journal article, "Lessons from the Brain-Damaged Investor," brain-damaged traders may have an advantage in the markets (1). Study participants who had a brain lesion that eliminated their ability to emotionally "feel" were compared against "normals" in an investment game. The chief researcher, Professor Baba Shiv (now at Stanford University), used a mixed sample of patients with damage in emotional centers including either the orbitofrontal cortex, the amygdala, or the insula.


In Shiv's experiment, each participant was given $20 to start. Participants were told that they would be making 20 rounds of investment decisions. In each round, they could decide to "invest" or "not invest." If they chose not to invest then they kept their dollar and proceeded to the next round. If they chose to invest, then the experimenter would first take the dollar bill from their hand and then flip a coin in plain view. If the coin landed heads, then the subject lost the dollar, but if it were tails, then $2.50 was awarded. On each round, participants had to decide first whether to invest. The expected gain of each dollar "investment" was $1.25 (average of $0 and $2.50), while each "not invest" decision led to a guaranteed $1. The expected value of the gamble being higher, it was always the most rational choice. Thus, one might assume that subjects always "invested" in order to make more money.


In fact, the results are not uniform. Normals (without brain damage) invested in 57.6 percent of the total rounds, while brain-damaged subjects invested 83.7 percent of the time. Many normal subjects (42.4 percent) were "irrationally" avoiding the investment option. Following an investment loss in the prior round, 40.7 percent of the normals and 85.2 percent of the patients invested in the subsequent round. After recent losses, normals invested 27 percent less often. They became even more "irrationally risk avoidant" after a loss.


Of the patients with different brain lesions, the insula-lesion patients showed the leas sensitivity to risk, investing in 91.3 percent of all the rounds and in 96.8 percent of the rounds following a loss. As a result, it appears that the insula is one of the most important drivers of risk aversion. Without an insula, brain-damaged patients were more likely to "invest."


On the lighter side, neurologist Antoine Bechara ventured that investors must be like "functional psychopaths" to avoid emotional influences in the markets. These individuals are either much better at controlling their emotions or perhaps don't experience emotions with the same intensity as others. According to Professor Shiv, many CEOs and top lawyers might also share this trait: "Being less emotional can help you in certain situations." (2)


1. "Lessons from the Brain-Damaged Investor" Wall Street Journal, July 21, 2005.

2. Chang, H.K. 2005. "Emotions can Negatively Impact Investment Decisions" (September). Stanford GSB.


Newton Linchen replies:


Larry Williams teaches that we shouldn't try to "improve" our personality regarding trading and emotions. There are "emotional guys" and there are "cold guys". Being an emotional type and trying to become cooler is another problem to solve, and the markets gives us already much trouble to work with. So, he says in his books that we should only recognize "what type" of people we are, and develop our trading style accordingly.


Pitt T. Maner III comments:


With the availability of more and more powerful software programs for the average Joe, will the human element eventually be less of a factor? One for instance can play a very mean game of chess without being a grandmaster by using a powerful program to suggest moves. There are tournaments where this is allowed—man/computer chess. http://en.wikipedia.org/wiki/Advanced_Chess So could it be that there will be a move towards very advanced "cyborgian" arrangements in the future. Not necessarily more profitable but less emotional–more algorithmic. It seems the younger generations are more trusting of technology to solve all problems, and as costs come down on the technology and software, will there be a pull to use methods similar to those now employed by professionals? Can one become competitive by using a "crutch"? Mr. Schnytzer noted a couple of years ago, " My guess is that with Deep Blue at your disposal, you'll beat Nigel easily at chess, but won't improve on your options trading profitability." Of course there is a company, however, using the Cyborg name that promises (for a small fee) to bring all this to the common investor…but does it work, or with increasingly advanced software can it work in the future? http://www.businessinsider.com/cyborg-trading-promises-hft-solutions-for-joe-trader-2009-11


Kim Zussman comments:


'We should only recognize "what type" of people we are, and develop our trading style accordingly.' Up to and including not trading. The idea that anyone can learn to trade successfully can be checked by asking yourself: 


1. Could you learn to play competitively right now in the NBA , NFL, or national league?


2. How long could you stay conscious in the boxing ring for your weight class, or with an opponent twice your size (SEC says no guns allowed)?


3. If trading can be taught, why do most fail?


4. If a scientist, by definition shouldn't you be too quick to abandon convictions, and therefore vig-out with overly-tight stops?


Rocky Humbert responds:


The answer to Kim's question #1 and #2, as posed, is self-evident.But there may be flaws in the question. No one can just walk onto a field and play pro ball. Likewise, no one can walk into an operating room and perform open heart surgery. However, must people can (assuming they are able-bodied and mentally capable) invest thousands of hours and achieve some reasonable level of proficiency in most activities. A reasonable level of proficiency, does not mean being Derek Jeter, Tiger Woods, Christian Barnard, Buffett, Soros, Steinhardt and Robertson. Fortunately, one does not have to be in the 99.999999% percentile to be deemed a non-failure — or almost every reader (myself included) of this email would be over-dosing on anti-depressants! On #3, Why is there any reason to think that the percentage of traders who fail is any more than the percentage of entrepreneurs who fail (90%), or the number of people who drop out of the 36-week Navy SEAL class (70+%)? Competitive, high-risk activities always have a high drop-out rate. But, most of these people find their calling and are productive members of society…even if they can't throw a 100mph fast ball.


Jeff Watson comments:


I've often wondered where that meme of a 90% failure rate in trading originated. I see it in the literature, and hear it repeated all the time, accepted as gospel. Has anyone actually done a study to quantify this, or is the number just one of those numbers like Mitch Snyder pulled out when he quipped that "10,000 homeless people die a day".. And, what constitutes success in trading, what time parameter. Is success measured by return, by amount made, or by the ability of someone to grind out a small profit for 30-40 years, solidly in the black but never making a fortune?


Rocky Humbert replies:


Jeff's statement: "Is success measured by return, by amount made, or by the ability of someone to grind out a small profit for 30-40 years, solidly in the black but never making a fortune?" are great first questions. Regarding traders "failing," one should also consider a related data point: According to the BLS, the "average" baby boomer held 10.8 jobs from ages 18 to 42. 23 percent held 15+ jobs, and only 14% held fewer than 4 jobs. So, the "average" person changes jobs every 2 years. If one defines trading as a "job," then someone who does this, sitting in the same chair, for a long time is quite unusual compared with the population. see : http://www.bls.gov/nls/y79r22jobsbyedu.pdf


Kim Zussman comments:


No one can just walk onto a field and play pro ball. Likewise, no one can walk into an operating room and perform open heart surgery. However, must people can (assuming they are able-bodied and mentally capable) invest thousands of hours and achieve some reasonable level of proficiency in most activities.> My question is based on evidence like the article; supporting geneticaspects to behaviour, ability, gifts, and handicaps. Not everyone canbe trained to reasonable proficiency in the big leagues - and marketsare by definition among the biggest. Shouldn't traders ask themselves whether the reward/risk compensates the opportunity cost of thousands of hours of (potentially pointless)learning, if one may be (unknowingly) missing abilities needed toexceed results of buy and hold?


Peter C. Earle comments:


I am quite sure that this particular figure - 90%, sometimes shifted to 95%or even 99% - originated firmly in the late 1990s, when the SEC went afterthe SOES shops. They took, as their core example of the dangers, the exampleof one office of a particular firm which in a short amount of time morphedinto a general representation of the daytrading business (e.g., even the'prop shops' which were less focused on commissions than profitable trading)and was ultimately extended through word of mouth and the nascentblogosphere (e.g. message board jabbering) to cover any intraday tradingdone (online brokerage accounts, the occasional one day open/close, etc),and has since grasped the received wisdom of the collective mind at thispoint to an extent that it goes unquestioned. The fact is, the SOES traders/daytraders (as my man Lack will no doubtattest to) were mostly undercapitalized, out-of-work accountants andconstruction workers being sold 'maps to the gold mine', as it were. A better statistic, to start with, would be: with an $X account, after twelve months, how many remained?


Kim Zussman comments:


Interestingly, the author was as irrational as his subjects byfollowing the academic herd, making a low-risk, incorrect conclusion: "This study is especially relevant because of a concept called the"equity premium puzzle" that has long bemused financial experts. Theterm refers to the large number of individuals who prefer to invest inbonds rather than stocks, even though stocks have historicallyprovided a much higher rate of return. According to Shiv, there iswidespread evidence that when the stock market starts to decline,people shift their retirement savings—that is, their long-term, notshort-term, investments—from stocks to bonds. "Whereas all researchsuggests that, even after taking into account fluctuations in themarket, overall people are better off investing in stocks in the longterm," said Shiv. "Investors are not behaving in their own bestfinancial interest. Something is going on that can't be explainedlogically." This study, 2005, was in the middle of a decade where bondsout-performed stocks, and the irrationally risk-averse were punishedby missing out on ruin.

 


	

	


	
Feb

	
7

	

	

	


Wind Direction (WDIR): WNW ( 290 deg true )

Wind Speed (WSPD): 27.2 kts

Wind Gust (GST): 33.0 kts

Wave Height (WVHT): 9.8 ft

Dominant Wave Period (DPD): 8 sec

Average Period (APD): 6.1 sec

Mean Wave Direction (MWD): W ( 271 deg true )

Atmospheric Pressure (PRES): 29.79 in

Pressure Tendency (PTDY): +0.04 in ( Rising )

Air Temperature (ATMP): 61.2 °F

Water Temperature (WTMP): 65.8 °F




The NOAA  has a series of buoys off the coasts that measures the aforementioned parameters. The data is updated every three hours on the web, and gives the amateur surf forecaster another arrow in his quiver. With experience and observation, one can look at the measurements and other data and have an accurate idea of current surf conditions at the local surf spot. The most important measures from the table are wave height, wave period, and wave direction. The measurements on the buoy indicates, for my location, a short period wind swell, and the direction indicates that the south side of jetties and piers will give the cleanest surf, although the north side will produce bigger surf. Due to the short period, the waves won't be as powerful as a longer period swell. The chart shows the pressure to be rising, so one can expect a day that won't be marred by rains, but the wind at the buoy suggests that conditions might be windy at the surf spot. The data from one buoy is a great tool, allowing for one to make decent guesses, but the predictability is just a ball park estimate. There are several buoys in my area of interest, and the study of the data from each allows for an extrapolation that will offer a decent forecast, good for the next 24-48 hours. With the swell direction and period, it is possible to construct vector models, mine is proprietary. If one has a good weather model with a wind rose (Accuweather and NWS is the best), and the ability to measure the length of the fetch, the forecasts can be accurate for a longer period of time. It is very important to know the effects of the local bathymetry, and how it will affect the swell. Every surf spot is different, and every spot reacts differently to the input (swell size, direction, and period).


Since waves are caused by wind blowing over water, the longer distance a steady wind blows over water, the better for waves. In practicality, better waves will be formed with a 15 MPH wind speed over 1000 miles that 45 MPH winds over a 20 mile length. Weather conditions are important, as they offer a level of prediction, eg: whenever cold fronts come through, we will get waves (Axiom#1 for Florida surfers). Knowing and studying the tide charts will allow you to pinpoint the time of the day the surf will be better. The surf is always better at low tide in Florida (Axiom#2). Winter waves are bigger than summer waves with the exception of hurricane waves (Axiom#3).


There are a few professional forecasters that do a good job on a world wide basis. Sean Collins over at Surfline.com has the best forecasting tool, the LOLA. LOLA is a proprietary tool that Mr. Collins uses to generate a swell rose prediction that has uncanny accuracy on a world wide basis. He gets rough estimates at first, and I assume that he compares the forecast results with the real results to tweak the system with a fudge factor for local conditions.


Many other people use different indicators to predict surf. I know a few inlanders that use a giant American flag as their indicator. If the flag is flapping in a certain direction and how it flies gives them personal, accurate indicators of wave height. Others use clouds as their indicators, and can get uncanny results. The flag and cloud indicators tend to miss a lot of swells, many which can only be predicted and discovered by the buoys.


There are many similarities with surf forecasting and market forecasting. Different market participants use different indicators, just like the surf forecasters. Grain traders use seasonal effects in their study of the grain markets, and surf forecasters have many seasonal effects to help or hinder their efforts. There are less inputs for surf forecasting than the markets, with the market inputs changing all the time. While market forecasters have to deal with the law of ever changing cycles, that's not much of a worry to surf forecasters, as our cycles are very seasonal and predictable.


With all of the technology, communications, surf cams, etc., surfers are able to get a five day forecast for swell in Hawaii(or anywhere on the globe for that matter), and plan a trip from the East Coast without much fear of getting skunked. Whether this is good or bad is up to the individual. I remember when I was in college, driving 20 hours to the coast, only to find the waves flat, no surf at all.


Jim Sogi adds:


Let me add some factors. Local wind is a big factor. Chop on a 20 foot wave cant be fatal on dropping in. It has to be glassy. In Hawaii the tide is very important, as it is in Bali and G-Land as well as the reef sticks out. The quality of the swell is harder to define, but swells of higher period from further away tend to be cleaner, and have more power. Another odd factor is the crowd factor. Perfect waves with too many guys out are not as fun as not perfect waves with few guys out. Recently there have been so many absolutely perfect swells, clean, big, no wind, perfect conditions and 4 guys in the water, clear air, mountains in view, blue sky. Just perfect. Its been the best year in the last 15 years because of El Nino . El Nino has big market impacts on weather, on economies, and psyche's. How is another question.


In markets the crowd factor is important. I note that at panic bottoms, or during big big moves like recently, the crowd really thins out. It's good to watch crowd action and reaction in waves and in markets. I notice this in the waves as well. In 20 foot surf, only a handful of guys are out with the equipment, knowledge. It's a good time to be there.

 

	

	


	
Jan

	
31

	

	

	
Jungle Ball Python[Ed.'s note: this post contains some vivid descriptions of snakes that may disturb some readers]. My son, John has a pet python. He's a jungle ball python, about 4' long. The python does not do very much, except to wait on his log, in his tank, for a meal. His moves are infrequent and very deliberate. He does not waste a single joule of energy, and just waits patiently for food day and night, week after week, month after month.. Snakes and alligators don't require a lot of food, and can wait for 5 months or more for a meal. They don't exercise, play, show personality, get crazy, or cause any trouble. They just wait for their next meal, single minded, hard wired in their next task..


The snake exhibits several signals when he is hungry, and can be seen after he sheds or evacuates, for example. When he is hungry, I feed him live rats. Although the snake is a master at camouflage and deception, he knows when a rat is being introduced to his tank. Snakes generally have poor eyesight, but can detect the presence of a rat through smell and vibrations. The rat goes into the tank, and the snake sits there sizing up his prey. It can go for 30 minutes to an hour and a half, while the snake watches the rat, waiting. He slowly puts his body in position, moving and flexing his coils quietly, maybe taking 30 minutes for a set up. He will sit perfectly still, while the unaware rat walks all over the tank, sometimes over the rat and,….the rat doesn't have a clue of the dangers. The snake finally senses his best opportunity, strikes at the rat, bites him on the back of the neck, and wraps his body around the rat suffocating him quickly. The rat squirms and quivers while the snake constricts a little more on each exhale of the rat. The snake is so quick, you can hear a swoosh when he attacks, much like the swoosh you'd hear in old Bruce Lee films when they were fighting.


The python, having dispatched his prey, lets him go and positions him for the swallow. When he's ready, he disjoints his jaw and puts it over the rat's nose, and uses his body to push the rat into his mouth, wiggling his neck to allow the rat to be swallowed. It takes about 15 minutes, but that big rat, 40 times the size of the python's head, is swallowed and the snake goes to the corner to hide and slowly digest his meal. I like the way the snake always strikes the rat in the same exact place, with quick dispatch. He makes a split second decision with his pea sized brain and wins. Trading can be like that, requiring split second decisions, and hard lethal strikes.


 The snake has a ritual for eating his prey, and manages to eat without wasting energy, getting hurt, or alerting his prey. Many trades require you to sit patiently for weeks or months for the proper set up, positioning yourself then swooping down on the prey just like the snake does. Snakes have many admirable qualities that traders should study and emulate. These traits include patience, economy of motion, concentration, surprise, and a quick but lethal offensive. No matter that the rat has a brain that is the same size as the snakes's, and is probably much more intelligent, he always loses to the python, every time. The snake is hard wired for the attack, has infinite patience, and will dispatch his prey quickly……all qualities successful traders should strive to practice and learn.


Pitt T. Maner III responds:


These guys are in the news down here in South Florida. Too bad there have been some irresponsible owners.




"Reptile retailers, brace yourselves: the federal government wants to ban the import of some large and seemingly popular snakes. Responding to growing concern over the spread of Burmese pythons in the Everglades, the federal Fish and Wildlife Service proposed Wednesday to ban both the import and interstate transport of the python and eight other snake species, all large constrictors."




A possible 10 to 100 thousand burmese pythons in the Everglades is amazing — they are bit too good at what they do.


My cousin is a big time, amateur "herper" and I remember going with him up to Orlando about 15 years ago to a national convention held there and it was quite impressive to see the reptiles on display and the captive breed ones for sale — water dragons, White's tree frogs, skinks, all sorts of snakes, etc. Very educational. One of the things I remember was a lecture about trying to catch a very large snake that escaped in a multi-room facility — the idea was to set the trap along a wall as the snake would tend to cling to walls as it moved from place to place. Big, non-venomous snakes though can still give some nasty bites.


Here is a summary of South Florida's non-indegenous species, the local vets get a lot of dogs who have tried to lick the Bufo toads.


Marion Dreyfus reminisces:


I remember living among unexpected boas and two-step and three-step crates in Thailand. I came home one night to find a 6-footer in my living room, as we lived near a thriving klong. The maid Sumpohn slew it with a shovel before it bit me. We called her Richard [the Lion-hearted] for a while. Up-country, I stepped gingerly on the roads near fields of produce, as much longer than 6-footers would slink out and slither on the hot bake of the dusty roads. And in Cambodia, I was foolish enough to wear a snakeskin dress in Ankhor Wat, and was actually chased by some outraged untethered serpents not happy with my attire. I changed my dress subsequently, and rode elephants, tall off the ground rather than encounter the ground-bound cold-blooded fauna.


Once, though, I overnighted at a friend's farm in Connecticut, and woke with a serpent cosied up next to my prone body. His pet had eluded the glass cage, somehow, and sought random visiting warmth. It was not the best wake-up notice I have ever experienced.

	

	


	
Jan

	
20

	

	

	
The Sage of OmahaThe Sage of Omaha has always been on record of never splitting shares, giving a multitude of reasons, (which I personally agree with). That's one reason BRK.A is so expensive. Now, BRK wants to split their B shares 50 for 1. That's hypocrisy. It also might be a tell, but my crystal ball is a little cloudy these days. Buffett purportedly wants to greatly expand the investor base. This whole thing smells like something out of the play book of Vanderbilt or Gould.


Stefan Jovanovich writes:


The comparison might be with Merrill Lynch in the 1950s. "Throughout the bull market of the postwar period and the 1950s, Merrill Lynch continued to be an innovator and a popularizer of financial information. The firm erected a permanent Investment Information Center in Grand Central Station, distributed educational brochures, ran ads with titles like "What Everybody Ought to Know About This Stock and Bond Business," and even sponsored investment seminars for women. These new ideas made Merrill Lynch the best-known investment firm of the day. Charles Merrill's reputation soared to such heights that shortly before his death in 1956 one Wall Street historian referred to him as "the first authentically great man produced by the financial markets in 50 years." Berkshire is being structured to become the stock that all "good" people should own and keep forever.


Kim Zussman shares:


Fanfare for the Common Man. 


Jeff Watson adds:


In the 1800s, consuls and other forms of gilts were considered safe investments that all "good" people should hold forever.

	

	


	
Jan

	
18

	

	

	
Chuck BerryAlthough Chuck Berry could not be considered 'Soul', he surely influenced the genre. At 83, he still plays regular gigs and his guitar skills have not diminished. Normally, when a guitar player gets to an advanced age, he will do a few riffs and let the second lead carry the load. Berry plays his 90 minute concerts from start to finish without a second lead. He is the consummate showman, an individualist, and has never let his legal and personal problems get in the way of putting on a great show.


He's probably one of the best guitarists alive, especially since Chet Atkins is no longer with us. Jimi Hendrix, the Beatles, and Eric Clapton all cited Chuck Berry as a major influence on their work. Chris Spedding (a very underrated guitarist) paid special homage to Berry in his seminal Guitar Jamboree.


Besides being a great showman, Berry really entertains his audiences and mingles with the crowd, unlike the current crop of superstars like Sting and Bono. A Chuck Berry concert makes you feel like you really got your money's worth. Chuck was considered to be so good by his peers that he was in the first class of the Rock and Roll Hall of Fame. I've seen his concerts in every decade since the 1960s and have left every concert totally uplifted. He is the definition of a true showman, with as much presence as Elvis in his prime.

	

	


	
Jan

	
14

	

	

	
 Although I love to collect fine art, especially Impressionists, I also am an avid collector of Surf Movie Posters. These posters were made during the 1950s-70s and some were real works of art. Since I like to check out eBay for the offerings, I have noticed a few things.


Normally, in that eBay category, there will be 30 posters offered, mostly $4.99 reprints of terrible movies like "Blue Crush" or "Surf's Up." Lately, I've noticed that there are 100-150 posters being offered and sold for amounts that haven't been seen since Mat Warshaw came out with his excellent coffee table book on surf movie posters titled Surf Movie Tonite! Surf Movie Poster Art. His book caused a pronounced bubble in the market for posters, and I stopped collecting until the bubble popped.


Looking through the current offerings, I see works by John Severson going for as much as $109-$299. Bruce Brown's posters are going for $129, and even the faux surf movie "Ride the Wild Surf" original is going for $1200. 2007-2008 was the year to buy these same posters, as they were 60% less then the current market prices. Some posters like Yuri Farrant's "Hot Lips and Inner Tubes" command prices of $3,000 if you can find a copy. I got mine in 1976 for $6.00 from an ad in Surfer Magazine. Any work of art or original surf poster by the late Rick Griffin costs as much as a painting from a gallery in Soho. Somehow, I suspect that the market in original surf movie posters is going up and might test the 1986 highs. Still, in this market, it is caveat emptor, as there are a lot of fakes out there.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.


Yishen Kuik observes:


There is clearly a lifetime cycle effect for the collectible asset class.


People in their 50s who are at a stage in life where the most successful of their cohort have enough money and time to indulge in the things that most captured their fancy in their formative years between 15-20 bid up the best collectibles in that class. It is likely that that is the peak average asset valuation of that collectible — the best items might continue to mark higher and higher prices, but any random assortment of quality pieces would slowly become less and less liquid, and speculative sellers would have to choose between the theta of warehousing & unknown time of execution in order to obtain bid improvement, or pay up for the illiquidity disposal fee.


The kind of comic books I read as a kid (X-men) have enjoyed a resurgence in popularity in the movies that I assume must have translated into higher prices, just as old arcade game boxes have enjoyed a revival re-entry into many bachelor pads. Star Wars figurines by Kenner are another example of items that have enjoyed resurgences in the past 10 years after a 20 year lacuna since their introduction.


What are the things that fascinate the young today, which if stored cheaply and properly, might yield good appreciation 20 years hence?


Russ Sears writes:


Surely any women painted by Renoir and any girls by Degas, deserves a place on the list of art that "makes life worth living forever." 

	

	


	
Jan

	
13

	

	

	
Albert J. NockThe Crony system is alive and well in the various exchanges across the globe. When there is a huge difference between the closing price and the settlement price, that is evidence of cronyism in the pit committee. When they close trading floors without a vote from the membership, that is cronyism. When the exchanges' hired management acts as the enemy of the membership, a la Nock, that is cronyism. When the hired management favors certain commercial interests with a quid pro quo, that is cronyism. When elections are rigged and committees are stuffed, that is cronyism. When jobs are created for the simple reason of getting friends on the payroll, that is cronyism. When dissent is not tolerated and members are fined for speaking publicly, it's the backroom cronies pulling the strings. You could substitute government bureaucracy for exchange management, and there would be little difference. Nock's views apply equally to exchanges as well as the state.


	

	


	
Jan

	
11

	

	

	
wheatFrom the 1980s up to 2005 there was a phenomenon in the wheat market that locals referred to as the "Noon Balloon." Four days out of five, the market would rally 2- 3 cents on big volume at the noon hour, then settle back after we sold into it and the buying stopped. It was so regular, that we'd start bidding up the market a few minutes before noon, hoping to get the buyers to pay even more.


Many a fortune was made on this anomaly and it was our personal ATM machine. The Noon Balloon curiously disappeared with the demise of REFCO, and was just one of those quirks that a sagacious person on the floor could exploit. Since so many people jumped on the Noon Balloon, the effects were exaggerated. Whenever I see an uptick in wheat at 1PM (12cst) I fondly think of the Noon Balloon.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.


Victor Niederhoffer observes:


A published report relating to an irregularity supposedly found regarding afternoon movements has been disseminated by a very profitable brokerage. The subsequent comments relate to the layers of meaning and deception behind such reports. 


Jeff Watson comments:


Not all players have the same motives in the markets, Case in point, hedgers will sell no matter what the conditions might be. Certain commercials will play with spreads, defending them for no discernible reason. Many games are played in the delivery months, and with deliveries being re-delivered, and on and on. Commercials try to stack the pit committee, and play with the settlement price (which is not necessarily the last trading price), for their own gain. Despite the fact that trading has mostly gone electronic to improve market efficiency, a whole new series of land mines has been laid down, part of the law of unintended consequences.


Tom Marks writes:


The question of a published report with an intra day trading regularity arises from Victor and he suggests that something seemingly useful like that must have an ulterior motive. I demur. But what if they figure that the jaded such as ourselves have figured that out that nobody provides gratis which otherwise provides profits, so they in turn fade the faders. Especially when they have the wherewithal to cross-check against the order flows of whom was provided with that report in the first place. Artful deceptors rarely ply their craft one-layer thick. They like suggest texture and added dimensions. A trompe l'oeil effect that fools the eye. 


Nigel Davies adds:


The fact that the effect has been noticed and publicized seems likely to make it behave differently from the past. At least some traders will want to jump in ever earlier to exploit it, and then there will be those who fade them etc. But the last thing I'd expect to happen is an exact repetition of the past…


There's a good chess analogy to this in that the champions tend to set new opening trends but move on as soon as the crowd has noticed.


GM Davies is the author of The Rules Of Winning Chess, Everyman, 2009




Phil McDonnell writes:


To echo the Chair's observation I once reviewed a quantitative study of some market anomaly. It showed that some 700,000 (!) trades backtested would have been 80% profitable over a 10 year period. The authors were a well known TA writer and his researcher. Although the report had none of the usual tests of statistical significance that we might use here, still the sheer magnitude of the number of observations was compelling.


Nevertheless publication alerted the antenna and caused me to ask why. I redid the study on a smaller sample for the most recent year. In fact it lost money in the recent period. Hence the reason for publication — it no longer worked. But it enabled the authors to keep their names in the press.


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


Tom Marks responds:


Perhaps the real intent was to get the market so confused over this "anomaly", that no substantive moves would happen around 12:30, and those at GS could get a bite of lunch. Like the strategy we played with my 7th grade social studies teacher, simply mention Vietnam and you could ignore him and safely work on your math homework for the next hour.


Russ Sears writes:


When it comes to deception, there are different strains, some ultimately less problematic than others. Toward that end, the 7th grade social studies subterfuge may be as benign as it is precocious as it is brilliant as it is utilitarian. Everybody wins. The teacher gets to indulge his fixation, maybe even sharpen some pedagogical skills, while the kids learn how to best juggle academic time constraints by effectively calling some sort of curriculum timeout.


Sure, in terms of flawless honor, it's a little chipped, but so is the Venus de Milo. Doesn't make either any less a work of art.

	

	


	
Jan

	
7

	

	

	
 One of the only times left today in our busy world for families to spend alone in close proximity with each other is in the car. Now that families eat out more and kids are being rushed from one practice to the other, traveling to school, games or activities.


My family also often take a 13 hour trp one way to Grandma's in the car. My kids and I spends more time together than I ever did as a youth with my Father including nightly meals.


But cars are not conducive to heavy discussions. While often my wife and I use this time to get caught back up to, what is happening in each others world; this generally has not been the case for the kids. Rather than bonding its time, it has either been a time to bicker or ignore each other for the girls (girls 11 and 16). Fighting, or stopping a fight,especially in a car while driving is probably one of the most distracting dangerous things you can do. We have a strict, no fighting in the car rule. I often say, "Unless it litterally is worth dying for…I do not want to hear it."Like many our family car is an SUV. It is now equipped with a plethora of mobile electronic devices that would make the early James Bond's car seem boring. Judging from the small screen DVD players, cell phone conversations, game boxes, and I-pod you see on the road, ignoring each other seem to be the alternative many families choose.

So in the past year I invented a game we call "the imagination game". The rules of the game, as we play it is every body has a chance to think of a topic they would like to hear the others imaginary story about. Then everybody listens to the story until it is finished. And then someone else's turn to either tell a story of the same topic or think up a new topic an asks someone else to go.


The girls love it. The oldest girl ups up and shares her feelings…something I think is pretty amazing for a 16 year old. And the youngest loves having the floor and chance to ham it up. It has probably changed my relationship with her the most. Because, like her Dad, she is a severe introvert. This allows her to express herself like an actor, or artist with a layer of protective detachment. But also because she now looks for chances to go to the hardware store or other trips just with me, so we can play.


I try to draw from my childhood daydreams and works of art for my topics. Some typical topics may be:If any book you read came to life what would it be? Which character would you be and which character would the rest of the family be?

If you could invent anything what would it do and how would it change the world?


If you dug a hole in the back yard and found something amazing what would it be and how did it get there?


If you could buy anything what would it be and what would you do with it?


What movie would you like to be real? What character would you like to be?


Etc.


Jim Sogi adds:


JSI found one of the best times to talk with the kids (when they were kids) was while driving in the car. They had a long commute to school. When the other kids in the car pool were in the car, they chatted away, and I got to hear about everything going on. Its a good non-confrontational situation since you are not looking at them, so they don't feel on the the spot and tend to open up more. It was a good time to raise things away from the rest of the family as well. The gadgets in the car might tend to discourage this nice talk time.


Jeff Watson remarks:


MotuMy son and I always had an agreement that he could decorate his room anyway he wanted from kindergarten on. He had a rather eclectic style of decorating, and his room (in surf-rat style) still reflects who he really is, not the Classics Scholar he wants the world to see. We always had an agreement that I'd come into his room every day, ignore the putrid mess, and we could have any discussion and he would have total immunity for anything he divulged. I heard a lot of things, but as my word is my bond, never punished him for any transgressions he revealed. Ultimately, the real lesson he learned was that he could trust me, that I was on his side, and it's better to be a good citizen than an outlaw. Since we live at the beach, he's run into many eclectic characters, has had to grow up early, and has seen many things that might not be age-appropriate. I've always played the role of "Ward Cleaver," and have provided guidance without hovering, but encouraged him to make his own rational choices. The result of our laissez faire parenting is that my son will tell me anything, won't lie to me, and will make and listen to rational analysis. I'm willing to let him go off on tangents (with a rope in hand to bring him back to earth), and I provide a safety net, so he has security which will give him courage to spread his wings and fly. So far, so good, but he's 21 and as a parent I will still worry about him until he's 80.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.


Jim Lackey writes:


LackMr. Jim, we all talk to kids on the way home from school or best, after sports practice when they can think without emotion. Long drives are greater than 3 hours but less than 8 hours or 500 miles. Brutal drives are 8-13 and 14 and over hours is pure torture. My brother and I call it "seeing fireflys".


The imaginary game sounds cool. We have a million BMX/MX miles and the 500 mile 8 hour drives are good for books on tape.That Turkey day Thunder run to Fla to see family, 13 hours, my wife had fun with "Sundays at Tiffany".  I said OMGauche a romance novel Jenn? It was, weird… an imaginary friend comes back to romance her.


One trip the BMX kids groaned one AM when I plugged in a murder mystery. "What is this, a book? No!…Let's listen to music!" The next rest area/stop the kids ran back to the van to listen. One trip a book had 30 minutes to go and everyone wanted to hear the end of the book before race practice. I've also used "cliff notes" books on tape for those Victorian classics that I would never read. We are talking Pride and Prejudice here. Which reminds me, my 8 year old girl is on Dickens. Last night after dinner she mentioned England, living in London. Yet our discussion was cut short with that pesky tech…1$ redbox movie the TV and DVD player and Cloudy With A Chance Of Meatballs. Cute story. The kids read the book. Only thing I got out of it was, "See, she is playing dumb blonde" which is one of my pet peeves and I tell my girls to "please never play dumb blonde." Yet do practice your southern drawl and lay it on thick during negotiations. Which was another spec list meal for a lifetime we learned here. Wish I had the ability.

	

	


	
Jan

	
6

	

	

	
Sun Storm with a CMEThe work by Krivelyova and Robotti on geomagnetic activity and market returns is fascinating.


They find outperformance vs buy and hold, but concede that factoring in transaction costs equates it back to buy and hold performance.


I'd be curious to hear critique of this paper or similar research (e.g. Dowling, Lucey; Kelly, Meschke).


The paper by Krivelyova and Robotti is another Atlanta Fed paper that has been discussed here in the past. When I did a followup using their data sources the only correlations that appeared significant were the Coronal Mass Emissions (CME). There did not seem to be much there for the basic sunspot and geomagnetic data. The CMEs only seem to have a Terrestrial effect when actual Solar matter is ejected and it hits us. CMEs visibly show up as auroras and radio and electrical interference. My test was only using a linear model not the somewhat more sophisticated cosine transform used by the authors. In any event neither study showed a strong effect.


Remember that a statistically significant effect is not necessarily strong enough to make money, especially after vig. Note that Golden Slacks has its own entitlement program that extracts $100 million a day in trading profits in order to do G_d's work. The rest of us contribute to that.


Chris Tucker writes:


Current space weather (read solar events) is always available at NOAA for those interested.


Jeff Watson adds:


I like Solen.info for solar activity much better than NOAA.


It seems that the sun has been quiet the past couple of years and solar activity should be picking up soon because we're supposed to be in a new cycle. Some believe this reduced activity might be part of a supercycle that the sun exhibits every 222 years or so. Needless to say, all indexes from the J index, K index to the A index all point in this direction.

	

	


	
Jan

	
5

	

	

	
I was playing in a 15-30 NL hold'em game this evening. Since everyone at the table was unfamiliar to me, I had to put my reading and deception skills to the test.


In the best hand of the night, I was in the cutoff seat, and my hole cards were the four and six of clubs. The player under the gun folded, and a European guy started the betting by smoothly limping in, and getting a caller after him. Even though the cutoff seat wasn't the button, I liked my position enough to feel I could take a flier with my hand, so I trailed in.


The player on the button, a friendly gambler with whom I've been building some rapport, put in a raise. Oh well, that's why its not such a good idea to limp in with a hand like suited 6-4 when you're not the button, but it's not called gambling for nothing. Not only was I committed to throwing an extra bet after a seeing a speculative hand, but the raiser was the one player who had position on me. Still, I had to stay in.


The player in the small blind dropped out, but the big blind, a young Asian guy whom I read as more of a thinker than a gambler, called. Everyone else who was already in the hand put in an extra bet and I stayed in.


The flop came down 8c 8d 5c. Suddenly, I liked my hand, although I wasn't crazy in love with it. I had a gut shot straight flush draw, which means that any of the three sevens give me a straight and the fourth, the seven of clubs, give me a straight flush. Any other club would give me a flush, too. But a non-suited seven could give anyone holding 8-7 (a plausible limping hand) a full house, and there could easily be better flush draws out there. The good news was that, given the action and the players in the hand, 8-5 was fairly unlikely in someone's hand, so that I was reasonably comfortable that no one had a full house yet……. maybe. I still had twelve outs to make a possible winning hand, but there was a reasonable likelihood that some of them would not work.


The action was checked through to the player on the button, who, surprisingly bet. Big blind called, European called, seat 5 called. I liked the pot odds, even though the number of players still in the hand means that my draw was thinner than I'd like it to be, I called.


The dealer burned and turned the 46-to-1 long shot miracle, the seven of clubs. I'd made my straight flush! Now my only task was to get as much money into the pot as I could without arousing suspicions or making people fold.. I decided to slow play, keep peeking at my cards to indicate weakness, act more nervous than usual, and give someone holding an eight in their hand the chance to catch enough to commit more money to the pot.


The big blind checked, and European bet. He might be playing a suited 8-7…… I'd seen him play cards like that in early position a couple of hands before — but I think the more likely hand for him was the ace of clubs and a suited kicker, but I could be wrong. The player between us dropped out, seat 5 dropped out, and I just called the bet, waiting for the river to put the squeeze on European. The player in the big blind called and it just kept getting better and better.


The river card that the dealer put out was the queen of spades. The big blind checked. European bet again. Now was my moment: I raised.


To my complete astonishment, the player in the big blind re-raised, and went all-in, which we both called.


At the showdown, I said, "I sure hope that somebody has pocket eights!" and showed my hand. The player in the big blind showed his queen and eight of hearts. He had a full house of eights full of queens which was too little too late. European forcefully mucked his hand in disgust and silently cursed, but I assume from the fact that he called the bet at the end that he too, had a losing full house.


I hid my glee, congratulated my opponents on such good play, and offered the everyone a drink, which was accepted.


I sat in 5 more hands and retired to the rail after racking up my chips.


This hand was my third straight flush in my life after playing about a half million hands. My first came early in my poker career in 1977, when I was dealt a pat straight flush in in a Vegas 2-4 stud game. That time, all I won was the antes and bring-ins and nothing more, zilch. The second was online a year or so ago, when I lost to a higher straight flush and I don't wish to discuss that particular black swan although it cost me the equivalent of a Cadillac. I've never had a royal flush, and I speculate that I never will. The odds of getting a pat Royal flush are over 600K to 1 in a 5 card game.


Still, it was nice to return to a brick and mortar game and realize that I still have my poker chops. I need to spend the next couple of days seeing how well my chops hold up.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.

	

	


	
Jan

	
2

	

	

	
General Post Office Morse code sounderI was thinking about Morse Code today and recalled that when learning the code it was actually counter productive to try to begin learning by listening to characters transmitted at a reduced speed and then progressively picking up the pace. Seasoned hams are familiar with either the Farnsworth or Koch methods. to quote Wikipedia:




People learning Morse code using the Farnsworth method, named for Donald R. "Russ" Farnsworth, also known by his call sign, W6TTB, are taught to send and receive letters and other symbols at their full target speed, that is with normal relative timing of the dots, dashes and spaces within each symbol for that speed. However, initially exaggerated spaces between symbols and words are used, to give "thinking time" to make the sound "shape" of the letters and symbols easier to learn. The spacing can then be reduced with practice and familiarity. Another popular teaching method is the Koch method, named after German psychologist Ludwig Koch, which uses the full target speed from the outset, but begins with just two characters. Once strings containing those two characters can be copied with 90% accuracy, an additional character is added, and so on until the full character set is mastered.




The point being that learning the code by hearing it at its normal (high) speed from the outset is easier than having to learn how to ramp up your speed as you progress. I was thinking that if you had a trading simulator that operates at speeds faster than real time, then you could learn to recognize set ups more quickly and perhaps be more agile when it comes to actual trading in real time.


Counters and algo writers may find dichotomic search interesting as well.


Jeff Watson writes:


When I first learned the code back in 1967, I didn't use the Farnsworth or Koch methods. An 80 year old guy (got his ticket in 1918) taught me the code by sending at high speed (40+ words per minute) and combining all the dits and dahs into entire words and making me learn whole words from the sound. He would not let me copy the code on paper, making me learn it in my head and drilling it in. Whereas a person could learn the code using the aforementioned techniques in a couple of weeks and be able to easily copy the minimum of five words per minute (required for the Novice license at that time), it took me five months of practicing code every day to learn and get dialed in, but I was copying code at 38 words per minute right out of the chute. He told me that the method I learned was the same method that they used to train the old telegraph operators in the 1880s.


To this day, I don't write my code on paper, instead copying it in my head, without the use of any computers or other such heresy. With 43 years of practice, code (CW) is like a second language to me. There is a certain elegance in in using the code, and there are many old-school diehards such as I who refuse to give up using CW. With the advent of electronic keyers and computer technology, it is possible to send code perfectly spaced and without personality. Using old-fashioned straight keys and Bugs, one was able to develop a personalized style of sending code, and the code would have an accent, an individual swing of sorts. One could identify the sender just by listening to his CW. I still use my old Vibroplex, and refuse to go to a keyer, where all functions are on a chip. There is also computer software that will copy code very fast, but it only works with the perfectly spaced code from a keyer. We know who the people using artificial cheat methods are.


There are many of us tradition-bound hams and many youngsters who still use code on the amateur frequencies. We are a rare bunch, with only an estimated 30,000 of us left in the world. I wouldn't count CW out as of yet, because it is still the best communication method when conditions are noisy or bad. Voice might be distorted to the point of being unintelligible, but CW will usually get through. On a personal note, I am rarely on SSB, AM, or FM, preferring to use CW for my communication needs. In fact, the only time I get on voice is when the International Space Station or the Space Shuttle has an operator on 2 Meters, and it is passing overhead. I will give them a shout. It's pretty cool to talk to someone orbiting the earth. It's also cool to send a CW signal up to the moon and bounce the signal off the moon and work people anywhere in the hemisphere.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.

	

	


	
Jan

	
1

	

	

	
 Ford E-350 Super Duty 12-passenger vanI've noticed that every time I have sold a car, the dealer told me how flooded the market is with my make and model, and that the prices are much lower than I would expect. I take the dealer's words with a grain of salt, but am still not going to beat him in his own market. The equities and futures markets are much the same (and although this is anecdotal), it seems whenever I need to pitch out a position, there is a lot of whatever I own offered for sale at that moment. Conversely, whenever I wish to buy something, there is never enough around. I usually end up paying too much and selling too cheap.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.


Bill Egan writes:


You need a new van. A large one. By the end of February.


Ford E-350 Super Duty 12-passenger vans look good.


Prices for 2009 models


new MSRP: $36,325


new Invoice: $32,184


new Edmund's "What Others are Paying": $30,459


Yuck


Edmunds used retail price: $25,808


Kelley Blue Book used retail price: $24,710


Better


What is the distribution of true prices? Attached is the histogram of prices of 168 used 2009 Ford E-350 vans listed on cars.com within 500 miles of my house. Yes, the same basic vehicle is selling for $16,477 to $32,995. This took about ten minutes for me to make. (Yes, some options did vary, and there were a few misclassified vehicles, but overall this is really useful)


It is even faster to look at the most useful percentiles. Just sort by price on cars.com. Then go to the last page to get the total number of vehicles that actually have a price. In this case there were 168 vans with prices. Scrolling through the four web pages and quickly counting allows you to figure out the percentiles. For example, the midpoint or median is at the 84th van (168/2). That price is $21,495. The 25th percentile is at the 42nd van (168/4) priced at $19,998.


Used list price at the closest Ford dealer: $21,695 (just over 50th percentile)


Used "best price" at closest Ford dealer after we had a chat about other dealers' prices: $19,495 (18th percentile).


For a fleet vehicle manufactured in March, 2009, auctioned in October, 2009, clean CarFax, with 13,200 miles and almost all the options.


Kim Zussman replies:


Don't you think the distribution of prices attributes less to mispricing than +/- valuation factors estimated by sellers — mileage, condition, options? They ought to know the going prices, and attempt to price theirs competitively modified by their knowledge of condition.


As with romance, if condition is held constant then price should vary based on ignorance and desperation.


Gordon Haave writes:


Car selling is all about one thing: price discrimination. The good salespeople do one thing: size up the maximum that you are willing to pay and make sure that is how much you pay. They do this through a number of techniques but most notably the questions about what you do for a living, how much your current car payment is, etc.


All the confusion around pricing and monthly payments and such is just to give them wiggle room to be able to charge you the most you are willing to pay.


Alan Millhone adds:


I pass a used car lot daily in Belpre and have been noticing the strategy this fellow uses to push his lot vehicles. He calls 89,000 miles LOW mileage ! One car he lists on window as a LOCALLY owned car — So? Occasionally he puts a HOLD sign on the windshield — who cares? Across the street is a strip plaza that a man owns that I know. On the front that is not used you can set your vehicle or boat or trailer and pay him 20.00 a month for that parking spot. Lots of traffic flows by each day. You list details on your vehicle and make your own deal. One new car dealer of KIA has his own clunker program and will give you 5,000.00 on your trade. My best friend traded in his car and a van he had towed in and the dealer allowed him 4,000.00 each towards a new KIA auto. I note gas in my area creeping up again so the economy cars are selling well.

	

	


	
Dec

	
24

	

	

	
 Did it ever occur to you that the world's largest advertising agency, Google (GOOG) has about the same market cap — $191,847,475,750 – as General Electric (GE) – $197,617,213,440? There are great societal implications in this, and many market analogies on shifts of priorities.


In the futures markets, 50 years ago all of the action was in the agricultural products, forest products, livestock, and foods. Today, the ES contract is as big, or bigger than the entire grain futures market put together in total volume. I wonder what the biggest item traded in 50 years will be?


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.


Marlowe Cassetti comments:


Fullerene


Scott Brooks writes:


Based on the current attacks on technology and advancement by the Climate Change Crew and their statist counterparts, I'd bet the main traded items in the future are going to rhyme with those of the past. Agricultural, livestock and foods.


Ignoring technology and the "Mind of Man" as the solution to our problems and pushing us backwards in our lifestyle will result in the past being our future.

	

	


	
Dec

	
17

	

	

	
 Alan wrote yesterday "on this day (December 16th) in 1773 the Boston Tea Party took place as American colonists boarded a British ship and dumped more than three hundred chests of tea overboard to protest tea taxes. Today we have many politicans we need to put overboard and start fresh with honest people."


It is a nice fairy tale, and it will be told as long as people keep quoting Jefferson about the tree of liberty being watered by the blood of patriots. (Jefferson, of course, came nowhere near any of the blood and was a notoriously unsuccessfuly hortoculturalist.)


The Boston Tea Party was an organized riot by the tea smugglers of Boston who were genuinely peeved that the British Crown had had the wit to ignore its own Navigation Acts for once and land tea that, even with the tax, was less expensive that the Dutch tea the smugglers were bringing in. The British tea was thrown in the harbor because it threatened the smugglers' profits. The best modern analogy is a riot by Union workers beating up "scabs" — i.e. people willing to work for less.


The Tea Party was not a success politically. The people in Boston knew what it was about and were angry that they had to keep paying more for their daily drug. But the Tea Party was, inadvertently, the start of the Revolution. That is why we have the myth. The Home Office in Britain reacted with more than the usual executive idiocy and decided that the answer to an unpopular minor riot was the military occupation of the entire city of Boston, the shutting down of all trade and commerce, including local fishing and the confiscation of privately-owned fire arms. That gets us to Concord and Lexington and, after that, there was no turning back — even if the Continental Congress itself thought that its first action should be not a Declaration of Independence, but a petition to the Crown for a cease fire.


Jeff Watson adds:


Not only were they smugglers, but many were Free and Accepted Masons, and most of the planning went on for the Tea Party, and other acts against the Crown, in Masonic Lodges. The whole Revolutionary War was stamped with the imprint of Masonry, and the importance of Masons in the Revolution should never be underestimated.

	

	


	
Dec

	
14

	

	

	
The Blind Side


The Blind Side is one of those movies that makes life worth living forever. What other such movies, plays, music, literature would you put in that category?


Vince Fulco replies:


Movies:


The Road to Perdition– everyone who participated in it was at the top of their game from writers, actors (primary & secondary), producer, director, cinematographer, musical director. It made for a polished period piece with tons of emotionally charged moments and an unexpected ending.


Boondock Saints– obscure, independent type movie; very novel story telling seen both by the vantage point of the perpetrators (Irish Mob in South Boston) as well as the talented detective trying to unravel a recent flair-up in gang on gang activities (Willem Dafoe). A great example of the grey areas in life; i.e. if you are using extreme violence against a rival gang to protect one's innocent neighborhood residents, are you a saint or sinner?


Gandhi– A masterpiece in so many ways, no more needs to be said.


Laurence of Arabia– ditto.


I am a sucker for underdog movies where the lead character rises from his own self involvement and selfishness to sacrifice everything for the greater good. Not 'Laurence'–obviously his striving for personal greatness led to its own extraordinary achievements but as I get older, the accomplishment of creating these complex, grand movie projects is inspiring in its own right.


Books:


 Shogun by James Clavell


Anna Karenina


Two monumental undertakings by the authors which fully develop their characters and keep the reader engrossed from cover to cover. As for the latter, although it has been years, as I recall, the ability to interweave multiple complete stories and have them entertaining and believable was sheer genius.


music:


Anything by Yo-Yo Ma and separately Tan Dun.


Nick White responds:


 Martha Argerich's rendition of the first movement of Rachmaninov's 3rd Piano Concerto with the Radio Symphonie Orchester Berlin and Riccardo Chailly conducting.


Her magisterial expression of the full range of human emotion in this performance is, in my opinion, unparalleled in any other work.


Thomas Miller adds:


Miracle on 34th Street and It's a Wonderful Life. Both made shortly after end of WWll. Still immensely popular 60 + years later.


Jeff Watson writes:


"Surfing for Life", is one of those special movies that makes one want to live forever. That's the movie that deals with all the old people who still surf well into their 80's.


James Lackey writes:


Cinderella Man (2005) …. Crowe as Jim Braddock is a good one. Invincible 2006 Wahlberg plays Based on the story of Vince Papale, a 30-year-old bartender from South Philadelphia who overcame long odds to play for the NFL's Philadelphia Eagles in 1976..


Ironic, I watched It's A Wonderful Life with my kids last night. What cracked me up is my quest to please my wife.I  remember 10 years ago when my boy was 4, I said "you're a bad boy" she said No no no what he did was bad, he is not bad. Ever since I have been working on my syntax to get the exact same point across with out damaging my own kids for life. ha.


Yet in It's A wonderful life the mom calls her sons idiots. It cracked me up as she was kidding sit down and eat you two idiots. The druggist smacked little George Baily around for being lazy. Baily tells the biggest backer and connected man in the county off countless times..turns down a 10x salary increase because he knew it wasn't best to sell his beliefs for money, but all the while hating his town his nickel and dime business where he cant profit much by helping others. He complained all along..which was hilarious "trapped"


Man on Porch: Why don't you kiss her instead of talking her to death? George Bailey: You want me to kiss her, huh? Man on Porch: Ah, youth is wasted on the wrong people.


George Bailey: Merry Christmas, Mr. Potter! Mr. Potter: And Happy New Year, In Jail! They're At Your House Right Now!


George Bailey: [yelling at Uncle Billy] Where's that money, you silly stupid old fool? Where's that money? Do you realize what this means? It means bankruptcy and scandal and prison. That's what it means. One of us is going to jail - well, it's not gonna be me.


Mary: I feel like a bootlegger's wife!


Stefan Jovanovich writes:


 It's A Wonderful Life is certainly popular now, but it was a bust at the box office when it was released in 1946. Its flop effectively ended Capra's career. The actors - Jimmy Stewart, Donna Read - went on to further success; but the plot reminded people of the bank runs of the pre-War era (hardly a happy memory) and they stayed away in droves. The Best Years of Our Lives was the hit that year; it was (among other things) about a banker who returned to work from the war and decided to lend a farmer money, not about depositors clamoring for their money back from an over-extended S&L.


Nick Procyk adds:


I would second Cinderella Man and Invincible.


March of the Penguins is a true-life movie about a group of emperor penguins that survive the harsh polar winter, breed, search for food — all captured in amazing photography.


Eight Below is another heartwarming movie based on a true story about a guide and his eight sled dogs. The guide is driven to reunite with his canine friends after they were stranded in Antartica during the brutal winter. It's a wonderful story about friendship, courage, and faith.


Riz Din writes:


 The Rocky films, all of 'em. I guess they just caught me at the right time. The first is the best, and Balboa doesn't even win the final bout. His victory is of another sort. The rest of the series works on several levels. You have both the quality of the Rocky films and Stallone's actual career ebbing and flowing with the ups and downs of Rocky's character. The score is everyone's 'go to' music when they want to get pumped up and motivated, the dialogue is wonderful, the characters memorable, and there are many lessons that can be drawn from the storyline, both good and bad.


From the first film:


Rocky: I been comin' here for six years, and for six years ya been stickin' it to me, an' I wanna know how come!

Mickey: Ya don't wanna know!

Rocky: I wanna know how come!

Mickey: Ya wanna know?

Rocky: I WANNA KNOW HOW!

Mickey: OK, I'm gonna tell ya! You had the talent to become a good

fighter, but instead of that, you become a legbreaker to some cheap, second rate loanshark!

Rocky: It's a living.

Mickey: IT'S A WASTE OF LIFE!


John Lamberg writes:


Life worth living forever? Well, none of the following make that cut, but my favorites are:


Hans Christian Andersen's works. (The Little Match Girl is perhaps the saddest story I ever read, and it stuck with me since childhood. We'll see if Gregory Maguire's "Matchless", a re-imagination of the story compares.)


Holst, The Planets


Bodysnatchers (original)


Forbidden Planet (not for the acting or script, but for Dr. Morbius' secret)


Vincent Andres adds:


The Last Kings of Thule - Jean Malaurie, about ordinary heroes


Many of Giono's books, eg Regain - J. Giono (in french onl)


Many of Pierre Magnan books 


Dava Sobel's Longitude


Order Out of Chaos by I. Prigogine


L'imprévu by I. Ekeland (in french only)


Des rythmes au chaos by P. Bergé, Y. Pomeau, M. Dubois-Gance, 1994.


For pointing an interesting trail, Deep Simplicity: Bringing Order to Chaos and Complexity by John Gribbin.


The Foundations of Ethology by K. Lorenz 


Studies in Animal and Human Behavior  by- K. Lorenz


The First Three Minutes: A Modern View Of The Origin Of The Universe by Steven Weinberg 


Mon oncle d'Amérique by A. Resnais (in French only)

	

	


	
Dec

	
9

	

	

	
 I've been trying to make some sense of the world, and have been revisiting the writings of Nock. I've dug up a few of his quotes off the Internet and from my notes that provide a 28 course meal for the rational individualist…


1. It is an economic axiom as old as the hills that goods and services can be paid for only with goods and services.


2. Diligent as one must be in learning, one must be as diligent in forgetting; otherwise the process is one of pedantry, not culture.


3. Learning has always been made much of, but forgetting has always been deprecated; therefore pedantry has pretty well established itself throughout the modern world at the expense of culture.


4. Considered now as a possession, one may define culture as the residuum of a large body of useless knowledge that has been well and truly forgotten.


5. It is unfortunately none too well understood that, just as the State has no money of its own, so it has no power of its own.


6. Life has obliged him to remember so much useful knowledge that he has lost not only his history, but his whole original cargo of useless knowledge; history, languages, literatures, the higher mathematics, or what you will — are all gone.


7. Like Prince von Bismarck in diplomacy, I have no secrets.


8. The mind is like the stomach. It is not how much you put into it that counts, but how much it digests.


9. Useless knowledge can be made directly contributory to a force of sound and disinterested public opinion.


10. The university's business is the conservation of useless knowledge; and what the university itself apparently fails to see is that this enterprise is not only noble but indispensable as well, that society can not . exist unless it goes on.


11. Someone asked me years ago if it were true that I disliked Jews, and I replied that it was certainly true, not at all because they are Jews but because they are folks, and I don't like folks.


12. The positive testimony of history is that the State invariably had its origin in conquest and confiscation. No primitive State known to history originated in any other manner.


13. Assuming that man has a distinct spiritual nature, a soul, why should it be thought unnatural that under appropriate conditions of maladjustment, his soul might die before his body does; or that his soul might die without his knowing it.



14. As far as I know, I have no pride of opinion.


15. As sheer casual reading matter, I still find the English dictionary the most interesting book in our language.


16. The practical reason for freedom is that freedom seems to be the only condition under which any kind of substantial moral fiber can be developed — we have tried law, compulsion and authoritarianism of various kinds, and the result is nothing to be proud of.


17. The conservative is a person who considers very closely every chance, even the longest, of "throwing out the baby with the bath-water," as the German proverb puts it, and who determines his conduct accordingly.


18. The State's criminality is nothing new and nothing to be wondered at. It began when the first predatory group of men clustered together and formed the State, and it will continue as long as the State exists in the world, because the State is fundamentally an anti-social institution, fundamentally criminal.


19. The mentality of an army on the march is merely so much delayed adolescence; it remains persistently, incorrigibly and notoriously infantile.


20. An assignment that you can really put your back into, and do your best without thinking about results, is a real job; whereas serving the masses is at best only half a job, considering the inexorable conditions that the masses impose upon their servants. They ask you to give them what they want, they insist upon it, and will take nothing else; and following their whims, their irrational changes of fancy, their hot and cold fits, is a tedious business…


21. There are two methods, or means, and only two, whereby man's needs and desires can be satisfied. One is the production and exchange of wealth; this is the economic means. The other is the uncompensated appropriation of wealth produced by others; this is the political means.



22. The surest way to make our youth suspect that there may be something in Communism would be for the government to outlaw it.


23. The glossary of politics is so full of euphemistic words and phrases — as in the nature of things it must be — that one would suppose politicians must sometimes strain their wits to coin them.


24. Bad as euphemism is, however, indirection is worse.



25. When we speak freely, let us speak plainly, for plain speech is wholesome; especially, plain speech about public affairs and public men.



26. Our preceptors were gentlemen as well as scholars. There was not a grain of sentimentalism in the institution; on the other hand, the place was permeated by a profound sense of justice…


27. Considering mankind's indifference to freedom, their easy gullibility and their facile response to conditioning, one might very plausibly argue that collectivism is the political mode best suited to their disposition and their capacities. Under its regime, the citizen, like the soldier, is relieved of the burden of initiative and is divested of all responsibility, save for doing as he is told.


28. Above all things the mass-mind is most bitterly resentful of superiority. It will not tolerate the thought of an elite; and under a political system of universal suffrage, the mass-mind is enabled to make its antipathies prevail.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.

	

	


	
Dec

	
4

	

	

	
U.S. nonfarm worker productivity jumped at an annual rate of 8.1% in the third quarter, the biggest rise in productivity since 2003.– News Report.


I own a couple of businesses and am constantly trying to increase productivity. One benchmark for productivity is the study of Items Sold per Labor Hour (IPLH). In my mind, this is the ultimate measure, as it's non-inflationary, and cannot be massaged. I also pay attention to Items per Customer and Sales per SQ Foot. I set goals and hold the managers' feet to the fire if the IPLH suddenly dips. I don't mind paying overtime if it is used to generate extra business, and not used to finish work due to slacking. Being retail oriented, when there is downtime, the employees are expected to clean and front the inventory. We pay our employees a little over the market rate and give quarterly bonuses, yet remind them that they are only as good as their last numbers. Still, our turnover is well below the industry standards. Turnover will kill you as it costs me $1600 to train a new employee and get him up to speed.


Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MasterOfTheUniverse.


Kim Zussman adds:


Possible ways to increase productivity:


Produce more with less

Produce more with the same

Produce a lot more with a little more

Produce the same with less

Produce less with a lot less


For those still employed, fear would seem to be a good motivator to work harder/more efficiently. Especially those making less than the Holy Ceiling of $250,000 per year.

	

	


	
Nov

	
25

	

	

	
 Here's a good article from Fortune/CNN-Money about the resilience of the agricultural real estate market. One never thinks much about agricultural real estate, but the value of the land reflects the amount a farmer can borrow to run his business and ability to put in his crops. Agricultural land has suffered far less in the recent downturn than residential and commercial real estate markets. Since 1945 the average size of a farm has increased from 213 to 461 acres, but yields have increased three to four fold. Still, the increased yields are working against the income of the farmer with each 1% increase in yield resulting in a 4.5% decrease in prices at the farm gate.


Despite this increase in size and productivity, the market in acreage is cognizant of the fact that we're losing an area of agricultural production the size of Ohio and Pennsylvania every 30 years, and our population is trending up. The bottom line is that the number of farms in the US is at an all time low, and that number is trending downward. The size of the farms are getting bigger, yields are going up, yet the arable amount of agriculture land is approaching a historical low basis the total population. We're down to 0.6 acres of arable farm land per person and that number is shrinking drastically.


The market is aware of these trends and the invisible hand is keeping the prices in agricultural land more in line with reality than the other real estate markets. Most farm land is sold without a broker and reporting of exact prices is difficult, as only the county assessors are privy to this most sensitive of information. Still, the broad trend of prices is up, and many are placing huge bets on the rise. Farmers are mostly close-mouthed, and asking a farmer how many acres he owns or how many head of cattle he has is tantamount to asking him how much money he has in the bank. Simply not good manners.


Jeff Watson, surfer, speculator and art connoisseur, blogs as MasterOfTheUniverse.


Scott Brooks respectfully disagrees:


I have to respectfully disagree with much of what Jeff has written here, though. He is right that the the farming landscape (both figuratively and literally) has changed immensely and keeps changing over time.


But as to farmers not wanting people to know how much land or how much cattle or how much crops they're running, that may be true, but it's certainly not like how much money they have in the bank. You're money in the bank can be kept a secret, but the amount of land you have is pretty much wide open for the world to see. I can go to the FSA office and use their computer system to draw boundaries around a person's property and it will tell me how many acres they have….plus, anyone who lives in the area for any period of time knows how much land farmer Jones has. As to how many heads of cattle one runs, that's open for the world to see, too. And on top of that, if you ask a rancher how many head of cattle they are running, it's been my experience that they will usually tell you.


Most farmers that I know do not have to borrow against their land to run their operations. The FSA office, the local grain elevator, or the local farmers bank will almost always loan money to farmers to grow their crops. I know some pretty awful farmers and they still get the inputs fronted to them by these entities.


Farm land pricing is very regional in nature and depends on the type of land. Bottom land in the farming country is very valuable in terms of income. Hay ground, pasture and non-bottom crop ground is probably next in pecking order. Land in my area of MO, is priced low compared to land two counties over and much lower than land two counties north in Iowa. Scrub land, the land that was of little or no value a few years ago, is now very valuable as hunters (like myself) come in and want to buy up property for recreation.


The little farmer with 461 acres is not what you think he is. Take me and my 522 acres. Based on the standards of the study cited, I am above average in terms of farm size…..but…..I do NOT farm my land (I don't even live on my farm). So what this changes is perspective. I may not farm my land, but it does get farmed. What happens is a farmer (who owns around 750 acres within their family) rents my land for farming purposes (bottom land for crops, grasslands for hay, and other lands for spreading excess manure from his pig operation).


You see, a farmer usually can not make much of a living off 461 acres. So real farmers (non-corporate farmers) rent up a bunch of land to farm. My farmer rents my land and a bunch of other land so that he has agricultural control over ~ 3000 - 3500 acres of land (3,200 acres is the equivalent of 5 square miles of land……640 acres is equal to 1 square mile). The family can run crops, do contour farming, hill top farming, cut hay, run cattle, build hog barns, and many other activities in order to make money.


As to the pricing of crops, I don't believe that we'll actually know the value of the crop (grain or cattle) as long as the government keeps subsidizing their values.


The discussion of subsidies is a whole other post that I don't have time to go into, but suffice it to say, a book could be written on the subject (and several probably have). I'll just say this final thought about them. It is my opinion that the government is like a drug pusher, that once they get their hooks in you with the drug of subsidies, you can't get off them.


As to farm land prices being in line with reality goes……….. This is just false. My farm has quadrupled in value since I bought it 10 years ago, and I've had offers to purchase it for 7 times what I paid for as recently as 3 years ago.


Farm prices skyrocketed in the boom, but they also have not suffered as much as other real estate in the downturn. Most farms in my area, quadrupled in value over the last ten years. They actually quadrupled in 7 years and have remained fairly steady over the last 3. My farm was an exception to the rule due to the fact that I ran a Quality Deer Management Program on my farm and had 7 years of records and pictures of our progress. Due to the work I did, wealthy hunters from out of state were inquiring about purchasing my land for hunting purposes. Those offers have mostly dried up due to the economic downturn.


Obviously there is more to write on farming, but I have a 4 hour and 15 minute drive home from my farm (been up here hunting for the last two weeks) back to my home in St. Louis, so I'm gonna cut it off here.


But I will say this before I sign off. Everything that I have said is very much regionally based. Remember, farming is VERY regional. So what I've written here may not be germane to what is happening in northern Iowa.


So with that being said, what Jeff Watson has written may be true overall, but it's not in my area……so take what I've written with the appropriate grain of salt.


Bruno Ombreux adds:


Here in France a state agency called SAFER records land sales. Their database holds more than 6 million transactions starting in 1970. They have less exhaustive data from 1950.


Unfortunately their database is on a pay-per-use access. But browsing it one can conclude:


- as Scott said, prices are very location dependent. There are literally thousands of micro-markets. Poor grassland in remote locations can be acquired for less than 1000 euros/hectare. Some wine land in Burgundy can fetch several million euros/hectare. (1 hectare = 2.47 acres).


- when one looks at the average of all transactions, land is a very good inflation hedge.


In real terms, prices today are a bit higher than in 1950. Land preserved its value through the inflationary 60s and 70s!


Actually, it looks like land is a leveraged inflation bet, with asymmetric payoffs around a CPI threshold. Above the threshold, one gain more than inflation, below the threshold, one loses in real terms.


On this long-term chart, there are 3 periods:


- 1950-1979: land prices gained in real terms. They increased faster than inflation. - 1980-1995: land prices decreased in real terms, while there was low but still positive inflation. - 1996-present: prices are gaining again in real term, by more than official CPI.


Stefan Jovanovich adds:


 The settlers in Plymouth had experience in growing the cereals that were the major foodstuffs for Europeans in the 17th century: Barley, Oats, Rye, and Wheat. It strikes me as highly improbable that the one edible grass born in the Americas - corn (maize) - would have been so surprising to the Plymouth colonists that, but for the help of the Wampanoags, they would not have known what to do with it. The colonists called it "Indian corn" because it was so different from the types of corns (or grains) they were used to growing and eating; but the name itself suggests that they hardly needed instruction in planting (their colony was named The Plimouth Plantation).


Here is Bradford's version of how "Indian corn" was discovered:


"They also found two of the Indian's houses covered with mats, and some of their implements in them; but the people had run away and could not be seen. They also found more corn, and beans of various colours. These they brought away, intending to give them full satisfaction (repayment) when they should meet with any of them, - as about six months afterwards they did… And it is to be noted as a special providence of God, and a great mercy to this poor people, that they thus got seed to plant corn the next year, or they might have starved; for they had none, nor any likelihood of getting any, till too late for the planting season."

	

	


	
Nov

	
22

	

	

	
 The best books on deception are the best books about the market. The best book about the market according to Martin Shubik is Ben Green's Horse Trading. I would add that there is a good section on deception in EdSpec. And I would point out that a systematic categorization of deception is essential and this is available in the ecology literature following J.R. Krebs's citations on deception in various species, especially monkeys.


Adam Robinson says:


Of course, as I've eulogized no end, The Farming Game by Bryan Jones also has much to say on deception in the buying and selling of livestock, and does so with wit and insight.


Alston Mabry recommends:


I like A Treasury of Deception: Liars, Misleaders, Hoodwinkers, and the Extraordinary True Stories of History's Greatest Hoaxes, Fakes and Frauds by Michael Farquhar.



Russ Herrold re: The Farming Game:


I purchased The Farming Game on your recommendation and enjoyed it.  It was a bit dated as to price examples (they look like a series from the mid 1960s to the mid 1970s), but the underlying principles remain sound. The book starts a bit slowly, setting up some stereotype character sketches, and then strings them together a bit, a bit later in the book.


Kim Zussman writes:


Here is my Deception reading list:


Stocks for the Long Run, Siegel

Irrational Exuberance, Shiller

A Random Walk Down Wall St., Malkiel (efficient markets)

Beating the Street, Lynch (inefficient markets)

Trade Like a Hedge Fund: 20 Successful Uncorrelated Strategies & Techniques to Winning Profits, Altucher

The Intelligent Investor, Benjamin Graham (value)

Common Stocks and Uncommon Profits and Other Writings, Fisher (growth)

Futures: Fundamental Analysis, Schwager

Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications, Murphy

Contrarian Investment Strategies - The Next Generation, Dreyman

Trend Following: How Great Traders Make Millions in Up or Down Markets, Covel

Momentum Stock Selection: Using The Momentum Method For Maximum Profits, Bernstein


(eigenvector = deception)


Vince Fulco adds:


To Dr. Zussman's excellent list, I would add another one very much off the radar screen. In Hostile Territory by Gerald Westerby is purported to be written by a former Mossad agent and profiles his adventures in Africa, the ME and Europe.  I consider it of the best books written on the manipulation of human perceptions, mental flaws and frailties.  I try to read it once a year to condition myself to avoid the traps. It is right up there with Cialdini, but the dynamic and life threatening challenges faced by the author are much more entertaining while providing extraordinary lessons on the subtleties of behavior.


I found the walk through on structuring a diversified [here: agri-]business very approachable, and anticipate lending it out to give context for further discussions to some I work with and mentor.



Jeff Watson comments:


The best book I ever read on deception was called The Game by Neil Strauss. This book is the holy grail for pickup artists, but the lessons easily translate into all areas of life from sports to trading to games. It was very entertaining and well written, znd Strauss gives point by point instructions on how to manipulate, deceive, obfuscate, hypnotize, and control your opponent or object of desire. Strauss takes time to delve into the science of how to pick up women, and believes in rigorous testing and the book surprisingly isn't as misogynistic as one would expect.


Bruno Ombreux writes:


One absolute classic is Arthur Schopenhauer's The Art of Controversy. It also goes by a different title: "The Art of Being Right". Here is a Wikipedia article with the full list of stratagems. And it is available for free at Gutenberg.


Kim Zussman writes:


The most respected investment books of the 20th century all have eigenproblem of hidden utility. Even when authors are intellectually honest, it's hard to understand how they could escape distortion induced by rewards.


Some are selling their strategy (read my book but invest with me), talking their book (I'm deep into growth or value, so please buy these), pandering the academy (status as published professor), making a career of teaching how to trade, increasing status, creating a legacy, etc. This is similar to the more general, "how many friends do you have who don't profit from you?"


Bruno Ombreux responds:


I haven't read all the books in Dr. Zussman's list, but among those I've read, I think two are not deceptions:


A Random Walk Down Wall St., Malkiel (efficient markets)


Most investors would be better off reading this book and stopping there. Also:


The Intelligent Investor, Benjamin Graham (value)


I haven't finished this book because after the first two chapters I realized it was just a watered down version of the first edition of Security Analysis, from the same author + Dodd.


Security Analysis is an excellent book that makes excellent points for the era it was written in. Their technique of looking into detail at companies accounts is similar to detective work, which itself is an application of the scientific method. In my opinion, this kind of financial analysis is a valid way to proceed.


Nigel Davies comments:


The nature of deception may be much deeper than many authors make out. I would say that the origin of all deception is in fact self-deception and that the supposed 'deceiver' is doing nothing more than moving into the vacant space within our understanding.


George Parkanyi writes:


 There is a saying.  "Fool me once, shame on you.  Fool me twice, shame on me."  To me it's just a given that traders, particularly those trading in size, use techniques to mask their intentions.  And sure, those that have knowledge of them, run stops.  That's just one of many influences that make financial instruments wiggle on a day-to-day basis, and you would not only have to sort out what is "deceptive" behaviour vs stupid vs herd behaviour, but whether the deception was or was not in your favour.  Unless you have a large network of people you can call on the inside that can give you information that helps you take the temperature of a given market, I don't see the point of trying to personify this market move or that market move as "deception", especially in a big liquid market that is essentially a non-linear system subject to multiple influences. If there's a pattern that you detect and can exploit then so be it.  But does it matter if it is "deception" vs. sentiment or just a big whale moving through?


Don't get me wrong. Reading about deception is certainly interesting. As a Scout leader, Arthur Baden-Powell's role in the Battle of Mafeking during the Boer War is an excellent example.  In fact, BP's entire early career was based on deception.  But I personally don't see the value in getting overly concerned about deception in the markets, though I understand that others do.


I think if you have a general sense of the day-to-day character of a market that you have researched and trade regularly, and do some research to try to anticipate macro influences on that market that might cause it to trend, the rest can be handled with money management.


Stefan Jovanovich replies:


Baden Powell's energy as a commander was probably the decisive factor in having the deception succeed:


From British Battles:




Baden-Powell conducted the defence of the town with great energy and resource, leading the Boers to believe there was a larger garrison than was the case. In November 1899 Baden-Powell launched a series of raids on the Boers lines that caused him some casualties but made the Boers wary of the garrison.


Initially the Mafeking garrison had no artillery. Baden-Powell improvised various items to look like real guns and trains, while engineers manufactured a gun, known as the "Wolf", from a length of steel pipe. The Boers used the 2 two inch guns they had captured from Dr Jamieson to bombard the town. Dud shells fired from these guns were reworked and discharged at the Boer lines from the Wolf. An officer found an old muzzle loading naval gun serving as a gate post. This gun was christened "Lord Nelson" and drafted into service. Dynamite grenades were manufactured and thrown at the Boer lines and a small railway line was built across the town.


In sharp contrast to the indolent Ladysmith garrison, Baden-Powell kept his men constantly on the move, raiding the Boer lines and keeping the besiegers on their toes.




Scott Brooks adds:


Atlas Shrugged  not only speaks of deception, but the deceivers are open about their deception. The deceivers/looters are like gangsters who are in complete control in kick sand in the faces of the producers, daring them to say A is A and damning them if they do, all the while fooling the masses with their A is B pablum. The parallels to our world today are stunning.

	

	


	
Nov

	
20

	

	

	
 Medical care is, of course, a right, and one that should be protected by the federal government.  Instead, federal and state governments actively restrict the right to offer medical care.  The expensive, complex, cumbersome, ridiculous health care bill in Congress would only make matters worse by increasing demand and doing nothing to free supply.


A Forbes column by Daniel Fisher (Medical Emergency) discusses the restrictive policies engineered by medical schools, mandatory residency programs, federal subsidies and hospitals. (Paul Starr's fascinating history "The Transformation of American Medicine" tells the bigger story of government intervention in medical care.)


Economic freedom for medical care would simply mean removing government force from the supply side of the equation.  Investors would be able to develop and staff new hospitals and medical schools, foreign doctors and nurses would be able to apply to enter the U.S. to gain certification to practice medicine.  Insurance companies would be free to reimburse medical care provided by new or expanded hospitals and clinics.


Wal-Mart, Walgreens, and other firms would be free to expand medical services offered in their stores, hire new doctors and nurses, and even develop their own online and in-service medical training programs.  Insurance companies could choose not to reimburse care from new providers if they believe such care to be substandard.


The Forbes article notes especially the coming shortage of primary care doctors, estimating that the shortage would reach 40,000 in ten years even without expanded "free" medical services if pending "health care" legislation passes.  With medical schools and residency slots locked down by special interests with state power, supply cannot rise to meet demand.


How many competent nurses, after five or ten years on the job gaining experience and expertise, might choose to take on training to become primary care physicians?  We won't know until such economic freedom became available to nurses.  Insurance company executives often insist on extensive physicals before writing million-dollar insurance policies.  And they often insist the physicals be done by nurses rather than doctors, who as a rule take more time.


How much should a primary care doctor earn?  Before government intervention in medical care, they earned about what other professionals earned.  If government officials and the American public were to somehow be roused from their ignorance of the history and economics of medical care, and insist that freedom of contract be again protected, tens of thousands of competent primary care physicians would soon emerge from new training programs and medical schools to offer quality medical care for Americans of all income levels.  People would likely pay modest fees for service in cash or with credit cards, using medical insurance only for catastrophic medical problems.  Mutual aid societies like the local Eagles, Masons, Moose, and Sons of Italy, might again hire "lodge doctors" to provide medical care to members.  More likely thousands of the nations health clubs might offer a range of "health care" services to members with part-time staff doctors and nurses.


Specialty hospitals operating on broken bones and joint replacements would not also treat people with infections.  Medical costs from accidental infections would drop dramatically. (See another Forbes article, Bad Medicine, for this regulatory disaster story.


Competent primary care doctors carry a vast amount of diagnostic information and experience in their heads.  Alternatively, medical care providers could have a more modest degree of information and experience in their head, but know how to quickly search vast computer databases and diagnostic software for cutting edge information. Imagine a world where all our diagnostic and repair services for cars, airplanes, and other machinery relied upon what mechanics could remember learning about or had fixed before.


Editors note: we find this PajamasMedia article highly relevant.


Jeff Watson points out:


ShrinersOne place that provides medical care for children is the network of 22 Shriners Hospitals in the United States. Run by the Shriners, an organization of Free and Accepted Masons, this network provides free medical services for children without any financial obligation or insurance requirements from the families. Entirely supported through donations, Masons raise around five million dollars a day to fund the network of Shriners Hospitals. The quality of these hospitals is first rate, and the facilities are state of the art. Many Shriners Hospitals offer training and residency programs for MDs. All Shriners Hospitals are committed to the uplifting and complete care of sick children in a family-friendly environment. The burn units are among the best in the country. Donations to the Shriners Hospitals are tax free, and much needed as current conditions and increased expenses might require the closing of six hospitals. The Shriners are desperate to keep the endangered facilities open and provide critical care for the communities they serve.

	

	


	
Nov

	
20

	

	

	
The basis is often the most overlooked part of commodity trading. The importance of a solid understanding of the basis cannot be repeated enough. An excellent article for the novice or anyone else can be found on TopProducer-Online.


	

	


	
Nov

	
6

	

	

	
Nock's adage that if a teaspoonful of arsenic won't cure you then a tablespoon is required relative to the unemployment rate and measures to stimulate economic health comes to mind in view of the 10.2% rate. Amazingly no leaks were visible on Thursday during the day or on Friday before the number in fixed income or equities. Indeed German fixed income was down before the number. There's only one explanation. "Boys, old Hanover is looking very sickly in the stalls. Be sure that we don't work him out in the next mornings before the election."


Nock enthusiast Jeff Watson explains:


Much ado has been made about Albert Jay Nock on Daily Speculations. An original thinker, with an uncanny sense of reason, Nock is a founding father in conservative circles. Such luminaries as William F. Buckley Jr. have used Nock's ideas as the genesis of their political views. I have assembled a series of full downloads of his works from various sources for your reading pleasure.


Our Enemy the State 


On Doing the Right Thing 


Memoirs of a Superflous Man [his autobiography and perhaps his best known book]


Cogitations 


Isaiah's Job


The Criminality of the State 


The Jewish Problem in America 

	

	


	
Nov

	
4

	

	

	
 I've been noticing a couple of guys set up on a busy corner here in Venice, FL (US 41 and Venice Ave), selling BBQ, and always paid them no attention. Today, while sitting at a long stoplight, with my window open, I smelled the delicious aroma of smoking BBQ, and had to stop. I pulled into the parking lot and looked at their set up. They had a couple of 55 gal oil drums converted into smokers, a couple of coolers, and a Weber grill. The whole set up looked very clean, much cleaner than most street food places I've been to New York. I ordered a couple of sliced pork sandwiches and a side of roasted corn. The pork was first rate quality and had a nice smoke ring around it. Done to perfection, and served on an extra large hamburger bun, they were very generous with the meat, heaping at least 8 oz on the bun. They only served one type of BBQ sauce, which was molasses based, and hands down was the very best BBQ sauce I've ever had. I asked for the recipe and was told, "If we gave you the recipe, then we'd have to kill you." Although the meat was wonderful, the sauce deserved special note. The roasted corn was very good, especially with chili pepper and lime as an accompaniment. They had ribs smoking on another cooker, but I declined to try some as I was so full. Still, I saw a few people get the ribs and they looked very happy. I was so pleased to see a couple of guys starting a business on a shoestring, making a superior product, and doing what they loved. The constant stream of customers was a testament to their quality. The look and taste of the food indicated a lot of love going towards the product. I just hope the powers that be will allow this grassroots business to remain in place. If not, the world will be a lesser place. In all my life, I have never had such good BBQ. Those guys do no advertising, and just let the smell sell their product, the way it should be. The price was very reasonable, with a sandwich going for $4.50 which is on par with McDonalds.


	

	


	
Nov

	
1

	

	

	
AA / SGThe story of the day is that Andre Agassiz's dad and Stefi Graf's are both hard driving. Andre's is known for driving the son crazy with a ball machine called the Demon. Graf's father comes to visit to congratulate the couple and see the Demon. The two dads start  jawing at each other about whether a two handed top is better than a slice on the backhand. They start circling and throwing punches at each other. Andre has to step in to prevent them from duking it out. I knew there was a market analogy. Marty Riesman  always said he was the luckiest man in the world to have a father who was a bookie. I didn't have that luxury. My dad was on the boxing and wrestling as well as football team at Brooklyn. But he would thank the referee for calling the foot fault on him. "If you have to win by that margin you don't deserve it." Indeed. He'd call it on himself at a critical time in our doubles matches. The Palindrome, just the opposite. He often called foot faults on me when playing against me. What is the ideal father for a person who's going to win? I'm afraid that the bookie, and the hot headed one fit you more for the trading business than the kind hearted one. Fortunately, some with a wonderful, benevolent father marry a miserable scoundrel like the daughter that's likely to result from the bookie or the fighting fathers. They can counterbalance the naivete and gullibility of the ones raised by an Artie. It's all my father's fault and Susan's that I'm such an easy mark.


Jeff Watson suggests:


The genetic component of what we are cannot be discounted. Since 1860, having had at least two members of each generation of my family end up trading is more that an outlier. The funny thing is that nobody in my family was ever encouraged to trade, and many stumbled into it by accident. I have noticed that many successful speculators come from a background with parents who were very laissez-faire in many aspects of their childrens' development, myself one of them. Many other speculators come from an environment that celebrated and taught a touch of larceny. The very best traders I ever knew came from ag backgrounds, which isn't too surprising. Still, it would be an interesting study to see if genetics matter more that environment in the psychological makeup of traders.


Jeff Watson, surfer, speculator and art connoisseur, blogs as MasterOfTheUniverse.


Michael Bonderer extends:


I kindly refer all Speculators to Daniel Ammann's recent book, The King of Oil: The Secret Lives of Marc Rich. Superb! There is even stuff in their on Familial Predestination! What a cool guy. Better then Steve McQueen.


Reid Wientge muses:


Being an easy mark reminds of Poe's stating he wished he could experience dying and write about it at the same time. Being the mark: You are stuck in slow motion, watching the other act and speak, indeed, watching yourself and hoping for intervention, hoping for "sombody stop me." Is it cynical to wish that one had been trained to master this vulnerability? I think not.

	

	


	
Oct

	
19

	

	

	
Father / SonJohn,


I just wanted to take this time to wish you a happy 21st birthday. It's hard to believe that you are 21 years old, and it's harder to believe that I made it this long. I would like to congratulate you for making your life so complete, and I'm very proud of your accomplishments. You've come a long way from the little beach rat you started out to be. All of your life, your mom and I made a very conscious effort to teach you the difference between right and wrong, as that is the measure of a complete man. We diligently taught you how to think on your feet, and how to think on your own terms. You embraced our high standards, then decided to exceed our wildest dreams and expectations.


Ever since you were a little boy, you had an insatiable curiosity about words, logic, languages, numbers, and music. You saved us a lot of time by teaching yourself to read, learning how to count, and add and subtract all by yourself. Your basic intelligence provided us with a pedestal, a foundation, a sound base in which to help guide your progress. We were rather laissez faire in our approach to teaching you, but you obviously soaked up knowledge like a sponge. Teaching you was a joy for both your mom and me. I especially enjoyed teaching you, and showing you the mad experiments I would concoct for your amusement and learning.. Our little experiments drove mom crazy, but then again we sure had fun.


I like to remember our rather spirited dinner table conversations you participated in since you were two years old. We always included you in every topic and discussion, and your very patient mom offered to clearly explain everything you didn't understand. Your mom and I didn't always agree on subjects, and we allowed you to jump into the fray, developing and formulating your own opinion. We respected your opinions as long as they were well thought out and intellectually sound, and corrected you when you had flaws in your thought process. If you remember, we always had the best dinner table discussions, and somehow the kids in the neighborhood all wanted to be at our house around dinnertime to participate and hang around. You know it wasn't the cooking that brought them over, but the love and respect we all showed one another. Your mom and I made a conscious effort to make out house a "Cool" house, where all the kids would want to hang out. I must confess that we weren't entirely altruistic, but we did that to keep an eye on you and your friends. Remember how Teddy and Alan stopped coming over. Your mom and I made a decision that those boys were going to get in trouble, and that you shouldn't associate with them. It turned out that we were both right, as both of them ended up in jail, and are common criminals.


I remember when you were a kid, I'd drive you nuts asking questions and creating hypothetical situations for you to analyze. Later on when you were a Middle 5th, you finally realized that all those questions were to enable you to develop your mind and thinking process. I might have used the Socratic Method on steroids(as you put it), but it taught you how to think and apply rigorous analytical skills to problems.


I remember when you were a little boy and showed zero interest in science. In fact, you hated science and math with a passion, Your mom was more concerned than I was, as I immediately figured out that you were wired differently. You got your penchant for the classics, arts, languages, and music from mom. Since she was preoccupied with her own artistic endeavors, I decided to take it upon myself and get you up to speed in those areas of your interest. Helping you learn, teaching you, was something that taught me as much as it taught you. Still, you did learn enough about math and science to get by, and I have no complaints there.


One of my greatest joys with you has been your affability, and genuine interest in making and keeping friends. You are one of the nicest, friendliest young men I have ever known, and have more friends than I can count. You are obviously doing something right, and again, I attribute your social skills, grace, and high culture to your mom. Still, it would serve you well in the future to only associate with people of the highest integrity. After all, the old cliche, "You are known by the friends you keep," certainly holds true. So far, you have done a reasonably good job in making and keeping friends. However, you need to not always think that every one of your friends will do the right thing, like that episode last summer. If you choose your friends wisely, life will be so much easier. One strong characteristic that you have that causes me admiration is your loyalty. Loyalty, combined with your word being your bond will get you far in life.


I urge you to keep up your interest in the arts and music. Your musical knowledge, theory, and general aptitude for music exceeds that of most music professors. Keep playing the bass, and keep recording your music with the equipment I bought you. I used to do a lot of that in college, but sadly, most has been lost because everything was on tape. You won't have those problems with digital. As for the art, someday, you will inherit a fine art collection. Remember that the art collection is not yours, but you are just its caretaker. Remember that final discussion your mom had with you about art belonging to the ages.


I hope that you keep up your surfing and golfing. I'm more concerned about the surfing as I'm rather selfish and intend on keeping you in the water when you're 50+. Surfing has been good to me and kept me sane. Plus, you are the best surf partner in the world. Think about it, all the thousands of waves we've shared all over the world….not too many father and sons can say that.


I know it's not PC, and we've had countless arguments about this, but one cannot discount the genetic component of your makeup and personality. Your excellence in classics and languages is not by mere accident. Your Uncle David was a classics scholar, as well as mom's dad and her grandfather was a man of letters. Your mom was a world class artist, and you are very proud of her work, and never fail to show your friends the videos, ads, watercolors, and illustrations she made. I sense your pride, and feel it myself. Getting back to genetics, when you finally decide to settle down and find a mate, please consider all the factors that will be in the mix. You need to find someone that will improve our line, just like your mother and I did by having you. Genetics are very important, and you can go to any pub and look at most of the habitues as an example of bad genetics. Have you ever noticed how the street people look different than the people at the club? It's all genetics, and intelligent and successful people breed with intelligent and successful people. The converse is true, just look at the underclass and the differences are readily apparent. You'd have to be blind to not see the difference. Remember when you were a little boy and I'd drive you through the bad part of town and you'd ask about the angry looking men hanging around and I'd tell you, "Those are the guys that didn't do their homework." I should have added the part about the genetics, but then again, you were only five and genetics was beyond your scope.. When you find a girl to settle down, take a hard look and consider if being with her will improve you or not. Always opt for the improvement. It's a common mistake for a man to fall to ruin, because the momentary pleasures of the flesh can cloud one's judgement. Don't allow that to happen. There are going to be a lot of women trying to snag you, as you're an outstanding catch. Don't allow the woman to choose you, choose her and make it a mutual thing. Use mom and me as an example of a loving couple, and live by that.


In two years, or ten, depending on how long you study, someday the real world of mundane things like getting a job, paying bills, and buying a house will be a priority. Remember to always think everything through and not do things on a whim. That sharp salesman is not your friend, despite his affable nature. People will try to look for an advantage, and some might take you for being an easy mark. My greatest regret is not instilling any street smarts in you, but that was an argument I lost with your mom. The easiest word to say is No. Your great grandfather drilled that piece of advice into me when I was just a little kid and it has served me well over the years. Speaking of your great grandfather, I would like for you to re-read his list from time to time. I have found that list to be a guiding principle in my life.


Finally, please realize that I will always be there for you. If I'm down to my last three cents, I will gladly give you two of them. Never be afraid to ask anything of me, and never be afraid to challenge me….but do realize that you better have all your ducks in a row if you challenge me. I know it's cliche, but a good way to look at life is to always do the right thing, even if someone isn't looking.


I've never told you this before, but your greatest characteristic that I admire is your strong desire to do things on your own and not ask for assistance. When you applied to prep school, you did it by yourself, filling out all the applications, lining up interviews. Same thing with college. You've really made things easy for me and I thank you for that. Not that I wouldn't be willing to help, but self reliance and individualism has been a hallmark of our family for generations.


Now that you're 21, you will be able to become a Mason if you so wish. Since you are a legacy, there will be no problems getting accepted into the oldest fraternity in the world. It will take a lot of hard work to become a Mason, but the rewards will so exceed the effort you put in to become one. I, personally would like to give you your Apron Lecture, and that will be the proudest moment of my life if you chose that path.


John, as you become an adult, I just want to reiterate on just how proud of you I am. Your mother would be equally as proud and I know she's looking down and smiling.. You have become the best of your generation in our family. I expect great things from you and know you will be up to the challenges life brings.


The main thing I want for you to do is be happy. Despite all my [misfortunes] over the past three years, I still have remained relatively happy. I might have my moments, but you know what I mean. Life has its ups and downs and you just have to roll with the punches, no matter what they throw at you. Our family is a resilient breed, and you, clearly are the best of breed.


One final piece of advice as you become an adult. The farms you inherited from your mom, although they're not the greatest, make sure you always keep them and never sell them. That is your real legacy.


Happy 21st.


Love,


Dad


Jeff Watson, surfer, speculator and art connoisseur, blogs as MasterOfTheUniverse.

	

	


	
Oct

	
15

	

	

	
VNStocks are at a several week maximum and bonds at a several week minimum as of the close today. This has happened with a rather amazing regularity on six occasions this year but not on the day before expiration in 2 1/2 years. How wonderful it is that hope spring eternal in the hearts of traders and man.


Everything that didn't work last year is working this year. And the Gannian adage that the best thing to do at the beginning of the year is to stand on your head and read the charts of last year, to be in the right framework for reversing goes. Of course, if you did that with leverage you would have been stopped out early on. But that's the whole point. Who would have had the fortitude to stay whole last year when buying the dips led to disaster and still be able to profit handsomely this year. What sagacity would have been required. Everything statistical that didn't work last year, worked in spades this year. But in a completely different locus with maximum after maximum and runs of up days upon up days, with nary an intervening decline of more than a gnat's eyelash in between.


It is interesting to reflect on how even in the heart of the tornado, the bankers knew enough never to "leave a trail" with their emails so that they would be able to deny any quid pro quo and harsh threats  made on bicycles. Everything that my kind of people thought about markets that was wrong this year was right this year. I can hear Jim Lorie saying " the drift is up " and it's always best to buy and hold because if you sell , you have to know when to buy back and you miss the drift. I can hear him saying that he got a call from this or that Nobel winner from the faculty club in the middle of one of his board meetings in October 2008 or April 2009, demanding to know whether they should capitulate with their last 20% of their holdings and he told them not to panic.


The POMO adding 15 billion of reserves through direct purchases of treasuries, agencies or what have you every other day has had an amazingly consistent impact . However the expectations have not been that good in following it, because the form is always ready to change when the public gets onto it. And some of those rare but grievous declines have come amidst the orgy of liquidity created.


One wonders if there are direct payments allowed to economic advisers for speaking engagements the way they were available when one was formerly president of this or that institution or whether it's the usual Chinese Wall stuff like the bankers cry of "no trail".


Jeff Watson adds:


Being the self-admitted worst stock picker on the planet, I followed Henry Clews's advice during the panic, and the rest is history. As far as I can tell. In Chapter 2 of his book, Clews recounted the best, most certain way of making money in the markets. As a sidenote, I found a cane during that week of peril and, after many attempts, managed to throw it up on a high tree branch outside my house. That cane has stayed up there on the branch for months and months, and as long as it stays up, all is well. It's OK to be a little superstitious.


Jeff Watson, commodities speculator and art connoisseur, blogs as MasterOfTheUniverse.

	

	


	
Aug

	
24

	

	

	
 It would serve one well to revisit history and look at the history of the Roman empire, as history does tend to repeat itself. The Romans had established property rights, protected trade routes; they had replaced barter with the use of currency, and had a sound monetary system complete with sophisticated banking services that are no different from the practices today. The Roman citizens enjoyed the use of bills of exchange, letters of credit, long term loans, and savings and checking accounts. Rome, at its height, had the reserve currency  of the world, and enjoyed the status of being the world's clearinghouse, especially with the developing trade with Asia and Africa. The Roman government kept their hand on the pulse of the thriving money market and exerted control and influence by setting and regulating interest rates. The pulse of the Roman economy was being taken by all productive citizens, and international trade and free markets were developing rapidly. Cicero was even perceptive enough to note that, " The credit of the Roman money market is intimately bound up with the prosperity of Asia; a disaster cannot occur there without shaking our credit to its foundations " [quoted in F. Teggart: Rome and China, Univ. of Calif. Press, 2d ed., 1969]. Because of the sound property rights, rule of law, and the ever expanding economy, natural evolutionary forces took over and the survival of the fittest was the order of the day, as it should be. In areas like farming, larger farming operations began to replace smaller operations in large part due to the good business practices of the owners (plus slave labor), and the economy of scale. The merchant class prospered, satisfying the demands of the ever increasing empire and finding new products from all over the world. With the economy humming along, many rural people, some displaced, started a trend of moving to the cities, a trend which continues in many places to this day. This group of new immigrants created a permanent underclass, and necessitated the beginnings of welfare programs, higher taxes on the rich and businesses, and increased regulation. In order to keep the underclass in check, they needed more than the "Roman Circus" to keep order. The government went on a building binge of public work projects, building roads, bridges, aqueducts, and places like the Coliseum (sort of like a Roman version of the WPA). Although the initial outlay for those buildings, bridges, and schools was large, the government never realized that there would be an even greater cash outlay for maintaining those institutions, after all buildings and roads need maintenance, and schools need teachers. So, more public money was needed, in ever growing amounts, and this became an ever increasing spiral of higher taxation, debt, and monetary debasement, all of which ultimately led to the demise of the empire. Contributing to this demise was the expense of maintaining an army, various wars they were bogged down, combined with uncessful military campaigns. Although the Romans were able to hold things together remarkably well for a few hundred years after the peak, things started to unravel around 300 AD, and took another 100 years to really crumble.


The entire Roman Empire could be described as an economic stimulus package run amok. It conquered and grew with each conquest bringing in more booty of land, silver, gold and free labor (Slaves). And each conquest led to more conquests, and on and on ad infinitum . But the net effect of this plunder, for which no productive work was done, was only the need for more stimulus. It did not stimulate real prosperity, but instead undermined prosperity, much like the Spanish were to realize 1500 years later. First, slaves bought by rich farmers undermined the free labor market and ruined many small farmers who weren't able to compete. And then, imported wheat from the new provinces and conquered areas, caused the wheat market to collapse and affected the larger scale farmers.. Rome was by then dependent on foreign sources for its food, being a net importer for the first time by the first century AD.. In the first century AD, Roman conquests reached the tipping point of diminishing returns and the first physical effects of the downward spiral were felt. However, borders and trade routes still had to be protected, armies fed and clothed, the bureaucracy paid, pet projects built, the increasing graft of public officials, and the ever increasing demand by the public for bread and the circus. Therefore, the money had to come from somewhere, and that somewhere was out of the pockets of the productive, and also an increase of the money supply. Caesar Augustus tried to increase the money supply by having the slaves work around the clock in the silver mines to produce more silver. More silver was produced and much more coinage was seen on the street and in the vaults, but the net effect of this was inflation. Still, the leading economists and leaders of that era still were bent on fiddling with the economy and this led to Nero reducing the silver content of the coinage and a recall of money with higher silver content so it could be melted down and alloyed, causing more inflation and currency debasement. The Roman Treasury even tried a direct cash stimulus to the citizens, releasing over three million pieces of silver on to the street to kick start a depressed economy, but the result was inflation.



The Edict of Diocletian  in 301AD was one of the bigger blunders in the Roman Empire. In order to control the spiraling inflation, in no small part caused by his tax and spend policies, Diocletian, along with his co-emperor and fellow autocrat, Maximian, issued an edict  that mandated against selling at prices above a certain level, for an entire list of staple items, with the mandatory penalty of death for violation of the edict. The law of unintended consequences caused merchants to hold back product rather than sell at a loss, and another edict against hoarding was issued, again violations of this law carrying the death penalty. Facing many business failures and a major recession, Diocletian took the ultimate step. He arbitrarily issued another edict that made it punishable by death for one to go out of business (something that would have been the end result in Atlas Shrugged had the looters prevailed), and that each son had to work at his father's occupation. Although many university scholars like to present Diocletian as a reformer, visionary, vessel of change, and good leader who was able to hold everything together, he tripled the number of laws and regulations and greatly expanded government's rule over the daily lives of the population. Diocletian was a personally greedy petty despot, making Boss Tweed look like Mother Theresa, because he had absolute authority over an entire empire. His complex holdings necessitated the need for two finance ministers, one for the empire, and one to manage his personal portfolio. He went on a hiring binge of government workers, increasing the number of lifetime civil servants in Rome from 15,000 to 60,000, although that exact number is in dispute. Along with the lifetime civil servants was a corresponding increase in clerks, scribes, accountants, and especially tax collectors. He increased the bureaucracy by dividing up states, thereby duplicating local bureaucracies on a large scale. The early Christian activist and author Lactantius claimed that there were now more men in Rome using tax money than were paying it, a condition which is starting to reappear in today's increasingly socialistic societies. The whole scene during Diocletian was reminiscent of Terry Gillam's excellent movie, Brazil. Ultimately for reasons that are in dispute among scholars, Diocletian ended up abdicating shortly after his 20th year run in power.


Modern academics tend to treat the fall of Rome as an inevitable consequence of a civilization run amok and discretely blame free market forces for the demise. They fail to recognise the impact that rules, regulations, debt, high taxes, and welfare had on the empire, and that the fall of Rome was more of an economic event than a geopolitical event. Had the rulers of Rome done a better job of management, not treated the treasury as their personal bank, and adopted a laissez faire free market approach to the economy, the world might be a totally different place. For one thing, that 900 year depression known as "The Dark Ages" might have been much shorter, or averted totally. The tentacles of the Roman Church might not have been able to reach in and siphon off tax free wealth, productivity, freedom, and ideas in that span of time. Perhaps the ideas of Adam Smith would have been adopted 800 years earlier for the betterment of society as a whole. While all of this is all speculation on my part, one can only imagine how the world would be if the producers and independent thinkers were always allowed to be free of the yoke of excessive government regulation.


Stefan Jovanovich says:


The Romans had specie and credit; they did not have currency in the sense of Demand Notes. It is an historicism to suggest that there was anything approaching a reserve currency for the world. Merchants did extend each other credit, but there was no central bank, only a Treasury; and there were no exchanges of sovereign currencies between, for example, the Parthians and the Romans. I would appreciate Jeff's providing citations for his assertion that contemporary classical scholars blame capitalism for the decline of the Roman Empire; the ones whom I admire the most - Peter Green , for example - see the matter as being a failure of Rome to accept enterprise as a substitute for war. In their view the "economy" of Rome was based on conquest, not trade; it followed the Napoleonic model. The legions were expected to be able to turn a profit from their wars; when they didn't, things became difficult. No one in the Roman world considered enterprise to be the appropriate occupation for a gentleman. "Trade" was looked down upon as something literally beneath contempt; it was the province of freed slaves, Gentiles and Jews, not "noble" (sic) Romans. Gibbon, who lived in a society that had similar snobberies, found it easy to blame the Christians for the fall of Rome because, in his day, the evangelical Protestants - the Quakers, for example - were a large part of the contemptible merchant class. He could hardly blame the Society of Friends for the fall of Rome, but he could blame their historical antecedents. It also helps to remember that Gibbon was writing for the applause of a public who saw the House of Hanover as a bulwark against the threats of Popish Spain and France and, closer to home, the Catholic parts of Scotland and Ireland.


Bruno Ombreux comments:


You wrote "For one thing, that 900 year depression known as "The Dark Ages" might have been much shorter". The so-called Dark Ages were not a 900 year depression.



Firstly, the Dark Ages never really existed. No one in that period described himself as living in the dark ages. The idea of a dark age is an artificial construct of later so-called historians that wanted to glorify their era at the expense of the previous one.


Secondly, over those 900 to 1000 years, a lot of things happened. This is not an homogenous period. There were phases of recession, but there were also phases of strong economic technological and cultural growth, notably the 12th  and 13th centuries


Scott Brooks comments:


Isn't it fair to say that the 12th and 13th century's were really the dawn of the Enlightenment?


Can you really have the light without the dark? Didn't the "rate of progress" of the world slow during the Dark Ages? Couldn't we argue that there were extended periods of time in which man made little or no progress, and in some cases went backwards for extended periods of time?


When one looks at modern depressions, what are we really looking at? During the 1930's the world suffered immensely, but there were a lot of great fortunes made during the depression.


I'd bet that Peter Lynch of Magellan fame didn't see the 1970's as a bad time. He cut his teeth and made his fortune guiding Magellan during a time frame when the major indexes were in toilet.


Some would consider a forest fire an ecological depression. But a fire can actually strengthen the forest and clear the way for new growth……just like we saw in the 1950/60 time frame or the 1980/90 time frame.


One man's depression is another's opportunity. I guess it's all in how you choose to view it.


Stefan Jovanovich has a more nuanced view:


Jeff's overall point - that Rome and its Mediterranean civilization collapsed and that, with that collapse, came an extraordinary increase in human misery - is unassailable. The Dark Ages may no longer be the politically correct term, but it is still the appropriate one. In measures of public sanitation, life expectancy, and practical individual liberty (the freedom to travel without threat of robbery, the freedom to buy and sell without threat of extortion), it took European cities 1800 years to get back to the place where Rome, Athens, Antioch, and Alexandria were at the time of Augustus [reigned 27 BCE to 14 CE]. The loss of classical literature alone is incalculable.


Scott continues to have a much more optimistic view of modern history than I do. If you include the totalitarian oppressions in Japan, the USSR, German-speaking Europe, Marxist/Fascist Spain, Italy and the consequent devastation of Part II of The World War, the 1930s are a period that has no equal in human history in terms of awfulness. The idea that this was somehow a cleansing devastation that "strengthened the forest" is astounding.

	

	


	
Aug

	
14

	

	

	
TurtlesSo far I sadly have neglected discussing my late grandmother, the one married to my 104 year old grandfather, who died in her 90s. She had an independent streak and made sure that we grandchildren were sufficiently exposed to concerts and music of all types. She was quite a character and had an uncanny resemblance to Rosalind Russell in Auntie Mame. She took all of us to the ballet, operas, and symphonies, and rock concerts on a near weekly basis. By the time I was in 5th grade, I had seen the Dave Clark Five, The Stones, Beatles twice, Monkees, Jimi Hendrix, The Turtles, Chad and Jeremy, The Animals, The Beach Boys, Jan and Dean, and a host of other bands. To make her happy, we went to see Dorsey, Sinatra, Tony Martin, Count Basie, and all the greats of an earlier generation. She was always 50 years older than anyone at the rock concerts, and had just as much fun as the kids. She also had an uncanny ability to score tickets in the first three rows for everything… she claimed her poor eyesight necessitated  front-row seating. Feeling that being around all of the kids made her young again, she was criticized by the rest of the family for her apparent craziness. She was crazy like a fox, as our generation of cousins has an appreciation of every form of music and we owe it all to her. Those concerts she took us to are among the best memories of my life and can never be taken away. I think that this fall I will invite Vic and Aubrey to a Phish concert when they come to NY. I know Aubrey will like it and it will open some news doors for Vic.


Marion Dreyfus notes the benefits of taking children to concerts and other grown-up activities:


You pick up a great deal of incidental ambient intelligence at those concerts. Different venues rouse new parts of the dormant brain, making more synaptic connections and neuron networks grow. The new intel becomes part of our personal carapace of knowledge and sentience. You can function on more data, have a greater range of facts and input upon which to think and act.


Tom Marks is skeptical:


The 'synaptic connection' angle sounds like what an embarassed neurologist in a Woody Allen film might say to his unamused wife after she had found strip-club charges on his Am_rican Express card statement.

	

	


	
Jul

	
21

	

	

	
C MI've been thinking about whether there's a correlation between trading success and intelligence. Do people with high IQs do better at the trading game than those with low IQs? I wonder if high intelligence is a prerequisite for trading success, or if it even fits into the equation.


Are traders in some markets smarter than those in other markets? Are the index or currency guys smarter than the grain crowd, for instance? Are the upstairs guys smarter than the floor guys? Does higher education really matter, or even have a correlation with trading success? Has any of this ever been measured before? An interesting thing to ponder is if there might be a correlation between juvenile behavior and trading success. Perhaps the most important traits for traders are balance, emotional intelligence, the ability and discipline to execute a plan successfully, and courage. Some of the smartest people I've ever known have been really bad traders, whereas I've known very successful ones who don't exhibit outward signs of extra intelligence.


Newton Linchen adds:


This is a great issue. How many times we sit and shout "why oh why didn't I trade the way I said (plan)?" This happens despite our intelligence — one thing is to be able to "understand" or predict markets — other is to be able to translate this view into action. Perhaps the best strategist is not the best fighter — and it's very unusual to see a strategist-fighter or fighter-strategist.


Generals plan their moves at night, in the tents, but they send the soldiers to do the job the next day.


GM Nigel Davies replies:


Even in a supposedly intellectual game like chess, character plays a much larger part than intelligence. A major part of it is in whether someone can bring himself to falsify his ideas or instead uses what intelligence he has to justify them.


Steve Ellison observes:


I suspect that practical intelligence (synonyms: business savvy, street smarts) is more important to trading success than the type of intelligence measured by IQ. Ben Green, in the preface to Horse Tradin', noted that horse dealers had to know about many factors such as demand, climate, crops, and soils, but then went on to say:


For a big dealer in a central market to be successful he also had to acquire a keen understanding of human nature… None of the knowledge needed by a high-class horse and mule dealer could be learned from books or schools, and it would be well understood that these men were usually middle age or over.


Last but not least, he had to be a man with a lot of nerve, who was willing to back his own judgment and that of his buyers and to face the risks involved in shipping, loading, and unloading (together with the possibility of various shipping diseases) that were a hazard of the business… It is easy to see that with money going out in both directions it took larger amounts of capital, accompanied by a good nerve and judgment, to be a successful central market dealer.

	

	


	
Jun

	
25

	

	

	
SurfI was surfing small waves on Wednesday, when time constraints made me catch that one last ride and take it all the way into the shore. Jumping off my board near the beach in one foot of water, my foot landed in a small hole and I ended up spraining it badly. It was sprained badly enough that I required a trip to the ER. Until then, my surf session was textbook perfect, a very mellow session, full of stoke, and without any mistakes. I didn't even make a mistake the way I got off my board, as it was the same way I've done it a thousand times before without any mishap. Analyzing my session that night brought the realization that when conditions are easy and the waves are small, I make more mistakes than normal. I can quantify this as 70% of my surfing injuries occur in easy surf. Last August, I nearly broke my neck in similar conditions, and that injury required surgery and a four month hiatus from the water. It seems that when the waves are small and easy, my confidence level goes up, accompanied by a little carelessness and reckless behavior. I've exhibited the same behavior in easy markets, where things are humming along smoothly, then out of nowhere, my account gets badly injured. This has happened to me time and time again when I find an easy pattern that works for weeks, I get complacent, then the market has a few day limit move against me. Looking back at my own account losses, it's not the volatile markets that get me, but the calm markets that hide a tsunami that washes me ashore and beats me up badly. My lesson to learn is the necessity to be on guard 100% of the time and treat all conditions, market or surf, like a big day at Sunset Beach. The big waves might beat me up a little, but it's the small ones that usually kill me. My grandfather told me that one can drown in a teacup, whether in surfing or the markets.

	

	


	
Jun

	
13

	

	

	
TeaI've been in New York a few weeks now, and find that I miss a few things that I took for granted in the South. Sweet tea is high on my list of things that I need and good BBQ is another necessity of life that hasn't been fulfilled lately. In fact, I've been boring my friends with my complaints about the lack of fine Southern cuisine and sweet tea. Last night, a couple of us decided to satisfy my sweet tea and BBQ jones all in one fell swoop and ended up at Daisy May's on 623 11th Ave at the corner of 46th. Looking at their web site and getting many recommendations from locals and readers of my blog, we went over there, and I have to tell you that I had great anticipation. Their menu looks like a BBQ junkie's nirvana, and their advertised 32 oz mason jar of sweet tea looked very promising. We took a taxi over to Daisy May's, waited in a long line and ordered 2 racks of sticky ribs, sides of cole slaw, mashed potatoes with red eye gravy, baked peaches, collard greens, mac and cheese, creamed spinach, an order of pulled pork, and of course, the 32 oz of sweet tea. The line moved quite fast, service was good, and we had our food in a manner of minutes. When our food arrived, we were profoundly disappointed with the ribs. Although quite meaty, they were not tender, quite dry, and felt like they had been held in a warming oven for hours. They also only gave 6 small ribs for a portion which was a minor disappointment. The sauce didn't adhere to the ribs very well, had no carmelization, and a pecular granular quality, which suggested that they were applied in a last minute rush job. The taste of the sauce was billed as being sweet, but we could not detect any real sweetness, however, the sauce tasted like a mouthful of wet spice I will give them kudos for the side dishes which were quite good, although the red eye gravy wasn't real red eye gravy because real red eye gravy has either coffee or Dr. Pepper as an ingredient, and this had neither.. The sweet tea was OK, but nothing spectacular, missing a key ingredient…..ice. They also put some kind of mint leaf for flavoring in the tea, which is something no self respecting Southerner would do.


The fact that Daisy May's was standing room only, suggests that a place like Woody's, Slim's, or Sonny's BBQ would make millions of dollars in Manhattan.


The quest for the best BBQ in Manhattan needs to continue, and further scientific study is needed.


As a sidebar, in the South, one can smell a good BBQ joint for blocks, and I've noticed no such smells in New York. Is excessive government environmental regulation responsible for the dearth of BBQ places in and around Manhattan.


To me, an ideal BBQ place would have the best BBQ, good sides, a variety of sauces, and a juke box playing country music non-stop.


Marion Dreyfus says:


Apologies on behalf of NYC, Jeff.


We foodies know Daisy May's is not that good, as no locals with foodie smarts go there. (The people in the queue must have been from the suburbs or tourists altogether hunting the same elusive nirvana you seek.)


Up in Harlem you can find BBQ (not sure about the sweet tea)–but I have been to only a very few of the bars there in the company of people in the know.


A Southern (but peripatetic) professor of the art of barbeque says:


Blue SmokeThe gentleman asks for good barbecue in NYC. It’s absurd to recommend Damon’s and Famous Dave’s [as Dailyspec contributor Steve Leslie did]. Damon’s has no presence in NYC and only a minor presence in the south. It is a bland midwestern place where people go to watch football on widescreen tvs. Famous Dave’s is the Olive Garden/Red Lobster of barbecue. They have a location now near Times Square, but even NYers are barbecue-savvy enough to know to stay away.


It’s also deeply offensive to dis both Woody’s and Sonny’s. Yes, they’re chains, but they have fantastic barbecue at ridiculously cheap prices. It’s a shame that the economy has forced Sonny’s to retrench and cut back on their number of locations. The dis also has no relevance because, again, the gentleman was asking about barbecue in NYC, where Sonny’s and Woody’s have no presence.


The places to go for BBQ in NYC are:


Blue Smoke – pricey and often crowded, maybe a little too glam for ‘cue, but very good (116 E 27th St)


Hill Country  (30 W 26th St)


Dinosaur – Out of the way, up in Harlem and near the West Side highway (646 W 131st St), but very good and very cheap


RUB  (”Righteous Urban Barbecue”) – in Chelsea (208 W 23d)

	

	


	
Jun

	
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Taxi DriverSome NYC taxi drivers work a predetermined number of hours each day; some work until they have made a predetermined amount of money and then quit for the day. Camerer et al.




I knew many new traders at the exchange who would set goals on the order of making $200 a day or whatever, and if they made that, they were finished for the day. Since their losing days were more frequent than their winning days, most did not last very long. The ones who did last tended to keep market hours, worked on pressing their winnings (if losing, learning in the process), and minimizing their losses. Absolute goals on the upside might be a bad thing for a trader to use. Keep the losses to a minimum, play a good defense, and the winners will take care of the losses. Since trading is not an exact science, why would someone set exact goals on the upside to meet?

	

	


	
Jun

	
2

	

	

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


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


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


James Lackey replies:


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


J.P Highland comments:


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


James Lackey adds:


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


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


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


Tim Melvin writes:


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


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


Scott Brooks comments:


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


Stefan Jovanovich writes:


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


Pitt T. Maner suggests:


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


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


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


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


Phil McDonnell writes:


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


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


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


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


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


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


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


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


Jeff Watson adds:


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


Stefan Jovanovich responds:


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


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


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


Phil McDonnell remarks:


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


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


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


Force = Mass * Acceleration


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


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


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


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


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


George Parkanyi comments:


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


Dean Davis writes:


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


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


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


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


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



Steve Leslie contributes:


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


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


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


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


Phil McDonnell admits:


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


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


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


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


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


Stephan Jovanovich replies:


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


Phil McDonnell suggests:


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


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


Charles Pennington demurs:


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


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


Stefan Jovanovich notes:


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

	

	


	
May

	
31

	

	

	
 In the bargaining process one side has the advantage. At some point that advantage switches to the other side, often, but not always, on consummation of the deal. Take a simple market purchase in which bargaining for price is involved. The customer in most sales has the advantage at the beginning since he has the money and the seller needs to sell a product with limited shelf life along with a number of other sellers of similar products. The buyer can negotiate a lower price during the typical three rounds of back and forth. The original offer or bid will set a range that slowly narrows until a deal is reached. The buyer has an advantage of being able to set the range, the initial offer, and he has the money. Once the money changes hands the seller instantly has the advantage, as the goods may not have been what they appeared. In money changing, sleights of hand can often make a deal less than it seemed. In legal matters, at times the first offer has the disadvantage. Now in a real estate market, buyers have the advantage.



In looking at the electronic markets, it is clear that one side has an advantage at times. The timing of this is important. In a dropping market, (define that as you may), bids clearly have the advantage. They have the money, they can submit lower bids. Their advantage lasts until the bottom tick or until the buy fills. The buyer then is at a short term disadvantage until the bottom tick at which point advantage goes to buyer holding in a rising market. At some point after the market turns, the buyers want in, and start competing with each other and raising bids. The buyer holding in as rising market has the best advantage to a point, i.e top tick. The seller, holding wanted goods, has the advantage and can keep raising the offers. As soon as the seller has sold his goods his advantage ends, unless he got top tick. If the seller waits too long and the bid disappears, his advantage disappears as well. The short seller has even less advantage since he owes his creditor as well.


Jeff Watson writes:


In the old days of open outcry, one could easily manipulate the bids and offers by goosing the market. If a buy order came into the market, (and one could detect whether it was a buy or sell order by looking at the movement of the broker's eyes) one could start bidding up a quarter in front of the broker, and perhaps get him to raise his bid where you could in turn sell it to him. One could do the same thing on the sell side. Although this was an effective method for extracting a little extra cash out of the market, it was fraught with danger, since you could easily get speared and end up being long or short a few contracts that you didn't want. Getting speared happened every day and was just the cost of doing business.


Newton Linchen replies:


I was reading the history of the Bovespa (brazilian main stock exchange), and I read that there was a guy who used to hit the market with a big buy or sell order and then hide in the toilet in order to not get filled! (He used to "mess up" this way until he was caught). Your description of reading the eyes of the broker in order to know whether it was a buy or sell order reminds me the tales of the Samurais, where they stood one in front of the other reading each other's breath. The strike always used to come when the opponent was finishing his exhale — the moment he was weaker.

	

	


	
May

	
17

	

	

	
 The bid/ask spread is another one of those hurdles that speculators must jump over in the quest for profitable trades. The spread is the instantaneous inside market, reflecting current market conditions, but it also is a product of unbridled free market forces. The bid/ask spread is a profit engine, for those in the right place at the right time, make no doubt about that. Many of the great fortunes on Wall Street were the result of always being able to buy at the bid, and sell at the offer.


In earlier times, people would pay for the privilege of an exchange membership in order to capture this spread. It must have been a worthwhile investment, as exchange membership prices have gone up on average for the last century. Now, in these more democratic, electronic times, it is harder to collect the spread on an all day, everyday basis. Much more confusion at the bid/ask point of the market reigns in this digital age. The mistress of deception likes to have her way with this spread. In today's supposedly open electronic age, where tyros see transparency in the markets, the same ages-old bluffing, misdirection, feints, probes, and stabs rule the inside market, as always. The same deceptive games played in the open outcry market have seamlessly morphed into the electronic markets, but with much more ruthless efficiency. Big players can see the open book, get the little ducks all lined up in a row, then slaughter them mercilessly. The inside market, the bid/ask spread, is tough to trade from anywhere on the outside, especially if you're a small player. Limit orders attempt to avoid the bid/ask spread, but one is really not avoiding the spread with a limit order when you think about it. Market orders give the other side of the trade an instantaneous profit, or return on their investment. No matter what you do, you're going to bump up against the spread, as it's unavoidable.


The bid/ask spread can represent the minimum amount of risk a player is going to assume, or it can cause a maximum amount of pain, it's your choice. Liquidity seems to rule the day in the bid/ask spread, with the more liquid instruments having narrow spreads, and some illiquid instruments (like pink sheet stocks) having up to a 10% spread. The spread can still change in liquid instruments, depending on the free market forces, fear, greed, deception, or any other emotion in nature's handbasket.


Emotions come into play when you are trying to get a trade down and don't get filled because the bid/ask spread won't allow it. Emotions can cause you to chase a market while the bid/ask spread seductively dangles a carrot in front of you. Emotions can cause you to avoid a good trade because of a perceived increase in risk when the spread is wider and you don't want to pay the cost, or assume any extra risk. I like to keep an eye on the spread, as I find that it gives many, many valuable market indicators, especially in thin markets and after-hours. However, like commission, vig, slippage, and mistakes, I accept the bid/ask spread as part of the cost of doing business.


Legacy Daily comments:


Some of the volatility seems to be created to soak up more money from the participants in the form of the spread but even with this money printing-press the houses got slammed in the past year. With their collective voice, maybe they would say that is their cost of doing business but I am yet to fully comprehend the societal impact of a bid/ask spread between a 1% deposit and a 5% loan. 


Phil McDonnell writes:


The bid/ask spread, volatility and liquidity are very much related concepts. When the spread is wide there is usually greater volatility. When volatility is greater the spreads widen. It is difficult to say which causes the other, rather it is safer to reason that they are manifestations of the same underlying phenomenon. In both cases that phenomenon may be liquidity or lack thereof.


The bid/ask spread and volatility are directly observable. But underlying liquidity is a hidden variable which cannot be directly observed. The St. Louis Fed has done some limited research looking for the underlying cause of volatility. In that work they found that consumer liquidity was highly correlated with market volatility. That offers a strong hint that liquidity, spreads and volatility may all be manifestations of the same thing.


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


George Parkanyi responds:


The spread is a market price in its own right –- the price of liquidity, and also of laying off risk. If you want to establish a full position immediately, or liquidate one, you pay the price for that convenience. If your small orders can piggyback the action of the big lines in a liquid market, then you don’t have to pay very much at all. If you’re the only guy walking up to the table, it can be pretty-much take it or leave it when things are thin. Market makers maintain a position in the security indefinitely. They can wait you out. Your interest is typically transitory, and you often want to get in quickly to act on an idea, or get out and move on to something else. You don’t have as intimate a relationship with that market. So the bid-ask is in effect a service, for which you pay a price.


I’ve stopped trading certain ETFs because they are too thin. The spread on the thinner ones was sometimes 10%, and even when I was getting a signal I couldn't always execute. This was disruptive, so now I’ve spent some additional effort weeding out thin markets where the spread is too costly, or makes me miss signals that would otherwise be profitable if I were trading a similar, more liquid security.


I’ve thought about and played with spreads a lot, and believe that with adequate capital, you can effectively simulate being a market-maker yourself by maintaining a “virtual” bid-offer. You simply put in limit orders to buy and sell at certain increments. The profitability of your “market-making” depends on how wide you make your “spread”, and how volatile the security. Too wide the spread and you might not get enough action to warrant the risk, too narrow and you may pick up a whole lot of inventory going the wrong way that you don’t want. Looking at the profitability of the specialist system, I believe you can make good money with a strategy like this in a market in which you have a reasonable grasp of the dynamics, although you won’t have the visibility of other limit orders — you’ll have to do it statistically.

	

	


	
May

	
2

	

	

	
 Einstein purportedly said that compound interest was the most powerful force in the universe. I challenge his statement and offer the hypothesis that the vig is the most powerful force in the universe, exceeding that of even free market forces because it's always there. Exerting a constant force on every trade, transaction, purchase, sale, or any human activity of any kind, the vig is always first in line to get paid.


The vig is a powerful enough force that both winners and losers pay, without even realizing it in many cases. The vig has clever ways of hiding and disguising itself but is always there. From the widening and narrowing bid/ask spreads in the market, to the 35 to 1 (or even more insidious 35 for 1) payout on a single number on the roulette wheel, the vig constantly grinds out and extracts it's percentage on every trade or activity. Like the steady beat of a metronome, the vig is just extracted, extracted, and extracted some more.


The general public has little awareness of the vig, but the vig takes a huge toll from the unsuspecting public. All of the great deals offered the public generally have a higher vig, although even the professionals must pay it. Games with longer odds such as trifecta pools, keno, and lotteries charge high vig, while short games and trades usually have much lower vig. Games that advertise that they're commission free usually charge the highest vig of all, such as those bucket shop Forex places that are sprouting up like mushrooms all over the place. The vig allows the beautiful Vegas casinos to exist, Churchill Downs to run it's card, and allows the temple at Wall and Broad to continue it's operation day and night.


I contend that although the electronic trading is supposed to increase liquidity and eliminate the vig charged by the locals, thus benefiting the public, the opposite occurs. The apparent percentage takeout of the vig might be reduced, but the increase in the velocity of trading, with a smaller vig collected each round trip, more than makes up the difference, sort of a Laffer Curve applied to the vig.


One can easily see this by looking at the volume and revenues at places like the CME where volume has exploded and the market cap of those high temples of finance has gone into the stratosphere. Those beautiful buildings have been built by the pennies per transaction takeout from everyone, every trade, and it all adds up. The apparent reduction of vig has allowed the online poker sites to flourish with advertised low rakes versus the brick and mortar clubs. People think they're getting a great deal with such a low rake but don't realize that they're playing at a rate six times faster than in real life and probably paying out more vig than they would in Vegas, Atlantic City, or the numerous underground clubs I used to frequent in my misspent youth.


Although the vig is a constant fixed percentage in sports betting, in the markets it is ever changing. With the advent of the electronic markets, I have a certain difficulty these days in calculating the amount of vig I pay every trade, although I have a general idea. I have some pretty sophisticated math that's supposed to help me figure out the vig I pay, but even that's just an approximation When I was a local, I knew how much vig I collected down to the quarter cent depending on what type of trade I was accepting. I collected a certain amount of vig buying a spread, selling a spread, trading with little locals, and fading paper from the public. I offered discounts in vig for size, and would give up a quarter cent if I knew I could bag a big order. I also knew how much vig I would have to pay and the percentage that might change if I were desperate enough. Even though I collected vig every day, I also knew how precisely much vig I would have to fork over at the end of the day to play in the pit, because everybody has to pay tribute to someone. Since every player pays vig in trading, the money has a way of working it's way up, to some unknown repository somewhere. All of this paid tribute and upward movement of money feels like it has a part in a certain Francis Ford Coppola movie that was so popular in the 1970's.


Free market forces do affect vig, widening and narrowing the percentage, but while free market forces might disappear for awhile due to governmental regulations and laws, the vig will always be around. Vig shows up in many other clever disguises such as lower yields on fixed investments, taxes, assessments, points, fees, payoffs, and graft. Vig has to be calculated into every transaction, and must be figured into every apparent overlay one might spot.


My late, great, grandfather used to cite the old axiom that "There's two kinds of people in this world, those who pay interest and those who collect interest." While he was spot on with reciting that observation, he sadly neglected to tell me that everyone has to pay vig, a hard lesson that I had to learn for myself.


Steve Ellison writes:


A traditional recipe for business success: reduce the price of a product and thereby generate much greater demand and higher profits.


	

	


	
Apr

	
25

	

	

	
On the topic of the role of individuals in history, I read a pretty interesting book called Ubiquity recently (reviewed on my blog ) that addresses this issue as part of its investigation into critical systems (earthquakes, forest fires, markets, etc). Towards the end, the author compares the roles of individuals in history to the grains of sand that cause mini avalanches on a sand pile:


'… the largest avalanches are far and away the most influential in terms of the effects they have on the pile. … how should some historian explain these movements?



Our historian will be sorely tempted to identify certain individual grains as having been massively influential. After all, colleagues will point out that in 1942, an individual grain of immense courage named Granular Columbus triggered an avalanche that ultimately carried grains all the way from the East to the West, and so altered the face of the world and its future. … For each great event, they can identify some extraordinary grain that touched it off, and perhaps a few others that kept it going at crucial stages. And these grains, they might conclude, are the real agents of history.


Despite being tempted to agree, our historian (a subtle observer of individual character) will have noticed that in the sand world every grain is identical to every other, so there really can be no question of any one being a Great Grain. … By understanding that the pile is always on the edge of radical change, our historian comes to realise that there are always places in the pile at which the falling of a single grain can trigger world-changing effects. These grains are only special, however, because they happened to fall in the right place at the right time. In a critical world, there are necessarily a few great roles and some grains by necessity fall into them.


Might the same be true of human history? There is no denying that some people, by virtue of their personality or intelligence, are more influential than others. And yet it is at least a theoretical possibility that our world exists in something very much like a critical state. In such a world, even if human being were identical in their abilities, a few would nevertheless find themselves in situations in which their ordinary actions would have truly staggering consequences. They might not even be aware of it, as the potential for their actions to propagate might only become apparent as history unfolded. Such individuals might come to be known as great men or great women, as creators of vast social movements of tremendous import. Many of them might indeed be exceptional. But this need not imply that their greatness accounts for the greatness of the events they sparked off.


Just as it is almost irresistibly tempting to seek great causes behind the great earthquakes or the mass extinctions, it is also tempting to see great persons behind the great events in history. But the sand-pile historian comes down firmly against the ‘great grain’ theory of history … Our historian might agree with Georg Wilhel Friedrich Hegel, who concluded that:


‘The great man of the age is one who can out into words the will of his age, tell his age what its will is, and accomplish it. What he does is the heart and essence of his age; he actualises his age.’




Rudolf Hauser comments:


For a fire to start one needs something that will burn and oxygen. Without either there will be no fire. With them there will still not be a fire without a spark, or more precisely enough heat to start the process. It is the same with history. No individual can change the course of history if the necessary conditions are not present. Sometimes a fire is more difficult to start and it takes greater skill on the part of someone trying to light it than when conditions are more favorable. The same with history. Sometimes a very unique person can make changes happen if conditions are only slightly favorable to such changes. At other times, conditions are so clear that almost anyone can push history in a certain direction. In short, individuals do matter in the direction history takes but more will be likely to push history in a particular direction at times so that the individual who does so matters little and at other times it takes a unique person to do so. Even if change seems inevitable, the exact direction events take can depend on individuals.


Jeff Watson writes:


Sometimes, wrong or false ideas get put into the mainstream and become accepted as fact. Consider the old axiom that fire always needs oxygen or an oxidizer to occur. Nothing could be further from the truth. There are examples of fire occurring in the absence of oxygen, such as lithium burning in the presence of a pure nitrogen atmosphere at high temperatures, forming lithium nitride. I consider this reaction to be fire as there's a visible flame, but some might dispute the fact that it is really a fire because of the lack of an oxygen component. Since it is ingrained in our heads from an early age that combustion requires four components (oxygen, fuel, heat, and chemical interaction to start a chain reaction), many will scratch their heads with disbelief at the idea of fire without oxygen. People who scoffed at the truths of Copernicus, Galileo Galilei, and Newton and were found to be proven wrong. Some market participants hold similar wrong ideas that get put into the mainstream. The benefit of the economic policies promulgated by John Maynard Keynes comes to mind. It will take time to get the mainstream to prove these ideas wrong, much like it took generations for the ideas of Copernicus to become accepted.


Stefan Jovanovich responds:


Riz Din mentioned Columbus. He became important in late 19th century American eyes because Italian-Americans (but, interestingly, not the descendants of his bosses, the Spanish) celebrated his discovery of the West Indies as a holiday. Before then he was no more important a figure than Vespucci and far, far less important to Americans own view of themselves than the Pilgrims. To his contemporaries the Genoese sea captain was simply one of the literally hundreds of explorers who were doing VC start-ups - looking for ways to break the Ottoman-Venetian monopoly on the spice and silk trade. When other explorers found what Columbus did not - gold and then silver - the focus of Europeans shifted somewhat from East to West; but it was not really until the sugar boom (the one commodity that could not be profitably grown in Asia) that our New World became as important as the Indies. And, even then, North America was very, very unimportant. It is always helpful (and properly humbling to us Americans who think we are truly the center of everything) to remember that after what we Inglese call the French and Indian War, the French peace treaty negotiators thought that keeping Guadalupe was more important than retaining Canada and for half a century thereafter the Brits thought they had gotten the worse part of the deal.


That is the most plausible story of what the Europeans did. But that, or any other story of how Europeans dealt with America, cannot tell us anything about the relative causal importance of individuals. The story is not an equation or an scientific test; there is no empirical answer. After enjoying and wasting half a century reading millions of words of written "history" and dragging my dear wife to old buildings, museums, and shrines, I have come to the same conclusion Hayek came to about "macroeconomics". The idea of "history" is an interesting construct, but it is an aggregationist illusion. Human action does not have a course or a moral or a lesson or a burning point; it is not a river, a sermon, a lecture or a fire. A good history is a plausible story about the past that is honest about the known records, is properly skeptical about our human capacity to tell stories that say "hooray for our side", and views the events from all sides. Not surprisingly, for every good history there are a hundred bad ones. What the bad ones all have in common is the same thing that Hayek found so dispiriting about Keynes as much as he enjoyed and respected the man: the ease with which inconvenient facts can be discarded in favor of a causal theory.


The book Guns, Germs and Steel is the most notorious recent example of really rotten history, but just about everything on PBS will do. But, to be fair, if you mute the narrations and turn off the closed captioning, the photographs have considerable interest. Or, they did, until documentaries decided to become awful dramas of "reenactment". If you want examples of the other kind of history, J.S. Holliday's history of the California gold rush, The World Rushed In, remains a classic; and his later work, Rush for Riches, is an even better story.


	

	


	
Apr

	
15

	

	

	
 Mediocre BBQ in the South is usually better than the best BBQ in other areas of the country. Today, I finally went to a BBQ place I've been meaning to go to for years. Located across from the Venice, FL Regional Hospital, Gold Rush BBQ  has a chintzy Western/gold prospector motif, but the name of the place and the decor are the only thing that would remind one of the West. The food is purely, to put it mildly, Southern all the way. Hitting the restaurant at lunch time, I had to stand in line to wait for a table. Crowds at BBQ places are usually a good sign. Finally seated, the waitress brought me a huge glass of sweet tea, and took my order. I ordered a chopped pork sandwich covered with slaw, served with fries and a cucumber salad on the side. I was amazed at the size of the sandwich, which was more than enough to satisfy my BBQ craving. I don't usually eat pulled or chopped pork preferring sliced, but they only offered it chopped, so that's what I ordered. The slaw offered a nice counterbalance in flavors, toning down the intensity that pulled pork usually has, and provided a little texture to the perfectly made sandwich. The sauce was homemade, and had a bit of zip to it, lacking the sweetness that I usually prefer. More Carolina in style, the sauce was still an excellent accompaniment to the sandwich and was delicious. The fries deserve special note, as they were perfectly made and tasted great. I decided to try the cucumber salad, a bargain at only $0.69. It was an salad made with cucumber, tomato, onion, celery, dressing, and celery salt. It was, no hyperbole intended, the best cucumber salad I ever tasted in my life. It was a very elegant little salad, lacking any complexity, yet a perfect accompaniment to the rest of the food. The food was served in metal pans, and the restaurant provided real gold miners pans for the discarded bones. I thought the choice of plates was a bit over the top, but it's the food that's important, not the plates. I noticed other diners eating the ribs, and while they looked good, the portions were not as large as I would have liked. Snooping on my fellow customers, it was apparent that everyone was enjoying the food immensely. The sandwich portion was large enough that I decided to skip my usual pecan pie for dessert, although theirs looked like a world class pie. The ambiance of the Gold Rush was only lacking because there was no good country music playing in the background. Somehow, listening to Toby Keith or Garth Brooks while pigging out enhances the Southern BBQ experience, or so I have noticed. If one has high blood pressure, cholesterol problems, or obesity, it might be best to avoid this place and eat somewhere else. Now that I've had my BBQ fix, I can go back to my usual healthy diet.


Clive Burlin reminds us:


On the subject of slaw, etc: this recipe from J.T., circa 2004 is definitely worth concocting at home.


Ingredients


1 head cabbage, grated fine


1/2 cup fine chop dill pickles


2 cups mayonnaise


1 teaspoon sugar


1 small onion, chopped fine


1 teaspoon pepper


Directions


Grate cabbage and let it sit in strainer about 20 minutes. Use paper towel to dry off excess moisture. Transfer cabbage to a bowl. Stir in remaining ingredients and refrigerate about 1 hour before serving. To those that wish to spice it up sprinkle Old Bay Seasoning when finished, you can also sprinkle Old Bay on those ears of corn when buttered up as well as on those Bloody Mary's, hell just put Old Bay on everything.

	

	


	
Apr

	
9

	

	

	
 A very good exercise for increasing one's mental capabilities is to learn how to read people accurately. Reading people and sizing them up is essential in every walk of life, and one who can make a good read has a built in edge in everything. I like to do a lot of people watching, constantly making a read, and have found the exercise to be very stimulating and illuminating. One starts a read by looking at a person's outward appearance, dress, the condition of their shoes, hands, and what kind of haircut they have.


Moving along, one notices things like posture, gestures, and facial expressions. Do they have a smile, a twinkle in their eye, or do they have dour personalities? Do they speak softly, or loud? Are they well spoken or not? What kind of affectations do they have? I like to observe exactly what people are doing, and the body motions they use, comparing the data to past observations of other people.


People readers get an added bonus is when a person is interacting with another, or in a group. Interactions between two or more people can give volumes of information regarding things like temper, character, and and general mental state. Subtle, nonverbal clues can let you know if the person is a dominant person or a follower, information which can prove to be valuable.


A good reader can tell you the socioeconomic status of the man by sight, can tell you if he has kids, and get a good estimate of what his spouse is like. An experienced reader can make a good estimate of one's income, marital status, level of either happiness or desperation.


The best place to start learning how to make a read is by going to a mall and watching the men sitting by while waiting for their wives who are shopping Practice on men at the mall allows you to size them up, and then check the accuracy of your observations when the wife shows up. This allows one to hone their skills in reading people.


I attempt to read people as a mental exercise, everywhere I go from a restaurant to an airport. Recently, I was at a very nice restaurant and startled my companion with the accuracy of my reads of the various patrons. I learned to read people from too many hours at the poker tables and the wheat pit. In today's electronic markets, reading people might not be as important, but the same thought process and mind set is a very valuable tool in the arsenal of the speculator. Incidentally, some of the best readers are car salesmen, and people in retail.


Reading skills can be learned, although it takes great self discipline and an open mind. Beginning readers will get things wrong but as their skill level increases, their accuracy will approach 80% or more. Learning to read people is a very fun exercise, and will develop critical thinking skills that will ennoble your mind.


Steve Ellison writes:


 Paul Ekman has studied the movements of every facial muscle and what thoughts these movements convey…here he is as described by Malcolm Gladwell in a wonderful article.




Ekman recalls the first time he saw Bill Clinton, during the 1992 Democratic primaries. "I was watching his facial expressions, and I said to my wife, 'This is Peck's Bad Boy,' " Ekman says. "This is a guy who wants to be caught with his hand in the cookie jar, and have us love him for it anyway. There was this expression that's one of his favorites. It's that hand-in-the-cookie-jar, love-me-Mommy-because-I'm-a-rascal look. It's A.U. twelve, fifteen, seventeen, and twenty-four, with an eye roll." Ekman paused, then reconstructed that particular sequence of expressions on his face. He contracted his zygomatic major, A.U. twelve, in a classic smile, then tugged the corners of his lips down with his triangularis, A.U. fifteen. He flexed the mentalis, A.U. seventeen, which raises the chin, slightly pressed his lips together in A.U. twenty-four, and finally rolled his eyes–and it was as if Slick Willie himself were suddenly in the room. 




Jordan Low comments:


 It is interesting how we can get different views over different topics from books. Almost similar to how movies come in pairs — Deep Impact and Armageddon, for example. In Gladwell's book The Tipping Point, the NYC crime rate decrease from a host of factors that tipped the scale contrasts with Freakonomics explanation of legalization of abortion lagged 16 or so years. In What Every Body Is Saying by Navarro, he claims that facial movements are the least accurate. The most accurate body part is the feet and as we move up, the conscious brain can fake responses.


Sushil Kedia adds:


 Desmond Morris. I urge everyone interested in the subject of watching, understanding non verbal behavior, deception & an endless array of related subjects to search this name on google. He is a maestro at this social science.


For over two decades I have been searching to obtain his lost title Ape Watching. One of my most revered teachers during my school days had shown me his copy and it was etched deeply in my mind. Resplendent pictures of apes capturing tell-tale nuances. Each picture therein is a unique shade of primal emotions. Just a glimpse through this tome, a flip across the hundreds of pictures taken by Morris was breathtaking. Based on a twenty year old memory, I reccomend you grab howsoever old and tattered a copy of this particular title if you see it. Amazon, google books, many other usual hunting pots in cyberia for books do not even mention it. Wonder if someone who has a serious interest in behavior studies has ensured that this title just vanishes. His numerous other works are fascinating as well, but Ape Watching would stand above any other book on any other subject I have ever seen. 

	

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