Trailing Stops

September 11, 2020 | Leave a Comment

Zubin Al Genubi writes: 

I would like some advice on trailing stops.  Lets say a guy took a trade, 3 down days, buy end of day, hold for expectation period of 1 day, sell half, set a trailing stop on balance.  Where?  low of day? break even? 20 period ema?  And how is best to move it up.  Low of day? Ema?  Fixed trailing?  I realize it is not efficient but selling at the expectation period would lose a run like last month from 3000 of 16%.   Things seem "trendy" now.  Appreciate any good ideas.  Can this kind of thing be tested?  I doubt it, because normal tests don't seem to catch trends as they tend to mean reversion.  Thanks.   

Sushil Rungta writes: 

I use a % trailing stop.  Usually, once I buy a stock, depending on the stock and the expected volatility, I place a trailing stop anywhere from 8% to 25%.  That way I do not lose any of the upside.  And the % trailing stop keeps moving higher if the stock keeps moving higher.

I am a novice and not meant to be advice.  Just shat=ring what I do

Ralph Vince writes: 

I think it depends on the particular market. For equities, I've found nothing worthwhile that constitutes a mechanical trend following methodology I would risk money on

I have a lot of experience looking for it though! Perhaps  a temporal solution is manifesting in the quities indexes right now, which will oly be evident at some future point in time?

Experience in the markets teaches us nothing, and I doubt it has any value whatsoever. If fact, there is a toxicity to it in that we begin to believe we know something that day one participants aren;t burdened with.

We are tasked with finding which of the 9 sections of the tic-tac-toe board a ball will (randomly) appear in. We choose the center. It comes up randomly in the NW corner. (It must like corners?). We choose the SW corner, it shows up in the NE corner. (see, it likes corners,) We select the SE corner. It comes up in the middle (Ah, two corners, then a middle…..) and on and on ad on. 


"I have a good sense for where that ball will come up as I;ve been doing this for years." Or, better still, "I have a good sense of where that ball will come up - it;s mathematical! It;s somewhat deterministic," (as said the man walking into the convenience store to pony up for his next magic powerball number combination).

In markets, If you find something that works, and is working, it's about to evaporate. This is why I've migrated to longer and longer-term views on things, as it results in a longer time until things evaporate. Everything we think is true in the markets, is a delusion of our own making. Even the notion of drift: in equities, vanishes - first, for  decades or so, then, with the next fall of an empire. The probability of a drawdown, of any given magnitude, approaches certainty as the length of time given for it to transpire increases.

Most things in markets (as in all of life) that are real, often tend to be dull and tedious, require work to get our arms around,  and reside nowhere near where we are looking.

Ralph Vince writes: 

The point is everything we are looking at in terms of timing mechanism is ephemeral. I like longer-term models because they might outlive me (e.g. be long S&P500 when 90 day bills /  S&P500 div yield >1.8, which has batted 9 of 9 since 1980, below) before collapsing. The flipside is a much shorter-term model that will work, until it doesn't, then won't, until it does again!

I have never encountered anything in terms of equitisinexes that works in terms of trend-following, save for the notion of long-term, upwards drift. But as I say, once you are comfortable that something will always work, it is likely near-finished. The buy all dips / drift works in our favor mentality is not immune, but has had the good fortune of being a lugubrious beast.



Experts Never Fail

September 3, 2020 | Leave a Comment

Dr. Zacek writes: 

The population density in Sweden is 25 per Km2 (64 people per mi2).

New York has the highest population density of any major city in the United States, with over 27,000 people per square mile.Just saying.   

Stefan Jovanovich writes: 

That is why they need absolute authority.

Peter Grieve writes: 

Stockholm was doing fairly well, last time I heard. Also just sayin'.




August 20, 2020 | Leave a Comment

Zubin Al Genubi writes: 

Mountain guides are an elite group who guide people into the mountains and backcountry around the world.  They face high risk and uncertain conditions and their job is to mitigate risk while at the same time pushing the limits of their clients to reach higher heights.

A joke among the guides is that the most dangerous situation they can find themselves in is traveling in the mountains with a group of guides.  None of them want to speak up and point out the danger they are getting into for fear of stepping on the other guide's ego, or appearing foolish and other group dynamic issues.  In fact, group dynamics is one of the most dangerous elements in backcountry travel.  Such heuristic issues as who is the leader, fear of being considered scared (when in fact there is danger), fear of looking foolish, expert syndromes, group think, familiarity heuristics, get home itis, summit fever can contribute to disaster.

A lot of the new list members appear to be high level experienced market professionals from the looks of their intro cv's.  Chair is pretty laissez faire, but it's good to contribute without worry.  If you're wrong, someone will tell you how wrong you are here, or the market will, and that is good.  

Jeffrey Hirsch writes:

Eloquent summation Zubin and inspiring. I look forward to discovering and discussing my many flaws and errors



Michael Brush writes: 

So the market got wind of this early and sold off near the close ahead of the announcement?

Futures down post announcement. 

Adam Friedman writes: 

Futures are actually up a little— I think market was nervous it was going to be Susan Rice.Kamala has friends on wall st

Stefan Jovanovich writes: 

The reason I don't trade is that I never, ever understand how "Wall Street" thinks when it comes to political events.  How could the choice of Ms. Harris be anything but a disaster for the Biden campaign?  Trump now has no worries about producing videos that criticize Joe Biden; his campaign can just run the clips from the campaign of Harris accusing Biden of being a racist, sexist…Then they can pull the videos of her being "touch on crime" in California with punitive sentencing for black people.  She comes from a state that the Democrats cannot possibly lose; at least Kaine won Virginia for Clinton.  In the polls that his campaign took before the primary contest with Mrs. Clinton,  Barack formerly known as Barry discovered that one of his serious weaknesses was among African-Americans, many of whom questioned whether or not he was truly "black".  What the campaign discovered was that those questions all went away as soon as voters were presented with images of his wife and children.  Someone who was considered a possible liability for the campaign became the essential partner; that is part of the explanation for how Michelle Obama became "the most admired woman in the world''.   Kamala Harris may be thought of as a "black" candidate by white people; there is going to be considerable doubt about whether black people will apply that label to a woman who is the child of a "mixed" marriage and is married to a "white" man who has adult white children from a previous marriage. 

Let's have a vote from the trading floor; who takes the over on Michelle Obama's being willing to risk her untouchable popularity by publicly embracing Kamala Harris and doing campaign commercials?

Michael Brush writes: 

If anything about the current political environment makes sense, you probably have mental issues

Stefan Jovanovich writes: 

So, MB, is that a vote for the over?



Leo Jia writes: 

If you are in the right factions of the New Class,  it's time to celebrate as you can expect to get a piece of the pie soon. 

Kklaw writes: 


That happened in 2017. He was snatched from Four Seasons Hotel in Hong Kong.  All of his bodyguards could not save him from armed CCP agents. The entire CCP is just like a giant mafia. His way to riches is of course through a lot of illegal deals via a whole bunch of connections within CCP. Rumor was that he shorted the Chinese market during 2015 and that pissed Xi off. Therefore Xi wanted to take him down and nationalize his financial empire.  There have been a number of Chinese billionaires who either died mysteriously or were jailed. The morale of this story is the lieutenants of the mafia can get rich and stay "free" until the head of the mafia feels the person is a threat. If Xi feels any of those billionaires is a threat to his empire, the person could be be whacked (i.e., died accidentally) or jailed. And the person's fortune would be the country's (should i say Xi's or his cronies') possessions.



Tom Ford writes: 

Should we be sanctioning Georgia?

Actually my comment was not meant to debate on covid numbers. Everyone will have different opinions on whether the virus is really re-surging. It depends on how the virus affected you (financially, personally, and politically). I found it interesting how we are accusing China of fake numbers (rightly so, i don't believe it either) when we may potentially also be doing the same thing. It's funny lately how some of the actions taken by our nation looked exactly like the things we've condemned China for. But hey, do as I say, not as I do….right?

Ralph, sources wise, we can debate till the next millennia what constitutes credible sources. Credibility most commonly depends on whether something sounds confirming for a reader (confirmation bias). If a news piece provides information that is inline with a reader's political affiliation and/or personal philosophies, it is more than likely the reader will find that news credible. I like to find things to read that don't agree with the general public's views because it allows for a more holistic understanding of the parties involved and their agendas. Kinda like stepping in the shoes of someone else. Its not going to fit, literally and culturally. Thats why I encourage people to go read news published by the CCP and contrast it with our own nations news. That way you can really understand what everyone's action may actually entail. The problem we have right now with China is a difference in culture, a way of life. Until we really dive deep and understand each other culturally can we ultimately find a common ground. 



Hernan Avella writes: 

A Fearful Asymmetry: Covid-19 and America’s Information Deficit with China

David Moser

July 11, 2020

Volume 18 | Issue 14 | Number 5

Article ID 5422

Abstract: There is a longstanding and fundamental asymmetry in level of mutual understanding between the US and China. Chinese citizens are avid consumers of American media and cultural products, whereas most Americans are woefully unfamiliar with even the basics of Chinese history and culture. This asymmetry has resulted in a situation where the US is in danger of misinterpreting or misunderstanding Chinese motivations in bilateral relations, particularly in times of crisis. This paper recounts how the Covid-19 epidemic of 2020 exacerbated existing tensions between the US and China, and how these escalations in state-to-state conflict were ilarge part due to America’s information deficit with the PRC.


Jeffery Rollert writes: 

The article reminded me of old Cold War articles. Clear local perspective, and cold lanuguage discussing hot topics.  I found the premise to be thoughtful and well explained, but it seemed clouded by reaching to far from it.

K. K. Law writes: 

The author completely missed a very major point and that is likely the result of him also only having very superficial understanding of China and CCP. The author fails to account for the key role of CCP's propaganda machine which controls what the Chinese can read and see and also controls what kind of information and mid-information is allowed to be sent to the West.  The CCP has perfected its machine to control the minds and behaviors of Chinese inside the country since 1945.

Stefan Jovanovich replies: 

1948 would be a better date.  Until the KMT outlawed ownership of gold and imposed price controls - which ruined all remaining exchange value for the currency, the Maoist insurgency had no guarantee of winning.  As usual, the "conservatives" in American politics picked the wrong villain.  The communists in the State Department had little effect on the outcome; the sensible bipartisan financial experts are the people who "lost" China.



Leo Jia writes: 

Jayson Pifer replies: 

There has been a series of those videos coming out, pre-covid anyway.   I believe propelled by the eruption of MMA in China and it's suppression there by the traditional martial arts.

Turns out the winner of these bouts are consistently the ones who train for the ring against actual opponents rather than their rank achieved in their Art.

I'd suggest the same answer applies to the Special Forces versus Martial Artist question.  The answer wouldn't be their employed technique, but the effectiveness of their training and it's applicability to the rules, if any, of the fighting arena.



I just had a nice chat with a German recruiter/headhunter.

I ask her about the current German labor market and how this (convid-
)summer compares to last year's summer ? I asked because I don't see
much difference on typical headhunter sites - lots of offers and job

She commented, that the labor mkt is quite different now. Many employees
work part-time and/or from home. Many are also satisfied with lower
wages ( as a result of part-time work) in exchange for more free time.
Many plan to keep working part-time.

I expect productivity or crater here. This is on top of a dried up
workforce even before the virus. Now many are also lazy. Such a move to
part-time does not happen gradually, but seems to occur herd-like.



Good stuff:




July 11, 2020 | Leave a Comment

Victor Niederhoffer writes: 

are you doing  and how is millie doing…'2 what is your reaction to all the police violence lately .d o you feel it shoudl be defunded?  3 artie said  that during  his tenure it wa s     aomost mpossible to arrest a b lack personage because  eveyone was loookign at you a skew.

William McCarthy replies: 

Hello Victor,

How are you doing?  Millie and I are hanging in there.  Plenty of doctor visits for the both of us.  But all is well considering.

The only thing different about the police violence today compared to the past is media technology.  Cell phone video cameras and the internet.  These recorded criminal acts by police unfortunately have always occurred by some rogue police officers that were denied. There is no justification for what was witnessed in the Minneapolis incident.  I feel for the 2 rookie officers that were present who were also charged.  There lives were ruined before their law enforcement careers even got started.

It seems that physically resisting arrest has become an expected allowable standard practice on the part of the public.  Resisting even a unlawful arrest is against the law (at least in the New York State Penal Law). The citizen's recourse is to submit to the arrest and make their claim of false arrest in court.  

The police have little influence if they are not supported by the general public.  And without the public's support they are personally discouraged from self-initiating any enforcement activity.  No one can know in advance the outcome of an encounter.  The public has been falsely educated by all of the popular TV shows that depict the law enforcement main character's swift and facile physical actions.  In real life it can get ugly fast even when the actions of the police are lawful. Few ordinary officers are prepared to make it look easy. That requires constant physical training and technique. On television the "good guy" always wins.  That is not the case in real life.  

Can society survive without the acceptance of the rule of law by the public and its enforcement by the police?  There would be little to video if the public did not physically resist arrest!

Victor Niederhoffer writes: 

do yoou agree with me that the strength oof the unons makes it    almost impssiblet ofire ann officer, and no knock lawas and qualified  immunity and  oikuce nilitary equipment, and  juries favoritism to olice   needs reform. very glad to hear of  your consilience, we are abotu the same as y ou and Millie. moved out of ny. no good reason to stay for us without broadway and restaurants, just reread the Gofrather . wata is realistic?.

Victor Niederhoffer adds: 

billl mccarthy  was a friend   and student     of my father    andn chie fo the bomb and couter  intelligence dept, and  made more arrewts than anyone with his patented method. loved to biox. his book is the best crime book ever

Ken Drees writes: 

 The Godfather types will move into cities that let their police forces shutter and then there will be the peace



Last weekend I have completed a transcontinental travel going from Las Vegas > Los Angeles > Amsterdam > Prague.

Prior departure Delta & KLM did bombard me with docs to fill out for the trip and plethora of entry and in-flight requirements.

Vegas: almost empty airport, 99% people in masks, at about 10% of normal capacity in terms of people traffic, 1 newspaper shop open, everything else closed. West Jet flight – small Embraer plane with about 30% seats taken, comfy free mid seat arrangement, 2 people in 1st class, refreshments placed on your seat in a Ziplock bag, no service throughout the flight. Masks required on the plane during the whole flight.

Los Angeles: no transit working, had to exit the domestic terminal and walk the curb to the international terminal, 14 flights on the monitor for the whole day, destinations as such as Mexico, China, Paris & Amsterdam. Terminal completely closed except 2 newspaper shops, departure terminal complete ghost town, passengers only for my and another China flight, both relatively small planes Boeing 777-300. Passengers ranging from full-on hazmat suits, masks & shields for ICU units, to scarf over the face and only when specifically requested by the personnel. No tourists-type travelers whatsoever. Flight about 35% full. Refreshments in Ziplock bags on the seat, except 1 hot meal (hot oats with marmalade – seriously, I kid you not) mid-flight, no in-flight service as well. Masks required on the plane during the whole flight. Big fuss about several forms to fill out before departure which will be requested upon arrival in Amsterdam. People using 1! pen provided by the gate attendant.

Amsterdam: no one asking for the tons of paperwork we were forced to fill out, no temperature check at all, no in-person questions inquiring where you landed from. About 80% of the airport in masks, terminal capacity at about 25%, all shops open including high end jewelry and designers.

Prague: airport at about 20% capacity, baggage delivery at record breaking 10 minutes from plane docking at the gate. First time border control staff asking where I did land from, even though I did land in Schengen terminal, meaning there is no border control in normal circumstances. 99% of people in masks inside buildings, outside no masks.

Every single flight except Prague had bus transfer to plane location, no direct gate access – perfect petri dish environment to get the virus.

Czech legislation allows to have the test up-to 72 hour after arrival as long as you self-quarantined home till the test results. Alternatively you can arrive with test results done max 4 days before departure. In Arizona the current test result delivery is up-to 10 business days with up-to 5 days wait time for the test exam as such. In Prague I did have it 24 hours after landing, to capture the trip exposure. I considered the risk during the transit much higher compared to being tucked away in my home in an small town in the middle of the Arizona desert. PCR test results took 6 hours, based on which I sent an email to the authorities and released myself from the quarantine.

Let's see how the experience will be in about 5 weeks when I fly back to the USA.



3 times the chair has sunk the prez with terrible prepared remarks. Lets the cattle trader spoon get ahead of the prez in the betting odds, Mr. Kudlow should take the Cat to the Chair and tell him that's not why he was made Chair. He was supposed to be diplomatic. We know he doesn't know anything about monetary or economic theory but at least he could refrain from a fourth strike.



"41% of businesses closed on Yelp have shut down for good during the coronavirus pandemic"

This article may be one of the evidences that the next shoe or shoes to drop. I have seen yelp report on 26% of fitness facilities to 53% of restaurants listed on yelps that have been closed forever. Regarding the US-China deal, I don't believe CCP will hold up their end of bargain. But then it is a ultra-small potato, in comparison to the significant loss of lives loss and the unprecedented impact on the US economy caused by the Wuhan virus.

If Trump wants to sing the praise of signing of the trade deal or use the per-pandemic economy and wants to get reelected, he is grossly mistaken. Whatever playbook he used to win 2016 won't work this time around given the current pandemic-driven unprecedented downturn. Just don't know who is advising Trump on his reelection campaign. Whoever they may be, they all need to be fired. Whoever running the campaign needs to adapt and modify the campaign quickly. Running for the highest office against one's opponent is like MMA competition in the UFC. It needs a well-rounded fighter. Just being a strong striker or 10th degree black-belt jujitsu expert can't enable a fighter to win the champion. It needs a strategy to adapt and change according to the opponent and the surrounding circumstances as well. In the mean time, I am buckling up and brace for the impact of having Beijing and dementia-stricken Biden in the White House, and the Democratic-controlled house and senate. I would like to be proven wrong, but until there are new data to show otherwise, that is what I envision for the time being.



In the end, they will push hard (HARD) for mail in ballots to ensure their (liberal) victories. I wouldn't be surprised if they try to do almost all mail in ballots. There will be a major ramp up of fear. We'll see a major spike in cases and deaths blasted out from the media and the democrats will in congress will be all over the news trumpeting doom and gloom and the end of civilization as we know it and that we need to close down the polls and do all mail in voting)

Anyone who doesn't think that there is a huge opportunity for fraud with mail in ballots is just disingenuous.

Heck, even if the non-liberals were pushing for mail in ballots, I would be saying that that is ripe for fraud.

I would be suspicious of any group that is pushing for mail in ballots. Why? Because that means that they are prepared for it. Prepared in a fraudulent way. I would say the same thing if non-liberals were pushing for it.

We're being played by TPTB and the useful idiots are lining up to worship at the altar of liberalism. And those of us that don't line up to worship at their altar will see the modern day version of Brownshirts unleashed on us. We've gotten a taste of that already.

anonymous writes: 

We've had mail in ballots in CO for years. I'm not sure mailing in versus filling out a ballot in person changes things dramatically when we think about fraud. Fraud happens when what was dropped in the box doesn't match the results.

Voting seems like a great way to use blockchain so a person can trace their vote and see it be counted anonymously. That may a leap too far, but it (on the surface) could solve many issues of fraud. Smarter people than me feel free to chime in. 

Brian Mulvihill writes: 

OSTK-backed Voatz has been garnering momentum on blockchain voting over last year.



The only thing different about the police violence today compared to the past is media technology.  Cell phone video cameras and the internet.  These recorded criminal acts by police unfortunately have always occurred by some rogue police officers that were denied. There is no justification for what was witnessed in the Minneapolis incident.  I feel for the 2 rookie officers that were present who were also charged.  There lives were ruined before their law enforcement careers even got started.

It seems that physically resisting arrest has become an expected allowable standard practice on the part of the public.  Resisting even a unlawful arrest is against the law (at least in the New York State Penal Law). The citizen's recourse is to submit to the arrest and make their claim of false arrest in court.

The police have little influence if they are not supported by the general public.  And without the public's support they are personally discouraged from self-initiating any enforcement activity.  No one can know in advance the outcome of an encounter.  The public has been falsely educated by all of the popular TV shows that depict the law enforcement main character's swift and facile physical actions.  In real life it can get ugly fast even when the actions of the police are lawful. Few ordinary officers are prepared to make it look easy. That requires constant physical training and technique. On television the "good guy" always wins.  That is not the case in real life.

Can society survive without the acceptance of the rule of law by the public and its enforcement by the police?  There would be little to video if the public did not physically resist arrest!



 I'm working on an hypothesis on Sweden and it's economic impact.

The FT has few articles on the way they are treating the covid but given that I do not have an edge on that I m more focused on second level thinking i.e

Sweden is the opposite of Italy from an economic standpoint high private debt (companies and private are highly levered) low country debt.

Riksbank stretched its mandate and there is a parliament earring to try to limit its intervention.

The economy is exporters based and employee costs are elevated (We are talking around 70% tax rate) due to highly "social" economy employees are covered for 6/9 months Va Italy 6 weeks…

They have kept almost 80% of the economy open but if you do not have external demand … who you are going to sell to?

Nevertheless the Omx is one of Europe best performer indexes…supported by a depreciated currency .Theoretically if you plot it against skeusd you will see that the relationship broke down around 2yrs ago according to this metrics it should be trading at half the price.

Add to this the real estate market which is creating a bit of headache on the ground.

All this to layout the conclusion that they could not close the economy without intervening directly on the private debt market.. which given the low level of country debt they could have done… but they preferred no to…

Hope I was able to add few point to your thinking process.



Folks here are running out of money for food. Unemployment web site is nonfunctional. They just extended shut down another month. Something is going to blow up soon.

K.K. Law writes: 

I don't have any proof and yet I always wonder whether that is part of CCP's multi-prong game plan that uses the Coronavirus, among other objectives, to create some form of limited-extent slow and steady self-annihilation within the US. While jury is still out whether they released the virus on purpose, and yet certainly they would not let even an accidental crisis go to waste. If this is a provocative speculative allegation, then so be it. 

Ralph Vince writes: 

Now I see the good Governor of MI has extended the lockdown for another month.

I'll stand by me earlier prediction, there will be bloodshed at that Capitol over this, that's but a formality now. The question is how do the governor's of other besieged states react.



Gilead arguably has the best science in the business. But success in Biotech / Pharma is reserved for those who keep their customers alive, but milk them forever by not curing them of anything.

Hits against Gilead:

1. Gilead did not make any friends by creating the Gardasil vaccine for HPV, which killed the downstream pipeline for those companies that would have treated HPV for 40-50 years.

2. Gilead does not have deep hooks inside the FDA either

Regeneron on the other hand has deep contacts inside the FDA and also practices the milking-forever business model. If they package dried-prunes as a cure for Covid, FDA will merrily approve it.



 Sheltered Specs,

Thought you might enjoy this talk:

"Roland De Wolk and the Scandalous Life of Leland Stanford"

Sushil Rungta writes: 

Very interesting.

Just ordered the book also.

A subject of great interest to me.



Looking at Dow Jones there have been 17 declines from ATHs since 1900 over 22%. Only two have recovered high within 1 year. 1990 and 1998 had declines around 22% and recovered within 1 year. 1917, the year preceding the Spanish flu recovering the all time high took 2 years.



I'm also wondering about real estate. Here there's a moratorium on evictions, a moratorium on foreclosures. Naturally no one will pay either rent, especially rent, or mortgage, because they are out of a job, and the unemployment fund is dried up.

That puts pressure on the banks, and so on down the chain.

Ralph Vince writes: 

Yes. This is why I think the virus is NOT a problem to be concerned about. Everything is downstream from everything else, in a giant circuit that is the US economy.

It cannot be started simply by reversing the order of operations form which it was stopped. Some fraction of the machine will inevitably be "amputated," I fear, and never re start.

I wish I knew what size that fraction is.

Peter St. Andre writes: 

The following is speculation, but it seems to me that much of the retail sector will not return to "normal" for at least 12 months and possibly as much as 5-10 years because apparently a vaccine will be difficult to create and distribute (the previous record for developing a vaccine - for Ebola - was 5 years [1]). You can write off theatres, music clubs, and the like. Museums and gyms and restaurants and salons and such will be severely challenged and perhaps unable to generate even 50% of their previous revenue because of persistent social distancing and the fact that many former customers will simply stay away. Some of this activity will move onto the Internet, but many of these organizations will cease to exist. Will anything take their place? That seems unlikely, which means it seems likely that retail rents will plummet ~50% too, leading to widespread bankruptcies in the commercial real estate sector. And this doesn't count factories, office buildings, and so on. What are the downstream effects on REITs, banks, pension funds, property managers, service companies, etc.? Others on the list are more expert in these matters so I'd love to hear their perspectives.

Peter Pinkhasov writes: 

If one had to throw darts I would think major consolidations in retail, airlines and O&G coming. Big winners are still middle-man removing; anti-cartel tech giants.

Ralph Vince writes: 

None of this stuff you fellows are discussing are part of the major backbone of American manufacturing though — what you are mentioning, even airlines, are not even complicated processes.

I'm talking about, say, large, design- engineered products, often one-offs like huge power transmission componentry involving oddball power transmission devices ( say, rotary actuators) that, say, operate in unusual environments, involve many complex comppnents and engineered upstream.

So if the more simpler services of the economy will struggle to reopen, how will the manufacturing backbone, comprised of it's own, interdependent, rather circuitous food-chain, stand up this decade, or ever? If things had been lost to globalism, the propensity for more of that will be far greater now by sheer necessity.

K.K Law writes: 

"COVID-19 is attacking our defense supply chains and our nation's security"

Gordon Haave writes: 

Covid 19 isn't attacking them. Human decisions are.

Julian Rowberry writes: 

Exactly Gordon, the same goes for the recovery. It won't be held back by complex physical limitations, it'll be limited in varying degrees in different segments by human decisions (red tape, regulations, access, sentiment etc).

The two areas I see that are going to do well are those with political clout to enforce the flow of decisions in their direction. These segments will be hard to swim along with because they will be able to front run, maintain and work their syndicates. The other is those who are who break the paradigm with new ideas, businesses & services, that the gatekeepers don't see coming until it's too late.

Easan Katir writes: 

Anecdote, pointing to a trend ahead:

A business-owning friend voluntarily quarantined on his yacht in Sausalito called to talk about money. He said he had just had a zoom staff meeting, and everybody said they liked working from home, and hoped it would continue.

So among other effects, the govt decision to shut down accelerates the work from home trend. #WFH



 I wonder if meat is going to have similar problems as crude as someone here mentioned with the meat factories shutting down. Similar carrying issues. I'm vegan, so not too worried, but it could be a problem for markets and food supply in general.

Brennan Turner writes: 

I think the challenges in meat markets is just a blip and oil markets are not the best comparable.

Long answer: Meat processing plants will open back up as entire factories get sanitized. In the meantime, 3 options emerge for the remaining animals:

1.    Only cattle can be grazed (cheapest option for beef farmers but not an option for hogs or poultry)

2.    Put on low-weigh gain/maintenance rations (still expensive)

3.    Or be culled: 100,000s of animals (if not millions) in the U.S who are supposed to be moved to said plants but simply can't now. Any of these options represent a significant loss for the livestock producer. As plants open back up, in order to reduce COVID-19 contagion risks, it's unlikely they'll be going full tilt (maybe closer to 60-70% of capacity).

As a result, I believe a few scenarios will emerge in the coming weeks:

 1.    Those who can pay more for meat, will continue to do so, but with more and more people on the unemployment line, this number will drop which would lead back to lower meat prices in the medium term (I.e. 3-6 months).

2.    We're already seeing an increase in demand for the local butcher and thus, one area I'm watching closely is the D2C game (Direct to Consumer); I've already seen a few of my cattlemen friends around North America kill a few of their own animals destined for the plants, but instead of just dumping carcasses in the manure pit, they're capturing the surge in D2C demand from their local consumers. And yes, dumping animals in the manure pit is often how they're disposed of…great organic fertilizer for the crops!

3.    With less animals to feed, and/or animals on smaller rations, this is a significant hit to the feed line item for grains and oilseeds. Cash corn prices in many areas of the Midwest (usually the corn demand epicentre) are already below $3/bushel thanks to an ethanol market that needs 50-60% less corn than 3-4 months ago! Considering that less than 10% of farmers actually hedge in the futures markets, this means a lot of farmers are swimming pretty naked right now. My last point echoes Mr. Vince in that that the ripple effect will be deep and long. Small-town America in the agricultural heartland could see significant demographic changes: farmers can't afford brand new equipment or trucks or even eating out in town 1x/week with their family…lots of these local businesses depend on, at bare-minimum, a break-even agricultural economy and, without it, they won't be able to weather the storm coming).

Not to patronize any of the List, but this will be a major reset of the scales in the agricultural landscape. I think there'll be major regulatory changes to the meat processing sector i.e. in a intense twist of irony, I could see it moving to the extreme opposite of Chinese wet markets. Further, there's going to be a lot of blood on the streets and I'm skeptical that any bailouts for farmers won't be enough for many. Here in Canada, the government is only lending more money to an already over-leveraged farmer (but students are getting $9 Billion or $1,250/person/month, no strings attached!!!)

I left NYC in 8 years ago to go back to Saskatchewan and help my family's farm be a little more structured/professional. This spring, we plan to seed ~55,000 acres in Sask and 20,000 acres in North Dakota (combined, ~5x the size of Manhattan). Agricultural markets are unapologetically cyclical (as are almost all commodities). What we're seeing now is the exact reason I implemented some serious SOPs and a somewhat overburdening pay down of debt during the good times of 2012-2016. However, because we've done this, we'll be able to weather the storm financially, no matter how bad it gets. The high-interest rate environment of the 1980s continues to come to mind, although I haven't had a chance to dig into the all various ripple effects back then, but I think there could be some similarities.

Bottom line is that, much like many other industries, the agriculture's big players will get bigger as the under-capitalized and under-prepared have to throw in the towel (be it now, or when the further over-leveraging catches up with them). I'm undecided if we want to expand our farm further, but it's either that, or all the pensions and endowment funds will buy up the land around us (assuming they've got pocket change to play with still), and the farmer is toast in the long-run over impossible cash rent costs. Thus, to respond to the conclusions in the Bloomberg piece, the U.S. will not be alone in this restructuring of agricultural economies.

Stefan Jovanovich writes: 

Questions for BT: Could you explain why you think the cash cost for rentals will go up? Don't the consolidations suggest that there will be fewer smart operators like you and more absentee landlords like the British Land Companies in the last third of the 19th century? 

Brennan Turner replies: 

Institutional investors always have deeper pockets than the local farmer/investor. And they are far from absentee landowners, as many have ESG requirements these days and are very protective of their generational investment. (They're not making any more land!) Ultimately, there's way less leniency and whoever can pay, will usually pay. Land ownership/operator has gotten fairly ruthless these days.



What are everyone's thoughts on this? It's down 50+% for the day already.

R. Dirani writes: 

The narrative has not changed. Pressure of crude should continue. Demand destruction has occurred to a great deal. Demand will take time to come back. 



"Department of Justice and Department of Health and Human Services Partner to Distribute More Than Half a Million Medical Supplies Confiscated from Price Gougers"

Victor Niederhoffer writes: 

The speculator as hero. The siege of Antwerp.

Rudolf Hauser writes: 

For the private sector to inventory supplies, etc. for potential future periods of shortages requires a return for their investment and the risk that such shortages will never happen. Someone or some organization should be able to charge higher prices during such a shortage so that they precautionary investment will be rewarded. That will encourage such future behavior to be warranted. There also is a worthwhile function when someone buys large amounts in areas with adequate supply in order to make then available in areas of shortages.

From a demand standpoint, pricing insures that those who get the most value from a scarce product will be buyers when it comes to most goods and services.

But things are different when after a crisis is clearly at hand, someone purchases large amounts with the intention of cornering a market and selling at inflated prices. Nor is price a fair distribution mechanism when it is a matter of life and death and it would have maximum utility for all and the ability to purchase is limited by the means to pay at one's disposal. The most basic human right is the right to survival in oth non-human animal world and in the human world. Any enforcement against price gouging should be limited to such agents, not those who purchased before a crisis situation was well known. Nor should agents who purchased before a crisis be forced to sell at any point in time. It is in their advantage to sell when the shortage is greater. If they hold off selling, it may be because they see an even greater need in the future, and they might just be right. In that case society would be better off if they hold off selling. When the future is so uncertain, better more judgements than fewer making such decisions. 



A few of us were around during 1960-82. These were bad years in the US. There were riots in the cities, the Viet Nam war, presidents were assassinated, impeached, there was a serious threat of nuclear annihilation. The stock market ranged up and down 40% for close to 20 years. The 70's were especially bad.

Hernan Avella writes: 

Everybody anchors to the familiar, to the period of time that fits their model of the world or their desires. Ray Dalio thinks we are in the 1930-1945, Stefan thinks we are in the 1920's, Ralph Vince thinks this is 1987… I don't feel very confident in any narrow set of outcomes outside minutes or hours.



 April 9th:

The best advice on the stock market during a "bear market" is contained in a book by Frank Kelly Why You Win or Lose: The Psychology of Speculation written in 1930 by a man who played the market during the 1929 crash and after and profited.

The advice is "the wrong behavior is almost sure to be seemingly logical behavior". Indeed one of the most charming things about the stock market is that one may prospect there by being illogical. The few who contrive to take more out of the market than they put into take more out by by going contrary to what would generally be accepted as logic. They do the opposite of what seemingly intelligent speculators are doing. Kelly gives many examples of this for the 1929 crash. Stocks go down on good news and up on bad news. A stock announces a dividend (earnings beat) and goes down but it rises when the dividend decreases (earnings masses) and goes up. Many other examples are given as to why the public buys stocks when the prices are near the top and sells them when prices are near the bottom.

No better example of the value of the illogical is given by the price behavior this week. For example, today. Friday March 7th, unemployment was at 8.5 million and 8 million more claims came in. What a time to take advantage of the coming carnage than that

At the beginning of the week the surgeon general reported that this would be a disastrous week or the hell of a week. Dr. Fauci in an interview give his usual prolonging the likely course of the recovery and downplaying the host of a cure within 4 months (why don't they confine him to jogging around a forlorn and distant track while others try to salvage any hopes of recovery). The drum beater of bad news continued during the week with headlines about retailers coming failure to meet debt payments and even online marketers were hurting because although views were up, advertising revenues were way down. Hardly a nook was spared. Typical was the highlight that airline leasing companies were in jeopardy to say nothing of the layoffs in Boeing and all travel companies.

No wonder the market has its best week in 48 years and that it is now 30% above its previous low. A content analysis of the negativity of news or headlines in the media this week would show this was the most negative on record. The WSJ was almost as negative as the NYT if that possible.

Is there any solution for succumbing to this all to human proclivity? Yes. A study of numbers will help. One example, it was 40 or so days without the stock market hitting a 20 day high. Such extended durations without a drink (or romance) are rare.

They have an expectation and Sharpe quite in line with what transpired. I could give many other examples. For example the big Friday decline that preceded the biggest rally ever. You have to be illogical and you can't assume that what happened in vivid memory continues.

Typical of all the bad news on the virus front was the number of new deaths and new reported incidents in NY reaching a maximum. (When will the common man understand that the more they test the greater than number of new virus will be found.

And the news that the after effect of ventilator cures are likely to be worse than shuffling off itself. As a benchmark the number tested is less than 10% of the population in almost all areas. The constant increase in the areas under lockdown and the extension everywhere. How illogical can you be?

T SUBSCRIBER 1 minute ago: "What we are doing is working," Dr. Fauci told reporters Thursday." Um, excuse me Dr. Fauci, you and your sidekick are strangling the economy of the US based on your euphoria over of this "pandemic". Mr. President, do what we elected you to do.

For all those against reopening the country until things are perfectly safe please educate yourself: (cont)

One more thing. Companies like Fedex and businesses like the professional sports have say 600,000 workers and the death rate is less than 10 deaths. How have they done it. They take care and use their common sense to distance.

Take manufacturing jobs 19 million or so. They are all used to tight work rules and restrictions on distancing. They would use choice and common sense to resume their jobs and pursuit of happiness. How did Mencken, Nock and Rand predict that we would give up all our liberties with a whimper.

What's amazing is that Kelly was able to profit by swing when commissions were so high unlike Livermore he was not born to commit himself in the Netherlands (never go near 62nd street). His swinging at least was with a several month holding period usually without margin.

Kelly didn't use margin and his average swing was 3 months hold so he didn't vig himself to death.

Follow @VicNiederhoffer on Twitter for more



The alleged reason why there is no more Coronavirus related deaths in Wuhan.



Deception in markets as in nature is business as usual. The geopolitical balance among global competitors (Russia, China, US) has been changing over the past years. The virus provides elements for an acceleration to this process. Quite significant are the implications in the EU because of the virus and the consequences mainly for weak economies like Italy, Spain, Portugal, Greece. If the Europeans do not find cohesion and solidarity, the Euro might be at risk. China is using its soft power to influence relationships. Russia is interested in the disintegration of the EU to regain influence in Eastern Europe and undermine NATO solidarity. Quite significant that China and Russia are offering their aid when nations in Europe are closing their borders and every one is focused on their self interest. Challenging developments ahead.



  It appears now, we should be thankful that the Chinese got their shit together (by whatever means necessary

Dylan Distasio writes:

I wonder where all those missing cell phone users are…

Some may be in here.

K. K Law writes:

Someone sent me a picture of people lining up outside a Wuhan funeral home to retrieve the cremated remains of their family members. Here is an unconfirmed rumor. Each funeral home could only handle releasing 500 cremation urns per day. Don't know why they can' handle thousands per day. By one estimate, they would not complete the cremation ash delivery process before Apr 4 (their Ching Ming Festival). A ball park estimate is each funeral home could at least deliver about 6500 urns by Apr 4. There are 7 funeral homes in Wuhan. Probably another circumstantial evidence China grossly under-reported their cases and death tolls.



An old spec in early 1900 wrote that panics cause markets to fall by 30% that tend to reverse by 1/3. Looking at the S&P this would put us to roughly the area we are now. Is there any scientific evidence to this claim?

anonymous writes: 

Fibonacci retracement to either 38% or 62%? Pretty natural for a shock, like the action of a released spring. That's only for the short term.

In the intermediate to longer term for the current case, stocks (in the US in particular) are expected to go higher.

Four reasons: 1. The virus or at least the scare or the impacts of it will be negligible in a couple of months; 2. The unprecedented rescue packages will kick into effects (inflation or consumption); 3. The very likelihood of a war will intensify; 4. The world will not be the same, but innovations in a lively economy will again realize high growth.

anonymous responds: 

Could you comment on why you think the probability of a war will increase?

anonymous replies: 

First, China rulers need a war to shift internal tensions. Attack on Taiwan is very likely during this introspection period in the world. They might have actually conspired for this opportunity.

Second, the huge demand for China to compensate for world losses will very likely lead to war.

Third, if the world find out that the spread of the virus was planned, a war is inevitable. 

anonymous responds: 

Thanks. Concur with all three arguments. If China decides to invade Taiwan, chances are they may may have first preemptive strikes against some US capabilities in the region as the US will for sure intervene to blunt the aggression against Taiwan. There are four US carrier strike groups in the Pacific. Never have had so high a carrier strike group concentration in the Pacific since WWII.



 I went to the local Bauhaus store (like Home Depot) to buy a LED mirror for the new bath room. I mentioned to the sales rep that I was surprised to see the parking lot quite filled, considering empty streets and this being the weekend before the monthly pay check. He was also surprised and told me that the manager had said they were only a bit behind budget, but ahead of last year. So they were happy.

In fact they are not the only ones happy. As my friend Mr. F.A wrote me, the air planes are grounded so the Green Party is happy. The borders are closed, so the Sweden Democrats are happy. There are tax cut backs for companies, so the Conservatives are happy. Places of sin, like bars and restaurants are closed, so the Christian Democrats are happy. There is talk about nationalizing industries and empty shelves at stores, just like in Venezuela, so the Left is happy. In summary–we are all happy.

I wish good health to all of you.




Yesterday Amazon announced the need to hire 100,000 workers to support additional package deliveries.

The link shows you the chart of the decline in payroll tax growth since the outbreak. Hint: there isn't any such decline. But we will continue to monitor. It will be interesting to see what happens in the next 2 weeks. N.B. this is daily data.



If there's one fact about the current trading environment that is unassailable, it's that one can't read anything into the daily swings. One can assume that the rallies are underpinned by mechanical hedge flows, and not a renewed optimism about future prospects for economic growth.Theses moves are often violent, especially into the close; but are always sold into, and short-lived.

The problem with trying to resurrect the market is that it was extremely overpriced in the first place. The drift ain't no +30%. CEO's were more concerned about managing (bonus linked) share price than managing their company's business. Now, they are paying the price. Also, years of suppressed vol allowed money managers to lever up ever more, leaving a market built on a foundation of greed, debt, and leverage.

Economic shock is still expanding in both scope and scale; and nothing is getting fixed. Until they address credit, corporate cash flows, and lending disruptions( per Mr. Rollert), sustainable buying will not re-emerge. Additionally, heightened levels of vol reduces the pool of potential buyers, leaving only fundamental/discretionary and VaR insensitive investors left to re-allocate.

Hernan Avella writes: 

It's tough out there when even the true experts are feeling it:

"Williams declined to say which trading firms are involved in conversations pressing the banks to increase available capital. When market-makers stop buying and selling, markets can sometimes seize up and undercut investor confidence in financial markets"

anonymous adds: 

This is the same refrain as ever. The Citadels of the world push for pay for flow dark pool friendly regulation in normal markets, and then shut down their APIs once there's some vol so that flow adversely selects whatever is on the lit markets.

These articles are all lobbying. One simple way to increase the liquidity of the market would be to give time/price preference to lit Market Makers all the time! Let's see that get regulatory traction.



I'm avoiding BA like the plague, but there are some incredible buys out there now…you don't even have to look at oil, looking at Visa here at 140…among 20 other big names.

Gary Phillips writes: 

Getting too old for this…bought spooz 2289-94 per your brilliance, and will be looking to add if it holds.

Ralph Vince writes: 

Alcoa…Dow Chem… UTX…you think these earnings are going to be impacted to ANYTHING of this degree? Wait to see new unemployment claims tomorrow morning…FB…AMZN…if you really want to be the king of nerve, PBR…

I got to keep buying into this or I'm going to be the king of chumps come the 3rd & 4th qtr.

anonymous writes: 

Respecting to the fullest Vic's prohibition on any kind of recommendation. I just want to put out there that many ETDs are half of their early February values. So for example TDS(Telephone and Data Systems) has 7 ETDs TDA, TDI, TDE, TDJ, UZA, UZB, UZC.

Whatever you think about TDS in the telco space, the common is holding up, but the debt got clobbered in forced selling and it now yielding ~12-15%

Just fyi not a rec, just b/c not much focus on ETD here.



There's been a lot of panicking and fear mongering happening on this list. First time I've seen it in my 15 years on the list.

Peter St. Andre writes: 

It has not been my intent to spread fear or foment panic. I shall wait at least 2 weeks before posting to the list again.



My own personal theory is that people (on both sides) were so tired of all the idiotic political bickering, divisions and stupid name calling, they were ready to embrace something, anything, that would unite us and make us feel like a country again.

Heading right into what promised to be the worst election campaign season ever for stupid political bickering, childish name calling and personal attacks, coronavirus popped up as that opportunity.

So people embraced it!

And everyone is relieved to find that we can actually still be a unified nation working together again. We all needed to know that. (The same dynamic exists in most other countries with the rise of populism etc.)

Why wouldn't they embrace the corona unifier?

Is there anyone on either side who is not tired of the political bickering, petty name calling and nasty personal attacks (including on this board and in the fake krs) and hungry for a way out of it?

On the irrationality of the Coronavirus Mass Mania:

It is obviously an irrational mass mania on the surface to anyone who has studied manias. Just looking at people's behavior (selling stocks down like crazy, hoarding toilet paper), and given that the virus is not that much more lethal or transmissible than the normal seasonal flu viruses, if not less so.

1. The brain is designed to shut down in times of perceived external threat to promote herd behavior for better potential survival. Mass manias take away the capacity to think.

2. Health manias are always way worse than wealth manias, since health is ultimately more important than wealth, and not everyone has wealth (so not everyone can participate in wealth manias).

But also, these obvious points on corona mass mania irrationality:

* People lament the lack of tests, oh this is so horrible! But in the very next breath they cite very scary numbers on R naught, and lethality.

They can't both be true!!! If you don't know how many people have it, you cannot possibly know R0 or lethality. Stop doing this!

* People say oh how horrible the end of flu season won't bring respite because look, people in warm weather Singapore got it! (or chose your warm country)

Without bothering to understand that warm weather regions have their flu seasons too based on changes in temperate and changes in humidity. And without bothering to notice that Singapore was until a week ago in its flu season! Totally irrational and nonsensical thought patterns.

* People say coronavirus is scary because it is new and we know nothing about it. Then they say it is scary because it is highly contagious. They can't both be true! Get a grip!

At least be internally consistent with your logic.

* People say a big risk is that viruses mutate. Of course they do, but why assume it will mutate for the worse? In fact, new C19 strains have been found which are far less lethal, not more.

People cite the Spanish flu as relevant, without bothering to notice we did not have antibiotics back then. That matters because secondary bacterial infection in the lungs is often what kills virus victims. Did you know that the Spanish flu is one of the seasonal flu viruses that regularly circulates today? That's scary!!! Or is it?! Did you even know this, while you were citing the historical example of the Spanish flu as a reason to be scared merde-less?

It is also interesting to note that virtually all the groups being alarmist have a personal interest in doing so.

* Health care system managers, because they see a potential onslaught of patients overwhelming the number of ventilators etc. and exposing their poor foresight and lousy management skills, so they want to bend the curve. This is understandable. It is now evident they are way overpaid, and they are heading for cover.

* Medical researchers are alarmist because they are trying to attract funding for their pet projects. (see shameless funding request advertisement in the middle of the Attia podcast today). This is shameful!!!

* The media are alarmist because it generates ad revenue. Also shameful.

* Negative Eeyores and worry warts want other people to be negative and worried because miserable people naturally repel most people so they try to bait social company with extra doses of misery to capture attention, and because miserable people love miserable company!!!

Everyone just calm the f down!!!

Go smoke a joint! Drink your whiskey! Pray to your imaginary man in the sky! Meditate! Go work out!

Whatever it is you do to calm your nerves go do it now!!! And turn the media off!!!! Especially twitter!



In this awful market collapsing day today, let me share with you a youtube video about this interesting property of copper just in case you don't know about this already.



I think it valuable to test the hypothesis that on certain days there are more crosses of the round number 50 as in 3250 in emini futures than is random.

Theo Athanasiadasis writes: 

This needs to be tested on intraday basis. On daily basis there is no statistical evidence. There is a small tendency to have more crossings than expected but in line with randomness. Happy to share the testing process/code. The idea is to compare the historical ES crossings of 50 (based on settlement prices) with random index moves that could have happened (bootstrapped delta estimated from adjusted prices). 

Since emini inception (10k simulations):
Historical Number of Crossings=1260
Expected Num Crossings (average of random bootstraps)=1246
Confidence Interval=[1196,1296]
Pval = .32
Similarly for the last 10years
Historical Number of Crossings=654
Expected Num Crossings (average of random bootstraps)=642
Confidence Interval=[608,677]
Pval = .29

What is perhaps more interesting from daily data is the 100point rounds. There is close to non-random tendency for ES to avoid crossing those levels frequently.

Since emini inception (10k simulations):
Historical Number of Crossings=620
Expected Num Crossings (average of random bootstraps)=649
Confidence Interval( 5,95) =[614,686]
Pval = .92
Similarly for the last 10years
Historical Number of Crossings=314
Expected Num Crossings (average of random bootstraps)=334
Confidence Interval( 5,95)=[308,361]
Pval = .91



 He was a great guy, genuine, open and a superb businessman/salesman. I enjoyed our talks enormously, as he knew retailing really well. The wine tastings he did at his house were a blast, as you would expect. He could be really funny, especially with the pretentious.

He lived down the street from us, and my wife was friends with his daughter Charlotte, who was the construction manager for the new (at the time) Getty Museum on this hill.

The family gave back a lot, both to Stanford, the arts etc. I miss him, and wish there were more like him.



Here we go, Italy goes first with stimulus to counter COVID-19.



With Trump's failure to blame the market crash on Bernie, and repeated observations that Blackrock's "ESG focus" is contributing to the Energy Crash - one wonders if the 'fall guy' for the crash is Larry Fink, a virtue/climate signaling financier who would energize Trump's base.

With BP's exit from climate council and XOP breaking well through 08 lows in an election year, and the mysterious disappearance of the word "fracking ban" from the democratic debates as well as Pelosi's behavior towards Sanders — things do appear to be setting up in an interesting manner re: an inflection point on the climate narrative.

Actions by the Trump administration to hold Blackrock and its executives liable for energy bankruptcies could result in a panicked buying move in the energy sector, and a much needed market pump. It sounds insane - but what's the alternative? Rate cuts can't stop Blackrock from divesting and exacerbating the CHK / other distressed situations.

I am toying with the idea of buying puts on Blackrock funded by a long solar company position w calls sold against them (calls extremely expensive in solar because retail loves buying them).



Energy stocks are down 20-30% for the year with valuation below the levels when oil was trading @30$/barrel. From that perspective they look attractive but it can easily be a value trap. Does anyone have a thorough view?



On another note, America should send large aids to Iran now! A lot of benefits in doing so. It will help the US to win Iran on its side from China. Most important is that the kind gesture will help later on solve the peace issue in the Middle East.

Kim Zussman writes:

They will have to wait until next year when Bernie sends more pallets of cash, which hopefully will work better than last time.



Till 7th February 2020, to begin with, anyone wanting to sell above a certain size needs permission before-hand.

Without a selling side there is no effective buy side to a spread. Fine, so this gum-mint is going to yank up the market prices. Huh! Such tricks can at most postpone the catharsis. The more a catharsis is postponed the more cataclysmic it gets.

Increasing short sales create a bubble of impetuous, emotional sporadic buying pressure because shorts do not have a long term drift to back them an eternal position. This basic axiom of markets is missed by regulators so often. A market with sufficient shorts is the market that will find sporadic rounds of panic buying to lift it much more.

In any case if no one will be buying in that market, if that's what their gum-mint thinks, then even if sales are prevented here the bids will slide down without activity. Such a market becomes hollower than it would be with normal sales allowed!

Why don't the Chinese shut down their stock market for some days then?

On the other hand, TA-35 gapped down more than 1.5% today and skidded and bumped down further. An uneasy Sunday & as Asia re-opens in four hours the intraday-violence of the markets will offer many quick hands largesses that are not often.

While the initial flight to safety has taken recourse to seek US Treasuries, melting the yield curve lower, the sell off on the Dollar Index is remarkably clearly due to the inexplicable smart one day rise in the Euro.

If Corona is the epicenter of all things now, why should Euro rise? I cannot surmise any other answer possibly except that when volatility turns into violence the popular trades in every pit are going to be bumped out. So if Euro seemed will melt into new 10 year lows its been whipped up.

Leverage is getting punished, trend seeking attitude is getting punished.

To come to the point without building a longer preamble, this juncture in the market is going to punish everything obvious. So what are the most unobvious trading ideas?

My chit in the ideas hat is short gold. The shiny pit is not reflecting the sort of behaviour a total risk-off world should. The collateral damage will be for short term gold bulls, now.

What are your unobvious ideas? Care to drop your chits in the ideas hat?



Just for comparison, FEZ closed Friday at 39.10, and the 2022 39 calls (farthest out available) show a closing ask of 3.05, which is 7.8%.

Cagdas Tuna writes: 

It must be due to pricing. Dax, Eurostoxx futures priced in Euro while ETF priced in USD.



There are many ways to graphically represent this data. The one illustrated here is the kindest: Payroll Tax Receipts Growth



Impeachment Blues

By Preparation H

Pelosi and Schiff looking for a crime

Issuing subpoenas as cheap as a dime

Fact witnesses can't be found

Yet bravado and innuendo abound

Nadler and henchmen wait with bated breath

Nary a Republican that they impress

It's saving the Republic they claim

But it's their lust for power for which they aim

Not Maxime Brown nor Schiff are fair in this quest

The media is complicit with the rest

The sequel to this sorry state

A Trump victory in 2020 with which we elate.



Sultan Qaboos of Oman dies

- Oman was a source of stability in the middle east.

- He was gay.

- Now his succession is in question. Or that is the fear.



 "A Clever New Strategy for Treating Cancer, Thanks to Darwin"

Relevant to big rises in a year in S&P?

Bill Rafter writes: 

This is a fantastic article for anyone with cancer, particularly prostate cancer. Thanks for posting.

K.K Law writes: 

A broader point is this is another excellent example of out-of-the-box thinkers and doers who create revolutionary innovations.

Dylan Distasio writes:

Unfortunately these innovations occur in spite of the current US system not because of it.

Gary Phillips writes: 

Not unlike market analysis, the key to effective clinical observation is how the scientist conceptualizes the problem, and how he uses the information gathered. The dilemma presented with molecular targeted therapy using chemotherapy, is the very process that induces cell death (aptosis) can also promote (chemo)-resistance.This is quite the recursive paradox. Chemo drugs activate multiple signal transduction pathways which can contribute to either aptosis or chemo-resistance. One of the ways to circumvent this problem is to use a combination of drugs; employing another drug that targets the signal pathways that contribute to resistance. Of course, treatment varies from one patient to another, and the major challenge is to develop individualized therapy options that are tailor made to the patient.

Ever changing cycles and evolving markets dictate that traders must be agnostic and and adaptive. A tested, multi-variate approach tailored to the intrinsic nature of the current market regime will provide the best assessment of the market's context and offer the best approach to trading that particular market.



 This is one of my favorite stories. I hope you enjoy it, and I wish you a Merry Christmas. — Victor Niederhoffer

High on the mountainside by the little line cabin in the crisp clean dusk of evening Stubby Pringle swings into saddle. He has shape of bear in the dimness, bundled thick against cold. Double stocks crowd scarred boots. Leather chaps with hair out cover patched corduroy pants. Fleece-lined jacket with wear of winters on it bulges body and heavy gloves blunt fingers. Two gay red bandannas folded together fatten throat under chin. Battered hat is pulled down to sit on ears and in side pocket of jacket are rabbit-skin earmuffs he can put to use if he needs them.

Stubby Pringle swings up into saddle. He looks out and down over worlds of snow and ice and tree and rock. He spreads arms wide and they embrace whole ranges of hills. He stretches tall and hat brushes stars in sky. He is Stubby Pringle, cowhand of the Triple X, and this is his night to howl. He is Stubby Pringle, son of the wild jackass, and he is heading for the Christmas dance at the schoolhouse in the valley.

[For the entire text of the story, please follow this link].



"Financial Transaction Taxes - the ghost in the machine"

Mr Hurd, who made markets in KOSPI options, knows a bit about US hft as well.

2 points:

+ the USA already has a financial transaction tax, SEC self-reg fees of $2000mmm last year.
+ Virtu's quarterly revenue is "only" $127mm. This puts a heavy limit on what an HFT tax could be estimated to raise. And, to Mr Williams' point, speed isn't everything. The total amount people make in the markets makes $half a billion usd of yearly revenue look small.

(sorry, I saw an estimate of the total size of the asset management industry on some slide somewhere not very long ago, but I'm too lazy to look it up.)



 The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution is a great book. 

In addition to this book, I'd recommend taking the time to watch the MIT fireside series feat James Simons.

The link is the 2nd in a three part series which cover the following:

Talk 1. His academic and personal history

Talk 2. Focuses on RenTec

Talk 3. Discusses his interests outside of finance.



 A Go grandmaster has retired because he believes that computers can never be defeated. What does that portend for individual, human participation in the markets? Are humans who manually enter trades destined to go the way of open outcry? Can humans have an edge over algorithms?

Bill Rafter replies: 

The following is guesswork. Anyone with a different voice is welcome to comment. (i.e., no need to flame)

I believe that the AI trading of the markets to date has centered on trades that have an almost zero risk of failure. Thus they have mainly worked in the extreme short run, mostly by picking off the marketmakers or the spread. There are many trading shops who do not permit their traders to take a position overnight.

Therefore if you wish to beat the algorithms you must pick a different venue, specifically longer-term trading. Maybe that's 4 days, and maybe it's 400 days, but it must be different from what the AI shops use. That of course means greater risk, but specs are in the business of taking risks.

Sooner or later, some of the AI people will invade this longer-term space, and they will do so by picking portfolios rather than individual stocks. But they cannot eliminate risk, and as long as risk remains, profit opportunities remain for the individual.

Larry Williams writes:

The basis of all profits is trend.

Trend is a function of time.

The more time in a trade the more potential for profits.

As long as losing trades are stopped out so they are not turned to big ones by time/trend.

Zubin Al Genubi writes: 

I believe humans can still beat computers in trading. Maybe one human can't beat one computer, but the computers as a group will have a distinct behavior that can be regularized and gamed. Its the group dynamic, as even computers will tend to a group think. This is especially true if they are learning, and if they are reactive. The fixed systems are still pretty easy to beat because they are still beating the same old dead horses. I've found, as Larry mentioned, that a longer time horizon seems to work better now days. Hard to out speed the computers. Probably easier to out wait them. For example I seem to use 4 hour / day bars now rather than 5 min/30min bars in years past.

Laurence Glazier writes: 

Such factors lean me more seriously to composing music than playing chess. What defines us as human?

Ralph Vince writes: 

I posit that about 50% of all human action is a feint, a misdirection of the opponent, a lie. Camouflage is the dress code on the planet, and we have a several million year jump at the game of deception the machines must learn, must catch up on.

The machines are so-far, trusted–trusted not to lie or deceive. Once they do, how will they be able to compete with us i that higher arena?

Even in music, Laurence, a variation on them, a little bending around of a melody, is a feint, an indirect lie, as it were.

Laurence Glazier writes: 

I've found fractal mathematical techniques of structuring music that have a ring of truth, however writing from inspiration, like painting from nature, must be a battle and a humbling one, with no concession to vacuous prettiness - nature's colour schemes seem always to work in the visual world, and I posit also in music, though I try to figure out more accurate methods of transcription.



 The graph on the link below shows that gasoline sales in the U.S. may already have reached an inflection point.

U.S. Gasoline Sales

Automobiles have about a 12-year average life. The graph below projects that almost all car sales in 2030 will be electric. Therefore, in 2030 the rate of decline in gasoline consumption should be about 8% per year. Some of my liberal arts friends might calculate that in the twenty years from 2030 to 2050 the total decline would be 160 percent.

Projected electric vehicle sales

By the time 2050 rolls around, there might not be enough carbon dioxide in the atmosphere to continue to stave off the start of the ice age, which was predicted to start in 1970.

Automobile companies that rely on the ability to design and manufacture internal combustion engines will face considerable hardship. Petroleum extraction enterprises and countries will need to be the low-cost producer in order to avoid rapid enfeeblement.

Stefan Jovanovich writes:

No one has seriously suggested that distillates can be replaced as the primary fuel for the engines for airplanes, ships, helicopters, farm and construction equipment, large tonnage trucks and railroads. Even the small motors used in chainsaws have had a hard time going electric; Stihl's latest model is a fuel-injected engine, not the battery-powered one they introduced several years ago. The wonderful success of electric motor devices is purchased by their not having to endure the nastiness of the world outside nightly indoor storage and recharging. Their usefulness is unquestionable; their ability to do everything that distillate-powered engines can do is a hope, not a near likelihood.

My favorite Listista enjoys reminding me that I took the pair trade of long coal, short BitCoin back when both Commodities we're priced under $100. (No, I didn't actually do the trade, but if my investing had matched my opinions, that would have been the bet.)So, all churlishness from me about the new energy world needs to be discounted to close to infinity. But, these numbers come from a churl whose calculations Martin Armstrong has chosen to publish this morning.

Current annual gasoline energy consumption by Canadian and American cars converted to electricity, using 30 miles per day as average driving distance and 70 kWh/mile as average electrical car "mileage" rating

Canada 4 Trillion kWh
U.S. 190 Trillion kWh
Present annual electricity generation
Canada .7 Trillion kWh
U.S. 17 Trillion kWh

George DeVaux writes: 

Hi Stefan,

I am always delighted to exchange thoughts with you and always with a smile on my face.

I guess the conclusion from your presentation is that the very large number makes the prospect a near impossibility.

So let me try to develop the cost of a "gallon of electric."

On gasoline, a car might get 25 miles on a gallon that costs $2.50. Searching for electric car "mileage", I get 25 to 30 KWh per 100 miles. For 25 miles, this works out to about 7 KWh (Decimal point error in your calculation?). At retail of $0.12 per KWh, the "gallon of electric" costs $0.84. I think that Carder would agree that the manufacturing cost for electric is about $0.03 per KWh. Clearly, there is more than enough margin to pay for the construction of the necessary capacity.

I will leave it to Carder to calculate how many acres of Palm Springs, California will be covered and how many windmills will shroud Martha's Vineyard, Nantucket and Block Island (NIMBY factor). I will also leave it to Carder to monitor the time-of-day consumption of electric in California to determine the impact of vehicle charging on required generation capacity additions.

We can also have a discussion about fission power (various versions) and fusion power (various versions).

One of my conclusions about the electric car phenomenon imposing an inflection point on petroleum usage - At some point in the future, the usage of electricity by electric cars will increase the need for (and the profitability of) the manufacture of carbon free electricity (solar, wind, nuclear). Retrofitting older facilities for improved operation may be a very profitable investment. 



 Harvard Bridge – Named for the Reverend John Harvard. The bridge, connecting Back Bay and Cambridge, is the longest bridge to cross the Charles River.

In 1958, the members of the Lambda Chi Alpha fraternity at MIT measured the bridge's eastern sidewalk by using that year's shortest pledge, Oliver Smoot‍—‌nominally, 5 feet 7 inches (1.70 m) tall‍—‌as a measuring stick. The bridge is 364.4 Smoots ± one ear.

Years later, Smoot became president of the American National Standards Institute (ANSI).



 Follow @RtNeeder on twitter for more dispatches from Japan

In spite of all Japan’s amazing qualities—number one, for me, being the food, also the design, the cuteness of the children, the low cost of living and convenience—there are some major deal breakers about the culture here which makes it obvious I can’t stay. The number one for me would ironically be ones that the Japanese are most proud of: The fuinki or “atmosphere” and omotenashi, or the "customer service/hospitality.” These are things that are exquisitely curated at every level through design and behavior and quite jealously guarded. Let’s start with the fuinki. The atmosphere. The fuinki reminds me of a soothing noxious gas filling up every space in the room and breathed in by the people.

The phrase “not a hair out of place” comes to mind wherever I go. Cleanliness is very important to Japanese culture. And the colors are so beautiful, whether on a dump truck, the train, or a department store. They are surprising combinations that somehow work well together. It doesn’t have to be fancy, but not a hair is out of place. I guess I mean this literally. There are as many hair salons in Tokyo as Dunkin Donuts in New York and training to be a hair dresser in Japan is like training to be a doctor in America. Everyone from the children to the grannies are perfectly accessorized in brand new fashions. The babies, literally, carry backpacks and purses. The men over 25 are in pressed business suits. Under 25 they’re in stiff t-shirts and wide-leg Dickies pressed of every tiny wrinkle. To me it is incredibly oppressive.

In public you have to be almost silent. Even a sudden broad facial expression will draw attention from people around you. It’s stressful. A baby about two years old was looking at his mother’s iPhone on a full but completely silent train one recent weekend when he let out a loud giggle at something he saw. Immediately, his mother’s hand shot across his stroller to cover his mouth while she pleaded with him to be quiet. While the unsupervised children in Japan are smiling and joyfully running, the grown people seem visibly miserable and exhausted to the point that every day I see some of them so tired they’re able to sleep standing up on the packed train. They remind me of Tor during our high school days in which we too led very Japanese style existences, come to think of it.

The work load is a lot. Up until fairly recently the official standard work week included Saturdays. (Unofficially this continues). And the workday doesn’t end after work, because Japanese business people are expected to socialize and drink with coworkers and clients after that.

But back to the fuinki. As many of you know, Merlin is very funny and sometimes he makes a joke while we’re walking down the street. I laugh, not like a hyena, and I really have to believe i’m not an obnoxious or loud person, but I do occasionally perform a natural bodily reaction in response to joy that comes out in the form of a medium volume noise. So when I indulge this behavior, this laughter, at least five people around me are guaranteed to make full 180 degree turns to see who has disturbed their precious mood of misery and look at me with such disgust it is like I’ve abused an animal in front of them.

A Japanese superstition is that it is bad luck to whistle at night. The neighbors will think there’s a madman on the loose. Another one is that if you lie down after a meal you will turn into a cow. I’ve also heard it as pig.

Pleasure for pleasure’s sake, happiness, joy…these are not things the Japanese seem to seek out. It is why Japan ranked in the high 50s on the World Happiness Index Report, below Venezuela. In a way a happiness report doesn’t make sense here in a culture where people take pride in being unhappy. It’s like the old Kanye West saying from before he was cancelled: not smiling truly makes them smile.

 One thing I really do enjoy about Japanese people is their self deprecating humor. When they complain about their lives to me, I check myself before feeling too sorry for them, because I realize they are trying to be funny in a way. And they are funny. From listening to them you would think every one of their bosses is crazy (definitely true). Their kids are lazy (doubtful). Their wife is always mad at them. And she’s ugly. (Ha. Ha. Ha). A very funny student was showing me pictures of his business trip to Portugal. Flipping through them he explained (in near perfect English) he had absolutely no fun because he was working day til night, and due to his extremely poor English he couldn’t understand a thing that was going on. “Wow, beautiful pictures though,” I said. (He shakes his head) “But, my wife (getting to a picture of an impeccably dressed middle aged Japanese woman in front of a vista) is in them, and she is… not beautiful.” Then he burst out laughing.

A really strange thing has happened recently. After an incredibly hot and humid summer, fall has begun. The leaves have started to change, the humidity has lifted, there is snow on the top of Fuji. Where I come from, this is many people’s favorite time of year. It’s Christian Girl Autumn. A time when everyone feels annoyingly positive and back home we would be saying to each other, “I’m so excited to wear layers! Let’s go apple picking or stay in and watch a movie. Don’t you love fall?” The first fall day like this, every student I saw greeted me with “It’s so cold!” What? Just yesterday you were using “atsui, ne?”— “hot, isn’t it?”— as a perfunctory greeting in place of “hello.” Now suddenly it’s cold? I respond like, “oh, I love this weather.” They look at me like they’re embarrassed for me or I’m bragging. It’s like “Ooo, someone’s in looove. You love cold? Good for youuu.” “??” (I’m obviously reading into this, but it’s the impression I get. I’m thinking, “am I going crazy here?”). So yesterday, it was a lightly breezy 75-and-sunny with not a cloud in the sky. In other words an Objectively Perfect Day (OPD). I was explaining to Merlin that I couldn’t wait to see what the students thought of this weather or if they would still find a way to complain. Exactly as I was saying this, a woman walked by on the phone, complaining to someone “atsui, ne?” And then, as if to make sure we heard her, she repeated it, this time. In. English. “It’s soooo hot.” We couldn’t believe it. We were laughing so hard. Well, as hard as we could while stifling our laughter so as not to disturb the fuinki. Suddenly the sun was out so it was back to, “it’s so hot”? What? Do you remember August when it was 99 and humid? No.

(Side note: there is nothing sinister or spooky about fall in Japanese culture. In fact, though they will take any opportunity to redecorate and have gone all out for Halloween, they don’t seem to have taken the leap from spiders and skeletons and witches on brooms to a feeling of fear. The accompanying Halloween messages are quite cheerful. Summer is the traditionally “scary” season in Japan, when all the terrifying Japanese ghost stories take place and kids transform their schools into “horror houses” for their end of year parties before vacation.)

It is another situation where up is down and down is up, so I really can’t compare or understand the fuinki because the significance and symbols mean something completely different to them as they do to me. But to me, their fuinki is what I will very American-ly diagnose as “triggering to my anxiety and depression.” I look around at the people on the train, their eyes either closed or on the ground, and I can’t see them any other way. Because to maintain this perfect fuinki and to perform the perfect omotenashi—hospitality—you have to hide your humanity.

There are two recent examples of this involving a really sweet person I work with named N*. I really can’t say anything bad about her as she is an angel who has gone above and beyond for me. She even accompanied me to the doctor when I needed to, translating everything, including questions that clearly humiliated her to have to ask me—like if I was pregnant (I’m not), and held my hand and told me “gambate—fight! or a better translation, ‘you can do it!’” when I had to get a shot. She is the administrative assistant at work, a position only open to pretty young women (not officially, but culturally) and she is required to wear heels and a pink scarf around her neck that signifies her level in the company (her boss wears an orange one, and their bosses wear blue ones). She also has to praise the students and deliver our feedback to them in appropriately respectful terms, and manage customer service, booking, and sales (subject to competitive targets and quotas each month). She works insane hours and is paid less than I am. And it seems she is also responsible for managing the faux pas of the foreign staff, like the following: I lightly sneezed in the presence of a student. Not a hacking sneeze, but a short, dry one as triggered by some dust in the air. I’m the first to admit I’m not the most well-mannered person in the world, but I distinctly raised my elbow to cover my mouth and clearly said “excuse me.” Well my coworker N* burst into nervous laughter and began apologizing on my behalf to the student who had to hear that. I was kind of annoyed to be honest. I already said “excuse me.” In my mind, a human reflex that every one us experiences merits just that. (Actually, in MY culture, it’s the OTHER person who is supposed to apologize, in a way, by saying ‘God bless you’ but never mind.)

Another time recently, I was eating my bento box in an empty classroom during break time. I had finished the delicious assortment of flavors (shrimp, an amazing spicy noodle salad, fried chicken, saucy tofu, Japanese pickles, some greens) and was staring at the empty box, admiring its packaging, when a student who was a bit early for the next class popped his head in. He began to read the label of the box to me, written in kanji which I can’t read. “Five colors, six flavors,” he said it said. (I bought this very cheaply, for around 400 yen or $4). Two of the dishes in the box had been the same color—the shrimp and the chicken—but each had its distinct flavor, so I guess that’s why it was called “five colors, six flavors.” Just as I was about to respond to his information, N* walked by and gasped. She began nervously laughing and apologizing to the student that he had to see his teacher, not eating, mind you, but looking at her empty bento box about to clean it up. She was making eyes at me, like, “how embarrassing! Oh no! Haha” I’m like, trying to look at her reassuringly back but thinking “…i’m sorry, i’m not embarrassed that an adult student had to learn something most children learn in the first grade, namely that their teachers are human beings who eat and exist outside of class hours.”

This reminded me of another time, some teachers and I were eating in the common area during official break time, when the doors are locked to students. N* gingerly approached us to say she would be opening the doors early because a student named Taiki had made an appointment with her to study for his level-up test. “Wait, isn’t Taiki a kid? Who is 8 years old?” “Yes,” she said. “That Taiki.” So, we have to clean up and hide in the back room for his benefit? (He wouldn’t be coming with his parents since at 8 years-old, kids can usually do everything on their own). “Yes. Sorry. As I told you,” she said, becoming visibly nervous, “he will be coming soon, so please…hide your selves.”

To quote William Blake it is through sh*t like this I believe that the kids who are so cute and free slowly lose the divine joy that comes so naturally to them and over time become anxious and depressed. It is all for the benefit of the fuinki and the omotenashi, which makes us pretend that the humanity in us is bad and the corporate world is great.

(train above that was decorated for its 90th birthday. I believe you can see the outline of a child trying to get my attention from inside. The sign on the window is that this car is women's only during rush hours—a tale for another letter) (I love the design details on the train below)



 The graph on the link below shows that gasoline sales in the U.S. may already have reached an inflection point.

U.S. Gasoline Sales

Automobiles have about a 12-year average life. The graph below projects that almost all car sales in 2030 will be electric. Therefore, in 2030 the rate of decline in gasoline consumption should be about 8% per year. Some of my liberal arts friends might calculate that in the twenty years from 2030 to 2050 the total decline would be 160 percent.

Projected electric vehicle sales

By the time 2050 rolls around, there might not be enough carbon dioxide in the atmosphere to continue to stave off the start of the ice age, which was predicted to start in 1970.

Automobile companies that rely on the ability to design and manufacture internal combustion engines will face considerable hardship. Petroleum extraction enterprises and countries will need to be the low-cost producer in order to avoid rapid enfeeblement.

Stefan Jovanovich writes: 

No one has seriously suggested that distillates can be replaced as the primary fuel for the engines for airplanes, ships, helicopters, farm and construction equipment, large tonnage trucks and railroads. Even the small motors used in chainsaws have had a hard time going electric; Stihl's latest model is a fuel-injected engine, not the battery-powered one they introduced several years ago.

The wonderful success of electric motor devices is purchased by their not having to endure the nastiness of the world outside nightly indoor storage and recharging. Their usefulness is unquestionable; their ability to do everything that distillate-powered engines can do is a hope, not a near likelihood.

My favorite Listista enjoys reminding me that I took the pair trade of long coal, short BitCoin back when both Commodities we're priced under $100. (No, I didn't actually do the trade, but if my investing had matched my opinions, that would have been the bet.)So, all churlishness from me about the new energy world needs to be discounted to close to infinity. But, these numbers come from a churl whose calculations Martin Armstrong has chosen to publish this morning.

Current annual gasoline energy consumption by Canadian and American cars converted to electricity, using 30 miles per day as average driving distance and 70 kWh/mile as average electrical car "mileage" rating

Canada 4 Trillion kWh
U.S. 190 Trillion kWh
Present annual electricity generation
Canada .7 Trillion kWh
U.S. 17 Trillion kWh



Here is a short speech I gave at an affair for LIFT–Leading India's Future Today.

I discuss capitalism including the idea of providing equal opportunities, not equal outcomes.



 Change in the natural world is not a gradual process, but rather occurs in leaps and bounds. Natural events like the change of tides is often mistakenly thought to occur as a gradual rise as shown in the graphs but actually the tide rushes in a few big waves. The change of state from water to ice is not gradual either. It faces an abrupt state change. The demise of the dinosaurs after 300 million years of success came in a moment when a meteor changed the world.

I've noticed, at least on 4 hours bars, that change in the market seems to come in spurts, then a period of recoupment or retracement in smaller increments over a longer period. The recent rise mostly occurred in several short periods when a longer period of wandering about. Drops seem to occur and big days with a longer period of retracement in smaller increments.

The trick is to either predict or be positioned for the big moves.



 "Baseball is Going Back to the Dead-Ball Era"

This trend brings one back to the useful idiot Paul Volker, the great scholar and lover of baseball Larry Ritter, and Kora Reddy's excellent study, and our own work proving that doc Greenspan was no doc.

Stefan Jovanovich writes: 

Jared Diamond knows as much about baseball as he does about "steel". The spirit of Larry Ritter–Bless Him–has to be laughing.

James Goldcamp writes: 

I still recall fondly reading a worn copy of The Glory of Their Times as a young boy in the car on the way to my cousins in eastern Ohio. The old timer stories were mesmerizing. A copy of a more recent edition of that book still sits buried somewhere on an end table in my living room. It was probably the first non-fiction book I ever read.

I recently finished reading The MVP Machine which centers on the tech wave of player development which has swept over baseball (down to the "Hit Traxx" at my son's 11 year old team's training facility and the now banned for patent infringement Zepp sensor at the end of my son's bat). This wave has finally fully swept up on my shore as the hero of the aforementioned book Trevor Bauer is the centerpiece of my hometown team's starting rotation and the founder of Driveline baseball has been hired to run pitching.

One hopes the wave of technology adopted by baseball ends better than the hordes of hedge fund-ists and investors who found system trading or smart beta just before the long extended bull run in stocks.

anonymous writes: 

Our daughter is an ambidextrous natural athlete who was accurately described, by the mother of a teammate on the 4×50 12 Under Relays as a "mound of muscle". By age 12, she was able to practice driving our "field car" by sitting in the passenger seat and steering with her left hand. We made her play basketball, run track and swim competitively because otherwise there was no living with her; to this day, if she does not have a 45-minute workout every morning, her excess of physical energy and the impatience that it brings with it is downright scary. For a few months earlier this year, we thought we had seen nature come to our rescue. Her now 9-month old son has the same internal combustion engine. His nickname, Whumpa, was acquired before birth; and, while other infants seem able to be awake without needing to do calisthenics, Whumpa has only two speeds: Full Throttle and Full Stop. For a while it looked like Walter was actually wearing his mother down. But that was only a phase. The two of them now happily go off to exercise together.

I mention this to give you all the background to my only disappointment as a father. It was the day, when she was 6, that, after playing catch with me with a tennis ball, using first the left and then the right hand, she announced, "this is no fun; let's go running." Like John Kruk I am not and never have been an athlete, I love baseball and I have always hated running.

Congratulations to JG on having a baseball player and an athlete and embracing the technology that is making modern baseball such a marvel. 

James Goldcamp writes: 

Anonymous, the last part (the Kruk quote with which I'm familiar and use sometimes) resonates with me. I'm one of the coaches on my son's team. At various tryouts for our teams I'm notorious for wanting to get past the timed running from home to 1st, 1st to third, etc. that is typically part of an evaluation and "just see them hit live pitching". I was pleasantly surprised while watching a Ted Williams biography hear recounted a story where some players or coaches were discussing the intricacies of a pickle or some such situation, apparently Williams was claimed to have said, when asked to ponder this, something like "#@#! it , let's go hit". Bill Beane was also purported to have said (as recounted in Moneyball) that we usually no player is too fat for us to draft, though we made an exception for Prince Fielder, and we were wrong.




This morning I happened upon your article at DailySpec, was pleased to see the use of robust regression, and have the following comments.

1. The package WLE package is no longer available (CRAN archived in June 2018).

2. We have a new package RobStatTM on CRAN, which is a companion to the 2nd edition of our book Robust Statistics: Theory and Methods, published earlier this year by Wiley, see the Wiley site, where there are downloadable materials, especially scripts to reproduce all the examples in the book.

3. Robust statistics has been almost totally over-looked in quantitative finance. Last time I looked there was still only one paper of note in the Journal of Finance (Knez and Ready, 1997, who were the first ones to show that the Fama-French 1992 conclusion the returns are negatively related to size is driven be a small fraction of outlier in small size (log of market cap in $M) firms.

4. I have been doing research on robust statistics for a long time, especially applications to quantitative finance. And more so in recent years now that I am retired and have more time for research. If you are interested I could send you a published paper on robust betas, and a talk on Fama-French 1992 Redux with Robust Statistics (I gave the latter at Soros Fund Management this last June).

Best regards,


P.S. I used to play squash and followed your squash career many decades ago.



President Trump has behaved like he's losing and has changed his mind enough to make me question his resolve, authority and Stately stamina. Fits of frustration to wind up China in an attempt to make them the bad guy, creating add ons that allow China a way to deal, akin to steeply raising the ask, as only a big player could, only to come down in price to make the earlier bid more appealing are tactics of a poor, or perhaps overly greedy position.

The bets don't matter because China can manipulate them very easily. The best way, I don't know; seems China might seek malaise among Republicans and place bets Trump stays in office. My offhand estimate is a $1M or 2 for the world. This could be timed with negotiation moves.

No one has talked about the House and Senate approval. I tried to make a box of potentials. Trump blames China and I guess all is lost. Or Trump gets a deal fast, January at latest. This will make him Presidential instead of dithering, regardless of rhetoric. This also ties up both Houses into a Greek or Shakespearean drama if the impeachment process ensues. I'll just have to guess that early polling in the primaries will support Congressional Democrats, while the Republican Senate has 22 Republican seats open and 12 for the Democrats. Senate primaries go from March to September of 2020.

In my view China has much more room to hold Trump to his own gamesmanship. I left out anything negative about China. Trump could have moved in the first so called 100 days if it was so almighty important and extensive.

I attempt to peremptorily state that China trade should have been curbed thirty to forty years ago.



Little slice of my life for you


Student 1 is very typical. He tells me he is an engineer, working at his company for the past ten years. 

Me: Do you like your job?

Him: No! I hate. I’m boring. Almost I talk with no humans every day. Just only me, computer, and messages. No humans. So hard, so boring.

Me: Ah, that’s tough. That’s why I like teaching. You talk to many people every day…Have you ever thought of teaching? Like, teaching engineering?

Him: Eh…Actually, I want to do something different. Not related to engineering at all.

Me: Oh. Like what?

Him: I don’t know.

Me: Do you have any hobbies?

Him: That’s my problem. I haven’t found a hobby yet. Only gambling. I like sports gambling.

Me: Hm, I see.

Him: …

Me: …

Me: …Anyway, this lesson is called “Have you ever lived in another country?” So, by the way, have you?

Him: Yes, I lived in Australia for a year when I was 25. “Working Holiday Visa.” 

Me: Oh, great!

Him: I was still in university and I wanted to discover myself.

Me: Oh nice! How did you like it?

Him: Horrible!

Me: Oh no!

Him: There were no convenience stores anywhere.

Me: Wow.

Him: Yes. They had only orange trees.

Me: Really! Orange trees? 

Him: Imagine a place the size of Atsugi City, and only orange trees.

Me: Wow. What was your job there?

Him: I was picking oranges on an orange farm. 

Me: Ahhh.

Him: As I told you, I wanted to discover myself. 

Me: Right…did you?

Him: Oh yes. I discovered I should return to Japan and work in an office.


Next I had my student from the Portland Movement (PM) fame. As I mentioned, he is obsessed with the American-Portland/Brooklyn aesthetic and is renovating his office (a printing company that his father founded) slowly in a Portland style. The first project was installing beams and a garage style door on the office front. Now he is redoing the bathroom. He explains to me that he doesn’t do the plumbing himself. He’s just the designer.

PM: I have a question for you. What do you think of the bathrooms in Japan?

Me: Um…right. Well they’re very different, aren’t they?

PM: Right. Very different from bathrooms in the US. So what do you think? Have you used a toilet like this? 

(He draws the toilet that’s just a hole in the ground)

Me: Ah, yes, hehe, yes I have.

PM: And like this? (He draws the more tricked out toilets that are typical)

Me: Oh yes. They’re very nice.

Him: But what do you think of the materials. What were your first impressions?

Me: Well, at first they reminded me of airplane bathrooms. (The walls, flooring, and hardware in Japanese bathrooms, for some reason, are fully plastic—even in a nice hotel). It’s very sanitary though, so I like that.

Him: I see. What do you think of tile?

Me: I love tile. 

Him: Me too. Is hexagonal tile typical in New York?

Me: I’m not sure. There’s something called ‘subway tile’ that I know is popular, and it’s based on what they use in the subway, but I think that’s rectangles. 

Him: Subway tile! I’m using that for the walls. The floors will be hexagonal tile.

Me: Wow! Sounds amazing. (I am being totally sincere. As nice as the bidet, the bird song sound effects, and the ‘powerful deodorizer’ functions are on the toilets, I would literally kill to step into a tile and porcelain bathroom again. It feels so luxurious.)

Him: And let me ask you something else. What do you think of bathtubs that look like this?

(He sketches the shape of a claw-foot tub)

Me: Oooo, I love them.

Him: Is this typical in America?

Me: Not typical, no. It’s kind of special. But I always wanted one.

Him: I really like this tub. But there’s something I can’t understand about it.

Me: What’s that?

(He points with his pen to the space under the tub, between the floor and the basin that is elevated by the claw feet.)

Him: When the bath is over, and you want the water to go out. How? How does it get out?

Me: Wow. (I’m picturing like a claw foot tub on pinterest that’s in the middle of a room. And I’m like… …) That’s a really good question. Oh my god. I have no idea. What? (I’m turning the picture he drew around and around) You know, I’ve literally never thought about that before. Maybe it goes through the foot. (WTF am I saying????) I’m sorry. I have to look this up for you after class.

Now that the tough questions are over for a minute, we start talking about his strategies for learning English. He wants to know if when I listen to American music, I can understand the words.

Me: Well not always, of course. Sometimes I don’t really listen to the words. But if it’s my favorite artist, I like to know, so I’ll look the lyrics up online if I can’t hear them.

Him: I see. Ok, so it’s the same for Japanese music.

Me: Yes…I imagine it’s not too different.

Him: I listen to American music sometimes.

Me: Oh, great! So you can look the lyrics up online, like on Genius or something if you can’t catch them. Sometimes I do that.

Him: I have one more question. What does ‘alternative’ mean?

Me: Oh, it means ‘different.’

Him: But it’s a music genre, isn’t it?

Me: Oh yes, that’s right. ‘Alternative rock’ is a music genre.

Him: What is it?

Me: Oh Jesus. Oh God. Um, you know, I think it’s from the Nineties. Um. Let’s see. I need to ask my husband this for you. I’m not, like, an expert. But, I think it means it sounds a little lo-fi.

Him: What does lo-fi mean?

Me: Oh no. (why did I say that?). Like, low quality, maybe? 

Him: Low quality??

Me: No no, sorry, no, not low quality. Maybe it’s not made by a corporate record label. No wait, that’s Indie Rock…what am I saying.. Ok, alternative rock is maybe just a type of radio station…? (Oh my god!!!! Now I’m just sweating and praying we run out the clock, and finally the little song plays, which means we have).

Me: Ohp! Well, would you look at that, that’s all for today. Great job with using the pronouns today. Thank you very much for the hard work.


He is out the door before I can google any of his questions, and anyway I have five minutes to prepare for my next class. It is a kinder-class of six 3-5 year-old babies. I brace myself for sheer chaos. There are a couple of flash cards with different phrases they are supposed to be able to say by the end of the class, but how I get them into their little baby minds, that can hardly speak Japanese yet, is up to me. Typically when I seat them at the table, they like to climb on top of it, hang off the chairs, or roll around under it. So today I have pushed the table aside to sit with them on the floor. We get through the ‘hello song’ and the ABCs, (I don’t sing the company version, I do the one I know). Then we do ‘head-shoulders, knees, and toes,’ and ‘the hokey-pokey.’ ‘The Itsy-Bitsy Spider.’ Those are all the songs I know, and there’s only so long I can put the flash cards off. So I pull them out. One of them grabs them from my hands. Today we are learning “dishes” “plates” “cups” and “forks.” 

“Ciricle!  Square!”

“Good! But no! That was LAST week. Now I have NEW cards!” 

They don’t know wtf I’m saying. One of them has crawled on top of me and is stroking my face. Another is hugging my leg with their head in my lap. In a way it’s a dream scenario, as whenever I see kids this age riding the subway (ALONE, as is typical in Japan), hurrying to make their transfers with their shoulder bags the size of their little bodies, and holding onto their straw hats (!) that they have to wear to school, I have dreamed of kidnapping one and doing just this. But now as one of them is clinging to my legs, a few of the others have taken the chance run to where I pushed the table and are getting ready to climb it, so I have to pry the tiny arms off of me and yell,

“Come back! KATSUMA! YUMEHA! WE NEED YOU!” I start playing ‘head shoulders knees and toes’ again to lure them back, but they are wrestling with each other and not interested.

Finally I get their attention with a game where I hide the flashcard behind my head and show it to them for a split second so they have to watch closely or they miss it. I have to do it differently each time, like by putting it under my leg, or doing a funny spin, (once I seriously injured my shoulder trying to impress them this way), until they get interested and come toddling over from under the table. Yumeha is just barely 3 and can hardly form words. Her big sister is in the class and likes to grab her by the mouth and cheeks and ‘help’ her say them, then sometimes the younger one will start smacking her when she gets tired of this. One little girl, who is Chinese, can’t speak Japanese yet, so English is like a first language for her, and she saves the day by repeating each word perfectly. The others kind of follow her lead and miraculously they start saying the damn words in no time.

When it’s time for their ‘quiz’ they all get very serious. They take their pencils out of their little pencil cases with great pride and if they make a single mistake they are all erasing the whole entire page while I am like “stop! stop! What are you doing!! It was just one tiny part that was wrong!” They don’t know what I’m saying, so now we have to start the whole quiz over. Finally the quiz is complete and they all shout at me ‘Sensei!! Sensei!” so I can come check their ‘work’ (usually coloring) and give them a sticker from a pack I got to bribe them with, and draw over the whole page this special flower, a huge red swirl called ‘the hanamaku,’ that is the symbol in Japanese schools for completed work (correct work? I’m not sure, but I know they all need to see it scrawled over their page to feel they’ve accomplished anything). Outside I have to greet their parents (the ones that came. Some literally walk home by themselves at this age), and get them to say the words one more time in front of them. Usually the little ‘angels’ come through for me. Thank god that class is only once a week.

This has been only 3 of the 8 or sometimes 9 classes I teach every day. But I hope you get the idea.

(below, some much older children than the ones in this class)

Follow the author on Twitter: @rtneeder



David Hogg, etc. "The children who suffer immoral hands of their parents shall rise up and lead".



Isn't it odd that the world's "second biggest economy" won't allow its currency to be used anywhere but on the mainland? Isn't it strange that every one of their financial statements and NBS releases have glaring, ludicrous, laughable misrepresentations in them? Isn't it incredible that they've achieved a $25 Trillion (plus) cumulative trade/investment surplus and no economist or Central Banker has ever asked why there's only $3 Trillion of FOREX on the PBOC balance sheet? As one vulgar observer of the events on Hong Kong is alleged to have shouted: "Hey, Xi….where's all the f&%$ing Western Money we made?"

anonymous writes: 

China's economy is interesting. I've been thinking a lot about it and trying to decide if I want to spend more time researching and analyzing their stocks. Spec listers pointed me to some useful resources last time I posted about this. The need to diversify internationally has increased lately given the trade war and many of the companies appear quite compelling from a valuation and growth perspective.

It's hard to say that China is entirely fake when you live in Vancouver and then feel like you're going to a 3rd world country when you go back to the US (largely due to the lack of Chinese wealth) — which also answers where all the USD went hah. I personally really enjoy the BP energy report which showed that Chinese electricity consumption in 2018 grew about 3.8%, which is closely tied to GDP growth.

At the same time, one notes that the economy has more than quadrupled while FXI (the China large cap ETF) is well below its 2007 peak and headed the wrong direction. FXI is composed of classic companies like Tencent and China Telecom–so hard to argue that it's a 'composition issue'. The bear would argue that all of China's numbers are fake and thus the GDP growth is likely the one that's wrong.

Some interesting statistics on valuation–China Telecom has 147m 4g mobile subs, more than 1.5x as many as T Mobile's entire base, and 220m subs overall. China Tel is worth $36b while T Mobile is worth $65b. It's very unlikely that China Tel is lying about its subscriber count based on network data / just observation around how many people are using data walking around Chinese cities / the ubiquity of mobile payment services there. Sure the Sprint merger is a (likely) catalyst for pricing power but when you add up TMUS and S fcf generation even after the deal it's not amazing. Which just puts into context the potential upside to brave investors (100%+)

The venture capitalists I know investing in Shenzhen which now has as much flow as San Francisco (and btw is a way, way nicer place to live) have seen obscene financial returns (60%+ CAGR) and have had real USD exits. The sentiment is that founders there work 2x as hard, don't virtue signal, and have better technical teams. Notably, they also are focused on making money instead of the bizarre 'mission' fetish used in Silicon Valley to beat down people's demand for compensation ("we are here for the mission not the pay!")

The other point in favor of China is that military research done by independent think tanks suggests that increased naval and air power is very real. This is relevant insofar as markets ultimately reflect ability to secure assets and thus military power.

The rise of SOEs as a percent of GDP and the weakening of the RMB feels like a step in the wrong direction… but lately, I've been increasingly thinking Chinese longs are more interesting than most US consumer companies which were premised on the ability to sell into China

Charles Pennington writes: 

Thank you for that post Alexander — those are really interesting insights and datapoints on Chinese stocks and the Chinese economy. The stocks do seem cheap!

Many of us are always worried that somehow all the money in Chinese companies is going to get embezzled by somebody, and in a way it's a miracle that doesn't happen to US stocks as well. An argument against that fear is dividends–China Telecom (according to Morningstar) has boosted its dividend pretty steadily form $1.10 to $1.60 over the past 5 years. So that proves they're not stealing everything!

A few years ago I was wondering how could BIDU not be a good stock. It's the Chinese Google, and Google itself is locked out of the action, so how could it go wrong? I bought it and ended up selling at a loss for some reason, which turned out to be lucky because it's fallen more than 50% during just the past year. I don't follow it closely. How did they screw up when they're the Chinese Google? And is it a bargain now, or did the business get permanently harmed?



Tests for Pareto II heavy tail extremes using R software tests Kendall, Pearson



Wes Gray, who studied with Eugene Fama, runs a firm called Alpha Architect. In his most recent weekly newsletter, he mentioned a new academic paper that asks the question: Do Stocks Outperform Treasury Bills?

Here is the abstract summary of the paper and the link to SSRN's publication of the full paper:

Hendrik Bessembinder Fifty eight percent of CRSP common stocks have lifetime holding period returns less than those on one-month Treasuries. The modal lifetime return is -100%. When stated in terms of lifetime dollar wealth creation, the entire net gain in the U.S. stock market since 1926 is attributable to the best-performing four percent of listed stocks, as the other ninety six percent collectively matched one-month Treasury bills. These results highlight the important role of positive skewness in the cross-sectional distribution of stock returns. The skewness arises both because monthly returns are positively skewed and because compounding returns induces skewness. The results help to explain why active strategies, which tend to be poorly diversified, most often underperform.

John Netto writes:

I was fortunate enough to have Wes, a former Marine Corps Officer and Iraq war veteran, write the foreword to my book. He's an inspiration. 

Larry Williams writes:

I thought this was common knowledge. Goldman did a studies years ago with the same conclusion and as I recall so did Edgar Lawrence Smith in the 1930s.

Ralph Vince writes:

Just go look at what happens to stocks when earnings yield and/or dividend yields exceed a certain multiple on t bill returns.

I have grown generally very skeptical of anything that emanates from U of Chicago. There is a philosophical problem there I have discovered, incongruent with real-world markets, but that is a subject for a different, future thread possibly.

And fwiw, these multiples of t bill returns, as metrics of valuation, are quite opposed here to the seemingly pervasive meme of being at or in a bear market's doorstep.

Stefan Jovanovich writes: 

Like Pat McAfee, I am now (and have been for a while) a fan of players, not teams. (The baseball Giants remain an exception because the old franchise at the Polo Grounds was my childhood home. Even the Mobile Shippers (the Negro team in Mobile, Alabama that nurtured Henry Aaron and Willie McCovey) never quite made me a die-hard.) So, I can offer no opinions about the University of Chicago or any other academic team. I am a fan of Eugene Fama because he seems to have been remarkably generous to his graduate students in encouraging them and their work, even when he thought they were "wrong". I also admire him for being the only person I know of who has questioned the utility of the United States having a central bank when the dollar, as currency, has no independent monetary existence.

As LW notes, Edgar Lawrence Smith put the case that, over any two decade period that he studied, "a diversification of common stocks has …, in the end, shown better results, both as to income return and safety of principal, than a similar investment in bonds." Professor Bessembinder's paper does not contradict that conclusion. His argument is that most stocks do no better than Treasury bills; the out-performance of "the market" is dependent on a very few spectacular winners. I thought this actually reinforced the belief of the List members that the Jack Bogle's advice - "Buy Everything and Keep It Forever" - was all wet.

Ralph Vince writes: 

As an aside but related data point on this discussion, as of Friday's close, the geometric multiple on the 30 year constant is at 35. It has NEVER been this high above the S&P P/E Multiple.

I want to drink in the bigger picture.

Kim Zussman writes: 

The only free lunch is diversification (including temporally, which means B&H).

Ralph Vince writes: 

It is the ILLUSION of a free lunch. 

Diversification works over long periods of time for the average investor because it creates a slight return asymmetry that compounds over time.

True. However, asymptotically, it is gone with the wind.

By way of a simplistic analogy. Consider the single proposition of a coin toss, heads you double, tails you lose all. So you diversify among 4 coin where the pairwise correlation between any two is r=0 (much better than you can find in capital markets, esp under conditions of extreme moves). Let's say you decide to play 4 coins simultaneously. So rather than a .5 probability of losing it all, you have a .0625 probability.

Eventually, everyone gets pasted. for whatever they have exposed to risk.

It is how you handle that - that inevitable lightning strike if you stick around long enough (and as I always say, if you live long enough, you'll get to experience everything - twice! if you live long enough). That is the only thing that ultimately matters in this primal arena. All other "edges," and supposed free lunches are only temporal.

Jonathan Bower writes: 

Ralph, you will be able to out math me so take all of this with a grain of salt. Maybe I can set up a simulation at some point that will prove my point…

But I think your assumptions may be not realistic for the case at hand, the average investor not skilled traders. While the 0 correlation gives an edge to your example because as you rightly point out that's not the case for capital markets. N of 4 is also not sufficiently diversified. However the double or 0 is possibly a far more restrictive constraint. In reality owning a basket of stocks the outcomes are more like 0 and 10x +. And while it is possible to go bust, going to 0 (without leverage) is actually an unlikely outcome as the stock will be sold before it gets to that point in most cases. The difference is you can (theoretically) come back from a 99% loss, not 100%.

I'm going to stand by my original comment and say that diversification creates return asymmetry which leads to long run higher compound returns than something less diversified.

Ralph Vince replies:


I don't claim to be a mathematician, so to explain this sans math for both of our sakes……

The problem is that is that

For any portfolio, regardless of the number of components or the outcome parameters of those components sees a probability of drawdown of any specified magnitude approaches 1 as the number of holding periods gets ever-greater.

So yes, you can amend the parameters of outcomes, and you can increase the number of components (and clearly, doing so mitigates the effect on the portfolio from a disaster of any individual component, but the tenet above still holds, only the expected time until you can expect to see it grows longer. I would point out though, that we are dealing with components of perverse distribution and correlations among themselves that conspire against us when things go wrong; the time expected until we can expect disaster is much shorter than anyone realizes going in. Random events, even coin tosses of "double or nothing," are far more gentle and forgiving than the real world tends to bear out with regards to capital markets.

And none of this takes into account the effects of leverage, which is ubiquitous, and unavoidable — and misunderstood in that there is always leverage present.It may not be borrowing, but how much we do not borrow is also a matter of "leverage." To mt point in this regard, and again referring to the simple proposition of coin tosses, imagine the coin toss that pays 2:1. If we have a portfolio of one component, if we risk more than .5 of our stake, per play, we go broke with certainty as the number of compounding periods grows ever greater. Growth here is maximized at risking 25%.

If we have three coins paying 2:1 whose correlation between them is 0, we maximize our compound growth by wagering .21 on each coin, each component. However, if the correlations slip to +1, it is the same shape in leverage space as the individual component whose peak is at .25 (aggregate wagered among the three coins) not .63 (.21 x 3) which has us beyond the .5 point in the individual component portfolio, and insures are re going broke as we accumulate compounding periods.

It is quite insidious, and far more prone to danger than Markowitz ever envisioned I believe.

In fact, when one takes leverage into account, the surface of "leverage space" as I refer to it, presents potential danger from a single component (no matter how many components comprise the portfolio) that can wipe out the investor. In the following graph, figure 3 from the paper here you an see how, at a steep enough "leverage" (and these leverages are < 1) on any individual component (2 in this case, to demonstrate leverage space in 3 dimensions) any point along either of the two horizontal axes where the corresponding vertical axis is <1 is assured ruin as compounding periods accumulate (anything multiplied repeatedly by a number n, 0 >= n < 1 approaches zero with each successive multiplication).

Diversification tends to reduce period-on-period variance. Variance is not risk, but a diminution in returns.



 Just suffered an extreme event. One of the biggest ever. Canary? Peso/USD is .018! And you can charge on credit cards.

Argentina is great place to travel. Things are really cheap there, food is good. Airbnbs are $40!

Meanwhile, in US, the risk is the explosion to the upside like this morning if one was not positioned to collect after the shakeout. I learned a new acronym, FOMO, which means fear of missing out. I think it's a good motto for this market.

Jeff Hirsch writes: 

Thanks for the look on Argentina.

FOMO = Greed

Larry Williams writes: 

Double down on that Argentina is a great place—fish—hike—drink great wines and amazing food. Change your money in the blue market, or black. Lots of Casinos will also exchange at a 10% discount.

Mendoza is marvelous; eat at The Fort.



Watch "Bridgewater's Ray Dalio Discusses the Impact of China's Growth on the World Economy" on YouTube

Watch "Gordon Chang: On Hong Kong Protest, Chinese Economy, Trade War, & Trump's New Tariffs" on YouTube 

Very distinct views. What is yours? Btw, any news on Jim Chanos' latest China results? Seems like he backed out his short earlier?

Stefan Jovanovich writes: 

When Cantillon shorted "France" - i.e. John Law's system, he went to the Bourse in Amsterdam and bought gold with a promise to deliver assignats. The difficulty with shorting "China" is who are your buyers? Cantillon's counter-parties were not AIG fools; they needed Law's paper to pay their French taxes, which could only be done with Law's paper legal tender. But who outside the jurisdiction of the PRC has a need for the delivery of Yuan?

Mr. Chanos' shorts, to the extent he disclosed them publicly, were derivative bets against exporters to China that did not touch the currency at all. Kyle Bass' hints at his short position, which he has closed, involved the exchange between renminbi and the Hong Kong dollar. A question for the List: where, in fact, can a sizable bet be made right now that shorts Chinese legal tender? A bet against the dollar in BitCoin can be laid on in volume but not Yuan. The price CNBC puts on its screens is no more a market quote than the exchange rate for Venezuela's money. Or, have I answered my question already. A purchase of BitCoins in China with the domestic currency would seem to be, for now, as good as selling assignats for future delivery in Holland in 1719. 

Peter Ringel writes: 

Hi Leo, I don't see necessarily a contradiction between the two.

Dalio seems to highlight opportunities in the Chinese private sector. Chang points to the many issues and question marks, that arise from the behavior of the Chinese government.

Anecdotally, I only hear of foreigners exiting China's "physical" sector. I don't know what foreigners are doing in the financial sector in China.

Isn't Dalio concerned about the rule of law? Will he get his money out at some point? I believe Dalio talks a bit to his book and to ears in China. His historical analysis of past global powers, which was also posted on his blog a little back, is aimed in this direction. I do see contradictions mid and long term. With all due respect to China's culture and idiosyncrasies, how can an economic power house and a police state coexist? (Mainly corruption will rip any economy apart).

What do you think the prospects are (in case as an analogy)? The ear on the ground is always the best source.

anonymous writes: 

Hi Peter,

I have been quite negative since a few years ago, and so started long term traveling outside the country since 2015.

I feel quite the same that Dalio was talking to his book and the top ears in the country, and suspect that might be a precondition for him to take his money out now.

His data presentation looks convincing, but it seems dated without considering the country's abrupt shift to the far left in these few years. One may argue that he is looking at a trend on a century level and a few years time can thus be well neglected. Well, people in the West really lacks the experience of what "far left" means. That alone, not to mention about other big issues in the country, will cause a deep and likely long hiccup in the near term, which might well expire everything imagined for the long term.

Larry Williams writes: 


Never forget: the Long Term Trend Is Up…do not fear the future. Fear does not create death. Fear limits life.



“The Threat That Will Send Oil Down to $10″:

“We conclude that the economics of oil for gasoline and diesel vehicles versus wind- and solar-powered EVs are now in relentless and irreversible decline, with far-reaching implications for both policymakers and the oil majors,” Mark Lewis, the global head of sustainability research at BNP Paribas Asset Management.”



The Cornucopian history of the last two hundred years will continue into the future.

"Impending Defeat for the Four Horseman of the Apocalypse"

Stefan Jovanovich writes: 

With friends like Mr. Bailey the odds of a decent future for our species already has enough reasoned enemies. Who else could write this - "(M)an-made climate change arising largely from increasing atmospheric concentrations of carbon dioxide released from the burning of fossil fuels could become a significant problem for humanity during this century." - yet fail, in an article about the to mention either nuclear weapons or pandemics? We should all pray that crowds in their wisdom remain as sceptical as possible. When the future gets so bright you have to wear shades, someone has just delivered a bomb.



 "The Mutual Fund Industry in 2003: Back to the Future", remarks by John C. Bogle, founder and former chairman of The Vanguard Group

We are all familiar with the impressive equity returns over the last century but I haven't seen any estimates for historical management fees for index funds. (Obviously not as important the last 50 years with dedicated index funds). I came across this article by Bogle that says the first mutual fund, Massachusetts investment trust 'MIT' back in 1924 had 3.2% management fee per annum. By 1950 the fee had gone down to .3% before going up again and today is sitting at the same spot - 33bps.



I have come to the conclusion that the only enemy of the wonderful long term equity (and bond) premium is inflation. Triumph trio also mentions it in their book; in fact the countries with the highest inflation shocks had lowest real returns and the ones with hyperinflation had obviously a break in data. Also many of the countries that don't have good historical data and weren't included they suffered higher inflation.

Inflation is not just a number you subtract from nominal returns but summarizes many forces like monetary and fiscal policies, people's trust in currency and policies etc. It contains valuable information. Countries whose currencies are undervalued in real terms have had the best forward returns. Very robust throughout history.

I am working on building a similar dataset for Greece for the last 30-40 yrs and one of the things that strikes out is that the 1970-1980 inflation killed real returns to an extend that they haven't recovered yet. Interestingly, the recent events with fears of country defaulting proved to be nothing both for stocks and bonds and both have made new highs.



Check out the London Mathematical Society's youtube channel. It has many fascinating lectures.

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