Apr

14

"Modern Exodus: the Sarajevo Haggadah's musical journey" from The Times of Israel:

Like all Sarajevans, Ključo, 39, was already aware of the Sarajevo Haggadah. A prized national treasure that Jews, Christians and Muslims alike have endangered themselves to keep from destruction, the book is seen as the ultimate survivor and a potent symbol of the non-sectarian unity of the people of the Bosnian capital.

Ključo, a concert accordionist who performs with chamber and philharmonic orchestras around the world, decided that she, too, must retell the story of the famed Jewish manuscript—but through the language of music. The result is "The Sarajevo Haggadah: Music of the Book," a multimedia work, which is the 2013-2014 New Jewish Culture Network's music commission.

"The Sarajevo Haggadah: Music of the Book" premiered in late March at Yellow Barn, an international center for chamber music in Putney, Vermont, where it was developed in residence. From there, the performance, which has digital art by Bart Woodstrup accompanying and interpreting Ključo's music, began a North American tour that will take it to Watertown, Mass., Dallas, Sa

Stefan Jovanovich writes: 

One of the unhappy aspects of watching the present efforts to rewrite the history of the Jews in Europe is how often, for reasons of present interest, Israel has to pretend that Muslims and Catholics were just as tolerant as Communists gypsies and Greek and Serbian Orthodox. The Sarajevo Haggadah is another work of that peculiar fiction that makes the people killed at Jasenovac and starved and killed in their villages into the spiritual equals of those who did the killing but are now — a generation or two later — gracious enough to want to join hands in the name of one world solidarity. One can hardly blame the Israelis; they are, on a very good day, far more vulnerable than the Florentines facing the Duke of Milan, the King of France and Philip II while trying to keep the Pisans in line. For them Machiavelli will always be no more than light reading.
 

Apr

10

 Will there be 7 inning baseball next year?

"MLB Exec Thinks Games Should Be Shortened to 7 Innings, Is Wrong"

To which I say that it costs $100-150 for a family of four to go to a baseball game, the players don't have a lot of interaction with the kids (at least not that I've seen), there's no longer much meaning to the idea of a league (never mind the weird uniforms sometimes used for inter-league play), every pitcher is pulled after 90 pitches and there's now instant replay appeals. Yessir, the problem with baseball and the reason it's losing little kids' interest is the 9 innings. It's all that attention-deficit disorder among the kids (now at 25% prevalence among those under 18), so it must be the 9 innings. I wonder what would have happened if the same marketing person had been at the PGA when Nicklaus ruled the fairways. 14 hole golf?

MLB needs to find someone who knows something about marketing. "The fault, dear Brutus, is not in our stars but in ourselves." The problem is within the MLB. Baseball–all of it, including 9 innings–is just fine as it is. But fix the above, and the kids will flock to the game—just as they have for more than a century.

Apr

7

 The best Italian food in St. Louis is on "The Hill".

"The Hill" is a shortened nickname for the neighborhood formerly known as "Dago Hill" where the Italians all migrated too from the old country.

Both Yogi Berra and Joe Garagiolia grew up on "The Hill" so I'm sure you NY'ers (and baseball fans in general) a point of reference.

However, when it comes to pizza in STL, the best (and most popular by far) is a local franchise called "Imo's Pizza". (the "I" is pronounced as a long "E").

It's thin crust pizza, covered with whatever you order, special sauce, provel cheese, and a special italian spice. It's really good stuff.

My first job was working at Imo's in Maplewood in 1979.

Lot's of family history at that establishment…I still stop in there now and again and order some food.

Mar

12

 Have you read Rashard Mendenhall's retirement letter. For those that haven't read it, it is worthy of your time.

Ralph Vince writes:

He got out near the top of his game.

Gramps, just before he died, a man who forgot more about the game than almost all will ever know, made a comment to me shortly before he passed away, about a running back for San Diego names Natrone Means: "A running back in the NFL these days has a lifespan of about two years, maybe three."

I found it very surprising when he said that, but have watched it occur over and over since. Mendenhall was a great running back, and his is a wise move.

Feb

17

I learned a lot from Mary Carrillo's Badminton Rant about the difference between pros and amateurs from the 2004 Athens Olympics.

Jan

6

 As children we grow up listening to our parents music, but over time we develop our tastes. No matter how much my tastes changed, there was no amount of Led Zeppelin or Lyndard Skynard that made me stop loving what I heard on the AM radio driving down the road in my parents car.

One of those groups that I always enjoyed was the Everly Brothers.

Wake up Little Susie, Bye Bye Love, and my personal favorite "Bird Dog".

Well, a chapter of Rock and Roll was closed yesterday as we lost Phil Everly.

In my opinion, the Everly Brothers were one of the defining sounds of the early days of Rock and Roll. For those not familiar the Everly Brothers, here's a sampling…..

Bye Bye Love

Wake up Little Susie

Bird Dog

All I Have to do is Dream

Cathy's Clow

Nov

25

 In August, Science published a landmark study concluding that poverty, itself, hurts our ability to make decisions about school, finances, and life, imposing a mental burden similar to losing 13 IQ points.

It was widely seen as a counter-argument to claims that poor people are "to blame" for bad decisions and a rebuke to policies that withhold money from the poorest families unless they behave in a certain way. After all, if being poor leads to bad decision-making (as opposed to the other way around), then giving cash should alleviate the cognitive burdens of poverty, all on its own.

Stefan Jovanovich comments:

In their efforts to avoid blaming the poor, the researchers failed to consider a possibility that Jesus himself acknowledged: people who lack mental abilities are overwhelmingly among the more impoverished people in a society. (How is that for a sufficiently politically correct rendering of Matthew 26:11? In the King James version: "For ye have the poor always".)

People with low IQs do not make not smart decisions about money or breaking the law or many, many other things; it is highly unlikely that giving them money changes any of that. The history of what lottery winners do with their windfalls should be all the proof a reasonable inquiry into the question requires.

Education is supposed to be an answer to this problem; but, like so many other efforts at social improvement, the principal beneficiaries of schooling, social work, et. al. have been the helpers. (As a concession to David's likely objection, I am happy to acknowledge that the principal beneficiaries of national defense and homeland security have been the non-combatant defenders and the equipment contractors. Whether from the right or the left, government is equally corrupt and inept except when people are free to choose the tenure of any authority.)

That still leaves the question of bribery. If giving the poor money will not make them smart, perhaps those who are also violent can be bribed to leave the rest of us alone? Alas, the "lesson" of history is not very promising. Americans have periodically paid bribes in the name of safety and security throughout our history; but it has not worked very well. Our most expensive attempt - until now - was the tribute paid to the Barbary States. Those pirates were happy to take our money, but they did not stop raiding our merchant ships or enslaving our citizens even after we made a succession of peace treaties. But, as in so many other things, we were blessed by having other people solve the problem for us. The piracies ended when the French and Spanish decided that coastal North Africa deserved to have extended visits from their armies.

Now, there is a possibility to be considered by future researchers. If we can have another country to take over the burdens of our many wars on poverty, won't that solve the problem?

Nov

22

 Cryptonomicon looks like a fun read and perhaps presages some of the issues in the news now. What secrets will be revealed in the next 30 years about things going on today?:

About the book:

"With this extraordinary first volume in what promises to be an epoch-making masterpiece, Neal Stephenson hacks into the secret histories of nations and the private obsessions of men, decrypting with dazzling virtuosity the forces that shaped this century.

In 1942, Lawrence Pritchard Waterhouse—mathematical genius and young Captain in the U.S. Navy—is assigned to detachment 2702. It is an outfit so secret that only a handful of people know it exists, and some of those people have names like Churchill and Roosevelt. The mission of Waterhouse and Detachment 2702—commanded by Marine Raider Bobby Shaftoe-is to keep the Nazis ignorant of the fact that Allied Intelligence has cracked the enemy's fabled Enigma code.

It is a game, a cryptographic chess match between Waterhouse and his German counterpart, translated into action by the gung-ho Shaftoe and his forces. Fast-forward to the present, where Waterhouse's crypto-hacker grandson, Randy, is attempting to create a "data haven" in Southeast Asia—a place where encrypted data can be stored and exchanged free of repression and scrutiny. As governments and multinationals attack the endeavor, Randy joins forces with Shaftoe's tough-as-nails granddaughter, Amy, to secretly salvage a sunken Nazi submarine that holds the key to keeping the dream of a data haven afloat. But soon their scheme brings to light a massive conspiracy with its roots in Detachment 2702 linked to an unbreakable Nazi code called Arethusa. And it will represent the path to unimaginable riches and a future of personal and digital liberty…or to universal totalitarianism reborn.

A breathtaking tour de force, and Neal Stephenson's most accomplished and affecting work to date, Cryptonomicon is profound and prophetic, hypnotic and hyper-driven, as it leaps forward and back between World War II and the World Wide Web, hinting all the while at a dark day-after-tomorrow. It is a work of great art, thought and creative daring; the product of a truly iconoclastic imagination working with white-hot intensity."

Scott Brooks writes: 

I read Cryptonomicon about 10 years ago and found it to be a mostly fascinating and fun read.

I recommend it to anyone looking for an enjoyable way to wile away the afternoon.

That said, Stephenson has a very distinct writing style that is somewhat cryptic (if you'll pardon the pun). There were multiple times in the book when I would have absolutely no idea what he was talking about, who the characters were or what it had to do with the story. He told the story in a disjointed and odd manor.

It was like he was writing in a puzzle format and tried to make things a confusing…like he was trying to be clever. Unfortunately, he only came across irritating. He did tie things back together later in the book, but it became a bit off-putting after a while.

However, that aside, I did enjoy it and recommend it to the group.

Nov

5

 A moment of Zen: What do the markets and skydiving have in common? The occasional fiery crash.

Mr. S. James writes: 

Common Traits include:

1. Success in either field requires deep respect for counting.

2. Checking equipment before the taking the plunge.

3. Absolutely no hesitation at the pre-planned moment.

4. Understanding that, regardless of planning, there do exist events beyond one's control that can finish everything.

5. The weather.

6. An understanding that, despite the people around you, it really is all up to you.

Nov

4

 I have a hypothesis that older people with money to invest put too much value on youth in their investments, i.e, that they think that young people and things that young people buy are better than other things. I wonder if this is because of their desire for immortality or just a rejection of their loss of virility. I looked for articles that were relevant to this hypothesis but not having the scope or sweep of Pitt, or Mr. E, I have not yet struck pay dirt.

Vince Fulco writes: 

Add to the mix of hypotheses, worry about not keeping up or relevant on world developments, IT, or scientific advancements. It is exhausting for some generations given they were raised with sliderules.

Scott Brooks writes: 

Isn't it fair to say that the growth companies of yesterday are the value companies of today?

Older people probably want, at least, some growth in the portfolio, so they invest some of their money with the younger generation who generally more innovative and/or more attuned to "newest" innovations and idea's that come out.

This makes me think of the thread that we had on the open list last week about music. The older we get, the less we are attuned to modern (innovative?) music. We become entrenched in what we know and what impacted our lives growing up.

My theory is that the growth stage of our lives occurs during our teens, 20's and 30's. In our 40's we begin to transition into entrenched value stages and by our 50's (and one), we are value driven.

I think this applies to music and investing.

However, if we are smart (and I'd like to think we are…..at least some of the time), we inherently understand that "youth innovates and invents" and we want to be a part of that.

And since by the time we are in our 40's (and up) we have the money, we are the ones that the "youthful innovators and inventors" come to for cash to fund their ventures. And if we missed the Angel/VC and even IPO stage, we'll still invest a portion of our portfolio's with them to harness their vision……and recapture some of our own lost youthful vigor and insight.

Kim Zussman adds: 

Perhaps this wasn't the case before Microsoft (Apple, Google, Facebook, etc) showed that young computer mavens could hit it big, and that nerds will rule the world. People who came of age in the PC era.

Weren't the big success stories pre-1980's stodgier companies?

Scott Brooks writes: 

Wouldn't it be fair to say that GM, Ford, IBM, were the growth and innovative companies of the Henry Ford and Bob Hope Generations?

IMHO, every generation has their MSFT or AAPL, or GOOG……it's just that by the time we know about them (we being the next generation), they've become value companies.

The car companies and airline companies of our parents generation were the equivalent to the computer companies of our generation.

Pitt T. Maner III adds: 

 One would think that the influence of youth is increasing due to the higher use of the internet by the over 50 crowd (which includes me).

1. "Baby Boomers Driving Technology Wave":

'What explains the rapid pick-up of tech tools among the older crowd? "The younger investor is usually an influencer towards their parents in terms of technology," says Ryan by email.

The numbers dovetail findings by the Pew Research Center's Internet & American Life Project that more than half of adults 65 and older are online today. They're flocking to YouTube, social networks and shopping sites—while also growing more comfortable using banking and other financial services online. They form a surprisingly active demographic for Facebook, where 57% of those 50 to 64 are on the social network, according to Pew.'

So you might look at who are the main internet influencers with respect to individual stocks and the stock market and older internet users. For instance Cramer appears to have a fair amount of online "clout" with respect to stock selection as might several others on CNBC.

2. There are many companies trying to figure out and somewhat quantify who the influencers are– such as Klout.

3. This is a recent paper on the influence of the collective mood state on Twitter with respect to the market.

Behavioral economics tells us that emotions can profoundly affect individual behavior and decision-making. Does this also apply to societies at large, i.e., can societies experience mood states that affect their collective decision making? By extension is the public mood correlated or even predictive of economic indicators? Here we investigate whether measurements of collective mood states derived from large-scale Twitter feeds are correlated to the value of the Dow Jones Industrial Average (DJIA) over time. We analyze the text content of daily Twitter feeds by two mood tracking tools, namely OpinionFinder that measures positive vs. negative mood and Google-Profile of Mood States (GPOMS) that measures mood in terms of 6 dimensions (Calm, Alert, Sure, Vital, Kind, and Happy). We cross-validate the resulting mood time series by comparing their ability to detect the public's response to the presidential election and Thanksgiving day in 2008. A Granger causality analysis and a Self-Organizing Fuzzy Neural Network are then used to investigate the hypothesis that public mood states, as measured by the OpinionFinder and GPOMS mood time series, are predictive of changes in DJIA closing values. Our results indicate that the accuracy of DJIA predictions can be significantly improved by the inclusion of specific public mood dimensions but not others. We find an accuracy of 87.6% in predicting the daily up and down changes in the closing values of the DJIA and a reduction of the Mean Average Percentage Error by more than 6%.

4. That reminds me of these websites

tickertweets

Marketpsych

avoiding the herd

5. This influence effect on the older investor might have to be considered with respect to the depressing findings asserted by this research:

"Examining the economic costs of aging, we find that older investors earn about 3-5% lower annual return on a risk-adjusted basis. Collectively, our evidence indicates that older investors' portfolio choices reflect greater knowledge about investing but their investment skill deteriorates with age due to the adverse effects of cognitive aging."

David Lillienfeld writes: 

And the problem is that it's unclear that there's any company to take over the place of MSFT, AAPL or GOOG besides AMZN, which can't seem to earn any money (real profit, not just revenues). I had hoped that my now, there would be some suggestion of which companies those may be, but I'm not seeing them.

Scott Brooks writes: 

You could have said almost the same thing about railroads…..then came big steel.

You could have said almost the same thing about big steel….and then came GM.

You could have said almost the same thing about GM…..and then came IBM.

You could have said almost the same thing about IBM…..and then came MSFT.

You could have said almost the same thing about MSFT…..and then came GOOG.

You could have said almost about GOOG…..and then came……?

You have successful well run companies that create cash flow and then use that cash flow and credit to buy up smaller (other) companies….and become dominate.

Isn't that just the way the eternal business cycle works?

Isn't that really just the way of mankind and government?

Sep

19

 Can anyone explain to me why counting matters anymore?

I asking seriously and without disrespect.

How can one "count" for what happened today? Is there some sort of "the market is up 37 out of the last 42 full moons" question/equation that would lend one to believe that the the 2 pm rocketing of the market was going to occur?

Maybe there's some other form of analysis that we can do to have an edge?

What about fundamental analysis?

What about technical analysis?

What about astrology?

Palm reading?

Maybe I should convert Scientology and see if the Thetans give me any insights?

I firmly believe that the government (and let's be not pretend that the Fed is not the government) and politics are driving 98% of what happens in the markets now.

This is a BS market.

Ralph Vince writes: 

It's a GREAT market.

At the risk of being a blasphemer, my interest in market analysis is an academic one. My implementation, devoid of my personal academic failings. That is……buy low, sell high, and at the same time, sell high something else, to buy it back lower.

You should never have a move like this go by without taking a profit on something.

Yeah, I take a lot of disparagement over my bullish stance on the markets here, as I do thinking the Miami Dolphins will be Super Bowl Champs this year. I have no skins in either game you see.

Gary Rogan writes: 

If you invest long-term in good companies you don't have to be hurt and/or left out of the steady progress of the market regardless of any of this.

If you enjoy this n-dimensional game of chess than you should be like the Palindrome: smart, totally cynical and totally connected.

Ralph Vince responds: 

Gary,

But the premise of buy and stay long HAS worked only because we have been in a bull market since forever. Every high of the past couple hundred years has been exceeded — long term bull market (for whatever reason).

That is a bet on that continuing.

Gary Rogan replies: 

Ralph, but didn't Victor publish some whole-world stock data from Dimson, I believe it was, that showed steady progress? Isn't it the expectation for the previous highs to be eventually exceeded simply from the nature of the beast and not being a a "hundred year long bull market"?

There are really only three risks for a diversified stock portfolio:

-Geographical concentration risk (including where the owner lives so that he can actually access his money if it hits the fan)
-Unprecedented worldwide collapse
-The future being TOTALLY different from the past in this area

Otherwise it's steady progress all the way to infinity.

The three risks are unquantifiable, but seem better than being able to outwit the flexions day-to-day.

You pays your money and you takes your chances.

Ralph Vince adds: 

The thing is, this isn't a big move up.

When the rain comes, it washes everything away in a hurry. Weeks worth of advance vanishes in minutes.

I don't recall, in my lifetime, a setup for liquidity disasters like we have under us here, and when this goes, it will vindicate any shorts you can hang onto.

Gary Rogan writes: 

Ralph, why would all this extra liquidity resolve itself by the stock market collapsing in a spectacular fashion as opposed to say (1) Sudden high inflation perhaps followed by hyperinflation of the economy improves, and the stock market losing value in inflation adjusted, but not absolute terms (2) Or a multi-year stagflation period with the economy not doing well in some middling fashion and with the stock market slowly drifting down or simply not rising (3) Given that we will have this extra liquidity for quite some time now, evidently, based on the recent Fed personnel developments and Ben's short term and new-found caution, a liquidity withdrawal quite a few years from now, making any shorts in the meantime unfeasible, even if there is an eventual collapse?

I really have no idea what will happen if there is a bond vigilante battle royale against the Fed and it's printing press, and clearly bonds cannot be a GREAT investment at this point, but how can you be even reasonably certain that there will be a stock market collapse unless there is an overall economic collapse (which is reasonably likely, but will make profiting from the shorts a moot point)?

Mr. Kris Rock comments: 

Counting is a discipline…like belonging to the mormon church is a discipline…

Ralph Vince writes: 

I think people look for "causes" (du jour) to explain market moves. Right now, the story is QE, and it sounds plausible, but the story always sounds plausible, but it is always a very, very specious causation there.

We're talking about equities. Puffs of smoke that only have value because people day they do, right now, that the value is X. And that is only because they don;t have something shiny elsewhere to put their money. Equities are an easy place to park money.

But they have the same value as puffs of smoke, and when we forget that, the market has a cruel way of reminding us.

Gary Rogan adds: 

The future is fundamentally unpredictable: no amount of past experimentation or data can preclude some fundamental parameter of the system changing and invalidating all the statistical evidence. We don't seem to have a choice in having to rely on the past to the extent that we understand it and extrapolating in the future. But what if a parameter like the unprecedented rise of the national debt in peacetime or the rise of socialism or the changing demographics flips the long term growth rates in profits? Or the reduction in de facto property rights or the rise of flexionism make it impossible to realize gains? I don't think there is an answer other than overall we have evolved to take the past as a consideration for the future, so we might as well stick with it for the lack of a better alternative watching out for the changes in the parameters where we do understand the causal relationships as well as (and particularly so) for contradictions.

Aug

12

 The system for selling life insurance seems kind of multi-level to me.

Around here there are a bunch of reps that sell Northwestern Mutual, which may be the highest rated life insurer. When you go the websites of those reps, what you see is not promotions of life insurance but rather promotions for starting a career in selling life insurance.

Scott Brooks writes: 

That's how many life insurance companies do their marketing. Prospecting by hiring..

Put out mass hiring notices, bring people in, hire the ones that can fog a mirror. Promise to reimburse them for licensing and promise training.

The first step of training…..take this memory jogger and make a list of 25 (50, 100…as many as you can get) people that you know. Now, we'll prioritize them by your relationship with them (i.e. who will take your call and meet with you if you request a meeting).

You manager will go with you to these meetings. You will watch him give the pitch (that is your training). If you're lucky, he will help you get some referrals.

But more than likely, they are going to churn and burn thru your warm market and then move on to the next guy.

anonymous writes:

When I was fresh out of college and trying to decide what to do with myself despite a science degree, I got wind of some company called Primerica offering interviews in the area. I decided to go in and find out more despite me being the farthest thing from a natural salesperson you can find. I am not extroverted, and don't enjoy the jibber jabber of the sales game. Nevertheless, I decided to keep my mind open and give it a shot. I figured the worst that would happen is that I would waste some of my time. Red flags were going off in my mind during the interview, as to Scott's point, I was not getting the feeling there was much screening going on, breathing was probably enough. Even at that age, I was used to tough interviews, and while I was proud of my academic background and credentials, I didn't get the feeling it mattered one bit. Instead of having the good sense to walk out right there and call it a day, I let him pitch me on how successful he and the organization were, and how I could be too! I had to put together a list of names of people who I might be able to get to attend a pitch meeting for term life combined with a family of mutual funds or some such (this was pre ETF days) self managed instead of the "whole life" thing. I was unwilling to provide a large list but I did start with a few. By the time I had gone to two of the people's homes with my "manager" and uncomfortably tried to pitch them life insurance, feeling bad about it the entire time, I had almost had enough. The topper was a regional sales meeting I went to that can only be described as a cult gathering. I said my goodbyes at that point and moved on to greener pastures. Ironically, when I went to pitch one of my family friends the life insurance, he only agreed to hear it out if I agreed to sit through some MLM nutritional scheme he was hawking (can't be 100% sure it was Herbalife as this was years ago, but I suspect it was). I get a laugh out of that thinking back.

I guess someone at the top continues to make money off these schemes, as I have been out of college quite a while now, and I still see Primerica, Herbalife, and other MLMs (for lack of the other word that is coming to mind) in existence.

Scott Brooks replies:

I actually got my start with Primerica (it was called "A. L. Williams" back in 1987 when I was introduced to it).

Anonymous is right, there is a bit of a cult following…..quite a bit depending on the organization you are in.

I have to admit that I got VERY LUCKY with my upline. He was a good man and a good salesmen. He took my 22 year old butt under his wing and taught me how to properly sell, properly close and how to get referrals.

So yes, I started out by making a list of people that I knew and taking my manager to see them, but it worked out well for me….but I was, by far, the exception to the rule.

I recall that my manager gave me a VHS tape and said that this was the presentation training. Take it home along with the presentation flip chart and learn it.

He did the same with what was called the "Bob Safford 3rd Party Referral Close" VHS.

I took them home and sat in my parents living room watching those VHS tapes over and over and over. I recall we had one of those VHS players that had a remote control with a cord attached to it.

So I'd hit play, rewind, play, rewind, play rewind…..over and over and over. I'd write down exactly what the presenter/narrator said and then I'd practice over and over again until I could say the presentation perfectly. I would then practice on not just saying the words, but working on my voice inflection and body language….which leads me to my next point.

My manager also gave me sales books to read (i.e. Tom Hopkins "How to Master the Art of Selling"). And I read them.

I guess what I'm getting at is that I was extremely coach-able. If my upline told me to do something, I did it on steroids.

Now, I don't want to make it sound like my manager just gave me stuff to read and watch. He actually trained me and worked with me and let me pick his brain. He was a good guy and I'm very grateful to him for all the help he gave me to get me started.

It only took a month or two and I was the top salesmen in the office. I quickly moved up the ranks of A.L. Williams eventually becoming one of the youngest Senior Vice Presidents in the history of the company at the age of 24.

Now, don't get too excited about the SVP thing. It was based solely on sales and recruiting. So it wasn't a real position, it was more of a title.

But I quickly peaked at ALW. At age 24 I was done. Why? I quickly discovered that I didn't like "recruiting" people….I wasn't into the whole MLM thing. But most importantly, I figured out very quickly that even though ALW had decent products that they offered, there was no way I could truly do the best job for my clients with a limited amount of products and services to offer. I did like the financial aspect of the business and the prospect offering my clients more and better solutions.

So I tendered my resignation during the summer of 1989 and went out on my own and opened my own financial planning and investment practice with an independent regional BD.

And that's when my real education started. The next two years were the real school of hard knocks for me. I didn't have any kind of a real pedigree or Ivy League education (heck, I went to Southeast Mo. State U. and my degrees were in biology, chemistry and psychology with minors in physics and math…..no business or finance or anything).

I had to figure out how to do it on my own. I had get out and hustle. I had find prospects and get referrals, mail out referral letters and get on the phone to call the people I mailed letters to 3 days later.

My goal was to get ~ 12-15 referral letters per client (I was really good at getting referrals). From those referral letters, my goal was to get 4-6 appointments and close 1 1/2 - 2 sales.

It was a rough life but it was profitable and I made a decent living. But after 5 or so years of doing that, I figured there had to be a better way….and that's when I started to plan for a transition from commissions to fees…..and process that took me several years to accomplish. But that's a whole different story….one I might write about someday if anyone is interested in hearing about it.

A commenter writes: 

I think it would be fascinating to hear the story in your last bullet. A key thing in business is finding mutual benefit in folks respective contact books. With the six degrees of separation being probably more like two or three in the specific 'sub sector' you're interested in, getting positive "referrals" is key. But, normally, there is a social limit on how much you can share back and forth. So 12-15 referrals is pretty amazing… what was your secret?

Jun

24

Isn't it likely that anything like the current level of prices will cause a slowdown in the economy and soon we will be hearing that the tapering is not imminent?

Anatoly Veltman writes: 

I assume energy prices are meant. Maybe food, too? Any other, "input" prices?

And my second question: ok, suppose "we will be hearing that the tapering is not imminent". Will it necessarily sustain record equity prices? What about cyclical fluctuations? What about economic realities? Will stocks always necessarily go up (from ANY level) due to Fed "hopes" alone? What about fiscal issues around the world? What about geo-political strains? What about currency wars? What about old fashion profit-taking, correction…

Again, the chart looks eerily like 1987 - when a drop of historic proportions proved to be a mere correction

I think the most dangerous for the market situation will arise precisely as described by the Chair: that participants will be given more Fed "hopium"; and we'll get a lot more of them in for the wrong reason and at the wrong levels.

Ralph Vince writes: 

Vic,

Don't you think that depends on the pace of events though here, doesn't it?

Conceivably, things can fall off very, very rapidly given the political backdrop right now and the history of anemic real GDP growth leading as a reliable prelude to recession (and the fact that YoY real GDP has seen successively lower troughs since 1980, the stage is certainly set for a rapid descent). And if the jawboning (which is likely priced in already) doesn't provide the support it is thought to?

A commenter adds: 

A Fed official has already bandied this idea in the media. On Friday Bullard said that the pace and duration of QE will respond to market conditions.

Gary Rogan writes: 

The costs of the rising rates are already hitting the mortgage refinancing market severely and may soon derail the housing recovery. The cost to the Treasury of higher interest payments and the lack of the profit rebates from the Fed would be enormous, while simultaneously increasing outlays for unemployment and food stamps if the Fed causes a recession. The recovery is tepid and not self-sustaining. Also getting to 6.5% unemployment is a long way off.

It seems likely that the Fed saw a stock bubble building and decided to puncture it. When the first downtrend after the initial attempt started to reverse itself, Ben jawboned some more. He probably has a target level in mind, but he can't afford to to let the rates rise too much so it's a balancing act. What may be best from his perspective is a stock market crash followed by a quick rhetoric reversal from him and perhaps even more QE to lower the rates. He needs to have stocks and bonds to move in the opposite direction by any means necessary.

Scott Brooks writes: 

IMHO, there is no amount of stimulus that ward off the coming demographic shift that is occurring in America as well as most of the rest of the developed world.

In America, the final wave (the 3rd wave) of the baby boomers have exceeded their peak spending years and are refocusing their money. Generation X is not yet ready (nor do they have the numbers) to replace the spending of the baby boomers.

Spending is one of the biggest (if not the biggest) driver of our economy. Spending peaks at about age 47/48.

If one were to look at an immigration adjusted birth index, one would clearly see that the baby boom peaked in 1961 then leveled out (with an ever so slight increase increase) thru early 1964 and then off precipitously after that. Add 48 to 1964 and you get 2012.

Spending will decrease for the boomers. The big index companies that sell to the boomers will see their profits further erode. The secular bear that started in 2000 will continue on for several more years.

It will be a traders market with several bear market rallies and opportunities to make money on the short side. I predict higher than normal volatility.

Old "buy and hold" dinosaurs like myself will have to adjust our portfolios and be more nimble. It will be a great opportunity for the day traders and option/future traders of this list to make profits (that is if you profit off volatility). Smaller more diversified positions, low leverage (you don't want to get burned by big moves in volatility), and hedging will be the hallmarks of the day. The long only crowd may experience more pain they are accustomed too, unless the volatility increases the premiums enough on OTM puts that it makes them worthwhile to sell without getting burned on the downside.

Although the potential exists, I don't see big moves down (like 1987)….I see more of a slow bleed like we saw in 00/01/02.

The combination of statist entitlements based on unrealistic assumptions are going to put excessive pressure on governments to deliver on their promises. The same pressure is going to be put on private pensions, many of which are currently underfunded.

This won't last forever, though. Things will get better. Watch demographic tables for those countries which see their demographic start to move positively and buy there when demographics make their positive move. Don't look at typical "index stock" type companies though. When demographic changes take place and the younger generation starts to move into power, they will innovate. Look at smaller companies for profits.

Of course, I've been wrong many times before so it may be best disregard everything I've said.

Ed Stewart asks: 

Scott, where do productivity increases fit into this type pf analysis? After all, isn't this what boosts living standards over the long run? Rather than think in money terms, what about the creation of real goods and services that improve lives.

If it is just "spending" that is needed, they could just poof cash into everyone's bank account in the same way that today they "poof" cash into the QE programs.

Scott Brooks replies:

Ed, it's more than just spending that drives any economy. Innovations that improve productivity do play a role.

As to real goods and services and improving lives…..I am very excited about that. Difficult times are often the fertilizer needed to cause innovation. As one generation (the baby boomers) moves off into the sunset of their lives, the next generation (GenX) moves into power and gets to apply their new ideas and innovations.

Each generation builds on the work of the last….and even comes up with brand new ideas along the way.

We saw it happen from 1968 - 82, 1929 - 48 (with a hiccup due to the war), and I could go back even further. Generation shifts occur and we are in one now.

Carder Dimitroff writes:

Your argument makes sense. Unfortunately, this is not how the system has been working. Worse, those advocating for the good 'ol days do not realize they are asking for more government guarantees, a la Solyndra.

Utilities love these guarantees. Given the choice of free markets or government controls, utilities pick government controls every time.

Look at the southeastern states. They had several opportunities to create a free market, called "Grid South." They rejected that idea, preferring instead to remain centrally planned by comrades in state utility commissions.

Almost two decades ago, liberal states began implementing free-market systems for New England to Virginia and all points in between. Soon after, California jumped in. Late to the game was the Midwest. Even later was Texas. Of course, utilities operating in these states were not pleased when their generating assets exit the state's rate base.

It gets better. For decades, gas and electric utilities operated a "cost-plus" enterprise. From time to time, utilities would visit their regulators, present their [prudently acquired] costs, seek an adjusted rate to recover those costs and then asked for a modest margin.

It's like milking your neighbor's cow.

May

31

 For the most part on this site, we discuss the big picture and large important markets. We discuss their stats, their trends and their probabilities.

By focusing only on these large markets (usually indexes and their derivatives) we can lose sight of the smaller markets and often we forget those markets even exist.

By focusing only the large, we not only miss out on "alternative" opportunities, we miss out excitement and ready made profits.

Therefore, I would like to point out to the list some alternative markets in baseball.

As I'm sure everyone on this knows, there are really only 3 teams in baseball. The Yankees, Red Sox and Orioles which trade in the AL East market. The Trinity of Baseball, if you will.

Now, most people who follow these team know that there are also at least two other teams in called the Devil Rays and Blue Jays. This is known because every once in a while, either the Yankees, Red Sox or Orioles has to play one of these teams. Of course, there are "lesser markets out there that occasionally pop up and as a result the only three teams that really exist have to go trade (errrr….I mean…..play) in those markets as well.

Many of the anointed traders (fans) might be confused by these other markets, and not only not know anything about them, but may not even be sure they really exist. Because, they are in what Dr. Zaius refers to as "The Forbidden Zone", or as some of our anointed betters refer to it: Fly over country.

These alternative markets are commonly referred to as the AL West and the AL Central.

Now, I need you all to buckle up because I'm gonna tell you all something that will rock you at the core of your belief system. I'm gonna challenge your belief in the existence of the Trinity. For even beyond the rumors you hear of the AL Central and the AL West and the almost credible reports of citings you hear about teams existing in "The Forbidden Zone", I am going to tell you that even more than you can imagine is in the Forbidden Zone…..

You see, a little know alternative market actually does exist. It is called "The National League"….I know, I know, stay with me here. I hear your gasp and your cries of "HERESY, HERESY". But if you will stay with me, I will lead you closer to the truth.

You see, there is market out there right now that you can trade in that will bring you much pleasure. It is market based on teams that are built on fundamentals, coaching and training in the minors.

You see, not all teams are bought on the free agent market. Some teams have only a fraction of the budgets that the Trinity of Baseball has.

And these teams are doing quite well right now.

For instance, if you were to google "MLB NL Central", you would find that there are three teams that dominating. And the third best of those teams, as of yesterday, would be in FIRST PLACE in every other division in MLB.

One of those teams, a mid-market team, has a long storied history of success. A history of growing their talent internally on the farm, and making wise free agent acquisitions to lead the nucleus of home grown talent. They are so good at this, that they have won the second most championships in the history of the game, second only to the head of the Trinity, the Yankees.

And if one were to compare the money spent in reference to winning championships, the Yankees aren't even a close second to this team.

What team am I talking about?

Well, the St. Louis Cardinals, of course.

Now, I know that many of your may not know about this market, let alone have ever even bothered trading in it (or following it).

But this is a market that is worth following as there are many life and trading lessons associated with how this market works, how the team works and how they consistently build championships teams and teams that contend year after year after year.

Throw away your belief system realize that great teams are not spontaneously bought and magically appear over a few days. The late George Steinbrenner may put together championship teams in 7 Days, but there are a lot of teams out there, like the St. Louis Cardinals, that grow their teams over time….teams that evolve into Champions.

And that is your snarky lesson for the day.

One of those teams, a mid-market team, has a long storied history of success. A history of growing their talent internally on the farm, and making wise free agent acquisitions to lead the nucleus of home grown talent. They are so good at this, that they have won the second most championships in the history of the game, second only to the head of the Trinity, the Yankees.

And if one were to compare the money spent in reference to winning championships, the Yankess aren't even a close second to this team.

What team am I talking about?

Well, the St. Louis Cardinals, of course.

Now, I know that many of your may not know about this market, let alone have ever even bothered trading in it (or following it).

But this is a market that is worth following as there are many life and trading lessons associated with how this market works, how the team works and how they consistently build championships teams and teams that contend year after year after year.

Throw away your belief system realize that great teams are not spontaneosly bought and magically appear over a few days. The late George Steinbrenner may put together championship teams in 7 Days, but there are a lot of teams out there, like the St. Louis Cardinals, that grow their teams over time….teams that evolve into Champions.

And that is your snarky lesson for the day.

Jeff Watson adds:

Gibson, 1968, greatest season of pitching in baseball? What about 1968 when Denny McClain won 30 games? Who's done that since?

May

21

David, you are obviously much more knowledgeable about the game of baseball than I, so I'd like to ask your opinion on Gibson and Koufax.

How do you think they would have fared in today's modern game and how would they have been used by their teams?

David Lilienfeld writes:

Thank you, but I doubt the premise of your question is true. Gibson and Koufax would likely still anchor their respective teams, but neither would likely get more than 25, maybe 26 starts, tops. I doubt that their arms would have been as strong–they wouldn't have developed to be, they would also throw only 100-110 pitches/game (sorry, having seen the great Orioles pitching staff of the late 1960s/early 1970s, I'm a big believer in strong arms that throw complete games). Their control would continue to have been outstanding. The thing about both Gibson and Koufax is that they pitched enough innings and in enough games that when they got tired and they knew the bullpen staff was pitched out arm sore, they would suck it up and make a go of it. They would change their set-ups, mix-up pitches more and so on. But a pitcher can only be that mature if given the opportunity to play–and that's something verboten today. So while both of these folks would have excelled, I doubt they would have been the dominant forces that they were in their day.

Take a look at their records, or throw in Jim Palmer and Denny McLain too, if you want. They routinely pitched more than 270 innings–good seasons and bad. It wasn't until Koufax started throwing more than 220 or so innings that he came into his own. Heck, even in his last season, when his elbow had been so threaded by arthritis that he needed to soak it in ice for 2 hours after each game, he threw 27 complete games. I guess you could say that his career would have lasted longer if he hadn't pitched as much as he did–except that that's how he found his groove.

It's not as though this was something that characterized only the greats of the day. Jim Kaat started 42 games one season–and he played for more than two decades. Never mind that he won 280 games and was never elected to the HoF. Take a look at Steve Carlton. These guys were good, sure, but I think that, like Koufax, part of their greatness was that they were worked hard.

I'm sure there are those on this list who will say everything's fine with how pitching staffs are managed today, that I'm a dinosaur for taking such a risk with someone's arm to let them pitch so many innings, start so many games–that that experiences really isn't necessary for pitching excellence, never mind greatness along the likes of Koufax and Gibson. Much as I think the days of someone as competitive as Frank Robinson are passed, so too are the days of the dominant pitcher. Consider Jim Lonborg, who pitched more than 270 innings in his CYA year (1967). During the World Series, he pitched game 7 on two days rest. Two days! Would any manager even think of doing that today? I doubt. it. I could hear the players union rep going to court about it violating some contract clause. His wife might complain that he's being asked to do the impossible–3 days rest is pushing it as it is. Nope, the days of the strong pitcher are done.

Koufax and Gibson: we likely won't see their likes again anytime soon. Probably not in my lifetime, at least. And I doubt that if they came up today, they wouldn't be nearly as dominant, good as they might be. They would never be given the chance in the first place. It's almost five decades since Koufax retired, and people still talk about the devastating Koufax curve. The same is true of Gibson and his fastball. You need someone with the insights of a Branch Rickey to go back to the four man rotation that produced a Koufax, a Gibson. Do you see a Branch Rickey around? Me neither.

All of which may not be surprising. 100 pitches isn't very many, after all.

(Sorry for the long-winded answer, but pitch counts are a tender topic for me. I don't like coddled arms–just a sign of a pussy-wussy approach to managing the bull pen.)

Stefan Jovanovich comments:

Koufax and Gibson would most certainly be stars no but so would Bob Feller and Christy Mathewson (Tom Glavine as a right-hander). What has changed in baseball is that starters can't start at 80% and then work up to full capacity the way they did in the good old days. Matt Cain's innings pitched have matched the old timers but what he and other top-line starters have painfully discovered is that they now have to pitch the first and second innings with intensity. The technology revolution has allowed all hitters to diagnose their own swings and pitchers deliveries the way only a genius like Ted Williams once could do with only his own eyes. Felipe Alou sat down with his son Moises when the Giants got their first screen analyzer; his comment was "I never understood my own swing". The pitch count is stupid because it is a hopelessly crude metric. 75 pitches at Coors is a solid performance; at AT&T the same effort should produce 95-100. But no one now can go as long as pitchers once did; hitters aided by video study won't let them.

http://en.wikipedia.org/wiki/Felipe_Alou

David Lilienfeld replies:

Respectfully, Cain doesn't have the innings pitched numbers of past cohorts. And I disagree on the "new" need for intensity. You don't pitch an ERA of 1.1 without that same intensity, and while analysis of one's swing is helpful, pitch selection is moreso. You could have an optimal swing, you still couldn't hit a Koufax curve. Palmer's slider wasn't quite so devastating, but if he was on his game, it didn't much matter how good a hitter you were, you weren't going to hit the ball.

The thinking these days seems to be that with all the money being paid to pitchers, no one wants to risk an injured arm from over use (!). Hence the five man rotation.

Maybe we're just going to have to agree to disagree.

May

15

 One has to admit that Smith is the perfect exemplar of the regression fallacy with the luck being ephemeral and the skill a constant expectation. Whenever he plays and hits some lucky shots, the Knicks are sure to try to give it to him the next game and lose as the luck vanishes. What a terrible player he is, almost as bad as the other regression fallacy, Robinson, who at 4'10 likes to fight with all the bigs and is guaranteed to lose for Chicago. They should have special brands on people like that in Basketball and life so they could not cause continued damage. The forecaster who is hot is generally like that. The regression fallacy tintype should be distinguished from the useful idiot. People like Kaufman and "you know who" would be on this. I "got a little list".

Tyler Cowen writes:

I say Miami beats Memphis in six, which is OK for NBA ratings.

Smith simply isn't any good in the playoffs when others are playing real defense. The preferred model is that some individuals have zero or negative productivity in key situations.

Plus Jason Kidd woke up one morning and was 56 years old, all of a sudden.

Regards,

Tyler 

Scott Brooks writes: 

Looking at this strictly from the "what is best for the NBA" perspective:

What the NBA wants is a NY/Miami and OKC/SA semi-final.

Then a Miami/OKC final…..although SA would be alright too as they have Duncan. However, OKC has just a bit more star power right now, so I give OKC the edge.

And with all due respect to NY…….. Even though NY has the more attractive population base, Miami just has too much star power (and a pretty good population base).

A Memphis/Indiana final would be a disaster….but the good news is that even if Indy can get past NY (which is very possible), they ain't getting past Miami.

May

9

 Cicadas leave the depths below to mate on prime numbers every 13 or 17 years so as not to be eaten by predators with normal life cycles of 1 or 2 or 3 years. One wonders whether other living things in nature have such prime cycles. The market has prime cycles. It likes to do overnight what a person that has to sleep can not take advantage of. If it's down big one night, and you cant sell a position, then it knows you can't stay up the next day or two, so it will go up to let others but not you get out of the position the next day. The idea can be generalized one thinks. 

Scott Brooks writes: 

Another thing to consider is the confluence of cycles leading great highs or great lows.

The year was 1998 (give or take a year or two) in MO. We saw the normal group of Cicadas make their appearance as always in the summer. But that year, we saw something that we only see once or twice a century. We saw all the groups of Cicadas make their appearance at once.

I remember the normal soothing sound that I fell asleep to at night as a child become a constant irritating and often uncomfortable non-stop drone of Cicadas looking for love.

My backyard was often a fog of Cicadas flying through the air. The carcasses littered the ground and the trees. It became almost impossible to even walk a short distance outside with several Cicadas landing on you. Of course, they were harmless, but that didn't matter. It was a little freaky to know that you were surrounded by millions upon millions of Cicadas many of whom just wanted a place and decided to make you that place.

Although I didn't try it, I'm sure that if I were to have stood perfectly still out in the yard for any length of time, I would have had dozens, if not hundreds of Cicadas covering my body.

I had never seen anything like it in my life before. It was as though the world had become a horror movie with Cicadas starring as the monster that ate the Midwest.

I have lived through Cicadas' highs and lows. I believe I prefer the normal years, when their population is steady and stable and they lull you to sleep at night with melodic song.

Pitt T. Maner III adds:

You have to wonder what the collateral, human irritation effects will be this time with the billions emerging from Brood II. More crime? More accidents? People who are even more sleep deprived than normal? An increase in the sale of ear plugs? Might be interesting to look back for things possibly associated/correlated with the 17-year cicada cycle (1996, 1979, 1962, … etc.)

"US Braces for Billions of Cicadas" :

"The insects, though harmless, are considered a nuisance both for their size and sheer numbers, not to mention the noise pollution that has been measured at up to 94 decibels, loud enough to drown out the sound of overhead planes according to the Associated Press."

(but they do have a couple of positive effects):

"Additional effects linked to the cicada mating swarms include higher yield for fruit trees, beneficial tree pruning, as well as an increase in bird populations."

 Oh, and by the way:

From the Dept. of Stork/Baby statistics.

Who knew there is a "cicada market theory"? If only some of the critters could make it into the city!:

1) "The Wall Street Cicada Index"

"The large insects — which emerge every 17 years — turn out to be great news for the market. During years when the critters appeared — going back to 1928 — stocks posted an average annual gain of nearly 21%, roughly double their historical average. That's a far better track record than most active mutual fund managers enjoy, the majority of whom tend to lag the market average over time." and 'Standard & Poor's market-data guru Howard Silverblatt agrees. When MarketWatch called to sound him out this morning, it turned out he'd already thought to check out the cicada market theory and had been pleasantly surprised by the results. Of course, that doesn't mean he's rushing to buy. Just like when we gaze at the stars or tea leaves, it's easy to read too much into stock market returns, he warns. "You can prove anything you want," he says. "Start with your answer, and I have the data to prove it."'

2) But the "flash crash" of May 1962 would have occurred during a cicada emergence too.

Mar

27

Lives there not one spec here                                                 
whose profits have caused all hope to disappear                                 
who's meager talents and frailty                                               
would not qualify him for disability

Here are some good definitions on the 54 million American with disability.

David Lilienfeld writes: 

That's an ADL-based definition, and includes persons with Alzheimers, Parkinsons, and several other conditions–including osteoarthritis, which is prevalent among those of us over 50.

Scott Brooks writes:

Still, that's 17.25% of the population. That's 1 in 5.8 people on disability. That number should give even an ardent liberal like David pause.

We have over 15% of American's on food stamps (of which many are both on disability and food stamps).

We have 40 million on SS.

How many taking Section 8 housing? How many others "entitlements" are we paying out?

TBTF bailouts.

How many government programs can even an ardent liberal find in the budget and say, "the government shouldn't be doing that"? I'll bet there's more than a few.

Let's start a contest and all throw $100 into a pot. The winner is the person who correctly identifies the "straw that broke the camels back".

Stefan Jovanovich writes: 

David's liberalism is to be treasured. Liberals have been the people who — throughout American history — got the rest of us to admit that the country had a problem. The difficulty is with their command and control solutions — public education, for example. Penitentiaries (thx friends), planning for land use, minimum wage and child labor laws, drug laws — the list of foolish solutions is endless. (I am not saying these are David's). The "welfare" problem is real — there are tens of millions of adults who are too slow sick or stupid to be profitably employed. That is the problem; what we constitutionalists have to do is find a solution. Offering up the market is a good way to begin the diagnosis but by itself it is the same kind of malpractice that had doctors blaming ulcers on their patients behaviors.

Russ Sears writes: 

Rather than disability a better definition would be unrecoverability. What spec still here has not had their dreams shattered more than once and has not, after some soul searching, found the strength to get up and learn from it.

Frankly, hope is fickle, fleeting, but it only appears to be extinguished. After a few hard runs in the woods and a few days time, hope has always reappeared and shown a path to turning the pain into greater future strength. Not that the path shown is ever easy or sure, but it has always reappeared, sometimes 360 degrees from the path I thought was the way previously.

Running has taught me that training is mastering recovery. 

Jeff Watson writes: 

And right away, getting back up on the horse after he's bucked you and cracked a couple of ribs is very important. Or, when you are surfing in huge waves, wipe out, break your board, and suffer a three wave hold down and nearly die, grab another board and paddle right back out….who knows you might get the ride of your life.

Mar

25

 Check out this picture of my deck …and the snow is still coming down!

The ground is already highly saturated. This is a heavy wet snow, and it's still coming down. They expect it will snow continuously until early Tuesday morning (3/26/2013). If our deep soil moisture and water tables are not completely filled up yet, they almost certainly will be after this snow.

And to think…..the spring rains really haven't even started yet. Any "upstream" land that drains into the Mississippi, Missouri, Illinois or Meramec Rivers is going to pass through St. Louis and other agricultural parts of the Midwest. If that land "upstream" from here get's a lot of moisture, we could be in for some real flooding.

I'm not a weatherman and I'm not making any predictions, but this sure smacks of 1993 to me.

Mar

22

 I thought the group might enjoy reading the 1879 classic of Political Economy: "Progress and Poverty" by Henry George. 

Stefan Jovanovich writes: 

Scott and I seem to be in permanent disagreement. Henry George got all the publicity, but Terence Powderly is the important figure. He was the "mainstream" figure whose doctrine of producerism, now completely forgotten — was the essence of American political thinking in the years before WW I. Unlike George and the other neo-Socialists Powderly had equal scorn for government-protected financial capital, large, politically connected institutions and the underclass, including illegal immigrants. It is no surprise that the Ohio Republicans - Grant, Sherman, McKinley - were in complete agreement with such a "radical".

As a labor union organizer Powderly was wise enough to understand that strikes were stupid and that there had to be 1 Big Union. He knew that, as soon as labor organizing became a matter of craft guilds, the unions would spend their time fighting with each other over the already organized workers rather than trying to organize new ones. (The historiy of the AFL-CIO more than confirms this.) Powderly also opposed the doctrine of last hired first fired; he knew that such seniority rules would destroy enterprise and, therefore, destroy the unions themselves. Worst of all, from the point of view of modern enlightened opinion - both liberal and libertarian — Powderly had the common sense to know that tariffs (but not quotas) and immigration limitations were the only certain ways that workers could use politics to raise everyone's wages. 

Scott Brooks writes:

Actually, Stefan and I are not in disagreement. I was not advocating for or against the work of Henry George. I was merely sharing with the list something that I thought would interesting and spur debate. 

Mar

20

 The following (copied from Mebane Faber) is so counterintuitive that it's worth considering. I don't think in these terms, and there could be outliers that explain the phenomenon. But (if they did the arithmetic correctly), it is what it is….

Source:

Should You Buy at New Lows? Or New Highs?

So we tested which strategy works better: Buying near 52-week lows… or buying at 52-week highs. We looked at nearly 100 years of weekly data on the S&P 500 Index, not counting dividends. You might be surprised at what we found… After the stock market hits a 52-week high, the compound annual gain over the next year is 9.6%.

That is a phenomenal outperformance over the long-term “buy and hold” return, which was 5.6% a year. On the flip side, buying when the stock market is at or near new lows leads to terrible performance over the next 12 months… Specifically, buying anytime stocks are within 6% of their 52-week lows leads to compound annual gain of 0%. That’s correct, no gain at all 12 months later. Using monthly data, our True Wealth Systems databases go back to 1791.

The results are similar… Buying at a 12-month high and holding for 12 months beats the return of buy-and-hold. And buying at a 12-month low and holding for a year does worse than buy-and-hold. Take a look… 1791 to 2012 All periods 4.3% New Highs 5.5% New Lows 0.9% The same holds true for a more recent time period, this time starting in 1950… 1950 to 2012 All periods 7.2% New Highs 8.5% New Lows 6.0% History’s verdict is clear… You’re much better off buying at new highs than at new lows. You might not agree with it… but it’s true.

Victor Niederhoffer writes: 

That's a shocking result. Heavily weighted one might think to the depression period and the 2008 period, and probably not taking into account durations from hitting the new lows. i.e. the 1st new low in a period or the tenth. Probably even more copacetic to the trend followers with individual stocks.this is how Rocky and I first met, but I don't think he remembered it. A loss of mine was reported in the papers and Rocky wrote to me to memorialize what a woeful idiot I am. I wrote back saying "You seem to take great pleasure in my losses et al". But as you know, you can never win a dispute with Rocky. Now we're friends again.

Scott Brooks writes: 

I have been privileged to buy the low and sell the high on multiple occasions. It's all those other darn trades in between that drag down my return.

I had a friend tell me once that there are 50 perfect days in a year….. a bluebird sky, cool temperature, perfect humidity, occasional slight breeze (you know the kind of day I'm referring too).

Most people make the mistake of living for those perfect days. The key to a great life is to make the best of the perfect days when they arrive. And the way you make the best out of those perfect days is to make the best of the other 315 less than perfect days per year.

It's about having a good positive attitude so you can make the best out of whatever you get. And they way you do that is through practice…..you practice and practice and practice…..until a positive attitude and making the best of things becomes habit.

So make the best out of our less than perfect trades, for they are the ones that are ultimately going to define you as a person and a professional.

Jim Sogi writes: 

Amen to what Scott says. In surfing you got to go on the crappy days so you are in good shape when the big waves come. You can't just wait, like many do, for those rare perfect days. Then they are so out of shape they can't make the drop and have no legs.

Alston Mabry writes: 

I'll assume the data for 1791-1950 is more troublesome, so let's just consider this result:

1950 to 2012

All periods 7.2%

New Highs 8.5%

New Lows 6.0%

The obvious question is: When do you sell?

Jordan Low writes: 

It seems that there is never a good time to sell. You can beat 6% by say investing in short term bonds. It has to be short enough for the turnover of the strategy, so say duration of less than 1Y.

Also, the new high strategy has not really worked since 2000 with the market risk-on/risk-off, so are we in a new "regime"? Or do I keep to the strategy and pray that I will end up ahead 60 years from now — i.e. not a repeated game, you get one dice roll!

Ed Stewart writes: 

I have noted that including historic t-bill rates or alternative short term rate benchmarks as an estimate for return while in cash dramatically alters the return of long term timing models. However, I am not sure if t-bill or similar has been a fair estimate of cash holding returns - I am sure others no much better than I do.

With regard to the article idea, It does seem to be the logic of a simple trend model - something like Long on first close in top X% of range 52 week range, Flat when close in bottom X% of 52 week range. A bunch of rule sets similar to this (some type of very long term trend indicator or look-back) seem to give similar results - and like was mentioned much of the benefit comes from missing a small number of significant market declines.

In other periods (like the 90's) the models can trigger whip-saws that would likely have frustrated many "believers" at that time into giving up on them - which of course means they would have missed the benefits that accrued since 2000.

In thinking about timing models, one real benefit is that they provide a framework for the panic instinct while including a signal to get back in. The problem with the public is that they can panic, become traumatized, then never get back in until years have passed (if ever). In other words, even if one is skeptical about the future performance of timing models, such models might be a useful tool if the realistic alternative is very poor money-weighted returns with a near certainty (rather than the theoretical return of buy and hold).

A commenter writes: 

 I take the view that when any sign is known to the market, it will start to disappear; and when it is no longer a sign, it will start to reappear.

I would think it applies to this case as well. The advantage of buying at market high is not news. When was it first exploited? Were the turtles first known to the public for doing this? In the 90'es?

But anyhow, I think a plot of the returns across the time span is more meaningful (and clearly more revealing) than the average. With that, I presume that we will see the advantage of buying at market high is diminishing in the recent decade. More meaningful I think would be how much it has diminished so that we can anticipate the future when it returns.

Russ Sears writes: 

I suspected that the results depended on the period looked at. Kim gave the 250 day period results. But what happens in other periods. I looked at the S&P index from 1950-2013, with cut-off dates determined by period's length. I defined it a "first new high" if there were X day high within X days. and looked at the next X days log normal returns.

5 day period
avg     0.14%    Stdev    2.18%
         count  avg next period      T
new low  1006   0.06%                (1.24)
New high 1004   0.29%                 2.14

25 day period
avg      0.71%   Stdev    4.77%
         count  avg next period      T
new low   208    0.99%                 0.85
New high  179    0.86%                 0.44

50 day period  
avg     1.40%   Stdev     6.75%
        count   avg next period      T
new low  100     1.16%                (0.36)
New high  96     0.87%                (0.78)

100 day period  
avg      2.78%  Stdev     9.67%
        count   avg next period      T
new low  44      3.69%               0.63
New high 35      4.51%               1.06

500 day period  
avg     13.42%  Stdev    21.96%
        count avg next period      T
new low    8      8.33%              (0.66)
New high   7      7.24%              (0.74)

Mar

20

 Margin Call is available on Netflix and has been available "On Demand" on various cable services.

I don't know how accurate the behind the scenes dramatization is of what happened, nor do I know if the sudden discovery amidst the layoffs is true, but I have to say that I found the movie fun and compelling to watch.

If you have some free time, I'd love to hear from those in the know just how accurate the movie is (or isn't).

I'm sure time frames have been collapsed as the movie takes place over ~ a 36 hour period of time, but if want to watch decent movie with pretty good acting, it's worth 107 minutes of your time to curl up with a bowl of popcorn and relax. You can rarely go wrong with a movie that includes Kevin Spacey, Jeremy Irons, Stanley Tucci, Paul Bettany, Demi Moore and few others.

For some reason, I enjoyed the performance of Simon Baker (The Mentalist). Although he had a small role, I liked his cool, cold matter of fact demeanor in the face of adversity.

I also enjoyed the subtle conflict between "good and evil" protracted by Irons and Spacey as they butted heads when the realization of the collapse of mortgage market was all too clear. The fight between going down with honor or going down with dishonor (a bucket load of cash) is interesting to observe.

The scapegoating, the back stabbing, and the "omission of facts" (some would call it lying), gives this movie a tasty flavor even though the truth may be embellished by Hollywood.

Mar

5

 I found this video fascinating and mesmerizing…….especially the ending.

Ralph Vince writes: 

"The intricacies of designing a proper portfolio can often balance on the weight of a feather."

There's a LOT in that statement. The generally-practiced mean-variance style portfolio constructions miss this point however — that a single component can readily offset all other components in the portoflio over time — even if that single component is profitable!

 

Jan

31

 Driving through the Owens Valley on a beautiful sunny clear day, the entire 150 mile stretch with 14000 peaks towering above showed the geological effects of immense glaciers that filled the entire valley during the past ice age. Ice could have been 3000 feet deep gouging up mountains. Even Mauna Kea in Hawaii has clear geological evidence of glaciers! The last ice age was as recent as 10-20,000 years ago and ice covered a large part of North America. Global warming is the end of the current ice age and has provided good weather and prosperity and the growth of civilization and the human race for 20,000 years. The reverse of global warming, namely cooling, is not an attractive alternative. Imagine if cooling began. It would mean summers with snow that did not melt lasting through destroying crops. 4 years of snow on the ground through summer would wipe out most of the world population. 4 years of 40 foot snow accumulation would erase most signs of civilization under a layer of ice. When Krakatoa went off in 1883 the ash plume circled the world and there was no summer in the US that year. Imagine the impact on gnp and the markets if cooling commenced. Its awful to imagine. So its a case of unintended consequences or be careful what you wish for should they figure out how to reverse global warming.

A commenter writes:

Cold weather crops like rye and barley would come back in vogue if we had an ice age which is not unthinkable. The zones for planting crops would change drastically. One would expect that researchers might do some genetic tinkering with corn, wheat, and soybeans, allowing them to flourish in a colder climate. Quite a number of scientists are predicting a Maunder Minimum at the end of this current solar cycle, which coincided with the "Little Ice Age.".

Steve Ellison writes: 

Quite a long time ago, I reviewed Evolutionary Catastrophes: The Science of Mass Extinction by Vincent Courtillot. Every one of the 7 mass extinction events identified by M. Courtillot was caused by global cooling. Therefore, I agree that global warming (which I see no reason to doubt) is the lesser evil.

David Lilienfeld writes: 

In the 1950s, 1960s, and 1970s, 1980s, and 1990s, the asbestos industry maintained that "there was reasonable disagreement" among scientists about asbestos as a cause of lung cancer; no asbestos-related regulations were needed. In the 1950s, 1960s, 1970s, and 1980s, the same was true of the tobacco industry for tobacco and lung cancer (and other sites, too). In the 1980s, 1990s, and last decade, many in the social conservative school of thought maintained that there was little evidence, or at least controversial evidence, about the role of human papilloma virus in the development of cervical cancer (I won't get into the matter of hand and neck cancer and HPV). In the 1960s, 1970s, and into the 1980s, the US salt industry insisted that the data linking consumed salt and hypertension were controversial and that no regulation of the salt content was needed. The argument against the consensus view holds only so long as additional data do not validate the view of that majority. With Copernicus, that was the case. It was the same with the role of bacteria in the development of peptic ulcers.

Absolute certainty and uniform conclusions by all members of the science community shouldn't be needed for policy formulation. If they were, then the Marlboro Man and Joe Camel would still be roaming the ranges and desserts of our television screens.

Ralph Vince comments: 

What a logical stretch David.

In the tobacco litigation, we found secret emails amongst the defendant employee's indicating a nefarious conspiracy to keep their methods and activities secret.

The East Anglia emails are similar in that regard.

I can tell you, from firsthand observation of the computer code that was in the email trove (because I have been writing code since the 70s, and I can tell you from examining someone's code what nationality they are, what mood they were in when they wrote it, and often what they had for breakfast). The code that was dumped was utterly damning to their cause. Not only does it show that the data does NOT sufficiently show that we are experiencing (anthropomorphic or not) temperature rises, but taints the issue because it raises the question of motive. We're left knowing that CO2 in the atmosphere has increased, a seeming understanding that this should have caused temperature rise, and the facts that do not comport to this, and as-yet no legitimate scientific reason (there are some theories, but that's all) to account for this.

Scott Brooks writes: 

I suggest that we look at the motives of the people involved in perpetuating what I believe is a giant con job.

Let's say the earth is warming. Is this a man made phenomena or is it just a normal cycle that the earth goes thru from time to time? Who stands to profit from these suggestions to stop global warming? Al Gore and his ilk?

Why do we trust these idiots in DC to make decisions that are common sense based and "special interest group" based?

If we start down this path that global warmists like yourself want us to go down, what happens when the earth keeps warming up (i.e. let's say it's really just a cycle the earth is going thru and not man made)…….what will happen then? Do you think the politicians will say, "Well, it's not mans fault. So let's roll back all the regulations", or do you think that they'll bloviate about how they need even more power to solve this horrible problem?

Why are you so willing to give more and more power to the government when they have a LONG history of abusing that power to their own selfish ends?

If you chose to go down that path, you will find people like me standing in your path actively trying to stop you.

Garrett Baldwin writes: 

I wasn't going to jump in on this, but I wanted to shadow something Scott said.

With regard to motives, pay attention to the way that the hearings and the solutions to solving this problem are handled. Some of us want the market to solve the problem. For example, let's say that the biggest threat in the world were something that is hard to measure, like the earth is running out of fresh air.

I'd argue that if that were a serious problem, a man would come a long and invent a machine to solve it. We'd rely on human ingenuity. We'd beat back that threat…

But the people who stand to profit through centralized alchemy only want to do it one way — their way. And any solution that is market based, creates competition, and doesn't enrich allies or decision makers or centralize more power with the government is either demonized, destroyed or regulated from the conversation.

The reality is that central planners can't solve this problem. They claim that they invented the internet, but if the government were still operating the internet, it would just be two dudes from DoD playing pong back and forth between New York and Camp Pendleton. This entire hype has evidence of scam all over it. Naomi Klein has demanded that the U.S. distribute $2 trillion to third-world nations who are "victims" of the U.S. and our energy policy. Ironically, the nations that are demanding the money are also the ones that are near the bottom of the Heritage Economic Freedom Index. Countries that aren't developing because they keep they limit their own people's ingenuity and production are going to get $2 trillion and then do what with it? Usher in a green economy? Come on…

So, when I hear the idea that we have to "do something" and do it fast without exploring the data, without asking questions, and without being allowed to have a debate because doing so would cast the distrustful of government as people who don't care about the children or the future or humanity. Meanwhile, the alarmist will have a moving wardrobe of children follow him as he spouts off how important his intentions are and how we are monsters.

Beyond that, we also ignore one thing in this discussion.

What are the positive benefits of global warming? After all, Greenland had a booming farm trade 1,000 years ago. I'd like to get some beach front property in Greenland. I'd also think that trade through the Arctic Circle would be nice and reduce shipping to Asia in half. Why is global warming such a terrible thing? Is it because we refuse to embrace the challenge, and because there's profit to be made by saving us from ourselves?

So, I will say from my perspective this. I don't consider climate change a big deal, and it's not something that I worry about. Humanity will adapt after government spends trillions of dollars chasing this dragon..

Jan

30

 Have you guys heard about this guy

"Hawaiian big-wave surfer Garrett McNamara will go to any lengths to chase a massive swell. On Monday that pursuit took him back to Praia do Norte, a tiny coastal village about 60 miles north of Lisbon, Portugal, where he got pulled into a massive wave that has the entire surfing world in awe. "

youtube video of him at Nazare, Portugal

Could the surfing aficionados please explain to me how these people do not die?

Jim Sogi responds: 

Scott, First they train and train and train so they are prepared. They have a system with the sled driver so they can get rescued if they fall. The maximum hold down would be 20 seconds for one wave, and possibly 40 seconds for a two wave hold down. With training one can hold their breath that long fairly easily. A three wave hold down for 60 seconds gets dicey and black out is possible. Thirdly, they are wearing life preservers that float them to the surface. Shane Dorian has also developed an air bag that inflates to bring the surfer to the surface. The statistics of surfing demonstrate it is rather safe overall.

Jan

20

We lost one of the great one's yesterday — Stan "The Man" Musial dies today at age 92.

One night after his longtime friend and teammate Red Schoendienst was honored on his upcoming 90th birthday, fellow Cardinals Hall of Famer Stan Musial died quietly at age 92 at 5:45 p.m. Saturday at his St. Louis County home under Hospice care.

This makes me very sad. He was one of the greatest to ever step on a ball field, but more importantly, a role model and honorable man.

Jan

7

 When will the drought vibe hit the grains if things continue weatherwise? Drought is a slow creep type of price impetus that suddenly pounces.

Ever since Jeff Watson asked about wheat and what to do with it a few months ago I have been poking around the river scraping bottom articles. With everything else up yesterday, I have to turn a head towards the left behinds and consider them as worthy orphans.

"Mississippi River Nears Historic Lows, Shipping at Risk"

Scott Brooks writes: 

One thing to watch for in a drought is the amount of snow that falls. Snow is very important in agricultural land. A good snow cover will slowly melt and drip into the soil, thus giving the soil water but in a way that allows it to soak deep into the ground without too much run off or evaporation (i.e. the snow cover keeps the water from evaporating thus allowing it to soak deeply into the soil.

Soaking the soil deeply followed by consistent and gentle spring rains helps end a drought.

The problem that these drought stricken area's have is that they are not only dry on the surface and in the rivers, but also deep within in the soil. And since water goes down (or evaporates up), we have to fill up the watershed from the bottom up, thus the need for snow. Otherwise, even gentle consistent spring rain won't help as much as you'd think…..as most of the water is going to go deep into the soil and not be of use to the plants.

Think about it this way. You have a cup that is 12 inches deep, but you only have a straw that is 8 inches long. You gotta fill the cup up 4 inches just to get a taste of the water. And to drink from it on a long term and consistently (i.e. throughout the whole growing season) you need the base amount of water to be closer to 5 inches and then have consistent rains to keep the water at a level where the roots can reach it.

a commenter replies: 

10 inches of snow is equal to 1" of rain. This article speaks to what you say: "Drought in 2013? Major Pains Ahead".

 

Nov

9

 It's now been 12 days without electricity. And unlike Bo (who lives in
boxcars), I'm still paying the highest real estate taxes in the nation.
So, turning lemons into lemonade, here is a list of things I've learned:

1. A recession is when your neighbor loses his job. A depression is when
you lose your job.  A storm is when your neighbor loses his electricity
for 12 days. A catastrophe is when you lose your electricity for 12
days.

2. ConEdison has a real time outage map. It is updated every 12 minutes. But you cannot view the map unless
you have electricity. Ironic. It provides the date and time of
restoration to the nearest minute. Their precision is eerily reminiscent
of companies that guide earnings to the nearest penny.

3. Beware of the weakest link. Where we live has no town gas. We have a
well. So without a generator, we can't flush toilets.  But the generator
runs on propane. And that's the weakest link.  Getting a propane
delivery is almost impossible.

4. Bad incentives create bad behavior. Our propane company told us that
they are only making deliveries to customers who have run out of fuel.
But we were running our generator only a few hours per day to CONSERVE
fuel so we would not run out. Hence our responsible behavior was not
rewarded. And profligacy was rewarded. Only after I pointed this out to
the propane company manager and threatened that I would make it a
personal mission to go door-to-door afterwards and convert all of my
neighbors to a competitor did we receive an 80 gallon delivery. (The
generator burns between 2 and 4 gallons/hour.)

5. People don't change. Our neighbor who built a 12,000 square foot
McMansion (that blocked our view) was running his generator 24/7 and
running his landscape lighting 24/7. I was looking forward to a good
night's sleep without his lights coming into the bedroom window. No such
luck.

6. Send more food gifts to our troops.  They were distributing beef stew
MRE's and water bottles at the local firehouse. After things return to
normal, I'm going to send more food baskets/etc to our troops. Those
MRE's are rude.

7. Traffic lights are optional. On the first few days, there were
horrible traffic jams since all of the lights are out. However, by day
5, a self-enforced ritual developed at 4 way intersections where people
yielded to the person on their right … and things actually
worked…not perfectly, but surprisingly good.

8. Francis Galton lives. Next week is the deadline for the Intel Science
Talent Search (formerly known as the Westinghouse Science Competition.)
My daughter is submitting the results of a 3 year research project in
an arcane and slightly bizarre topic. As we sat by candlelight reviewing
her hardcopy for typos, I discovered that she had made a reference to
Sir Francis Galton's work in her paper and she cited him. There is some
irony that in 2012, a promising young scientist is editing a paper by
candlelight that cites Galton. I pointed out the irony to her. She
didn't smile. She just said that all of her friends have electricity.

9. Some people like to complain. Some people lost a few trees. Some
people had trees crash through their roofs. Some people literally lost
their houses. Some people have no generators. Some people were annoyed
that school was closed for a week. A few people lost friends and family
to the storm. Listening to people, there was little self-awareness of
relative fortune and mis-fortune. Lots of people asked how we were
doing. My answer was: it sucks. But a lot of folks are much worse off.
And this too shall pass….
Que Sera Sera

10. Out of state line crews are nice guys. I've now had the pleasure to
chat with crews from Wisconsin, Maine, Atlanta and Alabama. All of these
guys are part of the mutual aid system. Sure they are getting paid time
and a half plus a per diem. But these guys are clearly aware of the
importance of their mission. And they are proud of it.  And they don't
bitch and moan. They get the job done. And that's what makes America
great.

Are there any market lessons here? We report. You decide.

Scott Brooks adds:

Speaking of traffic lights and/or stop signs…….

At my university, there was an intersection in one of the parking lots that was a bit of a bottle neck (actually, it was a big bottle neck). Vehicles
approached the intersection from directions. It had no stop sign, or light,
or anything. But the students developed their own system wherein each car
would take their turn pulling out into the intersection. Your turn came in
a clockwise fashion. It actually worked very well. It was all on the honor system and there were no posted rules.

Conclusion: people will figure things out on their own over time, and not a single law was passed by a bureaucrat and not a single regulator was needed
to make it work.

Oct

19

 I recently read this interesting National Geographic article called "The Secrets of Sleep" : 

If we don't know why we can't sleep, it's in part because we don't really know why we need to sleep in the first place. We know we miss it if we don't have it. And we know that no matter how much we try to resist it, sleep conquers us in the end. We know that seven to nine hours after giving in to sleep, most of us are ready to get up again, and 15 to 17 hours after that we are tired once more. We have known for 50 years that we divide our slumber between periods of deep-wave sleep and what is called rapid eye movement (REM) sleep, when the brain is as active as when we're awake, but our voluntary muscles are paralyzed. We know that all mammals and birds sleep. A dolphin sleeps with half its brain awake so it can remain aware of its underwater environment. When mallard ducks sleep in a line, the two outermost birds are able to keep half of their brains alert and one eye open to guard against predators. Fish, reptiles, and insects all experience some kind of repose too.

All this downtime comes at a price. An animal must lie still for a great stretch of time, during which it is easy prey for predators. What can possibly be the payback for such risk? "If sleep doesn't serve an absolutely vital function," the renowned sleep researcher Allan Rechtschaffen once said, "it is the greatest mistake evolution ever made."

Richard Owen comments:

A favorite pastime of mine is spotting that well held societal nostrums are in fact most often false. For example, Europeans holiday excessively relative to Americans, Mexicans are lazy, that the USA is the land of Horatio Alger and opportunity, etc. I once collected a lot of these for a slide called "Is Everything You Know False?"

Unsurprisingly, the floated nostrum typically serves some form of vested interest.

Sleep and leisure time probably also fall into this category. Sleep has become a deprecated activity. Many myths surround great men and their willingness to sleep only four hours a night. In many cases it is a myth. In others, like Thatcher, it's probably true. But Thatcher also allegedly was borderline nuts by the end of her premiership.

The greatest real time experiment in this regard was the three day week introduced during the miners strike in Britain under Edward Heath. Despite 2/5ths of the working week being cancelled, GDP dropped hardly at all.

Contrast this to an industry such as M&A advisory where 100 hours weeks are mythically common (and myth then dictates reality). Most of the work completed in this regard is surplus to actual transaction requirements and of zero utility. Back when the City was staffed by Etonians, they could take a 100bps spread and simply answer that they had got their client $10/sh more than expected, so surely the fee was just. Now, instead, a senior banker must recruit a handful of young slaves to work to the bone and spread rhetoric of 100 hour weeks as a form of justification for the perceived premium.

Contrarily, those whose achievements are without question are often willing to be totally open. In this regard, Churchill slept twice a day and felt it essential to his productive output. Einstein, when pushing against difficult problems, notched up a few extra hours of z's.

Oct

9

 Ok, I need some help.

My friend recently sent me this video of a 7 year old conducting an orchestra with the subject title "unbelievable!"

As someone who can barely play a guitar, can't sing a lick, and has no musical talent whatsoever, what is the purpose of a conductor, and why is it such a big deal that this 7 year old can conduct a symphony? I've nothing against what the young man has done, I just don't understand it.

My take as a non-music person is as follows:

1. I believe I could stand there and wave the baton and face towards the correct instrumental group that is getting ready to play.

2. Does the conductor really do anything of value standing there. For instance, if someone were to just count of 1 - 2 - 3 -4 couldn't orchestra all start at the same time, and then play their instruments at the right time to the right beat and so forth?

As I watched the video, I really didn't see anyone looking at the conductor. It looked like they were all looking at their sheet music most of the time.

So any elaboration on this subject would be much appreciated.

David Lilienfeld writes: 

Sure. I speak as a former cellist and pianist. The role of the conductor is three-fold:

1. The conductor sets the beat so that all players are playing to the same one. Otherwise, you may have one player who is slightly faster or slower than the rest. The conductor provides the means around that problem, since s/he sets the beat and shows with with his/her baton movement. In a similar way, the conductor cues the various instruments.

2. The conductor provides an assessment to the players concerning whether they are playing too loudly, not loudly enough, or just right.

3. If any of the instruments are being played out of tune, the conductor provides the feedback to that player

4. Through movement, facial expressions, and the like, the conductor communicates emotion about the music to the players. A good conductor can use his/her facial expressions and the like to coax the best music out of the members of the orchestra. von Karajan and Bernstein (and to a degree, Ormandy and Toscanini) were masters in the use of their faces and body movements to bring out a uniform interpretation of a given piece.

I hope that helps.

Sep

21

 One finds it very dysfunctional to lose my temper on all occasions, but especially when trading or with the children. It could even lead to tilt. So forgive me if I don't mount the high horse in my disapproval of talk about Fibonacci and Elliott wave and Gann waves on the spec list as our raison d'etre is almost as antithetical to such things as it is to politics, religion, and honeys (may they never meet).

Scott Brooks writes: 

Losing one's temper is among the worst decisions you can make. Emotions supplant logic and all is lost.

I coach my oldest son's high school age baseball team. On that team we have a few hotheads. Those kids are the bane of my existence. They cause us more problems and are the source of 99.99% of the drama on the team.

Their inability to control their emotions only makes the situation worse. And even when I am able to calm them down, get them to reasonably understand that getting emotional was a bad choice, they still get emotional the next time something doesn't go their way.

They boys that have the most trouble when it comes to controlling themselves will likely, IMHO, have a very difficult life.
 

anonymous writes: 

This recent book by John Coates, "The Hour Between Dog and Wolf" is certainly relevant to the topic of controlling one's emotions, though I disagree with some of the author's conclusions. He documents how our biological changes under conditions of risk and uncertainty impact our processing of information, often for the worst. His conclusion that markets would be less volatile if we populate the trading world with more females and older men strikes me as simplistic…some of the greater episodes of tilt that I've noticed have come from members of the fairer sex and those long past their biological primes! 

Jeff Watson writes:

Jim Lackey writes:

A lack of emotion in sports or trading can be very dangerous due to lack of focus. If there was certainty, there wouldn't be an emotion. The most uncertain outcome and the greatest risk is quite often the best opportunity. The fight or flight emotions should not be ignored.

We will make mistakes following our emotions and that experience will teach us when to ignore the fear response. The best trades or moves on the race track are when we are fearful, yet we attack. The best saves are when we begin an attack with confidence, slip, then quickly withdraw. Learning by making mistakes in real time is the only way to gain the experience to overcome.

Deception is a funny thing as it's difficult to call someone on it, unless they are a friend. If you're wrong and call someone out, you make enemies. Which is part of the reason deceptions work on the inexperienced.

At the race track there is always someone mad as Hades. On the track he is as cool and smooth as can be. There is always some one sick, wounded or coming off an injury. On the track he is as strong as an ox. Every year a new pro says after the races, "I thought they were going to fist fight! or Wow! That was an amazing performance for a guy that was sick or coming off injury". The old pros burst out laughing, "ride your own race, kid".

Aug

29

 This is a very interesting article on "What Happens to Stolen Bicycles":

It seems as if stealing bikes shouldn't be a lucrative form of criminal activity. Used bikes aren't particularly liquid or in demand compared to other things one could steal (phones, electronics, drugs). And yet, bikes continue to get stolen so they must be generating sufficient income for thieves. What happens to these stolen bikes and how do they get turned into criminal income? 

In 1968, Chicago economist Gary Becker introduced the notion that criminal behavior could be modeled using conventional economic theories. Criminals were just rational actors engaged in a careful cost-benefit analysis of whether to commit a crime. Is the potential revenue from the crime greater than the probability adjusted weight of getting caught? Or, as the antagonist in the movie The Girl Next Door puts it, "Is the juice worth the squeeze?"

Criminal activity (especially crime with a clear economic incentive like theft) could therefore be modeled like any financial decision on a risk reward curve. If you are going to take big criminal risk, you need to expect a large financial reward. Crimes that generate more reward than the probability weighted cost of getting caught create expected value for the criminal. Criminals try to find "free lunches" where they can generate revenue with little risk. The government should respond by increasing the penalty for that activity so that the market equilibrates and there is an "optimal" amount of crime.

Jul

31

 Are there any events these days that make people inordinately happy or sad. Perhaps these would influence the market? An event like an earthquake or a mass tragedy in a theater would seem to qualify. Perhaps there are classes of events that effect particular groups like flexions that cause them to be happy or sad that have a measurable effect also, like intervention by the EC, or the Fed. What do you think? Is it worth quantifying?

Rocky Humbert comments: 

Yes, there are such events. Flying a Boeing 767 into a tall office building is one such example.

Scott Brooks writes: 

Not sure this is an event, but…..the realization that massive fraud is occurring. For instance:

The Accounting debacle (i.e. Arthur Anderson, Enron, Worldcom, Global Crossing, etc.) of 2001.

The Mortgage Fraud Debacle of 2008.

Jordan Neuman writes:

The 2003 rally began with the freeing of Elizabeth Smart. Certainly the market was sold out, but I thought a collective sense of gratefulness served as a catalyst. But file this one under the difficulty of setting up the study.

Craig Mee writes: 

Potentially state dinners and the like, when the flexions are busy cleaning their shoes and are getting ready for another free meal. Maybe that's why silly season (late Nov through December) appears to do ok. Plenty of back slapping, industry awards and the like. Also maybe Oscars week (or award month) is a winning combo for listed movie stocks.

Jim Sogi adds:

Here's a couple of ideas. Use facial recognition software to detect a "smile" tune in all the security camera in the world, process for correlation. It's a bit big brother-ish, but there are cameras all over in cities now around the world.

How about using beer sales? Old Chinese proverb: If you want to be happy for two hours, drink wine; if you want to be happy for two years fall in love. If you want to be happy forever, take up gardening.

Track marriages.

Track gardening sales, or farming yields. It's said one of the few real producers of wealth is farming. Good weather=good farm yield=good production=happy markets.

Jul

19

 Where does one learn about the economics of the farming business. I'm curious if there is a good place to read up on a sort of income statement on farming on a per acre basis (averaged across different crop types and soil grades). I'm curious to understand the economics of the business of farming.

Vince Fulco writes:

King Corn is a short and amusing documentary (found on netflix) which documents two college graduates who decide to return home to their grandparents' town in Iowa. They rent an acre of farmland and attempt to grow corn all the while profiling the inputs and costs. Needless to say with no economies of scale they make a pittance netted mostly from govt programs.

Big River was their second movie documenting the amount of pesticides which go into our food supply and the prevalence of odd cancers in farming families; striking more wives than husbands.

Scott Brooks writes: 

I wrote this post back in January of 2008…..so it is very dated, but I think it will give you a good primer on the subject of growing and the economics of corn from a ground level. List member, Mike Ott is a MUCH better resource on this subject, but I think this will give you, at least, a decent idea of what's involved in growing and raising corn.

Russ Sears writes: 

While not an expert on the subject, my in-law are crop farmers and my paternal Grandparents rental farmed until they passed.

Much of the individual farmer's income statement depends on the type of agreement from the land use. (Rental, share expenses and crops, debt on land, corporate owned, farming own land etc.)

But I believe Scott posted the basics with perhaps a few notes. Property taxes are a big expense for most farmers. Also profit/losses on the value of the land should be considered. Most farmers are asset rich and "cash poor". Often they take out short term loans on the seed and fertilizer. Plus they often have some leverage or debt on the land. They generally keep this to a minimum so they can withstand some shock and long term downturns. (lessons learned from 70's and 80's) Most farmers budget their living expenses They often put off purchasing equipment and new cars/pickup until a good if not great year. Darwinian nature of the business has left a pretty conservative bunch for the individuals who still farm.

They also sometimes leverage to diversify their holdings investing in stocks and bonds.

The average farm owner is generally above 65. But if not often they take second jobs or have the wife work for health benefits. As independent business health insurance can be very high. Social Security and Medicare are also part of the taxes or part of the income depending on age.
 

Feb

13

 My dear friends,

Just now Athens city in every corner have fire. Shops, banks, hotels, are burning. As about the stupid politicians they are in the parliament looking how they will offer the last pieces of our country to Merkel & Sarkozy. I am so sad as all the people. Also sad for Whitney Houston, because I liked her voice. Good afternoon to you, goodnight to me.

Love,

Despina.

Scott Brooks shares:

I don't feel the least bit sorry for her. She did this to herself. I feel sorry for her innocent children and the innocent people in her life that will be so adversely effected by her reckless behavior and her inability to control her desires for the immediate satisfaction that "Dr. Feelgood" delivered. Her children have been given the worst possible example of how to be a responsible adult and as a result will be scarred lessened as human beings. Hopefully, they will escape the chains of bad parenting and the weakness of addiction that destroyed the life of their mother and turned their father into an abusive loser.

Hopefully they will find inner strength that all too few in their circumstances find and rise up from the ashes of lost childhood and become the best they can be.

Can they? I don't know. But let's hope they have inside of them burning desire to live….to survive…that Viktor Frankl wrote about in the first half of the book, Man's Search for Meaning.

I feel the same way about Greece. They did this to themselves. What I do feel sorry for are the innocent Greek people who are going to have their lives turned inside out by the insidious devil known as statism. Because of the reckless behavior of several generations of people indulged in the immediate satisfaction of political "Dr. Feelgood" (statism, living off the government teet), several generations of Ggreeks are going to have to suffer.

A whole generation of Greeks is about to riot….a generation that doesn't understand why there is no pellet delivered to them when they push the lever and, as a result, becomes angry and burns down their maze. They are a generation made weak and crippled by the "Dr. Feelgood" of statism.

It will take their children to begin to realize that the maze was simply a cage and the pellet was drug of statism. Some of them will escape and find freedom, but many (most?) of them will stay in the maze wailing at the machine to give them the pellet that they deserve…..but they'll know not why they deserve it……they'll only "feel" that it's owed them as they wail and chant and burn.

This is cancer of statism. The Dr. Feelgood of political philosophy.

In case the Dr. Feelgood analogy is lost on anyone, I give you Motley Crue and Dr. Feelgood.

Feb

9

 Not to be hostile or anything, but I have never had dealings with Chinese where they haven't cheated me. I am told that there is a Northern Chinese persona and a Southern Chinese persona, and that I believe in the South, everyone is dishonest with Westerners, and the more you have done business with such a one without a wrong being committed the more likely it is that it will happen the next time, a very strange kind of hazard rate by the way. I may be wrong about this, it cost me much of real time wrongness, many years ago which compounded, my goodness—I'd be a wealthy man— but I'd like to know if there's a kernel of truth to it. You, Mr. Jia seem like a very worthy and honest man, and nothing in this is personal, but the memory still stings, especially in these markets.

Yishen Kuik writes:

China today is often compared with America in the 19th century. What I find remarkable is how true this can be.
The Chinese in China will cut corners, bamboozle, harass, deceive and cheat you on par with any 19th century "wily yankee". They are energetic, entrepreneurial and as hungry as any red blooded capitalist can be.

The melanine milk poisoning scandal is often held up as the worst example of Chinese business men run amuck.

And it is an echo of New York City in 1858 where "swill milk" killed thousands.

The horrors of working conditions in Chinese sweatshops is an echo of Upton Sinclair's expose of the Chicago meat packers — which created such an uproar that Roosevelt sent a secret fact checking mission that largely corroborated Sinclair's novel.

If you have ever been on a boat or a plane in China and it is about to land, they will all surge towards the exit, pushing each other out of the way to save a few seconds on exiting. They are a nation that has industrialized late and are pushing and shoving to catch up.

Scott Brooks writes:

I believe Yishen is correct. China as a nation is where the US was back in the 1850's (of course, with modern technology and infrastructure mixed in). They are still transitioning from a 3rd to 2nd to 1st world country. If you stop and think about it, they are really all three mixed into one. To expect a country to act and behave like a mature adult when they are really more like an adolescent, raised by dysfunctional parents is simply not foolhardy.

It will take the Chinese several generations to move into full 1st world status, and several generations to after that to mature into a moral system that is akin to the US.

We all go through our growing pains, the key is recognizing where the other person, or country or trading partner is on the "national maturity continuum" and the relate to them accordingly.

However, it is also a mistake to underestimate or minimize someone or a group of people because you see them as "less sophisticated" than you. That's why there is such a divide in America between the coastal elite snobs and us backward country bumpkins out here in fly over country.
 

Jay Pasch writes:

One of my best friends had an IT business selling computer mainframes and services into overseas markets. He did fine everywhere he went until he wound up in China; he had the equipment shipped, put boots on the ground, bolted the mainframes together, bus & tag to the disk systems and tape drives, IPL'd the system and turned the project over to the Chinese with a perfectly turned-up MVS system complete with blinking cursor. To his dismay the Chinese all of a sudden wanted application support, which was not in the contract, nor part of the company's forte. The Chinese government detained the engineers for six months, holing them up in their hotel rooms, and withheld contract payment until the company was forced into bankruptcy after the big bank notes came due. That was a long time ago, but even today we can't get through a pitcher of beer without the inevitable cussing about dealing with the Chinese…

Rocky Humbert writes: 

My dealings with the Chinese are largely limited to my contact with the venerable General Tso. I should note that The General has treated me well over the years. However, one serious exception comes to mind: It was in a small, nondescript restaurant inaptly named, the Jasmine Rose, located on a hardly-traveled road in northwestern Massachusetts where my friend, who was seriously allergic to garlic, and I ordered dinner. We advised the waiter of his food sensitivity and were assured that our dishes would be prepared without any garlic. After my friend started to show preliminary signs of anaphylactic shock, we discovered some garlic in the dish and called over the manager. What amazed us was not that the kitchen had made a mistake (which happens), but rather that the manager when faced with irrefutable evidence simply kept repeating (in broken English), "NO GARLIC! NO GARLIC! NO GARLIC!" as if his protestations were proof that we were wrong and that he was right. It was a bizarre, but memorable experience, and left an indelible impression on my mind, and on my friend's medical chart.

More relevant to Specs is some below-the-radar-screen litigation currently underway against certain Chinese companies and their US underwriters. A lawyer friend, working on these cases has explained to me that vast numbers of listed Chinese companies are complete and total frauds — and that in fact, a variety of (private) Chinese firms exist solely for the purpose of providing seemingly-kosher accounting paper trails for the fraudulent Chinese companies– so legitimate US accountants will see their (completely bogus) payables, receivables and assets, and provide a clean bill of health. Every time I am tempted to buy a Chinese stock (or index), I think of this story and I stay away. It's not that US companies are immune to malfeasance (Worldcom, Enron, Adelphia, MF Global?), nor it is true that US companies don't massage their earnings (GE, etc.). But, rather, if you throw a dart at a list of US companies, the odds are good that you won't hit a complete fraud. It's my impression that the same cannot be said about Chinese companies, hence I will not invest there directly, but prefer to invest in world-class US companies that can complete their own on-the-ground due diligence in China. Lastly, the Chair has opined periodically on nature vs. nurture. At the risk of putting words into his mouth, he has usually come down on the side of nature. Without taking a position, I would suggest that corporate and personal behavior MIGHT BE more influenced by genetics than by culture. If this is so, certain countries and people will be inhospitable to passive investors for a very very very long time, while other countries and people will demonstrate very different characteristics. Again, I am NOT taking this position. I'm just putting it out there…

Feb

5

 Jackie Robinson Taking a Bat to Prejudice:

Jackie Robinson swinging a bate many New Yorkers leaving home for work on April 15, 1947, he wore a suit, tie and camel-hair overcoat as he headed for the subway. To his wife he said, "Just in case you have trouble picking me out, I'll be wearing number 42."

No one had trouble spotting the black man in the Dodgers' white home uniform when he trotted out to play first base at Ebbets Field. Suddenly, only 399, not 400, major league players were white. Which is why 42 is the only number permanently retired by every team.

Jackie Robinson's high school teachers suggested a career in gardening. Robinson's brother, Mack, had finished second to Jesse Owens in the 200-meter dash at the 1936 Berlin Olympics. Whites who won medals found careers opened for them. Mack, writes Jonathan Eig in " Opening Day: The Story of Jackie Robinson's First Season," wore his Olympic jacket as a Pasadena, Calif., street sweeper, while Owens found himself racing against horses at county fairs, "one small step removed from a circus act."

To appreciate how far the nation has come, propelled by what began 60 years ago today, consider not the invectives that Robinson heard from opponents' dugouts and fans but the way he had been praised. "Dusky Jack Robinson," as the Los Angeles Times called him, alerting readers to the race of UCLA's four-sport star, ran with a football "like it was a watermelon and the guy who owned it was after him with a shotgun."

 full article here.

Jan

24

 When I traded on the floor, superstition gave rise to very ritualistic behavior among traders. A bad day suffered, meant that certain abstract actions and physical items would be avoided if perceived to have caused bad luck. Conversely, if a trader had a good day, he would look to repeat the events that led up to his good fortune.

Not enough time to shave, and then a profitable day? Good chance, you were now growing a beard! Often times, boxers failed to be discarded in the laundry hamper in a timely manner, and most assuredly, ties were never changed after a good day in the pit. Pens were saved and reused, along with the repetition of parking spot, route to the building, and ingress into the pit; as long as your propitious streak persisted.

This perverse protocol even extended to the members bathroom. Inside this veritable sanctuary, every member had their lucky stall, having mentally claimed “squatters rights” after spending time there prior to a particularly profitable day. Conversely, losing stalls were avoided like a trip to OIA.

What are your trading superstitions or idiosyncratic behaviors?

Scott Brooks shares:

Anyone who thinks shaving or not shaving has never watched hockey playoffs…..a bunch of unshaven guys wearing one of two different uniforms, all skating around. One wins, one losses, and both have itchy scratchy beards that played no role in their success.

However, routines, based on logic and reason, can have a huge impact on outcome.

I have routines for hunting that I've used for years that I know work. From the time I get up to the time I am situated in my tree stand, I follow a routine. A routine that minimizes scent and the chances that deer will know I've moved into the area are followed religiously.

Reading my reports, news articles checking the spec list and communicating with other traders are all a part of the routine that I follow every day.

But the most important thing that I do when it comes to trading is this: If I have an up day, I don't change underwear, shower or brush my teeth as long as the winning streak continues, because I don't want the good luck to rub off…..but yeah, I know that's pretty obvious as I'm sure everyone else does the same thing…..right?

Jeff Watson writes: 

I remember knowing a very nasty wheat trader who was very superstitious and wore the same unwashed blue trading jacket for about 4 years straight. The thing was so dirty it stood up on it's own and smelled like a combination of sweat, nicotine, and BO. Although he ascribed many powers to the jacket, he was very careless with it and would leave it hanging on a coat hook after market hours. One night after the close, after about 5 hours at our local watering hole, a couple of us partners in crime went back to our clearing firm's office, in a prankster-ish mood and sufficiently lit, and hid his jacket at the back of a closet. The next morning, before the open he came in and couldn't find the jacket and went absolutely nuts. He was inconsolable, irrational, and out of control….and this was before the open. After the open, he went on tilt, made a hundred mistakes, and ended up losing a ton of money, all in one day.

The trading jacket, like any other talisman, had no power. What had the power was his faulty belief system and his delusions that he could not make money without the jacket. He was one of the most rational people I ever met and he thought a jacket had supernatural powers. He gave the jacket powers because of a couple of untested, unscientific, irrational, anecdotal observations.

Back to the story…..He lost money all week long and I felt very bad and ended up coming in early on Friday morning and put his jacket back up on the hook. He was very happy and thought his jacket would turn things around. Needless to say, he continued on his losing streak, bidding instead of offering, buying the spread instead of selling it, and making a million other costly mistakes. The jacket made no difference and it took him a couple of months and a few weeks off to right his head. Although it was a cruel joke, it wasn't the jacket that was keeping him from making mistakes and he ended up realizing that talismans are what they are….talismans. 

Gary Rogan writes:

These were cool stories, thanks for sharing Jeff! 

Jan

22

 I am researching and reviewing my contact with hats over a not uneventful life. I am considering their value, their uses, their symbolic significance, the great people I know who have worn them, the hat corporation of America I bought as my first trade, the hat that Tom Wiswell always wore to prevent sunburn and cover up baldness, the hat that Shane wore that made him an icon, the hat that the accountant in Monte Walsh wore that Hat Hendersson just couldn't resist noting was just right for a pistol shot, the hat that I wear now to show my respect for those previous, the man I called Hats H.  because he always had a million different conflicts of interest while working for us. The importance of a hat outdoors in the West to shield from rain, sun, and the elements. Et al. What value do you see in hats these days? What anecdotes? They seem to have gone out of style because of the automobile. You don't need protection from the elements any more. Also they're hard to store. How do they relate to markets?

Alan Millhone writes:

Mr. Millhone

Dear Chair,

I remember well the hat Tom wore. The ball cap I wear has a board on it (see picture). The Market trader might wear such a hat to remind them to look ahead and make the right moves (trades).

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Sam Marx writes: 

On the subject of "Hats". I am reminded of the aversion that John F. Kennedy had to hats and the picture that has stayed in my mind, since 1961, is of his carrying and not wearing his hat at his inauguration. I believe it was his attitude that caused the downswing in hat wearing in the U.S.

Tim Hesselsweet writes: 

 Seems like a good example of ever-changing cycles. The hat has been making a comeback for the last several years. Kate Middleton has become a popular figure and she frequently wears hats. Upscale department stores like Saks now carry a large selection of hats as well.

Alston Mabry responds: 

Yes, but…mens hats are a different dynamic:

Look at this photo of mens hats at a Liberty Rally in Columbus Circle, 1918, and mens Hats at the Horse Races 1920s style, and 1950s Men with hats.

Scott Brooks writes: 

When I graduated high school, the guy who measured my head for my mortar board said, "Young man, I've been doing this for 35 years and you have the biggest head I've ever measured".

 As a result of my freakishly large cranium, hats rarely fit me. I wear one from time to time, but only out of necessity, and occasionally for functionality.

Necessity is when I need to keep my bald head from burning in the sun or freezing in the winter or dry in the rain. Never under estimate the insulating and protective qualities of hair.

Functionally is because I need a hat when I hunt to keep the sun out of my eyes when I'm scanning for game, peering through my scope to place the cross-hairs on the shoulder of my intended quarry, or placing the aiming pins of my bow in the middle of said quarries chest cavity.

I avoid hats otherwise as I can rarely get one big enough to fit. If I wear one too long, it gives me a headache. Therefore, when it comes to trading, if you see me placing a trade while wearing hat, fade my position as I'm likely making a losing trade because my mind is clouded by the hat that is squeezing my brain all to tightly.

Pete Earle writes: 

I wear a hat, and have for seven or eight years. When I began to wear one, I expected to be lightly razzed by friends; that not only didn't deter me, but never occurred. Instead I've received unexpected compliments, and over the last few years other have seen a higher frequency of hat wearers in Manhattan, Washington D.C., and even when I'm down in Auburn and Atlanta.

Christopher Tucker writes: 

The grandfather of my best friend from college was one of the kindest and most sensible men I have ever met. He was a traveling sales rep for the John B. Stetson company. The man always had the best (the absolute BEST) hats.

GAP Capital comments:

 Born and raised in Chicago, so "hats" remind me of only one person…Dorothy Tillman!!!

Anton Johnson writes: 

"By some accounts, Christopher Michael Langan is the smartest man in America……….he has a fifty-two-inch chest, twenty-two-inch biceps, a cranial circumference of twenty-five and a half inches–a colossal head, more than three standard deviations above the norm"

Esquire article on "The Smartest Man"

Alan Millhone sends another photo:

Here is Tommie Wiswell with his trademark hat tilted back.  Might also been used to keep
overhead light from his eyes while he focused on the many boards.

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Russ Herrold writes: 

 I am traveling, and so cannot conveniently post, but I placed orders this week for a new Stetson, a couple of Fedora designs, and some other … I forget …and have in my car, for the conference I am at this weekend, easily 5 or so, which I use both for their protection of my head from the cold, and also so I can 'do some branding' work in the community the conference represents (I also have other 'branding' in my clothing, and appearance), such that people I deal with, who don't know me by sight, can recognize me anyway.

Marion Dreyfus adds: 

I think I am fairly well known as a hat person, and have been since I wore unusual chapeaux /to synagogue and school when 12 or 13.

Aside from style and stating an individualistic aspect, I think a hat harks back to a gentler, more mindful age, perhaps 100 years ago. It also keeps the head, inside of which are all these excellent ideas and scenes for a better tomorrow and a niftier evening today, comfy-cozy. Hats also show, oddly enough, respect. Hatless men in the 1970s were declaring their freedom from the mindfulness of suit and hat, and perhaps we are the poorer for having abandoned hats.

They also keep milliners in funds, and milliners I went to grad school with in the early 90s were aghast at the drop in hat-wearing citizens, alleviated only by temporary crazes or fads that fade as swiftly as they arise.

As a biker, for me, even mild days produce a breeze when one is on that leather seat, and a hat prevents sunstroke and sun in one's eyes as well as too much wind over one's head.

In the Orthodox world, wearing a hat connotes one is married, so it may be foolish of me to wear hats, because i communicate a status I do not currently entertain. But i do like the fashion and focus statement being made by wearing a lid, many of which, actually, i create myself.

Finally, one can maintain a superior air of mystery in a hat, which is impossible to the same degree in a hatless state.

Alan Millhone adds:

What really amazes me on hats are the clods at football games I attend who don't remove their head cover when the National Anthem is played.

Ken Drees muses:

 The baseball cap trend: rappers wearing the caps askew, wearing caps with logos of designers and companies, wearing caps for status/advertising, caps as gang signal, wearing caps in restaurants/indoors, wearing hoodies in lieu of caps, caps as fashion, caps on backwards, caps with brim curved just so, it all has to do with being cool. Lebron James wears Yankee cap to Indians games–it's all about me, fool.

Gary Phillips writes: 

"Wearing a cap backwards is a baseball fan tradition that started with Yankee fans. It wasn't because they liked Yogi Berra, either. The Yankees and Red Sox have a century-old rivalry. A group of young guy Yankee fans, around 1980, took the train up to Boston to catch a couple of games. Boston fans are loud and boo other teams. The young Yankee fans were seated in front of loud Bostonians. The New Yorkers didn't want to start an altercation, but made statement. Those guys turned their Yankee caps around backwards to show the Bostons that they were Yanks fans and proud of it."

Anton Johnson writes: 

On baseball's rally cap superstition:

"A rally cap is a baseball cap worn while inside-out and backwards or in another unconventional manner by players or fans, in order to will a team into a come-from-behind rally late in the game. The rally cap is primarily a baseball superstition."

And hockey's Hat-trick.

Victor Niederhoffer writes:

It would be nice if this worked in the market. But then the adversary could always tell if you were weak or strong, especialy if signals could be reflected from the hat. I was surprised to see that in all the uses for hats I have collected, including flopping the rump of your horse, and fanning a fire, and collecting water from a stream or the rain, I did not see many variants of using it as a signal to get a cab or alert a Native American that a interloper was near, or to collect bets, or to conceal a salt shaker. This latter is particularly effective in the west because to ask a man to remove his hat is akin to a date with boot hill. 

Gary Phillips adds: 

 Surely not a hat, barely a cap, let us not forget the kippah or yarmulke. The Talmud says that the purpose of wearing a kippah is to remind us God is the Higher Authority over us. He alone is Lord of Lords and King of Kings. When we pray and worship with our heads covered, we are saying that we are in total and complete submission to the will of God Almighty now and forever.

I was recently in the hunt for 2 of the crocheted variety for my 2 and 4 year olds to wear to school. My elder son demanded that the kippah be white with a blue Magen David. The synagogue gift shop was unable to fill our order, so I turned to a higher authority - E-bay. As J. Peterman would say, it is 6" in diameter — one size fits all. Handmade in Israel with a *very small* fine stitch. The yarmulkes are from Israel and are made by people who have made Aliyah; low income and handicap people, generating income to make a living.

I grew up and observant Jew until I had my first taste of bacon and blondes, and I never looked back. However, I now find myself lighting the candles, saying the hamotzi, and making Kiddish on Friday nights… Nice.

Jim Sogi writes: 

 A hat is essential in Hawaii to keep off the sun, rain and wind, to keep glare out of your eyes, and at night on the mountain for warmth when it gets cold. There are different hats for different situations. A baseball cap is good all around since it keeps the sun off your face, stores easily, can be worn in a car and is cheap and stays on in a brisk wind. A good brim hat is good to keep the sun and rain off the back and shoulders as well. A nylon hat is light and can be washed. A waterproof rain hat is good for extended rain, and a light nylon brim is good for hot sun. A small brim bucket with a strap is worn in the water while surfing to keep intense sun at bay for hours in the water, and to stay on in the surf. A knit or fleece watch cap is good for boating at night or sleeping in the cold. A helmet is good for sports to protect the skull from boards, rocks, trees and impact. The Original Buff is an adaptable piece that can be worn as a hat, scarf, or facemask. A balaclava is good for winter conditions and can be used as a hat, or face mask in windy conditions. I must have 20 or more hats.

As with all equipment, each type of hat is specialized for specific conditions, and there is not one that is good for all conditions. As with markets, its good to have specialized systems and rules for the differing conditions or cycles and no one rule is good in all conditions but must be tailored to match the expected conditions.

Rudy Hauser writes:

I do not wear a hat indoors with the exception of trains and planes or if there is no good place to put the hat. If there is a draft from air conditioning it helps to keep me from getting a headache. But more important is that unless I just want to hold my hat in my hands there is no good place to put it. I prefer to read, not hold a hat. I once made the mistake of putting a Panama hat in the overhead rack in a plane. The motion of the plane bounced it around enough to ruin it. That gives me little choice but to wear it. If I have a hat without a brim, such as my winter hat, I can a do take it off aside from trains which are not that warm.

Bill Rafter adds: 

 Glare, particularly from lensed overhead lights or high-hat floodlights can cause headaches and eyestrain. That can easily be counteracted by wearing a baseball cap or other large-brimmed hat indoors. I have kept one at my desk for decades.

For years I noticed that whenever I saw a certain actor & director, he was always wearing a hat, even indoors. Then I saw him entering a food emporium at a ski area and he removed his hat. I immediately understood why he always wore one — his particular baldness aged him at least 10 years. So his vanity choice was either a wig or a hat, and he chose the hat.

Hats indoors also provide a level of anonymity for those who do not want to be recognized in an airplane or robbing a bank.

My first "real" hat was a Homburg, which was required for one of my college jobs: pallbearer.
 

Dec

12

 I have recently found myself in a somewhat unfamiliar environment. I find myself being around people who live on the periphery of society to whom honesty and integrity are subjective whims, used only when they are of benefit to themselves.

I am continually amazed by the waste of intellect that I see around me everyday. Obviously smart people with a major character flaw that causes them to consistently fail or, at the very least, underachieve.

I watch as those around me, directly and indirectly, waste their potential because there is something inside of them that compels them to take the harder path. And let's be honest, it's harder to be a liar, a con man, a gossip, and a back stabber than it is be a man of good character who treats others they way they want to be treated.

I am amazed every day when obviously smart people make incredibly horribly stupid choices. Choices that may, in the moment, give short term satisfaction, but long term become an anchor around their neck dragging them further and further down. I find myself these days speaking to my kids more and more about the twin virtues of honesty and integrity and applying it to their lives. I also find myself speaking with them about protecting themselves against the less honorable people who infect our world.

One of my children wanted to know why people are dishonest and why they lie. The best I could do was explain to her what I've come to believe. The reason that liars lie is because they're liars. The reason that cheaters cheat, is because they're cheaters. The reason that thieves steal is because they're thieves. The reason that the scorpion stung the frog is really very simple: It's his nature.

We are going to watch this short video at our next family home evening. It not only discusses honesty, but it shows the courage needed to stand up to the dishonesty that surrounds us. I thought the group might enjoy it.

Russ Sears elaborates: 

Much of it has to do with their time frame and vision of sight and their view of other.s Lying is a way to maximize the short term gain. Lying also the best way to maximize your gain if everybody around you is expected to lie. However, honesty and reputation take time to build but maximize the long term "happiness".

Think of it in terms of the prisoners dilemma. If it's a one time thing the best option is to rat on your friend and give info to the police. However, if it is a reoccurring event the optimal choose is to stick together and hope they return the favor. That is unless your partners continually rat on you first, then you become the narc.

That is, honesty is the best policy in the long run only if you hang out with those that return the favor. Honest people will be able to cooperate, hence get much more done. But if you expect that those others are going to be lying to you, you should return in kind.

Think of negotiating with a car dealer. You don't tell him your wife must have that car. And he tells you 3 or 4 "best" offers. But once the contracts signed, honesty again is the best policy.
 

Nov

22

 We are creating a world very different from our grandparents. What will your last tweet/post be like?

Stefan Jovanovich replies:

Indeed, it is certainly a world without any training in grammar or usage. First sentence from this professional journalist: "people that". His presumption is fittingly modern. The literal explosion in writing and newspaper publishing that produced and required mail deliveries 5 times a day and fast mail trains that delivered Special Delivery letters and major city newspapers in 3 days to anyplace in America with a railroad depot is ignored completely in favor of a portrait of our grandparents with their snapshot albums and "diaries". Even as Google and others make the archives of what people wrote in the past available for free, the ignorance of what the past grows exponentially among the technocrati.

Oct

31

 Seems like a couple years ago this site had a discussion on sleep each night. Scott, you posted on this I think?

Note tonight H. Cain gets by on four hours a night. Is this a plus for a candidate?

 Scott Brooks comments:

As long as he gets what he needs.

I can only make a few days on 3 - 4 1/2 hours of sleep before I need a night of power sleep. If I can get 6 - 7 1/2 hours of sleep a night, I'm usually fine.

It's also a function of what you're doing with your life, too. I'm up at the farm right now bow hunting. When I'm here, I usually work pretty hard, so I need a bit more sleep. Something about being out on the farm taking in the fresh air that makes me a little more tired at night.

But everyone is different. The key is find out what you need and make sure you get it in 90 increments (+/- a few minutes on each side of the 90 depending on your personal sleep cycles).

Oct

26

After what I heard on NPR this morning I would say the Cards are doomed. It appears to me that they are looking for a great excuse in case they lose.

NPR was gleefully reporting a good excuse. It turns out the bull pen did not warm-up the pitcher for the guy that hit the double, like the coach called for because, get this, they did not hear what Coach La Russa said on the phone. Great excuse! That was painful to hear.

Here is the story

newsfeed: world-series how-the-st-louis-cardinals-got -all-mixed-up

Why does this matter?

In the heat of a grueling marathon I've learned that once you are searching for an excuse in case you lose, you sure will.

George Parkanyi writes:

 To your point, one of the biggest chokes ever was the Ottawa Senators going down to the Toronto Maple Leafs a few years back. They were leading the series 3-2, and the 6th, clinching, game 1-0 late in the third period. Toronto had been completely shut down to that point. Toronto got one penalty, and right after, another. What a glorious opportunity for Ottawa -a 5 on 3 power play! What did they do?

They didn't even go into the Toronto zone, they passed it around and just generally wasted time to eat up the clock. But there was still about 8 minutes left to go in the game. I still remember jumping off the sofa and literally screaming at the television "What the ^*&&*% are you doing, you idiots!!!!" Sure enough, playing not to lose, they gave up a late goal to an energized Toronto, who then won the game in overtime and also won the 7th game after that.

That game is etched in my mind as the poster-child example of why you don't play not to lose when you're in a competitive situation. I remember this when I play soccer, and never play more conservatively when we have only a 1-2 goal lead no matter what stage of the game. My philosophy is keep doing what got you there. That's also why I absolutely HATE late-game prevent defenses in football.

 Peter Saint-Andre comments:

 The Wikipedia page about baseball points out the following:

"In
clock-limited sports, games often end with a team that holds the lead
killing the clock rather than competing aggressively against the
opposing team. In contrast, baseball has no clock; a team cannot win
without getting the last batter out and rallies are not constrained by
time. At almost any turn in any baseball game, the most advantageous
strategy is some form of aggressive strategy."

Some form of aggressive strategy is always advisable in investing, too. You can never simply run out the clock.

 Stefan Jovanovich writes:

And, for racquet sports, even more so; they are the only hand to hand combat sport where you cannot be saved by the bell or blame the loss on the manager or the rookie who tried to steal second. Speaking of extraordinary sporting events, did anyone see what City did to Manchester United? Remarkable. Lazio's loss is Manchester's gain.

http://en.wikipedia.org/wiki/Roberto_Mancini

Scott Brooks comments:

This is not completely true of baseball. In little league, most (all) games have a time limit. So there is a strategy to playing to the clock. The home team always got the last at bat (unless they were ahead) after the cut off point.

So if we were the home team and were ahead and the cut off time is approaching, we would make the inning last as long as we could. We'd have our batters run the count up. We'd have them step out of the batters box between pitches. We'd call time out several times, etc.

All to ensure that the opposing team didn't get another at bat. Sure we'd have gotten another at bat after them if they tied the score or got ahead of us….but why take the chance.

Peter Saint-Andre responds:

So is the lesson that little-league investors think they can run out the clock, but big-league investors know they don't have that option? :)

 Scott Brooks writes:

Whatever league you're in……..

……Know the rules and use them to your advantage so you can win. I don't
care what the rules are, just make'em clear and let me play/coach/invest.

As Vince Lombardi said, "The object is to win, to beat the other guy"

http://photetpom.wordpress.com/what-it-takes-to-be-no-1/

 

Jul

8

 David Brooks is a "useful idiot" for the left who masquerades as a conservative in much the same way GWB masqueraded as a republican. Heck, if I were the head "Progressive" (or whatever sexy euphemism the statist are using at the moment to disguise themselves), I would take my talented writers/journalists and make them all put their names in a hat. I would then draw out a few names and say, "Your guys' job is to (pretend to) be "conservative writers", and fool the naive' conservatives into buying into creeping statism, while the rest of the Progressive writers/journalists in the statist MSM will, from time to time, refer to you as a "sensible conservative" who is merely pointing out how ridiculous and unreasonable the real capitalist are".

Jun

8

 My wife and I are making our way from Houston, TX to central OH and back over the next 2 weeks with our truck and fifth wheel trailer. Sunday was Houston to Dallas, yesterday was Dallas to Little Rock, today was Little Rock to Sikeston, MO. (I45, US380, I30, I40, I55). Because of time constraints and the size of our rig, we tend to stick to the interstates, but explore when we are unhooked. Just thought I would share some business/market related observations with the list.

1) Traffic composition. I typically drive 40-50K miles a year, mostly interstate, and would say I have a good feel for what traffic looks like. I've been struck by the composition of the traffic so far. It is very truck heavy, more like what I would expect for late night (midnight to 6 AM). I did some estimating and would say it is about 60-70% trucks, all apparently well laden (ie, no bouncing trailers). Good mix of flat, van, reefer and tank. So companies are ordering stuff and it is being delivered. There are enough loads that the trucks do not have to run empty. People are not traveling casually; in particular, the RV traffic is very light. I've been making reservations as we go, but no park has been full yet. Hotel/motel parking lots are vast waste lands. Think the travel industry is in for a rough summer.

2) Truck speed. Typically a good percentage of the trucks have the "hammer down" and are traveling well above the speed limit. Not so the last 3 days. My cruising speed with the trailer is 65MPH (or the speed limit which ever is less). I've yet to have a truck blow by me at 75MPH. And East Texas and Arkansas are prime speeding zones (flat and straight). A good number of the trucks are running 60-65, even when the limit is 70. Very unusual. My guess is that they are all looking for the sweet spot (RPM, engine, transmission combo) where they can milk the mileage allowance for an extra penny or two a mile. No more racing to be an hour early. The price of fuel is starting to cool the American racing tradition. This might have the effect of reducing demand considerably. Depending on the driver, you can vary from 6 to 10 MPG with a semi (I have 2 children who are/were drivers). So if a significant number are being incentivised to save fuel rather than deliver on time, it could have a major impact on diesel consumption. I'm also seeing a lot more trucks with under the trailer skirting and tight fenders over the tractor rear tires, which are both fuel saving devices. The under the trailer skirting almost all looks hand made (ie, semi pro body shop). Again, the truckers are facing tight enough margins that they are willing to sacrifice some load capacity as well as maneuverability (the skirting will hit the ground on railroads, etc) in order to gain a few pennies per mile. If this works, then the big fleet operators are either going to retrofit their trailer fleets or replace them.

3) Small town death While we drive mostly interstate, we do get off for food, fuel and sight seeing. Small town rural America is in deep trouble. Lots of empty stores. Many towns appear to have done some 'revitalization' or 'historic district' which all appear to be failing. Pretty banners, nice signage and empty store fronts sandwiched between antique shops, hair salons and second hand stores. The nicest building is usually the offices of the "economic development commission", or the bank. Was there Federal largess doled out in the last few years for this type of activity? If so, it has failed and appears to have dried up. While not strictly a "small town" North Little Rock has a beautiful riverfront trail and minor league baseball complex. The homeless seem to appreciate the nice grass to sleep on and the restrooms to cleanup in. One intersection appeared to have a section of bleachers for the homeless/pan-handlers to sit on. Not sure if the bleachers (one section 4 rows high) was provided by the city, or if the users had the gumption to haul it in from somewhere.

 4) Agriculture Crop planting is WAY behind. I already knew this since my brothers in central Ohio are just now planting corn, which should all be in the ground by May 15. I can just confirm it based on my own observations. The numbers say that they have already lost 25% of their yield potential by missing the optimum planting season. In years past, significant acres would be switched from corn to soybeans (which get planted later). I need to get the details from my brothers, but I think the government "price support/insurance" programs have become so lucrative, that it is better to plant the corn, harvest what you can and collect the difference from Uncle Sam. If this is true, then there will be extra payments due from the Treasury in the fall that are probably not accounted for anywhere. And in the great scheme of things, it is probably only a few billion (rounding error). Perhaps more importantly is what a 25% crop short fall will do to the world and domestic supply, demand and pricing. I am not really in tune with agriculture anymore, but it should make for an interesting commodities futures ride.

5) Outdoor advertising. Lamar (the most common name I see) and similar are in for a rough time. LOTS of empty billboards, or billboards touting the advantages of bill boards. Also a lot more of churches, hospitals, public service announcements, short term (gun show, event, concert). I take all these as indicators that the market is still very soft and that the billboard companies are dredging the pond looking for new customers, and adjusting the pricing to fit.

6) Replacing rest stops Texas, Arkansas and Missouri are all redoing rest areas. It seems to be driven by green/ecology forces. The new ones feature "eco friendly" designs, solar power, recycling toilets etc. Again, is there Federal largess involved? Or are the states just trying to save some operating costs by reworking old high maintenance rest stops into lower cost "green" ones? I doubt that this is a very consolidated market, probably lots of one off designs.

7) Arkansas Freeways. The state appears to be figuring out how to build smooth freeways. Though stretches of I40 still make you want to walk. And it is not potholes, they just did not understand how to lay 2 slabs of cement beside each other in a level fashion! I've been on gravel roads that were smoother than the remaining bad sections of Arkansas interstate.

Scott Brooks writes:

 If you pass thru Sikeston, MO again, you MUST stop at Lambert's Cafe (Home of "Throwed Rolls"). It's something that must be experienced at least once!

If you are passing anywhere near St. Louis on your way back, stop on by my house and I'll throw some pork steaks and venison (from my farm) on the grill and give you a real St. Louis treat!

And as always, all specs are always welcome to stay in my guest house anytime they're in St. Louis!

Rocky Humbert adds: 

Revisiting this post, a little bit of arithmetic puts point #2 into clear perspective, and allows one to calculate the optimal truck speed versus truck driver hourly earnings. The Kenworth Truck Company website says: "A general rule of thumb of thumb is that every mph increase over 50mph reduces fuel mileage by 0.1 mpg" See this paper.  

That means reducing the average MPH from 75mph to 55mph will increase the average fuel economy by 2mpg.

Let's assume that a typical day's journey is 500 miles. That means the journey will take 9.1 hours at a speed of 55mph or 6.7 hours at a speed of 75mph. And increasing one's fuel efficiency by 2mpg will burn approximately 16 less gallons of fuel. So, if diesel fuel costs $4/gallon, reducing the speed takes an extra 2.4 hours of driver time, but saves $64 in fuel. So the incremental driver time is worth $26.66/hour.But if fuel costs $4.5/gallon, reducing the speed takes an extra 2.4 hours of driver time, but saves $72 in fuel. So that's worth $30/hour.Everything else is ceteris paribus. Conclusion: if the trucker's salary is less than $50,000 per year (and most are, based on industry surveys), then it makes sense to drive slower…. and the pivot point is likely somewhere around $3.75/gal … which is EXACTLY the current national average diesel price.

May

26

 We just had a tornado pass within a few hundred yards of my office.

I watched it out the back window until it got within a few hundred yards of the office then I ran out of the office to safety of the stairway. Unfortunately, my 17 employees ran into the south stairway…which was on the same side of the building that the tornado was on…..so I had to run down there scream at them all to get to the middle stairway. Of course, my step mother, Patti, was down there, too. Patti has Muscular Dystrophy and can't do stairs. So I had to throw her on my back, carry her up two flights of stairs, run 100 yards down the hall with her on my back, then carry her down the middle stairway, and finally drop her off in that vestibule.

No one was hurt…but my back is gonna be sore tonight!

All in all, it was quite exhilarating!

May

25

 What % of NBA games these days are won by the team that puts in the first point, and can this be generalized to markets?

Jeff Watson writes: 

My grandfather used to tell me that a fist fight among boys was usually won by the kid who got in (not threw) the first punch. As an aside, I wonder if markets are susceptible to rhetorical sucker punches? 

Russ Sears writes:

In distance racing it is the opposite. You do not want to be out front at the start. This is especially true at High School races and at the big road races. Too much adrenalin spent at the beginning will waste it. The amount of aggression used at the start, may vary from sport to sport. But might I suggest that one on one sports or team against teams are different than sports like running or poker and trading where it is not just about beating the guy closest too you. You don't want to crush your opponent but use them or propel you to the front.

 On the other hand you must be watching for signs they can hold the pace. Exhaustion can be contagious if the pacer slows, all follow. Plus you must have confidence in your plan and stick to it. Do you beat all with a kick or do you win with a blistering last mile?

Having thousands chasing you can be a rush, but it is also very draining to wear the target on your back. You take the wind hardest without any wind blocks and you are also wasting mental energy setting the pace.

What I think all the comments below suggest is there are really 2 questions you need to ask yourself…How aggressive do you want to be at the start? And the second one is how intimidating should you be?

As Scott implies below, thugs will nip at you until they know you are or are not armed. But to answer these 2 questions in most civilized matter, you have to know yourself; be confident in your capabilities and and equally realistic about your limitations.

In racing, poker and trading, patience is the key. Be aggressive when you truly have the edge. Believe in yourself enough to wait for that edge.

What may be more fruitful questions are: what are the signs that the opponent has started too fast? And what are the signs that they are exhausted? 

A Mr. T.C responds: 

I spent years running, and I choose to disagree a bit. I don't know what type of resume is required, but I did manage two state championships and posted a 4:12 mile time in college.

Going out first doesn't always mean having to go out fast. Runners settle in as soon as someone takes the lead, whether it be track or cross country. If you can use just a quick burst at the beginning to get the lead, you can then set the pace you need in order to win. If it buries others, then great, but if you not, then you know what you have in terms of a kick when it comes to the finish because you set the pace.

Losing stinks, but there is nothing worse than losing and still having something left in the tank. That can happen if you let someone else set the pace, and you can't outkick them. Why? Because they set a pace knowing they could still have a strong finish. Yes, there are rabbits, but they are pretty easy to ferret out. They sprint out too far, too far, plus in any race you should have a pretty good idea of who your competition is not just who are the participants are. The wind is a factor, but only when the wind is actually a factor. Giving yourself some distance gives those behind you no benefit. They will hit the same wind. The idea of having to chase someone down can be tiring, and mentally it can crush you if you catch them, then they pull away.

The real key is any race with hills. A leader can really stretch a lead on the hills. It is where races are won and lost. I can tell you from experience, you do not want to be chasing on a hill nor do you want someone else to set your pace on a hill. If you have the discipline then being in front means you do not have to catch anyone else, and you merely only have to run the race. The same race you've trained for day in and day out. The same race you've run in your head so many times.

When I was good (and believe me when I say I am not good anymore), there was a span of 12 races that I did not lose (it was the 800m for those that care). In that time, I did not even trail a single lap. My first loss came when I altered strategy and ran with the pack. Through a combination of injury and mental roadblocks, I didn't win again after that…until the 4:12 road mile in which I never trailed. It is rarely about adrenalin. It is about preparation, planning, and running your race. And no, for some, it isn't from the front, but for others, they become almost unbeatable if you give them even an inch.

Russ Sears responds:

 Yes, there definitely are times to be the front runner. If you are better than everyone in the field and know it, taking the lead, pushing the pace is the way to go. Winning 8 races in a row shows that you had out grown your competition which does happen in high school and college. But as you imply, if a rabbit sprints to the lead let them go. The goal is not to win the first 100 meter, but the race.

A 4:12 mile would never have happened without preparation, planning and running your race, but also a personal record also never happens without digging deeper and find something extra within yourself at the end. As a 2:58 1200 meter runner, but only a 4:05 miler; I did not have a kick. So I understand that often you do not want to leave it down to the last 100 meter and you beat them when you can. But having to lead from start to finish sets yourself up for mental roadblocks in tough races.

Finally, I must disagree somewhat about the hills. If you are clearly better than your competition then the hills may further show this. But if your competition is equal or slightly better than you, extra resistance of the hills prevent you from putting too much distance between you.

On my hill workouts, I would practice relaxing at the punishing pace up a hill. In a race I would let my equal push trying to get away but near the top when the heart rates are at the highest, I take the lead. After the peak I then tried to stretch the lead on the level or down hill parts.

As a high school coach, kids would often think that we did hill work so we could beat the competition on the hills. So they would try to demolish the competition on the hills. But I would tell them it was to withstand the hills, and learn to relax while still giving the most effort, so that you can beat them when they are hurting the most. It is like buying the dips or taking out the cane.

Sam Marx writes:

4:05 is very impressive.

The greatest mile race I ever saw was Roger Bannister defeating John Landy at the Empire Games in the early 50s. For those of you unfamiliar with these names, etc., Bannister, of England, was the first one to run the mile in under 4 minutes, a major athletic feat at the time. John Landy, an Australian, broke Bannister's record shortly thereafter.

The two greatest milers in the world, both of English background, by a strange quirk of scheduling would then shortly meet thereafter and compete at the Empire Games.

In their race, Landy had the lead on the 4th lap going around the turn and looked over his left shoulder for Bannister. As Landy was looking, Bannister darted past him on the right took the lead for the last 100 yds and won.

It was the first time two men ran the mile in the same race in under 4 minutes or the first time anyone ran the mile in under 4 minutes and lost.

Maybe the film clip is on the net. An exciting race to watch and historic.

Russ Sears adds:

The distance runners are posting some incredible times. Granted the Boston marathon was wind aided point to point course, but simply amazing.

Thimes remained flat and perhaps a bit slower from 1985-1994 then times started dropping again.

Some of it is in the new training methods, some is due to the coaching available to most that show a promise, some is due to more ways to make a living while still coming up the ranks, and some may be due to the drugs available, but I suspect many of the best are clean, and those that aren't add motivation.

Jay Pasch writes:

Jeff, quite the interesting post as my father coached the same thing, and being small in stature, that it's not the size of the dog in the fight but the fight in the dog, and to work in tight, inside, where you have the advantage.

Scott Brooks writes:

Having grown up in a "rough" neighborhood and in light of the fact that I've been stabbed 3 times, I have always found that the best course of action was to avoid the fight at almost any cost.

I learned early on in life that there are "guys" out there who don't see the world the way 99% of the people do. They don't feel pain or fear like like 99% of the world. They are capable of a level of brutality and violence that is, quite simply, mind boggling. The way they fight and the things they are willing to do to their opponent in a fight is truly scary. They win fights because they are willing to go to a level of violence that 99% of the people in the world are not willing to escalate too.

My brother and three of uncles were "those guys". I witnessed them do things in fights that was truly stunning. My uncles grew up in one of the worst toughest neighborhoods in St. Louis. They were, hands down, the toughest guys in that neighborhood….no one was a close second to them. Two of these uncles were only a 2 - 5 years older than me.

 I remember one time when I was around 12 years old, I was over at my grandmothers house visiting. I was playing down the street from her house when these 4 guys came up to me and started to "accost" me. They surrounded me, started shoving me around and telling me to give them my money, and that they were going to beat the $#!% out of me. Basically, I think they picked on me because they didn't recognize me (they left the rest of the guys I was playing with alone….all of whom were from the neighborhood). One of the thugs asked me what I was doing in their neighborhood and I told them I was visiting my grandma. They kept picking on me. I was really scared and my mind was racing as they were starting "the process" of beating me up. It was then that a possible way out of this situation occurred to me. I asked the guys if they knew my uncles. They, of course, didn't care about knowing my uncles. So I said, you don't know my uncles, Mark and Kerry?

The next moment became frozen in time. You could have heard a pin drop. They immediately stopped shoving me around and all they stood perfectly still, first staring at me with a shocked look on their face, then their eyes began to dart from side to side looking at each other with the same stunned look on their face.

They immediately began to back peddle. They became my best friends and let me know that they were just joking around and were just messing with me. They said they were good friends with Mark and Kerry and that there was no reason to tell either of them. The "fear" in their eyes and their body language was as visible as lava pouring out of an erupting volcano. The mere mention of the names "Mark and Kerry" was like flipping on a light switch in a dark room. These guys who were just getting ready to steal my money and beat me up, who quickly became my friends, were now really anxious to leave the area as quickly as possible.

What happened next was really interesting.

When I saw my uncle Mark later in the day, I told him what had happened. He asked me to describe the guys who tried to mug me. Mark knew exactly who the guys were. Mark told me to stay at the house and he left. He returned some time later with bloody knuckles. He said he took care of the problem and that no one in the neighborhood would ever bother me again.

He was right. I was never bothered again. I saw those guys a few times after that. They not only never bothered me, they were semi-pleasant, while at the same time trying to get away from me as quickly as possible.

Between the level of violence that my uncles, my brother were capable of administering, I have decided that avoiding a fight is always the best policy….why take a chance on running into someone like my brother or uncles.

And anyway, even if you get into a fight and whip the other guys butt, if lands one good punch, you'll be laying in bed for the next week saying to yourself, "yeah, I won that fight, but man oh man, does my broken nose really hurt".

Call me a wuss if you want, but know this: I've been in more fights than most and had my butt WHUPPED by numerous people……and I never enjoyed any of them. I'll take "avoid" over fight any day of the week.

Sam Marx writes:

I grew up in the Weequahic section of Newark NJ, in the '40's (popularized in Phillip Roth's books).

We didn't fight we sued.

Steve Ellison writes:

I find it nearly impossible to literally score the first point in the market because of the bid-ask spread. If I hit the ask, chances are the next transaction will hit the bid. If I have a limit order to buy, it will not be filled unless the price is going lower. The best I can hope for is the analogy Mr. Sogi once made to a football play: the quarterback always has to retreat a few steps from the line of scrimmage to start the play. Similarly, the strategy on a hockey face-off is to draw the puck back to the defensemen so they can establish puck control and start a play.

Vince Fulco writes:

I often dream of being in the inner circle particularly under the scenarios of a nice outsized move off the O/N lows before the cash session. Then cash opens, declines all of 1/2 pt quickly, stops on a dime then zooms higher doubling the overall move.

Steve Ellison writes:

There are interesting parallels to the three choices for commerce posited by William J. Bernstein in his book A Splendid Exchange: trade, raid, or protect.

Apr

29

A favorite quote:

"Die Macht einer Weltanschauung bewährt sich nicht durch die Antworten, die sie zu geben weiß, sondern durch die Fragen, die sie abzudrosseln versteht" Gunther Anders [Die antikiertheit des menschen]

My amateur translation: "One doesn't measure the power of an ideology only through the answers it's able to provide, but also through the questions it's able to suppress".

Scott Brooks adds:

That is a perfect portrait of the evil influence of political correctness.

Apr

21

 I would like to give a book to the young officers of my ship when I leave my command in a few months. The idea would be to transmit the idea that one should look at opportunities today having a vision, a road map for tomorrow's journey.

As Randy Pausch said: "It is not about how to achieve your dreams. It's about how to lead your life."

Basically it is all about the curiosity to experiment and explore your dreams. Mistakes made are not about being good or bad. Don't be afraid to pursue your dreams. Opportunities occur randomly. If the environment is favorable there is a great chance that these opportunities will be favorable. Work to create this environment. If you are not happy, change. Do something. Don't whine. Do things with passion. Exploit and realize your potential and talent to the maximum extent.

Could you please give me some advice? What is the best book?

Thanks, 

Paolo

George Parkanyi writes:

Hello Paolo,


Yes Man
by Danny Wallace is a lot of fun. It's very funny (not sure if its translated into Italian though), but the central idea is that Danny wasn't happy with his life as it was and decided to see what would happen if he simply said "yes" to every opportunity and request that came along, without filtering. The book documents what happened. This addresses the curiosity/exploration part of the message you wish to convey, done in a fun way.

Think and Grow Rich by Napoleon Hill is an excellent book. It has many very good, uplifting life messages and very practical prescriptions for success.

Cheers,

George

Scott Brooks writes:

I agree with George that Think and Grow Rich is a must! It had a huge impact on my life.

Since part of vision is proper communication, I also recommend Dale Carnegie's, How to Win Friends and Influence People. I know the officers of a ship aren't there to "win friends", but communicating properly and in a manner that is receptive to the listener is a vital characteristic of all great leaders.

Apr

6

 When I coach basketball, what I emphasize is defense and boxing out. Here's why…..

Everyone wants to be LeBron or Kobe and do all the acrobatic scoring. The reality is that most of the kids will never be able to do all the fancy moves that those men do. Nor will most of the kids be prolific scorers. So take the road less traveled and do what no one else is really doing.

Do the dirty work. Not every kid can be a prolific scorer, but every kid can be taught to play tenacious defense. Since the vast majority of kids are unwilling to do the non-glamor work, it pays to be "blue collar worker" on the floor.

Every kid can be taught to be the vicious and feared rebounder on the floor…..no matter what their height. Watching youth games today, it very apparent to me that kids are NOT being taught how to box out for rebounds. Proper rebounding, done right, is a team effort so that THE TEAM can get the rebound. If I do my job right, and my team mates do their job right, and rebound caroms my way, I'll get the rebound. If I do my job right and my team mates do their job right and the rebound caroms away from me, MY TEAM MATE will get the rebound.

And contrary to popular opinion, basketball IS a contact sport. And the contact happens during the rebounding process. When done right, rebounding should be painful for your opponent, and over time, create fear in his mind. When that ball is shot, rather than him looking to get into position, he will be looking for you to avoid getting your hips shoved into his groin/thighs, or avoid getting your elbow shoved into his rib cage. He needs to know that challenging you for a rebound is going to hurt. Even guards play a key (and painful….for the other team) role in rebounding….remember, not all rebounds fall under the basket for the big men to grab. Lots of them bounce off the rim hard and end up away from the basket where the guards can grab them.

Most every kid can be taught be aggressive and dive into every scrum and tenaciously attack every loose ball. Whenever one of my kids bleeds, I make a big deal out it by praising them and thanking them.

I also teach my kids that unless I tell them otherwise, they get 4 free fouls a game……so use them wisely. No stupid fouls. If you are gonna foul someone, make it count. Never trip them or tackle them, never upend someone on a break away. But use your elbows and use your hips.

This is the path that will lead kids to a position on their high school, probably lots of playing time and maybe even a role as a starter.

Coaches love players who are willing to leave a little "red DNA" on the floor.

Feb

17

 Saw the Oracle get the Medal of Freedom yesterday. Will this enhance his stock?

Scott Brooks writes:

Another question: Who, on that stage, was truly deserving of receiving the Medal of Honor? I know there was at least one person on that stage who deserved the award for personifying what America is all about…..Stan "The Man" Musial. One of the 5 best baseball players of all time and a man who has lived to high standard all his life. He exemplifies what America should be….do the best with what you have and treat others with honor and integrity.

Feb

14

 1. For the early evening when you wanna dance and set the mood:

My Midnight Confession - The Grass Roots

Brandi (You're a Fine Girl)
- Looking Glass

Everybody's Talking
- Nilsson

You Can't Hurry Love
- Phil Collins

Toes - Zac Brown Band

Kiss Me - Sixpence (None the Richer)

2. Time to slow it down and hold your sweetie tight!*

Vincent (Starry Starry Night) - Don McLean

Somewhere Over the Rainbow/Wonderful World - Israel Kamakawiwo?ole

3. Songs to close the deal!!!!!

Make You Feel My Love - Bob Dylan

Angel - Sarah McLachlan

Unchained Melody - The Righteous Brothers

4. For those that want to reminisce on Valentines Day

Night Moves - Bob Seger

What Might Have Been - Little Texas

Times of Your Life - Paul Anka

Jan

24

First, why are so many people unemployed? The answer is very simple.
Because there is no profitable work for them to do as present labor
rates. Thanks to previous meddles, the US economy focused itself on
building houses and importing geegaws from overseas for people who
couldn't afford to pay for them. This was a dead-end economic model. And
the end came in 2007. Now, the latest figures show an uptick in
manufacturing…which is clearly the direction to go. But it will take
years before the US economy has made the adjustment to a new, healthier
model…making and selling things at a profit.

In the meantime, unemployment levels will remain high.

But wait…there's more. For which the adjustment is taking place, US
authorities are trying to block it. How? By taking resources from the
new, unborn industries and using it to prop up the old, dying ones. Like
Wall Street, for example. The financial industry grew like Topsy in the
bubble years. It began to shrink in the crisis of '07-'09, but the feds
came in and pumped more than a trillion dollars into the financial
sector, producing record profits for the big banks, but depriving the
rest of the economy of much needed capital.

Not only that, the feds also take the pressure off labor to make
adjustments. Food stamps, minimum wages, unemployment compensation,
make-work, shovel-ready boondoggles - all these things cause workers to
think they can continue as before…that a "recovery" of the good ol'
days is just around the corner…and that they'll soon be earning as
much as they were in 2007. Maybe more!

Want to really fix the unemployment problem? Listen up. Eliminate all
bailouts, subsidies, giveaways and support systems - both to business
and to labor. Abolish all employment restrictions and employment
paperwork. All free labor - undocumented non-citizens - to compete
equally with native-born workers. Cut taxes to a flat 10% rate for
everyone. Abolish every government agency that begins with a letter of
the alphabet. Then abolish the rest of them.

We confidently guarantee that the nation would be back at full employment within 30 days.

Tyler McClellan comments:

 This whole argument is bullshit.

The productive industries are by their own choice and for their own
reasons net suppliers of capital to the rest of the economy. It's a
myth, complete myth that capital flows to where it is most profitable.
It flows from where it is most profitable to where it will be accepted.

Stefan Jovanovich writes:

I wish I could agree with Craig, but he omits a significant handicap.
Because of the catastrophic decline in the productivity of American
elementary and secondary and college education, the skill sets of
workers under 30 are far, far lower than they were in 1945 - 1955. The
transcripts are immeasurably more impressive that they were for people
coming out of the military service and leaving college after the GI
bill. That Army confirms this sad fact in its recruiting statistics. The
handicaps for inductees in WW II were that some had had very little
formal education and were underweight from having struggled through the
Depression. The Army found that these could be remedied with "basic
training" in the 3 Rs (Reading, writing and arithmetic) - usually a 3-4
month course - and some decent chow.

The handicaps for recruits now are obesity and the creeping dumbs -
almost all the kids from the inner cities and slum suburbs are fat,
illiterate and without any learning skills. No entrepreneur in his or
her right mind is going to hire these kids, even if Craig's hallelujah
miracle of sane political economy suddenly appears. Full employment is a
long, long way off - as far away for this generation as it was for
people like my father-in-law in 1930. He had degrees in geology and
petroleum engineering from the Universities of Texas and Oklahoma, and
it took him half a decade to find steady work - initially as a
roughneck. These poor (in all senses of that word) kids don't stand a
chance.

Gary Rogan responds:

While I agree with all the recommendations, guaranteeing full
employment within 30 day while possible contradicts some fairly recent
Nobel prize work (of course the very fact that Krugman has one
invalidates it stature, but still it's something to consider).

The work of the winners,
Professor Diamond of the Massachusetts Institute of Technology, Dale
T. Mortensen of Northwestern University and Christopher A. Pissarides of
the London School of Economics, is best known for its applications to
the job market.

The researchers spent decades trying to understand why it takes so long
for people to find jobs, even in good economic times, and why so many
people can be unemployed even when many jobs are available.

Traditional economics, after all, would predict that wages should simply
drop, helping the labor supply to meet labor demand automatically and
sweeping jobless workers into whatever positions were immediately open.

These researchers’ explanation addresses the complications that come
from searching for jobs and job candidates: it takes time for unemployed
workers to be matched with the proper opening, since people are not
identical, cookie-cutter units, and neither are jobs.

While all this may seem intuitive, in the 1970s it was considered quite
radical. The resulting insights about how search costs can affect
markets also helped revolutionize not only labor economics, but fields
like public finance and housing economics as well. The work is
especially relevant today, as policy makers try to understand and combat
the causes of stubbornly high unemployment in countries like the United
States.

Stefan Jovanovich responds:

The equilibrium assumption behind the Diamond, Mortensen, Pissarides
study is fascinating. Why should there be any necessary match between
ALL the skills being offered and ALL the skills being demanded? Prices
can adjust supply and demand where markets exists; they cannot produce
demand for skills that offer no profit to the buyer at any price. The
neo-Keynesian fallacy is that money dropped from helicopters will cause
private employers to find profits in having holes dug and then filled up
again; the original Keynesian fallacy was that the government can take
money from the incomes of people whose skills are marketable and give
the money to the hole diggers without reducing the amount of savings
available for investment.

Scott Brooks writes:

Capital doesn't flow where it will be accepted, it flows to where the government allows it to flow.

America is like a sick body riddled with metastasizing cancer. Nothing
works properly in a body that is fighting for it's life. Nothing "flows"
properly. The "Body America" is riddled with the cancer of statism. As a
result, the entire "financial organ" of the "Body America" isn't
working properly.

Mr. Albert comments:

The 'Greatest Generation' had an enormous advantage. After the war,
the US faced essentially no mercantile or manufacturing competition, and
thus dominated foreign markets at a time of enormous replacement need.

It was easy for the unskilled and unlearned to find work in that
environment. This advantage lasted essentially for the career length of
that generation. Fortunate circumstances coupled with the wealth
transfer of government borrowing and spending fuels the illusion that
somehow they had it right and the next three generations don't.

Craig Mee writes:

Thanks Stefan and co. It
seems he brings up many areas, but at the heart of it, is protection,
and political correctness and slowly slowly, and looking after the
flexions. When in fact a case of strong medicine is often needed, and a
swift kick up the butt. 

Stefan Jovanovich comments:

Tyler makes the conventional mistake of assuming capital and savings are
equivalents. People, by and large, have been remarkably canny about what
they do with their savings as long as their money is immunized from the
manipulations of the government and the better class of people
(academic joke). "Capital" - that Marxist construct now used by central
banks presiding over fiat monetary systems - will always want to snuggle
up to the Emperor and the Praetorian Guard and stay as far, far away
from the unruly uncertainties produced by the getting and spending of
the plebs in the marketplace and their insistence of being paid in
actual coin.

Gary Rogan comments:

While there is something to the paradox of thrift as a game-theory
type concept, the idea that the government can solve it through directed
spending is one of the more evil ideas that ever occurred in terms of
practical impact.

Tyler McClellan comments:

I feel very confident in saying you simply
don't understand the paradox. you have likely never read it, have no
idea (unlike stefan) that it arises from the identity of private sector
account that savings must be equal to investment but that our motivation
towards the one is the opposite and equal of the other. That they are
intermediated by the financial system under any circumstance just at a
level that is previously not computable because it would require knowing
what everyone's planned savings and investment were prior to some of
their income being destroyed by or added to based on others similar
calculations. In aggregate society cannot save by dissaving.

Oh yes it can via the production of indeterminant claims by the
government which is a result of excess private sector savings demand
over and above each individuals in aggregate investment demand (real
investment as a flow).

Now Stefan is learned enough to admit that he at least simply doesn't
believe in the identity, which I must admit is too difficult of a
concept for me to think about after years of trying to have kept at it.

Stefan Jovanovich responds:

Tyler and I have a quarrel over the nature of money, and his is most definitely the majority opinion. Mine is the quaint antiquarian notion that (almost) predates utility curves. You find the odd vestige of it (like a kind of monetary appendix) in the valuation of gold at the price set by President Roosevelt's order under the Trading with the Enemies Act (the loophole that allowed the provisions of the Federal Reserve Act to be superceded). This pricing of gold at a U.S. dollar figure other than the current market serves no evolutionary purpose in a world where Tyler's tautology is not only the economic rule but also the legal tender law.

But these odd remnants of a past economic world should serve as a reminder that the idea that a bank's reserve should be specie - a monetary thing tangibly powerful enough to stop even the most severe breaches of trust - was once common wisdom. It is no accident that the term "reserve" came from military doctrine; a reserve was supposed to be the troops strong and brave enough to held back from the front lines with the understanding that they would be sent forward when the frontline troops had been routed. We have nothing like that now. The Reserves of the Federal Reserve and every other central bank are to be found behind the curtains of the neo-Mussolini architecture (both inside and out) of their buildings where there lie printing presses (excuse me - computer keyboards - with linkages so vastly powerful that no skepticism about the ultimate exchangability of the bank's units of "capital' dare be whispered, even by the girl in the ruby slippers. Until now, that is.

Those odd people who insisted that the Federal Reserve Act itself affirm the exchangeability of U.S. Notes (what were to become our Federal Reserve Notes) into gold under the Constitutional standard thought Tyler's aggregations were dangerous because they established a full substitution between money and credit in the name of "capital". Most of the time this aggregation did no harm; but when people were tempted to borrow and spend (as they had in the American Civil War/War Between the States) without any regard to whether the borrowings could, in fact, be repaid in money as good as gold, the ability of the government to create savings by simply increasing paper bank reserves was a fatal temptation. As we have seen, that temptation has been impossible for modern governments to resist whether the war is one "to end all wars" or "against poverty".

Gary Rogan writes:

Whatever the nature of money is, sooner or later there is a war that interrupts even the most stable tax/spend regimes, and there is never enough political will/desire/ability to tax enough to support it. Or there is a "crisis" and the voters in the next election are always more important than the ones in the following one. So sooner or later the government will find a way to corrupt the monetary standard. It just gets irritating when someone like Bernanke is p***ing on everybody's shoes an telling them this is the rain that will finally end the drought.

 George Parkanyi writes:

And what government/country/civilization in the past hasn't done this? It's the nature of the beast. Different regimes will do it a different pace, but the long-term historical result will be the same. Read Machiavelli's "The Prince". This is an excellent treatise on how politics relates to human nature. You could always try working your way into office and try to change the government, or become some kind of guru and try to change human nature -good luck with either.

Stefan Jovanovich responds:

 No, George. Machiavelli wrote The Prince as a satire. That is why the book was banned by the Pope aka the Medici's ally Julius II. Machiavelli was a republican - i.e. someone who thought tyrannies were bad because they were so ultimately stupid. Under the Florentine Republic Machiavelli was in charge of the militia and he insisted that only citizen-soldiers serve, breaking with the tradition of hiring foreign mercenaries. If you want to know what the man actually thought about "how politics relates to human nature", read Discourses on Livy. Machiavelli had no doubt that people can and do change the government and the world of political-economy they live in; it is the Princes who want us to think that history is a Hobbesian monotony.

 

Jan

14

 If you are looking for a good book, try The Shadow Elite by Janine Wedel. She coined and documented the flexions of all stripes. Also very good is The Short Stories of Jack Schaefer, and Mathematics Unlimited, 2001 and Beyond by Engquist, Schmid et al

John Tierney writes:

OK, if you are looking for non-fiction try The Invisible Hook: The Hidden Economics of Pirates

Kim Zussman recommends: 

"This Time is Different" by Reinhart and Rogoff

(Spoiler hint: the common ploy of sovereign debt default via confiscation and hyperinflation appears not to apply to U$)

Scott Brooks writes: 

We've talked about it on the list before and I I found it very good: Amity Shlaes "The Forgotten Man"

Easan Katir writes: 

To the Last Penny is an excellent but little-known Edwin Lefevre work, which, thanks to Google books, one can read online.

Bud Conrad writes: 

How about my book, which explains how the economy works from the view of an engineer looking at the total system. It also gives investment recommendations in the second half. It is titled Profiting from the World's Economic Crisis and published by John Wiley. Amazon has reviews and some sample pages. It is number one in one category on interest rates. 

Craig Mee adds:

I recommend the Book on Games of Chance. A few of you may be no doubt already connected with it. Here is an interesting excerpt about it:

Cardano was an illegitimate child whose mother had tried to abort him. His father was a mathematically gifted lawyer and friend of Leonardo da Vinci. Cardano studied medicine at the University of Pavia, but his eccentricity and low birth earned him few friends. Eventually, he became the first to describe typhoid fever, a not inconsiderable achievement in itself, but today, he is best known for his love affair with algebra. He published the solutions to the cubic and quartic equations in his 1545 book Ars Magna, but Cardano was notoriously short of money, and had to keep himself solvent by gambling and playing chess. His book Liber de ludo aleae ("*Book on Games of Chance*") written in 1526, but not published until 1663, contains the first systematic treatment of probability, as well as a section on cheating methods. I told you he was bad.

Vince Fulco adds:

A little late to this thread but "Panic" by Andrew Redleaf and Richard Vigilante is proving to be a good read. Redleaf is a convert arb manager out in my neck of the woods who runs Whitebox Advisors. He is in print in his Dec 2006 letter stating, "Here is a flat out prediction for the New Year. Sometime in the next 12-18 months there is going to be a panic in credit markets. Spreads which now hover at an extremely tight 300 bps or so, will gap to more than 1,000. To put it another way, prices of HY securities will drop by something like 20 percent with some weak paper plunging even deeper"

A few powerful paragraphs from the first chapter:

The ideology of modern finance tears capitalism in two, then abandons the half beyond the ken of bureaucrats and the professors. Capitalism demands free markets because it needs free minds. Modern investment theory says efficient markets can moot the minds entirely. The entrepreneur cherishes freedom including the freedom to fail. The bureaucrat of capital dreams of a world in which failure is impossible. Confronted with demons of uncertainty, the entrepreneur wrestles with them till dawn. The bureaucrat of capital crafts idols of ignorance and worships in the dark.

Prevailing in Washington as on Wall St. were the most vile and self-destructive assumptions of anti-capitalists everywhere who imagined they could wield capital while abandoning the principles that created it; that systems could substitute for the moral standards they once embodied; or that men who lost trillions of dollars of other people's money might somehow recover it if only the govt gave them trillions more. Crony capitalists on the right and socialists on the left united as always behind their most fundamental belief, that wealth is to be captured by power and pull rather than created in the minds of men.

Jan

2

 There is something about True Grit that is truly loathsome. Each of the 3 main characters is deeply flawed. Marshall Rooster Cogburn is a drunk and dead beat who speaks unintelligibly. Texas Ranger LaBoeuf is a show off, loser, and a chauvinist. The girl is sharp tongued, litigious, and naive (no wonder she didn't get married). It all fits in with the idea that has the world in its grip, that the purpose of life is to keep oneself small by sacrifice. There is no chemistry or romance between any of the characters except for Pepper the Quixotian leader of the outlaws, who as could be predicted was the only man good in his every day business of being a outlaw. No wonder this Western follows the code of the west breaking, denigrating Brokeback Mountain and no wonder that Louis L'Amour's novels have sold more than all western authors combined since the beginning of time, and that they dare not make one of them or an Atlas Shrugged, in favor of this disrespectful Portis trash that violates all the rules of good mystery by having one hair breadth, extraordinary, lucky escape after another, and stereotyped snake bite scene (a la Larry Mcmurtry) release the tension.

P.S I have never written about a subject not directly related to the multivariate analysis of time series that Mr. Jovanovich has not corrected and amplified on where I was astray. And I must admit that I didn't realize that the Western Novel was yet another of his expertises. Okay, I want to know from him if he agrees with me, on this one point that Monte Walsh is the greatest western novel, (if the chapter where the accountant comes to reduce the pay of the hands that took vengeance on the trainmen doesn't make you cry, I'll eat that hat the accountant wore that was so tempting to Hat, Cal and Monte), and the best business novel of all time.

Stefan Jovanovich replies: 

Grub street used to honor the basic code for reviewers: read the book first, then slander the author. We should do the same. Portis' book is like neither of the movies; the John Wayne version comes much closer in spirit, but it is still far, far too "nice". The actual novel is a memoir written by a tough-spirited, one-armed spinster Presbyterian capitalist remembering the one man whom she loved and how they avenged the murder of her father when she was– by other people's standards– "still a girl". Blaming authors for what Hollywood makes of their books is like blaming men for the conduct of their ex-wives after they finish paying the alimony; all the authors can be held accountable for is the size of the check they cash.

I am old enough to have lived near (but definitely not in) Beverly Hills when Louis L'Amour still gave readings at the library. He was a great and good man, and– yes– Monte Walsh is the classic. As is often the case, my anger is misdirected; what infuriates me about this latest version of True Grit is what is says about the Coen brothers' decline and fall. The novel will survive their abomination of it; hell, it will probably be reread again. But for the Coen brothers, what hope is there now? Intolerable Cruelty is the best and funniest film ever about Hollywood and lawyers and now the guys who made it can only do splatter trash.

P.S. Eddy just called. She thinks our only hope is to pray that South Park's explanation once again holds true and blame it all on Matt Damon and his friend. 

Dylan Distasio writes: 

At the risk of raising some hackles, I'd make the argument the McCarthy's "Blood Meridian or the Evening Redness in the West" is one of the greatest Western novels in that genre and one of the best I've read from 20th century authors in general.

J.T Holley writes:

If you like Blood Meridian then go read Suttree. IMHO, it is an existential masterpiece. Cornelius being a man of the "made, trust-fund baby, life of given not earned goes to be a fisherman in TN. Though the content could be considered as a rebellious misguided stab at the establishment, I found it a read that was of self-introspect, self-realization, self-reliance while battling vices with choice by going to the extreme to find such. Once again not oft mentioned amongst Cormac's works, I feel it is one of my favorite reads to crack open and read again. I'm a Southerner so the read is much suited to me, so some of the "in between the lines" stuff might not be appreciated.

Jim Wildman writes: 

My personal favorites in the Western genre.

"The Virginian" (Wister) if for no other reason than "Smile when you call me that"…and the baby swap prank.

"A Man Called Noon" (L'Amour) always makes me think about how I define who I am.

In "The Last of His Breed" Mr L'Amour applies similar themes from his Westerns to modern times. For my taste, the book is a bit long, but in fairness, it takes a while to walk across Siberia. And it has a great last line.

Trader Craft comments: 

Another great classic of the West is Thomas Bergman's "Little Big Man". Much better than the Dustin Hoffman movie.

Scott Brooks writes:

 As one who doesn't read a lot of westerns, (and I'm sure the purist will scoff at me) I have to say that Larry McMurtry's, "Lonesome Dove" is my favorite of that genre.

Good guys and bad guys. Multiple story lines all intertwined. Sudden and unforgiving death. Fortunes made and fortunes lost. Adventures piled on top of adventures. Good choices and bad choices. Friendships that are strong, but that don't override honor. Human foibles that override honor to do what is perceived as the "right thing". False friendship's that never were except to be used as seen fit by the "user".

Story of youth and aging and lesson's learned, lessons shared and lesson's taught. Love found, love spurned, and love lost. The superficial wannabes intermingled with the intellectual drivers. The high self esteem and low self esteem of characters revealed for the world to see.

Characters that arrive unexpectedly and stay and others that depart just as unexpectedly. Ego's that clash and feelings that are hurt. Life and time wasted on loves that can never be.

High risk adventures fraught with deadly consequences. People that love risk, taking more and more risk because the downside never happens to them…until it does.

Their are cowboy versions of "Eddie Willer's" (hard working and reliable) tying their horses to the wagon's of cowboy versions of "John Galt" (hard working reliable, but intellectually superior)…..but in a much more realistic sense….i.e. there's no mythical "static electricity generator" or "nearly infallible hero's"….just really smart people who make more good decisions than bad decisions…but who make bad decision…sometimes with catastrophic consequences.

I could go on and on, but something has just struck me as I write this general description of "Lonesome Dove"…..am I describing a Western Novel, or the modern day "Spec List".

Jack Tierney writes:

The Chair's mention of L'Amour reminds me that I've neglected to comment on the man's autobiography, "The Education of a Wandering Man". Unpublished during his life, the manuscript was found in his desk only later. The author of the Introduction speculates that L'Amour purposely put off publication fearing charges of braggadocio.

After reading the book, it's a possibility. For many years he kept a written record of the books he had read– the selections are so diverse and numerous that it's impossible to pigeon-hole his preferences or determine how he found the time.

Because of finances, he left home at early and, Hoffer-like, rode the rails in search of employment. He also shipped out for as many foreign ports as he could find, baby-sat an abandoned mine for three months in the middle of nowhere without any human contact, and took up small-town prize-fighting when he really needed money and the locals really needed a fight.

But no matter where he was or how broke, he always had books. If there's any drawback in his story it's the realization that one could have read much, much more if he hadn't been sidelined by trivialities.

Pitt T. Maner III writes:

 It looks from L'Amour's autobiography that, from the years from 1930 to 1937 in particular, he tried to read approximately 100 books and plays each year. They were not what you would think a man writing Westerns would be reading.

Not a bad New Year's resolution if one has the time. It takes discipline too.

A quick perusal indicates he liked to read several books by one author or playwright that he liked within each year. Certain themes or genres captured his attention. Perhaps he was buying books in bulk or series from bookstores.

In 1930, for instance, he read many of the plays of Eugene O'Neill. In 1931 he read Flaubert. Shakespeare and Detective stories were popular with L'Amour in
1932. It looks like works by H.G. Wells and Conrad were favorites. L'Amour's lists are interesting because there are many books included that are not commonly read these days.

For instance "Trader Horn" by A.A. Horn and Ethelreda Lewis was a book made into a movie with filming done in Africa under extremely difficult conditions (they don't make movies like the used to).

The world was less explored and a bit more mysterious just 80 years ago.

The best writers often do a tremendous amount of critical reading and know a little bit about a vast array of subjects— even things that would be considered controversial today.

Dec

31

UPDATE 1/31/2011:

Contestants Summary:

- 31 Spec-listers contributed to the 2011 Investment Contest with "specific" recommendations.

- Average 4 recommendations per person (mean of 4.2, median and mode of 4) came in.

- 6 contestants gave only 1 recommendation, 3 gave only 2 and thus 9 out of the total 31 have NOT given the minimum 3 recommendations needed as per the Rules clarified by Ken Drees.

- The Hall of Fame entry for the largest number of ideas (did someone say diversification?) is from Tim Melvin, close on whose heels are J. T. Holley with 11 and Ken Drees with 10.

- The most creatively expressed entry of course has come from Rocky Humbert.

- At this moment 17 out of 31 contestants are in positive performance territory, 14 are in negative performance territory.

- Barring a major outlier of a 112.90% loss on the Option Strategy of Phil McDonnell (not accounting for the margin required for short options, but just taking the ratio of initial cash inflow to outflow):

- Average of all Individual contestant returns is -2.54% and the Standard Deviation of returns achieved by all contestants is 5.39.

- Biggest Gainer at this point is Jared Albert (with his all in single stock bet on REFR) with a 22.87% gain. The only contestant a Z score greater than 2 ( His is actually 4.72 !!)

- Biggest Loser at this point (barring the Giga-leveraged position of Mr. McDonnell) is Ken Drees at -10.36% with a Z Score that is at -1.45.

- Wildcards have not been accounted for as at this point, with wide
deviations of recommendations from the rules specified by most. While 9
participants have less than 3 recommendations, those with more than 4
include several who have not chosen to specify which 3 are their primary recommends. Without clarity on a universal measurability wildcard accounting is on hold. Those making more than 1 recommendations would find that their aggregate average return is derived by taking a sum of returns of individual positions divided by the number of recommends. Unless specified by any person that positions are taken in a specific ratio its equal sums invested approach.

Contracts Summary:

- A total of 109 contracts are utilized by the contestants across bonds, equity indices (Nikkei, Kenyan Stocks included too!), commodities, currencies and individual stock positions.

- The ratio of Shorts to Longs across all recommendations, irrespective of the type of contract (call, put, bearish ETF etc.) is 4 SELL orders Vs 9 Buy Orders. Not inferring that this list is more used to pressing the Buy Button. Just an occurence on this instance.

- The Average Return, so far, on the 109 contracts utilized is -1.26% with a Standard Deviation of 12.42%. Median Return is 0.39% and the mode of Returns of all contracts used is 0.

- The Highest Return is on MICRON TECH at 28.09, if one does not account for the July 2011 Put 25 strike on SLV utilized by Phil McDonnell.

- The Lowest Return is on IPTV at -50%, if one does not account for the Jan 2012 Call 40 Strike on SLV utilized by Phil McDonnell.

- Only Two contracts are having a greater than 2 z score and only 3 contracts are having a less than -2 Z score.

Victor Niederhoffer wrote:

One is constantly amazed at the sagacity in their fields of our fellow specs. My goodness, there's hardly a field that one of us doesn't know about from my own hard ball squash rackets to the space advertising or our President, from surfing to astronomy. We certainly have a wide range.

May I suggest without violating our mandate that we consider our best sagacities as to the best ways to make a profit in the next year of 2011.

My best trades always start with assuming that whatever didn't work the most last year will work the best this year, and whatever worked the best last year will work the worst this year. I'd be bullish on bonds and bearish on stocks, bullish on Japan and bearish on US stocks.

I'd bet against the banks because Ron Paul is going to be watching them and the cronies in the institutions will not be able to transfer as much resources as they've given them in the past 2 years which has to be much greater in value than their total market value.

I keep wondering what investments I should make based on the hobo's visit and I guess it has to be generic drugs and foods.

What ideas do you have for 2011 that might be profitable? To make it interesting I'll give a prize of 2500 to the best forecast, based on results as of the end of 2011.

David Hillman writes: 

"I do know that a sagging Market keeps my units from being full."

One would suggest it is a sagging 'economy' contributing to vacancy, not a sagging 'market'. There is a difference. 

Ken Drees, appointed moderator of the contest, clearly states the new rules of the game:

 1. Submissions for contest entries must be made on the last two days of 2010, December 30th or 31st.
2. Entries need to be labeled in subject line as "2011 contest investment prediction picks" or something very close so that we know this is your official entry.
3. Entries need 3 predictions and 1 wildcard trade prediction (anything goes on the wildcard).

4. Extra predictions may be submitted and will be judged as extra credit. This will not detract from the main predictions and may or may not be judged at all.

5. Extra predictions will be looked on as bravado– if you've got it then flaunt it. It may pay off or you may give the judge a sour palate.

The desire to have entries coming in at years end is to ensure that you have the best data as to year end 2010 and that you don't ignite someone else to your wisdom.

Market direction picks are wanted:

Examples: 30 year treasury yield will fall to 3% in 2011, S&P 500 will hit "x" by June, and then by "y" by December 2011.

The more exact your prediction is, the more weight will be given. The more exact your prediction, the more weight you will receive if right and thus the more weight you will receive if wrong. If you predict that copper will hit 5.00 dollars in 2011 and it does you will be given a great score, if you say that copper will hit 5.00 dollars in march and then it will decline to4.35 and so forth you will be judged all along that prediction and will receive extra weight good or bad. You decide on how detailed your submission is structured.

Will you try to be precise (maybe foolhardy) and go for the glory? Or will you play it safe and not stand out from the crowd? It is a doubled edged sword so its best to be the one handed market prognosticator and make your best predictions. Pretend these predictions are some pearls that you would give to a close friend or relative. You may actually help a speclister to make some money by giving up a pearl, if that speclister so desires to act upon a contest–G-d help him or her.

Markets can be currency, stocks, bonds, commodities, etc. Single stock picks can be given for the one wildcard trade prediction. If you give multiple stock picks for the wildcard then they will all be judged and in the spirit of giving a friend a pearl–lets make it "the best of the best, not one of six".

All judgments are the Chair's. The Chair will make final determination of the winner. Entries received with less than 3 market predictions will not be considered. Entries received without a wildcard will be considered.The spirit of the contest is "Give us something we can use".

Bill Rafter adds: 

Suggestion for contest:

"Static" entry: A collection of up to 10 assets which will be entered on the initial date (say 12/31/2010) and will be unaltered until the end data (i.e. 12/31/2011). The assets could be a compilation of longs and shorts, or could have the 10 slots entirely filled with one asset (e.g. gold). The assets could also be a yield and a fixed rate; that is one could go long the 10-year yield and short a fixed yield such as 3 percent. This latter item will accommodate those who want to enter a prediction but are unsure which asset to enter as many are unfamiliar with the various bond coupons.

"Rebalanced" entry: A collection of up to 10 assets which will be rebalanced on the last trading day of each month. Although the assets will remain unchanged, their percentage of the portfolio will change. This is to accommodate those risk-averse entrants employing a mean-reversion strategy.

Both Static and Rebalanced entries will be judged on a reward-to-risk basis. That is, the return achieved at the end of the year, divided by the maximum drawdown (percentage) one had to endure to achieve that return.

Not sure how to handle other prognostications such as "Famous female singer revealed to be man." But I doubt such entries have financial benefits.

I'm willing to be an arbiter who would do the rebalancing if necessary. I am not willing to prove or disprove the alleged cross-dressers.

Ralph Vince writes:

A very low volume bar on the weekly (likely, the first of two consecutive) after a respectable run-up, the backdrop of rates having risen in recent weeks, breadth having topped out and receding - and a lunar eclipse on the very night of the Winter Solstice.

If I were a Roman General I would take that as a sign to sit for next few months and do nothing.

I'm going to sit and do nothing.

Sounds like an interim top in an otherwise bullish, long-term backdrop.

Gordon Haave writes: 

 My three predictions:

Gold/ silver ratio falls below 25 Kenyan stock market outperforms US by more than 10%

Dollar ends 10% stronger compared to euro

All are actionable predictions.

Steve Ellison writes:

I did many regressions looking for factors that might predict a year-ahead return for the S&P 500. A few factors are at extreme values at the end of 2010.

The US 10-year Treasury bond yield at 3.37% is the second-lowest end-of year yield in the last 50 years. The S&P 500 contract is in backwardation with the front contract at a 0.4% premium to the next contract back, the second highest year-end premium in the 29 years of the futures.

Unfortunately, neither of those factors has much correlation with the price change in the S&P 500 the following year. Here are a few that do.

The yield curve (10-year yield minus 3-month yield) is in the top 10% of its last 50 year-end values. In the last 30 years, the yield curve has been positively correlated with year-ahead changes in the S&P 500, with a t score of 2.17 and an R squared of 0.143.

The US unemployment rate at 9.8% is the third highest in the past 60 years. In the last 30 years, the unemployment rate has been positively correlated with year-ahead changes in the S&P 500, with a t score of 0.90 and an R squared of 0.028.

In a variation of the technique used by the Yale permabear, I calculated the S&P 500 earnings/price ratio using 5-year trailing earnings. I get an annualized earnings yield of 4.6%. In the last 18 years, this ratio has been positively correlated with year-ahead changes in the S&P 500, with a t score of 0.92 and an R squared of
0.050.

Finally, there is a negative correlation between the 30-year S&P 500 change and the year-ahead change, with a t score of -2.28 and an R squared of 0.094. The S&P 500 index price is 9.27 times its price of 30 years ago. The median year-end price in the last 52 years was 6.65 times the price 30 years earlier.

Using the predicted values from each of the regressions, and weighting the predictions by the R squared values, I get an overall prediction for an 11.8% increase in the S&P 500 in 2011. With an 11.8% increase, SPY would close 2011 at 140.52.

Factor                  Prediction      t       N    R sq
US Treasury yield curve      1.162    2.17      30   0.143
30-year change               1.052   -2.28      52   0.094
Trailing 5-year E/P          1.104    0.92      18   0.050
US unemployment rate         1.153    0.90      30   0.028

Weighted total               1.118
SPY 12/30/10               125.72
Predicted SPY 12/30/11     140.52

Jan-Petter Janssen writes: 

PREDICTION I - The Inconvenient Truth The poorest one or two billion on this planet have had enough of increasing food prices. Riots and civil unrest force governments to ban exports, and they start importing at any cost. World trade collapses. Manufacturers of farm equipment will do extremely well. Buy the most undervalued producer you can find. My bet is
* Kverneland (Yahoo: KVE.OL). NOK 6.50 per share today. At least NOK 30 on Dec 31th 2011.

PREDICTION II - The Ultimate Bubble The US and many EU nations hold enormous gold reserves. E.g. both Italy and France hold the equivalent of the annual world production. The gold meme changes from an inflation hedge / return to the gold standard to (a potential) over-supply from the selling of indebted nations. I don't see the bubble bursting quite yet, but
* Short gold if it hits $2,000 per ounce and buy back at $400.

PREDICTION III - The Status Quo Asia's ace is cheap labor. The US' recent winning card is cheap energy through natural gas. This will not change in 2011. Henry Hub Feb 2011 currently trades at $4.34 per MMBtu. Feb 2012 is at $5.14. I would
* Short the Feb 2012 contract and buy back on the last trading day of 2011.

Vince Fulco predicts:

 This is strictly an old school, fundamental equity call as my crystal ball for the indices 12 months out is necessarily foggy. My recommendation is BP equity primarily for the reasons I gave earlier in the year on June 5th (stock closed Friday, June 4th @ $37.16, currently $43.53). It faced a hellish downdraft post my mention for consideration, primarily due to the intensification of news flow and legal unknowns (Rocky articulated these well). Also although the capital structure arb boys savaged the equity (to 28ish!), it is up nicely to year's end if one held on and averaged in with wide scales given the heightened vol.

Additional points/guesstimates are:

1) If 2010 was annus horribilis, 2011 with be annus recuperato. A chastened mgmt who have articulated they'll run things more conservatively will have a lot to prove to stakeholders.

2) Dividend to be re-instated to some level probably by the end of the second quarter. I am guessing $1.00 annualized per ADS as a start (or
2.29%), this should bring in the index hugging funds with mandates for only holding dividend payers. There is a small chance for a 1x special dividend later in the year.

3) Crude continues to be in a state of significant profitability for the majors in the short term. It would appear finding costs are creeping however.

4) The lawsuits and additional recoveries to be extracted from the settlement fund and company directly have very long tails, on the order of 10 years.

5) The company seems fully committed to sloughing off tertiary assets to build up its liquid balance sheet. Debt to total capital remains relatively low and manageable.

6) The stock remains at a significant discount to its better-of breed peers (EV/normalized EBITDA, Cash Flow, etc) and rightly so but I am betting the discount should narrow back to near historical levels.

Potential negatives:

1) The company and govt have been vastly understating the remaining fuel amounts and effects. Release of independent data intensifies demands for a much larger payout by the company closer to the highest end estimates of $50-80B.

2) It experiences another similar event of smaller magnitude which continues to sully the company's weakened reputation.

3) China admits to and begins to fear rampant inflation, puts the kabosh to the (global) economy and crude has a meaningful decline the likes of which we haven't seen in a few years.

4) Congress freaks at a >$100-120 price for crude and actually institutes an "excess profits" tax. Less likely with the GOP coming in.

A buy at this level would be for an unleveraged, diversified, longer term acct which I have it in. However, I am willing to hold the full year or +30% total return (including special dividend) from the closing price of $43.53 @ 12/30/10, whichever comes first. Like a good sellside recommendation, I believe the stock has downside of around 20% (don't they all when recommended!?!) where I would consider another long entry depending on circumstances (not pertinent to the contest).

Mr. Albert enters: 

 Single pick stock ticker is REFR

The only way this gold chain wearing day trader has a chance against all the right tail brain power on the list is with one high risk/high reward put it all on red kind of micro cap.

Basic story is this company owns all the patents to what will become the standard for switchable glazings (SPD smart glass). It's taken roughly 50 years of development to get a commercialized product, and next year Mercedes will almost without doubt use SPD in the 2012 SLK (press launch 1/29/11 public launch at the Geneva auto show in march 2011).

Once MB validate the tech, mass adoption and revenues will follow etc and this 'show me' stock will rocket to the moon.

Dan Grossman writes:

Trying to comply with and adapt the complex contest rules (which most others don't seem to be following in any event) to my areas of stock market interest:

1. The S&P will be down in the 1st qtr, and at some point in the qtr will fall at least

2. For takeover investors: GENZ will (finally) make a deal to be acquired in the 1st qtr for a value of at least $80; and AMRN after completion of its ANCHOR trial will make a deal to be acquired for a price of at least $8.

3. For conservative investors: Low multiple small caps HELE and DFG will be up a combined average of 20% by the end of the year.

For my single stock pick, I am something of a johnny-one-note: MNTA will be up lots during the year — if I have to pick a specific amount, I'd say at least 70%. (My prior legal predictions on this stock have proved correct but the stock price has not appropriately reflected same.)

Finally, if I win the contest (which I think is fairly likely), I will donate the prize to a free market or libertarian charity. I don't see why Victor should have to subsidize this distinguished group that could all well afford an contest entrance fee to more equitably finance the prize.

Best to all for the New Year,

Dan 

Gary Rogan writes:

 1. S&P 500 will rise 3% by April and then fall 12% from the peak by the end of the year.
2. 30 year treasury yields will rise to 5% by March and 6% by year end.
3. Gold will hit 1450 by April, will fall to 1100 by September and rise to 1550 by year end.

Wildcard: Short Netflix.

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

Equal Amounts in:

TBT (short long bonds)
YCS (short Yen)
GRU (Long Grains - heavy on wheat)
CHK (Long NG - takeover)

(Wild Card)
BONXF.PK or BTR.V (Long junior gold)

12/30 closing prices (in order):
37.84
15.83
7.20
25.97

.451

Bill Rafter writes:

Two entries:

Buy: FXP and IRWD

Hold for the entire year.

William Weaver writes:

 For Returns: Long XIV January 21st through year end

For Return/Risk: Long XIV*.30 and Long VXZ*.70 from close today

I hope everyone has enjoyed a very merry holiday season, and to all I wish a wonderful New Year.

Warmest,

William

Ken Drees writes:

Yes, they have been going up, but I am going contrary contrary here and going with the trends.

1. Silver: buy day 1 of trading at any price via the following vehicles: paas, slw, exk, hl –25% each for 100% When silver hits 39/ounce, sell 10% of holdings, when silver hits 44/ounce sell 30% of holdings, when silver hits 49 sell 60%–hold rest (divide into 4 parts) and sell each tranche every 5 dollars up till gone–54/oz, 59, 64, 69.

2. Buy GDXJ day 1 (junior gold miner etf)—rotation down from majors to juniors with a positive gold backdrop. HOLD ALL YEAR.

3. USO. Buy day 1 then do—sell 25% at 119/bbl oil, sell 80% at 148/bbl, sell whats left at 179/bbl or 139/bbl (whichever comes first after 148)

wildcard: AMEX URANUIM STOCKS. UEC, URRE, URZ, DNN. 25% EACH, buy day 1 then do SELL 70% OF EVERYTHING AT 96$LB u http://www.uxc.com/ FOR PRICING, AND HOLD REST FOR YEAR END.

Happy New Year!

Ken Drees———keepin it real.

Sam Eisenstadt forecasts:

My forecast for the S&P 500 for the year ending Dec 31, 2011;

S&P 500       1410

Anton Johnson writes: 

Equal amounts allocated to:

EDZ Short moc 1-21-2011, buy to cover at 50% gain, or moc 12/30/2011

VXX Short moc 1-21-2011, buy to cover moc 12/30/2011

UBT Short moo 1-3-2011, buy to cover moc 12/30/2011

Scott Brooks picks: 

 RTP
TSO
SLV
LVS

Evenly between the 4 (25% each)

Sushil Kedia predicts:

 Short:

1) Gold
2) Copper
3) Japanese Yen

30% moves approximately in each, within 2011.

Rocky Humbert writes:

(There was no mention nor requirement that my 2011 prediction had to be in English. Here is my submission.) … Happy New Year, Rocky

Sa aking mahal na kaibigan: Sa haba ng 2010, ako na ibinigay ng ilang mga ideya trading na nagtrabaho sa labas magnificently, at ng ilang mga ideya na hindi na kaya malaki. May ay wala nakapagtataka tungkol sa isang hula taon dulo, at kung ikaw ay maaaring isalin ito talata, ikaw ay malamang na gawin ang mas mahusay na paggawa ng iyong sariling pananaliksik kaysa sa pakikinig sa mga kalokohan na ako at ang iba pa ay magbigay. Ang susi sa tagumpay sa 2011 ay ang parehong bilang ito ay palaging (tulad ng ipinaliwanag sa pamamagitan ng G. Ed Seykota), sa makatuwid: 1) Trade sa mga kalakaran. 2) Ride winners at losers hiwa. 3) Pamahalaan ang panganib. 4) Panatilihin ang isip at diwa malinaw. Upang kung saan gusto ko idagdag, fundamentals talaga bagay, at kung ito ay hindi magkaroon ng kahulugan, ito ay hindi magkaroon ng kahulugan, at diyan ay wala lalo na pinakinabangang tungkol sa pagiging isang contrarian bilang ang pinagkasunduan ay karaniwang karapatan maliban sa paggawa sa mga puntos. (Tandaan na ito ay pinagkasunduan na ang araw ay babangon na bukas, na quote Seth Klarman!) Pagbati para sa isang malusog na masaya at pinakinabangang 2011, at siguraduhin na basahin www.rockyhumbert.com kung saan ako magsulat sa Ingles ngunit ang aking mga saloobin ay walang malinaw kaysa talata na ito, ngunit inaasahan namin na ito ay mas kapaki-pakinabang.

Dylan Distasio comments: 

Gawin mo magsalita tagalog?

Gary Rogan writes:

After a worthy challenge, Mr. Rogan is now also a master of Google Translate, and a discoverer of an exciting fact that Google Translate calls Tagalog "Filipino". This was a difficult obstacle for Mr. Rogan to overcome, but he persevered and here's Rocky's prediction in English (sort of):

My dear friend: Over the course of 2010, I provided some trading ideas worked out magnificently, and some ideas that are not so great. There is nothing magical about a forecast year end, and if you can translate this paragraph, you will probably do better doing your own research rather than listening to the nonsense that I and others will give. The key to success in 2011 is the same as it always has (as explained by Mr. Ed Seykota), namely: 1) Trade with the trend.

2) Ride cut winners and losers. 3) Manage risk. 4) Keep the mind and spirit clear. To which I would add, fundamentals really matter, and if it does not make sense, it does not make sense, and there is nothing particularly profitable about being a contrarian as the consensus is usually right but turning points. (Note that it is agreed that the sun will rise tomorrow, to quote Seth Klarman) Best wishes for a happy healthy and profitable 2011, and be sure to read www.rockyhumbert.com which I write in English but my attitude is nothing clearer than this paragraph, but hopefully it is more useful.

Tim Melvin writes:

Ah the years end prediction exercise. It is of course a mostly useless exercise since not a one of us can predict what shocks, positive or negative, the world and the markets could see in 2011. I find it crack up laugh out loud funny that some pundits come out and offer up earnings estimates, GDP growth assumptions and interest rate guesses to give a precise level for the year end S&P 500 price. You might as well numbers out of a bag and rearrange them by lottery to come up with a year end number. In a world where we are fighting two wars, a hostile government holds the majority of our debt and several sovereign nations continually teeter on the edge of oblivion it's pretty much ridiculous to assume what could happen in the year ahead. Having said that, as my son's favorite WWE wrestler when he was a little guy used to say "It's time to play the game!"

Ill start with bonds. I have owned puts on the long term treasury market for two years now. I gave some back in 2010 after a huge gain in 2009 but am still slightly ahead. Ill roll the position forward and buy January 2012 puts and stay short. When I look at bods I hear some folks talking about rising basic commodity prices and worrying about inflation. They are of course correct. This is happening. I hear some other really smart folks talking of weak real estate, high jobless rates and the potential for falling back into recession. Naturally, they are also exactly correct. So I will predict the one thing no one else is. We are on the verge of good old fashioned 1970s style stagflation. Commodity and basic needs prices will accelerate as QE2 has at least stimulated demand form emerging markets by allowing these wonderful credits to borrow money cheaper than a school teacher with a 750 FICO score. Binds go lower as rates spike. Our economy and balance sheet are a mess and we have governments run by men in tin hats lecturing us on fiscal responsibility. How low will they go Tim? How the hell do I know? I just think they go lower by enough for me to profit.

 Nor can I tell you where the stock market will go this year. I suspect we have had it too good for too long for no reason so I think we get at least one spectacular gut wrenching, vomit inducing sell off during the year. Much as lower than expected profits exposed the silly valuations of the new paradigm stocks I think that the darling group, retail , will spark a sell-off in the stock market this year. Sales will be up a little bit but except for Tiffany's (TIF) and that ilk margins are horrific. Discounting started early this holiday and grew from there. They will get steeper now that that Santa Claus has given back my credit card and returned to the great white north. The earnings season will see a lot of missed estimates and lowered forecasts and that could well pop the bubble. Once it starts the HFT boys and girls should make sure it goes lower than anyone expects.

Here's the thing about my prediction. It is no better than anyone else's. In other words I am talking my book and predicting what I hope will happen. Having learned this lesson over the years I have learned that when it comes to market timing and market direction I am probably the dumbest guy in the room. Because of that I have trained myself to always buy the stuff that's too cheap not to own and hold it regardless. After the rally since September truly cheap stuff is a little scarce on the ground but I have found enough to be about 40% long going into the year. I have a watch list as long as a taller persons right arm but most of it hover above truly cheap.

Here is what I own going into the year and think is still cheap enough to buy. I like Winn Dixie (WINN). The grocery business sucks right now. Wal mart has crushed margins industry wide. That aside WINN trades at 60% of tangible book value and at some point their 514 stores in the Southeast will attract attention from investors. A takeover here would be less than shocking. I will add Presidential Life (PLFE) to the list. This stock is also at 60% of tangible book and I expect to see a lot of M&A activity in the insurance sector this year and this should raise valuations across the board. I like Miller Petroleum (MILL) with their drilling presence in Alaska and the shale field soft Tennessee. This one trades at 70% of tangible book. Ill add Imperial Sugar (IPSU), Syms (SYMS) and Micron tech (MU) and Avatar Holdings (AVTR) to my list of cheapies and move on for now.

I am going to start building my small bank portfolio this year. Eventually this group becomes the F-you walk away money trade of the decade. As real estate losses work through the balance sheet and some measure of stability returns to the financial system, perhaps toward the end of the year the small baileys savings and loan type banks should start to recover. We will also see a mind blowing M&A wave as larger banks look to gain not just market share but healthy assets to put on the books. Right now these names trade at a fraction of tangible book value. They will reach a multiple of that in a recovery or takeover scenario. Right now I own shares of Shore Bancshares (SHBI), a local bank trading at 80% of book value and a reasonably healthy loan portfolio. I have some other mini microcap banks as well that shall remain my little secret and not used to figure how my predictions work out. I mention them because if you have a mini micro bank in your community you should go meet then bankers, review the books and consider investing if it trades below the magical tangible book value and has excess capital. Flagstar Bancorp(FBC) is my super long shot undated call option n the economy and real estate markets.

I will also play the thrift conversion game heavily this year. With the elimination of the Office of Thrift Services under the new financial regulation many of the benefits of being a private or mutual thrift are going away. There are a ton of mutual savings banks that will now convert to publicly traded banks. A lot of these deals will be priced below the pro forma book value that is created by adding all that lovely IPO cash to the balance sheet without a corresponding increase in the shares outstanding. Right now I have Fox Chase Bancorp (FXCB) and Capital Federal Financial(CFFN). There will be more. Deals are happening every day right now and again I would keep an eye out for local deals that you can take advantage of in the next few months.

I also think that 2011 will be the year of the activist investor. These folks took a beating since 2007 but this should be their year. There is a ton of cash on corporate balance sheets but lots of underperformance in the current economic environment. We will see activist drive takeovers, restructures, and special dividends this year in my opinion. Recent filings of interest include strong activist positions in Surmodics(SRDX), SeaChange International (SEAC), and Energy Solutions. Tracking activist portfolios and 13D filings should be a very profitable activity in 2011.

I have been looking at some interesting new stuff with options as well I am not going to give most of it away just yet but I ll give you one stimulated by a recent list discussion. H and R Black is highly likely to go into a private equity portfolio next year. Management has made every mistake you can make and the loss of RALs is a big problem for the company. However the brand has real value. I do not want town the stock just yet but I like the idea of selling the January 2012 at $.70 to $.75. If you cash secure the put it's a 10% or so return if the stock stays above the strike. If it falls below I' ll be happy to own the stock with a 6 handle net. Back in 2008 everyone anticipated a huge default wave to hit the high yield market. Thanks to federal stimulus money pumping programs it did not happen. However in the spirit of sell the dog food the dog will eat a given moment the hedge fund world raised an enormous amount od distressed debt money. Thanks to this high yield spreads are far too low. CCC paper in particular is priced at absurd levels. These things trade like money good paper and much of it is not. Extend and pretend has helped but if the economy stays weak and interest rates rise rolling over the tsunami f paper due over the next few years becomes nigh onto impossible. I am going take small position in puts on the various high yield ETFs. If I am right they will explode when that market implodes. Continuing to talk my book I hope this happens. Among my nightly prayers is "Please God just one more two year period of asset rich companies with current payments having bonds trade below recovery value and I promise not to piss the money away this time. Amen.

PS. If you add in risk arbitrage spreads of 30% annualized returns along with this I would not object. Love, Tim.

I can't tell you what the markets will do. I do know that I want to own some safe and cheap stocks, some well capitalized small banks trading below book and participate in activist situation. I will be under invested in equities going into the year hoping my watch list becomes my buy list in market stumble. I will have put positions on long T-Bonds and high yield hoping for a large asymmetrical payoff.

Other than that I am clueless.

Kim Zussman comments: 

Does anyone else think this year is harder than usual to forecast? Is it better now to forecast based on market fundamentals or mass psychology? We are at a two year high in stocks, after a huge rally off the '09 bottom that followed through this year. One can make compelling arguments for next year to decline (best case scenarios already discounted, prior big declines followed by others, volatility low, house prices still too high, FED out of tools, gov debt/gdp, Roubini says so, benefits to wall st not main st, persistent high unemployment, Year-to-year there is no significant relationship, but there is a weak down tendency after two consecutive up years. ). And compelling arguments for up as well (crash-fears cooling, short MA's > long MA's, retail investors and much cash still on sidelines, tax-cut extended, employee social security lowered, earnings increasing, GDP increasing, Tepper and Goldman say so, FED herding into risk assets, benefits to wall st not main st, employment starting to increase).

Is the level of government market-intervention effective, sustainable, or really that unusual? The FED looks to be avoiding Japan-style deflation at all costs, and has a better tool in the dollar. A bond yields decline would help growth and reduce deflation risk. Increasing yields would be expected with increasing inflation; bad for growth but welcomed by retiring boomers looking for fixed income. Will Obamacare be challenged or defanged by states or in the supreme court? Will 2011 be the year of the muni-bubble pop?

A ball of confusion!

4 picks in equal proportion:

long XLV (health care etf; underperformed last year)

long CMF (Cali muni bond fund; fears over-wrought, investors still need tax-free yield)

short GLD (looks like a bubble and who needs gold anyway)

short IEF (7-10Y treasuries; near multi-year high/QE2 is weaker than vigilantism)

Alan Millhone writes:

 Hello everyone,

I note discussion over the rules etc. Then you have a fellow like myself who has never bought or sold through the Market a single share.

For myself I will stick with what I know a little something. No, not Checkers —

Rental property. I have some empty units and beginning to rent one or two of late to increase my bottom line.

I will not venture into areas I know little or nothing and will stay the course in 2011 with what I am comfortable.

Happy New Year and good health,

Regards,

Alan

Jay Pasch predicts: 

2010 will close below SP futures 1255.

Buy-and-holders will be sorely disappointed as 2011 presents itself as a whip-saw year.

99% of the bullish prognosticators will eat crow except for the few lonely that called for a tempered intra-year high of ~ SPX 1300.

SPX will test 1130 by April 15 with a new recovery high as high as 1300 by the end of July.

SPX 1300 will fail with new 2011 low of 1050 before ending the year right about where it started.

The Midwest will continue to supply the country with good-natured humble stock, relatively speaking.

Chris Tucker enters: 

Buy and Hold

POT
MS
CME

Wildcard:  Buy and Hold AVAV

Gibbons Burke comments: 

Mr. Ed Seykota once outlined for me the four essential rules of trading:

1) The trend is your friend (till it bends when it ends.)

2) Ride your winners.

3) Cut your losses short.

4) Keep the size of your bet small.

Then there are the "special" rules:

5) Follow all the rules.

and for masters of the game:

6) Know when to break rule #5

A prosperous and joy-filled New Year to everyone.

Cheers,

Gibbons

John Floyd writes:

In no particular order with target prices to be reached at some point in 2011:

1) Short the Australian Dollar:current 1.0220, target price .8000

2) Short the Euro: current 1.3375, target price 1.00

3) Short European Bank Stocks, can use BEBANKS index: current 107.40, target 70

A Mr. Krisrock predicts: 

 1…housing will continue to lag…no matter what can be done…and with it unemployment will remain

2…bonds will outperform as republicans will make cutting spending the first attack they make…QE 2 will be replaced by QE3

3…with every economist in the world bullish, stocks will underperform…

4…commodities are peaking ….

Laurel Kenner predicts: 

After having made monkeys of those luminaries who shorted Treasuries last year, the market in 2011 has had its laugh and will finally carry out the long-anticipated plunge in bond prices.

Short the 30-year bond futures and cover at 80.

Pete Earle writes:

All picks are for 'all year' (open first trading day/close last trading day).

1. Long EUR/USD
2. Short gold (GLD)

Short:
MMR (McMoran Exploration Corp)
HDIX (Home Diagnostics Inc)
TUES (Tuesday Morning Corp)

Long:
PBP (Powershares S&P500 Buy-Write ETF)
NIB (iPath DJ-UBS Cocoa ETF)
KG (King Pharmaceuticals)

Happy New Year to all,

Pete Earle

Paolo Pezzutti enters: 

If I may humbly add my 2 cents:

- bearish on S&P: 900 in dec
- crisis in Europe will bring EURUSD down to 1.15
- gold will remain a safe have haven: up to 1500
- big winner: natural gas to 8

J.T Holley contributes: 

Financials:

The Market Mistress so eloquently must come first and foremost. Just as daily historical stats point to betting on the "unchanged" so is my S&P 500 trade for calendar year 2011. Straddle the Mistress Day 1. My choice for own reasons with whatever leverage is suitable for pain thresholds is a quasi straddle. 100% Long and 50% Short in whatever instrument you choose. If instrument allows more leverage, first take away 50% of the 50% Short at suitable time and add to the depreciated/hopefully still less than 100% Long. Feel free to add to the Long at this discretionary point if it suits you. At the next occasion that is discretionary take away remaining Short side of Quasi Straddle, buckle up, and go Long whatever % Long that your instrument or brokerage allows till the end of 2011. Take note and use the historical annual standard deviation of the S&P 500 as a rudder or North Star, and throw in the quarterly standard deviation for testing. I think the ambiguity of the current situation will make the next 200-300 trading days of data collection highly important, more so than prior, but will probably yield results that produce just the same results whatever the Power Magnification of the Microscope.

Long the U.S. Dollar. Don't bother with the rest of the world and concern yourself with which of the few other Socialist-minded Country currencies to short. Just Long the U.S. Dollar on Day 1 of 2011. Keep it simple and specialize in only the Long of the U.S. Dollar. Cataclysmic Economic Nuclear Winter ain't gonna happen. When the Pastor preaches only on the Armageddon and passes the plate while at the pulpit there is only one thing that happens eventually - the Parish dwindles and the plate stops getting filled. The Dollar will bend as has, but won't break or at least I ain't bettin' on such.

Ala Mr. Melvin, Short any investment vehicle you like that contains the words or numerals "perpetual maturity", "zero coupon" and "20-30yr maturity" in their respective regulated descriptions, that were issued in times of yore. Unfortunately it doesn't work like a light switch with the timing, remember it's more like air going into a balloon or a slow motion see-saw. We always want profits initially and now and it just doesn't work that way it seems in speculation. Also, a side hedge is to start initially looking at any financial institution that begins, dabbles, originates and gains high margin fees from 50-100 year home loans or Zero-Coupon Home Loans if such start to make their way Stateside. The Gummit is done with this infusion and cheer leading. They are in protection mode, their profit was made. Now the savy financial engineers that are left or upcoming will continue to find ways to get the masses to think they "Own" homes while actually renting them. Think Car Industry '90-'06 with. Japan did it with their Notes and I'm sure some like-minded MBA's are baiting/pushing the envelopes now in board rooms across the U.S. with their profitability and ROI models, probably have ditched the Projector and have all around the cherry table with IPads watching their presentation. This will ultimately I feel humbly be the end of the Mortgage Interest Deduction as it will be dwindled down to a moot point and won't any longer be the leading tax deduction that it was created to so-called help.

Metals:

Short Gold, Short it, Short it more. Take all of your emotions and historical supply and demand factors out of the equation, just look at the historical standard deviation and how far right it is and think of Buzz Lightyear in Toy Story and when he thought he was actually flying and the look on his face at apex realization. That plus continue doing a study on Google Searches and the number of hits on "stolen gold", "stolen jewelery", and Google Google side Ads for "We buy Gold". I don't own gold jewelery, and have surrendered the only gold piece that I ever wore, but if I was still wearing it I'd be mighty weary of those that would be willing to chop a finger off to obtain. That ain't my fear, that's more their greed.

Long lithium related or raw if such. Technology demands such going forward.

Energy:

Long Natural Gas. Trading Day 1 till last trading day of the year. The historic "cheap" price in the minds of wannabe's will cause it to be leveraged long and oft with increasing volume regardless of the supply. Demand will follow, Pickens sowed the seeds and paid the price workin' the mule while plowin'. De-regulation on the supply side of commercial business statements is still in its infancy and will continue, politics will not beat out free markets going into the future.

Long Crude and look to see the round 150 broken in years to come while China invents, perfects, and sees the utility in the Nuclear fueled tanker.

Long LED, solar, and wind generation related with tiny % positions. Green makes since, its here to stay and become high margined profitable businesses.

Agriculture:

Short Sugar. Sorry Mr. Bow Tie. Monsanto has you Beet! That being stated, the substitute has arrived and genetically altered "Roundup Ready" is here to stay no matter what the Legislative Luddite Agrarians try, deny, or attempt. With that said, Long MON. It is way more than a seed company. It is more a pharmaceutical engineer and will bring down the obesity ridden words Corn Syrup eventually as well. Russia and Ireland will make sure of this with their attitudes of profit legally or illegally.

Prepare to long in late 2011 the commercialized marijuana and its manufacturing, distribution companies that need to expand profitability from its declining tobacco. Altria can't wait, neither can Monsanto. It isn't a moral issue any longer, it's a financial profit one. We get the joke, or choke? If the Gummit doesn't see what substitutes that K2 are doing and the legal hassles of such and what is going on in Lisbon then they need to have an economic lesson or two. It will be a compromise between the Commercial Adjective Definition Agrarians and Gummit for tax purposes with the Green theme continuing and lobbying.

Short Coffee, but just the 1st Qtr of 2011. Sorry Seattle. I will also state that there will exist a higher profit margin substitute for the gas combustible engine than a substitute for caffeine laden coffee.

Sex and Speculation:

Look to see www.fyretv.com go public in 2011 with whatever investment bank that does such trying their best to be anonymous. Are their any investment banks around? This Boxxx will make Red Box blush and Apple TV's box envious. IPTV and all related should be a category that should be Longed in 2011 it is here to stay and is in it's infancy. Way too many puns could be developed from this statement. Yes, I know fellas the fyre boxxx is 6"'s X 7"'s.

Music:

This is one category to always go Long. I have vastly improved my guitar playin' in '10 and will do so in '11. AAPL still has the edge and few rivals are even gaining market share and its still a buy on dips, sell on highs empirically counted. They finally realized that .99 cents wasn't cutting it and .69 cents was more appropriate for those that have bought Led Zeppelin IV songs on LP, 8-track, cassette, and CD over the course of their lives. Also, I believe technology has a better shot at profitably bringing music back into public schools than the Federal or State Gummits ever will.

Other:

Long - Your mind. Double down on this Day 1 of 2011. It's the most capable, profitable thing you have going for you. I just learned this after the last 36 months.

Long - Counting, you need it now more than ever. It's as important as capitalism.

Long - Being humble, it's intangible but if quantified has a STD of 4 if not higher.

Long - Common Sense.

Long - Our Children. The media is starting to question if their education is priceless, when it is, but not in their context or jam.

Short - Politics. It isn't a spectator sport and it has been made to be such.

Short - Fear, it is way way been played out. Test anything out there if you like. I have. It is prevalent still and disbelief is rampant.

Long - Greed, but don't be greedy just profitable. Wall Street: Money Never Sleeps was the pilot fish.

I had to end on a Long note.

Happy New Year's Specs. Thanks to all for support over the last four years. I finally realized that it ain't about being right or wrong, just profitable in all endeavors. Too many losses led to this, pain felt after lookin' within, and countin' ones character results with pen/paper.

Russ Sears writes:

 For my entry to the contest, I will stick with the stocks ETF, and the index markets and avoid individual stocks, and the bonds and interest rates. This entry was thrown together rather quickly, not at all an acceptable level if it was real money. This entry is meant to show my personal biases and familiarity, rather than my investment regiment. I am largely talking my personal book.

Therefore, in the spirit of the contest , as well as the rules I will expose my line of thinking but only put numbers on actual entry predictions. Finally, if my caveats are not warning enough, I will comment on how a prediction or contest entry differs from any real investment. I would make or have made.

The USA number one new product export will continue to be the exportation of inflation. The printing of dollars will continue to have unintended consequences than its intended effect on the national economy but have an effect on the global economy.. Such monetary policy will hit areas with the most potential for growth: the emerging markets of China and India. In these economies, that spends over half their income on food, food will continue to rise. This appears to be a position opposite the Chairs starting point prediction of reversal of last year's trends.

Likewise, the demand for precious metals such as gold and silver will not wane as these are the poor man's hedge against food cost. It may be overkill for the advanced economies to horde the necessities and load up on precious metals Yet, unlike the 70's the US/ European economy no longer controls gold and silver a paradigm shift in thinking that perhaps the simple statistician that uses weighted averages and the geocentric economist have missed. So I believe those entries shorting gold or silver will be largely disappointed. However in a nod to the chair's wisdom, I will not pick metals directly as an entry. Last year's surprise is seldom this year's media darling. However, the trend can continue and gold could have a good year. The exception to the reversal rule seems to be with bubbles which gain a momentum of their own, apart from the fundamentals. The media has a natural sympathy in suggesting a return to the drama of he 70's, the stagflation dilemma, ,and propelling an indicator of doom. With the media's and the Fed's befuddled backing perhaps the "exception" is to be expected. But I certainly don't see metal's impending collapse nor its continued performance.

The stability or even elevated food prices will have some big effects on the heartland.

1. For my trend is your friend pick: Rather than buy directly into a agriculture commodity based index like DBA, I am suggesting you buy an equity agriculture based ETF like CRBA year end price at 77.50. I am suggesting that this ETF do not need to have commodities produce a stellar year, but simply need more confirmation that commodity price have established a higher long term floor. Individually I own several of these stocks and my wife family are farmers and landowners (for full disclosure purposes not to suggest I know anything about the agriculture business) Price of farmland is raising, due to low rates, GSE available credit, high grain prices due to high demand from China/India, ethanol substitution of oil A more direct investment in agriculture stability would be farmland. Farmers are buying tractors, best seeds and fertilizers of course, but will this accelerate. Being wrong on my core theme of stable to rising food/commodity price will ruin this trade. Therefore any real trade would do due diligence on individual stocks, and put a trailing floor. And be sensitive to higher volatility in commodities as well as a appropriate entry and exit level.

2. For the long term negative alpha, short term strength trade: I am going with airlines and FAA at 49.42 at year end. There seems to be finally some ability to pass cost through to the consumer, will it hold?

3. For the comeback of the year trade XHB: (the homebuilders ETF), bounces back with 25% return. While the overbuilding and vacancy rates in many high population density areas will continue to drag the home makes down, the new demand from the heartland for high end houses will rise that is this is I am suggesting that the homebuilders index is a good play for housing regionally decoupling from the national index. And much of what was said about the trading of agriculture ETF, also apply to this ETF. However, while I consider this a "surprise", the surprise is that this ETF does not have a negative alpha or slightly positive. This is in-line with my S&P 500 prediction below. Therefore unless you want volatility, simply buying the S&P Vanguard fund would probably be wiser. Or simply hold these inline to the index.

4. For the S&P Index itself I would go with the Vanguard 500 Fund as my vehicle VFINXF, and predict it will end 2011 at $145.03, this is 25% + the dividend. This is largely due to how I believe the economy will react this year. 

5. For my wild card regional banks EFT, greater than IAT > 37.50 by end 2011…

Yanki Onen writes:

 I would like to thank all for sharing their insights and wisdom. As we all know and reminded time to time, how unforgiven could the market Mistress be. We also know how nurturing and giving it could be. Time to time i had my share of falls and rises. Everytime I fall, I pick your book turn couple of pages to get my fix then scroll through articles in DSpecs seeking wisdom and a flash of light. It never fails, before you know, back to the races. I have all of you to thank for that.

Now the ideas;

-This year's lagger next year's winner CSCO

Go long Jan 2012 20 Puts @ 2.63 Go long CSCO @ 19.55 Being long the put gives you the leverage and protection for a whole year, to give the stock time to make a move.

You could own 100,000 shares for $263K with portfolio margin ! Sooner the stock moves the more you make (time decay)

-Sell contango Buy backwardation

You could never go wrong if you accept the truth, Index funds always roll and specs dont take physical delivery. This cant be more true in Cotton.

Right before Index roll dates (it is widely published) sell front month buy back month especially when it is giving you almost -30 to do so Sell March CT Buy July CT pyramid this trade untill the roll date (sometime at the end of Jan or begining of Feb) when they are almost done rolling(watch the shift in open interest) close out and Buy May CT sell July CT wait patiently for it to play it out again untill the next roll.

- Leveraged ETFs suckers play!

Two ways to play this one out if you could borrow and sell short, short both FAZ and FAS equal $ amounts since the trade is neutral, execute this trade almost free of margin. One thing is for sure to stay even long after we are gone is volatility and triple leveraged products melt under volatility!

If you cant borrow the shares execute the trade using Jan 12 options to open synthetic short positions. This trade works with time and patience!

Vic, thanks again for providing a platform to listen and to be heard.

Sincerely,

Yanki Onen

Phil McDonnell writes: 

When investing one should consider a diversified portfolio. But in a contest the best strategy is just to go for it. After all you have to be number one.

With that thought in mind I am going to bet it all on Silver using derivatives on the ETF SLV.

SLV closed at 30.18 on Friday.

Buy Jan 2013 40 call for 3.45.
Sell Jan 2012 40 call at 1.80.
Sell Jul 25 put at 1.15.

Net debit is .50.

Exit strategy: close out entire position if SLV ETF reaches a price of 40 or better. If 40 is not reached then exit on 2/31/2011 at the close.

George Parkanyi entered:

For what it's worth, the Great White North weighs in ….
3 Markets equally weighted - 3 stages each (if rules allow) - all trades front months
3 JAN 2011
BUY NAT GAS at open

BUY SILVER at open

BUY CORN at open
28 FEB 2011 (Reverse Positions)
SELL and then SHORT NAT GAS at open

SELL and then SHORT SILVER at open

SELL and then SHORT CORN at open
1 AUG 2011 (Reverse Positions)
COVER and then BUY NAT GAS at open

COVER and then BUY SILVER at open

COVER and then BUY CORN at open
Hold all positions to the end of the year

WILD CARD
3 JAN BUY PLATINUM and hold to end of year.

RATIONALE:

. Markets to unexpectedly carry through in New Year despite correction fears.

. Spain/Ireland debt roll issues - Europe/Euro in general- will be in the news in Q1/Q2

- markets will correct sharply in late Q1 through Q2 (interest rates will be rising)

. Markets will kick in again in Q3 & Q4 with strong finish on more/earlier QE in both Europe and US - hard assets will remain in favour; corn & platinum shortages; cooling trend & economic recovery to favour nat gas

. Also assuming seasonals will perform more or less according to stats

If rules do not allow directional changes; then go long NAT GAS, SILVER, and CORN on 1 AUG 2011 (cash until then); wild card trade the same.

Gratuitous/pointless prediction: At least two European countries will drop out of Euro in 2011 (at least announce it) and go back to their own currency. 

Marlowe Cassetti enters:

Buy:
FXE - Currency Shares Euro Trust

XLE - Energy Select

BAL - iPath Dow Jones-AIG Cotton Total Return Sub-Index

GDXJ - Market Vectors Junior Gold Miners

AMJ - JPMorgan Alerian MLP Index ETN

Wild Card:

Buy:

VNM - Market Vectors Vietnam ETF

Kim Zussman entered: 

long XLV (health care etf; underperformed last year)
long CMF (Cali muni bond fund; fears over-wrought, investors still
need tax-free yield)
short GLD (looks like a bubble and who needs gold anyway)
short IEF (7-10Y treasuries; near multi-year high/QE2 is weaker than
vigilantism)

Dec

27

 Most books and movies have a indirect way of indicating that their talent and authors are fellow travelers. The common thing is to have the radio or tv on showing some stereotyped situation where the rich are living in mansions while the homeless are on the street, or a Republican President like Regan or Bush or Nixon saying something that looks evil and cold-hearted when taken out of context. A new technique would be "Fox News would have us believe that"…."tenure gives university professors the green light to teach that revolutionary overthrow of the capitalist system is appropriate." What are some of the other techniques? How does financial news color the news to make us do and think the wrong things?

Scott Brooks writes:

It doesn't matter what you say, it can be edited to be anything that the "opposition" (whoever they may be) needs it to be. Witness Alan Grayson's attack on Dan Webster.

In today's MTV short attention span 10 second sound bite world, the media can easily manipulate the 90% of the population that are the "unthinking masses". They lack the critical thinking skills necessary to put 2 and 2 together to get 4. Unfortunately, in today's society, the world is much more complicated than 2 and 2. The media, the government and complicit so called capitalists industry (which they are not) have complicated things so much that we're way past 2 and 2….we're easily at 3 and 3 and with the housing market derivative meltdown we're at 4 and 4.

Asking 90% of the population to put 4 and 4 together is ridiculous…..you may as well ask them to explain how gravity works.

Ken Drees writes:

Looking back at 2010 and market / news coverage related trades I would confess that I missed a big one–being taken in by fear even when intuitively I knew I should have tried to buy that fear.

BP

The coverage was oppressive. Obama was going to keep a boot on the throat, x billion was for "starters". BP would have to sell off divisions, they would be constantly garnished—every market guy on tv said BP this and BP that but always ended the interview with "Of course I would not buy it at this level yet".

I made up my mind to pass it up since I couldn't figure out how the USgov was going to handle it. BP CEO looked out of touch–yacht racing when he should have been in the bunker, then he gets sacked. Someone was buying all that BP stock and Jeff Watson framed the big picture of how much was spilling into how big an area–but the logic of this was weighed with the fact that cap was still leaking and the blowout may need a nuclear option and the shrimpers were committing suicide.

The news was the most bleak and black–and not only network news but blogs and such. In the end I missed a biggie—there is a lesson to be learned here that I still have not completely distilled out in terms of what triggered me not to even "try" a trade. Even when the leak stopped–it seemed like it would not hold!

George Coyle writes:

Having recently read some books on screen writing techniques, it becomes apparent that certain structures are conventions and are generally present (or should be if one wants to sell dreams to studios for production). Also, the biggest grossing films tend to be either love stories or Horatio Alger style rags-to-riches tales of the poor boy turned not so poor. People love these stories because they allow escape into the ideal growth toward fame and fortune (financial or otherwise) and provide hope. We don't see many modern videos selling being green or moral values either…it is all g5 this, bling that, etc. Take Avatar of late, crippled none-too-bright man on earth becomes champion of a new world, gets the girl, becomes the leader, etc. Hollywood is notorious for sticking with what works and the fact is selling love and rags-to-riches tales just trump the alternatives because who wants tragedy in fantasy or to come out of a situation we paid for feeling bad, life provides more than enough of that. It is a story telling norm and is rarely violated in mainstream commercial profit seeking films. So patterns not only exist, they were specifically tailored to what made a profit last time and will again. As pretty much everyone is seeking more wealth and/or love and wouldn't turn down becoming the hero of a new world we all become fellow travelers on these stories. The stories feed our hope of being something greater.

As for popular media, especially the financial variety, they seem to filter their speakers to suit the topic du jour. During the crisis Roubini was a financial God and was quoted by everyone I knew but he doesn't get near as much air time at present with the spx nearly double the crisis lows. Should the market collapse again they will undoubtedly trot out the doomsday seers to explain why the longs got it so wrong. Media giants allow price action to dictate program lineups such that when markets go one way or another out come the biggest advocates of that move to tell us all why. It serves as a reinforcing phenomenon and can foster buying more or widespread panic depending on the environment. But I feel people will generally believe what they hear on tv (especially people who aren't market professionals). It would be interesting to see the p n l of following the recommendations of all of the commentators. Who knows if they are telling us the truth or dumping their positions profitably to the general populace.

Galt Niederhoffer writes in with a comment:

Movies have always been a populist medium and the structure of the plot is best suited for very simple ideas to be proven or disproven with beginning, middle and end. I don't think writers are socialists by nature. I just think that movie plots best lend themselves to tales of good and evil and it's easiest to prove the error of new, mass or radical ways than the opposite.

Gary Rogan writes:

The most important tool at the disposal of the information industry is choosing what not to cover. If it's a politician they like, they will not cover significant concerns about their background, like the lack of basic information about their past. If it's a financial bailout, etc. they will create an illusion that there is a consensus supporting it by concentrating on those with the "right" opinions.

Dec

26

 From a Mercatus study on pensions:

Pension plans operated by state governments on behalf of their employees are underfunded by an estimated $452 billion according to official reports, with total liabilities of $2.8 trillion and total assets of $2.3 trillion in 2008. However, many economists argue that even these daunting liabilities are understated. Current public sector accounting methods allow plans to assume they can earn high investment returns without any risk. Using methods that are required for private sector pensions, which value pension liabilities according to likelihood of payment rather than the return expected on pension assets, total liabilities amount to $5.2 trillion and the unfunded liability rises to $3 trillion. The ability of governments to pay for the retirement benefits promised to public sector workers runs up against the reality of limited resources.

In this study, we consider the case of New Jersey, which operates five defined benefit pension plans for state employees. The New Jersey Senate unanimously passed legislation in February 2010 that would put a question on the November ballot to constitutionally require the state to begin to make its full annual payment to the state's pension system. The bill requires the state to catch up to paying its full obligation by FY 2018. From that year forward the state will be constitutionally required to make the full payment to its pension systems each year as calculated by plan actuaries. The state reports that its pension systems are underfunded by $44.7 billion, when liabilities are discounted at the 8.25 percent annual return that New Jersey predicts it can achieve on funds' investment portfolios.

However, when plan liabilities are calculated in a manner consistent with private sector accounting requirements, methods that economists almost universally agree are more appropriate, New Jersey's unfunded benefit obligation rises to $173.9 billion. This amount is equivalent to 44 percent of the state's current GDP8 and 328 percent of its current explicit government debt. This calculation applies a discount rate of 3.5 percent (the yield on Treasury bonds with a maturity of 15 years) to reflect the nearly risk-free nature of accrued benefits for workers. It is estimated if state pension assets average a return of 8 percent, New Jersey will run out of funds to meet its pension obligations in 2019. If asset returns are lower than 8 percent, they will run out of funds sooner. State actuaries estimate that under certain assumptions, New Jersey's pension plans will run out of assets to make benefit payments beginning in 2013.

Scott Brooks comments:

So basically, all that needs to happen for pensions to be fully funded is to pass legislation to require that they be fully funded. Now, all the states have to do is pass legislation that allows them to print money and they could make all their problems go away over night!

If one were to squint one's eyes and put on a "fact blind-fold", you can see that there is no problem with pensions. This is obviously alarmist claptrap.

I seem to remember bringing up the underfunded pension problem on this list over the last several years and getting "poo-poo'ed" for being a bearish chicken little.

Nothing to see here, move along, move along.

Dec

22

 The other day, I was forced to attend an amateur showing of Dickens "A Christmas Carol." The production was well executed, the stagecraft was excellent, and the scenery was first rate. I've seen the Dickens classic so many times, I either just nod off, daydream, or try to improve my mind. During the show, I started to think of how the author, Charles Dickens, really hated capitalists and was a socialist at heart. He portrayed Ebeneezer Scrooge as the prototypical capitalist of the day, but his real "sin" was that he was a miser, only interested in his self, mistreating everyone. The fact that Scrooge had a bad attitude and dour personality did not work in his favor and was a great device used by Dickens to generate hatred for capitalists and the rich in general.

This got me thinking on many levels. For one thing, Scrooge was a businessman who earned his money fair and square. He cheated nobody and expected his contracts and debts to be paid as per any previous agreements, Scrooge ran a tight ship, to the point of being called miserly. He was a demanding employer of his clerk Mr. Cratchit, who accepted the employment contract with Mr. Scrooge with good cheer. Much has been said and written about the evil Mr Scrooge, his name has become part of the lexicon of the definition of an evil capitalist. Even the people in the neighborhood made disparaging remarks about Scrooge, and this mistreatment and lack of respect added to his dour personality. There was no evil to Mr Scrooge, and his unfavorable treatment was a literary device, a populist reaction by the left, the socialists who portray all rich as greedy, evil people who allow people to suffer while they live rich, extravagant lives. 

As I said before, Mr Scrooge had an employment contract with his clerk, Mr. Cratchit who was a man of good cheer. Cratchit's wife constantly complained that Scrooge was an old miser with a flinty heart of stone. She neglected to mention that Mr. Cratchit was free to seek employment elsewhere if his working conditions were so bad, but this aspect and so many others were left out by Dickens. As for Scrooge's miserly description, some would call his miserliness thrift, which is an esteemed Franklinian virtue.

Scrooge's refusal to participate in a festive dinner with his nephew and wife was his business and he certainly didn't deserve the ridicule heaped upon him by the women folk, nor was he required to offer an explanation or apology. He was merely exercising his freedom to do what he wanted, and if he chose not to celebrate Christmas, that was his natural, god given right. During Scrooge's pre ghost phase, he was a hard nosed flinty business man, albeit a bit ill mannered. There is no law against being ill mannered, dour, mean, or miserly. Scrooge was free to do whatever he wanted, with no worries what society would think as long as he behaved within the law and remaining scandal free.

Every good story likes to make a case of human redemption, a change from self interest to the interest and service of the collective. In popular culture, rich are inherently evil, their gains ill gotten off the backs of workers, and the poor always triumph over the rich. Dickens masterfully pulled this off when he had three ghosts visit Scrooge on Christmas Eve to scare the hell out of him and change his evil ways. His powerful scare tactics caused Mr Scrooge to abandon his own self interest, abandon his personal freedom for the good of society, destroy the profitability of his business, and spend his hard earned wealth on charity to repent for his earlier miserliness.

The messages Dickens made in a Christmas Carol were very clear. Productive people must give to the more deserving poor to be considered worthy, rich people are not happy due to guilt, producers must abandon self interest in order to satisfy the needs of others in a society who don't work as hard, businessmen must run their personal business for the sole benefit of their employees, conversely to the detriment of the stockholders. And finally one must give exorbitant sums to the poor, provide medical care for the employees, and give retroactive raises to allegedly underpaid employees. Benevolence is not a virtue in this world, it is a requirement. Scrooge was manipulated into this transformation by the three ghosts creating immense guilt and fear, and by the end of the story Mr Scrooge was more concerned with what people thought of him, his personal image, than the real work of creating profits, creating jobs, growing a business, and contributing to the general business climate.

At the end of the story Mr. Scrooge was a transformed man. He was happy, benevolent, highly thought of, giving,almost giddy, much like a person who has had a drink or ten. A good case could be made that he was a better man, but w hat he lost was the real tragedy. Scrooge lost his independence, his freedom, became dependent not on profits, but on the opinions of others. He was required to give money away, raised expectations of others, and caused economic imbalance by changing the market pay scale of employees in his business. In a way, Scrooge's new found largesse probably was bad for the economy as a whole a la the theories of Hazlitt. On another note, happiness tends to be fleeting much like health and I suspect that with Mr Scrooge, old habits die hard.

When the curtain closed, everyone was cheering. I felt a bit of sadness, as here's another story of poverty trumps wealth, rich is evil while poor is good, and being a second hander is more important than being a real, virtuous free man. In the end, Mr. Scrooge was the real loser and the real story was the transformation of a rich, productive man into a welfare state.

Rocky Humbert comments:

Dear Jeff:

Considering "A Christmas Carol" to be an indictment of Victorian Capitalism is not a novel idea, yet I still find your words and spirit to be sad, indeed.

While you are free to intrepret Dickens however you see fit, you have no such freedom with respect to core Judeo-Christian values, which parts of Dickens' play embodies. The principles which you lament are the core principles of Judaism and Christianity.

What you find lamentable, I find laudable. When you find trivial, I find grand. In short, I celebrate the charity and goodness toward man that Christmas celebrates, while you mock it as political correctness.

I wish you a happy holiday, and hope that you someday discover what Scrooged learned– that there is no greater joy than bringing happiness to others.

Scott Brooks adds:

 Let's not confuse charity with force of threat.

Scrooge offered a fair deal at a fair price. The way we can infer that this is the case is that people came to him, and willingly signed a contract. Scrooge performed his half of the contract by loaning them money. What is wrong with him expecting that they honor their portion of the contract?

And, let's not confuse what Scrooge did for charity. Giving to other under threat of force…..i.e. the spirits (under the direction of Dickens) threatened him with the threat of eternal damnation if he didn't commit business suicide.

Another problem with "A Christmas Carol" was that the story ended on December 25th. Let's flash forward to the "The Week After Christmas":

Bob Cratchit shows up at work on the 26th only to find that he doesn't have a job. Why? Because Scrooge, in his "fit of charity to bring happiness and joy to others" tore up all the debts owed to him and there was no more accounting work for Cratchit to do.

Later that day, and throughout the next week, a bunch of former Scrooge customers come to the office to borrow more money, only to find it closed because Scrooge has no more money to lend out. If he did, it would be evil (under Rocky's view of the world) to unfairly loan out money. And he couldn't just keep the money, he would have to give it away to atone for his supposed sins.

Therefore, the vital role that Scrooge played in the community…i.e. loaning money to people that had need of a loan for whatever purpose they felt they needed a loan for (and that Scrooge deemed as a good "loan risk")….that vital role was no longer available in the community.

And what happens when credit dries up in a society….well, I think we can all agree that that's not a good thing.

Sorry Rocky, but you're wrong in your assessment. This is not charity or Christian/Judeo ethics. This is a story by a man who didn't like Capitalism, that slams capitalism. It could have been written by most any journalist or university professor in today's society.

David Hillman writes:

 And then, there's the contrarian point of view

….which makes as much sense as does the interpretation of A Christmas Carol as an indictment of Victorian Capitalism [which, by the way, was far different from what we generally think of as 20th Century capitalism, i.e., the kinder, gentler Fordist model or the so-called millennial capitalism that has been evolving since the 1980s.]

I don't know much, but two things I know, 1) what Dickens' meaning and intent in A Christmas Carol was is about as clear as what the founding fathers intended in the Constitution, or as clear as whether the origin of the universe was a God or a Big Bang, and 2) we don't see things as they are, we see things as we are.

That said, I would posit that one's interpretation of A Christmas Carol, or just about anything else for that matter, tells us far more about the interpreter than it does of Dickens. 

Gary Rogan writes:

It's interesting that with all of his supposedly anti-capitalist novels, Dickens undertook two trips to America mostly to lobby for copyright enforcement. He also blamed his bankruptcy and later health and financial problems close to his death on being deprived of his rightful royalty stream. Somehow various American software companies and their hyper-liberal billionaire founders fighting intellectual property theft in China come to mind, although they are all in decidedly better financial shape.

Kim Zussman chimes in:

It's not every day you see Jewish pro-Christmas arguments against Mormons; a market top indicator?

The 1938 Christmas Carol is a great film, and if you don't tear up your trading accounts are definitely too flush.

Scrooge's encounters with ghostly futures cause us to ask what is really important. It is difficult to balance the race for money with taking time for things and people who will too soon be grown, old, or gone.

Stefan Jovanovich writes:

"A Christmas Carol" is far less about what our List calls "capitalism" - i.e. pricing by competition - and far more about Dickens' wanting the world to have a universal catcher in the rye and not be like the America he saw in 1842. He was appalled by our slavery and by our insane "push". He was also upset by the fact that, like the East Asians today, Americans were notorious copyright pirates. We were also the source of his growing wealth by being the best customers for his books. During his visit to New York his American publisher and his admirers (Washington Irving, William Cullen Bryant) held a gala in his honor, with 3000 people attending.

Dickens knew almost nothing about business by 1843 (the date of A Christmas Carol's publication) from direct experience or observation. His father had worked in the Navy Pay office and lived on a family inheritance. Dickens' only job in any "dark, satanic mill" was a few months sticking labels on bottles of shoe polish. He then went back to school. After school he worked in a law office as a clerk, taught himself the new short-hand and became a court reporter through a family connection. That led to political journalism. Sketches by Boz - his first book published in 1836 - is a collection of his political pieces for the Morning Chronicle, covering the Parliamentary elections.

The socialism Jeff finds in the story is there; it is the same socialism you find in Thoreau. It came from the same source - Unitarianism - which Dickens became interested in while visiting the U.S. And, capitalism in its modern forms was still in its infancy. It would be another decade and more before limited liability was formally recognized in Britain in the legislation of 1855-1856.

Gibbons Burke writes:

A Christmas Carol is not anti-Capitalist as such. But it makes a case strongly against Capitalism run by capitalists who serve Mammon rather than God. Scrooge, who initially perfectly represents that anti-human form of Capitalism at its worst soul-less excess, is the perfect picture of a seemingly-self-satisfied soul roasting in a Hell on Earth of his own devising, and he seems certainly destined for the eternal flame pit until his heart is converted later in the book. At that moment he becomes filled with the Joy that is the gigantic secret of the Christian (according to Chesterton).

Here is Dickens' initial description of old Scrooge - which seems to have plenty of editorial voltage:

Oh! But he was a tight-fisted hand at the grindstone, Scrooge! a squeezing, wrenching, grasping, scraping, clutching, covetous, old sinner! Hard and sharp as flint, from which no steel had ever struck out generous fire; secret, and self-contained, and solitary as an oyster. The cold within him froze his old features, nipped his pointed nose, shrivelled his cheek, stiffened his gait; made his eyes red, his thin lips blue; and spoke out shrewdly in his grating voice. A frosty rime was on his head, and on his eyebrows, and his wiry chin. He carried his own low temperature always about with him; he iced his office in the dog-days; and didn't thaw it one degree at Christmas.

External heat and cold had little influence on Scrooge. No warmth could warm, no wintry weather chill him. No wind that blew was bitterer than he, no falling snow was more intent upon its purpose, no pelting rain less open to entreaty. Foul weather didn't know where to have him. The heaviest rain, and snow, and hail, and sleet, could boast of the advantage over him in only one respect. They often "came down" handsomely, and Scrooge never did.

Nobody ever stopped him in the street to say, with gladsome looks, "My dear Scrooge, how are you? When will you come to see me?" No beggars implored him to bestow a trifle, no children asked him what it was o'clock, no man or woman ever once in all his life inquired the way to such and such a place, of Scrooge. Even the blind men's dogs appeared to know him; and when they saw him coming on, would tug their owners into doorways and up courts; and then would wag their tails as though they said, "No eye at all is better than an evil eye, dark master!"

But what did Scrooge care! It was the very thing he liked. To edge his way along the crowded paths of life, warning all human sympathy to keep its distance, was what the knowing ones call "nuts" to Scrooge.

The book is available in several illustrated editions for free on Project Gutenberg.

Jeff Watson responds: 

So, in other words, while Scrooge was unpopular, he enjoyed total freedom. That sounds pretty good to me. At least If I had his rep, I wouldn't have to say no to 30 requests for donations a day. Can you imagine how refreshing it would be to perform an essential service, perform admirably in business, deliver superior service, and not give a damn what people thought of you? That would make Hank Reardon proud. It is not a crime to be disagreeable, a skinflint, self serving or any other eccentricity. If we punished men for their eccentricities, Henry Ford would have never created and revolutionized the automobile business, J.P. Morgan would never have risen beyond the level of margin clerk, the old Commodore Vanderbilt would have probably died in a house of ill repute, Barney Frank would have been hanging out on…, and Bill Clinton would probably be in an Arkansas … for a very youthful indiscretion. 

John Tierney writes:

In 1899 Elbert Hubbard viewed the "Scrooges" thusly:

We have recently been hearing much maudlin sympathy expressed for the "downtrodden denizen of the sweat-shop" and the "homeless wanderer searching for honest employment," & with it all often go many hard words for the men in power.

Nothing is said about the employer who grows old before his time in a vain attempt to get frowsy ne'er-do-wells to do intelligent work; and his long patient striving with "help" that does nothing but loaf when his back is turned. In every store and factory there is a constant weeding-out process going on. The employer is constantly sending away "help" that have shown their incapacity to further the interests of the business, and others are being taken on. No matter how good times are, this sorting continues, only if times are hard and work is scarce, the sorting is done finer- but out and forever out, the incompetent and unworthy go.

It is the survival of the fittest. Self-interest prompts every employer to keep the best- those who can carry a message to Garcia.

I know one man of really brilliant parts who has not the ability to manage a business of his own, and yet who is absolutely worthless to any one else, because he carries with him constantly the insane suspicion that his employer is oppressing, or intending to oppress him. He cannot give orders; and he will not receive them. Should a message be given him to take to Garcia, his answer would probably be, "Take it yourself."

Tonight this man walks the streets looking for work, the wind whistling through his threadbare coat. No one who knows him dare employ him, for he is a regular fire-brand of discontent. He is impervious to reason, and the only thing that can impress him is the toe of a thick-soled No. 9 boot.

Tim Melvin comments:

 The question of scrooge and how we view him is one that men of business have wrestled with since the damn story was published. The thing is that Dickens does not paint Scrooge as the example of every businessman. We tend to take much of the Scrooge story out of context, I think. Business itself is not painted as evil or wrong. Was not Fezziwig the owner of a prosperous and successful business when young Ebenezer was employed there in his youth. Judging by the Christmas party it was prosperous business indeed. Yet Fezziwig was a generous soul to his employees who treated then well and asked for a fair days work for a fair day's pay and got it it cheerfully from those in his employ. Scrooge described his time employed there and his boss thusly, "The happiness he gives, is quite as great as if it cost a fortune ."

In contrast Scrooge underpaid Bob Cratchitt and treated him poorly. To say that Mr. Cratchitt could simply look for other employment is as ridiculous a statement as it is heartless. With a large family and a sick child he would be foolish to change what employment he did have by seeking other employ. Given the hours he toiled when would he had the time anyway?

Scrooge is indicted not for being a man of business but for being a man who shuts out the world and pursues only business in a mean spirited way. I greet my lender when I see him on the street. Scrooge was harsh man who was probably the lender of last resort and treated his customers poorly. Good business is a win win were the partied walk away feeling that both have scored a victory in my experience. To have your neighbors ignore you in the street and cackle over yor corpse does not paint the idea that he did business fairly in my mind. To be sure we all have probably made some enemies along the way, but we have made friends as well who would mourn our passing/ not so in this case.

Scrooge is indicted of closing his heart to all of humanity. He chooses commerce over the love of a woman and the potential for a life and a family. He helps no one with a kind word, a gentle lesson or a shared idea. The concept of charity is unique to us all. But hard asses as all of us are, as libertarian and objectivist rooted as we are, would we hesitate to assist a friend, relative or even employee who had an ill child if we had the resources to do so? Which of us would not give our nephew, our only family a visit on a holiday eve or at least a kind word, a lesson in the ways of the world that might help them succeed in life?

Scrooge was not indicted and sentenced to haunting for being a business man. He was convicted of living without love. The love of a child, of a woman, of humanity. He hated himself as much as he hated the rest of the world. Scrooge's crime was not being a business man but for failing to appreciate the wonder that life actually can be. I like so many other readers of this site detest the corporate charities, and I say no quickly and clearly in my best bah humbug fashion. But just like everyone else here there are charities and causes I believe in and donate my time and money. I do not buy the in the give to all philosophy or faceless giving anymore than the rest of you. I do believe in libraries, special olympics and a few other causes and I give. So do you whether it's a church, a cause, a philosophy of a friend in need so quit pretending your are an objectivist hardass who helps no one. Not only is that so much BS, it's a heartless life that would create a scrooge like existence and so far I have met no spec who fits that description.

Scrooge's crime was not business. It was living with love, without the touch and hear of another, without a child's smile, a lover kiss or the hand of a friend. By Dickens account he denied himself all the makes life special. There is no account given of good food, or beautiful music or even good books. Scrooge's crime was not one of business. He was guilty of crimes against life itself. 

Jeff Watson responds: 

(While I agree with much of Tim's premise, I'd like to see the statutes Scrooge violated regarding the aforementioned crimes). If those are indeed crimes that Scrooge committed, I fear the state is on the road to becoming more totalitarian if they feel the necessity to regulate those areas of normal but eccentric human behavior. Again, it's not against the law to be a total dick, nor should the government concern itself with forbidding person to be rude, self absorbed, cheap, hated, or mean spirited. I certainly can't find anything in the constitution addressing this issue. 

Stefan Jovanovich writes:

Dickens wanted women to stay in the kitchen; Hubbard wanted them to own the restaurant.

His company - Larkin Soap - gave Frank Lloyd Wright his first big commission. The friezes on open galleries of the building had these mottoes: GENEROSITY ALTRUISM SACRIFICE, INTEGRITY LOYALTY FIDELITY, IMAGINATION JUDGMENT INITIATIVE, INTELLIGENCE ENTHUSIASM CONTROL, CO-OPERATION ECONOMY INDUSTRY.

Here is Hubbard's story of how he started the Philistine magazine and the Roycroft shops. Begins at page 309

Dec

17

 Any Boy Scout who achieves his Eagle in 2010 not only gets an Eagle Pin, but this year, their Eagle Pin will even have a "100" on it to commemorate the 100th anniversary of the Boy Scouts.

If this site will indulge me to boast a little…….

Tonight, David had his Eagle Scout Board of Review and passed with flying colors. He is very excited about getting his Eagle pin with the 100th anniversary logo on it. He worked long and hard to achieve Eagle.

Those on this list that have met my son know that he is one of the finest of the rising generation.

I am honored and blessed to be his father!

David Brooks writes:

Hi everybody, this is David. Thank you everyone for the kind words on me getting my Eagle. My father asked me to give a short report on how I got my eagle and my eagle project.

Well the first year of scouting one works on getting first class. In order to get this there aren't any merit badges needed, its just stuff like getting enough camp-outs and knowing the scout oath, scout law, etc.. once a person achieves first class the new challenges are merit badges. In order to get one one has to work on the badge and meet with the counselor for that badge. A person needs twenty-one merit badges to be an eagle (plus the eagle project). I believe 15 of those 21 are not optional, one needs to get merit badges like: citizen ship in the nation, first aid, swimming, etc.. and 6 optional merit badges-one can pick six out of the over one-hundred optional merit badges. That is the relatively easy part.

Then work on the eagle project begins. After thinking of ones project and getting it approved from the organization one is doing it for the first step in this drama is begins. one meets with the eagle board with there proposed eagle project. they 'ingterigatin' of the persons eagle project and will hopefully approve it with only a few minor changes-on mine I only left out a few minor details on the report-. a typical eagle project a takes about twenty hours of the actual scouts time and about fifty hours of the troop and other volunteers time(all their time combined). On mine I spent about twenty-four hours personally and my troop and volunteers spent about fifty hours on the project. After this, one writes a report on the project and sets a date to meet with the final eagle board. I spent an hour and thirty minutes in the room with the scouting 'enthusiasts' and, thankfully, they passed me. This is just a brief overview of what one can do in scouting, but there are definitely many other things, enjoyable things like campouts, canoeing trips, the Klondike Derby-a sled race- but its not all just boring merit badges and writing reports, I have definitely enjoyed my scouting experience.

For my eagle project we picked up trash, planted twenty native MO trees, and built six wildlife bundles. My project was located on a flood plain and there was an abundance of trash that had been washed into the park from the previous flood. I instructed my team to make a police line and pick up all the trash in one quick sweep. then I instructed my team to divide into smaller groups and plant the trees. After this we built the six wildlife bundles which are basically six feet high 'teepee' like structures to house the small game in the area.

Pitt T. Maner III writes:

 Congratulations David!

Coincidentally, I was going through some old books the other day and ran across my grandfather's Boy Scout handbooks from around the time of WWI. He was born in 1902. If you were able to learn all the things in the handbook you would have had a very good start on a practical education. I imagine that some of things you have to learn today are similar and perhaps some of the tasks remain the same.

Unfortunately I was pulled from scouting after the local troop asked for an extra donation. But I did participate long enough to help carve and build a small, hand-sized, wooden racing car that finished in 3rd place after running down a short ramp. It was a nice summer memory. Don't imagine that many kids do a lot of whittling these days!

Planting trees is a very commendable endeavor. You may be interested in the following organization. I have enjoyed doing a bit of field volunteer work with them– environmental preservation and restoration certainly is a great cause.

Jonathan Bower adds:

Congratulations David! As a fellow Eagle Scout I know the amount of time invested by you, your troop, and your family in this achievement. It takes hard work and commitment to achieve the rank of Eagle as evidenced by the fact that less than 2% of all Scouts have ever achieved this milestone. The lessons in life learned from Scouting will provide you with a solid foundation for great things ahead in your personal, scholastic, and professional life. Well done!

Dec

16

 Payroll tax receipts are a very good surrogate for jobs. The data is daily with a 1-day lag. It is reported by the Treasury rather than the BLS, and is NEVER revised. It does have the disadvantage of being presented raw rather than seasonally-adjusted, a fact which keeps many from considering the data. The series tends to lead the unemployment numbers (which are the opposite side of the coin) by some four to five weeks. All of the above is a repeat announcement. Now the news: At this time the growth/slope of that data is decidedly negative, almost to the point of being scary in our opinion. This is not what we expected and put it out as a word of caution. Of course, remember that the economy is not the market.

Scott Brooks adds:

Two anecdotal observations:

1. My insurance brokerage clients and insurance industry clients are reporting that their workers comp premiums are down and not coming up.

2.
My small business clients that are hiring are reporting that they are having a very difficult time hiring at the lower end of the pay scale. They simply can't compete with unemployment benefits that are paid for doing absolutely nothing. People would rather earn slightly less money without the hassle or expense associated with actually working.
 

Dec

16

In 1980, our family's life was changed by a drunk driver. My mother barely survived the act of this horribly irresponsible man….but out lives were changed forever because of his actions.

I have no tolerance for anyone who drives under the influence. This video (I believe from Australia…it's not the one from Britain that was making the rounds a few months ago) is a must watch for anyone (and especially your kids) who is thinking of drinking and driving. Your actions don't just effect your life, but the lives of many innocent bystanders.

Even though we've raised our children to not drink, I will show them this video so they can clearly understand that choices have consequences.
This video is graphic and heart wrenching. But it is worth a watch.

Peter Vinicius writes:

Oddly enough, the above reminds me of a fond memory. It has nothing to do with the important topic of drunk driving above. It's about my father.

No, he never injured anyone while driving and being addled by age, though in his latter years he was no stranger to wreaking havoc on the aplomb of strangers.

You see, he was what they call a live wire. Didn't get married till he was 39, though that hardly deterred he and my (younger) mother from having 11 kids. There's something to be said for any guy who still dutifully picked up the tab for college tuition when they're 80.

So once upon a time when he was in his mid-80s it was time for him to renew his driver's license, though mercifully he hadn't driven in years. So my mother takes him to the DMV, where he gets on line until the clerk behind the counter tells him to approach the window. Once there she asks him to read the eye chart, which of course he can't. Actually she probably had to ask him 4 or 5 times because he couldn't hear anymore either.

Those limitations all extraneous to the task at hand though as far as he was concerned, because there's no way in the world a guy like this was walking out of there without a driver's license. At least what he thought was a driver's license.

So once he had cleared the communication hurdle with the clerk, he called over the next guy on line, a total stranger, and right in front of the clerk nonchalantly asked the dumbfounded guy, "Son, what does that bottom line on the eye chart say?" I later found out that "Son" was about 60, but when you're pushing 90 everybody's a kid.

My cagey mother meanwhile is watching this deal unfold from afar because she knew full-well that immediate proximity would have run the risk of putting her apple cart in harm's way. Ever the stoic, probably figured this was a job for New York State, not her equilibrium.

So the young clerk figured out how to best handle the situation and politely instructed my father to proceed to window such-and-such for his new photo. Whereupon he was presented with a state-issued ID card that surely looked like a license, which was the government's idea all along.

It would have been an affront to his dignity to deny somebody like that something he's had for close to 70 years, yet there had to be some sort of mechanism in place to ensure that drivers were still capable of the responsibility of driving. I thought that they struck a nice and sensitive balance there by coming up with the ID card solution.
 

Nov

18

 Obama to award Warren Buffett Medal of Freedom

WASHINGTON (Reuters) – President Barack Obama will name Warren Buffett as one of fifteen winners of the 2010 Medal of Freedom, a White House official said on Wednesday.

Buffett, one of the world's most successful investors who has donated a vast chunk of his multibillion dollar fortune to charity, will receive the medal at a White House ceremony early next year. The award is the highest U.S. civilian honor.

Buffett is one of Obama's closest defenders in the business community and the president has sought his counsel dating back to the 2008 presidential campaign and since.

Nigel Davies adds:

A person in Sage's position would be wise to support both sides so that whoever wins will be grateful.

Scott Brooks comments:

Whoever wins will go to him with cup in hand. He's a "made man".

Jeff Watson shares:

Barry Ritholtz, on his blog, crafted an excellent parody of the Oracle's thank you to Uncle Sam note in the NYT.

Scott Brooks adds:

We as a nation have foolishly allowed the federal government, which was set up to by the states to serve the states and endowed with less than 20 enumerated powers, to exceed it's mandate. Today, we not only have a nearly omnipotent federal government, that is controlled by two political parties that are only nominally different in key area's (i.e. they are taking different paths to the same destination), but we have a single leader that is so powerful that our entire country revolves around this one man, regardless of who "he" is.

We are learning the hard way that when we put together a "gang of voters" to elect a person ("our guy") to give us favors, that we are endowing that "office" (position) with the power. And when "our guy" is no longer in the office, power to "give favors" doesn't leave with him, they stay with the office and are/can be used the person who occupies that position next.

That is legacy of Lincoln playing out before our eyes. He saved our nation is a contiguous geographical/demographic cohort, but the ultimate legacy of his power laid the groundwork for what we are as a nation today. (that noise you just heard was Stefan's head exploding.)

Stefan Jovanovich responds: 

I can't argue with Scott about the disease– imperial Federalism; but he and I will always have very different opinions about its causes. Lincoln had no actual legacy; that is why he was a safe saint for everyone who wanted to ignore the 14th Amendment. Anyone who takes the trouble to watch Birth of a Nation will see that. What makes my hero, Grant, a universally-reviled figure is that he was willing to use his powers as Commander in Chief to enforce the individual rights granted to citizens by the Constitution (which is what the powers are there for) and, at the same time, he had no taste for having the government "manage" life in America or the country's money. The Big Lie in the tradition of American conservatism is how much the doctrine of "states rights" was about imposing slavery on the territories and free states by using the Federal power and how much it continued to be about keeping the darkies down and those awful immigrants away from our shores. Conservatives were more than happy to extend government's reach for those purposes. Roger Taney's career– first as the enabler of Jackson's "spreading the wealth around" with the state banks and then as Chief Justice - is the best evidence of this unavoidable historical truth.

I know it does not fit Scott's construct, but it is what happened. Thanks to Grant and his Republicans, the Federal government had far less power of citizens' lives in 1890 than it had in 1848; and, if you exclude the political tyranny over black citizens, the country's government as a whole was not only smaller and less expensive but also less authoritarian under Harrison than it had been under Polk. The modern expansion of Federal authority has its sources in the two World Wars and the Progressive reforms in banking and trade laws that preceded them. Lincoln can rest in peace. As for my head, the only thing that even gives it an occasional ache is the continuing belief of otherwise sensible conservatives that the tyrannies of county sheriffs and the state drug laws are somehow less offensive than those of the Department of Agriculture. As my favorite Justice– Hugo Black– once said, "No law means no law". We have far too much of all kinds in this country, and that - not the relative distribution of the presumption of authority - remains the problem.

Gary Rogan writes:

Once again an excellent educational post from Stefan. I just have a quibble with this statement: "As for my head, the only thing that even gives it an occasional ache is the continuing belief of otherwise sensible conservatives that the tyrannies of county sheriffs and the state drug laws are somehow less offensive than those of the Department of Agriculture." Without commenting on the "merits" of either form of tyranny, anything Federal IS more offensive because (a) the Founders' idea was that you could escape a state much more easily than the Federal government if the state becomes offensive, by moving to another state as opposed to leaving the country, thus actually providing feedback to the state that it has gone too far (b) ANY claim by the Federal government of non-enumerated powers is likely un-constitutional and against the spirit of the founding of the country.

Stefan Jovanovich responds:

 I wish what Gary wrote was true. Mobility in 1787 was practically non-existent. People rarely moved between counties, let alone between states. There were more French soldiers at Yorktown than American because the French could move on ships while the Americans had to march. Gary may know the Constitutional debates better than I do; but I can't find a single remarks by any of the Founders regarding the idea that a citizen could somehow escape state tyranny by moving. What the Anti-Federalists disliked most about the Constitution was that it placed real limits on the claims of the states to absolute authority. Patrick Henry is, in that regard, all too typical: brave words about tyranny followed by persistent lobbying that the boundaries of the state of Virginia should extend as far west as the Pacific Ocean. The Founders who voted in favor of the adoption of the Constitution wanted a Union that would guarantee citizens' Federal rights and a supremacy clause that would assure that those rights could not be abolished by State or local action. They wanted the doctrine of "non-enumerated powers" to apply as much to the states as to the Union, and they were so adamant about establishing a balance of authorities precisely because the states had behaved so badly during the Revolution. I should have recommended Calvin H. Johnson's book, Righteous Anger at the Wicked States: The Meaning of the Founders' Constitution before now. It is the best history on the subject, and - like Grant - it remains thoroughly unpopular because it refuses to accept the rightist cant of slave-states rights or the leftist fantasy of inherent Federal moral superiority.

As always, the historical truth struggles to get its boots on.

"A lie can travel halfway round the world while the truth is putting on its boots." - This quote has been attributed to Mark Twain, but Twain stole it ("geniuses steal") from Charles Haddon Spurgeon (1834-92), who said: "A lie will go round the world while truth is pulling its boots on."

Oct

20

 Here is a nice article on the "greatest president of the past 100 years." He shows the value of restraint. Just what we need today.

Scott Brooks writes:

When ranking the greatest American presidents, I believe one has to use separate categories.

One for the Founders who became president and one for everyone else.

Coolidge, in my opinion is at the top of the "everyone else" list.

Now as to the bottom of that list…the worst presidents ever (in descending order):

7. (a tie) Bush 1, Bush 2,

6. Clinton

5. Carter 

4. (a tie) Nixon, TR, Wilson, Hoover

3. LBJ

2. FDR

1. Lincoln

Stefan has laid out a well thought out argument as to why I am wrong on Lincoln, but I still stand by my assessment. And BTW, I believe Lincoln ranks at the bottom because of acts of "omission" and not acts of "commission". The rest are there because of acts of "commission"

And as a future prediction: If Obama keeps going the way he's going…well, let's just say he is fighting for the top spot (at least #2).

Stefan Jovanovich replies:

The only reason it is safe for me to argue with Scott (who is decades younger, in much better shape and a much, much better shot) is that his fierce opinions are always tempered by his piety (yet another argument in favor of that bizarre practice known as faith). So, here goes:

I think ranking Lincoln is like assessing the performance of a captain of a ship in a typhoon when someone else decided how much ballast the vessel should take before it left port. Susan and I are doing the ancestry hunt for the Lipscombs, Austins, Gayles, Turners and Gaudelocks from whom she is descended by searching the graveyards of South Carolina and Virginia. Among the sites we have seen on the way have been Appomattox, Blacksburg Junction (the logistical Gordian knot that Grant, with his usual genius, cut within a month of taking effective command of the Union Armies in the East) and Limestone College (largely funded by Jefferson Davis' daughter). The Civil War (War Between the States, whatever) was the greatest single disaster in American history; it dwarfs everything else, and we still live with the legacies of its idiocies and nobly mistaken loyalties. Whatever anyone says about it is going to fall far short of telling the truth.

Oct

5

 Certain (unmentionable) positions in my portfolio are starting to act like a runaway freight train. It therefore seems an opportune moment to consult my copy of The Worst Case Scenario for the correct methodology for "how to jump off a runaway train." (One notes the instructions do not mention the purchase of puts and put spreads.)

1. Move to the end of the last car.
2. If you have time, wait for the train to slow as it rounds a bend in the tracks.
3. Stuff blankets, clothing or seat cusions underneath your clothes.
4. Pick your landing spot before you jump. Avoid trees, bushes and of course rocks.
5. Get as low to the floor as possible, bending the knees, so you can leap away from the train.
6. Jump perpendicular, leaping as far away as you can.
7. Cover and protect your head with your hands and arms, and roll like a log when you land. Don't try to land on your feet, or you'll likely break your ankles and legs. Do NOT roll head over heels.

Vince Fulco jokes:

Come on Rocky. The ice floating in the punch bowl has just settled after getting a "perceived" refill which may, just may, overflow the bowl. This is when the Bernanke dance party really starts to pick up with the fast music. Earning ZIRP and saving is for the wallflowers. 

Scott Brooks comments:  

Rocky's mention of some stocks acting like a runaway train makes me think that it's time to review my very simple fool proof methodology for stock investing.

Take two pieces of paper, one green one red.

On the green sheet, put all stocks that are going to go up. On the red list put all the stocks that are going to go down.

Then, go long all the stocks on the green list, and short all the stocks on the red list.

Sell any green list stocks once they go on the red list and cover your red list shorts once any stock goes onto the green list.

Repeat this process early and often.

Enjoy your profits!

John Lamberg writes:

And I thought the secret to the stock market was to buy low and sell high. Similarly, in the casino the secret is to bet big when you are going to win. Unfortunately, I seem to buy high and sell low, and every time I bet big it seems the dealer gets blackjack, although occasionally I get blackjack too, but being a fool I take even money when that happens. 

Sep

27

 Wondering if the more politically savvy specs could venture some opinions as to the relative flood of departures in the last few months and timing? I've read all sorts of reasons from the left/right and in between varying suggesting the pragmatic to the audacious. Normally I don't pay too much attention but given pols enhanced effects on the markets these days…as Buffalo Springfield sang, "…there's something happening here. What it is ain't exactly clear…"

I have my own thoughts on this but they border on the less probable and would only exacerbate the tensions in the country.

Rocky Humbert writes:

This doesn't address Vince's question, but one of the more obscure points of the conflict of interest laws waives capital gains taxes on required divestitures for individuals who accept government positions. This provision incentivized certain people (particularly in the Clinton and GW Bush administrations) to leave the private sector and sell large blocks of appreciated stock tax free. The tax savings in some cases were worth millions of dollars. If the capital gains tax rate goes up in January, it would be sensible to expect more people with this tax situation to join the administration and address the noted lack of industry executives.

Scott Brooks comments:

I was unaware of this. Thanks for sharing, Rocky.

But I gotta think that unless you're really really rich, this tax savings will not be as much as the lifetime of earnings one will receive from having held a high level position in the government.

On the other hand, there is that whole analogy of rats and a sinking ship. Of course, if the ship was really sinking, I never understood where the rats were going to go as there isn't a $25,000/speech speaking tour available to members of the non-political rodent community.

On the other hand, I think a lot of these political rodents realize that after after 8 years of pushing towards "statism lite" and nearly 2 years of a full on push towards "statism", they see water level rising below decks coupled with a huge lack of support for their policies on deck, that has metastasized into near outright rebellion……well, with all this going on they are scrambling for the life rafts as fast as they can.

Gary Rogan writes:

Summers is leaving in time for the election because he is very unpopular with the base and while he can still count on a couple of years of consulting engagements, and because of the failure of the stimulus. Romer, the architect of the stimulus and the effect it was supposed to have on unemployment , left to keep whatever little is left her credibility, to be the one to actually take the blame for the failure of the stimulus, and to make room for Goolsbee in time for the election because he is supposed to be much better at explaining away any problems. Orszag lost the debate on the deficit, he argued for taking some steps to bring it down.

Sep

20

They just announced 1 1/4 years late that the recession ended. Many interesting questions arise. What would happen if you bought and sold a swing system, when they announced recession and when the announced expansion? What are the chances that a random number generator or intelligent robot could do better at calling turns in the economy than the NBER? Many others.

Scott Brooks comments:

The recessions over?!?!!!?

I find that hard to believe. Just a minute….let me turn around and check something….looking….looking….OH MY GOSH!!!! There ARE monkeys flying out of my butt….the recession MUST BE OVER!!!

I work with a lot of insurance related organizations (brokerages, TPA's, insurance companies) and there is nothing happening in the insurance world that indicates the recession is over. Workers insured under workers compensation is down 20%+ off it's high. Workers comp premiums are down. Business insurance premiums are down. There are still more companies that are going out of business than there are start ups. There are still more companies that are contracting than there are companies that are expanding.

At the grassroots level, there is a lot of pain….and the bad stuff outweighs the good.

The recession is not over.

Jeff Sasmor writes:

What they said was that the last one ended June 09. They also said a decline now would count as a new recession. Talk about a lagging indicator!

NBER said "The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

Pitt T. Maner III writes:

Not only is the recession over but now the technical purists say it is impossible to have a "double-dip" since another downturn would be counted as a separate recession. Let the cheerleading begin…

Stefan Jovanovich shares:

"The Business Cycle Dating Committee was created in 1978, and since then there has been a formal process of announcing the NBER determination of a peak or trough in economic activity. Those announcement dates were: June 3, 1980; July 8, 1981; January 6, 1982; July 8, 1983; April 25, 1991; December 22, 1992; November 26, 2001; July 17, 2003; December 1, 2008; and September 20, 2010."

From NBER FAQ

NBER Cycles

Sep

19

 It's amazing to me how certain songs can cue up such strong memories. It's even more amazing to me how my 46 year old mind filters out the negative emotions and focuses on the good…or at least the good that should have been…the good my young mind was not capable of grasping.

I had an apartment at 124 S. Lorimer Street in Cape Girardeau, MO during my junior and senior year of college. My bedroom was a basically a giant bay window that hung over the south side of the house. I could look out my east window and see over the Mississippi river to fertile plains of the Illinois bottom land. Below me, lay the river front of Cape with it's old buildings, and giant flood wall to block the high waters that inevitably came.

Every morning, I would awake to the sunlight breaking in through east window. I usually just pulled the blankets over my head went back to sleep. But often I would get up and sit in the chair next my closet and watch the sun come up over Illinois and glisten on the surface of the greatest river in America.

In the evening, I would often be studying at my desk, which, unfortunately faced the wall to the west. But I was no immune to the lure of the setting sun to the west. So I would often get up, go sit in the furthest bay window and watch the sun set over the 100 year old houses across the street to the west. Then as the sun dropped below the horizon, I would turn to the east and watch the radio towers in Illinois light up their blinking red lights.

Looking back, I realize that those were good times…good times that I wasted on the things that are important in youth…but now, as an adult, I realize they were largely meaningless. Melancholy days wasted on pinning for lost love. Days of distress over boredom with school and an inability to stay focused on my goals…I look back on those days and think of that young man sitting there in that room, not sure what was going to happen to him, seeing my goals shatter before me and I want to tell him to enjoy life and not worry about things that will (I promise) look so trivial in the hindsight of maturity.

But I guess in hindsight that it was important that I go through those times to make me appreciate what I've got and the journey that I took to get where I am today. You can't understand how good the sweet is until you've tasted the bitter.

When you're young, you don't understand that high waters come and may make things look hopeless. But if you just hold on, those waters will eventually recede…and in their place they leave a new, changed landscape, filled with fertile opportunities.

That was 25 years ago. I wonder, 25 years from now, how I will look back on these times. I wonder what I will clearly see then that I can't see today?

I look forward to that journey and all the wonders that remain to be discovered when whatever rising waters I will face in the future eventually recede….just like they always do.

Here are a few songs that triggered these thoughts tonight.

Sep

16

a campfireWhat's the worst that could happen? Potlatch! Everyone who owes goes bankrupt and the government just issues new currency. It's happened many times before in many countries. People, roads, buildings and all that will still be there– only the medium of exchange, and the mix of who owns what, will change. People will still produce and consume, so there will still be an economy. Granted, it may get messy for a while– the lawyers will need something to do. If you have something in hand that gives you title to real property of some kind, you'll be able to keep most of your chips unless they are forcibly taken. If it's all paper and electronic blips, well …

If we pollute our planet beyond repair, that's a little more problematic. I guess we'll just cross that bridge when we get to it.

Scott Brooks says:

I have given this further thought and have determined that a potlatch and camp out at my farm is in order. Gary, Rocky and Stefan please make arrangements to fly to Missouri and we'll make smore's, roast wieners and marshmallows, drink some ice cold beverages, and debate until all of this is settled….or until the haunting silence of a beautiful full moon night is broken by the howls of coyotes. Or, if there's a new moon, we can get out the optics and gaze up at the heavens and see constellations with the naked eye (or a good pair of binoculars) that you could never see in the city.

You will be entranced with the simple beauty and simplicity of life, and all these debate issues will slowly melt as we all discover our commonality of purpose under the stars that one can only see in the middle of nowhere.

We can debate or just share life stories as our friendship grows thru the night. And then, when the skies begin to turn from black to blue, to purple to red, and the world comes alive around us with song birds, and whippoorwill's cry fades off into the distance, then is when we'll all realize that all of these debates are mere exercise.

When the turkeys fly down from their roost and the first deer of the morning move from their feeding area's to the edges of the forest and creeks to bed down for the morning, then we'll realize how tired we really are and how pleasant our camp out has been.

We'll head back to the farm house, crash for 5 or 6 hours, get up, eat a hardy breakfast around noon and then I'll take you on a tour, around the place. Maybe we'll ride in a tractor. Or if the family that farms my land is harvesting, I'm sure we can go get a ride in a combine and watch the miracle of the harvest.

Early in the evening, we'll grab a fishing pole and see if we can't catch a bass, bluegill, crappie or catfish. Maybe we'll shoot some clay birds. Then we'll go to town and sit in the local bar and grill and watch the locals wander in. I'll even introduce you to a few. You'll meet small town businessman and farmers and ranchers. You'll meet laborers, and school teachers and those just passing thru. And you'll find many of them to have unique stories of success. Their scripts will be different, but you'll see that they are really just like you and me….only with a different calling in a different geography.

We'll eat small town food and feel our arteries clog in the process. I'll have a water with lemon and you guys can then start a different kind of debate….a debate about trying to remember who owes who a drink. And then you'll decide to just not worry about it.

And that, my friends, is the effect that the BrooksFarms has on one and all that take the time to travel there.

So smile guys and enjoy the debate and remember, it's all amongst friends…..friends who are only a plane flight away from a campfire, some smore's and the haunting howl of a pack of coyotes under a blanket of stars.

Aug

22

the gateway archBeing from St. Louis, I'm partial to the Arch and what it stands for. The construction of the Arch is quite a story to behold. But what the Arch stands for is even more impressive. There is a reason that St. Louis is called "The Gateway to the West", and the Arch symbolizes the spirit of all those brave men and women who went into the great and untamed wild of this country.

The Arch is probably one of the most under appreciated monuments in the world–the true embodiment of Manifest Destiny and the "Mind of Man". The same spirit that built the skyscrapers and great cities of America was found in those that ventured west to settle this great land and lay foundation for the revolution of freedom that was to come.

Aug

12

 Mr. Brooks has regaled us with a litany of bad things about the current state of affairs versus the late 30s. Yes. however, the question is whether this is bullish or bearish? The market does move to levels consistent with the state of affairs so that the anticipated rate of return takes into account the constellation of current events and future cognizables and reasonable unknowables taking account of randomness in the process.

Mr. Brooks responds: 

To be more clear, I am bearish. I don't see the market doing well, now, or in the near term. My money is where my mouth is. I'm short Europe, NAZ and long long gold with a large cash position to take advantage of opportunities that will arise.

I work closely with insurance companies, insurance brokers, TPA's, and small businesses. There is universal pessimism amongst these organizations (and these are quality proven businessmen/women). They are NOT hiring. They are hording cash and not spending on capital expenditures. They are fearful that their lines of credit will be cut. They don't like the onerous regulatory environment that metastasizing around them.

I am not a bear, but I am a realist. But I am not a trader like most of this list. I have, historically held positions for well over a year (on average), but that isn't working anymore. Therefore, I search out short term opportunities where I can find them (and they are few and far between), and I am looking at PE opportunities in businesses that produce cash and do well in hard economic times (I wrote about that on this list in the recent past).

I don't care whether the market is up, down or sideways, with either low or high volatility. The bottom line is that I have to make money for me, my family and my clients. If I'm wrong, I'll be a man, fess up to my errors take my lumps and move on…but I'd rather be right! 

If you want what I think is a real good indicator for what is really happening in our country economically, look at Workers Compensation insurance. Look at the numbers of employees that are employers are paying for (i.e. that are covered under a corporate WC plan), and look at the total premium dollars being spent on WC. Both are down substantially.

The total # of employees covered by WC are down substantially, and the total WC premiums are down (proportionally) even more.

Look at the money that companies are spending on things like liability insurance. They are cutting their premiums, and cutting their coverage.

There are many things that you can learn from this information.

Now, where to find this data? Well, I get mine from my insurance clients via conversations. I don't know where to find it out in the real world, so I can't supply a link….my anecdotal data will have to suffice. Sorry I can't give more than that.

Rocky Humbert adds:

Alan AbelsonFurther to the chair's comment and just to shake things up a bit, I will confess that I am bullish on stocks over the next decade, and believe that they will substantially outperform cash and bonds (from these yields ). From these prices, I expect returns in the order of 6ish percent. I also have a ton of cash right now because I want to exploit the volatility of the markets which will probably dwarf that 6% drift.

yet, other than valuation (which got me out of stocks prematurely and into bonds prematurely) in 1997, the single best reason to be bullish is that none of the really smart people on this list can articulate any reason to be bullish.

For example, I owned Intel pre-internet-bubble at a 10-12x p/e … and sold it in the 2nd inning of the bubble, and felt like a fool as it rose to 70+ times earnings. As of this afternoon, Intel is back to 11x earnings and it's a stronger company today than ten years ago and it has a 3.1% dividend yield to boot. With all due respect for my bearish speclisters who see a permanent lack of prosperity (and who may indeed be right), the single most important thing to an investor is the price you pay for an asset. To think that you see things that the rest of the world doesn't see over the next decade is repeating the same mistake that people made in 1999.

I have no clue what the market will do over the next month or six months. But when no one can spin a bullish story, it's important information…. And if you look back to 1958, you'll discover that an entire generation of investors had been turned off the stock market by the great depression and who swore that they'd never buy stocks again…only to miss wonderful opportunities always looking into the abyss for the next shoe to drop. We're all Alan Abelson's now!
 

Jeff Sasmor writes:

I could buy into Rocky's thoughts but I have the conviction that humans have less and less to do with what's going on; and market makers aint what they used to be.

Indexing, etfs, double etfs, double inverse etfs, commodity & metal etfs have changed the landscape quite a bit in ways I needn't elaborate for this group. For sure, Jeff is in the bearish camp, for the (intermediate) time being. But not really on emotion as on observation. One can't be married to these concepts as we all recall the ever changing cycles.

That said, I agree with Rocky that cash is a good thing to have right now, and wait for some real panic as we wait to see whether the various indices' "death cross" is actually a predictive thing or not.

What will it be this time? China dumping Treasuries? Some new allegedly pandemic disease? Radioactive ash from fires near Chernobyl? Eddorians or some other intergalactic baddies?

There'll be something…

For what it's worth from a lowly daytrader.

Ken Drees comments:

 I am bullish since the dollar is no store of value and stocks at least promise a share in profits. How that anti dollar hedge plays out is a whole other can of worms.

But you must consider equities at some point when they are finally puked up and sworn off by the public if that time does come. The gov will probably force treasury purchases for retirement on the masses during their exodus from risky stocks.

And I like the idea of cash to a degree –relating to that Buffet comment from a while back–in that you have the ability to buy panic.

Jim Sogi writes:

I am of the 60-70's persuasion: 40 % up 40 % down multiple times. That would mess up the most people. We've seen one pump already. 

Charles Pennington coments:

I agree with Rocky. Every week I lazily read Barron's, and they'll have an article about some solid growth company at 12 times earnings, paying a big dividend, and holding a lot of cash in the bank. J&J is a good example, but there was even an article about Ebay recently, and the stock valuation sounded like it was Bethlehem Steel. If you step back and look, though, there's never anything special about the stock that Barron's is covering, it's just that the market as a whole is offering all this pretty much everywhere you look. And if these companies can earn money now, when can't they?
 

Jul

21

 My family has decided we're doing a triathlon in September, so they're making me do stuff to get ready for it.

Well, tonight on my 16 mile bike ride (the most I've ridden a bike in 30+ years), I saw something that made me think of Mr. Sears:

I saw a juggling jogger! He was jogging and juggling sticks at the same time!

As luck would have it, he and and both got stopped at the same traffic light so I compelled to inquire about…..well you know…

He informed me that he loved to jog, but never felt like his arms got a good workout. So he started juggling while jogging. He says not only does he get a great workout from jogging, but his arms are also now getting a great workout too!

I figured this meant one of two things:

1. This gentleman has come up with a great new training technique, or

2. The end is near, because (and I'll have to check my scriptures to confirm this), I believe that juggling joggers are one of the 7 signs of the Coming Apocalypse.

Jul

18

 Is it me, or is it easier to bluff and steal a pot when the pot is small and less is at stake? It seems like players are not quick to defend or contest when the stakes are "not worth it".

Can this be seen in markets? Do sellers dump near lows or not care to squeeze you when you are trying to trade through their midst when action has lost its edge? What are some examples where the markets let you steal a little–out of nothing more than fatigue or lack of interest?

George Coyle writes:

I think about this often but in a different way. Looking at the concept of the bluff from another perspective, the amount of capital a player has certainly influences play and outcomes in both poker and markets. The person at the table with the most chips can often “lean” on the other players without much risk. As an example, if the pot was say $25 then the person with $250 in risk capital will be exponentially more averse to attempting the bluff (or holding on to a questionable hand) than the person with $2500. In instances where you hold the majority of the chips the cost to see how things play out and/or wait for a potential reversal of fortune or increased probability of success with new cards coming out (or information/prices in markets) is worth it more often than not so long as the stakes don't get too high relative to your risk capital (unless you truly have a terrible hand then discipline is prudent). The blinds (commissions/spreads in markets) will eat away at the little guys in the meantime to the tune of a much greater % of holdings. Leads me to wonder if there are any studies to this effect showing the tipping point wherein an uneven distribution of holdings presents an inevitable conclusion in outcome (i.e. the big fish wins/the rich get richer) should the majority holder choose to play conservatively and never risk too much going “all-in” (and barring social revolution)? I would imagine Warren Buffett rarely gets margin calls and his “genius” at this point could just be by virtue of having the most chips and ultimate staying power (mindful that he did manage to get himself to his current position).

Similarly, I would imagine the player with the most chips wins hands s/he probably shouldn't (statistically speaking) by the same virtue. The film director Oliver Stone said, "Luck comes from persistence and talent. If you're talented your luck will eventually come." Perhaps this is the root cause of lots of modern success, a little well timed luck leading to a "lean" advantage which serves as a self-reinforcing phenomenon. In horse racing they use "claiming" races to account for this effect. These races have a fixed cost where the horse can be bought should anyone want to pay the cost. This keeps the $20k horses from consistently stomping the $4k horses (the owner of the $20k horse entering the $4k race would run the risk of having to lose $16k selling his horse at $4k). It would be interesting to see how markets would play out if a similarly tiered structure existed.

Scott Brooks adds:

Ken is right. When I played poker in the 80's (I played strictly 7 card stud back in the day), the size of the pot mattered. But at the same time, it also had to do with the pain associated with the final raise. Of course, the final raise wasn't the end all be all. It was the build up to the final raise……i.e. slowly suckering the guy in with a series of raises that were painful, but not so painful that he wouldn't make call the raise, or even raise the raise.

It was also helpful if earlier in the night you had the nut hand and suckered him into a sure loser hand (loser hand for him). It was key that when you suckered him into the sure loser that you not make the loss too painful. Save the pain for the big bluff to come later that night (or on another night….it might be weeks before you get cash on this set up).

One of the keys with this set up (I'm sure professional poker plays have a name for this set up, but I don't know what it's called) is that after you sucker him into calling your last raise, you show him your cards and tell him, "Fred, I'm sorry man, I stole it from you" (or some similar phrase). But it's very important that you show the cards in a humble manner, with a contrite look on your face, and say the words "Fred, I'm sorry man, I stole it from you", in the kindest most humble manner possible, looking almost ashamed. You are conveying to empathy to him.

But if you did all that right, later in the evening or even weeks later, you could sucker him into a big bluff. But you have to use this bluff wisely. You have to make sure that he's got a decent, but not great hand. You have to use your best judgment to determine that he has, at least a high straight but no more than a low full house. And you have to make sure that your hand is mystery to him, but that it doesn't appear to have the potential to be too big of a hand.

You have to slowly sucker him into matching raises or raising raises and suckering him in without him noticing the financial commitment he's made and how painful losing at this point would be. He needs to think that your bluffing again. You then hit him with a big raise, a raise large as to be painful……so painful that you can almost always see the fear on his face.

You can see the fear in his eyes as he realizes, "I've got a lot of money in this pot and losing this pot now would hurt, but I'd survive. But if I call his raise and lose, I'm gonna lose my house payment for this month".

At that point, you have them. The fear of losing this months house payment is too much and they usually fold out of fear.

You can then decide whether or not to show him your cards (since he didn't "pay to see them….i.e. he folded), either way, be gentle.

Later in the evening, make sure you're compassionate to him. For instance. If later on you have the "nut hand" and he wants to keep raising you (i.e. he thinks he can beat you), tell him, "Fred, I've got the nut hand". If you've done things right, Fred will know that you're being honest with him and fold. Show him your cards and let him know that you really did have the nut hand.

That way, Fred will have a good feeling about you (and feel less bad about his earlier losses) and will want to come back to the table, night after night after night so you can slowly bleed him of more and more capital.

That is how poker players bleed gamblers dry.

And that is why I quick playing poker. I couldn't stomach what I was doing. I loved the money, but not how I was making it. I couldn't look myself in the mirror.

If I win a trade or beat out a competing businessman I can feel good about that win. But I felt like a hustler win I took money from the "Freds" of the world.

Gains without integrity are hollow and empty….and if they're not, then you are a hollow and empty person. I was not that person. So I quit.

 

Jul

11

Don CoryellRIP Don Coryell, innovator and aerial conductor. 

Scott Brooks comments:

St. Louisan's suffered for years with the Big Red (the football Cardinals). But under Coryell, we had several years of great excitement! If only we'd had a better owner (Bill Bidwell) and a better draft department (George Boone), we might have done something.

Don Coryell, should be in the Hall of Fame for no other reason that he took a pathetic franchise, with a pathetic owner and a pathetic draftnik, and turned them into a team that contented.

Stefan Jovanovich adds:

More about DC:

He played quarterback and running back at Washington but was never good enough to start because his classmates happened to include Don Heinrich and Hugh McIlhenny. He was the university champion in the light heavyweight division; people who saw him fight said he was a copy of Jack Dempsey as a teenager, pure aggression for 3 minutes of every round.

Dan Fouts: "He was an atypical coach. A lot of football coaches believe it's my way or get on the highway-thing. But Don gave us as players a feeling of ownership of the offense, the plays. He took our ideas and tried them. He wasn't afraid to try things."

John Madden: ""It was the way he treated players. I think that was something that was missed. We tend to jump right to the coaching part, the offensive part, and the passing game. But his No. 1 thing was his handling of the team. He was a master of it. As an assistant, he treated you as an equal. Players were always the most important thing to him. I think he had more respect for his players and coaches than anyone I've ever known."

Like Pete Newell and John Wooden the man put literally everything he had into coaching. When someone asked him in 1992 if he was sorry he had retired, his answer was: " I don't miss coaching one bit. Not a lick. I miss the people, the coaches and those great players. Those great guys. But I gave it everything I had. I didn't want to die on the football field, and I might have if I had stayed around much longer. I was tired. No question, I was physically and mentally shot."

No one who knew him can remember his having ever been cruel or even petty.

Scott will get his wish; they will get round to voting him into the Hall of Fame now that he is safely dead. When they voted him down earlier this year, he told his daughter not to worry because they would get round to it some day. Committees always have an impeccable sense of timing.
 

Jul

11

VolkswagenAndrew Briggs: "State pension funds are underfunded by over $3 trillion; this is more than six times the $438 billion in underfunding the plans themselves report. Pension shortfalls far exceed explicit state debts." The humor starts when you get to the part about "actuarial assets".

Scott Brooks writes:

I have been accused of crying wolf for years on these lists about the problem of underfunded pension. This is a huge problem that isn't going to go away with actuarial slight of hand. There are so many straws being tossed on the metaphorical camels back that eventually there will come a day of reckoning. But this pension problem (think PBGC) and the big lie that is the Social Security Trust Fund aren't straws tossed on the camels back, they are Volkswagens.

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