At the gym yesterday, I was struck in the parking lot by how many Teslas were there. They seemed to be all over the lot. In Silicon Valley, having a Tesla is no longer much of a status symbol. There are simply too many of them. I suppose a Ferrari or a Maybach counts for something in the status wars seemingly omnipresent out here. But you don't see many of them (and fortunately, even the Ferraris have reasonable colors—no pink ones like I saw in San Diego—maybe she was a Mary Kay salesperson). On the Stanford University lots near the engineering section of campus, the proclivity of Porsche Carreras is hard not to notice.

Not many Jags, though. At one time, Jaguar was among the leaders in the sports car market. The premium sports car market. Jags could (and did) win at Le Mans and other racing venues (D-type had that honor). The problem with Jags was that in order to buy one, you needed to be prepared to pay for the mechanic who would live in your home to keep the car going. Even so, Jaguar, to its credit, made some gorgeous cars. Some that were works of art. Many in the 1960s lusted for the Aston Martin, especially after Goldfinger was released.

My favorite, though, is the Jaguar XKE, sometimes referred to as the E-class. Simply exquisite. I contend that there has never been a finer car built, from an appearance perspective, than the Series 2 XKE, which was more drivable than the Series 1. The Series 3 is the one I like least of all (it strikes me as overdeveloped)l but I'd take it in an instant with the right opportunity.

I don't know which version of the XKE he was looking at when he said it, but Ferrari (as in Mr. Ferrari) thought it the most beautiful car ever built. The Roadster XKE is in the permanent collection of the Museum of Modern Art. It's not a car easily found these days—there were fewer than 75K ever manufactured. At one time, I had a dream of buying one that had seen better days and rehabbing it. As it turns out, that concept and Jaguars, at least for the XKE, do not mix.

As I write this, I'm hearing one of my neighbors barreling down the street in his Lamborghini, the automobile version of a Harley. At least everyone that I've seen is loud. The cop who's now chasing him down the road wouldn't have had a chance at catching up on an interstate, but here in the neighborhood, there's likely to be a ticket issued and accepted.

As for the Teslas, I'm still waiting for the company to post a profit. Any damned fool can produce something at a loss, especially with a government subsidiary.

There are those who enjoy Lamborghinis, though I'm not one of them. But the XKE? Now there was a car.



 My friend Roger Arnold, among others, has been writing about the approaching economic cliff presented by the automation of our society. It's not hard to see that in maybe 5 years and surely 10, jobs in warehouses like Amazon's will be but a memory. In 20 years, much of what we now call "jobs in the economy" will likely become "machines in the economy."

The link describes the tensions the economic transition in China is unleashing, and I have to wonder if the US isn't going to live something similar (tension wise). We're already seeking what is arguably one of the most contested presidential primary elections in decades (it's now April and there's no clue who will be the nominees; there may be some bets, but in terms of anything with certainty? Nada—not this year) and I suggest that some of that contestation is the result of tensions already forming.

Whenever there are losers (such as with jobs that are just disappearing for eternity), there are winners, too. Who will be the winners over the next 20 years as the US enters the I Robot era?

"China is trying to make a huge industrial shift that could have disastrous consequences"



 I watched a beautiful bunt sacrifice attempt last night at the local high school baseball field. A runner on first, the pitch, with the batter already squared with bat set to bunt, as the entire field moves poetically. The catcher rocked forward on his heels, the first and third basemen raced toward the batter, the second baseman covered first, center fielder moved in to cover second base, and the fastball sped toward the bat. The ball popped up to the first baseman who caught it on the fly ten feet from home plate, he wheeled and lobbed the ball to the second baseman covering first base, and the runner was out too, as the umpire in black jerked his thumb toward the stars and screamed, 'Double play!' The sacrifice had failed, but it often succeeds.

The bunt in baseball is a special type of offensive technique. The goal is to tap the ball into fair territory to advance the base runner in a sacrifice of the batter. It requires great physical dexterity, concentration, and a knowledge of the fielders' positions, and foresight of the pitcher's most likely pitches. One of the sport's most famous early figures, Dickey Pierce, used this 'tricky hit' to effect as the rules permitted it to roll foul and still be counted as a hit. The bunt did not become common until the 1880s, and it has been accepted as a baseball strategy, with periodic waves of acceptance and dominance, to this day. During the 'dead ball' era of the 1960s, bunting was an important offensive weapon. Conversely, and now in the 'fast ball' and 'money ball' era of staying ahead of the economic curve of the fan in the stands who demand big hits, the bunt is seldom seen. Nevertheless,the role of the sacrifice bunt in baseball strategy is one of the daily discussions for baseball fans.

It is an exciting moment in the game. It reminds me of chess where every move is as strategic, making chess more exciting than baseball with at least as much sweat. Some situations in the board game that parallel the bunt are any gambit, pin into a weak position, zugzwang, or piece sacrifice to lose the position but win the game.

Likewise,with upright humans, there are various sacrifices that parallel the bunt. In a true sacrifice, the officer will have to play with less soldiers to capture the objective. In a sham sacrifice, a fake flank attack gains leverage in a territory. In speculative sacrifices, the commander risks losing something that he believes will soon regain material of the same or greater value.

In survival, after many years of baseball and chess, but none at war, the bunt is a repeated metaphor. To live, you must be able to bunt, over and over. For example, in hoboing you board a 'dog' slow train, and hop off as it pulls away to climb aboard a 'hotshot' to evade the bull. In the Amazon jungle, you raise your arms on greeting a wild mammal to feign a taller profile, while risking balance and putting your hands in reach of an anaconda. In the mountains, you risk crossing a snowy pass to reach a village before starving. In the desert, you walk at night to avoid the heat at the risk of stepping on snakes. On skid row, you may 'chuck a dummy' by faking a fainting fit in order to get a sympathy coin. In a dark alley, you take one on the chest to put on on his chin.

Learn the strategy of the bunt and you're almost home in baseball, into the mid-game of a good chess match, gotten the upper hand in a fight, and are half way out of the woods in survival.

David Lillienfeld writes:

With all due respect, I cite Earl Weaver: All that you do with a bunt is give up an out. You've only got three in an inning. Why give one up? Some of the time (I've lost track of the stats on it), the sacrifice is a twofer, as in a double play.

As noted, bunts require much dexterity, they also require lots of speed if one is bunting for a base hit (I think even Weaver was supportive of such) if the infield was back far enough. Rod Carew was perhaps the most able bunter I've seen who could/would bunt for a hit. Ricky Henderson was pretty good it, too, though showing less control the bat than Carew (admittedly subjective assessment).

Pitching, three run homers, and great defense was the Weaver prescription. There were no sacrifice bunts in that formula. (Weaver wasn't a great lover of the sacrifice fly, either, but he figured the batter had had a shot at a hit and at least the runner(s) could advance, maybe even score (if on 3rd).)

If sacrifice bunting ever becomes part of the Orioles game plans at Camden Yards, don't be surprised if there's a rumble in the ground by home plate; the ghost of Weaver will have been awakened.



 Developing diagnostic tests for Alzheimer's hasn't been quite the burial grounds that developing therapeutics for the disease has been. That's mostly because there has been even less progress on basic science underlying diagnostic testing than that on the therapeutic one.

I don't know if much of the electorate appreciates that while there is much work taking place on Alzheimer's disease, particularly therapeutics, a significant portion of that work is based around one hypothesis for the etiology of the disease—amyloid. For 30 years, advocates of the amyloid hypothesis have pushed for research funding (perhaps more than 30, I know just the past 30) into that particularly line of thought. Other areas haven't received quite as much funding even as the amyloid hypothesis work hasn't been able to show much progress on the therapeutic front. Perhaps that will change if there is a diagnostic test for an earlier stage of disease when more neuronal pathways presumably remain intact.

A similar focus was made in the national War on Cancer. The research hypothesis then was viruses, and because the Nixon and Ford Administrations were convinced that scientists outside the government (and even most of those in it) were people who were wasting precious government funds proceeding in an organized manner, those administrations issued contracts for research mostly into a viral etiology. Perhaps there is a viral etiology to cancer; the research conducted certainly didn't find it, and the bureaucrats in the White House who directed the NCI to contract this research at academic medical centers and contract research organizations (think RAND, Batelle, and so on) were insistent that this be the singular focus of the NCI. (BTW, funding to develop stealth technology was originally declined by the White House because it was too "fanciful"—the term used by the analysts in the Office of Management and Budget and work on the Internet (then known as the Arpanet) almost met the same fate except that it was sheltered in the ARPA budget; the assertion by the White House then was that if the ARPAnet really had any value, it would developed by private industry, not the government.)

Not much progress was made on either the etiological or therapeutic fronts (in contrast to heart disease, where the research program of the government, spearheaded by the NIH) rested on a variety of etiological and treatment hypotheses) with cancer. Indeed, for thirty years, the major achievements of the War on Cancer was the reduction in the incidence of lung cancer. That result was achieved principally through smoking cessation programs (the culmination of research at the NSF as well as the NIH—some from the heart institute, some the cancer one), not the contracted basic science work. With lung cancer incidence in decline, the NCI decided to roll the dice with other prevention programs, principally diet and supplements. The basis for such an approach was not nearly as developed as for smoking cessation (for which the epidemiologic base was solid), and it has not been nearly as productive.

The knowledge on viruses was useful, just not for cancer. Peter Ducker notes that this research was still valuable for discerning that viruses were not the etiological approach to be further pursued (at least not then) and that the information gleaned in the course of that research was nearly as valuable as if the research had been successful. The response to the AIDS epidemic, when research funds were finally made available, was greatly facilitated by having that knowledge base about viral etiologies of disease available. And in that respect, it's probably one of the reasons AZT, originally developed as a treatment for cancer before work with it was discontinued, found its way into the treatment regimens for the disease. It took some time to develop a sufficient basic science basis for the develop therapeutics for HIV infection, and we still lack a cure (and for all the hoopla about how those with HIV live almost as long as those without it, the reality is that resistance is developing to the available medications so the need to develop new medicines is still present).

One of the lessons of the success of the smoking cessation programs compared with the other approaches to cancer was that the basic science work needed for those programs—from epidemiology and behavioral science—was established by the time the cessation programs were developed. (The same can be said for high blood pressure control and stroke.)

The problem with the moon shot approach to biomedical research is two-fold: 1. It needs to be coordinated by the government (and as NCI demonstrated, picking the winners in such research isn't something the government does well—better to take the ideas from the medical community and pursue the leads meeting with increasing success) and 2. (as Peter Drucker has noted on many cases) in the absence of an established research base, such efforts are doomed to failure. For both Manhattan Project and Apollo, the scientific base was established before the "moon shot programs" developed.

Don't be surprised if the current moon shot approach to cancer meets with the same fate as the viral etiology one.

As for Alzheimer's, maybe this diagnostic test will mark the beginning of a different approach to the etiology and treatment of the disease.



 There's been much hand-wringing since the Great Recession to explain not only why the US economy hasn't grown faster but why the global economy is in such a morose state. Explanations include the overhang of personal/government/corporate (take your pick) debt, demography/aging of the population, central bank interference, among others.

Carder and I had a discussion today about this subject. Somehow, the topic of 9/11 came up, and he noted that we've spent a small fortune in responding to the security issues presented by that event. There have now been a number of other terrorist attacks in Europe, and I expect that there has been a considerable amount of money spent in shoring up security there, too.

I therefore wonder if the two aren't connected. First, the amount that was spent on security infrastructure and operations was not available for investment or any other economic use. Second, that the tightening/less open state of Western society in the hopes of creating a sense of security (in the pursuit of zero incidents) has created enough impediments to wealth creation in itself that the performance of Western economies has been rendered sluggish. To rephrase, that the West has, in its search for security, reduced the openness of the society that created the wealth which placed a target on the West in the first place.

If that hypothesis were correct, then the terrorists will have succeeded in at least some of their aims without having exploded yet another bomb.

I'm sure there are those who disagree with that hypothesis, likely including many on this list. I put the idea out here for discussion.

Nigel Davies writes: 

Yes, as Nimzovitsch pointed out, the threat is stronger than the execution. Much of chess mastery consists of the correct gauging of 'threats', defending by minimal means and keeping every part of your position equally weak (Lasker). The problem is that in a democracy the clamor for resources will not be based on this kind of logic but rather than influence over the electorate per unit cost.

Peter Grieve writes: 

Excellent point. Imagine a chess game where millions of people vote to decide the next move, and subgroups receive a different share of the winnings depending on which pieces are left on the board at the end. Laskerian principles might be hard to maintain in this case.

Not a perfect analogy, of course, but I think it hits Nigel's idea.



 We've had many discussions about bitcoin over the last couple of years. It seems the Swiss like to focus on banknotes, not bitcoin. For some countries, such notes provide a means of artistic expression, and in others a way of providing a history class. The subjects of banknotes may also reflect the values of the country itself.

Stock certificates,when they were still used, provided a similar venue for artistic expression. Then, of course, there were cultural phenomena at work. Sometimes a Bar Mitzvah boy would get a share of Apple, given with the physical stock certificate. At other times, it might be a share of Playboy.

Some collect mint quality banknotes as a reflection of the country's artistry and values. Like antique maps, some frame such bills and use them for wall decoration.

The same is true for stock certificates. My own collection is based around Israeli companies, with the underlying contention that in those certificates lay the economic story of the state.

I wonder if the same holds true for banknotes. Somehow, I don't think so, but I'm sure there are those on the list with better knowledge of the subject than I do.

"Cash is Still King in Switzerland"



 Tomorrow, at 3:05 in the afternoon (Eastern Time), one of those moments of celestial perfection will transpire, a moment when all seems possible and nothing has been tarnished by the dropping of the grains in the hourglass, the passage of time. Boys of the deep South will understand that moment as the baseball equivalent of the moment before Pickett's Charge. At that moment, in Camden Yards, arguably the king of all ballparks and certainly the grandad of the current retro design parks, Chris Tillman will reach back in his windup to throw the hardest fastball he can as the 2016 season opens—at least the Orioles' 2016 season.

For golf fans, the green jacket of the Master's champion will find a new bearer for the year, and the US and British Opens loom large. For basketball fans, the Final Four beckon. For ice hockey fans, well, I don't know, I've never followed ice hockey.

The unfolding disaster that is the Rio games will soon come into view. But for the moment at least, one's attention is on baseball, on the opening of the season, and one's vision turns to Orioles Park at Camden Yards. Or Camden Yards for the cognoscenti. Or just the Yards for Baltimoreans.

Camden Yards has not yet ascended into the annals of baseball as sacred ground the way the Old Gray Lady of 33rd Street, Memorial Stadium, site of 1966 World Series with the dominance of the Orioles over the Dodgers, site of the last game Sandy Koufax ever pitched, the site of the "Here" pennant, the site of Brooksie, Frank, Pancakes and Cueller, the Kingdom of Earl and much of Cal Ripken's streak, no tomato plants by which one could time when the club would start to perform, never mind the Colts and all that went with that tradition before the Indianapolis theft (of the name, not the team—starting with the shape of the stadium from above—has. Like other storied venues, like Ebbet's Field, the grandeur that was once there has been reduced to a plaque that future generations can walk by with little understanding conveyed of the significance of the site that they are standing by.

The Yards with Boog's barbecue. With the 6:30 minyans. With the kosher (glatt this year?) hot dogs. All are the sentinels of an approaching game that evening.

Tillman will rear back and let loose a fastball because throughout his career, when Tillman starts off a batter with a breaking pitching ("curve ball" is so passe´—particularly since kids in Little League are so determined to throw curve balls that it screws up their arms and leaves the Show with little more than a 5 man rotation and a bunch of weak arms (compared to the ear before the 1980s)), there's a 4-fold greater chance of the hitter assuring that the ball becomes the new acquisition of some child in the bleachers than if Tillman throw some heat. There may be a shift, though why baseball refuses to follow the example of the St Louis Cards I do not know. Regardless, for that one moment after the ump (hopefully with glasses and a certificate attesting to his visual prowess) screams, "Play ball!" and Tillman winds up and throws, for that one moment as the pitch sails towards home plate, when the standards show all teams tied for first place, for that moment the world sits in an state of quiet perfection, with the ills of seasons past banished and the promise of 162 games going into the win column unfolding, for that one moment peace is on earth and there is goodwill towards all.

Then the ball hits hard into the catcher's mitt. Thump! And the call will be heard throughout the ballpark, "Strike 1!" as the ump, in a demonstration of his visual skills, holds up his right arm with the index finger extended.

The 2016 season will have begun.

How will the Orioles fare this year? Probably not at the level the Card will. Scott, you will have a much easier season, I am sure.

For Baltimore fans, there will be much gnashing of the teeth, wonderment that Danny Duquette decided that paying a pitcher like Ubando Jimenez $4+ million to learn how to pitch—again, questioning of why Duquette did so little to address the seemingly perpetual weakness of starting pitching (and this from the club which 45 years ago had 4 20 game winners (only one of whom, Jimmy Palmer, made it to the HoF), and hoping that for once, the pitching and defense are actually in sync with the hitting. Some questions remain: Will Manny Machado make it through the season without an injury—if so, he starts to look like a worthy successor to Brooksie and Cal; will Davis hit now that he's no longer looking at free agency; will the bullpen perform—particularly Zach Britton; and will Kevin Gaussman finally show that his future isn't always in the future. We'll know soon enough. six months hence. 162 games, to be exact.

It is a time when all is possible, and a young man's fancy turns from the cold snows of winter to the hummingbirds of spring. And the knock of the bat hitting the ball.

Play ball!



 Zika presents a clear and present danger to the US, both medically and economically. Think not? Remember the economic impact of SARS a little more than a decade ago? Those empty planes and hotels?

Then there are the costs associated with the births. And the neurological consequences (which seem to include GBS).

Will there definitely be an outbreak? No. But the setting for there to be is definitely there.

And the economic hit? You can't just write it off. Hopefully, it will be a lot better than the worst case scenario.



 There are many whom one might point to and declare that they are an architect of our society, or that the world would likely be dramatically different had they not strode upon the face of the Earth. Some might go so far as to suggest that the impact of someone is so great that the current world is practically impossible to conjure in the absence of that individual. Andrew Carnegie, Alfred P Sloan, Steve Jobs, and Bill Gates are all in that category.

So is Andrew Grove. Or I should say, was Andrew Grove, who passed early in the day:

I wrote recently about Grove’s place among the Intel Trinity. Unlike his peers at Intel (Moore and Noyce), Grove was directly involved in the creation of Wintel and all that it encompassed. Whether one thinks in terms of PCs, the internet, or the electronic controllers in automobiles (among other places), one sees Grove’s handiwork. It would be easy to wax poetically about the man and his accomplishments. He was not only a phenomenal CEO who shone in an age of phenomenal CEOs, he was a phenomenal teacher, both at Intel and at Stanford University. His course in the Graduate School of Business was easily the course most in-demand on the entire campus. At one point, there was a waiting list of GBS students hoping to take the course, never mind from disparate parts of the university.

A refugee (escapee might be a better description) from communist Hungary, Grove might have taken a stance on the political right. He did not, and was among those who championed the Democratic Party in one of the few geographical areas in California in which the GOP was even somewhat competitive. He was a tireless support of the Silicon Valley Jewish community and worked furtively to develop strong ties between SV and Israel. It was no accident that Israel became not only one of Intel’s research centers but also a major microprocessor manufacturing center—and that faith was returned when the plant remained open during numerous attacks on Israel over the years, with barely a hiccup in production.

There is the oft-uttered phrase “We shall not see his likes again in our lifetime.” It seems likely to apply to Dr. Grove. I hope that it does not, however. The world could use many Andy Groves. He will be missed.



The Intel Trinity
by Michael S. Malone

First, this is an outstandingly written book, the post-war industrial biography of the Santa Clara Valley in California. It reads like a novel: Isaac Asimov meets Tom Clancy in the ease of reading. And the story presented is a compelling one. In short, it was an enjoyable read. Let’s dig a little deeper.

One of my majors in college was electrical engineering/computer science. It’s a bygone era. No one remembers much now about Unix, Version 6 (the first version that allowed the computer, typically a PDP-8 or -11) to perform such that one didn’t think there was really a washing machine trapped inside the cabinet of blinking lights. I doubt that many recall when MSI stood for middle scale integration or LSI for large scale integration, indicative of the density of transistors on the chip. Ask an engineering student about an 8080 and you’re as likely to be told that that’s a low starting monthly salary for her to receive upon hiring just after graduation. That the 8080 (and arguably the 8008) is the origin of the modern PC is probably something about which she has no idea.

[This review continues here.]



 Sixty feet six inches. The distance a baseball with minimal spin flutters in the the breeze as it meanders its way towards home plate. The knuckleball. Generally, if the batter swings at the pitch, he would likely look foolish—he has no better idea of where the ball may go than anyone else—pitcher included—does. And in catching the pitch, the catcher may also look pretty foolish. David Skaggs, a one-time catcher for the Orioles, kept an extra-large mitt when his battery mate was a knuckleball pitcher. (Take a look at one such pitch The only pitch that made a batter look nearly at foolish was the Sandy Koufax curve—attested to by both Willie Mays and Hank Aaron, neither of whom was exactly a slouch in the batter's box. (Yogi Berra is reputed to have observed—whether at a World Series or spring training game—during a Koufax warm-up, "I understand how he won 27. What I don't understand is how he lost 5." Maury Wills, the Dodger's infielder, responded, "He didn't. We lost them for him.") Arguably, Mariano Riviera's cutter came close, too.

The knuckleball is one of the more difficult pitches to master in baseball, so much so that it merited exploration in a documentary. It can be effective as a means to dominate a line-up, though, and it's easy on the arm (which means it may be better for those little leaguers who are determined to screw up their arms in throwing curve after curve after curve). RA Dickey demonstrated a few seasons back that its mastery can lead to that pinnacle of pitching performance, the Cy Young Award. And recently too, Tim Wakefield has used it to great effect too. The physics of the knuckleball is described in this link. I'll leave that part of the pitch alone.

Supposedly, it can be traced back to the early years of last century, but I suspect it was around even before, though probably unnamed as a pitch. A knuckleball travels at a seemingly impossible speed of only 60 or so mph. Not much force behind it, also one of the features that aids in minimal wear and tear on the throwing arm. Of course, with that speed, stealing a base or getting a good jump on the pitch is easier. I don't know the stats on runners thrown out trying to steal when a knuckler was on the mound.

It will be interesting to see if Gamboa makes it to the starting roster in Apri. Hoyt Wilhelm was also a knuckler. Also an Oriole. I wonder how many teams have had one knuckles, never mind two, in their history, though the Senators had an starting rotation of knuckleballers during WW2. Only 75 pitchers in major league history have thrown knuckleballs as more than an incidental pitch, i.e., in a deliberate way.

The Orioles have made a concerted effort at developing knucklers, with Phil Neikro attending a few of the Os' training camps. Buck Showalter was the one who started Dickey on the knuckleball path; A Cy Young suggests that it was a good decision by all. It's not hard to understand Showalter's thinking: Throwing the knuckleball is a long-term commitment, one that may not mature for several years. But it's a pitch that's easy on the arm. Speculating a bit, it's not hard to imagine going back to a 4 man rotation with 3 or 4 knucklers in the starting rotation. That means there's space for another hitter or a stronger bullpen. Win-win. Moreover, an older pitching staff means more maturity during the inevitable ups and downs of season—and good minds to train younger players who might even be in the minors and attending spring training. And those arms, even on an older pitching staff may not be quite the headwind that it would be if the staff were based around 95 mph hardball throwers or breaking ball pitchers.

This year's Orioles spring training camp promises to be an interesting one. Perhaps the season will be a fruitful one.

In any case: Play ball!



 Mosquitoes aren't going to be the means by which this virus spreads in the US. And health officials have likely made a mistake suggesting that the risk in the US is low. That's not a statement that an outbreak is imminent, just that there's more to this virus than just swatting flies.

And don't be surprised at the economic effects. SARS, you may recall, led to essentially empty planes flying to and from Hong Kong for a period (albeit somewhat short) of time.

Any sense of what the impact of zika will have on the Olympics this summer? Not that Brazil needs any help in figuring out new ways to torture its economy (the nationalization of Petrobras being Exhibit A), zika may have an economic dimension the effects of which aren't yet fully appreciated. I wonder how big the tourism industry is in Brazil.

Stay tuned, same bat time, same bat station.

"Brazil Finds Zika Virus in Human Urine and Saliva, but Risk Is Unclear"



 It will come as no surprise to readers of this list that I am an Orioles fan. Like most fans,

(In 33 days, Orioles pitchers and catchers report. Spring is almost here. It's raining in NorCal and there's snowpack at Lake Tahoe. Almost all is right in the world.)

I enjoyed the dominance of the 1970s (actually, 1969) through the early 1980s, and living through the dim times at the beginning of this century. The Orioles traditionally were built around pitching defense and the 3-run home run (aka Earl Weaver Specials). Speed didn't much matter, contact hitting didn't much matter, bunting and such didn't have much of a place, hit and run wasn't of consequence (though these days, the Os are hardly unique in that regard), and so on. And Orioles Park at Camden Yards (aka Camden Yards, or just Yards for the locals—23 years young and still one of the greatest, if not the greatest, places to watch a ball game in the baseball universe) is certainly a ballpark made for power hitting left-handers, with 318 ft down the right field line.

Of course, not every major hitter the Os have sent to the plate at the Yards has been a left handed one. Cal Ripken spent half of his epic career (no, not just the streak, but the 400 HR and 3,000 hits) at the Yards—always as a righty. More recently, Nellie Cruz dominated the HR race as a righty at the Yards. But lefties have an advantage.

Enter Chris Davis, the Os All Star first baseman. Davis started his career in Texas, and it's pretty clear that it's principally been since coming to the Os that he's experienced success. Lots of success. Twice leading the AL in homers, once in RBIs, and if he didn't strike out so much chasing some awful pitches, he may have gotten a Triple Crown. Alas, it was not to be.

This year, Davis is a free agent. He's been offered $150+ mil for 7 years. Not chump change. But the Os have made it clear to Davis's agent, Scott Boras, that the offer is what it is. Some have even suggested that the offer has been withdrawn )including the Os). But if Davis were interested in accepting it, I doubt there would be the least hesitation from the Orioles front office in putting it back on the table. Meanwhile, Boras is shopping Davis as a first baseman-left fielder. That latter one is interesting. I can't imagine Davis hitting as well while learning left field on a permanent basis. But he is getting shopped around, and some have suggested that Detroit will pick him up and drop him into left field. Maybe. But one of the things that no one has ever suggested about the Os, even during the awful 2000-2010 period, is that the team lacks heard, lacks soul. Cruz made it pretty clear that he wanted to stay in Baltimore. Seattle apparently made him an offer impossible to refuse.

So what will happen with Chris Davis? If I were a betting man, I'd bet that Davis is going to play for the Tigers next year. Fortunately, there are only a limited number of games that the Os would have to face him. I think he might find that his performance isn't quite what he's used to, at least for a year while he learns a new position. As for relations between Scott Boras and the Os, well, it's baseball, there's always next year. At least Duquette actually did something this winter.



Let's say that US manufacturing continues to comeback. How much of an impact will that have on the US economy. Manufacturing doesn't seem to generate the jobs it once did. Roger Arnold's suggested that it's unlikely to ever do so again. It may generate wealth, but for whom, and where does that wealth go? Back into the US economy? Outside the US? Would such a development foster income inequality? The re-unionizing of the economy? If manufacturing begins to again create wealth in the US to an increased degree than in the past, will that lead to a strong dollar? Lower interest rates? Perhaps an increase in the velocity of money?

Or is manufacturing sufficiently small as a part of the economy that the effect is muted at best, no matter what it might be?

Or is the effect irrelevant because once oil prices rise (albeit not to their former highs), manufacturing in the US again becomes inefficient compared to elsewhere in the world and this is just a temporary blip best ignored.

anonymous writes:

Where any wealth goes is a function of taxes.

Assume for a moment that energy is free, such that manufacturing could occur anywhere. Where then would it occur? That depends on the other costs. Labor immediately comes to mind, but quickly followed by robots who tend not to unionize. So labor might not be a determining factor. Proximity to bulky raw materials might be an issue, but with free energy the costs of shipping are minimized. What then? Taxes, friends, are the ultimate cost of production. Of course certain politicians don't believe this because they have never run a business. However there are examples. Consider those businesses in which the end product is a service. Where do they locate; why in the most tax-friendly place. And those businesses in which the variable cost of production is small, such as pharmas, have been merging to locate the head office in a favorable tax jurisdiction.



China is building a commercial plane. One might expect nothing less from the world's largest economy. However, that said, China still has not "created" a new industry. Neither has Japan. Given the focus on the group as opposed to the individual, I doubt that either ever will. Innovation is, at its core, an individual activity, a gift for the West deriving out of the Renaissance. (I am sure some of the scholars on the list will contest that interpretation, but I submit that it is one reason why economies in countries lacking freedom of expression have little in the way of innovation—if an individual fears saying something, the chances of creating or developing a new idea are notably reduced (if not practically eliminated).

By new industries, I do not mean a new variant in an existing industry but rather something that is transformative. For instance, the British with steel and coal (maybe railroading—I'm still undecided on that one). Italy with banking and music, possibly wool (again, I'm not sure about this one). The US with oil, aerospace, entertainment (media generally? I'm not sure of that one), computers and the net, electronics, atomic energy (and commercial energy for that matter), automobiles. The British, news. The Dutch corporate finance. (sufficiently different from banking as to qualify as a new industry.) Germany, publishing. (I'm not sure about defense and Germany.) And so on.

Britain's development of radar was an innovation, sure. It didn't create a whole new industry. Ditto for Japanese innovation in the atomic energy industry. (Carder's counter to this idea.) And for all of the economic growth in the Union associated with the American Civil War, US economic leadership would await its industrial revolution which didn't start until well after that in Britain and wouldn't pass the British untill the 1900s when autos, oil, and entertainment began as industries in the US.

Not every industry was created by one country. The pharmaceutical industry for instance was a creation of Germany, Switzerland, and the US. Ditto for chemicals. The British and Germans together developed the chemical industry.

I don't think it's an accident that creating these industries took place during the height of the economic influence of these countries. China and Japan have shown an amazing ability to grow economically by perfecting existing industries, but there is a limit to how much one can grow an economy in taking this approach. This may be contributing to the Japanese malaise. The Soviets did the same thing in its push to industrialize during the 1930s. It caught up. It didn't create. And it was no accident that the Soviet economy topped out in growth in the 1970s.

There are some interesting corollaries from this idea. First, for all of the rancor about the US going in the wrong direction, the US has been creating new industries. The internet was an industry created in the 2000s. (Were there internet companies in the 1990s. Sure, but as an industry? I think one can reasonably challenge that idea. It wasn't sustainable as an industry until the 2000s.) That said, I'm a bit challenged to name other examples in the US, though I'm equally challenge to do the same for the rest of the world. Maybe that's why global growth is slowing down. Just a thought on that one. I have to wonder though, what new industries will develop in the digital economy. And I'm not sure how to categorize the "sharing" industries like Airbnb. Is there even an industry there?

And for all of the problems of a government program (centrally planned) like Apollo or the Manhattan project, there were whole new industries created in their wake—developments that in diverse ways paid for the costs of those programs. (I'll note as well that for both Apollo and Manhattan, the science was pretty much established by the time the projects were launched.)

Another corollary is that for all of the interest in the economic growth of Europe, the Europeans haven't produced a new industry in at least a century. European economic growth will likely be stymied until one again sees new industries emerging in it.

Is this thesis flawed? Maybe in some aspect, but I think the observation stands. Is such innovation the cause of economic growth? I won't go that far. But it is at least an indicator not only of economic growth but of economic leadership. I don't see such leadership coming from China or Japan anytime soon. Will China remain the largest economy? Perhaps. But as the Soviets demonstrated, there are real limits to how far an economy under a totalitarian government can take an economy (and that's beyond just being centrally planned, which has its own set of problems).



Since Rocky is taking a 4 week from posting, I will take the opportunity to miss a usually well deserved intellectual slap to the back of the head and note that we will soon have a test of Humboldt's Law on the importance of the time versus magnitude of a bubble versus the intensity of the deflation.

In Canada, housing has been on a 12 year bubble. It will deflate at some point. 12 years is, I suggest, a long period for a bubble. Let's see what happens during the inevitable deflation.

Alex Castaldo clarifies:

Humboldt's Law of climate says that the temperature at a certain point  on the Earth depends on both the altitude above see level (the higher the altitude the colder it is) and on the latitude (the further away from the Equator, the colder). Humboldt's Law of market crashes is David Lilienfeld's idea that the severity of the crash depends both on the price runup and the length of time the bubble lasted,



 Since the situation may well be worse than this data suggests, my question is how can China maintain 5% growth this year, never mind 7%. Or will the economy hit a wall?

Ralph Vince writes: 

It is not like our economy at all. Whereas we panic over QE this or that, there the government owns everything. It can go on forever.



 As some might recall, I follow coffee pretty closely. And while coffee trading may be a relatively closed shop, the price still responds to supply and demand. I recall from my econ class that even monopolies have to factor in the reduction in demand consequent to an increase in price unless the good is inelastic. That's four decades old, though, so maybe my recollection is off.

Here's the thing: oil's dropping as the supplies bulge and the dollar strengthens. Gold's weak as well. That fits a deflationary environment. Increasing interest rates fits an inflationary one. Coffee remains weak, trolling multi-year lows. What's intriguing to me about this is that evidence continues to grow that the el Nino taking place is getting stronger, and there's now discussion of whether this year's even might be stronger that the record one in 97-98. El Ninos generally mean the coffee crop is smaller than average. So while weather developments suggest a reduction in supply, pricing suggests a marked decline in demand, too. Either that or deflation with a stronger dollar.

Maybe I'm missing something here. (I probably am.) Anyone care to help me understand this better?

anonymous writes: 

Procter & Gamble, Starbucks, Sara Lee, Kraft, Tchibo and Nestlè control 60% of the market. Actually they are in overproduction, 120 million bags (sixty pounds) of coffee products, 105 consumed. The inventories accumulates from year to year.

They are trying to introduce into the market a GMO coffee variety whose seeds ripen all at the same time, greatly cutting production costs and collection costs, allowing automatation. They are destroying the lives of 125 million people, mostly small-scale farmers and their families for profit in exchange for a coffee built in the laboratory.

Andrew Goodwin writes:

Has anyone else made the same observation that nearly without fail, the same people who make the sternest warnings about climate change are the same ones who mostly firmly protest GMO food?

If the climate is changing then please explain why the crops that worked in the old climate will succeed in the new one. Sometimes it is enough to make me think these folks are going to succeed in starving us all.

In this case, respectfully, it seems that some parties would rather see higher coffee prices, which they think will help some number of people. They don't consider that the destruction of the Brazilian rainforest to make room for coffee plantations, profitable only with prices at higher levels, might have catastrophic impact on humanity in the longer term. 

Michael Ott writes: 

I've noticed that those that are vocal about climate change tend to make arguments based on the overwhelming scientific evidence. Yet when pressed with overwhelming evidence about the safety and benefits of GMOs they ignore it or claim it's a conspiracy. They make fun of those who ignore climate change science or claim it's a conspiracy. It's all hypocritical. This article was thought provoking: "Unhealthy Fixation: the war against genetically modified organisms is full of fearmongering, errors, and fraud. Labeling them will not make you safer."

Jim Sogi writes: 

The Kona Coffee specialty crop will be big this year. There are a lot of beans and just starting to ripen. We had some big rains right at the beginning of the season and there were rows of fragrant coffee flowers early on. The coffee borer was bad last year, but as with many natural cycles, it is not as bad this year. With the trees stronger from good rain, the pests can't get as big a foot hold. There is not enough Kona Coffee to make even a drop in the world wide market, but it's what I grow, harvest, process, dry, roast, grind and drink. There's not many coffee gourmets who can say that.

My son got me a nice Rancilio grinder. It's made a huge difference and now I enjoy real Italian style espresso and cappucinos. It's a game changer compared to the cheapo grinders and results in a very even fine fine grind which you can't get any other way.

Stef Estebiza writes: 

There is a ton of material about the problems with GMOs, and not only with the way in which they are then treated with pesticides. The list is long, but lobbyists' interests are mor profitable and important than your health. Here are two articles:

"Cancer Viruses Are Deliberately Inserted Into Your Food"

GMO: Study Shock, Toxic to Animals and Man

Michael Ott replies: 


Those articles are perfect examples of unfounded claims. This quote is just false: "because they are heavily contaminated with the toxic herbicide, Roundup". Literally dozens to hundreds of tests have been performed and prove the opposite.

False: "petunia plant which is a nightshade. That means folks with nightshade-induced arthritis can now get arthritis from soybean products." This has never been shown in a valid scientific study. Rather it's been repeated by pseudoscientists from a base false claim.

The second article showed results based on massive unrealistic doses and has been widely discredited. 



Four years ago, I asked some investment bankers about fintech supplanting their businesses. They laughed and opined that there's too much personal interaction, the human touch is key they said for their businesses to operate. I recall hearing the same thing from car dealers a bit more than a decade ago (shortly before I bought my current car—a Honda Civic with 110,000 miles under the hood (ain't stick shifts great!)) and they insisted that people needed to see and touch a car to buy one. Then there were realtors. I'm not sure that real estate has quite reached the stage that car buying has, and the need for in person inspections prior to signing the paperwork will likely continue for sometime, but there may be some improvements.

Looking at successful internet companies like Facebook or LinkedIn suggests that they owe their success in taking a key human activity and digitalizing it. Banking beyond loans or brokerage-related activities would seem ripe for such exploitation. There are already such efforts moving forward in the VC space. In Africa, mobile banking of all sorts is the growth sector of the banking industry. But I know of no investment banks that have been digitalized, never mind successfully so. Does anyone know of any instances of this?

"Bitcoin is the 'Napster' of finance — and there'll be an iTunes"



 I was looking at Greece's unemployment rates historically last night and found something interesting. The Greek economy seemed to hit a pothole in 1981 from which it never extricated itself. Between 1980 and 1982, unemployment tripled, and has stayed that way as a base since then. (I say 1981 because the rate didn't return to where it was, it increased.) Now, there were recessions in the US in 1980 and 1982, and Greece is a tourism-based economy. So a short-term increase in the rate can be explained in that way. However, that doesn't explain that the rate didn't go down in the 1980s. Why? Any suggestions as to the reason? It seems to me that that reason may provide more insights to the current situation than simply that the Greeks lived beyond their means. Something changed in their means.

Alex Castaldo writes:

According to Greek analyst Nick Tsafos, one reason for the low growth rate that started in 1981 was monetary mismanagement.

From 1953 to 1973 the 'third drachma' like most currencies was tied to the dollar; the exchange rate was 30 GRD per USD. This was the period that Greece experienced its best economic performance.

After the mid 70's the currency floated. It was (in round numbers) 58 in June 1981, 148 at the end of 1985, 157 at the end of 1989, 240 at the end of 1994, 328 at the end of 1999 and 325 in 2002. (In 2002 the Euro was introduced).

In other words from 1981 to 2001 the GRD was a 'soft currency' that allowed the Greek government to finance itself easily at the cost of higher inflation and currency depreciation. It could create government jobs, pay generous retirement benefits and get away with it by issuing more drachma. And the Greek politicians were masters at this kind of thing, buying support with monetarily financed expenditures.

The inflation ended in 2002 with the introduction of an externally managed currency, the Euro. For a time everything seemed wonderful. But old habits die hard and the politicians kept up their old ways of solving problems. Government debt increased but interest rates were very low, so it did not seem to matter. But the debt this time was hard debt, that inflation and devaluation would not erase…

Now for a rhetorical question: if Greece abandons the Euro and introduces the new drachma, how do you think the new currency will be managed? The past history is not encouraging.



 Will China liquidate its holdings of US debt to pay for the recovery?

"BLACKROCK WARNS: China's debt has lost its potency and is now 'turning into poison'"

Jordan Low asks: 

What would they do with the US dollar? Convert it back to RMB and hurt Chinese exporters? 

Rudy Hauser writes: 

To get rid of dollars they could import goods and services, make investments dominated in other currencies or buy other currencies. They could just invest in other U.S. investment possibilities (including equities, real estate, etc.) In the aggregate the only way foreigners can get rid of U.S. dollars is to buy goods and services. They can also make fixed investments, but the returns and proceeds upon sale would be in U.S. dollars, so they would not really have reduced their dollar holdings. They can of course make investments in the U.S. that decline in value. (They could also convert to currency and burn it, but that is not a logical choice.) An other alternative is to give the dollars to Americans as a gift, another unlikely choice. Yes, the Chinese could buy RMB for dollars if they find someone who has RMB to sell. To the extent Americans hold RMB that they would sell for US dollars, the gross positions would change but not the net positions.



 I like the part of The Boys in the Boat where the freshman coach pretends that Cal can beat them handily. The necks of Cal swell even further making it even for Washington to cut them off. I followed the same principle in squash, and never admitted that I had a chance to win. I also never admit to a profit in the market for the same reason. It will be interesting to hear what Mr. Rafter has to say about The Boys in the Boat because he has won many national rowing championships. In particular the wisdom and ability of George Peacock, the world's best boat builder, whose materials in wood have now gone with the wind.

David Lillienfeld writes: 

The beauty and terror of baseball is that there is no clock; and the second you stop thinking about the next pitch, you are on the way to losing no matter how big a lead you have.  What made last year's 7th game so good is that neither team ever once lost that focus; the game score was as close as one can be, but neither team ever for a moment got "tight" thinking about the end result before play was over.

Alston Mabry writes: 

Yes, in games like basketball or football or soccer, you can work the clock. But baseball and tennis have that exciting element of the game not being over until it's over.

anonymous writes: 

I have had the pleasure of seeing some true greats in action over extended periods of time in the markets. The only time these guys really lost any money was when they ignored time.

A fixed clock on any speculation in the organized macro markets is vital in my opinion and experience.

Unlike most things we discuss, the addition of fixed clocks (or predetermined holding periods for individual speculations) is actually countable and its efficacy is testable.



 The Phillies this year stink. Simply stated, they can’t get out of their own way. The team is off on so many different dimensions, it would difficult to overstate just how bad things are. And there comes a point where the random sorts of things, like injuries, maybe aren’t so random given that players begin to push well beyond what they should out of frustration. Case in point, the injury to Williams, pitching on Tuesday in the Os vs Phillies game. (And that was why I took a look at the Phillies.) Granted, it was just a blowout, but a 19-3 blowout isn’t just a matter of pitching batting practice for the opposing team. On Tuesday, it got so bad that a position player was brought in to pitch—and he did at least as good a job as the real pitching staff. Or at least no worse. Perhaps in a nutshell, that communicates why this team is at .333 this late into the season.

Yesterday, the Phillies entertained the Os just up I-95. I thought that as the home team, the Phillies might hunker down and make a good game of it. A good enough game that the tedium accompanying a good 40 minutes on the bike at the gym could be relieved by watching the game. Fat chance!

The Orioles won 6-4. The score doesn’t sound so bad, right? Perhaps, but consider this: An American League pitcher with a career batting average of 0.115 (from his time at Colorado) not only legs it out for an infield base hit, but also rings up an RBI! That’s pretty bad.

I guess the question now is whether Ryan Sandberg (the Phillies’ field manager) makes to the All Star break, or is he fired in the next few weeks.

I gotta feel for Phillies fans. I’ve been there, and it’s not much fun.



 It's lots of money, but it doesn't sound like any of the debt is held by banks: "A judge ruled Argentina owes $5.4 billion, not $1.7 billion — now here's the freakout everyone expected"

anonymous writes:

The basic problem is that there is no international bankruptcy court. The reality is that the vast majority of the bondholders accepted the restructured notes. Had this been a domestic bankruptcy with that many noteholders accepting a deal, bankruptcy court could have been used to force the others to accept it as well.

anonymous writes: 

Argentina offers great travel value with exchange rates, I'm guessing here, on street of probably close to 20 pesos to the dollar. They're hungry for the dollar. The wine is very very good,the food very tasty. The countryside is beautiful. The mountains big and snow covered. So their problem is our opportunity. It is much more cosmopolitan than I had imagined and there are many lively young people. It is much more European than Mexico and many of the people have European ancestry and it retains cultural affinity with Italy and Germany in some areas, hence the good wines. 

anonymous writes: 

There is a black market for US$ as well as a blue market, even better rates for yanks. Easiest way for us to change there earlier this year was at casinos that were substantially better than black market. Their rate, of course, on the bet you would wager so we took the bet at their excellent rate and walked happily out of the casinos. Mendosa is a must for wine and foodies.

anonymous writes: 

Agreed with Larry.

If I had to give it all away and go somewhere, I would move to Buenos Aires in a flash. Buy a motorcycle and travel the country on a motorbike.



 He's the first pitcher in MLB history since 1995 (and second since 1900) to throw with both arms.

But he's by far the best to do it. I never thought he would make it to the bigs given that he has velocity issues… but what a great debut.

"Venditte makes MLB debut"

He's not an Eddie Gaedel gimmick. This could be fun to watch for a few years. And, his story is very interesting.

Go Elephants!



 A recent post by Tim Melvin noted that Baltimore may be a shit hole, but it's our shit hole. That of many of us on the list. Even if we no longer live there, we identify with it. The glory of Fort McHenry. The commanding of Johns Hopkins. The ignominy of Bankruptcy Tower. The notoriety of Payoff Row. The poverty and lack of hope for a better life in some places in the city. And of course, The Block. Once two blocks (go figure), it's now not even one. Maybe that's the effect of being right next to the police HQ. Add in a dysfunctional education system in the city, the three decades of the departure of industry and the conversion of the town to a bedroom community for DC (in part), and you have a shit hole. I'm sure that some (many?) may contest that conclusion, but try contesting the elements leading me to it.

In the 1960s and early 1970s, if one were to hear a screaming crowd at Memorial Stadium, 33rd Street, Baltimore, chances were good that it was Sunday and the Colts were playing at home. The stadium was usually sold out. It was the era (the "Diner" era—and the Hilltop Diner really did exit, across Reisterstown Road from the Crest Theater—providing relief from the infernal Baltimore summers—and Barcelona Nut Shop) when Colts season tickets were inherited and valued as much as a car or a prized bottle of Lafite or Mouton. It was the golden era for the Orioles, but they did not commandeer the attention, the love the Colts did.

But all of that changed in 1979, specifically June 22, 1979. Edward Bennett Williams had just bought the Os and was complaining about the lack of enthusiasm (and attendance) by the good people of Baltimore. Maybe the team should move to Washington. Lots of interest in DC. and it took forever to drive back to DC. By his chauffeur. The BCPD tailed him once and clocked his trip as 45 minutes, not much more than from York, Pennsylvania (Birdland North) to the Grey Lady of 33rd Street It was the night of the birth of "Orioles Magic," which eventually had an accompanying song (until "You can do magic" replaced it for when relievers entered the game in a tight pitching situation during the early 1980s).

So 1979 wasn't shaping up to be a great year for the Os. Until June 22, 1979. On that night, in the bottom of the ninth, with one on, Doug DeCinces homered to left field. Anyone in the stadium that night will surely remember it. The roar of the crowd was deafening, and the stadium didn't really begin to empty for at least 15-20 minutes after then. Carley Eckman's call (I was listening on a transistor radio, not unusual for someone in the bleachers, not far from the orange and black "Here" flag) was memorable, too. Objective calling of the game flew out the window that moment. The entirety of the Orioles team greeted DeCinces at the plate (for DeCinces, the hit became, at least in part, redemption; it's hard being the position successor to a baseball legend, the "human vacuum cleaner" aka Brooks Robinson), making for an award-winning photo. The next day, a Saturday, that HR was the talk of the town. The following Monday, discussions around the water coolers and over coffee included at least some mention—and often much more—of the HR. 1979 wore on, and the Birds flew high. No one expected much of that team. There were few dominant players, and it was the rare season when Jim Palmer was out of sorts during the season. The World Series that year found the Os against the Pirates, losing in seven games with the final one at home. It was the last time that a visiting team won the series in seven games.

The night of May 29, 2015, also a Friday night, may go down as the renaissance of Orioles Magic. The game was a hard fought pitchers' dual. Gonzalez had pitched a good 8 innings for Baltimore, giving up only one run—earned. Going into the ninth, the score tied, at 1-1, Darren O'Day, a journeyman pitcher who had become the Os middle relief/setup man, came in, proceeded to give up back-to-back hits and promptly loaded the bases with no one out. A situation pregnant for a hit and an RBI to take the lead. But that wasn't the script that was followed on that Friday eve. What followed were two strikeouts and the final out of the inning, a grounder by Elmore to Machado for an unassisted out at third. O'Day had thrown 24 pitches that inning. 24 (or was it 25?). One inning. That's a lot of pitches. For that final out, the crowd was on its feet and the Camden Yards reverberated with cheers and stomps. The bottom of the inning found Os on 1st and 3rd with 2 down. JJ Hardy, an infield specialist with a batting average south of .200 (Orioles faithful will recall Mark Belanger as having somewhat better production at the plate, which isn't saying much), strode to the plate and promptly hit a single to left field. It was all that was needed. Somewhere between 1st and 2nd, after the winning run had been scored, the Os mobbed Hardy as the sellout crowd registered its approval.

The night felt like that of June 22, 1979. One of those days when many in Birdland can recall where they were when DeCinces homered. Will the Magic reappear? The excitement? Hard to say. Let's revisit it in a month. This year's Os are hardly dominant in just about any position on the field, save maybe Zach Britton as a closer. Jimenez is having a good year, and compared with 2014, a great one. But that's about it. And the Os are in 3rd place in the AL East as a result. One game under .500 and one game behind the Yanks. Who ever would have thought that a third of the way through the season the pace would be set by a team one game over .500. At least the Birds have the best home record in the division. So the team has its work cut out for the next three months—not to violate the first rule of holes for the next month as it gets its act together and the, in a reprise of last year's performance—rise to the top.

We've had some discussions recently about the decline of baseball in the US, and yes, the sport has had its troubles. But it's always managed to find a champion and grittily renew its place in the national entertainment firmament. Babe Ruth, Cal Ripken.The sport is shaking off the self-induced haze of the steroid era. And the helicoptering of kids doesn't auger well for a rebirth of the national pastime, which has indeed become passed time. As the country struggles economically with a recession possibly looming over the horizon, with dysfunction in DC and political sex scandals seeming to be the order of the day (I don't recall them being this common, but maybe it's like FDR's wheelchair, no one ever reported them)—the latest being inappropriate touching by the pre-political life former Speaker of the House (does it much matter that it was pre-political life?)—it must have been some serious touching to merit a $3+ million payoff—the country needs to rally around something. As President Snow observed, hope is the only emotion stronger than fear, and while complacency is the rule on Wall Street for the moment, there's some fear being voiced by those with memories of times before ZIRP, of times when interest rates actually ascended, not declined. Memories of the early 1980s. With deflation the concern du jour of the NFL if not the BEA, it may be baseball's time to shine again.

So, in Baltimore, is it Orioles Magic, 2015 edition? We'll see. As for the moment, it's to be savored. Go to war, Miss Agnes! Let's go Os!

Play ball!

Stefan Jovanovich writes: 

This notion of baseball's "decline" is entirely a construct of the Fairness Police. There is now, in fact, far greater "diversity" (sic) among the players of Major League Baseball than there ever has been; the only problem is that the darkest-skinned players are more likely to be Cubans than American blacks. Measured by money paid to the players (baseball, unlike football and basketball and hockey, does not have a hard salary cap), valuations for franchises, television revenues, ticket sales, and concession revenues, these are the best of times. And, regarding the play itself, Buck Showalter is right: "this is the Golden Age". 

Paul Marino writes: 

Here is a great video of the great player for the Buccos, Andrew McCutchen, making some little kids' life last night when playing in San Diego.

Would love to see Pitt make a run at playoffs again, but in a tough division with the best organization in the league St. Louis playing .660 ball, almost a clean + .50bps win % over entire MLB.

anonymous adds: 

I hated the fact that the Giants had to play Pittsburgh for the wild card; they have a wonderful ball park and a really great organization and they are all around good guys. So, clearly the plan for this year is that the Giants beat the Dodgers outright and the Bucs have their wild card game on the road.

Having your loyal fans cheer for you can be a tremendous handicap when it is all or nothing. The Giants have been lucky to be the road team in their "Big Games". The last 4 times they have won the World Series - 1954, 2010,2012,2014 - the deciding game was in the other guys' park. The one time it was at home - 1962 - they lost even though they had Willie McCovey at bat and the winning run on second base and he absolutely smoked the ball - right into the Yankees' second baseman's glove.



 Here is an article from the world of transport engineering. It's not too much of a stretch to apply something similar to observations and timings of magnitudes in financial markets:

Extract: "Why Buses Bunch at Single Stops"

Maybe you've waited at a bus stop for longer than usual, and your bus finally shows up. And then, immediately after, a second bus on the same route pulls up right behind. What gives? Why can't they stay evenly spaced to improve everyone's waiting time? Lewis Lehe provides an explanation in a small interactive game.

Two buses travel along the same route, starting off in opposite positions. They make stops and pick up passengers right on schedule. But then add in your own small delays, and you see bunching relatively quickly. It really doesn't take much to throw off the equal spacing…..'

Jim Sogi writes:

Watch the ocean for a while, or the beach. Random waves cluster to form set waves, larger than the rest, or rogue waves, which can be magnitudes greater than the average. I believe this is a function of randomness or alternately pattern formation from simple binary functions a la Wolfram.

Here's some good information about Three Phase Traffic Theory.

Jim Sogi writes: 

When I go to the US Mainland and drive the big freeways for long distances, I try to drive about 2 or 3 miles per hour slower than traffic.  Most try to drive as fast as they can and bump up against slower traffic groups, and results in waves of clusters of cars.  It's more effort and emotional cost to try drive fast and requires more attention to try pass, notice and avoid slower cars, and cars next door.  Driving a bit slower requires less attention, less stress as you set you speed, and allow other drivers to pass, avoids coming up on slower traffic, and allows you to drive in the spaces between clusters, the "lulls" so to speak. I'm not in a rush and find it more relaxing and you can see the clusters in the distance, and adjust to drive between them. In large urban areas, the clusters tend to be time of day (rush hours) and location oriented, except for accidents.

In markets, vol clusters and it's good to be aware of the lulls and clusters, the timing of them, the length of the lulls.  It's like the lulls and sets in surfing. Trading also seems to cluster around the rounds, and time of day (arc sine).

In playing and composing music, it's important to leave "space" in the music, where there are fewer notes to allow emotional development. 

Jonathan Bower writes: 

 Mr. Sogi makes some very good observations. I drive 150 miles round trip every day for work. I see people in such a rush to "slow down" when they inevitably meet slower traffic (or jam). Maintaining a high average speed is much more important in determining length of drive (and better on gas). There is also a strong behavior bias to get in the left lane that frequently staying right, particularly in heavy stop and go, is frequently and consistently optimal.

Jim Wildman writes: 

And mathematically, except on long, open road drives, speeding won't save you signification time even assuming you succeed in increasing your average speed.

You can't save 5 minutes on the typical 20 minute commute by speeding. You can if you are willing (and able) to run stop signs and stoplights.

I used to drive from East Texas (Longview area) into Dallas every day (about 115 miles). It was my observation that most radical speeding (10 MPH over) occurred where it would do the least good. Very few drivers speed in the truly rural areas, but once you get into the more potentially congested areas, the number of speeders goes up.

David Lillienfeld adds:

I've found that the frequency of speeding is inversely proportional to the density of police cars on the side of the road. The result is that you have lots of speeding going on on the interstates, punctuated by islands of drivers going at the stated speed limit. I don't know that the state makes much off of speeding tickets in this setting; I do know that it presents a nice the opportunity for accidents as cars slow down and then speed up. Twice, I've seen cars flip in the course of trying to avoid an accident while slowing down—once was just out of range of a radar gun.

Stefan Martinek writes:

I found that a good solution is to reverse the time zone. I had one period when I was living in the US time zone while in Europe. It is always good to avoid crowds. Gyms are also nice and empty around midnight. No clustering.



 This coming Monday is Memorial Day. That means different things to different people. For me, it will be my mother's yahrzeit, as well as remembering those whose efforts provided the cover under which the USA lives. But it also means the running of the Indy 500. And switching to the summer comforters. For one of my neighbors, it's setting up the outside grill for the summer—which he does after visiting his brother's grave (he died in Vietnam) at the national cemetery up the road. I'm sure there are lots of similar activities at one another's homes. Some many no longer give much thought to those whose deeds provide that cover, to those who sacrifice assured that we may live under it. But they should.

A couple of years back, Tim Melvin penned a piece that encapsulates the meaning—for at least some of us—of the day. (It will be reposted below)

It is one of the more eloquent expositions of the holiday.

Stefan Jovanovich comments: 

 First of all, it was not Memorial Day. It was Decoration Day; the particular day on which the public would officially do what people regularly did on their own–go to the cemetery and put flowers on the graves of the departed. And it was a Sunday, not a Monday.

Second of all, how does anyone presume to speak for the dead in war? That is the sickest of all sick jokes. If you are lucky/skillful enough to survive one, the one thing you know is that medals for the living are pure vanity; and Grant was–as with so many things– right: parades are only tolerable if they are parties where you throw ticker tape out the windows (ticker tape, windows?) and can make noise in praise of the living. For the dead there should only be flowers, no speeches.

FWIW, the first decoration day was on May 1, 1865 in Charleston, SC. It was held in honor of the Union soldiers who had been held and died as prisoners of war and buried in a common grave. After the Federals occupied Charleston, one of the first things they did was give each of the soldiers' remains its own individual burial and marker. In gratitude for their liberation the Negroes in Charleston built a fence around the new burial ground and an arch over the carriage entrance. The "Union" cemetery was opened that May Day; according to the newspaper reports ten thousand people came to walk among the graves and put flowers on them. (This is what David Blight of the Rocky Ghostly Academy concludes from his research into the subject.)

For "Memorial Day" and this bathetic dishonesty, we have to wait for World War I and segregated mourning.

At least baseball still does it right; people simply stand in silence for a moment, as they did when they remembered Christy Mathewson, a casualty of that truly awful war.



 David Lillienfeld writes:

Last year, Tim Melvin posted a classic piece about Memorial Day. It brought me to tears then, and it did so this morning when I went through it again. It is some of the most eloquent writing I have seen about Memorial Day, and it's a shame that it hasn't received more notice outside of this site than it has to date—it certainly merits it.

Tim Melvin writes:

They call to you this weekend. From Flanders Field, from Normandy, Khe San, Gettysburg, Concord and Lexington, the Chosin Reservoir, from the hull of the Arizona, and from all the hundreds of thousands of resting places marked and unmarked they call to you. The call to you from the depths of the Pacific and the jungle of Asia, from the deserts of the American Southwest, from the fields and cities of Europe, from Cuba, from around the world they call you with a request this weekend. Remember me.

Remember who I was and the hopes and dreams I willingly laid upon the altar of the great American experiment. Remember that like you I was once flesh and blood and I gave that up to secure a portion of the American Dream and secure essential liberties at home and even for people around the world. You may not have agreed with the rational for some of the conflicts we have ensnared ourselves in over the centuries and I am not even sure I fully understood it. But our nation called and I answered. Liberty carries a price tag and I paid it for you. Remember me.

War is an idiotic human endeavor and I wish we never had to go engage in such a wasteful exercise. But at times throughout history it has been necessary for good men to take up arms to secure our freedom from tyranny and defends ourselves against expressions of pure evil and hatred. When such times have arisen I have taken arms and defended the freedom and liberty in which I believed and for which all humanity years. Remember me.

Do not remember me with tears and sadness. Pray solemnly and shed tears if you must but that it is not my preference. Remember me in a violent celebration of all that is America. Take your families to the seashore and frolic as man has done since we merged from the sea. Go out on your boats and go as fast as you can over the waves with the winds of a free land and a free people blowing back your hair. Fire up your grill and invite the neighbors up for food, drink and laughter. This is why I laid down my life. Not so you would cry for me but so you could enjoy your life and your family, your loved ones and friends. Remember me in the laughter and joy of being alive.

Hear me in the sound of loud music coming from a dock bar. Hear me in the growling of a stock car engine taking a green flag or the whine of Indy car hitting 200 mph on the backstretch. Hear me in the laughter of a child skipping in the surf or running through the sprinkler in the back yard. Hear me in the chatter of friends around a BBQ pit. Hear me in the swell of an orchestral pop concert on a wide meadow as the sun settle over the land. In all the joyous raucous noises of being alive, hear me and remember me.

 See me in the flag unwinding in the breeze. See me on the baseball diamond, the soccer pitch the basketball court. See me at the bar with my friends raining a glass to good times gone by and still to come. See me in the smile of your wife, your girlfriend or male equivalent thereof. See me in the hammock beneath the tree taking a slow summer nap. See me in all the moments and times of that make life special. See me and remember me.

Remember me best in living well. Think of me when you are passing around the steaks and steamed crabs. Remember me as you sip the cold gin and tonic in a sweaty solo cup under a shade tree. Think of me in the fisszt of a beer bottle opening, the fizzing of soda pop in a glass, the shaking of a martini, the pop of a cork, and the tinkle of ice. Remember me in the sounds of the party of life.

I do not want you to remember me in solemn sweaty ceremonies and pompous parades of politicians. You do not need to go to the cemetery to remember me for I am not there. I am at the beach, the ballgame and in the backyard. I am at the lake, on the boat and fishing on the riverbank. Do not remember me simply because I died. Forgetting to duck or being ordered to charge impregnable positions is a crappy legacy if you ask me. Remember me because I lived and I died protecting your right and ability to live and experience all the joys and madness that is life.

I am not merely a dead soldier who died in the service of his country. I am all the things that were made possible by freedom gained and protected. I am Mark Twain, William Faulkner and Hunter Thompson and all the words written by the geniuses spawned in the America. I am the music spawned among a free and talented people. I am Robert Johnson, Miles Davis Liberace and Ted Nugent. I'm all the great scientists and inventors that have graced this land. I am Edison, I am Feynman and I am Ford. I am all the great athletes born in the towns and cities of this nation. I am Mantle. I am Unitas. I am Jesse Owens and Jim Thorpe. I am every greatness achieved by this nation born in a sea of blood and protected by rivers of it over centuries. Do not mourn me for the time has past for that, but remember me.

Remember me for I am also the future of this great nation I died to build. Remember me as you live, as you build as you work and as your create. Remember me as youprotect my legacy from the charlatans, thieves and idiots who make up our political class. Remember me when you refuse to cede personal liberties I died for to those who have good intentions and bad ideas. Remember me when you take chances and reach for your dreams and ideal. Remember me when you refuse to participate in limiting freedom or opportunity based on skin color, sexual preference or genital make up. Remember me when you dream, when you achieve and when you celebrate. These are things for which I died and for which I would be remembered.

My voice calls to you today. Life, love, laugh dream, build achieve. Do this in remembrance of me.

Happy Memorial Day. Remember me.

Stefan Jovanovich writes: 

 Memorial Day used to be Decoration Day — the day when the graves of soldiers were draped in flags — and there was no official Federal date. In Gettysburg it was held on November 19, the day the cemetery was dedicated. In the South it was on various dates in the Spring. It was never, ever a day for speeches until the official South decided that the soldiers graves should be part of a general uprising to justify the Rebellion — the same political movement that gave us official segregation; at that same time - the late 1880s — the states began legislating official holidays for Decoration Day, they also made Jefferson Davis' birthday a state holiday. What we now observe dates only from WW II, and the date itself was fixed in the 1960s. It is strictly a Cold War ritual that has been revived for the war against unspecified terrors.

I hope Tim finds an equilibrium somewhere between thinking that everyone who ever died in uniform as a hero and believing war is everywhere and always to be considered the worst of all things. I hope everyone enjoys the ceremonies today. If I don't, it is not out of disrespect for what people have done. I don't like official remembrances for the same reason Grant hated parades; they tend, by their very nature, to be organized lies.

They allow the people in the reviewing stands to preen and they present a picture of order that is the very last thing that wars ever are.

The truth is that some wars are worth their awfulness and some are completely stupid. The people best qualified to judge are the ones who have done the fighting; as with so many other things in life, those who know the most are the very ones who don't say much. There are exceptions, like Professor Sledge:

"War is brutish, inglorious, and a terrible waste… The only redeeming factors were my comrades' incredible bravery and their devotion to each other. Marine Corps training taught us to kill efficiently and to try to survive. But it also taught us loyalty to each other - and love. That espirit de corps sustained us."

"Until the millennium arrives and countries cease trying to enslave others, it will be necessary to accept one's responsibilities and be willing to make sacrifices for one's country - as my comrades did."

anonymous comments: 

I differ…greatly.

I preface by saying I have not served in the services nor in a war.

Yet I've known many…young, naive or foolish men who have answered the call. Many didn't believe in the cause and thought their superiors to be idiots. Yet they stayed and fought. I respect and remember that loyalty, and buy dinner or drinks for them and their family when I come into contact with them. I do it out if loyalty and not guilt. They upheld their end of the bargain. The least I can do is acknowledge them.

These are not the she-men that appear to surround me, those who talk about shat should be done yet are never there to do it. They have loyalty to no one.

There are pieces meant to rouse the animal spirits and conscripted ranks. I felt Tim's piece wasn't a call to enlist as other pieces.

The generation of Vietnam castigated those who were drafted and required to fight. That double bind or catch-22 has always bothered me. There's a similar thinking in DC now, where you are encouraged to break laws and obey them simultaneously.

One if the primary social contracts is to take care of your own. Tim's piece echoed that sentiment. The Chair demonstrates it too, as do many on the list.

In the Catholic Church, there are many celebrations of saints. I have learned, not having been raised Catholic, that many saints were far from perfect. There was a similar idea in his piece. Monday isn't a celebration of personal perfection or success in war. As Tim writes, it is recalling the guy who once sat in the empty chair at our table.

Semper Fi et Ductus Exemplo. 

Ralph Vince writes: 

There is nothing more inadvertently dangerous than a young man.

There is nothing more potentially vicious than a woman on her own.

One must tread carefully around these. 



 April is the time of the Master's and jackets (usually iill-fitting of green), and of Opening Day. The grass is freshly mowed. The paint on the dugout top is bright. The peanuts are crisp, and the seats still creak from the stills of winter. The call of "Play ball!" is usually a welcome one, but particularly in April, probably more so in the Northeast and Midwest, where the snows may still be melting, but generally around the country regardless of the specifics. April is the month Passover, of Easter, of renewal. The baseball season awaits, pregnant with potential to confound the statisticians whose analyses figure into most, if not all, of the moves a field or general manager may make in the course of a game, a series, a week, a month, a season. Now is the next season we spoke about last season.

By May, the season is in full bloom. The first assignments to AAA have been made, the first players have been placed on the 15-day DL. The true depth of a team's bench, of its pitching staff, of its bullpen, of its farm system are becoming clear. The Derby is done as the run for the roses completes and the golf world disengages from Amen Corner to contemplate the upcoming US Open. As the month progresses, teams find their grooves and the season begins to take shape.

So one might be pardoned for wondering if the same Orioles team that prostrated itself 10-2 before Toronto last night could possible be the one that skewered the same opponent 5-0 this evening. Looking at the program, they are indeed the same teams. But the games played couldn't be more different.

That's the thing about baseball. It's a 162 game season. Sure, some games are a bit strange, like when the Os played Chisox in an empty ballpark. And there are the glimmers of genius that surface in those who previously performed as if they has no clue, as in Sandy Koufax's show in 1961 (does anyone realize how close he came to just hanging up his cleats after the 1960 season?). Maybe this year, that will be the case with Ubaldo Jimenez. Certainly, there is the potential.

The season's still young, though it is May. Preakness is coming up, and the Stakes isn't too far behind. The wheat fields will be coming to life around then, the cornfields too. And somewhere across the US, there's an 8 year old boy or girl heading off to the ballpark, A, AA, AAA, or the show, makes no difference, glove in hand, convinced that he or she will catch a foul in the stands and, if someone will sign it, a great thing for "show and tell" that week. And at least a ball for a game of catch if not.

Baseball in May. Breathe it in. Smell the freshness of the cool grass in the outfield. Hear the clap of the ball off the bat.

It's restorative of the soul. And watching a team metamorphose as the Orioles did from last night to tonight, restorative of hope and of dreams. In May, in baseball, all things still remain possible.

Play ball!



 Some good books one is reading after a hurried visit to the Seminary Book Store in Chicago.

The Best of Ed Zern by Ed Zern, a hilarious and deep book by a writer with part Ring Larnder, part Mark Twain, with all the stories relevant to trading.

Somewhere For Me, a bio of Richard Rodgers by Meryle Secrest, a lugubrious account of a great musical composer, great businessman, son of a gun.

Why Capitalism by Allan Meltzer, an excellent update of Free to Choose and Capitalism and Freedom by a monetary economist with many deep thoughts appropriate for introductions to free markets for kids.

Karl Pearson: The Scientific Life in a Statistical Age by Theodore Porter, a bio that shows how philosophy and morality led to the foundation of frequency statistics, a disciple of Galton.

The Roman Market Economy by Peter Temin, some nice charts and diagrams showing the importance of economic variables, prices, labor, land in the history of Rome up to 300 AD.

Modeling Binary Data by D. Collett, everything you'd want to know about how to explain binary data using logistic models and maximum likelihood. The simple dependent variable makes the book a good intro to variables whose magnitudes go all over the map.

Europe by Brendan Simms, a 700 page intro to European history from 1500 to the present emphasizing the importance of Germany with many pithy and seemingly deep summaries.

 Magnificent Trees of the the New York Botanical Garden, a beautiful pictorial and descriptive journey through the Bronx Garden we will be visiting September 4 with Adrian Bejan, who says it's replete with constructal trees.

Crony Capitalism by Hunter Lewis, a surprisingly informative view of bribery, double dealing and insider activity in the financial crisis written surprisingly by an agrarian reformer.

Top Dog by Po Bronson and Ashley Merryman, shows how competition, incentives, and motivation effect winning in many psych experiments and sports outcomes.

The Improbability Principle by David Hand, a deep book explaining the reasonable probability of coincidences and extreme events by a profound and erudite scientist, good for the layman and the expert.

Chemistry: Science Double Award by B. Earl and L wilford. A secondary school intro to chemistry about my speed in developing a foundation for this fascinating and useful subject.

Gordon Haave adds: 

 I wrestle with reading non-fiction and fiction. I have been reading so much non-fiction for work that I have been trying to read fiction when I can to unwind.

Recently I have finished, for the 2nd, time, three of my favorite books:

Growth of the Soil, by Kunt Hamsun.

Independent People
, by Halldor Laxness

And Chronicles In Stone, by Ismail Kadare

All three are great. After I read Chronicles in Stone I had to go and visit Girokaster, Albania, where it is set.

Here are the pictures I took. The WW2 items are inside the castle which is the focus of the book (the book takes place under Italian occupation in early WW2).

The above is a public link that everyone should be able to see. There is also a picture of Enver Hoxha's house in there.

David Lillienfeld writes: 

I've been reading Supreme City by Donald L. Miller. The book discusses the development of Manhattan during the 1920s. It includes the development of radio networks (Paley vs Sarnoff), the rise of organized crime in the wake of Prohibition, the building of such icons as the Chrysler Building and other buildings, the creation of the Park Avenue residential district (43rd to 96th Streets), and so on. A fun read.

anonymous writes: 

It's been quite a while since I last recommended a book. However, "The Boys in the Boat" by Daniel James Brown deserves consideration. It traces the course of a group of young men attending the University of Washington through their (Depression) years of crewing (eight man) and their quest to represent the U.S. in the 1936 Olympics. We don't produce guys like this anymore– unless you can name a recent college team (any sport) that achieved athletic greatness while all acquired degrees in engineering, science, or law.

anonymous recommends: 

I'm really enjoying Conn Iggulden's 5 book series on Genghis Kahn, starting with Ghengis: Birth of an Empire.



It looks like a new currency awaits.

There's lots of assertions about what happens to Greece in case of a Grexit given that the resulting drachma would probably quickly lose value. What if Greece were to tie itself to bitcoins or some other cryptocurrency?

anonymous writes: 

The first step will be capital controls. The second step will likely be some form of domestic IOU's and or default. Those IOU's may or not morph into a New Drachma, etc. depending on both domestic and international factors. Very good chance they default and remain in the Euro as well. The Greek populace has made it clear they don't want to leave the Euro and want some sort of compromise. The bridge to cross between the two sides, however, has proven to be too far to cross. Further, the Greek economy is collapsing and all targets are moving faster than "shoot the freak" on Coney Island.

-primary budget now at best deficit of 1.5% of GDP, target was 1.5% surplus

-so need 3% of fiscal tightening in middle of this recession

-Greek constitutional court now talking of reversing some pension reform

-watch the bank deposit and financial market flows for keys to whether capital controls will be implemented



 All hades broke loose in Europe in 1846, and the Rothschilds played the same role, begging favors, and granting pocket money to the politicians, and financing debt that their modern counterpart of faith and Flexionicism played in 2007-2008, albeit none of them officially received a post in the cabinet. However, despite the revolutions in Germany, France, and Italy, the Rothschilds' offer to take down Austrian debt at 4 3/8% was only 1/4 % higher than the going rate prior to the Hades.

It was interesting to learn how openly the Rothschilds influenced the rates with well timed purchases to help their changing political alliances along. Natah proudly told Metternich "I raised the rates very easily yesterday by buying Mettelligique". In those days a rise in the stock market was good for raising confidence and lowering rates.

The general impression from reading the history of the Rothschilds in this period was that their influence was quite similar to their modern counterparts in Treasury but their grand balls and mansions seemed to the observer from the grandstand to be of a much more ostentatious scale. Hopefully, the great historian Stefan will correct and sharpen these observations.

Stefan Jovanovich comments: 

There were two differences: (1) the Rothschild brothers had to raise the money they lent and paid for their trades. They could not print it or engage in a perpetual swap of one debt instrument for another. They had to have customers believe in their resources and also have the actual specie reserves to back up that belief. Their personal displays of wealth were important as theater and necessary as investments in private accommodations in an age when important visitors became house guests, not hotel customers. (2) they never indulged in national policy. Being permanent outsiders as Jews allowed them to avoid the corruptions of patriotism. They were accused of being guilty of caring only about self-interest and at the same time trusted because no other interest would supersede. They would act in a way that benefited themselves and their clients but never at the expense of their reputation with others. It is impossible to imagine their advising any of their sovereign clients to choose devaluation at the expense of their trading partners.

David Lillienfeld adds:

The Rothschilds did not earn their money from banking. They worked for sovereigns, too, as when they ran the funds for the British government to Wellington's army in Spain. Supposedly, no one else was willing to do it and the Nathan and company earned a nice fee for their troubles. That was supposedly not an unusual undertaking.

Stefan Jovanovich comments: 

Er, not quite. The Rothschilds were merchant bankers; if you can imagine a band of brothers of Larry, Watsurf, the Zachar et. al. dealing in everything from cotton bales to consols, you have a picture of who they were and what they did. They took deposits, underwrote loans and also dealt in used furniture, as the Maturin saga notes.

The story about Wellington's Army has been retailed for over a century; the Sharpe books (and the TV serial made from them) have an episode with Nathan pretending to be a Quaker (or Baptist? this part is entirely from recollection) woman missionary riding in a coach through Spain so he can smuggle a letter of credit to Wellington. It makes - I suppose - good fiction; but absolutely none of it is true.

With Wellington paper would have been more than useless; the French were paying their allies in script. If Wellington and his allies were to win what was the first modern Spanish Civil War, they had to pay in gold. This is where Nathan and his brothers came in; they dealt in bullion. The Rothschilds were sensible enough never to stray very far from their security; Wellington's gold was delivered to John Charles Herries in London. He and the Royal Navy had the responsibility of getting it to Lisbon.



 We are in a new era in Major League Baseball. It's an era which will witness great strides in our ability to thrive as inhabitants of this planet. It will greatly aid in our ability to avoid war and promote the peace. It will assure one and another's appreciation of one's fellow person.

No, the Age of Aquarius isn't upon us, but you might be pardoned for thinking that it was if you were watching the Boston Red Sox (home) playing the Baltimore Orioles last night. For last night we witnessed proof positive of an umpire's ability to read a player's mind and know that player's thoughts before even the player thought it. It was an amazing demonstration that umpires no longer need be bothered with what is or isn't happening on the diamond, or in the ballpark, if you prefer, before making a decision about something. Maybe MLB should revoke the vision benefits plan for umpires; they surely don't need glasses any more. Mr. Baker is going to teach them how to read everyone's mind to know what happened on the field.

Last night, Ubaldo Jimenez, a wild pitcher signed by the Os last year to a 4 year $50 million contract, was into the 4th inning of a no-hitter. Jimenez throws a pitch that's inside and up to Sandoval. The ball rides up instead of riding down. Sandoval was hit in the right shoulder. Immediately, with no warning, Jordan Baker, in the show for his 3rd year, decides that Jimenez was retaliating for a hard slide into 2nd to break up a double play. But the slide was legitimate, it's how you play the game, and it's not as though it was a spikes in the chest thing. It was hard-played baseball, the way you'd expect pros to play. But Baker, you understand, apparently peered into Jimenez's deepest thought and knew—just knew—that Jimenez was throwing at Sandoval. No one else in the park seemed to know that. hey, if I'm leading by a run in Fenway Park, why would I throw at someone and have a man on base. The Bosox have some good offensive threats. Do I really want to risk giving up a run? Not really. But Baker knew that this was retaliation, and only after the ejection were both benches warned.

The broadcasters said nothing to suggest any unrest in the Bosox dugout immediately upon the hit, the camera caught no immediate effort by the Sox to protest, there was nothing in the way of reaction, probably because no one would believe that Jimenez had enough control to do anything like hitting Sandoval. Chances are decent that if Jimenez did throw for Sandoval, the ball may have gone into the backstop or maybe way outside of Sandoval, as in behind his back. Looking at the Boston Globe this morning, I don't think Boston fans thought the hit was retaliatory.

Jimenez has, after all, led the league in wild pitches—twice, I think, not just once. Just because it was a no-hitter, though, doesn't mean Jimenez had great spot-on control. He didn't. I don't think he ever will. It seems at times that he's throwing a knuckleball with lots of speed, so no one knows exactly where the ball is going to go once it leaves Ubaldo hand—maybe not even the baseball itself. But he was doing well enough to have a no hitter. He's just wild. Last year, he was ultra wild, and his season was just awful. A few on the list and I have emailed back and forth about Jimenez. He's almost the Maria von Trapp of the Orioles, lots of potential talent, lots of interest, but challenges to be surmounted while figuring out how to tap into that talent.

The retaliation, you see, was a phantom. It was all in Baker's head. Or maybe it was in Jimenez's head, it's just that Baker understood it as such before Jimenez did. Maybe Yogi Berra said it best when he stated, "If I don't read other people's minds, they won't read mine." Yogi didn't say that, you say? You see, I've been taking lessons from Mr. Baker, and I know that that's what Yogi is thinking—even before Yogi does!

I have no qualms about protecting the players. None whatsoever. But let's protect them about real things, not phantoms.

Oh, I forgot to give the coup de grace: The Os were leading 1-0 at the time of the ejection. As a result of the ejection, the Os tapped the bullpen pretty early in the game and used up more relievers that one would like given that yesterday night's was the first of a three game series at Fenway.

The Os lost in the bottom of the 9th with a walk-on hit. The score was 3-2. The ejection was hardly inconsequential.



 I'll just throw this out.

Intuitively, I suspect that if a fraction X gets better on a placebo, and if a fraction Y (which could overlap with X) gets real physiological benefit (as determined the by the deities), then the fraction that will REPORT being better would be something like sqrt(X^2 + Y^2). (The "reasoning" is that the real effect and the placebo effect are probably uncorrelated and therefore "add" in an orthogonal way, like the Pythagorean theorem.)

So if X is 0.6 and Y is 0.4 then 72% of people in the study would say they were better.

Of course this won't be valid if X^2+Y^2 gets close to or exceeds one.

Anyway, if that formula is right, and if 40% of people really do benefit as determined by the deities, then we'd see 72% reporting that they're better, which is not much more than the percent that "respond" to the placebo, 60%. So it's probably hard to smoke out an effect, even if it's kind of big.

anonymous writes: 

Before any marathon or ultra, you hang around in the corral of runners waiting to go, (towards the back. towards the WaaaaaAAAaay back, with the jockeys, fat ladies, kids dribbling basketballs) and ask practically ANY old guy if they take it, they will tell you affirmatively. I've done that at least dozens of times. Then look around at who has had a knee replacement and is in that category. No one.

Now that does not mean that the prevalence of old guys running marathons now (whereas two or three decades ago you didn't see that, may be a function of fad, but I remember old guys who ran two or three decades ago stopped running– almost all of them because "their knees couldn't take it anymore," or they "wore out their knees.") is a result of G&C consumption, or the fact that there are so many more older people running now, the fad effect.

There is a tendency to mock anecdotal evidence such as this– but our entire lives are spent accumulating anecdotal evidence and attempting to draw conclusions, from what we consume, what the "best" route to get to a certain destination is, what time we ought to wake up, to how we trade, etc. Everything we do in life is an attempt to solve an optimization problem based most often on a statistically insignificant number of data points.

David Lillienfeld writes: 

First, I'm a physician and among my areas of expertise is the evaluation of drugs (pharm, not abuse). If you want to use anecdote, then you must have little use for regression to the mean. Anecdotes are subject to publication bias, small numbers, inadequate control of bias, among others. It is human nature to work off of anecdotes. It is also misleading.

Based on anecdote, radical mastectomy would still be the standard of care for breast cancer. Based on anecdote, rehab after a heart attack would consist of sitting on one's butt for six months "for healing." Based on anecdote, there are any number of medications one might use for treating pulmonary fibrosis. They actually don't do much. None of them. Based on anecdote, laetrile would be the nectar for cancer. Guess what—it isn't. So if you want to run on anecdote, go right ahead. But don't be surprised if your results are random, because that's what's happened in medicine based on anecdote. It's the reason why evidence-based medicine has emerged from the shadows. And don't forget that regression to the mean. Relying on anecdote goes right up there with physician self-treatment of disease. BTW, my uncle treated himself for a heart attack. Wrote the orders for morphine (it was 1960). Managed to kill himself with an overdose. In the hospital.

Second, vitamin C has been looked at for any number of diseases. For the common cold, there's lots of hedging by the Cochrane Collaboration, but I'd hardly call it something where they see compelling evidence—at least for the common cold. Linus Pauling may have thought he was onto something. He was brilliant, some would say he was a genius. That doesn't give him a pass on evidence. Ronald A. Fisher believed cigarette smoking wasn't—couldn't be—a cause of lung cancer, and he was mystified by the increasing mortality rates from it. The same was true for Jacob Yerushalmy. There's a fellow in San Francisco, generally acknowledged as brilliant (he may even have a Nobel) who maintained that HIV wasn't the cause of AIDS. Genius isn't immunity from being wrong. Conjectures in science, even from geniuses, need evidence to be considered worthy of incorporation into the corpus of scientific knowledge.

I had two good friends, Bill Cochran (he of Cochran's Theorem and Abel Wolman talking at a symposium on the history of epidemiology. Cochran observed that "Evidence is a bitch." Wolman replied, "At least evidence is visible. It's the non-visible things that will get you every time." Wolman made his reputation in sanitary engineering (as it was then known) on figuring out how to get sufficient chlorine into tap water as to kill the cell present in it while maintaining that water's potability. Threats that weren't visible was his stock in trade, so to speak. But these were philosophies of science, not specific research questions.

Third, the pharmacokinetics of vit C do not suggest that more is better, ie, always gives a higher serum concentration.

Sorry about the length of this message, but it's worth noting that saying, "Guessing is a capital crime, and if you engage in it, you will lose your capital and become a criminal." I wish I could remember who said it. Can't though.

Ralph Vince writes: 

I don't disagree with you (more specifically, I'm not qualified to disagree with you on this even if I were inclined to), however, as infants we learn to speak, and before that even, in our earliest life hours, we learn to learn by optimization based solely on the sparse data set of anecdotal evidence.

It's a platform that has certainly served us well, should not be disparaged, but rather ought to be acknowledged as perhaps not always best when other determination making platforms are available.

Jim Wildman comments:

Properly done full squats are excellent for strengthening knees (assuming no preexisting damage, only weakness). One of the surprising things I've found since starting powerlifting 4 years ago, is that a lot of 'knee pain' can be corrected through better mobility (ie, stretching). New power lifters of all ages typically have to work on hip and ankle mobility before they can successfully squat. Once you have the mobility issues corrected, building strength is a matter of patience and diligence.

Russ Sears adds: 

My wife, a RPh, thinks it MAY help, because it does seem to increase the lubricant on the joints.

However, firstly, this effect takes 2-3 months of use to develop this effect, The placebo effect is much more immediate. And most users think it works much quicker than the measurable effect to the body.

Secondly, it may simply be self selection, since as Jim and others suggest. Those willing to stick to taking 3-5 large pills a day are usually the ones willing to exercise. Diet also effect it.

Thirdly, many drugs help cause the desired response to the body, but create other problems to produce that effect. For example lowering cholesterol, but also side effect of lower calcium/electrolyte for the heart. (this is why I avoid supplements in general)

Fourth, it is not a "cure" but a MAY prevention future flare-ups, it MAY mask the symptoms. And people with arthritis have various rate of deterioration. Hence, needing a large group to determine if it helps.

With this said, many doctors and pharmacists do recommend using it. 



 Kyle Bass recently opened a new strategy against drug companies: short their stock and then attack their patents, using a law from three years ago that basically opens the door to such things.

"Hedge Funds Found a New Way to Attack Drug Companies and Short Their Stock"

Even if the challenge results in no action by the PTO, it will take a while for that to come to closure. In the meantime, there's some discounting of the presumed NPV of the portfolio as those wily masters of earnings estimates on the Street (who are never ever wrong) conclude that the company's earnings will be adversely impacted in this way or that. Stock drops, shorts cover, and PTO denies the claim. If the patent is for a cytokine, the challenge may be upheld based on recent SCOTUS rulings, but that's about it.

Some patents may seem absurd (and some are!), such as Schering's (now Merck's) patent on interferon alpha (used for Hep C) dosing—how many times a week, and so. That patent was challenged, and the challenge was denied. That doesn't stop the perceived value of the company from dropping, though.

For big pharma, this may be more of a pain than a major matter. Sure, they will go to Congress to get the law repealed or at least reformed. And the structure of matter patents key to industry are probably intact so long as they are not straight copies of a naturally occurring molecule (I think that's been the new SCOTUS standard). After all, if they were at risk, the chemical industry would be at risk, too. And the capitalization of the majors is such that a drop, while unwelcome, can be weathered.

However, for the start-ups, this may be a bigger problem. Not only is there usually tight spending already so that paying attorneys' fees has a potentially major impact on the budget (could it mean needing to raise more capital, likely with significant dilution??), never mind management's attention more productively spent on product development.

Then there's the stock price. Many start-ups look forward to being acquired as an exit strategy for investors in the company. However, they prefer to do so when the company is in Phase 3, when the valuation has considerably risen. (Including product failures and the like, peak valuation of start-ups is midway through Phase 3). However, if the stock drops because of shorts piling on the company, the market cap will drop, potentially enough to attract the attention of a major pharma looking at the company's assets as priced at a bargain. If this is early enough in development, the market cap isn't going to be that great to begin with. Consider, InterMune's valuation about a decade ago was 100 mil. Pirfenidone, the stuff it's marketing now (whether it's worth using is a different matter), was in Phase 1 / 2. Early development. Go ahead 9 years, and Roche bought the company for 8.5 bil. (Roche is a conservative company; someday, I want to get the BD fellow responsible for the deal off to a quiet corner of a bar and ply him/her with enough cognac to understand the thinking behind the purchase—but that's just my view of it).

So while the biotech frenzy continues (there may be a bubble, except there are real products generating real earnings (and lots in the pipeline from acquisitions) that's supporting much of the valuations. And while you can say that Celgene is a bit stretched, but Gilead sure isn't. Take a look at its PE, its revenues, its products and therapeutic areas and then its pipeline. Not stretched at all. So, is there a bubble? If you look at Valeant, you might be pardoned for thinking so. At some point, Valeant is going to be big enough that the M&A isn't going to support the company's valuation anymore. Kind of like what happened to PDL before the Facet spin-off. At that point, Valeant has to start functioning like a pharma (and not an PE enterprise) and generating some increases in earnings to support its market cap. Either that or watch the air come out of its balloon (guess where I stand on that assessment).

So back to the patents. I think Congress will do something at some point, just not the current Congress, which could barely pass a bill mandating that Reagan National should remain open. In the meantime, there will be some raids by the shorts until everyone else starts to discount rumors of invalid patents. At that point, it's Game Over. Until then, though, while the big pharmas aren't going to be bothered much, there may be some significant damage on the start-up front. And before you pooh-pooh that sector of health care, it's worth remembering that the amount of productive research in big pharma labs is pretty poor these day. Innovation is taking place in the start-up world (not for big pharma, which may get some bargains, but for the investors in those start-ups, who may decide not to invest as much in the area, or in any given company, citing this "play" as a major risk and lowering RoI as a result. in VC terms, that RoI has to be high enough to cover the costs of the all-too-prevalent product failures).

Stefan Jovanovich writes:

I don't think BIOTEK will go upper 162 (hope).

anonymous writes: 

Not to insist, but this latest bounce on BioTek is particularly strong on the numbers/ participation. Will be a maximum of less? The swan song? 



 The 2015 baseball season is now into its second week, and some interesting patterns are appearing. For instance:

1. The Orioles may have some weaknesses in pitching. It's still way too early to hit the panic button, and Jimenez is doing so much better than last year that memories of Steve Stone's 1979/1980 performance come to mind. Base stealing has not been an Orioles strength, and there's either a more aggressive view to the base paths than in the past or some blown hit and runs. On the other hand, Jonathan Schoop gave a nice clinic on Sunday on sliding into second base and avoiding the tag.

2. The Cubbies may have a pitching problem with Mr Lester, who is having some trouble connecting with his first baseman. Hard to get a pick-off if you can't throw to the first baseman. And that hasn't prevented the Cubs from a strong opening to the season in 1st place.

3. The Astros are performing better than I had expected, even if it is early in the season.

4. On the other hand, the Padres are not. Again, though, still early in the season.

5. And the Braves, signer of former Oriole Nick Markakis over the off-season, are sitting nice in first place, 5 games over .500. Quite a strong start in Hotlanta.

Two items of note:

First, MLB instituted some rules to speed up the game. They seem to have worked. The impact on the game itself, though, isn't clear—maybe we'll have an idea by the end of the season. On the other hand, if the MLB really wanted to speed up games, they'd eliminate the challenge provisions. That seems unlikely, though. Does anyone know how many decisions on the field have been overturned by the challenges?

Second, there are some increasing concerns being raised about head trauma among catchers. One of the big differences between football and baseball is the lack of similar collisions among persons of high body mass with consequent transfer of energy often manifesting in the skull as a concussion or just trauma. Unlike football, in which it is difficult to imagine how the game might be preserved in something akin to its current form without such transfer of energy, in baseball, such collision are relatively rare. The exception is the catcher. Backstops do not, generally speaking, experience head trauma so much from efforts to tag a runner at home (though there is some of that) as from the foul tips/foul balls, and even an occasional hit with the tip of the bat (not often though, fortunately). The former though can impart much energy to the catcher, usually through the catcher's mask. That mask has been around for almost 110 years, and it's hard to imagine how the battery operated before those masks became prevalent. The amount of evolution in the mask during that time hasn't been nil, but it hasn't been that great, either. More recent versions of the mask have been somewhat more protective, but the basic problem of how to dissipate the energy imparted through contact of the ball and the mask remains. How soon the MLB will address this matter is unclear, but fans certainly hope it is sooner rather than later.

The discussion of baseball vs football brings to mind that classic from George Carlin:

"Baseball is different from any other sport, very different.

For instance, in most sports you score points or goals; in baseball you score runs.

In most sports the ball, or object, is put in play by the offensive team; in baseball the defensive team puts the ball in play, and only the defense is allowed to touch the ball. In fact, in baseball if an offensive player touches the ball intentionally, he's out; sometimes unintentionally, he's out.

Also: in football,basketball, soccer, volleyball, and all sports played with a ball, you score with the ball and in baseball the ball prevents you from scoring.

In most sports the team is run by a coach; in baseball the team is run by a manager. And only in baseball does the manager or coach wear the same clothing the players do.

If you'd ever seen John Madden in his Oakland Raiders uniform, you'd know the reason for this custom.

Now, I've mentioned football. Baseball & Football are the two most popular spectator sports in this country. And as such, it seems they ought to be able to tell us something about ourselves and our values.

I enjoy comparing baseball and football:

Baseball is a nineteenth-century pastoral game.
Football is a twentieth-century technological struggle.

Baseball is played on a diamond, in a park.The baseball park!
Football is played on a gridiron, in a stadium, sometimes called Soldier Field or War Memorial Stadium.

Baseball begins in the spring, the season of new life.
Football begins in the fall, when everything's dying.

In football you wear a helmet.
In baseball you wear a cap.

Football is concerned with downs - what down is it?
Baseball is concerned with ups - who's up?

In football you receive a penalty.
In baseball you make an error.

In football the specialist comes in to kick.
In baseball the specialist comes in to relieve somebody.

Football has hitting, clipping, spearing, piling on, personal fouls, late hitting and unnecessary roughness.
Baseball has the sacrifice.

Football is played in any kind of weather: rain, snow, sleet, hail, fog…
In baseball, if it rains, we don't go out to play. [The same is true in snow—in mid May, 1986, a 15 inch blizzard in Minneapolis forced postponement of a game. This decision was notable not because of the condition of the field being unplayable (it was the Metrodome, an indoor park) but that the teams could not get to the park.]

Baseball has the seventh inning stretch.
Football has the two minute warning.

Baseball has no time limit: we don't know when it's gonna end - might have extra innings.
Football is rigidly timed, and it will end even if we've got to go to sudden death.

In baseball, during the game, in the stands, there's kind of a picnic feeling; emotions may run high or low, but there's not too much unpleasantness.
In football, during the game in the stands, you can be sure that at least twenty-seven times you're capable of taking the life of a fellow human being.

And finally, the objectives of the two games are completely different:

In football the object is for the quarterback, also known as the field general, to be on target with his aerial assault, riddling the defense by hitting his receivers with deadly accuracy in spite of the blitz, even if he has to use shotgun. With short bullet passes and long bombs, he marches his troops into enemy territory, balancing this aerial assault with a sustained ground attack that punches holes in the forward wall of the enemy's defensive line.

In baseball the object is to go home! And to be safe! - I hope I'll be safe at home!"



 The Sound of Their Music, a bio of Rodgers and Hammerstein, by Frederick Nolan, has many layers of interest for the speculator and others, especially considering that Nolan seems to know nothing about the technicalities of music such as harmony or rhythm, and he seems to be uninterested in the personal lives of one of his heroes. Here are some of the interesting layers.

1. It describes the life and career of the greatest musical duo in history

2. It gives a birds eye picture of the evolution and creation of each musical

3. It gives a glimpse of every great popular composer of the 20th century, up to and Lloyd Webber as the duo collaborated with every one of them including Gershwin and Romberg and Sondheim

4. It gives the financial details of raising money in those days for each musical, e.g. 75,000 to put on Oklahoma

5. It provides a great snap shot of what life in the 20th century was like for the middle classes who loved music in the days when there were 150 American piano manufacturers versus 2 or 3 today.

6. It has great pictures of all the stars and directors of the day

7. It contains a great picture of the dynamics of a beautiful 2 person partnership (R and Hammmerstein) and a terrible one (R and Hart)

8. It contains nice details about the significant family events and deaths of each character.

9. It shows by indirection the techniques that built up a billion dollar business in the field masterminded by Rogers.

10. It shows how many musicians including the duo were able to overcome great neurosis and bounce back to do great work.

A great example of boom and bust was between 1924 and 1929 there were 26 new theaters built in NY, and these would house a total of 225 new shows a year. Similarly in 1929, the Hollywood studies produced about 250 talking musicals, but by 1934, hardly none at all and movie theaters would have to place a sign on their marquees: "there is no music in this show". 

I was also interested in some of the lessons for speculators and great anecdotes contained. Here are some of my favorites. When the cynical critics came to vet the duo's musicals in tryouts they often said as Mike Todd did about Oklahoma: "no leg, no jokes, no tits, no chance." They said the same thing about The Sound of Music. And Hammerstein in a typical quote (he was a saint) said: "the cynics hate to see a kid playing, a blushing bride, and a happy family."

Oscar's father and grandfather were impresarios in the business, and one of the rules that Hammerstein emphasized was "there is no limit to the number of people who would stay away from a bad show." Rogers said something similar in "the smartest people to judge a musical are the audience". And he was always willing to change a tune or cut if the audience didn't like it.

The musicals all needed road shows and tryouts to become good. They started out 4 1/2 hours long, and they changed enormously by the end based on what the audience and the critics liked. Hammerstein would have been a lawyer and Rogers, an underwear salesman if they had listened to their family and tried to get a steady job as they were urged. Both fathers were absentee fathers who spent little time with their kids as they were too involved in business. Many chance meetings let to the great shows. Hammerstein collaborated with Kern on showboat because they met at a Victor Herbert funeral. Kern was able to convince Ferber to let them use the book because he met her at a how with Woolcott and interrupted his conversation with a pretty lady saying "you have to introduce me to Ferber at the Circle" and Woolcott said "I think that could be arranged. The one you rudely interrupted is she".

After the success of Oklahoma, Hammerstein took out an ad in Variety saying "Here are my recent failures. Very warm for May, ball at the Savoy, three sisters, free for all the gang's all here, east wind, and gentlemen unafraid. I've done it before, and I can do it again". The latter thought is something that all speculators should perhaps plaster to their walls.

David Lillienfeld comments: 

It's interesting that it was during the mid 1920s that Park Avenue above 42nd Street took on its current characteristics as a major residential street. By 1928, 10% of all the millionaires in the US had a Park Avenue residence. Emery Roth designed many of those buildings (leading to perhaps the greatest irony in NYC real estate). This was also the time that the Vanderbilt mansions on 5th Avenue began to fall and multistory co-ops replaced them.

That there would a number of musicals appearing on Broadway makes sense given the wealth then accruing in NYC.

What I find curious is that when I think of a movie musical, I think of MGM. MGM practically minted money during the 1930s. Louis B. Mayer was rumored to have a $500K (some suggest it was as high as $1 million) annual salary during the Great Depression. So how is it that there were no musicals made?



 I was with a commercial real estate broker for several hours today looking at office space for my business. He said that Commercial Real Estate is really moving well and inventory is coming way down. It's a sellers market. Rents are going up.

He said that in 2014 in the St. Louis area they leased more commercial real estate than they had in the previous 3 years combined.

David Lillienfeld writes: 

In Silicon Valley, commercial real estate (CR) is almost non-existent, and the same is true for residential. Sunset Publishing maintains a beautiful garden at its headquarters in Menlo Park. After decades during which the garden was built, it will be plowed over for housing starting Jan 1 next year. Google and Facebook are both within 2 miles.

However, the situation in Tracy, on the East Bay, is a different story entirely. CR over there isn't nearly as in demand as in the Valley, and there's still reasonably-priced apartments (read: those earning under 100K can still afford them). (See this article from yesterday for a nice summary of the state of the valley economy.)

As an index of CR in the valley, though, consider: there is real estate speculation starting along the CA-92 and 17 corridors, and there are whispers of the valley extending its reach into Half Moon Bay and perhaps even Santa Cruz in the next one-to-two decades. HMB seems more likely, though, should it happen at all.

There are now two impediments to further growth in the central valley: open space (marsh lands are being looked at for construction) and infrastructure. In the AM, 101 rivals the LIE as a parking lot. East Palo Alto could be developed but it has almost no available water supply (not just water, but the infrastructure to distribute it).

So while CR is now strong out here (and residential too—as of yesterday, there are a total of 10 houses for sale on the peninsula. There are many for lease, though even then you're only talking about 50-55 or so), it's also strained—there's a limit to how many customers can get to it, there's an understanding that the valley business environment is frothy, and while there is household formation, it's anyone's guess as to how long it persists. Things change quickly when you cross to the East Bay. Strong in the valley (including the peninsula extension) and so-so in the East Bay. Everyone "knows" a downturn is coming, but no one it seems is much prepared for it. Go to the Stanford or Santana Row shopping centers, and you get the sense the area is floating on a cloud of money. (I think of it as the fleecing of Wall Street.) One sign of this state of affairs is the abundance of Teslas on I280, I680, and the 101. The Ferrari dealership in the west valley isn't hurting, but it's nothing like it was in San Diego near the QCOM and biotech ridge locales. Teslas are now seen as the new "chick magnets."

The big imponderable in California right now (and the other constraint on RE demand of any sort) is water. One story making the rounds had Facebook and Google considering moves of some of their admin functions to Reno, until they realized Reno was as short of water as California.

If there's another year or two of drought, I think much of the money now going into CR will be written off—there won't be the growth to sustain it. Not without a war between the San Joaquin Valley and the coast over water. With 10 percent of the state's water going to almond trees versus 12 percent for all human use, it seems likely that the almond trees will lose, but not before a battle



Kyle Bass recently opened a new strategy against drug companies: short their stock and then attack their patents, using a law from three years ago that basically opens the door to such things. Even if the challenge results in no action by the PTO [Patent and Trademark Office], it will take a while for that to come to closure. In the meantime, there’s some discounting of the presumed NPV of the portfolio as those wily masters of earnings estimates on the Street (who are never ever wrong) conclude that the company’s earnings will be adversely impacted in this way or that. Stock drops, shorts cover, and PTO denies the claim. If the patent is for a cytokine, the challenge may be upheld based on recent SCOTUS rulings, but that’s about it.

Some patents may seem absurd (and some are!), such as Schering's (now Merck’s) patent on interferon alpha (used for Hep C) dosing—how many times a week, and so. That patent was challenged, and the challenge was denied. That doesn’t stop the perceived value of the company from dropping, though.

For big pharma, this may be more of a pain than a major matter. Sure, they will go to Congress to get the law repealed or at least reformed. And the structure of matter patents key to industry are probably intact so long as they are not straight copies of a naturally occurring molecule (I think that’s been the new SCOTUS standard). After all, if they were at risk, the chemical industry would be at risk, too. And the capitalization of the majors is such that a drop, while unwelcome, can be weathered.

However, for the start-ups, this may be a bigger problem. Not only is there usually tight spending already so that paying attorneys’ fees has a potentially major impact on the budget (could it mean needing to raise more capital, likely with significant dilution??), never mind management’s attention more productively spent on product development.

Then there’s the stock price. Many start-ups look forward to being acquired as an exit strategy for investors in the company. However, they prefer to do so when the company is in Phase 3, when the valuation has considerably risen. (Including product failures and the like, peak valuation of start-ups is midway through Phase 3). However, if the stock drops because of shorts piling on the company, the market cap will drop, potentially enough to attract the attention of a major pharma looking at the company’s assets as priced at a bargain. If this is early enough in development, the market cap isn’t going to be that great to begin with. Consider, InterMune’s valuation about a decade ago was 100 mil. Pirfenidone, the stuff it’s marketing now (whether it’s worth using is a different matter), was in Phase 1 / 2. Early development. Go ahead 9 years, and Roche bought the company for 8.5 bil. (Roche is a conservative company; someday, I want to get the BD fellow responsible for the deal off to a quiet corner of a bar and ply him/her with enough cognac to understand the thinking behind the purchase—but that’s just my view of it).

So while the biotech frenzy continues (there may be a bubble, except there are real products generating real earnings (and lots in the pipeline from acquisitions) that’s supporting much of the valuations. And while you can say that Celgene is a bit stretched, but Gilead sure isn’t. Take a look at its PE, its revenues, its products and therapeutic areas and then its pipeline. Not stretched at all. So, is there a bubble? If you look at Valeant, you might be pardoned for thinking so. At some point, Valeant is going to be big enough that the M&A isn’t going to support the company’s valuation anymore. Kind of like what happened to PDL before the Facet spin-off. At that point, Valeant has to start functioning like a pharma (and not an PE enterprise) and generating some increases in earnings to support its market cap. Either that or watch the air come out of its balloon (guess where I stand on that assessment).

So back to the patents. I think Congress will do something at some point, just not the current Congress, which could barely pass a bill mandating that Reagan National should remain open. In the meantime, there will be some raids by the shorts until everyone else starts to discount rumors of invalid patents. At that point, it’s Game Over. Until then, though, while the big pharmas aren’t going to be bothered much, there may be some significant damage on the start-up front. And before you pooh-pooh that sector of health care, it’s worth remembering that the amount of productive research in big pharma labs is pretty poor these day. Innovation is taking place in the start-up world (not for big pharma, which may get some bargains, but for the investors in those start-ups, who may decide not to invest as much in the area, or in any given company, citing this “play” as a major risk and lowering RoI as a result. in VC [Venture Capital] terms, that RoI has to be high enough to cover the costs of the all-too-prevalent product failures).



 Growing up in the Jewish enclave of Pimlico in 1960s Baltimore, I would often hear stories of Hank Greenberg and Al Rosen. Greenberg was from the 1930s, and Rosen, the 1950s. (In 1965, Sandy Koufax entered into that list. When he retired a year later, you would have thought there was one giant shiva at someone's house; mothers who didn't know the difference between an infield and the infield fly rule, or who thought a Texas leaguer was a ball player in Texas—my great grandmother, when told that the Astros played in Houston, observed, "Boychik, don't they know it's hot in Houston, especially in the summer? Those men must be exhausted running around the field all day. Why didn't they do what Hank Greenberg did and play in Detroit? Detroit's nice and cool." How she knew anything about Hank Greenberg I never figured out, as it was the only sports fact of any sort that she knew. I didn't have the heart to tell her how hot Detroit got during the summer—began talking of Koufax with tones of reverence.

Al Rosen was one of the anchors of the very successful Cleveland teams of the late 1940s and early 1950s. Ask many about those teams, and the first person from those teams they might mention is likely Bob Feller, the hard throwing HoF pitcher. Rosen would probably be the second one. He was a power hitting third baseman, leading the league in HR and RBIs twice each, MVP one year, and almost a triple crown in 1953. It's a real shame that an injury cut short his playing career. I wonder what his stats woudl have looked like absent 4 years in the navy during WW2 and the injury.

More about Al Rosen from SABR:

Q. Who, during his AL MVP year, missed the triple-crown finishing second in batting average by .0016?

Hint: Had he not missed the bag at first, he would have had a hit in his final at bat that may have given him the batting title and triple crown.

Hint: However, the Senators players were rumored to have intentionally made outs to prevent the eventual batting title winner from getting a final at bat.

Hint: Bill James called his MVP season the greatest ever by a third baseman.

Hint: During his short career, he hit more homers than anyone else that played for only one AL team.

Hint: During the 1950's, only he and Mickey Mantle won the AL MVP by a unanimous vote.

Hint: In fact, he was the only unanimous AL MVP since Hank Greenberg - an irony not lost on either man.

Hint: He and Greenberg not only had the same award, but they also encountered the same type of prejudice during their careers.

Twint: An excellent boxer, he said he had a trick for dealing with anti-Semitic players and fans: "You flatten them!"

Twint: One might say of his mother "A Rose is a Rose is a Rose".

Twint: Hall of Famer Ralph Kiner said, "He was the leader of the team and the best all-around player I ever played with."

A. AL ROSEN, SABR Bio (1953 Won HR [43] and RBI [145] titles, but finished 2nd to the Senators Mickey Vernon (.3372 to .3356): He admitted he missed the bag and thus provided his own excuse for losing the title; It was rumored that Vernon didn't bat in his final inning due to fellow players intentionally making outs in order to award him the crown; MVP 1953 Vote; 1950-1956 HR 192, Yogi 191, Gus Zernial hit 193 but for two different teams; Greenberg unanimous AL MVP 1935; Like Greenberg, Rosen was Jewish; Jew or Not Jew? quote; Mother Rose Rosen) FCR - Bill Deane, Cooperstown, NY



 Whether Grexit is on or off the table, it would appear that the Greek government is boxed in not only by the EMU but also by its own electorate. At one time, I thought that whatever happened in Greece short of Grexit would stay in Greece. Now I'm not so sure. Nationalism is a theme on the rise in the EU. To what degree will responses such as this one by the Greek electorate "spill over" to other countries in Europe?

"Europe Has Approve Greece's Reform Plans"

Stefan Jovanovich writes: 

David's use of the domino theory surprises me. In the Balkans there has never been a need for "spill overs"; nationalism is all that these small, poor countries have. What you have to understand about the Greeks is that they actually do remember the Nazis. If the French, British and even Putin have forgiven the Germans and shifted to the Gaullist notion that it is all the Americans' fault, the Greeks still think about what the Third Reich and its Muslim allies did to their country. They think less about how WW II was followed by a hot and cold civil war that continued, with various interruptions, for another 40-odd years - until the fall of the Berlin Wall.

The combination of those historical memories - one remembered, one deliberately forgotten - is what allows practically everyone in the country to now have the politics of a Beverly Hills communist who has just received an audit notice for his/her tax shelter.



There's lots of discussion of correlations on this site. In many ways, it's a big data in the financial world.

Yesterday, I was working on a pharmacoepidemiology syllabus and realized that in epidemiology, we now have the technological power and data access (in theory, at least) to follow entire populations of tens of millions of people. It's the age of big data. It's the age of genomics/genomic markers. In such circumstances, do the precepts of what is a cause change? Is it a matter of biological plausibility when the correlation for a genomic market with a disease is moderately strong but there is no known mechanism (and may not be since the market may be a regulatory gene—or it may be close to the gene that has an effect)? With big data, epidemiologists may be able to follow vast populations (tens of millions even). In such circumstances, are the means of making a causal inference unchanged?

The correlations reported have been provided a course to profits for some. But if the precepts of causality haven't changed, then the correlations in the absence of other data don't provide a much of a path; those sustaining losses from using the same correlations (assuming the events themselves are random) would simply be silent. Our perception would then be that the correlations have some meaning, and we build upon them.

I'm sure I'm missing something here, but I'm also confident that those on the list can provide some needed direction.

Steve Ellison writes: 

We have sometimes discussed here the problem of multiple comparisons. If one looks for enough things in the same set of data, the odds of finding something that appears to have p <0.05, but actually occurred only by chance, increase dramatically.



 There are indeed spirits afoot, and no, they are not related to Rocky's ghost.

The spirit is one of the spring, a time of renewal, a time of warmer weather, a time when snow melts and the grasses up north start to green as the boys of summer begin to slough off the slumber of winter.

in short, it is spring training time, a ritual going on for more than a century (actually 120+ years). And not only has this rite of spring been going on for a while, it's never been something exclusively American (or at least taking place in the 48 contiguous states), as the Dodgers once-upon-a-time trained in Cuba (extra credit points for the when and for what reason).

Orioles pitchers and catchers report today. (Same for the Cards, Scott.) Let's summarize some notables from the winter: First, the Os did not lose their general manager. On the other hand, that general manager doesn't appear to have done much for a second straight winter. Judging the results from last year, though, it may be hard to argue with his method.

Many O's stalwarts, like Nick Markakis, are gone. They will be missed. The pitching staff remains weak. There are three potential all-stars who missed either all or large segments of last year; will they perform this year? Mochado and Weiters are both question marks in whether they get onto the diamond, and Crush Davis needs to get his 2013 groove back if the Os are to stand a chance at the post-seaon in 2015.

So the Os are a question mark for the season. That's been the case for a while, and one hopes that maybe, just maybe, next winter will be more productive than this past one has been.

In the meantime, some predictions:

First, the Yanks are going to demonstrate that while money isn't everything, it's well ahead of whatever's in second place. That said, there's no reason not to think the Royals might repeat. Time will tell the tale. Regardless, come next January, New Yorkers will likely pay more attention to the Yanks off-season moves than to anything the Knicks may be doing.

Second, the Padres will improve this year. It's hard to see how they couldn't.

 The Cubbies. Ah, yes, the Cubbies. The Cubbies did a lot to rebuild/retool the team in the past 12 months, even as the beloved Ernie Banks passed from our time. However, I will go out on a limb and—to the disappointment of those baseball fans on the north side of Chicago and Cubs fans everywhere else—the Cubbies will not only not win the Fall Classic, but they will not even be in it! I say that with some sense of certainty. Why? Regression to the mean. Except in the case of the Cubbies, going back more almost three-quarters of a century, have not been in the series, and hence, the variance for that regression line is zero. Zip. Maybe this year will be the outlier, but I doubt it. (And for Cub fans everywhere, that may well be the best indicator that the Cubs will clinch the series in four. But we'll see in eight months. Or is the post-season long enough now that it's nine?)

So, in the spirit of spring:

"Spring is here, spring is here
Life is skittles and life is beer
I think the loveliest time of the year
Is the spring, I do, don't you? Course you do
But there's one thing that makes spring complete for me
And makes every Sunday a treat for me

All the world seems in tune on a spring afternoon
When we're poisoning pigeons in the park
Every Sunday you'll see my sweetheart and me
As we poison the pigeons in the park

When they see us coming
The birdies all try and hide
But they still go for peanuts
When coated with cyanide

The sun's shining bright
Everything seems all right
When we're poisoning pigeons in the park

We've gained notoriety
And caused much anxiety
In the Audobon Society
With our games
They call it impiety
And lack of propriety
And quite a variety of unpleasant names

But it's not against any religion
To want to dispose of a pigeon

So if Sunday you're free
Why don't you come with me
And we'll poison the pigeons in the park
And maybe we'll do in a squirrel or two
While we're poisoning pigeons in the park

We'll murder them amid laughter and merriment
Except for the few we take home to experiment

My pulse will be quickenin'
With each drop of strychnine
We feed to a pigeon
It just takes a smidgin
To poison a pigeon in the park.”

Those being the immortal observations of Tom Lehrer, who had only 102 performances in his brief and non-stellar musical career. Even so, enough material for one Broadway (I think it made it that far) show and one off-Broadway show, both of which ran, I think, for some time, gives some reason for pause.

Play ball!



 This article "14 Ways An Economist Might Say 'I Love You" seems appropriate for the day. Personally, I'll go with an orchid. No lines, no trumped up cost. (The line on 86th used to go from 2nd Avenue over to Lex before turning south for 1+ blocks back when I was living in Manhattan. And a dozen red long stems was $44. Ouch.)

Gordon Haave writes: 

The best move to make on Valentine's Day is the single red rose, presented elegantly. That way it looks like you put some thought into it to make it special when really you are just trying to save money.

Ralph Vince writes: 

But you don't just give it to her. Now, is where the REAL thought has to happen and the magic transpires. But most men can't figure that out.

anonymous writes: 

The technique I have had great success with is to engineer events so that it looks like I was not thoughtful, had no plan, forgot, etc. This causes a growing sense of letdown and frustration, which of course seems a counter-intuitive intent. The key is in the swing to euphoria that can occur from this low level. When it is discovered that rather than "forgetting", you had instead been very thoughtful and utilized foresight well in advance (the opposite of what had previously lead to her sinking feeling), the elation can be intense on the lady's part, which leads to a very solid return from the male perspective. I think in the markets, you often get this same euphoric reaction after a test lower has cleaned out the stops– nowhere to go but up.



 Okay. What market situation is similar to The Seahawks decisions to pass with first and goal on The Patriots 1 yard line with 1 minute to go which pass was intercepted.

anonymous writes: 

Working a bid/offer to get flat with a profit ahead of an announcement only for it to come out 1 minute early and go the wrong way resulting in a painful loss.

Andrew Goodwin writes: 

That play call will go down in the annals of history as one of the worst calls ever. The folks who gathered to watch where I watched included one most vocal who cried for Lynch to get the ball to run. Many were calling for the run.

Let us call this a trick play that backfired. The deception factor was high but the pass call was otherwise a poor decision.

David Lilienfeld writes: 

Respectfully, with the benefit of a good night's sleep on it, I disagree. Go take a look at the defensive line. Where was he going to run. The line had been getting a surge. I'm not sure that's the exact passing play to use. A screen might have been better, but a run wasn't going to necessarily do the trick, and with time running down, an incomplete pass buys time for another play. Bad passing call, but going to the pass makes sense. Just not that play. Something a little harder for New England to read would have been better, though.

Chris Cooper writes:

I'm in the middle of reading Scorecasting: The Hidden Influences Behind How Sports Are Played And Games Are Won by Werheim and Moskowitz. The authors do an exceptionally good job of demonstrating how conventional wisdom in such situations can remain wrong. I would not be surprised to find that this particular example was a theoretically correct call which nonetheless always leads to opprobrium by the masses.

I recommend the book, and note that it is on the Chair's reading list as well. The insight into referees is particularly well expounded. Likely many market lessons.

Tim Collins writes: 

At the very least, you try the run. Lynch is truly hard to take down. Call time out if he doesn't make it. Use a QB roll out on 3rd down. Throw it away if not there. That would leave any play open for fourth.

anonymous writes: 

The play made sense in terms of clock management. It was about NOT giving a guy like Brady an extra 20 seconds to come back and beat you. Further, one must wonder why Seattle didn;t let the play clcok run down to :01 and call a timeout at that point.

A similar analog occurred at 2:02 left in the fourth quarter, when NE kicked off winning 28-24. I was certain they could kick the ball short, allow for a run back, let the clock burn on the play and then stop for the 2 minute nonsense, rather than giving away a pass play for free by kicking a touchback.

NE didn't do that of course, and by the two minute warning, the ball was at midfield.

The point is,running down the clock, or not, is not without its risks. The hypothetical — give the ball to Lynch, could have been a fumble as well. The game is comprised of such things, and no play is without risk, as is no trade, hanging out there by its lonesome.

Tim Collins replies: 

Fourth down play doesn't matter, so you have one run and one pass with the one time out. As long as my QB doesn't take a sack on the rollout, I'm fine. Plus, I thought they took too long to get to the line. There was 55 when they huddled up/lined up. Seattle took over 30 seconds to run that 2nd down play. Either way, I run on 2nd down. I'm stopped short and call time out. I now have roughly 20 seconds (plenty more if I actually get lined up in a timely fashion and run), so my QB rolls out. He is told to throw it away if there is not a wide open lane to the end zone or no one is open. As long as he does what he is told, I have plenty of time to run one last play from the 1 yard line. It doesn't matter what the last play is. I either score or the game is over as I will turn over the ball.

Sure, you could switch these and run the roll out on 2nd and the running play on 3rd down. I might even leave that decision up to Wilson based on his read of the defense, but these are my 2nd and 3rd plays. And, yes, I would run it again with Lynch on 4th down from the 1.

Pitt T. Maner III writes: 

My 2 cents and second guessing– Don't lead the receiver. Aim at his body so he boxes out the defensive back(s). The bigger and stronger the receiver you run across the middle the better. More chance of a defensive interference call. It was a play with poor execution. Lynch can catch the ball too as was seen– one would rather have him fight a rookie DB over a short pass. A fade to the corner with your tallest receiver might have been good too. It's all about size and position and ball placement.

Victor Niederhoffer adds: 

"Seattle Coach Pete Carroll Stands By Decision to Pass"

Scott Brooks disagrees: 

I disagree.

He had one time left and The Beast in the backfield. Run the ball twice and then use your timeout. At the very least, he Belichik would have been forced to call a time out to preserve the clock in the (likely) event that Seattle could have Beasted that ball across the goal line.

Worst case scenario, if you pass, do a fade route to the corner.

The Pats were stacked in the middle prepared to take on Lynch, why throw it into a sea of blue?

They even had time to do a play action and give Wilson time to improvise and still throw it away if there's nothing there. Then run two running plays and use the timeout in between.

It was a stunningly poor call, one that will haunt Carrol for the rest of his career.

Pitt T. Maner III writes: 

Think of the money involved (excluding endorsements and lots of other things): "This year, the salary bonus for players on Super Bowl teams has inched up a bit to $97,000 (up from $92,000 a year ago) for each winning player, compared with $49,000 for players on the losing squad ($46,000 a year ago). So the total gap between the game's winners and losers should be a bit higher than it was last year, when the difference was just under $3 million."

anonymous writes: 

Read a paper earlier this year that the most statically reliable goal line play was the slant pass. The least was the fade pass. In my observation the receiver needed to be about 2 yards deeper. He was too shallow to get separation.

Craig Mee comments: 

This reminds me of turning a winning position into a loser. We have probably all achieved this in a number of ways. Spreading off risk and turning over possession has got to be up there. I must include talking to a fellow trader and after the chat swinging your position from net long to net short, and watching the market go limit long.

anonymous writes: 

What about the quarterback sneak?

Would be good to have stats on how many inches/feet can be reliably picked up on a quarterback sneak, even if everybody knows it's coming:

"Around the time Pro-Football-Reference added the Game Play Finder in 2012, I used it to look up Tom Brady's rushing success in short-yardage situations (third or fourth down, 1-2 yards to go). The results were staggering. Including last season, in his regular-season career Brady is 88 out of 91 (96.7 percent) on these runs, including 56 straight conversions. That's almost as efficient as the extra point. After researching some other quarterbacks, I found that most of them had great conversion rates. This is largely due to the quarterback sneak, which has worked 85.9 percent of the time since 2009".



 It's less three weeks before the Orioles pitchers and catchers report (Scott: same day for Cards pitchers and catchers; any other teams of note, please let me know off-line). So it seemed like a good time to kvetch about one of my pet peeves in modern baseball: the intentional base-on-balls. I can get the infield shifts, much as I dislike it (though Boog Powell's 1970 stats are as good an indication that even a shift can be defeated). Supposedly, hitting instructors in the minors have already begun training batters to use the whole field. As Buck Showalter put it, "You don't golf with just a 9-iron, you don't hit just to one side of the infield."

An intentional base-on-balls is when a pitcher wants to assure that a batter who might pose more of a hitting threat than the succeeding batter is thrown 4 unmistakable balls. Alternatively, a player might draw the IBB to set-up a double play. The decision to give a batter an IBB is often left to the manager, but some senior pitchers will issue them on their own initiative. In the Baltimore I grew up in, there was only one Earl—Earl Weaver, and Earl assiduously never used the IBB. An advocate of "walks will haunt," he wanted his players to walk, but he refused to give up a base if he had the choice; to him, an IBB was simply a base. (Then again, Weaver despised the 5 man rotation, asking why you let a 5th guy pitch when you had 4 who were better. I'm in agreement with him on both counts.)

The first IBB was in 1896, when a Giants manager Kid Gleason directed his pitcher, Jouett Meekin, to give a base on balls to Chicago (eventually known as the Cubs) batter Jimmy Ryan (he who scored more runs than any other play not in the HoF) so that he could to pitch to George Decker (who was hardly the threat Ryan presented). Decker struck out, the game was done, and the gambit worked.

The IBB caught on enough that the owners viewed it as something that took away offense (it took the bat out of someone who could presumably do some baseball damage with it) and prolonged the game. They tried to ban before the 1920 season (that being just before the BlackSox came to attention), but umpire-manager Hank O'Day lobbied against the move—and his argument prevailed. The compromise was that if the catcher moved out of the catcher's box behind home place before the pitcher threw the ball, it would be a balk, and the runners on base would advance. That's still the rule. Most of the IBBs I've seen have had the catcher not even crouch to take the pitch, so getting wide of home plate to catch the ball shouldn't be too challenging.

Whether the IBB should be eliminated or at least changed to something where the pitcher or manager indicates that there's an IBB in process, have been around for a while. The argument is that it would speed up the game. Speeding up the national pastime. Wouldn't be much of a pastime anymore. But as any parent who's taken their kids to the games knows, keeping kids focused on the game means having them watch hitting—and that's something the IBB certainly doesn't do.

The only instance I know of in which a batter got a hit in an IBB setting was Miguel Cabrera in 1986. Perhaps Stefan knows of some; I don't.

The trend in IBBs is decidedly down—at least since the early 1990s. Maybe it's that managers are more diligent in using the IBB, but as Weaver observed, it's still a base that's being given up. So it appears the iBB is becoming an endangered species.

I can only hope that it become extinct soon, though I sure there are the purists who think otherwise. We'll see what the coming season brings.

Play ball!



 QEe (QE euro) seems to be moving forward. So why did gold, which has had some strength over the past month, not budge at the news the way currencies did?

anonymous writes: 

The theory I am working on in my head and was hoping to have time to write about tonight is as follows:

QE depends upon a central bank "cartel" all agreeing to do it in unison and or in staggered phases. The cartel allows them to get away with this absurd policy without immediately wrecking the currency as compared to other currencies they don't seem to be devaluing.

Switzerland broke the cartel.

This means that the future of QE is in fact in jeopardy and will be more limited than otherwise.

anonymous writes: 

Isn't that the path off all cartels of > 1 players (Debeers),

Look at OPEC post 1974.

Like the prisoner's dilemma, the "cartel participant," game would call for a certain, upside price where the first member jumps ship, with a phony justification for their greed trumping the purpose of the cartel.

anonymous replies: 

Yes of course. Only in this case instead of restricting the supply, the deal was to expand the supply.

In the old days when Kuwait broke from the cartel and cheated it brought oil down more than just by the amount of Kuwait's extra production because once one member of the cartel cheats everyone else is going to.

It's the same thing here. Once SNB broke, others will be tempted to as well.

This isn't talked about in the press because of the insane and incorrect notion that your currency going up is somehow a bad thing, so the mainstream all think that the Swiss are somehow hurting themselves.

Alston Mabry writes: 

But the alt version is that they weren't playing along because their EUR purchases were putting upward pressure on EUR, counter to ECB's strategy.

anonymous replies: 

What ECB, US, and Japan would have wanted is for the SNB to devalue along with them. SNB wasn't going to do that.

Now, all of QE depends on the big lie that you are not really printing money and not really devaluing the currency.

Any time someone says "you're printing money" the response is met with "you just don't understand" followed by a description of the complicated process of QE and how it's not really printing money.

But the fallback position for the QE'ers is "look, there's no inflation (no consumer inflation.. it's in assets) and "the currency isn't being devalued".

The SNB's peg kept the ECB being able to claim they weren't destroying the currency. The SNB undoing of the peg reveals that the emperor has no clothes and they are, in fact, going to destroy the currency.

Alston Mabry responds: 

It may be true that claims were made about the EUR on the basis of the CHF cross. But I find compelling the narrative that Mario called up Thomas Jordan and said "look, unless you're willing to print tens of B of extra SFrs a month, you're not gonna be able to keep up." And Jordan, knowing that technically the SNB could do it but politically internally couldn't, said "you're right" and they dropped the cap. 



 Cold and flu season seems to be taking an unusually severe toll in California this year. Though it's still early in flu season, there are state-wide shortages of cough syrup, and state health officials are beginning to wonder what the consequences may be for the public's health.

While the notion of flu season is likely already incorporated into many of the models that we usually discuss, and while for the day-to-day modeling it might not much matter, I wonder if any of the other models of price movements have incorporated any indices of health status such as might be represented by flu cases? At some point, those case levels may impact us economically, leading to some increased gravitational pull bringing prices "closer to the earth."

Even if people who are infected go to work, their productivity will be less than usual. Or is the impact sufficiently muted as to be inconsequential?



 As the days lengthen and the crocuses bloom, as the buzz of spring approaches, one's thoughts turn to the icon of the warmer times of the year: baseball.

Over the weekend, I was talking to a neighbor about the coming season, and he commented about the changing styles of ballparks and their effect on the game and how it's played. Consider: Yankee Stadium is often referred to as the House that Ruth Built. I had always understood that to be a reference to the size of the ballpark. When it opened in 1923, Yankee Stadium was 60-70 percent bigger in seating than other ballparks–accommodating the fan interest in the King of Swat. But one could argue that the moniker The House that Ruth Built was as much about the dimensions of the field as about the size of the stands. Yankee Stadium had incredibly shallow depths along the foul lines–under 300 feet. While no one would question Ruth's ability to belt out home runs, the quantity of those hit at home was likely aided by the short distance to the foul pole. Perhaps that's the reason Ruth's (and Gehrig's) power is shown so well in extra base hits. Those aren't helped so much by a shortened outfield.

 Compare Jacobs Field (now Progressive Field) in Cleveland, or Oriole Park at Camden Yards, with 320-330 along the foul lines. (The short lines were not strictly a Yankee Stadium characeteristic. Ebbets Field and Fenway Park, for instance, both had similarly short foul lines.) Big difference. (It wasn't until 1958, tough, that dimensions like those of Yankee Stadium would be considered unacceptable under the MLB rules for new ball parks.)

As we were talking, I thought about the different eras in the construction of baseball parks. There was first the innovator era, when the owners built the parks and often named the parks for themselves. Wrigley Field, for instance, named for the owner of the Cubs who play there. Not that Wrigley built the park, he just named it after himself during the late 1920s. Comiskey Park was built and named for the White Sox owner, Ebbetts Field in Brooklyn, Griffith Stadium (Washington Senators), Shibe Park (renamed Connie Mack Stadium) (Philadelphia As), and so on. (Not all were so named, though; Forbes Field in Pittsburgh, for instance, was named for the soldier in the French and Indian War who named the city.) It was in this cohort of ballpark that the "classical" design took hold. It would hold sway until after World War 2, when the next era of ballparks would arrive, typified by Memorial Stadium ("The Old Grey Lady on 33rd Street"or "The World's Largest Outdoor Insane Assylum," take your pick) in Baltimore. (At one time, at 34th and Charles Streets, by the Entrance to Johns Hopkins's Homewood campus, there was a bust of Johns Hopkins on an island in the street.

 When Memorial Stadium opened, so the story goes, there was such confusion about where the stadium was–many drivers thinking the bust was for some athlete, insisted on turning onto 34th Street, with lots of accidents, as the traffic signals were not set for lots of left turning traffic (many drivers jumping the light)–that the bust was moved to the side of the road. At least that was the story on the Homewood campus, particularly the university's historian during the centennial commemoration of its founding. 

This new cohort of ballparks was designed for mixed use–not as a ballpark for which some other sport might be tolerated. That meant some compromises. They still abided by the general feel of the first round–the "owners' round"–of parks. Bricks and such, but they also started strut some steel; materials were used to have the ballparks "fit in" with the surrounding community, though how something as big could "fit in" isn't so straightforward. One other interesting feature to this round: Unlike the prior round, in which the teams financed the construction of the park, now municipalities were doing so. Perhaps that was the beginning of the myth that ballparks pay for themselves.

At least for the baseball season, with 81 games played, I can see how there might at least be an argument for economic benefit, but for football?? In any case, this round of ballparks lasted into the 1960s. It may not harken the same loyalty that the owners' round would–but when the baby boomers went to the park, it was as often as not one of the newer parks, and so the newer parks were embedded with pleasant memories in their brains, unless of course they were Senators' fans, in which case I can't talk about any association of pleasantry since my recollection of the Senators in that era was of a team more consistent with A-AA ball than the big show. And some days, sandlot might be applicable (except when Frank Howard was hitting well; they didn't look so bad then–even the defense seemingly performed on those days).

 The Astrodome ushered in the "modern" era of ballparks. It was domed–that was new. It had a space age look (befitting its location in Houston)–that was new. It was big–that was new (well, it was in Texas). No longer would the fans enjoy the proximity to the field of the earlier eras. Houston being a major petrochemical center, it's not surprising that the Astrodome also ushered in Astroturf, a plastic pseudograss that bears as much similarity to its living counterpart as an aluminum Christmas tree does to the living (or at least formerly living) one (or if you prefer, ox to bull, or McDonald's shake to those available at many of the remaining diners still operating in the US). I'll leave aside the issue of whether real baseball can be played on pseudograss–a field lacking the sweet scent of mowed green blades, all in support of that most pristine shape in sports, the baseball diamond–or has to be played on the real thing to qualify as "real" baseball. There are also variations on this theme–for instance, no dome, or a retrievable cover.

 Perhaps the peak of the third age can be found in the Hubert H. Humphrey Metrodome, know affectionately in the Twin Cities, prior to its demise, as the West Bank Marshmallow. It may remain as the only site in which an MLB game was snowed out by a 15 inch blizzard on May 15, 1986–without a snowflake ever touching the field. The Metrodome was a hitter's paradise. Four baggers would go flying out faster than an F-18 off a carrier. Maybe that's why Kirby Puckett liked playing for the Twins so much. Regardless, while there are many who probably liked the Metrodome, it always struck me as sterile. Indeed, that's my complaint about the third age: the ballparks lacked character, identity. There was one thing I liked about the Metrodome, though: it was right by downtown. That was not a universal characteristic. It wasn't a feature of ballparks until the fourth era, the one we are still in.

In the fourth era, ballparks went back to the early 1900s to take their style cues. Sure, modern engineering enhanced the experience, with unobstructed views. And there were the skyboxes, rights to which flowed to the team's bottom line. But with the style going back to the classic one of the early 20th century, one might term it retro. Fans like the effect. Ballparks built over the past two decades have been designed in the retro style. Bricks, old style grillwork, often located near downtowns, and so on. Character was not absent in these places. The trend started with the building of Oriole Park at Camden Yards. Oriole Park was part of a grander scheme to revitalize Baltimore's downtown. First, there was Harborplace, then the Aquarium (site of Willy Don's battle with the sea lions in 1981). And then, nothing. There were a few apartment houses built, a convention center, but not much else. Downtown Baltimore still felt incomplete.

With the departure of the Colts in 1984, scurrying like a thief in the night at the end of March that year, with snow flurries in the air and a Governor whose campaign theme of honest government seemed to think that it prohibited him from intervening, Baltimore's city elders realized the risks of the Orioles leaving Baltimore (I'm not sure the name would have moved as easily as "Colts" did) were there, and needed to be addressed. Back in the late 1970s, the Os' owner, Edward Bennett Williams, complained that it took too long to get from Memorial Stadium back to DC and that Baltimore alone was too small of a market to support a baseball team. Enter the Mayor, who had the police tail Williams back to DC for the next three games that he attended. When Williams next complained about the troubles of leaving 33rd Street, he was met by the Mayor noting how quickly Williams made it back to his DC office (not noted was the speed that Williams's limousine took to achieve those times, nor the anger among the State police that Williams–a defense attorney–that they were under strict orders not to issue a speeding ticket to that car). Williams never complained about it again. So the city elders caucused as they were wont to do, and they decided that Memorial Stadium, beloved as she was, likely was near the end of her useful life. Barely 30, and washed up. Thus began the planning for a new ballpark in downtown Baltimore, around which further downtown development would happen. There was mass transit emerging in the city (though why Baltimore needed a subway is beyond me), and I-95 right next door to facilitate ingress and egress. That was the plan, at any rate. It took a few years to get all the plans in place, but when Camden Yards was finished, it was magnificent. So much so that it kicked off the retro trend

 One of the nicest ballparks built with the retro theme is AT&T Park, the replacement for Candlestick Part in San Francisco. AT&T was built in part because not only was Candlestick not economically competitive in terms of skyboxes and the like but it was arguably the worst located park in the MLB. The winds off of San Francisco Bay would howl in the summer, so much that Fisherman's Wharf and the Presidio seemed warm even during the summer. Had the park been built a mere 75 or so yards to the west, the winds would have been less of an issue. Ditto for orientation. The fog that enveloped Candlestick during night games was legendary–not only for the associated temperature drops, but also the challenges it presented to the player, particularly in the outfield. One of the Alou brothers once noted that at Candlestick, you could see the pitcher throw the ball, you could see the batter hit the ball, but from then until the ball came down, the fielder had to rely on instinct–you just couldn't see the ball all the way through the air. This was the place, after all, where Stu Miller (he died a little over a week ago) was called for a balk during the 1961 All Star game played at the spanking new Candlestick Park. Miller always contended he hadn't balked. No matter, that's how it was scored Of course, many of the pre-retro parks are beloved by the fans. Dodger Stadium at Chavez Ravine is a great example. Woe to the visiting team fan at Dodger Stadium. Watching Koufax pitch at home was a delight, but the fans like the ambiance of the ball park itself.

There are 37 more days before Orioles pitchers and catchers report.

Play ball!



 It's barely 50 days until O's pitchers and catchers report, and already there are potential disappointments to the 2015 Os season: Matt Wieters may not be ready for opening day. While the Os have back-up defensive strength behind the plate, they're not so deep on the offensive side, esp after the departures of Cruz and Markakis. Then there's pitching, about which the Os didn't do a whole lot thus far. Of course, at this time last year, Nellie Cruz was still a free agent, so we'll see how the pitching rotation fulls out by opening day. I'm not sure that Buck wants to again wait for the staff to warm up during the first two months of the season, but that was a hallmark of the Weaver years—and those didn't turn out half bad. (Buck is a little more humane, though. There's a great story about one of the pitchers—I've forgotten who—limbering up in the outfield. This fellow had been throwing fastballs all the time. Maybe a curve (yes, that pitch is still thrown, but not like in days of the past (think of Sandy Koufax throwing a cutter? nope)) every now and again. So Buck goes out to the pitcher and asks, "Do you play golf?" "Yes, Buck, you know I do. I love golf." "And when you're playing, do you use only a driver?" "Of course not, Buck." "Just asking." And Buck goes back to the dugout. The next game, that pitcher threw more breaking pitches that in the season to that time cumulatively.)

But that's not to say that some changes would have been unwelcomed. Will the Os bullpen looks solid. If Gausman blossoms as a starter, a lot of problems start to disappear. Ditto with the Machado and Davis. Those are question marks, and the bench isn't quite as deep as last year. Or at least that characteristic isn't yet clear. Given that the Yanks may yet get a decent year from their starting rotation and Boston retains some punch, and all of the sudden, the AL East is competitive. The question of the day is what happens to James Shields. In an off-season in which Pittsburgh plucked a shortstop from the Korean League who looks like he maybe the power player to build a team around, that Shields—one of the most durable pitchers of recent seasons—is still available speaks volumes about the price of players and the expectations regarding length of contracts. Shields will land someplace, but exactly where isn't clear as yet.

So spring training will be interesting this year, as always, it seems. And we finally enter January, the last month of the year without any baseball (though if the MLB smells money in it, I'm sure the October classic would be moved wholesale into November and go right up until Thanksgiving—leaving only December and January with as baseball-free).

Of note today: It is Jerry Koosman's 72nd birthday. Koosman is one of my favorite players, not so much because he was such a standout (he had an OK career—222 wins, 3.33 ERA—not shabby, but he also had 209 losses) but because he had endurance. Koosman was the sort of pitcher you needed to throw lots of innings during a season. That he did—for 18 seasons. While everyone thinks of Tom Terrific Seaver when talking about the 1969 Mets (he of the 25 wins and Cy Young awardee status for that year), Koosman was right behind him with a 17-9 season. Koosman came out of the 1968 season looking pretty solid on the mound, so much so that he was beaten out by Johnny Bench by a single vote for rookie of the year (a 19-12 record with an ERA just above 2 will do that). He was a rookie all-star in 1968—not too common, esp for a pitcher. But Koosman did not stay with the Mets for his career, eventually playing for three other teams along the way. It was during his stay in Minnesota that I came to appreciate his talent—on display when the Os were hosting or during a televised encounter from Metropolitan Stadium (rivaling only Candlestick Park as atrocities for a game with such enduring icons as Ebbetts Field and Yankee Stadium, Fenway, Wrigley, and so on). Going to Metropolitan Stadium in April rivaled any evening game in San Francisco—on temperature, even if the ball was always visible during the game. And while Koosman played for those 18 seasons, he also displayed volatility in performance that is itself remarkable, going from a 20+ win season in 1976 to a 20 loss season (leading the majors in that ill-sought status) in 1977, followed by another 20 win season in 1979. Another notable season: 1984. 14 wins sounds pretty good for a 41 year old arm, and the 3.25 ERA was better than during that 1979 20-win season. That ERA was better than his career one, in fact. But the 15 losses suggested that the long career should close, and after 1985 (6-4 with an ERA over 4.5 (4.62, to be specific)—not good by anyone's definition), it did. (He would also lead in posting 13 losses in 1981 during that strike-shortened season. And that was after a 16-13 1980 season.)

Happy birthday, Jerry Koosman!



 There's been lots going on in the baseball world, and I thought I'd start with (surprise!) the Orioles. The Joe Piscopo report would be something like this: "Cruz—gone. Markakis—gone. Miller—who knows. Davis—more drugs? who knows. Justin Upton—meh. Jimenez—oh, please.Orioles in 2015—not a chance so far. Yanks—always." I think Piscopo would have blown, just like the sportwriters who insisted the Os would troll for 4th place in the AL east in 2014, and would be lucky to even see 3rd place for part of the season. Then again, Baltimore's never gotten much respect from the sports journalism club. I still remember the predictions that the Big Red Machine would dominate the 1970 World Series—until Orange Crush took the machine apart. Check that, Brooks Robinson took the machine apart, while it seemed at times like the rest of the team came along for the ride and gave him great support. That series was Brooks Robinson vs the Big Red Machine. Go ask Sparky Anderson. (And if you succeed in doing so, please let me know how; there lots of money to be made there.)

The Os didn't do much last winter to shore things up for the 2014 season, other than sign Jimenez (which rivals the Glenn Davis-Curt Shilling and Frank Robinson-Milt Pappas as the worst off-season actions in baseball history). This year, well, it kinda depends on three player who didn't play last year who the Birds need to get solid seasons from to deal with some of the free agent departures. For instance Nelly Cruz signed with the Mariners. Ouch. He was a major piece of the success the Os enjoyed in 2014. Maybe it was money, maybe something else. It sure wasn't Buck; he loved playing under Buck (and that's a common refrain, not unlike players talking about Davey Johnson as a manager). Still, a big loss, particularly for a team that scored half its runs on Big Daddy Long Ball.

Then there's Nick Markakis going to Atlanta. Not such a big loss. He had been a solid player for the Os Great arm in right field. Just spot-on. Not much of a hitter anymore though. So while he may be missed (and maybe not depending on who the Os have to replace him), it's not nearly the loss that Cruz was. Signing Cruz in 2014 was a masterstroke for the Os.

So, one big loss, one so-so loss (good player, hopefully replaced in kind or better). And then there's Andy Miller, the wild card, and it's unclear what clubhouse he will inhabit come the spring. But one needs to remember that during 2014, the Os did not have Matt Weiters or Manny Machado for much of 2014 (Weiters was the whole season) and Chris Davis was out for long segments of it. If Davis gets his groove back (and learns not to swing at every first pitch so he doesn't strike out so much), the Os should be able to compensate for Cruz's departure. Weiters too. And Steve Pearce, with another solid season, would help to fill the hole.

Machado's offensive production and defense were hard not to miss in 2014. He's the first third baseman in Os history since 1977 (when Brooks retired) to be spoken of as harkening back to that era when the hot corner in Memorial Stadium (where the Os played back then) was manned by one cool cucumber. Weiters's offense was missed, but on defense, Caleb Joseph displayed defense talent not unlike that of Rick Dempsey. So at least one half of the battery is solid. It's the other part (until you get to the closer) where the Os need to do a lot of work. A lot. Having to wait through the first two months of the season for your pitching to warm up means you're digging an awfully big hole, and violated that first rule. Badly.

So that's some of where things stand with the Birds at the moment. I'll try and update soon. And provide something about some of the other teams (though Scott, I can't possibly know the Cards nearly as well as you do).

As Walt Whitman put it, baseball: America's game. And no, baseball hasn't been bery, bery good to me, but it's been fun.

Best of all, only 75 days until Orioles pitchers and catchers report (revised reporting schedule).

Play ball!



 The dollar is strengthening. I remember when I was young in the 50s and 60s and the dollar was worth 350 yen, and 7 Francs. Bank accounts paid 5%. The world was a great deal. I wonder if that world will return.

David Lillienfeld writes: 

That was the world in which Jews and blacks couldn't own homes in some neighborhoods and could be refused service at will by any business. It was a world in which someone could be denied a job because of his/her sexual orientation, ditto for renting an apartment/buying a house. It was an era in which when women worked, they were expected to earn a fraction of what their male counterparts did, particularly if they were married since they weren't (it was assumed) the primary source of income for the family. It was a world in which a physician might not inform a patient of a diagnosis of cancer or pressure a patient to participate in a research study after the patient had declined to do so—in some instances, declined repeatedly. It was a world in which a black man with syphilis in a government study would be denied treatment in the interest of learning about the disease's natural history, though without the man having given any consent to be so studied. Ditto for Guatemala men and women, who were infected with syphilis by the US government with the same aim of learning about the natural history of syphilis. That world included an American government which didn't hesitate to listen in phone calls as it pleased and spied on persons as it pleased.

I could go on. There were lots of aspects of that world that were good economically, it's true, but there were lots of downsides, too. Maybe the level of discrimination is the same as back then—just less visible, but I'd like to think that we've matured as a society, as a country, such that there's been a reduction, ideally a significant reduction.

Is today better? Worse? I don't know that I can given an answer other than to note that it's a different world. Would I like our economy to be such that we had the dollar at 350 yen and 7 francs. You bet. But as for the rest of that world, I'm not so sure.

Jeff Watson writes:

But we live in a world where the poorest of the poor can own a smartphone and have the access to information greater than the library at Alexandria, in fact they have all the information of the world available to them. I'm very optimistic for the human race. Our poor are better off than Louis XVI in almost every way.

anonymous writes: 

The central conceit of many well intentioned people is that the poor are dumb and can't find their way around anything. We think the poor need help, and they need our money transferred via politicians to be made whole. As the Chair drums the cadence in our heads, it's "the idea that has the world in it's grip." That conceit needs to go away as it is just wrong. The war on poverty has cost enough to give every poor person a couple hundred grand, but the money has gone to programs, not the recipients. Not all poor are dumb at all, they are victims of circumstance. However, the war on poverty will continue, as will the war on drugs, terrorism etc as there's really big money in it for the insiders. 



 With the end of the baseball season last night, there is the chance to reflect on the off-season, a chance for signing free agents, a chance to consider the merits of such inanities as the challenges, a chance to consider the causes and implications for the uptrend in strikeouts and the downtrend in offense, a time to reread Walt Whitman, to see Field of Dreams and Bull Durham, a time to contemplate those sweet words, "Play ball!" The mysteries of spring will soon be here, but the emptiness of winter must first be negotiated.

The Great Voice of 2014 is now upon us.

Only 105 days til pitchers and catchers report. Thank God it's that soon.

anonymous writes: 

Football, basketball, hockey: professional, college and high school (high school games can be especially fun and inexpensive to watch).

If it must be baseball, go volunteer as a coach. You don't have to be very good or know very much. Yes, coaching "know-how" is very different than "knowing baseball", but it's not that hard to figure out.

Coaching can be so fulfilling!

105 day void filled (and the 260 other days just got more enjoyable).



 Since Rocky's unfortunate demise (though I still hold out hope he will yet be found alive), it seems like there hasn't been much talk of the muni market and the impact of various factors on rates. So when this piece on Chicago came out (albeit on Chicago as the new "Detroit"), I thought it might invigorate a discussion which seems to have disappeared from the list. At some point, there's going to be more than Chicago and Detroit in trouble, but I don't sense that anyone else shares that view.

Ed Stewart writes: 

I know the finances look dire but on the ground level much of the City (loop, west loop, near north) appear to be doing great. It is a "tale of two cities" - at least. Google just finished rebuilding an old meat freezer building into its new midwest headquarters about 4 blocks from my apt. New hotels, new restaurants everywhere, seem to be plenty of wealthy people with jobs or starting businesses. Plenty of street-level entrepreneurship. So far taxpayers don't seem to be fleeing the city. The banana republic element is mostly out of site to the extent that one can forget there is a serious problem. I think they realize they can't afford to trigger capital/talent flight.

My guess is that the Chicago bail-out will be the same one that saves all the other failed systems, if inflation does not pick up enough to get the job done. 



 One might be pardoned for thinking that baseball has undergone some sort of recent metamorphosis judging by the recent chatter of how slow the game is. Between innings, one team takes the field and prepares for play, and the other gets set to take its at bats. But the determinant of how much time the changeover takes is television. That time period hasn't changed much, actually, for many decades. Indeed, given that commercials are now sold in shorter time increments than in the past, that television-determined time period could be shortened. No one, however, is talking about such.

One might try to limit each batter to one "groin-touch," but let's face it, there's no data to suggest that there's more of that going on now than, say, in the 1960s. Ditto for the batter tapping his cleats. Batters now step out of the box to reset their batting gloves, so I suppose one might have some effect by restricting the time taken in so doing. And then there's the time the pitchers spend prancing about the mound.

There's been some data suggesting that the latter may have increased a bit during the past couple of decades, so perhaps one might put in a "pitch clock," but I doubt that that will have a whole lot of impact. Let's see what might have increasing playing time during the past couple of decades: the designated hitter. Designed to spur offense (since that's what fans want to see), the DH has done exactly that. But offense means time. More offense = longer games. A 1-0 game generally takes less time to complete than a 5-4 one.

So I ask again: What changes have resulted in longer games, and specifically those long enough to raise concerns about the length of the game?

As for the comment about kids—the issue here isn't what's gone on with kids and baseball so much as baseball players and kids. I can recall when Brooks Robinson made a fueling stop at a gas station where I worked. Everyone took some paper out to him for a signature. He complied with each request, no money, no scowls, just a nice Oriole. I highly doubt that such would happen today. Does that have any impact on the young? Undoubtedly yes, and therein lay the problem for the MLB. I doubt that the loss of interest in baseball among kids has nearly as much to do with how long a given game might be as with the emotional attachment of those kids to ball players.

"One Of The Highest-Paid Players Of All Time Calls Baseball 'Slow,' Says Changes Are Coming"



Bill McBride published this interesting piece on wage growth in the US.

On the one hand, one might argue that this is a surefire harbinger of inflation. On the other, some wage growth might carry with it some opportunity for increased spending (save? in this country??). Some top line growth would, I'm sure, be appreciated by one and all.

And that assumes that there really is wage growth going on. At best, the jury's still out on that one.

Bill Rafter writes: 

Wage growth has not been underestimated. Payroll tax receipts suggest otherwise. The latter do so some signs of coming back from the grave, but absolutely nothing to get excited about.

Regarding inflation, there are two forms of money growth that have to be monitored: that originated by the Fed known as the Monetary Aggregates, and that originated by the banking system known as fractional reserve lending. The aggregates are the Monetary Base, M2 and MZM. The lending data are commercial and industrial loans. The planned growth of the aggregates is designed to limit deflation. Inflation will not proceed apace until you get a growth in loans. So if you are worried about inflation, at this time all you have to watch is the loan data.

Aggregates and loan data are available on the FRED site. Payroll taxes are on the Treasury site.



A good indicator of an over-valued, or at least fully valued, market: "Insider Buying Dries Up Defying $275 Billion of Buybacks"

On the other hand, if prices are high, why not sit on the cash until they come in a bit? Are insiders not buying in a risk diversification move?

Gordon Haave:

One wonders if insiders are really immune to errors that individual investors make. Individual investors see their neighbors portfolios going up and wish they had owned more stocks and then jump in. In the case of insiders they actually see other directors/executives making a fortune from owning shares. I would have to think that the psychological pressure of "missing out" would be even greater that that of the average guy.



Interesting study, though the numbers are small.

"Study Says People Smell if Someone Has the Same Political Beliefs as Them"

Scott Brooks writes: 

You can also tell a lot about people from the shoes they wear, their clothes, the kind of car they drive, and how many bumper stickers they have on their car. 



 I'm in Chicago for a few days to attend to some personal business matters. I'm sitting in hotel lobby when a part of three very loud men sit down at the table next to mine and began to discuss the previous evening's Chisox game. I couldn't care less about the Chisox, mind you. Not my team. But when one of the three fellows observed that "Baltimore is just having a lucky year," I calmly looked over at the fellow and asked, "A lucky year? Really? Why do you say that?"

"It has to be luck. Look at their players. There's no A-Rod there. No Jeter. They're over-performing. It's just luck." "You mean like last year was luck?" "Yeah, like that. Last year, Baltimore was lucky too." "Do you think Baltimore is always lucky?" "For the most part, sure. It's not in the big leagues that Chicago is. Or LA. Or New York. Or Cincinnati."

That last comment burned my ears.

"You're from Cincy?" "Yes, yes, I am. 3rd generation P&G." "So remember the days of the Big Red Machine." He smiles and responds, "Yes, yes, I do. Johnny Bench and Sparky Anderson? Yeah. Those were good times." "Do you remember the 1970 World Series?" "No, not specifically. Was there something special about it?" "The Big Red Machine was in that series." Another smile. "Yes, yes. I remember now. They were."

"Do you remember what Sparky said about that series?" "No." "Look it up. Something about dropping a paper plate and being thrown out at first." The image of Annie Savoy lecturing Nuke LaLoosh on the importance of lizard eyelids to success in baseball forms in my head. "Sparky Anderson?" "In 1970, Brooks Robinson played 3rd based while Orange Crush, the 1970s Orioles, systemically took apart the Big Red Machine." "OK. I guess Baltimore had a good 1970 season." "Y'think?" "But there's no way the Orioles can be as good as their record suggests. No way. How can they possibly win games like that without the players?" "Easy. Pitching, defense, and an 'Earl Weaver Special.'" "What's an 'Earl Weaver Special?'" I was getting up to go to a meeting and finished paying my tab. A waiter came over, smiled at me as he laughed and said to the fellow, "An 'Earl Weaver Special' is a three run dinger. I grew up by DC, and we heard about them all the time. Everyone in Maryland did." I looked at this very confused Reds fan, and said, "Buck's for real, and so are the Orioles. Orioles Magic is back. Get used to it. This is a team that's going to remind people of how the Birds flew high in the 1960s and 1970s." "But they're just not that go—" "They're for real. Get over it." At that, I got up and the waiter, clearing dishes off the table, smiled at me. I gave him a thumbs up. He laughed, and I walked off to go to my meeting.

I grant you that every team is entitled to its due. And those who know me know all too well my passion for the Birds, dating back to the time I got laryngitis as a 3 year old screaming about a Jim Gentile home run. But the reality seems to be that sports teams in Baltimore don't get much respect. The Os this year are the real deal. They don't just win. They create runs. They persevere when the pitching staff is having a bad outing. They cover for one another, and while Machado (before the injury) and Hardy aren't quite Robinson-Belanger, they're getting close. Is Brian Gaussman a Jim Palmer? Not clear yet. How about Chris Davis? Few teams could have handled having their heaviest hitter go into the swoon he did and handle it as well as the Os did this summer. And I don't mean teams just in 2014.



 Dearest Scotland,

In only days you can choose to cleave yourselves from our United Kingdom. We sit one of the five or six greatest nations and mightiest economic powers on this earth: wedded together in a marriage begun almost three hundred years ago. Please don't end our great union together.

As an Englishman and Welshman, I feel great love for Scotland. As a child I would travel from Liverpool to holiday in the beautiful Welsh Ogwen valley. I would be abroad but at home. I would travel to the wonderful Fort William or idyllic Skye: refreshed and energised in my own nation state. I would no more wish to see this separated than the Lake District carved out and floated off into the Irish Sea.

As in every great marriage, both man and woman take occasion to think: "Did I make the right choice? Am I better or worse in this relationship? Am I fulfilling my potential or being taken advantage of?" And it is good to take stock.

So what have we achieved in our centuries long union?

Together, did we not build the world's greatest empire, bestow it with all of our verdant statecraft and know how, then set it free?

Together, did we not fight off Napoleon, in ships commanded by the Earl of Dundonald?

Together, did we not underpin the defense of the first world war? Would you now deny our United Kingdom a great man like Field Marshal Sir Douglas Haig, who so valiantly led the British Army? At the Somme and Ypres, at Amiens and Arras, would you have us separated?

Together, did we not fight off Hitler, the greatest evil the globe has known? It was Monty and Patton versus Rommel: the three generals everyone recalls from that most vicious of wars. One third Scottish! What great debt do we owe to 1st Viscount Montgomery of Alamein? Would you deny him us?

Together, did we not pioneer industrialisation? Medicine? Enlightenment thought? Scotland is eight percent of our headcount. But in prestige, in know-how, in capability, in pride, it is so much more.

Your countrymen have led us seven times from around fifty prime ministers: a big overshoot relative to your population weight. Do not deny our United Kingdom your capability and leadership. Did you not give us James Ramsay MacDonald? A man who changed the British political landscape forever? Who set the political scene for all that was to come for the labour movement?

Mr. Darling has argued from security and risk. And he makes strong points: the currency, the volatility of oil, the curmudgeon of the European Union. But I say - of course Scotland can be great and secure alone! It is a great country! But let us be greater and more secure together.

As with a marriage, one partner makes complaint and the other responds "we've got it great, why are you carping?" But that is not the right response. They want to hear "I love you, I need you." Scotland, we love you. We need you.

Mr. Salmond talks about NHS privatisation, about Trident, about the Bedroom tax. These are important issues. But they are issues of today, not tomorrow. They can be solved and soon. The decision of independence is forever. It is binding. We have not yet had our great generational challenge. Our World War One. Our World War Two. It is yet to come. But it will. Would you have us face it apart?

Our biggest trial so far has been the financial crisis. We have come through it together arm in arm.

The Royal Bank of Scotland: Fred Godwin's bank. Its equity was almost wiped out and stood vast relative to your GDP. Its assets were at great risk: they dwarfed Scotland's GDP. But we got through it, together.

Why was the Old Lady of Threadneedle trusted throughout the world during the crisis? Because of her centuries long history as a great central bank. Her name respected because of all of our collective credit and productivity. Without Scotland, without your prudence, she is less. Without Scotland, our United Kingdom is less.

But you ask: is Scotland just mistreated property? Can't she get on better alone? Just like a marriage, sometimes you crave freedom to forget all ties and run. But just like a marriage, we can discuss and negotiate. Do you want more devolved powers? Let us devolve more powers. Do you want more freedom and leeway? We can give you that. We can perfect our marriage over time. But like a marriage, each obeys certain restrictions for the mutual good and insurance of all.

And in this decision, let us not discount Mr. Salmond's vanity. He wishes to go down in history as the man who brought Scotland glorious and independent. He wants to make his personal history by tearing up our great communal history. Scotland is already glorious, is already independent. But she is also part of our great union!

Mr. Salmond gave us his final question, what he says it all comes down to: "who decides?" for Scotland.

When the UK negotiated the great post war settlement at Versailles, Scotland was there, deciding. Alone, her voice would be quieted.

When the United Nations Security council was formed from the top five powers on earth, Scotland was named to it. Alone, her voice would be excluded.

When the UK joined with the USA to stymie and defend against communism and the cold war, Scotland was there, deciding. Alone, she would be muted.

In a world where the USA is dominant, the BRICS are growing, where the international scene is as complex as ever, would you cut Scotland from its might within the UN, the IMF, the World Bank? At peace and at defense?

Stay with us Scotland. For you are a great nation. But together, we are one of the very greatest of all!

David Lillienfeld replies: 

A very nice love letter. Please permit me to play devil's advocate for a moment (I have no interest in the outcome of the vote, seeing merits in both sides' arguments).

Dearest England,

I do so appreciate your most recent missive. I cried throughout my reading of it with those sweet memories of days past, when the future seemed boundless. Then my German mother noted that one needs to keep one's head at such times and be frugal and focused on what is best for oneself. I had to keep reminding myself of her comments while reading your wistful note.

You list our accomplishments in the past. They have indeed been great. But, dear England, let's be honest. They are in our past. We are no longer spring chickens, you and I.

But now I find myself the scolded, battered spouse. You've taken my dowry and spent it, and on what?! Estates in and around London. Military adventures in parts of the world in which we had no business. At least you had the good sense not to arm your police.

And those wonderful vacation homes in America. You did a fine job of ruining that effort. All I asked was that you build the house there. Maybe a modest estate, even. That's all. Nice and simple. But no, first you insist on taking those nice people in Africa and take them to work on the estate. They didn't want to be there, but you insisted. Then you bullied France. She was so much fun before you did that to her. You know I've a sucker for French accents, dear. But no, you said, I have to make that estate pay for itself, so you had to tax, tax, tax the hired help. Haven't you learned yet that exacting money from people at gunpoint, even if it is legal, is hardly endearing? Oh, England, when will you ever learn. You manage to mess up so much once you've succeeded with your plan. We were poor once, and you managed to beat the Dutch and the Spanish at their own game. And you looked so regal in doing so. I was so proud of you, dear England, so proud. So now we're left with that island in the Atlantic and its gaudy pink beaches and those shorts which men have the temerity to show off their legs. Well, I never!

At least you had the good sense to send those felons off to that island down under. That was one of your inspired moves—something you haven't had in a while. You left them to fend for themselves, and see? They created a nation all by themselves.

And that empire of yours—the one where the sun never sets. I didn't want an empire, some of us like the night. We used to have so a good time after the sun had set, before you filled ever hour of the day thinking about that damned empire of yours!. You had to send me our son, the one who had nothing more worthwhile than issuing a new version of the Bible, to get me to stay in the family, and I went along with it despite my better instincts. United would be stronger, you said. For a while, you were right. But I caught on to your ways, England. You couldn't even decide what your religion would be at first. When you finally did decide, it wasn't mine. And my favorite clothing—those kilts, my favorite instrument—the bag pipes. You've always pretended to like them. And when I celebrate cultural achievements, where are you? Sunning yourself in Spain. You know I'm too fair for that—I'd burn if I did that. Do you drink any of my libations? I spend so much effort and wait years before it's ready to drink. No, you go for the port. Edinburgh now feels so unwanted when you do that. "Scotch on the rocks" to you means taking some of my best creations and putting him or her in that tower of yours down in London. Really, dear, what were you thinking? That I would welcome such treatments? And that gin you favor. Your people had so much of it that you created a set of laws just to control the drinking. A lot of good that did you. They just switched to beer instead! Not something I made, but beer. Honey, if you wanted beer, you should have married Germany. Mother was right, you are incorrigible.

Now let's go back to my dowry. That oil. You can't seem to keep your hands away from it. I keep telling you not to push, but you do. I wouldn't mind if you spent some of it on me, but like I said, England, you've wasted it. The that gambling on Persia pay off? I grant you that it did for a while, but once again, you managed to make a mess out of success.

And if I so much as mention any of this to you during those few occasions you let me talk, there's little I get besides a slap. So now I sit in my lawyer's office, working on the divorce papers. I'll serve you with them just as soon as I can. You know, England, I went to the bank yesterday, and they told me that you had assumed the mortgage, but you cut off my credit line. And my access to the checking account!. Did you think I wouldn't notice? Do you think this is a way to tell me that you again want to waltz with me through those omnipresent formal gardens of yours. Haven't you realized I have an allergy to roses. If you hadn't taken my wealth all the time, I could have afforded the allergy shots at the doctor's office. No, you said, better to spend on some fast aircraft that no one could afford to fly. I know, you said that getting the French involved would help matters. Well, dearie, did it? Not much.

Well, England, I could go on and on. That nasty man Marx for instance. Not Groucho. He was American. No dear, I mean Karl. He wasn't funny at all. Don't you realize how many people died because of his drivel.

You'll be hearing from my attorneys, Dodson and Fogg, soon enough. And they've warned me that you'll try to drag this out so long that no one will remember what the case is about. England, you better set yourself in because I'll remember.

It's time for a divorce, England, time for me to salvage what remains of my dowry, time to get the bankers to look at me and realize that I have wealth, too, time for you and the rest of the world to see me for what I am—proud, able, with lots of resources and a rich heritage.

Good-bye England my my love. Maybe next time, you can get that bard of yours—yes, Shakespeare—to talk about Scotland some time rather than England all the time. And get it straight, dear. No sex is because you're English. Did you hear me English. It's you, not me. It never was me. So say "No sex please, we're English." You'll have to speak to Foot and Marriott, but given the result you got from Shakespeare—after you promised you'd speak with him about that line of his you know I can't stand, nothing changed. I wasn't the problem England. I never was. You always did have problems raising your flags. especially when we in my castles and not yours. You said you could change, learn, be better. Well, how much does it take to raise a flat! And then your promises to change? That's the problem England, there's never any change outside of appearances. Even haggis. You kept telling me I made a great dish, and you kept drinking that infernal gin of yours to wash it down.

So England, I'm sure you'll come out on top some how. You always do.

As for me, I need to see my lawyers. They keep telling me I have quite a case. And they keep suggesting something going on between you and America. They call it a "special relationship." Really, England, how could you? It will all come out in court in due time.

Just realize England, we're done, au revoir, and all that. Maybe you can get America to take it, but won't. Not anymore. I need to finish this letter right now any way, before my haggis overcooks. I have to eat lunch before going to the tailor. He's made me a whole set of clothes using Harris Tweed to wear just for our divorce case. Assuming you decide to make it a public affair. For your sake, England, I hope you come to your senses and realize that it's over. It will be so much easier for you to let go.





 Isn't this how the US began in Vietnam, as I recall it (Stefan, please correct me on that one if I'm off base)?

"Militants’ Siege on Mountain in Iraq Is Over, Pentagon Says"

Stefan Jovanovich replies: 

Bless you, David, you are not off base; you are not even playing the same sport. The American attempt at "guns and butter" in Southeast Asia involved the last mass conscription among Western nations and outright expenditures on the war itself (not counting the other military efforts for the Cold War) that were a larger percentage of GDP than the entire Defense Department budget, with all its social spending, is now. "Viet-Nam" was the last war of mass armies in what will be seen in retrospect as the age of Napoleonic state militaries (the French, as with so many things, started it, the Prussians, Russians, Holy Roman Empire (Italy, Austria) followed and the British and Americans came in last and made the final industrial improvements.)

We are back in the age of small wars - tactical encounters between professional soldiers (Hamas and ISIS are no more a bunch of amateurs than the Barbary pirates were; this is their trade). If you want to see things in their proper light, look to the campaigns for which Vauban built all those fortresses; there are no proper comparisons to be found with any of the large wars in past American history. This is going to be an age of extraordinary gains in technology just like those of the 18th century before the French revolution - i.e. the French making the first systematic application of mathematics to warfare by inventing ballistic science. The fighting is going to be expensive but nowhere near as economically ruinous as the the mass wars were. It is also going to be equally bloodless - at least for the Westerners.



 There's lots of PE money going to Europe. Given the continent wide slowdown, I have to ask: why?

Tim Melvin writes:

There is a ton of PE and distressed money moving into Europe to buy bank assets and southern Europe. RE, KKR, Apollo, Baupost WL Ross and others have moved in a big way this year. The fund manager survey does not track this more patient (and probably smarter) money at all. Basically the PE and distressed guys are buying what the classic asset managers ares selling. Guess whose side I'm on?

anonymous writes:

On the macro level the fact that Germany is slowing is a major source of concern for the European economy, and the experiment in the single currency. Considering the Asian export market slowdown, persistence uncertainty in the Ukraine and ME it is unlikely German will have a meaningful pick up in 2014. German was supposed to be the main source of growth of Europe as the rest of Europe tightens budgets and deals with domestic crunch. The growing debt levels in the periphery, persistent weak growth, disinflationary forces, social and political discontent cannot portend well for the future.

The Italian government bond market is the 3rd largest in the world and they can borrow at roughly the same level as the US. Since 2010 public debt has gone from 120% of GDP to 135% and over the past 10 years GDP has been barely above .3%.

There is value in many of these assets being liquidated by banks and asset managers but expect the ECB to remain easy and the currency to make much of the adjustment necessary balance the macro picture.

Milton Friedman said:

I think the euro is in its honeymoon phase. I hope it succeeds, but I have very low expectations for it. I think that differences are going to accumulate among the various countries and that non-synchronous shocks are going to affect them. Right now, Ireland is a very different state; it needs a very different monetary policy from that of Spain or Italy. On purely theoretical grounds, it's hard to believe that it's going to be a stable system for a long time. … If we look back at recent history, they've tried in the past to have rigid exchange rates, and each time it has broken down. 1992, 1993, you had the crises. Before that, Europe had the snake, and then it broke down into something else. So the verdict isn't in on the euro. It's only a year old. Give it time to develop its troubles.

Boris Simonder writes: 

Interesting quote by MF. That must be a very old one judging by his comment. Fourteen and half years later the Euro is alive and kicking, in fact, well beyond of what any skeptic would believe given recent years.

John Floyd adds: 

The quote was from 2000, alive and kicking is relative, the euro straight jacket has done no favors to other macro indicators such as GDP, productivity, debt levels, etc….I am not making a prediction on Euro survival or failure, in the end that will be a largely political event, as was the inception, one cannot ignore the fact now that a negative political and economic vortex is forming and become self-reinforcing, where the braking mechanism is in asset prices I am not sure, and full disclosure I have been bearish the Euro concept since inception, luckily I have learned from mistakes and been able to squeeze out some profits and both sides and from other asset markets playing the same thematic tones, such as long the front end curves, I merely ask the question now is the timing and confluence of catalysts pushing us closer to seeing the Euro move lower? And yes alive and kicking for some time it has been, but so did the Argentine Peso pegged at 1 for about 10 years.

Boris Simonder writes:

The macro indicators you are referring to has more to do with national and cultural structures of each individual EU country, than the currency itself - As for betting against the Euro since inception, I'm sure no one envisioned an almost 100% rise between 2002-2008. Euro moving lower? Speculators net positioning in the futures market would think so, and perhaps the macro crowd betting on widening EU/U.S rate-spreads would support as well. If you consider Euro to be a risk-on currency, then the climate isn't perhaps the best to support that. Or how about the bag of technical breakdowns since May.

As for the comparison to Argentine Peso, can you really compare a pegged currency against a free-floating one? Or yet a single country against a bloc of countries with far more political and monetary power?



 I was at the Whole Foods this weekend and spotted a very attractive woman giving out samples of a new, "Small Batch" whiskey made by a new "craft" manufacturer. Naturally, I stepped up and requested a sample. While I sipped (slowly, as I am not a regular whiskey drinker) she rambled incessantly, providing the charming "back-story" of this "craft manufacturer." It was a "secret recipe" passed down for generations, etc.

I pulled out my phone and took a picture so I could easily research the brand further when I got home. It turns out this "craft" brewer was featured in the following article.

The "secret recipe" of this "brand" is the unaltered factory product from the standard, generic producer of this Whiskey variety. The entire "charming story" is a work of fiction. I am not naive enough to think that this not often the case, but at some point it gets ridiculous. I think it was that this woman wasted three minutes of breath telling me the ludicrously bogus story that put it in a different perspective. Perhaps if she was not busy telling the fraudulent story, we could have had a decent conversation — which would have made my time sipping the mass-industrially produced whiskey far more enjoyable.

Victor Niederhoffer writes: 

As the Senator would say, where's the picture of the con artist?

David Lillienfeld writes: 

My wife is a pathologist who also completed post-doctoral training in epidemiology/outcomes research. Her thesis was on reasons physicians adopt new laboratory tests. It turned out it was the first time the question had been posited, at least in the academic sphere. It blew her thesis advisor's mind. I was in my Marketing 201 class at the time, and both she and her advisor were surprised with my response to her finding-"Don't you think that the marketing departments earn their keep? If they didn't, that cost would have been cut already." I've been told that mine is a naive view, that no one in a business would dream of cutting marketing back do the degree I suggested if the exercise had little ROI.

Same thing here. Someone in marketing had some rich ideas, and it sounds like the sales department was executing nicely.

John Floyd writes:

What are the usual tells and ways to decipher such marketing? I wonder about market parallels such as market reversals shortly after events that were fully priced, i.e. the market reaction after the first shots in Gulf War, etc….also makes one think of the famous Schlitz live beer taste during NFL games.

Chris Cooper writes: 

It has always been hard for me to understand the appeal of small-batch, "artisanal" marketing stories. Nevertheless, we sometimes use it ourselves in marketing our bottled iced coffee. But the sooner I can scale to big-batch brewing the happier I'll be. I designed the process so that it would scale…now I just need the sales.

Better than any marketing story is simply letting people sample the product. Even better is blind tasting against the competition. When people try it, they know it is the best. But that marketing approach does not scale.



 An interesting story on NPR this morning dealing with banking among the working poor. No surprise that this is a group that is underbanked in so far as there isn't much access to branches. There is access through through smartphones. I don't know how many in the working poor in the US have smartphones, but my guess is the number isn't overly small. In Africa, a continent which is underbanked, apps for smartphones have been flowing more strongly than water over Minnehaha Falls in Minneapolis during the summer (I know we have some readers in the Twin Cities who can attest to the amount of water involved). Within 5 years, maybe 10 at the outside, banking in Africa will be a mobile phenomenon. There may still be some bricks and mortar offices—neanderthals like me like to see such things. But for the kids—soon to be adults—and the young adults, mobile will be it.

Banking execs are going to have to change to deal with this paradigmatic shift. The current leaders arose in a different era, and their understanding of mobile banking will necessarily always be in the context of bricks and mortar branches. (This has already begun happening in Africa.) As I said, the branches aren't going to disappear, just fade/be relegated downwards in importance as a means of interacting with customers and generating business. This got me thinking about the US banking system. There's been lots of talk about the coming wave of layoffs on Wall Street because of the decline in volatility ("The End of Equities" the cover declared in 1979—I'm waiting for a similar one on volatility this year). Banking in the US has changed during the past 6 years since the crash. Fees are returning as the basis for banking profitability. Boring. (Though Mr. Melvin has made some nice change, and not exactly chump change either, off of boring.) Mobile banking will come at some point to US. But I have to wonder if the growth of mobile banking and the paradigmatic shift to fees rather than trading profits hasn't revealed a major weakness in US banking—or at least the larger US banks: leadership.

While bank managements attempt to deal with a new era in which trading doesn't produce much in the way of profits, I have to wonder if the problem isn't with the managements themselves, rather than with the rules under which the banks operate. Much as mobile banking requires a different mindset than bricks and mortar banking, maybe the new era in US banking requires new managements—wholesale. Perhaps that's the key component, thus far missing, in dealing with TBTF. There should be lots of opportunities in mobile banking, but one needs to have come from a mobilized background rather than a brick and mortar one. Planck's Law applied to finance. One might have expected shareholders to demand new managements to effect this change and maximize shareholder value, but replacing managements by shareholders is about as hard as defeating an incumbent Representative. It's possible, it's just hard to do, expensive to do, and happens pretty rarely. When it happens, it's in the context of a wholesale shift.

Perhaps the banking system in the US isn't functioning to the top of its capabilities because of managements who long ago should have retired. At least part of the problem, that is. How big? I'm not prepared to suggest a number.

My impression is that banks, at least the larger ones, are still trying to work through the changes. For all the hoopla about the recent earnings report from JPMorganChase, the reality remains that profits were down and no one knows if the increase in small business loans, for instance, is a blip or trend in the making. With retail looking a bit peaked, I'm pretty sure those loans aren't going to small retailers. With Europe continuing to behave like a diabetic uninterested in controlling his disease, and whittling up both legs as gangrene sets in, I'm wondering how much of the other parts of the US economy are going to be throttled back in the second half of 2014 and looking into 2015. Getting the banking/financial services sector to function optimally is important for US economic growth. I'm not sure the current managements are up to the task. Wholesale change may be necessary, but I have nary a clue as to what might bring it on.

anonymous writes: 

I have listened to de novo (new) bank presentations for 30 years, and this underbanked crap is mentioned in every single one. It's as bad a global warming. There are NO underbanked communities in the US. There are only lazy people.

Additionally, many new bank equity presentations are frequently overweight products that the so-called under-banked wouldn't even use.

The under-banked, when there was such a thing, learned to go to credit unions.



This is an intriguing piece, but I have no sense as to how well founded it may be. Any thoughts anyone?

"Wall Street Skips Economics Class"

Mr. Isomorphisms writes: 

Noah is not credible among his peers, although he's at least infamous. He's stirred up this DSGE discussion beforeâ€"or, rather, piggybacked on Delong/Krugman/blogosphere discussion of same.

In fact I think when he first started blogging (6 years ago? basically a PhD ago) he expressed some reservations about DSGE.

E Falkenstein has made the same point as have numerous econ PhD holders, that the mathematics used in econ grad school is not considered valuable by industry. By contrast FEM gets things done and is flexible enough so the people who deal with the real world (and lose money there) can fill in the tedious details and jerry-rig something together that really works, in the here-and-now. So in short, people have been making this critique for a long time. And even longer if you include the predecessor Arrow-Debreu general equilibrium theory, which was also of only academic interest. I don't think the "only academic interest" critique is particularly damning. Academics want deep answers whereas money-makers want something that actually works right now, and leave the hard critical thinking for mañana.

Two things I noticed from googling around this story: 1) Mark Buchanan writing the same piece in January in bbgView, cites Noah. And Dr Buchanan is a physicist, not an economist. 2) Someone added to Wikipedia that apparently the ECB uses a DSGE model. It doesn't surprise me at all that econ PhD's are more likely to work for a government than a hedge fund. Think about any economic model you've ever seen; it's almost always from a policy perspective. Economists are interested in social engineering, so fairness; discrimination; unemployment; inflation; tax policy; utility; housing shortages; bubbles as they affect the man-in-the-street; benefits of trade to the man-in-the-street…Financial econometrics is a small subfield of economics-in-general, meaning it's a small subset of what economists are interested in. So it doesn't surprise me that they're not good at predicting financial markets.

anonymous writes: 

I like Duncan Foley's critiques, because he goes back to the Walrasian auctioneer which is a more reasonable starting-point of where the fully-cleared markets goes wrong, and where in my opinion geography-less, individual-less theory diverts from common experience of market participants.

As far as I can see this sort of critique gets at the heart of what's going wrong without being too focused on specifically DSGE or Aâ€"D or some other clas of models.



 I thought this was an interesting article: "The most effective way to fight HIV Worldwide may be legalizing prostitution"

This is a "Gary Becker moment," an instance in which discrimination (in the form of criminalization) undercuts the discriminator and the discriminated. Becker held that in such situations, one should eliminate the discrimination to benefit both discriminator and discriminated. That's on an economic level. Let's face it, economics is one of the driving forces of prostitution worldwide.One might argue that in Southeast Asia (particularly Bangkok and other venues in Thailand), anything which might mitigate HIV transmission should be tried. HIV is among sex workers isn't quite at the level of Botswana (at 33 percent of the population—no, that's not a typo), but it's not that far behind. And trafficking is clearly an issue there. I'm just not sure that focusing on the customer will do much to protect the prostitutes. Customers will still want a maximal amount of privacy and will work to avoid interaction with law enforcement personnel, LEOs will be focused on prostitution rather than more violent offenders, and in response to customer desire for privacy, the prostitutes will exact higher charges with consequent entry (because of perceived ROI) on pimps and encouragement of trafficking (since there's still lots of money to be made).

The Swedish model, which attempts to regulate demand, is based on the same logic as arresting drug users in the US. That's been such a success that it merits being adapted/adopted to prostitution? Is there any data that the Swedish model has enjoyed any more success than its predecessor? The one advantage to full legalization is that if a prostitute has an infection communicated to his/her customers, there's one less reason for a customer to not seek treatment–or at least diagnosis. In the Swedish model, the customers would still have an incentive not to do so. I submit that that isn't a minor issue.

The question becomes: what's the point of decriminalization? Is it to move prostitution (the world's oldest profession) out of the back alleys or to minimize the trafficking of women? If the former, with the attendant potential for regulated health check ups and maybe even some measure of revenue for the state (not unlike legalizing pot), then teh Swedish model won't have much impact. If the latter, it may have impact, it may not–the data are hardly definitive. Either way, the status quo in much of the US certainly does not facilitate disease control among the prostitutes or their customers, save in Nevada where it's legal and health checks are mandatory.

It's not just HIV (deadly as it is) or GC/syphilis (with their attendant morbidity) but also HPV and herpes (which has its own co-morbidity during childbirth). There's more here than meets the eye, or the…



 I like sunshine. For me, the best time of the year is June. The days are getting longer, the air is warming up, and pitchers' arms are getting limber and hitting their (hopefully) triple digit marks—or in the case of the knuckleballers, not hitting them. Summer solstice is my favorite day. Of the whole year. Let the sun shine, let the sun shine in. Perfect weather for baseball, for as Walt Whitman called it, "America's game."

For some time, football has been in ascendency in the US, and baseball falling from its perch as the "national pastime." With the development of the replay challenges, pastime certainly fits. I'd add in the time the pitchers spend prancing about on the mound. What are they thinking about up there? Fantasizing about when the mound is raised another 8 inches? The past two years haven't been kind to football, and I think it safe to suggest that football is now on a down spiral. That some parents in Texas are steering their children clear of school football teams tells me that pro football's problems are just starting. Maybe that's the reason for the increasing popularity of soccer in the US.

Baseball. Growing up, it was easy to imagine that one was Mantle at the plate, Robinson snagging the unplayable ball at the hot corner, Koufax throwing the unhittable curve (well before Clint Eastwood), Mays with a basket catch. My curve ball never did break, but that didn't mean I couldn't try throwing it as though it did. Take a look at the leading players throughout baseball's history, and you'll find lots of kids in outsized bodies, kind of like a Big goes to the ballpark sort of thing. During the 1920s, as baseball tried coming to terms with the Blacksox fiasco (it was well beyond a scandal), Babe Ruth appeared and salvaged the game, leading it to new heights. Ruth was one big kid. Maybe that's why kids flocked to him and he was willing to engage them as he did. Fast forward to the 1990s, and one finds the national pastime struggling with the body blow of a strike. Not many Americans were particularly happy with the MLB during the first half of the 1990s. Players, owners, didn't matter who, Americans were upset with them. There were lightening rods—George "I need to fire Billy Martin one more time before I die" Steinbrenner is but one example. There were others.

The strike could have been the knockout blow for baseball, such was the level of discontent with it. For a period of time, I swore I'd never go back to the ballpark. (My wife was all too happy that I decided I had been too hasty in that decision—she didn't like to go with me, and it gave her some well-earned time for, well, those things that women do when they get together for lunch and an afternoon out. Fortunately, there were rarely new hats or dresses awaiting me on returning from ballpark.)

Yes, a knockout blow. Except for one person, one player who would play in the same position as Ruth did in the early 1920s: Cal Ripken. It's now a generation that has grown without Cal on the diamond. Few of them know about how he and a few others redefined the position of shortstop from what it had been for a century. Away from the Luis Aparicio style of fleet afoot, contact hitting, "get on base" to be driven home type of shortstop. Cal was big, strong, a quiet leader, perhaps, but a leader all the same. He came to work everyday, and that was something John Q. Public could relate to. The millionaire players, not so much (not that Cal wasn't well paid for his efforts). One sportswriter tried to ask Cal about his work ethic when it became clear in the early 1990s that he was in position to challenge Gehrig's 2130 game streak. Cal asked the reporter if he came to work every day. The reporter replied that he did. Cal followed, asking if the reporter liked coming to work every day. "For the most part," he replied, "but some days are just bad." "Same for me," Cal said. "And if I don't play, I don't get paid any more than you do when you don't work." Perhaps, Mr Ripken, not quite, but John Q Public understood well enough. It was Ripken's passing of Gehrig's streak with nationally televised games the likes of which hadn't been seen since Hank Aaron hit number 715. Those games, that streak shook off baseball's funk. Football may have become the national sport, baseball, though, was back. People focused on Ripken and his streak (with stats that would assure a spot in Cooperstown in any era), much as they had Ruth and his four-baggers.

Fast forward a couple of decades. Baseball has gone through an exasperating scandal of performance enhancing drugs with fallen heroes like Raphael Palmero and Barry Bonds. Through it all, though, was the Yankee captain, Derek Jeter. No Yankee Clipper—the team didn't perform well enough to assemble any sort of record comparable to the Yankees in the middle part of the 20th century. But Jeter was like the foundation around which the baseball club operated. And his performance commanded attention well beyond his base of New York City. There was never any question about whether Jeter had used PEDs. It would have been so out of character for him to have done so. Possible, sure. Anything's possible. But 10 sigma events aren't something that one bases one's understanding upon.

Jeter will no doubt grace the halls of Cooperstown soon enough. This year, he said before the season began, would be his last one. Yesterday's All Star Game will be his last one, too. When he went onto the field and was then brought back off of it—as happens in All Star Games as managers try to use everyone on their team—he received a well earned ovation. Earlier, the recognition from his peers underscored the man's significance to the game—not just his performance but his commanding ability on the field and at the plate. There was little mention of ARod last night, he of the suspended in association with PED list. Lots of mention of Jeter. And Jeter, like Cal ("Silent Cal") accepted it, enjoyed it, and then went back to doing his thing—being a member of a winning team. Thank you, Mr. Jeter.

Baseball has been down for a time now. It's about to rise again.In the immortal words of the Great Man:

"People will come, Ray. They'll come to Iowa for reasons they can't even fathom. They'll turn up your driveway not knowing for sure why they're doing it. They'll arrive at your door as innocent as children, longing for the past. "Of course, we won't mind if you look around", you'll say, "It's only $20 per person". [Prescient–it does indeed run about $20 a head these days.] They'll pass over the money without even thinking about it: for it is money they have and peace they lack. And they'll walk out to the bleachers; sit in shirtsleeves on a perfect afternoon. They'll find they have reserved seats somewhere along one of the baselines, where they sat when they were children and cheered their heroes. And they'll watch the game and it'll be as if they dipped themselves in magic waters. The memories will be so thick they'll have to brush them away from their faces. People will come Ray. The one constant through all the years, Ray, has been baseball. America has rolled by like an army of steamrollers. It has been erased like a blackboard, rebuilt and erased again. But baseball has marked the time. This field, this game: it's a part of our past, Ray. It reminds us of all that once was good and that could be again. Oh…people will come Ray. People will most definitely come."

(Note to the reader: My daughter goes to school in Grinnell, Iowa, known for its regional hospital, regional John Deere dealership, regional WalMart. No regional Starbucks, though. Most of her fellow students are from the MidWest, often from Iowa and Central/Western Illinois. She found out during her freshman year that many (most?) have no idea what the Field of Dreams is or that there's a cornfield in northeast Iowa of any cultural significance. Her generation has some catching up to do. Just saying.)



I wonder if there's some way to use bizarro patents as an index of where the market is at and may be headed—kind of like the hemline and skyscraper indices. For bizarro, I mean things like this: "Airbus Patents 'Bicycle Seats' That Look Terrifying For Airline Passengers". Yep, stale peanuts for $3, a can of flat Coke for $5 and a copy of Lance Armstrong's autobiography. Makes that 6 hour red eye from LAX to JFK really tempting, eh? Since I don't see any possible use for such a patent, my conclusion is that its filing represents sufficient accumulated wealth that a company doesn't much care about wasting some of it for the prestige of a patent. There must be some directional clue from such developments.



Does anyone know how much multiples contract during crashes, has there been any trend in those contractions, and do industries differ in any meaningful way in the degree of contraction?

Allen Gillespie writes: 

Normally, a crash is the fast repricing of a full recessionary effect and recessions typically are 16-21 month affairs, so a rough rule would be you wipe our 16-21 months of market activity with about a 33% contraction in earnings and 7% for the investment backers to raise capital, so 40%. If you really have a bubble, then you can wipe it out all the way back to balance sheet valuations of the prior recession, which might be a 10-12 year period, but that generally takes time and if you blow up the government too then 90% seems to be the rule.



 I've spent the last week in Sacramento, and the week before that in San Francisco. Two things caught my attention that seem like ticking time bombs no one is talking about: sub prime auto (and other non-mortgage) loans and interest rate resets on mortgage rate resets from 2010—leading to lots of houses about to be foreclosed on. I heard a bit about these two from individual perspectives. I don't know, though, how large these two may be. Anyone know how big the sub prime auto loan market is now?

Victor Niederhoffer writes: 

In my 55 years in wall street, there is always a month when there is something bad happening. From 1954 to his helpful passing for those who refrained from buying during his incessant and invariable weekly bearishness, one can merely look at the king of pessimism's column to find the bearish thing of the month– a very helpful thing for the bulls as it creates unnecessary fear and selling. After his passing, there was our friend the bearomoter who consistently found bearish things. This will save one from having to look through every days newspaper which I'm told is much easier now that you can look at it in the net and don't have to use microfilms any more, although I have not had the pleasure of doing this yet. However, Doc Lilienthal often has very helpful pessimistic things he's noticed, and the ticking time bombs mentioned above are a helpful substitute for the bearomoter with the elegant equestrian partner.

Gary Rogan writes:

But overall it seems like examining any individual piece of news, positive or negative, is pointless with respect to predicting the future market direction.  If it's out, it's already in the market, and the vast majority of them are too small to affect the market in any predictable way anyway.  Certainly something that is known by someone will affect the market, but knowing what it its among the thousands millions of candidates doesn't seem worthwhile.  The good doctor seems to have an idea that the market needs an excuse to do something.  I don't know if it does, but short of a sudden outbreak of a major war that one can't predict anyway or some well-known employment of Fed news that everyone knows, it seems pointless to look at news as a guide.

Ralph Vince writes: 

I would point to any short which shows US Equity prices and US recessions, and I would argue that US GDP is relevant when it is contracting for multiple quarters, and we should bear in mind the 1st qtr predictions, none of which were as negative as the final number came in at, and consider we have second quarter preliminary right around the quarter.

anonymous writes: 

Auto loans are not backed by the feds, while most home loans are, thus I expect fallout from the sub prime auto loan market will not get the same attention in the media or in Washington that home loan foreclosures will get.



I'm not a technician so I may have this completely off, but the Baltic Dry Index is making 12 month lows coming off a head and heck. I'm told that my suggestion of the HAN is off because the decline wasn't immediately after the right shoulder and the necklines were declining, but it makes me wonder about China.

John Bollinger writes: 

The point of studying such formations is to identify the underlying psychology and then act on it if appropriate. Perhaps, a core understanding might help? Richard Schabacker, Humphrey Neill, John Magee and Richard Wyckoff are a few of the authors that might throw some light on the matter for you.





The word "Huh" appears spontaneously without any root in all languages. Is there a regularity that appears spontaneously in all markets? The minimum on Monday? The big up open? The liquidation at the close from margin calls? What's your word?

David Lillienfeld writes: 

Huh is a palindrome. Palindromes seem like a good system idea.



 It may help to remove some of the heat from further discussions if we can all agree that individual liberty was never any American's birthright. The idea that people should be left alone and not harassed by officialdom was as radical an idea as the notion that God does not need appointed intermediaries to translate the message of faith.

Exhibit 1: The Oath of a Freeman

And June 1st was the anniversary of Mary Dyer's execution on the Boston Common.

David Lillienfeld writes: 

Since your citations are more than a century before the Declaration, I'm not sure I'm ready to accept your proposition. What are your distinctions between a 1776 definition of individual liberty and what you would characterize as what was viewed as the birthright?

Stefan Jovanovich replies: 

Franklin, who opposed actual slavery of other human beings, was wise enough to edit out of the Declaration of Independence Jefferson's indictment of King George for making white Americans "slaves". Jefferson, who never saw anything wrong with the enslavement of black and copper-skinned people, had thought it was a telling indictment and a politically appealing one to be added to the 1776 "definition of individual liberty". Franklin knew better. Neither Jefferson not anyone else i 1776 had a good answer offered to Samuel Johnson's question: "How is it that we hear the loudest yelps for liberty among the drivers of negroes?"

You really must sit down and actually read the Declaration of Independence, David. There is no definition of individual liberty in the document; if you want to find even a hint of that radical idea, you have to fast-forward nearly a dozen years. First, you have to watch the country go through a ruinous civil war and catastrophic financial default. Then you get to watch the genius and wisdom from experience of Washington, Franklin, Morris and (to a lesser extent, although the academics like you give him the greatest credit) Madison produce the first official confirmation of the rights of individual citizens in American history - the U.S. Constitution.

Here are a few things for you to consider as you follow the lesson plan:

1. The Declaration of Independence has no legal authority as far as the United States of America is concerned; it was the unanimous Declaration of the thirteen united States of America. That is why it is the favorite document of people who want to believe in absolute "states rights" and, like Justice Sotamayor, in a legal authority that is not required to be confirmed by the votes of the actual citizens of the country, as the U.S. Constitution has been.

2. If you read the document carefully, you will find that it has absolutely nothing to say about individual liberty; it is very detailed in its descriptions of the abuses by the King and his ministers and agents against individuals but those violations are mentioned as justifications for the rebellion that had already occurred in and around Boston, not as wrongs to be corrected in the laws of England and America.

3. War messages never, ever contain assertions about individual liberty; they only speak of "the people" and "the state". Note the entire absence of any statements about individual liberty in Jefferson's Wow finish: "That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor." The colonists are telling King George what the new boss is going to do; they are not spending any time telling him what the distinctions will be between their sovereign authority and the one held by the old boss.

I offered "my citations" as a reminder that Americans have not yet been gifted with individual freedom from birth. The arrival at Plymouth did not change that; neither did 1776. Thanks to the war veterans who were the majority in Philadelphia in 1787 and those who were a majority in the Congress in 1868 we have, as a country, made a more than decent start at establishing, once and for all, that people's natural rights come before everything else at law. But, we are still very far removed from Jeff Watson's ideas of freedom; and it is the worst kind of schoolie propaganda to assert that this is a nation founded "in liberty". We Americans (and the foreigners unfortunate enough to be snagged in our courts) have a few specific individual rights that can, with money and luck and honest judges, be successfully asserted. But, as too many of our List members know from painful experience, "the law" spends most of its time telling the citizens that the sovereign is right even when it is clearly wrong and then charges "the people" extra for the privilege of reminding them who is boss.



 Have you seen this interesting graph of debt/GDP ratios of the G7 countries since 1946.

It's puzzling to me that in 1946, UK had 270% debt to GDP, and US and Canada had >100%, while at the same time Germany, Japan, and Italy had almost no debt.

I'm sure the allies didn't want another Versailles, but still this seems like an extreme outcome.

David Lillienfeld comments: 

Germany, Japan, and Italy also had almost no assets. Their currencies were worthless, hence no debt. I'm guessing that the same phenomenon occurred with the Confederacy as the end of the war approached.

Stefan Jovanovich retorts: 

David's answer is - alas - a muddle. The currency and the debt of the government of the Confederate States of America was officially worthless after the surrender at Appomattox. (Read Section 4. of Amendment XIV of the U.S. Constitution.) So were Germany's debts, currency and laws after the formal surrenders signed by the remaining German General Staff officers with first the Americans and British and then the Soviets. Germany, like the Confederacy, literally disappeared. That is why the line for Germany beginning in 1945 is flat at 0 until the reconstruction loans that were part of the Marshall Plan took effect in 1948. What is interesting is the other flat-line - the one for France. The Vichy French government never formally surrendered; one of deGaulle's marvelous bits of arrogance was to assert that Vichy itself was not a government and could have no recognition. Somehow that also became the rule for the debts of the Third French Republic (I don't know exactly how) as well. After the war, their debts, like those of Vichy and Germany, seem to have legally vanished. When deGaulle took charge after the Normany landings he was meticulous about asserting that he represented the Provisional Government of the French Republic (GPRF), not the Third Republic. Yet somehow the financial assets of that Republic - specifically the gold on deposit with the Federal Reserve bank - were "saved" and became the property of the new Fourth Republic that came into existence after deGaulle resigned in 1946. Italy, which had overthrown Mussolini and signed an Armistice with the Allies, and Japan, which retained its Imperial Rule, both continued to exist as governments; their debts were restructured but not officially abolished.

FWIW, Charles, I don't think the the parts of the graph that deal with the immediate aftermath of WW II have any meaning. They are another attempts to put prices on things for which there is no market. The statistics for the U.S. GDP during WW II are another example. As Higgs and others have pointed out, the "recovery" of the U.S. economy in WW II cannot, in any sense, be measured in dollars. We know what the U.S. "spent" but that money cannot be considered an "investment"; the factories had no value except to make things that only governments would want to buy and this was at a time when all the governments of the world, except the U.S., were broke.

 So, how did the U.S. "recover"? Sewell Avery and others conservatives feared that hard times would return; Truman was certain that the U.S. would need to return to Hoover and Roosevelt's managed economies. They were both wrong; just as the voters in Britain threw out the existing government, the voters in the U.S. decided that whatever they wanted, it wasn't what they already had. They voted for the war plants to be closed and the military to be demobilized, and they all went out and spent the money that they had been saving. The war had been financed by money created by the central banking system; what made this less than a fraud were the wartime restrictions on spending. The war debts were funded by the ability of the banks to draw on the deposits from the defense workers' and military inductees' pay. When WW II ended and triumphal march to socialism (ah, national health care) was at least temporarily post-poned, what came instead was a boom of spending on consumer goods by a population that had been on rationing for a decade and a half. That cash spending, plus the flood of borrowed money from consumer finance (something previously unknown except on a small scale for radios and cars) and home mortgages, did not (contrary to the usual myths) "pay off" the debt or inflate it away; but it did create incomes and the taxes that go with making money. That revenue was more than enough to fund the much smaller government and to sustain the rolling over of the maturing debts from the war. When the British and Canadians got tired of Laborism, much the same thing happened for them - as the graph illustrates.

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