To limit it to three major concerns, I suggest:

1. Having a significant number of blockchain apps come to market with a viable product

There are some already in production, such as OmiseGo and StatusIM. But more will need to succeed in the marketplace for this to be a fertile area of fintech development.

Some projects to watch are Augur (Ethereum-based), Golem (Ethereum), Gnosis (Ethereum), Factom (Bitcoin), Civic (Bitcoin), Air (Bitcoin)

There is a fundamental question of the viability of these projects as businesses. Undoubtedly, many will fail. Only time in market and experience can resolve these questions.

2. Beyond viability of blockchain-based business models, the more immediate barrier is scalability.

At the moment, the Ethereum network could not handle rapid-fire trading of prediction market contracts on platforms such as Augur or Gnosis.

These issues are expected to be resolved over the next two years through a series of technical upgrades. They will constitute "hard forks", which will probably resolve without any problems, but there is some risk.

Bitcoin has similar scalability issues that will need to be resolved to support apps like Civic and Air.

3. Regulatory and legal issues.

The ICO funding model holds potential for a revolution in capital formation. But most ICOs are in a legal grey area in most jurisdictions.

Favorable regulatory guidance will need to be issued to bring blockchain projects into the mainstream.



[A Barron's article, published in 2016, was concerned with a Tail Risk Protection product].

I'm a neophyte simpleton, but it seems to me that risk and reward have a linear relationship. How do you take less risk and get more reward in anything speculative?

Andy Aiken replies: 

He's proposing that far OTM put prices embed assumptions of solvency and central bank competence that are revealed to be untrue in a crisis. This is probably true to some extent. It's similar to betting on #19 on a roulette table month after month, at a casino where the (unlikely) policy buried deep in the published casino rules is that if the lights go out mid-spin, the player is declared the winner.

The payoff for a straight number bet at roulette is 36:1. Of course the probability of a straight bet winning is 1:37, so the expected value of the bet is 36/37.

Tail risk strategies are a bet that the probability of the lights going out mid-spin are significantly greater than 1:37.

The problem is that if a crisis is really severe, then no payoff may be possible.

Did the lights go out because the casino couldn't pay its electric bill (because it is bankrupt)? Did a 3-mile-diameter meteorite hit the casino? Did the Fed declare put contracts null and void, requiring redemption at the original purchase price? This problem is analogous to David Bernoulli's famous St. Petersburg paradox:

The game could be profitable if there were no tail risks on collecting the winnings themselves. Also, although there may be near-term anomalies/market inefficiencies enabling a "value" investment, the question is whether the strategy is profitable in the long run accounting for spreads, transaction costs, and tail risks on collecting the winnings. 




Andy Aiken writes: 

And in response, bitcoin says that Dimon is a fraud…

Alex Castaldo writes: 

Not very courageous either:

JPM's Jamie Dimon on #Bitcoin: "Don't ask me to short it, it could be at $20,000 before this happens but it will eventually blow up."

anonymous writes: 

Mine, it's better :-)

"JPMorgan patents Bitcoin-like payment system"  



 I'm not unfamiliar with the VC world, and I'm baffled by the size of the filecoin raise. Can anyone provide insight?

Andy Aiken writes:

In effect, Protocal Labs, the company behind Filecoin, has eschewed VC funding and simultaneously made a gambit that selling the coin will stimulate quick adoption of their app.

1) In contrast to other ICOs, Filecoin deliberately designed the ICO to be SEC-compliant, and thus could allow US investors
2) the timing could not be better, with Bitcoin and platform coins such as IOTA near ATHs. It has been hyped in a well-orchestrated marketing campaign.
3) the project/app has immediate practical value, and similar offerings have already been implemented in such projects as Sia and Storj.
4) the coin is the transaction token, and does not represent a share of the company. Think of a Filecoin as a unit of revenue, not as an indication of valuation. Consider Walmart: annual revenues this yearwill be about $500B, while Walmart market cap is <$250B. The relationship between Walmart revenue and market cap depends on other variables, such as operating margin.

I did not participate. My view is that the project will succeed and be profitable, but that the valuation is rich given the established market presence of Sia and Storj, not to mention cloud storage offerings such as AWS. But with AWS or similar cloud storage, a user is not able to generate income from their own unused storage capacity. There is a financial incentive to use apps like Sia, Storj, and Filecoin.

The future value of the coin will depend on adoption. Sia and Storj are not very easy to use. If Filecoin can make their user client easier to use, then it could well deserve the valuation.



I've been trying to figure out what a President is *supposed* to say when a foreign power threatens:

"WSJ: Trump's 'Fire and Fury' Comments: Statement by William J. Perry"

Andy Aiken comments: 

"We do not make empty threats, because empty threats weaken our credibility, and weaken the strength of threats that we do intend to carry out. As Theodore Roosevelt said, "speak softly but carry a big stick."

So is Perry speaking of Trump when he writes this, or Obama, GWB, and Clinton? The Nork nuke deal hatched by WJC, Jimmy Carter, and Madeleine Albright was the framework for the Iran nuclear deal. Both were deeply flawed miscalculations, modern versions of "peace in our time". What came of Obama's "red line" in Syria? His pronouncement was counterproductive blabber. Perry himself was probably behind that empty threat.

Rocky Humbert writes: 

Well he was certainly not speaking of Reagan — who directly and openly challenged the existing Soviet military doctrines (pre-gorbachev):

From "Reagan and The Cold War":

What struck Reagan about Communism was its weakness. Communists ruled by fear and intimidation. He believed that policies of peaceful coexistence or of passively containing the Soviet Union would be disastrous. The Communists would over time use the Western fear of war, especially nuclear war, to undermine the confidence of free peoples. They practiced "salami slice" tactics of intimidation and bluff to gain marginal advantages that would eventually accumulate to a victory in the Cold War or allow the Communists to win a final showdown. Reagan sought to turn the tables on Moscow and its allies by advocating an all-out fight against the growing encroachment of Communism in this nation and throughout the world.

By all-out fight, Reagan did not mean military action, although if that was required of the United States in particular circumstances—e.g., Korea, Vietnam—the United States should have fought to win. The key front in the Cold War, in Reagan's assessment, was actually the Soviet economy. Marxism was a materialist philosophy, and its chief claim to practical allegiance around the world was its supposed ability to produce economic plenty (and thereby, social justice). In fact, Reagan believed that democracy and capitalism had decisive, natural advantages over totalitarian systems and centrally-planned economies. Reagan sought to confront the Soviet Union simultaneously with various forms of economic pressure: nearly-open ended American military spending; threats to the security of the Soviet empire (especially in Eastern Europe and Afghanistan) through direct and indirect American support to resistance movements; losses of foreign currency that the Soviets had expected from sales of oil and natural gas; and a cutoff of Western aid and technology.

Reagan argued that the Cold War would end only when there was a fundamental change in the Soviet system, and not just in Soviet policies. The strategy of economic warfare was designed to force such a change, by bringing to the fore a new generation of Soviet leaders who would finally recognize the bankruptcy of communist ideology and move toward a true political rapprochement with the West. The United States, in turn, would promote democracy throughout the world as a magnet and an example to all the peoples oppressed by dictatorships of whatever stripe.



 We owe our modern misconception of optimism/pessimism to Voltaire, who in the interest of satire, oversimplified the schools of thought greatly.

It's possible to be an optimist in the sense of being a judicious risk-seeker, of seeing opportunity everywhere, while being an anthropological pessimist.

The judicious risk-seeker assesses the probabilities and is unreserved and aggressive, not assuming the worst.

The anthropological pessimist is a philosophical conservative, not in the modern political sense, but in the sense of Oakeshott:

"To be conservative, then, is to prefer the familiar to the unknown, to prefer the tried to the untried, fact to mystery, the actual to the possible, the limited to the unbounded, the near to the distant, the sufficient to the superabundant, the convenient to the perfect, present laughter to utopian bliss."

People too often think that schools of thought are in contention, instead of being potentially syncretic. The post-Marxist Leszek Kolakowski articulated one type of syncretism brilliantly: "As for the great and powerful International which I mentioned at the outset–it will never exist, because it cannot promise people that they will be happy."



Finally something useful and not hateful from the fraternity paper.

"In the Hunt for New Antibiotics, Scientists Hit Pay Dirt" by Jenna Gallegos

Bill Ray writes:

Until fairly recently, the direct was a great place to find antibiotics. Streptomycin, which was the first treatment for TB (and which showed that randomized trials had a place in clinical research) was discovered in direct, as was erythromycin, I think. There have been many others, as well.

Soil can be fertile in lots of ways.

Andy Aiken writes: 

I heard someone recently mention colloidal silver as a natural antibiotic with zero side effects. Zero collateral effects, except turning blue. Also, probably zero effect on melanoma and other conditions that colloidial silver is supposedly used to treat.

Vancomycin, Erythromycin, Penicillin, etc are all the purified form of natural antibiotics produced by fungi. Why consume silver, which has no nutritional function, when the best antibiotics use the ancient wisdom that playing in the dirt provides excellent immune protection?



 Amazon hits 1000 and FANG pulls back. Already commentators at Barron's, CNBC and are talking about a topping out of growth stocks and a shift to value stocks…

Anatoly Veltman writes: 

Talking strictly random digits: both AMZN and GOOGL exceeded 1000 right before reversing; AAPL and FB both reversed from 156 area.

Andy Aiken writes: 

I didn't call it a reversal. I called it a pullback.

The morons in the media are quick to call every pullback in a bull run a reversal or a popped bubble.

Anatoly Veltman writes: 

Yet other morons may be paying 1000, like there is nothing else to do with 1000.

anonymous writes: 

Without resorting to invective by calling people morons, didn't Ableson have a similar denigrating mindset to yours when he wrote that people thinking the S&P was cheap at 400 were "intellectually challenged?" I think the word he used back then was idiot, but he still was a name caller. Wasn't the late Abelson the name he used on others that didn't share his wrong beliefs?



How I got out of Florida condos at the top:

1) The tennis pro at the building became a realtor.
2) The fellow who installed my window treatments became a realtor.
3) Hurricane season was approaching.
4) A "ballerina" I knew quite well told me to delay selling my condo until she could take the newly instituted 5 day cram course to get a realtor license for which there was a several month waiting list.

This week I heard from a fashion model eagerly desirous of entering the coin market who had opened up accounts at several shops and was mad because they had a waiting period for her buying of various coins.

The conventions on coin presentations were oversold and standing room only.

Sad I can't hand out a statistical answer to document the froth, but there are many.

1) Control of more than 50% of the coins potentially weakens the security.
2) The leaked ability of the hackers to enter any computer in multiple ways retrospectively.
3) The advent of access to quantum cloud computers by corporations in beta (which means govts have had access longer)
4) The untested nature of the post-quantum algos.
5) The need for the governments to track and tax money flows.
6) The investigation powers newly needed to stop ransom attacks requiring payment of coins to "anonymous" wallets.

Andy Aiken writes: 

Possibly some lessons are:

Techies, anarchocapitalist utopians, Chinese elites, even ordinary people desire a currency not controlled by the state, that offers privacy and security without requiring armed guards for a big gold stash.

The financial technology and payment processing systems for USD, Euro, etc are antiquated and slow, decades behind what is feasible and in reach, struggling under a mountain of regulation.

A currency is what people use to pay for things. When the European banking system was in shambles after WW II, people paid for food with cigarettes. Scrip has been used many times throughout history.

Getting financing for a company by working with bankers is an expensive, frustrating experience.  Business founders will find a way to cut the middlemen out of the game if they don’t add value.
The cryptocurrency mkt is definitely frothy. As with the dot com bubble, most of the coins & firms will fail.  Some will go on to be the future Amazons. These human needs are in search of a solution even if all of cryptocurrency goes to zero tomorrow.

Orson Terrill writes: 

Same here, starting about 2 weeks ago, yet again, people are asking me about bitcoin. This has usually coincided with near term top, and has been true since 2012. Same for stocks.

anonymous writes: 

I do some consulting in this area, and last week I had a few calls (one from a PE firm) come in asking me for a general overview of the competitive crypto landscape, including who mines, what the pecking order of coins is (in terms of best, most used, etc.) and so on; stuff that could pretty easily be found on the web, by haunting Reddit, etc.

Froth indeed.

Stefan Jovanovich writes: 

Thanks to Andy Aiken, I have been able to get some sense of how Bitcoin actually trades. Also thanks to him, I learned - yet again - the most important lesson about trading: you can't claim to understand a market if you don't actually trade it.

I don't trade Bitcoin and have absolutely no idea what will happen to the markets for it. But, it does seem to me that the participants in the markets for cryptocurrencies - whether long or short - are making one assumption that is simply not proven by the evidence.

Bitcoin is not a currency. Neither, for that matter, are ounces of gold. These days a currency is an IOU that

(1) is accepted as a credit for deposit by the banks that are willing to use that currency as a unit of account; (2) is accepted as final payment for taxes and legal judgments; and (3) is the face denomination for the government debts that are accepted as officially-sanctioned reserves for financial institutions

That Bitcoin is not a legal tender has not mattered in the slightest as far as the traders in Bitcoin are concerned.

In the days when money was coin, there was a long history of unofficial credits being actively traded and readily exchanged and even accepted for deposit. The Virginia lawyers who most closely followed Washington as President (Jefferson, Madison) were infuriated by the speculation they saw in New York over the debts that were to be redeemable in the country's new money. They were themselves active speculators, as Washington had been; but their gambles and savings were in warrants and other paper claims on the Western lands. When the people who support and believe in Bitcoin argue that the digital claims they have bought or mined are as "real" than as the digits that represent the vast bulk of people's dollar/pound/Euro/yen/renminbi "money" (sic), they are absolutely right. Bitcoins and dollars are both simply collective promises that what is represented has the value of scarcity and is not counterfeit, and they both have to be taken on faith.

There is only one problem. Governments, as Hamilton demonstrated, have a serious interest in having their official fictions take precedence. The risk of any Bitcoin "bubble" is that, in the name of the protection of official legal tender, unofficial digits may find themselves being investigated for their risks of "fraud". Government can always be relied on to investigate others for having committed the very sins that the government wants to preserve for its own spiritual authority. 

Anatoly Veltman writes: 

Centrals may investigate and outlaw whatever they wish - but since they've encouraged the vastness of the internet, it's impossible for them to replace the cork. Eventually, they'll be adapters of a protocol.

anonymous writes: 

And that is exactly the point.

With crypto there are no groups of individuals painstakingly crafting bills in basements OR shadowy dictators buying eight figure currency printing machines from manufacturing facilities in Bavaria or Switzerland. Even if governments manage to cripple or persecute the Bitcoiners - (who? miners? users? developers? writers? consultants?) - there are as I type this 735 existing crypto issues, over 100 crypto assets, and thousands of tokens trading in nearly 4000 markets of varying mechanisms and liquidity around the world. Far more important than that, each day tens of thousands of new minds are brought into the crypto sphere, some of whom are brilliant programmers both (a) eager to outdo the best of what is currently available, and (b) eager to get rich. There is no, absolutely no, putting the proverbial genie back in the equally-proverbial bottle.



 Bitcoin is currently stalling out on transaction speed and will force the hand of the core development team to make adjustments.

At present, the miners are clearing (very roughly) 2000 transactions every 10 minutes, this is primarily due to the limit of the block size of 1 megabyte and the amount of transactional information they can place into that size.

There is a lot of hand-waving about the slowing rate of growth of bitcoin versus other cryptos and the glacial adoption of newer protocols is certainly a part of it. For my part, I am content that the developers are overly cautious as any bug in the implementation can crash the economy. Ethereum learned this firsthand last year after they lost millions due to a bug. That said, Ethereum is also a model about how resilient the cryptos can be in the face of lost confidence.

At some point, bitcoin will increase the size of the block above 1MB and punt the transaction problem down the road for a while, but it exposes one of the problems with it's design which is transactional throughput. Most of the cryptos out there have the same tree-based transactional design that at greater scale will eventually cause the system to come to a crawl under normal load, not to mention making them vulnerable to spam attacks.

There is some promise in a new way of guaranteeing transactional integrity without a tree in DAG (directed acyclic graphs). The concept is more of a mesh of (very) lightweight transactions, each of which is forced to validate two other previous transactions. This obviates the need for miners and makes every initiator of a transaction do the proof of work. This concept would scale far better than (what has become) the centralized miner model of the major cryptos.

I am aware of two cryptocurrencies being developed that use this model, Byteball and Iota, with Iota having a better marketing department. They are completely unproven, flawed, hoarded and still in development, but already have a solid following and are trading at what I'd consider high premiums. If they somehow reach critical mass without implosion there may be a big future in actual microtransactions, fulfilling the promise of cryptocurrencies years ago.

Andy Aiken writes:

Ethereum is on track to convert to a Proof of Stake transaction model sometime in 2018. Like bitcoin, ethereum is currently a Proof of Work cryptocurrency, in which transactions must be included in each new block being "mined".

As Jayson indicates, mining is highly computationally intensive. BTC and ETH mining requires special hardware, and consumes hundreds of gigawatts of power globally.

In a Proof of Stake (PoS) system, the network consists of nodes that reach network consensus on transactions without the computational intensity. The owners of the nodes (stakeholders) get a share of the transaction fees. A node could be run on an ordinary PC. There are currently PoS coins, but they are much less popular than bitcoin and ethereum.

On May 22, there is an Initial Coin Offering (ICO) for Tezos, which will be Proof of Stake right out of the gate. Tezos claims to be a direct competitor to Ethereum for the mantle of next-generation bitcoin. I'm skeptical of this ICO since the issuance is uncapped. This means that interested individuals and institutions will be able to get a piece, unlike other recent ICOs (e.g. Blockchain Capital, a venture fund that issued its own coin) that closed within 5-10 minutes of opening. On the other hand, Tezos could raise billions of dollars while being years from developing anything close to what Ethereum has already developed.

Byteball and Iota are using an entirely different model and a unique distribution system. E.g., if you hold BTC, you can get an allotment of Byteball by providing some personal information.

Cryptocurrency is much like the auto industry of the early 1920s. The failure rate of new coins/businesses will be high. Regulatory agencies are barely present, there are many scams, and a gambling mentality at the cryptocurrency exchanges. But the opportunities appear to be commensurate with the risk.

Stefan Jovanovich writes: 

AA may want to adjust his historical analogy slightly. The failure rate for automobile manufacturers peaked not in the 1920s but in the preceding decade. By the "early 1920s" the "Big 3" were already established.

The historical analogy that works best for me is the growth in the collectibles market pioneered by Joseph Segel. No one can question the Marxist measure of value for the objects that the Franklin Mint and others produced just as no one can quarrel with the enormous amounts of human labor, energy and computation that have gone into producing these current digital collectibles. One wonders what network of Quality Value Convenience will evolve out of all this buying and selling of precious man-made objects.



For those interested in pharma/biotech investing, or simply interested in innovation or public health, here is an interesting, easy-to-read study recently published by the FDA: "22 Case Studies Where Phase 2 and Phase 3 Trials Had Divergent Results".

To paraphrase the political scientist cum statistician Andrew Gelman, the problem with the Neyman-Pearson statistical decision framework (set a null hypothesis, perform a statistical test to accept or reject it) is that the difference between statistical significance and non-significance is itself non-significant. Computer models are often inaccurate, and even animal surrogates may not be predictive either. We often don't understand how a drug really works until it is put into clinical use.



 "I have noticed that 538 are quite incompetent (and aggressively so)– they don't grasp something basic about an election probability as an estimator of a future binary outcome. The more uncertainty, the closer the estimator to 50%. But let us 'price' it as an arbitrage-free option."

I think that Taleb is correct here. The point estimate of an election probability is far more unstable than the 538 model portrays. Also, on the betting markets, the uncertainty should be reflected in wide bid-ask spreads, which is not the case in these markets either.

Stefan Jovanovich comments: 

The poll numbers are not trades that must be cleared; they are, at best, applied social science research.  There is no penalty for getting the estimate wrong; no one ever gets fired for having missed the spread.  When you all lay on a single trade, there is actual money at stake - far more serious money than anything these D List celebrities on the tube ever put at risk. (Reminder: "Politics is show business for ugly people.")  The stuff fascinates me because it is the random walk of actual history, but why do any of you serious punters pay attention to it as anything other than a minor sports bet - like wagering on Columbia basketball in Casino (the movie)?

For all the supposed money at stake in politics and the outcomes of political elections, the actual net expenditures - the money spent that goes outside the bubble of the campaign organization itself - are trivial.  There is more money spent by GEIGO and its rivals on pitching auto liability coverage than all the net payments to television for Presidential campaign ads for both parties. 

The poll numbers being reported, even this morning, are for samples taken before Friday's revelation about the Danger Man's laptop.  They "changed" because the pollsters decided to use a sample that was a statistical probability rather than one that was completely bent in favor of Mrs. Clinton.  ABC News had a headline that says it all "Shift in the Electorate's Makeup Tightens the Presidential Contest".  Yeah, right.  The makeup of the electorate over an entire campaign season does not change.  If it did, the Democrats would not be so passionate about enacting same day registration and voting. 

A week ago ABC News had a poll that showed Mrs. Clinton up by 12 points and at the magic number of 50.  The poll with the headline had her at 47 and Trump at 45.  What "changed" was the weighting of the sample.  The earlier poll divided the electorate as 36% Democrat, 27% Republican and 31% Independent.  The more recent one splits it 37, 29, 29. 

So, Stefan, how does this prove your thesis?  Easy.  The folks at ABC decided that 81% of the registered Republicans are now going to vote, as opposed to only 75% a week ago.  They also decided that 5% fewer registered Democrats were actually going to vote.

Who is in the electorate does not change.  Who is going to be foolish enough to waste their time to actually vote is always the question.

The enduring paradox of representative government is the fact that there is no statistically valid reason for any individual to bother with voting.  Your individual vote NEVER counts.  It is a pure act of faith.  That is the reason that the countries that are actual democracies are wise enough to make voting have a real cost; it is only in autocracies that voting is free, easy and compulsory.

As for who will win next week, I still favor the Harold Macmillan prediction.  When asked by a journalist (who else?) what will determine the coming Parliamentary election, he replied: "Events, dear boy, events."



 Regardless of who wins this election, this market is going to rip to the upside — and I can be quite certain of that without even looking at the numbers, just the very tentative nature of nearly everyone around it. I've smelled this dish cooking before, and so have a lot of folks on this site. I don't know who is going to win this, but I do know that a 500 bln stop (not even flip) in the hemorrhage of balance of payments translates into an instant 3% GDP growth, and the multiplier effect on that puts us at 1965 growth, or even Truman-era growth. I was fortunate, in the 1980s and latter half of the 90s, anyone who showed up on time with their shoes on did pretty well. I had some lucky breaks too, which didn't hurt (and, as I have said repeatedly, and bears repetition for no one's sake other than my own perspective — "Anything that I may have has been given to me.").

But nothing has gone anywhere since the Spring of 2001. It would be wonderful to see growth in double digits, or just robust, 80s-90s style for the morass of all these millennials. People teasingly refer to them as "Snowflakes," but I have proactively and of my own volition gone out of my way in the past since 2007 to get into their heads, to work alongside them — not your typical snowflakes but snowflakes of all varieties. For all the negatives said about these kids (which I do not disagree with!), they are a much harder working, industrious, adaptable and far more pleasant gang than we boomers were. And for exactly them, I hope they get a break here and get the the change they deserve, and the economic growth they can use.

Stefan Martinek writes: 


The whole 2014, maybe the first part of 2015, you mentioned multiple times the issue of liquidity, the risk of a huge crash, structural liquidity problems, ETFs, etc. Do you consider all that is over? I always thought that the trend in equities (from 2009) will take some time to reverse, that there will be some chopping on the top before the next up move. I never tested this, but the chopping for another 1-2 years would look proportional, beautiful, expected… Of course growth will resume at some point. I thought that maybe market needs to take back some easy money generated in the last decade before going forward.

Jack Tierney, the President of the Old Speculator's Club writes in: 

A few observations on this thread.

First, perhaps because of its nature, Dailyspec tends to look for the cause of many social phenomena in financial terms. In our discussions, Mr. Haave suggested "that while the Southern states get more benefits those benefits go predominantly to the minority that votes democratic." Mr. Aiken's thoughts illustrate exactly why: "NY and IL are 'red states' outside of NYC and Chicago, respectively…" I can't speak for NY, but "ethnic demographics" are the key driver Big D majorities in IL…I have no idea how to quantify, or define, the effect of "cultural indices."

Mr. Hauser added a vital insight in suggesting that "many elderly move South in their retirement years" and, by extension, while their benefits add to the states' totals, it does not necessarily translate into democrat votes. I am one of those "expats" and can say with some certainty that we have had a marginal impact.

But several very important issues are either overlooked or avoided to explain why these states remain in the red column. First, and most important, many in the current (and, more than likely, continual regime) have quite boldly and heavy handedly attacked the religious foundations of many individuals in these states…certainly enough to swing the vote.

Second, gun control is no minor issue. Its rare to find a resident in my part of the state who doesn't own both a shotgun and a deer rifle…their purposes, though, are concentrated on bringing down consumable game and/or eliminating non-human varmints. Though many own pistols, their numbers are dwarfed by the many in our larger cities who use them for quite different purposes.

Third is education or, more specifically, the make-up of the curriculum and the content of the mandated text books. Many of today's parents and grandparents are now, after a significant amount of published and broadcast news, aware that they have received a less than adequate education. When school prayer was outlawed they were upset, but, over time, grudgingly came to accept it. However, when the study of Islam was made part of required courses, things became (and remain) a point of relentless debate.

Other points of contention which aren't appreciated outside the immediate area, but which lead many to the red side of the spectrum are the "elite" dictates discouraging, eliminating, or outlawing the Confederate flag, tobacco farming, soft drinks, fried food, salt, and "dipping."

Individually, these may seem to be trivial matters and, in many cases, "settled issues." Big mistake. Taken together, these represent stark examples of big government going well beyond its mandate. It took the Tea Party to underscore this and galvanize the voters…not just here but in other states as well. The current Democrat platform offers them nothing of substance and can do nothing to alter this situation.

Will things change? Sure they will. Despite a growing number of home schoolers and charters, an overwhelming majority of young students remain classroom captives in a system that has essentially replaced much that shaped western civ with new age agitprop.

But there will always be a remnant and as surely as all grand socialist experiments fail, this, too, shall pass.

Andy Aiken responds: 

It's tricky to quantify in toto, but consider a simple variable: married vs. unmarried. There is a stark difference in party ID and voting behavior between the two subgroups, all else being equal.



 In every election since 1984 and in 19 of the 22 elections since the Composite Index was introduced in 1923, the S&P 500 Index has been the most reliable gauge of Presidential election results. If the Index on election day is higher than it was three months earlier, the incumbent party retains the White House. 2181 is the magic number; that was the close on August 8th. Back to life not lived through "the news"….

Andy Aiken writes: 

I am also low-news/high-information. I seek out primary sources, e.g. read the academic paper or CBO study instead of a journalism student's usually flawed interpretation of it. As Nietzsche said, "All things are subject to interpretation. Whichever interpretation prevails at a given time is a function of power and not truth." The major media in the US have been speaking power to truth for a long time.



 I tested the old Jewish trader axiom "Sell on Rosh Hashanah and buy back on Yom Kippur?".

Andy Aiken writes:

Historically, returns between the two holidays are negative, but not often enough so to be a reliable calendar trade. Average returns are distorted by 2008.

Year    SPX change (%)
2000    -2.40%
2001    -1.94%
2002    -0.32%
2003    3.76%
2004    -0.92%
2005    -4.06%
2006    1.26%
2007    3.68%
2008    -17.76%
2009    -0.50%
2010    2.43%
2011    0.38%
2012    -2.21%
2013    1.77%
2014    -2.03%
2015    0.31%

% negative      56.3%
average return  -1.16%
median return   -0.41%

A 2004 paper suggests that the negative returns during this period may be due to lower-than-usual volume.



Vigilanted and Palindrome cronies in S. Hampton trying to force world state by shorting stocks.

Stefan Martinek writes: 


Andy Aiken writes: 

The event guaranteed to elect President Trump is a break in the U.S. Stock market that hits the better people in the 401k. The hermit says the only reason I like his counting is because I share Queen Milo's hope that the Donald will beat the hag. He may be right, but I think the recession is what will make the hermit's numerology come true. If there is one thing Trump's election will kill, it is the one world currency order.



 I first learned about Thompson's On Growth and Form at a talk back in the late 80s by Benoit Mandelbrot, who referenced the book as an influence. I think Thompson's book has relevance to equity markets, philosophically as well as on more practical terms. Thompson simply observed nature and described relationships of form to function. He didn't attempt to infer an evolution process. In this sense the book is an early precursor of Bejan's Constructal Theory.

Examples: Thompson shows that the speed of a fish or ship is proportional to the square root of its length, and that the kinetic energy exerted by an organism is proportional to its mass to the fifth power. Thompson considered form as the product of the dynamic forces acting upon it. Logarithmic spirals reflect a constant proportional growth rate. The logarithmic spirals in pine cone scales or sunflower seeds result in a Fibonacci expansion in the number of scales or seeds. The Fibonacci sequence is just a discrete version of the continuous logarithmic curve.

It's not unrealistic to think that logarithmic spirals and Fib sequences crop up in equity prices. Daily returns are often assumed to be lognormally distributed. The relationships are probably not as simple as "stock x should drop to 38.1% Fib level and bounce".

One of the forces acting on the form in this case is human perception of emerging patterns. One of the more powerful conclusions drawn by Thompson is that many species share features that are invariant under simple linear transformations. So the shape of a gorillas skull and skeleton is the same as a human's through a "stretching" deformation.

If we make an analogy to stocks, this could imply self similarity in price patterns (fractal relationship) or the idea that we need to adjust for both price and time transformations when using historical analogs to predict future returns..


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