One of the 10 million things that the Specs have said either on Daily Spec or to me personally in the past five years that made complete sense is how the first priority for the evildoers is to get you to question not your facts or even your beliefs but your own version of reality.

They do this by attacking you on a very personal level such that you begin to question your own ability to think clearly about an issue, to use your abilities to reason. This is accomplished generally by intimidation, by peer pressure, or by insinuating that they have access to knowledge that you don't, thereby denigrating your intellect. Then into that vacuum of logic they can insert their own ideology. 

J. T. Holley adds:

 A very good example of this is shown in the movie, "A Bug's Life," by Disney via Pixar. The following is the logline from Yahoo! Movies:

"A colony of ants is threatened by a gang of grasshoppers led by the evil Hopper. Flik, a common ant and a misfit, has an uncommon vision when he tries to rise to heroic proportions by enlisting a band of circus fleas to help him defend his colony from the grasshoppers."

The amazing story is how the libertarian heroic Flik utilizes individualism and technology to bring about change in the ant colony and helps them realize they have the strength and the numbers to stand up against the evil Hopper and his grasshoppers. Up until then the way the psychological edge was maintained by Hopper and Tom's "questioning your own ability" was wonderfully demonstrated. No one single ant ever challenged Hopper due to this very thing.

Nice to see Heroes and Individualism rising above "Colonies" thoughts and overcomes in the end and is a great lesson for children! That is one movie my kids love to watch over and over!

Incredibles! is another also Pixar! I know Jobs is high up the food chain there at Pixar, but there has to be some other Libertarian, Rand-loving someone who keeps cranking these brilliant movies out every five years? Anyone know who?

Tons of hypothesis and good speculating questions are espoused during the film as well by the way.

Ken Smith adds:

Propaganda is the mechanism of the market also. Money seeping away from investors at a higher rate than should occur is the consequence of the media's flooding the public mind with anodyne.

Investors can ameliorate the losing process by cancelling the Wall Street Journal, Financial Times, Money Magazine, and so on; additionally cancelling all subscriptions to advisory letters.

What's more put a block on emails from services that recommend stock picks, ETFs, puts and calls, and those that promote trading platforms such as Metastock and Tradestation.



On 2/5/07, Andrea Ravano wrote:

Evidence from Capuchin Monkey Trading behavior: The study confirms for animals, what behavioral studies have shown for human beings; that to offset a loss of 1 you must have a profit 2.5 times as big. In other words the perception of your pain is greater than that of your pleasure.

That pain of loss is 2.5 greater than pleasure of gain, in absolute terms, has been bandied about in literature for a while. What is the nature of a trader's state of mind as a function of trading (or more specifically, position checking) frequency?

One check on this is to look at the effect of multiplying losses by 2, and comparing with gains scaled at 1. Using SPY returns since 1993, checked average returns for daily, weekly, and monthly intervals:

           Daily       Weekly    Monthly

Ave:   -0.003      -0.005     -0.002

Pos:    1855          411       411

Tot:    3529          730        169

%Pos:    52            56          65

When the "effect" of losses on your soul is double that of gains, you are suffering, on average, in all intervals. Therefore, it is no coincidence there are so many psychologists/psychiatrists involved in trading. Percentage of the positive, however, scales up with longer intervals, so you feel bad less often.

Philip McDonnell adds:

Consider what happens when you lose: How much is required to break even? 

Loss       Required Gain          Ratio
-20%           25%                    1.25
-25              33.3%                 1.33
-50              100                     2.00
-75              300                     4.00

Average Ratio                       2.15

The ratio of how much is required to break even rises rapidly as the losses increase. Although the above unscientific data points appear to be in the ball park of the putative 2.5 ratio, the underlying ratios are clearly non-linear and NOT well described by a simple number. In fact any simple ratio is far too simplistic to be a good measure.

I would argue that a log linear utility function is what an investor, and any rational individual, would want. In their famous paper on Prospect Theory, Kahnemann and Tversky identified what appeared to be irrational behavior on the part of university students and some faculty when presented with hypothetical bets. The Nobel Prize winning professors concluded that the students chose irrationally as compared to the Gold standard of statistical expectations based on an arithmetic utility of money.

But if money compounds, one would want a log utility of money. When the examples cited in the study were recalculated with a log utility based on the relative net worth of typical students the results showed that the student subjects were invariably quite consistent with a log utility function. This re-opens the question: Were the subjects or the professors the irrational ones?

If one expresses the gains and losses in the above table as the natural log of the price relative, then the negative logs of the losses exactly cancel the logs of the gains.

Charles Pennington adds:

These experiments that psychology professors run on students invariably involve the students' winning or losing maybe $100 or less. That's a small amount by any reasonable metric.
$100 is very small, for example, compared with their first year's salary out of school. So it's quite reasonable for the professors to assume that the amount is in the limit of a "small" amount, in the sense that it (1+x) is approximately x if x is "small."

Any reasonable person, offered the opportunity to bet with a 50% chance of winning $250 and a 50% chance of losing $100, should take the bet. That's true even if he only has $250 to his name, because he also has prospects for future earnings.

In this case, the professors are more rational than the monkeys.

J. T. Holley wrote: 

"Could it be that all the bruised and battered hold-outs from '00 - '03 will finally join in, and we resume the incessant trek toward the summit of market-based capitalism?" kz

How about this simple fact: For the first time in recent years that I can remember, the Dow and S&P indexes (headline purposes) outperformed the price appreciation, across America, of houses or real estate. This is roughly a two to one ratio. Now for the sake of simplicity, how many of the '00 - '03 bruised and battered people are going to scratch their heads and say, "twice as much, huh?"

I think the "Confidence Index" mentioned by Carret has a ways to go fellas; but this must obviously be tested.

 Philip McDonnell adds:

"Any reasonable person, offered the opportunity to bet with a 50% chance of winning $250 and a 50% chance of losing $100, should take the bet, and that's true even if he only has $250 to his name, because he also has prospects for FUTURE earnings." 

I would agree that future earnings can be and perhaps should be factored in. But to a freshman with $100 (not $250) the 50% chance of no beer, pizza, and dating for four years might seem an unacceptable risk. Losing it all results in a utility of Ln (zero), the way I look at things. Ln asymptotically approaches negative infinity.

A few points:

1. KT did include some bets in the thousands of dollars.

2. Most of the KT bets were fairly close calls even viewed from an expected arithmetic value as opposed to a log utility.

3. KT never concluded that the indifference ratio was 2.5 or any other number in their ground-breaking paper.



I have been thinking about kids' games. The purpose of these games is to prepare them for a productive and happy life. The game they seem to play first is one where they take something out of a bag and put it back in. I wonder how many market situations are like this in which the game prepares you. The gap to a new level is one. The refusal to go up a certain large amount is another. The inability of a market to be number one is another. Other situations include when the price hasn't been fulfilled, and when the stop hasn't been hit. I will attempt to quantify this and other lessons that we can learn from kids, and would appreciate your help and suggestions.

Mark Goulston comments:

While you're on the subject of kids' games, you might want to check out zoooos here. It's an educational interactive toy/device that three year olds can use to interface with educational DVD's rather than plopping in front of a tv.

J.T. Holley offers:

I have been thinking about kids' games. The purpose of these games is to prepare them for a productive and happy life.

When my three kids were each around one or two, my favorite activity was to play the interaction/game Peekaboo. That purpose, it seems, is to spawn and draw out those beautiful smiles and giggles in that specific stage of development. But it also could very well be the initial training of anticipation for earnings announcements, IPO's, government figures, AP headlines, CNBC guests talking, and spin offs. We all know what's coming within a half a deviation most of the time, but we so easily giggle and get all bent out of shape with enthusiasm and expectation. It's as if the Mistress places her hands over her face knowing that she can make us all giddy and put a smile on our faces. She controls our giggles.

Jeff Sasmor comments:

My younger daughter learned to read whilst playing Role Playing Games (RPGs) where there's a lot of dialogue popped up for everyone to read aloud. Many games are also good for hand/eye control improvement. That said, Grand Theft Auto is NG and other M-rated games are not for kids. Excessive use of games and videos as babysitters is also bad. It's also no good for kids to be so booked up with sports, tutoring, music, et al after school that they don't have any free time and can't have a social life!

But not everyone can afford a nanny and parents need some rest once in a while. What parent hasn't envied the DVD player in the minivan? What parent hasn't plunked down their child in front of the TV to watch Lion King so they could rest? A kid with a Gameboy in the back seat of the car lets you concentrate on the road rather than having to concentrate on the child's needs while driving. A kid reading a book in a car may throw up. And checkers in a car? Well, maybe magnetic checkers …

Many video games teach logic and thought in the same way that chess or checkers do. For example, strategy games where you battle various players against the AI in the game. You move around players and pieces which have various move types and capabilities - and the game tries to knock your players out. These games are very much like chess in spirit.

Both my kids have had an unrestricted diet (but a well selected choice!) of video games and computer use (but no games on school nights so I get a chance to play) and they're intelligent children & excellent students.

Parents have to modulate choices for children, but it's too easy for Grups to blanket-condemn a whole lifestyle and genre because some parents are too lazy to monitor what their kids do. Guidance and monitoring is what's important. Kids deserve to have some fun of a type that they choose. We don't need to control everything down to the last molecule.

Alan Millhone adds:

On our ACF website I always say: Checkers — the mental sport alternative to video games. Children of today are too addicted to video games and TV as babysitters. Children's minds have to be challenged in any way we as parents and grandparents can.

J.T. Holley adds: 

On our ACF website I always say: Checkers — the mental sport alternative to video games. Children of today are too addicted to video games and TV as babysitters. Children's minds have to be challenged in any way we as parents and grandparents can.

OK I'll speak up on this one. Now guys, really, I'm not a spring chicken and I grew up with a Stretch Armstrong, Green Machine, Red Rider, various board games, Cable TV, microwaves, and yes Atari. I also had a Commodore 64 that I won in a raffle from a minor league baseball fund raiser, and I also had my favorite 64 in one electronics kit from Radio Shack. That was only to establish background.

My point is "the ole gray mare ain't what she used to be." I do not, repeat, do not allow my children carte blanche the ability to watch hours and hours of tv, but have ya'll watched what is out there for children these days? I mean in the 70's when I watched tv it was Captain Kangaroo, Electric Company and Sesame Street and all those lingering cartoons from the 50's and the 60's that had smoking, gun shootin', Popeye's tatto's, and fist fights. These days it's Dora teachin' Spanish, Wonderpets dishing out principles, Little Einsteins introducing Classical Music to three year olds, Bear in the Big Blue house teaching four year olds to "Clean up the house," and my favorite on Discovery Kids Prehistoric Planet educating my children about dinosaurs that we were never told about! The bottom line is that it's good stuff and educational in content and delivery as long as you stay away from old man Turners Cartoon Network (junk) and be selective with duration and channel.

Now having said that, tv is no substitute for reading, flipping index cards with numbers and letters, and interacting with your children in the traditional sense. Heck, my little Addie loves reading Dick and Jane.

On the topic of boardgames, I'm an addict and I will say that we've advanced to higher levels as well, as far as education and skills. To once again show my lineage, I grew up with Risk, Stratego, Checkers w/ Grand Daddy Holley, Connect Four, Monopoly, Chutes & Ladders, Pay Day, Perfection, Simon, and Axis and Allies, my favorite game around 16 years old. These board games today made by Cranium are out of this world. If you want to see your children ages three to eight stimulated and become a ball of laughs while learning competition and creativity, then go buy Cranium's Hullabaloo either on DVD or with the Simon-esque plastic voice box. The other that I highly recommend is a newer game called Zingo! It is a mix of Memory and Bingo. Once again, the bottom line is that kids these days have far greater choices and boardgames to play than the classics that we had. If you play enough of these newer boardgames, you'll see that children at an earlier age are picking them up than it seemed before.

I won't even go into Leapad, Leapster, and the other computer stuff that exists out there in the electronics world today. It ain't all Doom, Drive-by Shoot 'em up either!

Yes, myself and my children spend countless hours walking paths identifying trees, birds, rocks and such. We run, bike, hike, and swim too! We also do Tae Kwan Do, Soccer, Golf, Bocce, Badmitton, Croquet, and Kick the Can.

James Sogi offers:

A favorite kid's game is "drop it." My kids would say, Dad pick it up … drop it, Dad pick it up, drop it etc. It's lots of fun.

A favorite market game is market drops. Dad picks it up … market drops, Dad picks it up … lots of fun. It's profitable too.

Nigel Davies adds:

I'd like to put in a word for computer games for kids, which don't necessarily include shooting aliens or others with laser guns etc. You not only get strategy and problem solving in quite realistic scenarios (well kind of realistic!), but also the development of computer and motor skills. The characters can also talk in context. The 'Thomas the Tank Engine' series are especially good, especially 'Thomas Saves the Day.'

Even with board games I think they can be made much more fun if they're on a computer with nice graphic presentations, warnings about illegal moves, ready made opponents etc. You and your child can take the same side against computer generated play, much better than having you beat them or letting them win I think.

My son's a bit young for chess right now but when I do start him off, it will be with Chessmaster, not a strong program but with nice graphics and teaching facilities.



Since 1980, it has only been three years since we have not seen a year (as of '06) where there has been a significant sept. - dec. clear out of longs (using a variety of available weekly trend change indicators). These years are '03, '96 and '93. Of these years, the Dow finished relatively flat for one of them, which was in '93, and the bid for the other two were in '96 and '03.

In particular in '96, after the market had three relatively strong years, it still posted strong gains in '97 without a sept. - dec. sell off.

In all three years, however, the April hoodoo's came through the following year before recovering, maybe not a significantly strong sample, but maybe of interest nevertheless.

As the chair suggests, it may be a case where as the volume attracts volume, strength attracts strength.

J.T. Holley comments: 

So remember, as good as counting is, it ain't gonna change what happens tomorrow. So protect your stack (your portfolio) and never lose your stake (all your net worth and ability to invest). No odds are worth losing everything. You gotta live to play another day. -Sb

There are 52 cards in a deck with four suits.

66 stocks make up the Dow Composite with Industrials, Transports, and Utilities (3 suits). Playing Dow Theory is like playing the classic 21 cards a piece "War," meaning totally random and no strategy involved unless you're a cheater.

If you really want to step back and take in the big picture, there are 3000 stocks (operating or not) roughly on the NYSE and 2000 stocks on the NASDAQ NMS. This is what makes up the deck we call the Willshire 5000. That's it. All you have to do is know how many players are sitting down at the table like American, Fidelity, Vanguard with billion dollar portfolios, and then remember that it's like blackjack with ten decks. Most of the big guys don't take positions with numbers around five's and three's. This means that there is maybe 0.55% or 0.33% of a mutual fund that has 300 stocks in its coffers with one or two reserved for cash. I'm sure if you'd like to do the work, you could form enough hypotheses and tests to come up with something fruitful. I mean it's only 5000 stocks right?

Victor Niederhoffer adds:

These days, there is talk about it's having been 978 days from the last 10% decline, how the maximum is just 1050 et al, and ha ha, the day of reckoning is coming, and things like the decline in oil prices are going to cause the Fed to join the doomsday camp and knock the stock market down by raising rates because things are so good with energy prices going down that they have to act et al. Thus, no matter which way energy goes, it's bad for inflation. There are many statistical errors with the above reasoning that go far beyond the always suspect former Tennessee research outfit that was bearish all through the 90's because stocks were above book value the way they were in the 1929 era. It's a good statistical exercise that we all might profit from considering that it involves conditional expectations and predictions given a certain extreme range of an independent variable without knowing the form of the distribution itself. For others, the statement might better be bruited about among the 150 reasons to be bearish and to go against the drift among the good colleagues of the weekly financial columnist and his fellow performers. For those who would like to shed some light on the line of reasoning itself, what's required is a bit of counting. What is the life expectancy and the expectation given that you have reached a certain number of days without an x% move? Books on survival statistics are a great help here with our favorite being The Statistical Analysis of Failure Time Data by John Kalbfleish (Wiley Series). Not knowing the secrets of Rebecca, pi, or key level analysis, one has counted such expectations. The good news here is that like the crocodile or the oak tree, or Chorus Line, or Shakespeare himself, the longer a stock market goes without a big decline, the greater the expectation of going further once a threshold is reached.

J.T. Holley offers: 

Instead of utilizing survival statistics to attempt to predict the non-randomness of a -1% day or worse, how about looking at the frequency of the 2% up days that are hopefully gaining? We took a long spell of oct. '03 to june of '06 some 682 days in between the last time. Then the latest run is 156 days without one. It's always eyeopening to see how in the trenches, the smaller (quarters or thirds) up days on a histogram are winning the war in the quarterly battles of the war called drift.



This would make old Colonel Leonard Ayres proud! I caught this article and I thought you would like to read it. A couple things worth noting include the Virginia Company, the progress to immediately start making steel, and the positioning of the furnace near the fork (round number theory with flow and liquidity).



 Yes, there are two paths you can go by, but in the long run, there's still time to change the road you're on and it makes me wonder.          –Led Zeppelin's Stairway to Heaven

I've since felt that those lyrics were trading lyrics. What a song that has such sweet convergences and divergences. Many references to the Mistress, and yes, what a capitalistic ending that she's actually "buying" the Stairway.

James Sogi comments:

From a dialogue this weekend:
A: It was nice we met 35 years ago. It was like fate.
Q: What if you had a little GPS unit that told you where in life you were?
A: Well it wouldn't matter because things would be fated and you would go where you would go no matter what.

Well, there is no fate, but there is causation and timing, so the question always arises, "When is the best time to jump in and the best time to jump out of a trade?" Or in navigation, "what is the best course to take and when?"

While reading "Cake Cutting Algorithms" this weekend by Robertson and Welsh, I discovered that there were a few main methods of dividing a cake or object of desire among two or more fairly, which is applicable to markets as well. There is the basic cut and choose. The other is the moving knife. Variations include multiple cuts and choices. The parties yell stop when they feel their fair share has come, but if they wait too long, someone else will yell stop before them, leaving the waiter with less. The net result is to evenly divide the pie based on each person's self interest, but the individual's goal is to get the most cake. There is the trimming variation where one party goes away happy with a piece and the remaining trims up the remains. As in life and in the markets, the question is, when is it not in the abstract, but in competition with others? The path dependency would be simple in isolation, i.e. deciding when to eat dinner by yourself is easy, but with a group of eight is very hard. Try to arrange a meeting with six people.

When is the best time to buy a falling market? If you wait too long, others jump in before you and get a better price. Jump in too soon and you get inspired to write a haiku. When is the best time to sell your holding? If you wait too long, you might lose your profits. If you make too many cuts, then you end up with crumbs not a slice (i.e. vig. eats you up). The approach of the Bayesians takes into account the subjective, which is pertinent. The question on paths still is the following: Is there a sweet spot in each cycle that will maximize the trade? We want to know where the the right spot and the right amount is, but it is always in competition with others. In terms of counting a minimum number of cuts to fairly divide a cake, it takes at least two cuts to divide a cake three ways, and six cuts to divide it five ways. No wonder there are so many trades in a market to determine a price at the end of the day. If you take the situation where unequal portions are to be divided, different considerations are at play since the pieces are not interchangeable. Also, consider taking the benefit of disagreements that sometimes allows for fair division. In the market, if there were no disagreements, there would be no trades! Only the disagreement in value allows a trade to be made. At the moment of the trade, each trader is happy with the transaction. Only subsequent paths will lead to happiness or a haiku or both.

Kim Zussman offers:

Isn't this directly related to regression to the mean?

A student gets 100 on the first exam, but the next three are 80's and 90's, i.e. the first result was "luck" (good day, coincidental study with questions, etc.), but over many trials he approaches his true position in rank. This is discussed often with kids in school to help with setbacks and to point out how long it takes to become truly accomplished.

Life is like that. There is little you can do about who your parents are, where you live, who you meet; there are so many paths. But if you are consistently honest, hard working, and you try to get along, on average and in the long run, you will wind up approximately at the correct level.

Victor Niederhoffer adds:

Occasionally, I think back and forth in my life and everything that happened since is related to that. For example, Gail Niederhoffer, was a very good impersonator and used to call up people when she was nine and pretend she was someone famous. She did this with a reporter four times, and told him that he should investigate those people at NCZ who forecast stock prices with an accountant. Graham loves reading the article. He had traded for the palindrome. After we were introduced, I started trading bonds and currencies and stocks for him, and one of my jobs was to vet quant things there. And one such quant through the palindrome came to my office to discuss his sure thing for options. Ha. The rest of the story … but if Zeck wasn't my tutor at Quincy House, I wouldn't have met Gail at his wedding, nor would I have met Susan nor would any of my subsequent seven been born. It's like that for everyone and for every trade. But for causation, it's a very tricky thing. What's unseen is what would have happened without those forks. If I hadn't ever sent Doc Bo to visit the brothels of the SE Asian country with the PHD from northwestern in key posts, I might be still playing tennis with the Palindrome, and having a home in the Hamptons. Path dependence in markets is a key factor to consider and deserves to be modeled and systematized.

Stefan Jovanovich adds:

Morgan, a devout Episcopalian, believed that character was fate and that one's character was shaped by the people one knew and worked with and their characters, and in turn, by the people they knew and worked with. In that regard, he seems to have been like the man who believed that the cosmos rested on the back of a giant turtle. When asked what the turtle stood on, his reply was "It's turtles all the way down." Morgan thought it was character all the way down. His religious belief, IMNSHO, was formed most by the faith of his first wife.



The Pack 720 Pinewood derby took place this morning. We had an outlier in our four times that kept our average 2/100'ds of a second from taking second in the Den. It was amazing to see the Den's times and Pack's times. For the first time in my life, I could 'visualize' distributions as they were taking place both on a macro and micro scale. I attribute the DailySpec and all of its makeup of characters for this wonderful skill!

The Den's times for win, place, and show were as follows:

Total Avg.

1st   11.95   2.9875
2nd  12.03   3.0075
3rd   12.05   3.0125 (Jacob Holley)

Jacob improved from fourth last year to take home a trophy. He's so happy and ecstatic that I had to calm him down. That average included a 3.08 outlier as well with the other times coming in at 2.98, 2.96, 3.03. Lane two of the four lanes made all the difference in everyone's outcomes, being the most difficult lane, and the one that slowed everyone down.

The theory that proved to be a bit confusing for me was the advice I took for granted! The weight distribution of the car either had to be one of three things:

Forward - pulling effect rear - pushing effect middle - balanced

We were told that forward placement of weight added gave a nice pulling effect that was better out of the gate and down the long runway. It actually wasn't though and the rear placement cars pulled ahead on those runways. First and second both had rear placement whereas Jacob's had forward placement.

Aerodynamics plays no part it seems, and weight placement seems to be key.

I'm proud that the boys won the Den award for best average time of 3.12! A bowling/pizza party is the reward. We were the only one to issue an incentive if they won and we took it by a landslide, second being 3.85 seconds.

It was great to see 30 plus kids hugging the rail in anticipation to watch their cars come down the track to the finish line. There were fists pumping and two inch vertical leaps when they won their heats! This was an amazing experience.



Reading Sartre's La Nausee, I came across a wonderful "counting" sentence:

"Three o'clock is always too late or too early for anything you want to do." (obviously untested and his opinion)

Is there such a dead time or point in the trading day to which it's more advantageous not to do anything? In the six and a half hours of the NYSE, does there exist a slice of the pie that is such an apex?

Looking at things, it's nine thirty to lunch, then lunch to three o'clock (bond market closing), and three o'clock till closing. Any hypothesis stick out at ya'll? How do you divide the day? What statistical tools should be taken into consideration?

Furthermore, can you break up the week, month, or quarter to find a dead spot that's too late or too early for entry?

Food for thought.

Russ Herrold comments:

Reading Sartre's La Nausee, I came across a wonderful "counting" sentence:

"Three o'clock is always too late or too early for anything you want to do." (obviously untested and his opinion)

Is there such a dead time or point in the trading day to which it's more advantageous not to do anything? In the six and a half hours of the NYSE, does there exist a slice of the pie that is such an apex?

I think of it differently — there are better times for some strategies, as a trader, than others within the pulse of a day.

Any hypothesis stick out at ya'll? How do you divide the day? What statistical tools should be taken into consideration?

Let's go to the track, and lean on a rail for a few days. The horse to watch: An ECBOT future, and only on non-major scheduled news days. The methodology: Counting track conditions with a tally sheet for a month or two. The stopwatch: five minute intervals (I have my computer on a weak tone sound every minute and increasingly stronger ones at the five's and quarter hours to remind me to look up and rate the market when I do this). Observations are in New York time.

Taking the notation of conditions, and doing reduction of the patterns after several days, I find this:

8:30-9:25 'pre-open' light volume, often scalpable, but also with no material liquidity if one ends up on the wrong side of an exogenous event (most of the news issues at 8:30, and so a gapping move play is often available)

9:25-9:30 'at the post' untradeable

9:30-9:50ish 'from the gate' choppy and not overly tradeable until all the underlyings in NY are both open and have finished running the market and are easily reachable overnight resting LMT and STP orders

9:50-11:50 'around the first stretch' trending and mean reversion plays will often emerge (about 1/3 of the time), or if not, range bound movements will grind up a player seeking to trade — a 'three strikes, you're out' approach works well here

11:50-noon, noon-13:00, 13:00-13:30 'on the back stretch,' see 'Feeding Time for Giants' discussed on this list last June (9-Jun-2006: A Cyclopean Workshop, also read more here)

Eminently playable — The chair's comments about mid-day loss of liquidity, and my observations at the time have covered this time frame already (watch the volume)

13:30-15:00 'coming into the far turn,' similar to 9:50-11:50

15:00-15:45 'down to the wire' as people realize the day is drawing to an end, and wind up intra-day or assume overnight positions before the 'rush hour' about to occur

15:45-16:00 'at the finish,' very hard to trade well as liquidity is bleeding off by the second (watch the volume)

16:00-16:15 'back at the paddock,' earnings of an index component will often move the futures, and laggards with resting LMT or STP can be picked off (watch the order book for such plays)

Similar patterns with different time bands exist on the FTSE100 (Z.FUT.LIFFE), the DAX (DAX.FUT.DTB), and the Aussie SPI (SPI.FUT.SNFE), for which I maintain tallies.

Furthermore, can you break up the week, month, or quarter to find a dead spot that's too late or too early for entry?
Well known dead spots are standing aside from using such time based expectation plays in front of major scheduled news; other trading approaches exist in their stead — setting up LMT's on either side of historical gap ranges to enter a post-Fed meeting announcement and to trail up an exit waiting for the peak of irrational exuberance worked well in the last year, but that play has been dead now for a while.



Reading the talk about Verizon Fiber Optic (FIOS) Internet/TV bundles brings two thoughts to mind:

1. When you get FIOS, you lose your copper.
2. If the power goes out, you are relying on a small backup battery in the premises equipment that they give you. It only lasts a few hours (a Verizon tech told a friend that it lasts 6-8 hours). Implications of #2 are obvious. Your normal phone line is powered by the central office which has lots of backup batteries which will last much longer.

So back to the story:

About two years ago, after suffering with ISDN for eight years, I was able to obtain a cable modem. It was great except that the cable modem went down sometimes; like yesterday when a contractor cut a cable a few houses away from me. Fortunately, about a year ago, Verizon finally brought DSL to me ($15/mo for 768Kbps). It's an embarrassment of riches. This brings me to this lifesaver and very cool tech product:

Xincom Twin-WAN Router XC-DPG502 ~ $175.00

Now, this is for wired networks, but it saved my tush yesterday. The router connects to both the cable modem and the DSL modem (the WANs or Wide Area Networks), and then you connect the home network to the router. You can have it set to aggregate the bandwidth, but the cable modem has more than enough and so I have it set up to use the cable modem and only to switch to the DSL modem as a backup. It also has a very nice web-based interface as well as a good firewall, etc.

So yesterday at about 10:00 AM, Tradestation (what I use daily) blinked out for a second and then reloaded the data. I didn't think much about it. At 11:00 I decided to turn on the TV and watch the news. No TV! I logged into the router's web interface and hey! The cable modem was down too, and the router had switched to using the DSL backup. The cable was out until 11:00 PM (we now have an orange wire snaking down the street). It's just luck I guess, that they didn't cut the phone line as well.

I can't tell you how hosed I would have been yesterday if I didn't have this gadget.

J.T. Holley comments: 

The other option, if you want to further embarrass your richness (I can't afford), is to get a wireless card from Verizon for $49.95 a month for a notebook as back-up. That'll run you 35 more bucks, but at least you'll be mobile while traveling to a hotel that has power and a router.

Last week was the first time in my neighborhood that I had to call 911. I purposefully chose my house due to the fact that it has a cul-de-sac. In this cul-de-sac there are only three homes where usually there are five to six. The reason is that from ten o'clock to one o'clock, there is a Tot Lot that is part of my community, and from one o'clock to four o'clock there are modified wetlands. I live at nine o'clock, which is the house closest to the Tot Lot. Due to this, it is dark at night with no major street lights other than those of my house and neighbors.

When we first built it four years ago, no one would drive in our cul-de-sac. However, two years ago, I'd look out randomly and notice a single car parked in the darkest curve outside my house. I usually wrote it off as teenagers doing what teenagers do, so I'd flick my lights and that would flush them out. Last week, I had a car pull up around 1:30 A.M. and I watched the young man get out and take a leak on the other side of his car. He got back in and left the car running with the lights on. I thought nothing of it and then went back to crunching numbers. I looked out at 2:00 A.M. and noticed that the car was still there. I turned on the light above the garage door and the one outside and he drove away and then immediately came back. I went to bed finally a little later with the car still running outside. My wife woke up at 4:00 A.M. to use the bathroom, and I asked her to look outside to see if the car was still there. It was and that's when I said enough is enough and I dialed 911. I didn't turn any lights on, barely moved, and my wife never hits the blinds or anything. To my amazement the guy left as soon as I hung up with the 911 call. It was like he knew I was talking and had a scanner in his car.

Back to the point, later I shared this with my neighbors in our close community and one lady spoke up and said that in the wee hours of the morning, this happened to her. She said that they pulled into her driveway at 3:00 A.M. and parked behind her car. She walked out to the car and the person had a laptop on, surfing the net. She said that the police told her that they have caught kids between the ages of 16-18 sitting in cars in neighborhoods after sneaking out at night, using "wireless routers" and surfing the internet more than likely for porn! Geez. I called the police department to verify and they said you'd be amazed at how many people haven't encrypted their routers and have upgraded to wireless networks that are giving them more range.

Now I make it a habit to peek out of my window at night before I go to bed and I've personally helped three neighbors in the past week encrypt their routers!



In considering support systems in markets, one would certainly not wish to overlook Thigmomorphogenesis ( which I believe formed the basis of the modern boy wonder's systems) which are height and thickness responses to strong winds to make the tree more stable.

One often finds that after a big move in an individual stock or market, there is much backing and filling, reversals, and gravitational moves to the close of the big move, before further growth or decline ensues. The question is whether such phenomena are predictive and how to test. Perhaps in the spirit of David Brooks, who better to ask then the specs. We have foresters and technicians among us.

Vic further adds:

Many trees are supported by roots attached to the trunk as seen here. I am wondering if this natural phenomenon, used widely in architecture and engineering, has its counterpart in markets, and whether this can be quantified and whether it creates for more stability. I wonder what other support systems exist, their prevalence and function.

J.T. Holley comments: 

As mentioned before on the List, while I was in Wilmington, NC a few years back, the Bald Cypress trees have a wonderful support system and are a great metaphor for the markets. Not only do they have the buttressing effect with their bottom trunk, but they also possess "knees" that serve both to get oxygen to the roots and to further support the tree in the silt laden waters. 

Mentally, picture the bids and asks around the market price of a stock. They too are the "knees" that feed oxygen to the price. I will try to type a rudimentary picture:

b = bid      a = ask      x = price

       X     a
 b     X     a
b b b b X a a a a

As the bids and asks move together in compromise they feed the price, adjusting upwards and also downwards. The bids and asks can form the "knees" by having a larger size than that on either side of it, bringing either strength or weakness towards the price inwards. The key in attempting to quantify might be to see how "fat" the price attributing to the buttressing effect is. Do round numbers have more of a buttressing effect and stability? Do low beta stocks have fat buttressing? 

For what it's worth, the Bald Cypress lives along the water's edge. I've been told that trees that have large and big leaves act as "sails on a boat" when hurricanes blow through and they get easily knocked down. The Bald Cypress seems to be well adjusted in the South in combating Mother Nature's breath by having well adapted leaves for this theory and the buttressing is the kicker. They are the most amazing trees next to the Sequoia's that I've witnessed in my life.

Scott Brooks adds:

Based on the link Vic provided, we've learned that trees don't collapse on their weight. This is incongruent with trading as stocks collapse all the time from their own weight (i.e. tulip mania, .com bubble, etc.)

What I found interesting in the wikipedia search is that the more a tree limb is rubbed, the more their growth pattern is altered and as a result the limb gets thicker (and stronger I assume). This may be analogous to a stock building a base before moving up (growing). There seems to be a disconnect here as a stock that is heavily traded (rubbed) would likely move strongly in one direction. Stocks seem to build bases when there is a lack of excess interest in one direction or another (interest in buying is equal to interest in selling). It's not until there are more buyers lined up to buy than there are sellers willing to sell that the base is broken to the top side. The inverse is true for breaking to the downside.

Thigmomorphogenesis is the response by plants to mechanical sensation (touch) by altering their growth patterns. In the wild, these patterns can be evinced by wind, raindrops, and rubbing by passing animals.

M.J. Jaffe discovered in the 1970s that regular rubbing of bending of stems inhibits their elongation and stimulates their radial expansion, resulting in shorter, stockier plants.

Growth responses are caused by changes in gene expression. This is likely related to the calcium-binding protein calmodulin, suggesting Ca2+ involvement in mediating growth responses.

Mark Goulston offers:

Here is another interpretation of thigmomorphogenesis. “The more a tree or plant is rubbed, the more its radial vs. elongated growth increases” is a metaphor for "the more hits that life smacks you with, the wider your stance better be to endure subsequent ones." This is not unlike cowboys circling the wagons when under attack, or animals hunkering down to diminish their exposed area to repeated attacks. The question is how much this is a reaction to attacks vs. an anticipation of future attacks where the most Darwinian evolved to withstand future attacks (that actually occur vs. merely a bubbameister) will out survive peers. On the other hand, if there are no future attacks, such an increased girth or widened stance will limit your movement and flexibility.

The interpersonal equivalent is that when nobody is attacking you and you act defensively, you are perceived by the other as being on the offensive.

No wonder the world will always needs shrinks and lawyers.

John Kuhn comments:

There is a giddy feeling when one of one's holdings experiences the "long bar" lurch. One is almost helpless to push the sell button. Yet as with those vomitous feelings engendered by unimpeded collapse, so with the inebriating joys of rapid equity advance … many an optimal moment for action is signaled in the emotion. As a counting incompetent, many of my best moves are in fading the long bar, and more of my worst, by failing to do so.

Jack Tierney adds:

What I found interesting in the wikipedia search is that the more a tree limb is rubbed, the more their growth pattern is altered and as a result the limb gets thicker (and stronger I assume).

I wasn't aware of this (or of much else), but this comment triggered a memory that goes back to a high school literature class. One day one of my fellow students popped up with the following rhyme: 

A woman, a dog and a walnut tree, the more you beat them, the better they be. 

As I recall, Mrs. Rigsby wasn't terribly amused and even less so when the offender couldn't name the source. The rest of us didn't much concern ourselves with that - instead we pondered how such treatment could benefit a tree (it was an accepted truism for the other two). 

Scott's remark moved me to Google the line which remained buried in the recesses of my mind. It's attributed to Thomas Fuller, a "British Clergyman and Writer, one of the most prolific authors of the 17th century. 1608-1661." 

So it only took 50 years or so to find a possible answer; I'm not sure that there's any market applicability involved.



Miss Reversion is baking her cake. Having last year's worst INTC already, early first and last year's first, GM is already in the bottom half for the DOW 30 layer chocolate cake.



 Denny's is my kids favorite restaurant. They've noticed that the Denny's by our house is always at least 1/2 full, or more, no matter when we go. David seems to think that they have a steady clientele that is growing.

The kids like the fundamentals they've researched from the analyst.

They think the food is good, served quickly and has catchy names (Moon's over MyHammy … who can argue with that name … and Hunter likes the kid's menu).

Mr. Russell (their teacher) likes the senior menu (Mr. Russell bought Denny's in his trading portfolio two weeks ago).

David is very excited about doing this trade, but I told him we should do more research. He said, "Let's ask the spec list, they'll know what to do" (who can argue with that)

So … what is the list's opinion of Denny's?

Tom Larsen replies:

Maybe the kids should try to find someone that doesn't like Denny's and ask why.

Maybe the kids could estimate what it costs to make a specific meal at Denny's and then compare that to the price. They could count how many customers are in the restaurant. They could see what people are eating. Maybe they could have a short conversation with the local manager about how he manages the restaurant.

They could learn about the different jobs at Denny's. They could learn what a franchise is. They could also think about the company's advertising and whether it works or not. They could try to determine which restaurants are "the competition," and test the food at these establishments as well. This research could get really expensive, Scott, but if you are taking kids out to eat, Denny's is a good place to go.

David Wren-Hardin Adds:

I would have them analyze the upcoming increase in minimum wage and its possible impact on Denny's costs.

Martin Lindkvist Suggests:

 The stock could work great, but I would ask one more question: Do other investors already know this, and is it discounted? By discussing whether a restaurant that stinks and has bad food actually could be a better investment one stands a better chance not investing in something that "should" work great but that others have already invested in and driven up the price. Compare with Birinyi Research that just showed that the five least liked companies by analysts (Dow components) beat the 5 most liked by analysts in each of the five or so last years. They also beat the average of the thirty years. As I said, it can be a great investment, that restaurant you are discussing, but I think the discussion could give more meals for a lifetime including expectations.

J. T. Holley Contributes:

 A few years ago when I got to go to one of those “pat on the back” conferences w/ Paine Webber they had Lou Holtz come speak. He spoke to a crowd of folks that more than most liked modern portfolio theory and randomness. The best part was when he started to speak about investing and speculation. One day back in the 70’s or 80’s a guy asked him if he’d like to invest in a McDonald’s franchise. Lou said that he had been plenty of times but went by one that night and had a meal. He looked up at the Arches and underneath it read at the time “Millions Served”. He thought at that time that it had saturated the marketplace and probably wasn’t a good investment. Now the sign reads “Billions Served” so he said take that for what his skills were worth in speculation.

The other thing Lou mentioned in the spirit of “Racquet Sports” was when he came onto campus one day when Rocket Ismael first came to Notre Dame. He said that he knew Rocket was going to be one of the fastest players that he’d ever coach when he looked over and saw him playing Tennis. After a subtle pause he exclaimed “by himself”. I’ve probably missed out on a ton of good companies in my short investment life so far, but I had an older man tell he upon entering the “Speculative” business to stay away from Airplane, Restaurant, and Mining stocks and to this day I’ve done that (untested out of blind obedience to the unnecessary fixed rule to obey your elders).

Scott Brooks further adds: 

I just thought I'd update the group on the Brooks Kids Question on Denny's from the other day:

David is driving me crazy. He wants to buy Denny's stock and buy it now.

He is very excited about making this trade. He is cajoling, pushing, negotiating … and just short of begging me to make this trade for him. He has made up his mind and wants it now … however, I want him to wait.

I've told him that we need to do more research and figure out if this is a stock he wants to buy. He says, "Dad, you buy stocks a lot quicker than this … you don't spend this much time doing research …".

Of course he's right. I pull the trigger a lot quicker. But, as I've told him, I've been doing this a long time and I think I have a pretty good handle on what I'm doing (or at least I'd like to think I do).

I've told him that we need to wait until he gets more questions answered about the stock. I've told him that this is going to be a research project for him and the other kids. They should research this out, prepare a list of vital questions and get them answered before making the trade … or not making the trade … (as I've tried to tell him, some of the best things I've done in investing are the trades I didn't make).

But still he wants it. I've decided to wait and make him and the other kids do their research. I've concluded that it will be of more value to them to learn the details of the process (from the fundamentals on up) than to just make the trade on a little more than a whim and then see what happens.

I was tempted to let them make the trade, but decided to wait. I am not so worried about them making the trade and then losing money … I think that would teach them a great lesson. I am worried about them placing the trade and then making money … I think making money on a poorly planned and thought out trade would be far more detrimental to them.

So the trade waits for the research to be done.

Russell Sears adds:

Perhaps I missed the post, but did anybody else suggest counting, besides fundamental analysis?

While complex stats may be beyond the young ones, reading a chart and then doing some math on money should be a clear lesson when it is their own money.

A quick look at DENN max on yahoo shows they tanked big time in '98 to mid 2000 from $10 to below $1, apparently after recapitalization due to heavy debt.

You should have them count what could have happened back then.

Also I would suggest that you mark the dates of their ten Q release on the chart for the last ten quarters.

Perhaps stat significance is beyond them but I think the ideas can be grasped with some visual help. 



I have been considering areas in which I am supposed to be an expert. And it’s sobering to realise how many flaws there are and how I haven’t improved my knowledge at all during the last few years.

Could it be that the thought that one is an ‘expert’ starts to close the mind to new developments and counter-arguments whilst fostering stultification. I suspect that many great players have had this thought, and they counter it by changing their game as soon as they know what they’re doing.

Scott Brooks agrees:

Interestingly, I have felt the same way for some time about deer hunting. I am confident that I know what I’m doing, but in the last few years, I have found it difficult to improve my “game”. I used to like to read all the deer hunting magazines. I got bored of them. It’s the “same ‘ole…same ‘ole” in every magazine story. Nothing new.

I then got into the Quality Deer Management Association. It’s a scientific organization that gets into the real nitty gritty of deer managment (with the emphasis on hunting). Good stuff and more detailed. But still, it is becoming a more detailed version of the “same ‘ole…same ‘ole”.

It makes me wonder:

  1. Is there really anymore to learn about deer hunting (chess, trading) or is just a different rehash of the “same ‘ole…same ‘ole”
  2. What am I missing? There has to be more, and I’m just not seeing what the next level really is…of course, no one else is either…but that’s no excuse….just because others aren’t seeing the “next level” is no excuse for me to not see it.
  3. Maybe the “Peter Principle” is real and I’ve risen to the level where I’m no longer competent (I reject that, of course. Which means that I’ll break thru to the next level. Or its further proof of the principle in action).

So maybe it’s my complacency in what I “think” is competence in an area that I “think” I have expertise. I have been feeling this way for sometime about many areas of my life. Deer hunting, trading, and my businesses. There is either more or there isn’t. If there isn’t more, do I have the intellectual capacity to see my limitations and find happiness with “my level of competence”? If there is more, how do I tap into my intellectual capacity to find it?

J. T. Holley offers a suggestion:

“If there isn’t more, do I have the intellectual capacity to see my limitations and find happiness with ‘my level of competence’? If there is more, how do I tap into my intellectual capacity to find it?”

Don’t necessarily forget everything that you’ve read, watched or seen; but wipe the slate clean. I personally feel that a lot of those “hunting” and “fishing” magazine are just like the “financial pornography” that exists on Wall Street via papers, TV, and radio programs.

Go out and get nothing more than a .99 cent composition notebook and pencil and start writing down everything that comes to your mind. Approach hunting as if it were a “science experiment” and don’t limit anything that comes to your mind.

My Papa did this back in the early 1900’s and kept many a journal. He has one on trapping minks and muskrats that I cherish and feel honored to have read due to the fact that only a handful of people have done so. The other journal comes from hunting deer in Picco Gap of the Blue Ridge Mountains. It gives insights that nothing today would give or come close to.

Persistently writing and keeping notes and reviewing will allow you to see things that you’d have never before paid attention to or might have been distracted over “other’s experience”. Once you have enough of this data and writings then you’ll be able to form hypothesis and see that certain things are or aren’t predictable when it comes to hunting. Sure beats taking David Petzl’s or Bill Dance’s word for it.

The approach above is one of the main parts of Vic’s two books that I cherish. If you read  Education of a Speculator he didn’t promise a “get rich quick” but a way of thinking that will apply to everything you do. The joke is that nobody wants to take the time to do the work to get the results. They would rather cheat themselves and farm it out or not do it at all and rely on others.

I am not a single expert on anything. Maybe the outdoors in general but that’s about it! That comes from Cub Scouts, Hunting, Fishing, Rafting, Hiking, Climbing, Skiing, Camping, and going places and experiencing things that other people simply wouldn’t do.



I was in my garage late last night changing oil in my car and I came across an old beat up paperback of Moby Dick that was stashed in a box next to the oil filter wrench. One thing led to another and I was 30 chapters deep. I came to the realization that chapter 24 titled “The Advocate” could easily be retitled “The Speculator” and have the word/words “speculator” “wall street” substituted. I will share some samples with the ya’ll:

In the first place, it may be deemed almost superfluous to establish the fact, that among people at large, the business of “speculating” is not accounted on a level with what are called the liberal professions. If a stranger were introduced into any miscellaneous metropolitan society, it would but slightly advance the general opinion of his merits, were he presented to the company as a “speculator”, say; and if in emulation of the “Corporate Presidents (C.E.O.’s)” he should append the initials “C.S (Chief Speculator)” to his visiting card, such a procedure would be deemed pre-eminently presuming and ridiculous. Doubtless one leading reason why the world declines honoring us “speculators”, is this: they think that, at best, our vocation amounts to a butchering sort of business; and that when actively engaged therein, we are surrounded by all manner of defilements. Butchers we are, that is true. But butchers, also, and butchers of the bloodiest badge have been all “CEO’s” whom the world invariably delights to honor. And as for the matter of the alleged uncleanliness of our business, ye shall soon be initiated into certain facts hitherto pretty generally unknown, and which, upon the whole, will triumphantly plant the “speculators chambers” at least among the cleanliest things of this tidy earth. But even granting the charge in question to be true; what disordered “trading desk” of a “speculators chamber” are comparable to the unspeakable carrion of those “cherry desks” from which so many “corporate presidents” return to drink in all ladies’ plaudits? And if the idea of peril so much enhances the popular conceit of the “corporate president’s” profession; let me assure ye that many a “CEO” who has freely “signed quarterly earnings”, would quickly recoil at the apparition of the “Market Mistress’s hand”, “fluctuating his capital up and down with reckless abandon”. For what are the comprehensible terrors of “being a corporate officer” compared with the interlinked terrors and wonders of “Speculation”! But, though the world scouts at us “speculators”, yet does it unwittingly pay us the profoundest homage; yea , an all-abounding adoration! For almost all the “TV shows”, “Daily Papers”, “Radio Programs” that spread “market wisdom” around the globe, “shout our language”, as before so many “pulpits”, to our glory!

I will save the last of the chapter for you to read. It is an impressive homage to the whaler or “speculator” as I have taken the liberty to implant. It discusses the heritage forgotten, the lineage of the men, the importance of the risk taken and the rewards reaped by those of the type. I got goose bumps from the reading. It was something I must have forgotten or hadn’t thought of the first few times I’ve read Melville’s masterpiece.

Gibbons Burke replies:

Interesting that you should run across ‘Moby Dick’ yesterday as November 14th was the 155th anniversary of the great novel’s publication.

My favorite chapter is The Castaway, about Pip, who jumps from a whale boat on a sleigh ride and is abandoned to the solitude of the ocean alone:

He is treated to a vision of God, and returns and is adjudged to have gone stark raving mad. Of course, he is also given the gift of prophesy, and like Cassandra, can see what the future holds for the barky.



The Hawaiian polymath James Sogi recommends Coercive Family Processes by Gerald R. Patterson. The book discusses how to measure and study aggressive behavior, and has already lead to great controversy in my family, as it recommends an authoritarian approach to raising children by removing what kids value, e.g. attention, when they are bad. Don't give them attention when they cry. Removing the attention is called negative reinforcement. The whole subject of how we behave when faced with stimuli of various kinds, with selling and buying being the behavior, and the environment, e.g. an economic announcement, a vivid change in a related market, or a backdrop of staged conditioning by the Fed Commissioners, would seem to call out for study and testing. This introduction to operant conditioning provides a nice summary of the kinds of things that behavioral psychologists study and might open up some fruitful lines of inquiry. A good reference to Patterson's work can be found here. In examining the diverse bodies of stimulus and response schedules covered by behavioral psychologists, one comes away with the impression that the grass is always greener on the other side and that if instead of following the promiscuous theories of cognitive psychology, that have a hypothesis for any seemingly irrational behavior, (albeit most of them are completely rational and based on rules of thumb that people in real life as opposed to college students for a buck an hour would choose), the often validated and completely specified studies of operant conditioning would be a much more fruitful line of inquiry for market people. One feels he is one the right track here as "Operant Conditioning" and "Stock Market " is almost a Google whack at 337 mentions but "Operant Conditioning" "Cognitive Psychology" has a promiscuous 38,700 mentions. It would be good to take the basic two by two table of operant conditioning and classify it by fixed ratio, fixed interval, variable ratio, variable interval, and see how these relate to predictive patterns. For example: bonds up/ stocks down, a positive reinforcer when it occurs at a steady rate with little variation (fixed interval) versus when it occurs with great variability (variable ratio). But bonds up/ stocks down, if it occurs at an unsteady state, it is an example of a positive punishment variable ratio. All the predictions of operant conditioning could be tested in the real world of humans with prices in markets, instead of on rats.

Reinforcement (behavior increases) Punishment (behavior decreases)
Positive (something added) Positive Reinforcement: Something added increases behavior Positive Punishment: Something added decreases behavior
Negative (something removed) Negative Reinforcement: Something removed increases behavior Negative Punishment: Something removed decreases behavior

Source: "An Animal Trainer's Introduction To Operant and Classical Conditioning"

Alston Mabry Replies:

As I understand it, in animal learning trials, if you put the rat in the cage with the little lever, eventually, in the process of exploring the cage, the rat pushes on the lever, and there is some possibility that a bit of food plops out. The process repeats, and the rat learns to associate pushing the lever with getting food. Interestingly, if what you want is for the rat to push the lever a lot, you provide the food reward only intermittently and randomly. If the food is provided each time the rat pushes the lever, the rat will push the lever only when it is hungry. However, if the food appears only occasionally when the lever is pressed, the rat will press the lever over and over, brimming with anticipation. Now let's assume the Mistress is a master trainer, to her own benefit. She places the rat (trader) in it's cage (home office with high-speed internet access, TradeStation account, etc.) and waits until the rat discovers the plastic keys on the keyboard and starts tapping them. Then she provides the rat with a food pellet (profitable trade). If the Mistress wants the trader/rat to trade as often as possible, she will reward the trader/rat with a profit (food pellet) only intermittently and randomly. If the trader/rat could get profit/food any time it pleased just by tapping the keys on the keyboard, then it would tap the keys only when it needed money. But because it is actually the Mistress who is in control, and she wants to maximize trading behavior from each rat, she keeps the rewards as random and unexpected as possible. In fact, "unexpectedness" is one of her most important tools. By the Rescorla-Wagner model of conditioning, the greater the unexpectedness of the reward, the higher the associative strength of the learning. This is why it is so effective for the Mistress, after a rat has tapped the keys many, many times with no reward at all and become convinced in bleak despair that no further reward is possible, to toss a nice food pellet into the cage and provoke the rat to even greater efforts.

Russell Sears responds:

This is of course the opposite of what is recommended for a baby totally dependent on the parent. I find this one of the greatest challenges of parenting, determining when to use negative reinforcement to cut off the dependency. And looking around to family and friends, especially with young adults, it seems many have never truthfully acknowledged this.

Steve Leslie adds:

This is exactly the foundation of slot machines. Intermittent rewards promote more activity on behalf of the participant. The theory is that if one gets rewarded on equal installments the activity is seen as work, whereas if one receives an intermittent reward then it is seen more as recreation. This is also how companies motivate their salesmen and saleswomen. They conduct sales contests but they do it randomly. It is one way that the company keeps the salespersons attention. Brokerage firms were famous for offering sales contests during the summer months, typically the slowest months for commissions to keep the brokers working and keep the revenue flowing. Here is a sidebar to this discussion. In Las Vegas, if a casino advertises that they give a 99% payout on their slots, then they must pay out on average the machines that they have posted to pay out that amount. This does not mean that every slot machine in the casino pays out 99%. It applies only to the bank of machines that are listed as paying out this amount and the patron has to look long and hard inside the facility to find those. What this does mean is that if you took a large enough sample size for example a $1 slot machine and played this machine forever and each individual were to put $100 in and no more, taken collectively they would receive back $99 on average. Now statisticians will tell you that everyone who plays slots will eventually go broke. The reason for this is that people continually take their reward and plow it back into the machine until eventually they have spent their full bankroll. Therefore the machine will collect everything, it just takes longer if the payouts are higher. This applies to all other games as well including roulette baccarat and dice. Even though you can approach almost even money odds such as betting the color on a roulette wheel, the player only on the baccarat table, and the line on the craps table, if you keep playing them long enough you will lose your entire bankroll.

Jay Pasch replies:

Markets are authoritarian, nature is authoritarian, society is authoritarian, the world they're going to live in is authoritarian, "ya gotta serve somebody" as Dylan would say. Of course there is great benefit to self and others in going against at times, i.e. Thoreau's Civil Disobedience, the rebel call, et al. But on the battlefield of child-rearing, relieving one's self of authority is like dropping one's arms on the field, and pants, and waiting to take one between the… eyes. What works best for the young warriors is that they have 'contracted' to decency and respect with all of the ensuing benefits and luxuries given their meritorious behavior; but break the contract and it is they that surrender their benefits, rather than the mindset that some sort of entitlement has been 'taken away'. Under this arrangement the kids have buy-in, they feel important, creative, their ideas beneficial, because they were asked to help create their world in the first place. They see clearly the reality of their own behavior, understanding it was they that surrendered their privileges rather than the big bad general removing their stripes…

Daniel Flam replies:

It would seem to me that all education revolves around pain. So you say we can't "flik" the kids? Ok let's give them a mental pain Like take away something they like, put them in the corner, its like the way the intelligence interrogators in the western world operate under the democratic laws, we just find a better way of inflicting pain in confines of the law… I find the same with the market… which bring an old adage… "No pain, no gain" How would we go about studying pain in the market?

Steve Leslie replies:

First let me say that "No Pain No Gain" is a very dangerous statement. Physical pain while training is an indication that one is approaching a physical limit. By going too far, one can instill permanent damage. Only a fool would feel a muscle tearing during a set of lifting weights and continue to lift weights. Now there are minor aches and pains that an athlete must endure however there are limits that the body can withstand. An athlete who is in touch with their body is well aware of the difference. I am sure my good friends Dr. Goulston and Dr. Dorn are much more qualified than myself to comment on this subject matter and I hope that they do weigh in. However, there are three distinct subjects here.

Giving a child an iPod for excellent grades is positive reinforcement. Withholding a reward from a child or taking away privileges would be negative reinforcement. Yelling and/or corporal punishment would be forms of punishment They are very different. The problem with punishment is that it has a very short term result. And repeated punishment eventually will result in no positive result whatsoever. Please forgive me for probably misrepresenting this study but here goes: There was a famous study performed where an electric grid was installed in an enclosed box. Mice were placed in the box and half of the box was shocked. The mice went over to the other side away from the pain. Then a barrier was installed so they could not move from one side of the box to the other. Then the mice were shocked. They initially tried to escape to the other side. However the barrier would not allow them to move over. After repeated shocking, the barrier was removed. The mice were shocked yet they did not move over to the safe side. In effect, they were conditioned to just sit and take the pain. Think about this: When your dog runs away and you beat it. That is punishment. If the dog runs away and you beat it again it will be trained to stay away. If you beat a dog long enough eventually it will just lie there and allow itself to be beaten. This is shown dramatically in abused wives. They become beaten physically and/or mentally and that if this occurs long enough that eventually they just sit there and continue to be beaten. And should someone come along and offer them sanctuary, the abused wife will chose to stay with the abuser. Someone once said you train animals but you teach children. If you really want to go into deeper understanding of this, I recommend an exceptional person Dr. James Dobson either in his numerous books on this subject most notably Love Must Be Tough. He also hosts an extremely informative radio show entitled Focus on the Family. My church radio station broadcasts this as do many Christian radio stations around the corner. He is seen very regularly on Fox shows such as Hannity and Colmes.

Daniel Flam adds:

Having spoiled brats that everyone in the room hates to be around because you don't want to put them in their spot, Will just delay the point in time where someone that is not a family member will put him in place in a most unpleasant way. Bringing up Children is like painting a work of art. You must use all the colors of the spectrum, although some colors should be used a very small dose, or you might get an ugly result. I see additional factors to the one suggested:

Today we find names for anyone who doesn't behave like a sedated rabbit. This reminds me of that shirt "I hate it when people think I have ADD! Oh look, a chicken!"

James Sogi replies:

Rather than 'greed' and 'fear', counting, like behaviorism, is more scientific. Quantify to predict. The market trains everyone to do the wrong thing. When one is trained to go long, the market goes south. When one is trained to play the range, it breaks out. Of course it trains one in the just the most intermittent and thus most powerful manner, like slots, to go the wrong way. It is called variable reinforcement. Counting gives the clue that the training is in play and not to follow the masses and to stay a step ahead of the market. Be the trainer not the trainee. Who is in control here after all. Little babies train their parents. It is the brat in public that has the haggard parent running around like a chicken. Both are miserable. Proper training involves the use of love attention and affection. It is not the rats-in-a-box syndrome. The natural reaction is to run to the crying baby. That merely reinforces the crying. The natural crying pattern has variations. When there is a break in the first few moments of crying, use that moment variation to sooth the child. The reinforces the calm not the cry. Inconsistent parents give mixed signals can cause confused children, unhappiness. Consistency give certainty and clearness to the child. I tried to see how many days we could et my kids without crying. How many times per day would they cry? Why did they cry, what were the operant conditions? Quantify the responses. Forget the mumbo cognitive jive. In the market, the public rushes to the upsurge, but is this the correct response? When the market tanks, the public trained panics. Again, scientists, is this the right response? Quantify one's own responses to get an idea of what works, what doesn't. consistency brings profit.

J. T. Holley reminisces:

My PaPa would espouse to me "the grass might be greener on the other side but someone has to mow and rake it too" whenever I would act like those cognitive psychologists! I think the operant conditioning like B. F. Skinner is appropriate for those dealing with the markets. The classic philosophy (shortened and brief) is that Plato felt to "know the good was to do the good", whereas Aristotle had a more operant conditioning belief in that "to do the good was to know the good".

Russell Sears suggests exercise:

What the kid needs is an outlet for his energy. Have the kid run a few lapse, go a few miles on his bike, or even shoot some hoops. I would suggest, that what Lackey encourages his kids to do has more to do with his kids well adjusted behavior . Lackey little league, and coaching wouldn't see these kids. Kids with no competitive outlet, takes it out on the adults. Exercise generally works better than any drug for mild depression. But what Doctor will prescribe 2-3 miles run everyday for 2 months to a single Mom for her kid. Its called "child abuse". But giving him mind altering drugs, to a developing growing brain, is called "therapeutic care."

Pamela Van Giessen laments:

This seems to be part of a larger issue where every single moment of childrens' days are being structured and moderated by adults. There is school, soccer practice, swim lessons, judo, music lessons, play dates, etc. It's kind of like jail. Even worse because at every turn there are adults loitering, supervising, and otherwise keeping a watchful eye. I call them helicopter parents. They mean well, but I can't help but be eternally grateful for my parent's lack of vigilance. I read an excerpt from John Dickerson's book about his mother, Nancy (first female TV news star), where he noted how absent his parents were and that he and his siblings were often left to their own devices, and how, in the long run, that turned out to not be an entirely bad thing. My American nephews are supervised 24/7 and while they are smart and adorable children, I notice that they are more prone to temper tantrums and the like. My Dutch nephews roam free; they rarely have a baby spell. And, honestly, the Dutch kids seem more creative and amusingly naughty. I like children who stick carrots up their nose at the dinner table, provided they are stealthy and quiet about it. Kids don't put up with other kid's temper tantrums and so children who hang out with children stop behaving like brats — at least if they want to have friends. At the age of seven, I was biking a mile to go get candy. I rarely see children about my 'hood without adults. Can't they even go to the bodega without Mom? At what point will they not be supervised and watched over? I've also noticed that the young women (oh, how I hate saying that) that work for me seem to approach their jobs, careers, and even daily to-do list like a school exam that they must ace. They miss the larger point about spontaneity, about creating, about doing as you go and it all becomes about getting an A and moving on to the next "test." They also seem to structure their lives accordingly. From x-time to y-time is work time, from z-time to a-time is not work time. One hopes that romance isn't scheduled so rigidly. When I think of all the wonderful experiences and successes (and even some failures) I've had by being spontaneous, by looking in rooms I wasn't due to be in, by not scheduling my life with much structure it makes me sad to see us creating a society of automatons.

Nat Stewart adds:

One of the most worrisome trends in my view is the "bans" on student organized, spontaneous recess games, which for me were always the highlight of the day in the early grades. The spontaneity and sense of it being "ours" and not a teacher/instructor lead activity also increased the value and fun of these activities. I think for many kids this type of vigorous exercise is almost a need or requirement, It certainly was for me. Kids who are naturally curious, such as this kid in the article who is a "gifted reader" need independent outlets to exercise their own curiosity, and opportunities for individual study and thought. I think many of these kids are just bored stiff! The extreme bureaucratic environment is not a good learning environment for many children. Kid can use logic, and I believe many start to rebel and have trouble when they are repeatedly asked to do things that they do not find logical. "Johnny has a problem…" Well, maybe he is mad that so much of his day is wasted in useless, pointless, mind numbing activities? Maybe he would rather be off on his own, reading a book. Kids can be sensitive to injustice, and little things over time poison can poison ones attitude to the entire process or system, which is unfortunate. All kids are different. Labeling children with 1000 different Disorders is only a smokescreen that hides our severely dysfunctional system.

Professor Gordon Haave replies:

I would suggest that what is wrong with the children is nothing… except a total lack of discipline and their learning at 5 when taken to a psychiatrist that being crazy is normal and they can do whatever they want because they are not being bad, they are "sick". Another good thing about Oklahoma: I don't know anyone who sends their kid to a psychiatrist. Kids get discipline, hard work, and an ass-whupping if they do something particularly egregious.

November 11, 2006 Troubled Children What's Wrong With a Child? Psychiatrists Often Disagree By Benedict Carey

Paul Williams, 13, has had almost as many psychiatric diagnoses as birthdays.

The first psychiatrist he saw, at age 7, decided after a 20-minute visit that the boy was suffering from depression.

A grave looking child, quiet and instinctively suspicious of others, he looked depressed, said his mother, Kasan Williams. Yet it soon became clear that the boy was too restless, too explosive, to be suffering from chronic depression.

Paul was a gifted reader, curious, independent. But in fourth grade, after a screaming match with a school counselor, he walked out of the building and disappeared, riding the F train for most of the night through Brooklyn, alone, while his family searched frantically.

It was the second time in two years that he had disappeared for the night, and his mother was determined to find some answers, some guidance.

Sam Humbert responds:

The long-time sense of the word "discipline" was to instruct, educate, train. It somehow became twisted (as has the word "liberal") to mean, in common usage, Prof. H's "ass-whupping." What does an "ass-whupping" instruct or educate? Well, it teaches that if you're frustrated, angry, tired or stressed, and have the advantage of being bigger and stronger than the other guy, then it's OK to indicate your frustration with verbal or physical violence. Is this the what a parent wants to teach? "Discipline", in the bastardized sense of the word, means the parent has failed. Failed to authentically instruct, educate, train. And is now lashing out, motivated by frustration, not by a desire to educate or improve the child. The parent's reptile brain is in charge. And what becomes of kids who are beaten into submission for 12, 14 years.. But then become teenagers? How will they conduct themselves "out of eyeshot" of their parents, when their parents are around to "control" them with "discipline"? What actually does work in parenting — since "discipline" doesn't — is spending time with kids, and most especially, meeting them at their level, not at your own. Becoming engaged in their lives, their interests, their hopes, fears, dreams. Really hearing them, rather than lecturing them. My kids have never been "disciplined", and many parents in our town have commented to us that there are — far from being "undisciplined" — among the kindest, most thoughtful little boys they've met. The proof is in the pudding.

Professor Gordon Haave replies:

Although, as I have said, I don't believe in Ass whupping, I don't think what you are stating is correct. In its simplest form, it is the most crude way of stating "actions have consequences". Most of this on this list know that there are better ways of teaching that then ass-whupping, therefore they don't do it. Around here in Oklahoma, it is probably not very common, but was even just 15 or 20 years ago. Now, what goes on in NYC is simply the opposite message, that actions don't have consequences, that nothing is your fault, that if you look out the window during class or talk back to your mother you have a problem that needs to be medicated. Mr. Wiz suggests that those who receive an ass-whupping grow up having learned the wrong lessons, etc. I submit that it is better than the weirdos who grow up thinking that actions don't have consequences. They are more prone to destroying families and societies, in my opinion. So, I will restate: Ass-whupping is preferable to the NYC psychobabble approach, even if it is crude in its own right.

Stefan Jovanovich responds:

The "ass-whupping" meme seems to me more than a bit overdone. Striking a small child is like beating a cat. Children are small creatures compared to us adults, and they spend most of the years up to the age of puberty navigating around us comparative giants. Simply restraining them physically - holding them still - is enough physical punishment for "acting out". What was notable in the article about poor Paul Williams is that his father - the person most likely to have the physical strength to be able to hold him still - is nowhere mentioned. You can step on a cat's tail, and she will instantly forgive you even though the pain was excruciating. Intentionally strike the same animal with one-tenth the same force, and she will view you as an enemy until the day one of you dies. I agree with Gordon's skepticism about psychiatric diagnoses. Since they almost always have no clinical basis in blood chemistry or any other quantifiable physical symptom, they are usually like visits before the parole board. The patient - i.e. prisoner - has to reassure everyone that he is "sorry" and will make a sincere effort towards "rehabilitation" - i.e. sitting still in school. My Dad's theory was that compulsory education was invented so that the adults could find somewhere to warehouse the children during working hours. In his darker moments he also speculated that it was an expression of society's underlying belief that poverty was a crime. Since almost all children were destitute, society was simply doing what it did with other criminals - locking them up and then pretending that incarceration had some useful purpose.

GM Nigel Davies responds:

I agree. And given that one of the tenets of libertarianism is to remove physical force and coercion from human affairs, this seems to be given quite the wrong message. I strongly suspect that kids who get beaten will tend towards an authoritarian attitude to life. There are more creative ways to instill discipline, such as gaining a child's attention by showing them something that actualky interests them and using a system of reward and punishment based on what they like to do. If good behaviour is rewarded it represents a trade and fosters an attitude to life based on exchange rather than force.

The President of the Old Speculators Club:

I recently read an article with a darker view — suggesting that Americans who send their children to public schools are allowing the "state" to "kidnap" their children for 8 hours a day. Hours in which they are taught what it is believed they should be taught, and shielded from those things that might make them less than docile, cooperative citizens. The goal is to produce individuals who will view governments the provider of all solutions.

Roger Arnold replies:

When I was a boy, getting a butt tannin from time to time was a part of growing up, as it was for everyone else I knew. I can still hear the sound of my father's belt as it is pulled through his belt loops. My mother would send me and my brother to our room with a pronouncement of "wait til your father gets home", and we would sit in there laughing and joking until we heard the front door open — and oh my god that's when the terror began. Nowadays we joke about it at family get togethers and, although I have never raised a hand to my own child, I can understand the utility of the spanking as a tool of nurturing.

Jim Sogi adds:

The characterization as 'authoritarian' places the wrong emphasis. The reason is that firstly operant conditioning is not necessarily controlled by parents as the authoritarian and that secondly rewards are more powerful than punishments. Everyone is subject to operant conditioning regimes, some of which they may be aware, but also by many others of which they are not aware. There are in fact random conditioning regimes that wreak havoc on the unsuspecting. The result is superstitious behavior and the development of personal "issues" and psychotic behavior due to the various random influences at work creating random patterns in people without their knowledge. We see this in the markets daily. When one is not aware of the theories of social learning, feedback loops can be created that are destructive and create bad habits. When one is aware of feedback patterns in social situations one can control the bad influences and foster the good. A human cannot opt out of conditioning regimes. They exist everywhere in the family, in society, at work, and also as random elements in daily life. The question is not whether social learning takes place, the question is which regime is going to dominate your development? The random crying of a baby? The whims of a teenager? The random flow of traffic? Or the structured goal oriented regime of successful adults in the pursuit of happiness. To believe one is not conditioned every minute is denial. The question is who is doing the conditioning and to what ends? In the delightful and hilarious book, Taxonomy of Barnacles by Galt Niederhoffer, read during the last vacation, the issue posed by the author was whether nature or nurture were the determining factors in the success of a person. This issue has been a great debate in our family and I agree with the author that nature is the predominant influence, and that we in fact are subject to many of the same traits our grandfather's displayed to a remarkable degree, and that conditioning might try to guild refined gold or paint the lily, but the mold is cast genetically to a much greater degree than most are willing to admit.

Steve Leslie offers:

Jim, you have nailed what I find one of the most difficult aspects of trading. If I open a trade and the price goes the direction I want, I feel rewarded; if it goes the other way, I feel punished, but these feelings have little to do with actual success. Success is trading when, and only when, one has an edge. Individual trades may not be profitable because of variance or because the hypothesized edge is illusory or has fallen prey to changing cycles. Success is managing risk so that, after the inevitable setbacks, one lives to fight another day.




“The fund will be people of limited income, employees, and others, this groups matters most to me . If they win then this is their luck, with God’s will, and if they lose, then their capital is preserved with us” — Saudi King Abdullah in commenting on his implemented plan to allow 3 Million investors, out of their 10 million population, to invest risk free in the face of a 50% drop in marriages this summer in Saudi due to the 60% decline in the stock market in which 50% of the population plays.

J. T. Holley replies:

A Google search of the words “Saudi Arabia Market Crash” produces 969,000 hits. If you read any of the articles and also look at the headlines scrolling down you’ll see the same “editorial propaganda” as if it was here in the States. The Body Snatchers have no borders!



I like reading Kenneth Fisher’s columns in Forbes and Bloomberg Money (also available on Fisher’s own site), and I liked his books Super Stocks and Wall Street Waltz (I have not read his 100 Minds That Made the Market). In early December he is due out with a new book The Only Three Questions That Count (excerpt here). Apart from some inspiration for testing, it seems hilarious.

One of the reasons why I like his writing is that he dares to be different and stick his neck out. It also seems that he does a lot of testing of different hypotheses about the market. His works are full of ideas and inspiration for further testing. But — the million dollar question — I have no idea about what his returns have been like. And he has been in the business since 1972 with his own fund from I think the late 70s. He is currently managing $30 billion, so there has to be a long track record somewhere. Can anyone enlighten me?

Steve Ellison replies:

The Political Economist reviewed his book.

“First, what do you believe that is actually false? You may be preventing yourself from making smart investment moves because you’re blinded by falsehoods - ones that you get suckered into believing just because everyone else believes them.

Fisher comes up with some good examples of such falsehoods. You probably believe that stocks perform better starting at times when price/earnings multiples are low - and that they perform worse starting when multiples are high. Haven’t you heard that a million times? Isn’t it the core tenet of ‘value investing?’

According to Fisher’s research, it simply isn’t true. He’s crunched the numbers. Over history, it turns out to just not make much difference whether market multiples are high or low.”

“The second question is, what can I fathom that others find unfathomable? If you’re investing based on ideas that everyone else can grasp, those ideas are probably too stale to make you any money. Go for the things that you think are true - but that everyone else thinks are crazy.”

“The third question is, what the heck is my brain doing to blindside me now? Here Fisher walks us carefully through a minefield of cognitive dysfunctions that trick even smart investors into doing very dumb things.

Fisher points out that two emotions rule most investors’ souls — pride and regret.

We seek to build up our self-image by successful investing, rather then treating success as an end in itself. When we do succeed, we swell up with the pride of it and start believing we can do no wrong. At the same time, we will do nearly anything to avoid the shame of regret - that horrible sinking feeling we get when an investment goes bad, and you have to accept the fact that we really blew it.

Fisher says to turn these emotions inside out. Seek regret - that is, embrace your mistakes and learn from them. Shun pride — invest to make money, not to pump yourself up, and never, ever imagine you are invincible.”

J. T. Holley replies:

Vic and Laurel in Practical Speculations (chapter 2) did a wonderful job of illustrating and showing the reader with the added education of Scatter Plots the “Propaganda of Earnings”. A fish for a lifetime more importantly was the 7 techniques that came from the book “Fine Art of Propaganda”. Since reading the book the two that have come up the most in my observations is Plain-Folking and Bandwagoning. When I read an Ezine or online paper dealing with Finance those two seem to be the most frequent to me or the ones that I find easier to identify.



I got to ride in a Combine last night for the first time in my life. Neat  experience. My farmer and I were talking as we watched coons run out of the corn. One of the things he said that this is a very unusual year. Corn  prices are rising nicely going into harvest….according to him, not a  normal occurrence.

Michael Ott replies:

Prices usually go down around harvest time because farmers are forced to increase supply because they simply can’t store any more corn. Most farmers have decent storage capability on their farms and sell throughout the year when they get a good price or need money. Obviously at harvest time storage is at a premium, so overflow goes immediately to market.

The huge demand for local corn due to ethanol has dramatically shifted the use, storage, and transportation of billions of bushels of corn. We’re seeing a lot of interest in building grain elevators, railheads and other fixed installations. I think this is the next wave of biofuels spending, because investing in new grain ethanol plants is nearly dead.

J.T. Holley Replies:

My buddy has a Deere 9660 with a satellite equipped system that literally drives the combine for ya “hands-free”. It also has A/C and XMFM built in. He could literally utilize wireless internet connection w/ a laptop, trade, harvest crop, and have lunch/dinner in that bad boy! Once seeing and riding in that fine piece of machinery you know why Mr. Simon won his bet.



Yesterday’s dramatic finish between Dallas and Washington with a blocked field goal, a run back, a penalty, and another field goal kick to the opposite side, all with six seconds remaining, reminds me of the closes that often happen in markets where until the last moment you’re winning and then a 1 in a billion event occurs to snatch defeat out of the jaws.

Russell Sears replies:

When you are tired, some frustrating and very unexpected things can happen.

This is what makes racing the marathon such a love/hate relationship for me.

You can train and train, be physically ready. When exhaustion hits you, you can out think it, with mental toughness. But you only get a few brief seconds to decide if you really are ready. You must be both physically ready and mentally looking for it. Even then, it can take you by surprise, with a moments mental lapse. Then expect it to turn ugly and the unexpected.

But when you are on, it is powerfully exquisite.

This is a very hard painful lesson to learn and most marathoners, never do. They either give up on the marathon, or give up on doing them for times.

Ask Lance about this.

I suspect when people are on a team, or a large group of speculators, people often rely too much on the others. At that critical moment you are exhausted but needed most. Some will step-up, some will drop the ball.

J. T. Holley responds:

This was felt by Joe Gibbs if you watched the game and heard him speak immediately afterwards. During the Cowboy field goal attempt he had his head up watching his own defeat happen right in front of him, but when Novak (1 for 5 in attempts this year) miraculously got an attempt to win the game in the above mentioned 1 in a billion, coach Gibbs had his head down unable to watch the outcome. Afterwards he simply replied “that doesn’t happen a lot”.

My Hokies had a similar but not the same time frame outcome against Miami on Saturday night. They too blocked a kick that led to their victory. The relevant counting part is something I heard spoken by Coach Frank Beamer some years ago at an alumni function. When questioned in regards to his “Beamer Ball” style i.e. blocked kicks, blocked punt, he — being also the special teams coach utilizing the best athletes on the team instead of reserves — responded with, “one out of every eight plays in a game is a kicking play, that’s where we can make a difference”.

Steve Leslie adds:

In 1999 Jean Van de Velde, France’s greatest golfer of all time, had an opportunity to be the first Frenchman to win the British Open since 1907. He came to the last tee with a three stroke lead, needing only to double bogey the last hole and win the tournament. After hitting the fairway with his driver, Van de Velde hits his next shot far to the right careens of the grandstands and into the rough. He flubs a wedge into the water, takes an unplayable lie, hits his next shot into a bunker, and hits out of the bunker and sinks the putt for an unimaginable seven. He then goes into a four hole playoff where he loses to another improbable winner in Paul Lawrie.

Perhaps the most amazing finish in golf history.

John DePalma replies:

ProTrade.com calculates “win probability.” These calculations have become popular in baseball. Conditional upon home/visitor status, inning, # of outs, runners on base, and score differential, a team’s probability of winning is derived based upon what has happened historically. For football ProTrade describes “Win Probability” as “a percentage that states a team’s chance of winning at any given point in a game.” The probability reflects “score, clock time, field position, home-field advantage, available timeouts and many other factors.” Before Dallas attempted the field goal with 6 seconds left, the team’s probability of winning was roughly 91%. After the field goal was blocked Dallas’ odds dropped to 43%. The odds fell incrementally to 19% on the runback and penalty. And of course the odds dropped to 0% on Washington’s field goal. (See http://tinyurl.com/y6u8y2)

As an aside, it’s interesting to note that at least with respect to the baseball calculator, there is no path dependency. Momentum is assumed away. (Momentum and “hot hands” as mostly a statistical illusion.



I am attempting to consider the analysis of jokes, e.g. James Lackey’s often stated “…get the joke…” as an aid to market analysis. The work of Arvo Krikman on Contemporary Linguistic Theories of Humour has been helpful. He divides this analysis into:

  1. Incongruence theories; the intersection of two different planes, incongruities, contrasts.
  2. Linguistic theories; those based on similar phonics or normal interpretations.
  3. Freudian theories; those based on the theory of the effect of humor on the recipient in allowing release.

There are many events associated with markets that make one wish to roll on the floor with laughter. The selling out at the exact low, the attempt to make a profit without risk, the guarantees of profit, the attempt to make money the usual tested way that leads to oblivion because the cycles have changed, the assurance that the fund is in great shape the day before it fails, the loss of an estate built up over 60 years with one trade, the failure by one tick to make a good profit with a limit order, the trader that calls you with a seemingly good bid or offer that you trade on right before a number or news event or earnings report terribly against you that its 99% they knew about when making the quote, the change in position based on an economic number that’s completely random, ephemeral, and certain to be revised in your favor as soon as you get out, the market move that occurs way before the news, the constantly one sided analyst who explains every event, no matter how improbable as supporting his view, the forecasters who can’t forecast, the Chinese Wall that supposedly separates the buy and sell side and advisory role of Wall Street, the constant backdrop of explanations for the market moves and reasons to extricate from positions when buy and hold would be so much more appropriate, the shooting stars and falling comets, the attempt to couch a bearish sentiment in bullish terminology, the profits that can come from disaster and the losses from triumph, the inevitable fall from the top of yesterdays superstars, the inevitable results of overconfidence, the tweaking from the recommended 60% weighting in stocks to 58%, the flimsiness of the foundation for many runups or rundowns, the executive of the public company that chisels a hundred bucks on his expense account or dating of options when his salary is $100 million a year, the investments that’s made partly for reasons that make one unpopular in the hallways of the service that you lose your entire stake on, the commentator that’s always bearish who relies on the broken clock to be right once, the fundist who hits the top when his sector finally goes his way and receives great public acclaim for it.

All this humour, and so much more, which I call upon readers to contribute, calls out for a general theory of market humour which is falsifiable and predictive, and helpful to the trading process.

I am more partial to a mathematical theory which strangely I haven’t seen, i.e. most of humor seems to be based on two events in some sort of probabilistic relation to each other- contrasts, collisions, unusual couplings, ambiguities, startling events et al. usually of a pithy nature. That’s it. When an event A given B is highly likely, P(A|B) is near 1 and B occurs and not A occurs or P(A|B) is near 0 and B occurs and A occurs, that’s usually the foundation of humor. Alternately if P(A|B) is much higher then P(A|C) and A occurs, but even though it’s much more likely that B occurred, C really occured, then that’s another Bayesian revision sort of humor. A linguistic aspect of humor typified by the bronchial joke must also be considerd. That’s the joke where a very attractive young man with a bronchial condition knocks on the door of his Dr.’s house and whispers to his very attractive young wife, “Is the doctooor in?”. “No, come right in she says”. That would be typified by P(A|C) is much higher than P(B|C). C occurs and then B occurs but not A.

J.T. Holley responds:

The one that jumps out to me is the old formula that is not defined but given as:

Tragedy + Time = Comedy/Joke

The key being what is the definition of a tragedy and equally important what is the appropriate time elapsed?

Looking at 1819, 1837, 1906, all the “Black Days” in ‘29 - ‘32, Oct. ‘87, 10/27 in ‘97, ‘98 Ruskie, the Internet Debacle ‘00-’02, one would say that we have had our tragedies. Throw in the Hunt Bro’s, Nick Leeson, and now Brian Hunter and you have more to poke at, but is it appropriate? Is the punch line the drift that the Mistress gives? It ain’t funny when you lose, especially money. The further we do get away, time has a wonderful way of healing due to our tenacity to come back. The bear camp doesn’t see the tragedies as lines in the joke; they don’t even get to laugh with giggles of resiliency?

I am so glad that I have the Holley genes that makes me have a love of peanut butter on my pancakes, and a smile on my face. This has always been thrown back at me as a sign of not being serious about life, but I can’t act or see life any other way than as Nock stated “as it is” with that smile.

Jimmy Buffet wrote the line “if we all couldn’t laugh we’d all go insane”.

I was thinking that the opposite of the formula above is also a wonderful joke the market provides if you have a sick sense of humor:

Comedy/Joke + Time = Tragedy

How many think they can trade/speculate but really haven’t any clue and submit their money to the Mistress? They give and as Vic states “lose more than they have any right”. This is the sickest of sickest jokes involving the markets due to the plethora of examples many more times than that of Tragedies listed above. Maybe that’s a key to those that have been Body Snatched? They aren’t aware of the part they play in the joke?

Sushil Kedia adds:

  1. Newspapers : All newspapers that cannot refrain from offering explanations of market moves post-facto. Particularly the electronic screen famous for its dark- back ground-orange text, despite its outstanding analytical tools.
  2. Experts: Columnists, newsletterists, bar-waitresses, friendly cabbies all espouse opinions worth only the size of their exposure to the markets. The world doesn’t want to get the joke because the formal from such ones are the experts who are selling ideas which as though would otherwise still be getting rich on their own.
  3. Margin of Safety : So bad that one holy grail is believed to be truly existent since the wealthiest of the the investors seems to have actually implemented this but nothing else.
  4. Insider trading regulation: the assumption probably supporting such expenditure of effort is that one day they will be able to or willing to put to end from where information on each thing begins! End the beginning? What’d be leftover then?
  5. Free markets: well to put the idea getting my mind for a while on this core issue finally a joke: girl fights up with her boy saying he is being much of an easy flirt. Boy laughs back saying, “Well, you are quite a believer in free sex. Aren’t you?” Girl yells red-eyed, “free sex! My foot” Boy says with a deep cold sigh, “well just tell me then what have you started charging ?”

James Sogi responds:

Humor has the element of surprise, the unexpected. That’s what the market gives, the unexpected. Its never what you might think it is, its always something else, something counterintuitive, not what you expect. And it knows ahead of time what you are going to do and sees you coming. Like the thread on the group mean, the group knows everyone’s secrets, for it is theirs. The market trains you to go the wrong way, feints, always gets you off balance. You need to be a step ahead, look over the horizon, over your shoulder. You can’t be a step behind, reactive, you have to lead and take the initiative. Following is too late. The reflexes are not fast enough to defend in the market, you have to punch first, and let the others in the market defend, and have that split second initiative advantage. On longer terms get that strategic edge moving the troops first,. Like lack says, don’t let the joke be on you. You have to beat it to the punch line. Why do you think its called the “punch” line? Just like a punch, the reaction is always slower. Got to beat the market to the punch, bob and weave, come in low. Keep your distance. Always protect yourself. It really not all that funny except in a self deprecating sort of way.

Tom Larsen replies:

While I was working as a no-advice broker, a Texan who had added several spreads to his option position, told me: “I got myself so I don’t know what I want the stock to do”. Maybe it’s funnier when I say it out loud with a drawl. In any case, it shows how people think they have a simple financial product figured out and then realize that they are in over their head. Some people who hear this are laughing at the guy who seems inferior, but thinking, “this could be me!” Or it could be reminding us to not get too cute with our positions. Don’t take on more complexity than necessary. This is probably just a variant of a common form of joke where we laugh at somebody who gets confused. Superiority humor?

While working as an option market maker in the pit, it was common for traders to deconstruct the trading day in the brokers lounge after the close. During one such conversation another market maker told me that during the day he had been so desperate that he “would have paid anything for those puts. Fortunately no one would sell them to me.” This is very deep for me, and reminds me that sometimes you can be unaware flying full speed toward disaster, and the only thing that saves you is grace. and it reminds me not to panic. This joke is probably funny because of the reversal implied as the speaker is clearly aware of his good luck. It’s like the feeling you get when you tell someone about the near collision you avoided on the freeway. There is a release, relief and relaxation at the end.

James Lackey responds:

Why did god make chartists? To make weather men look good. The mistress of the markets can make traders look so foolish at times, it is much better to laugh than to cry. Your only as good as your last trade. However, your next trade might be your last, make it a good one.

The worst market jokes are those that everyone has known for years. The market makes “you feel” like a child. You start your joke to friends: a priest, Jesse Jackson and Clinton are all on an airplane that is about to crash. Your Dad, the old man immediately chimes in and crushes your joke “only two parachutes get back to work!” They have heard them all before.

The joke is “housing is a disaster, the consumer is all tapped out” the news tape blinks Bulletin: “US Housing lowest level in 30 years.” The market immediately goes to the punch line. The old codgers come in, at the market “take it and bid it.” The time and sales boys say “my limits never get filled all size trades the offer all day, who knew?”

Perma bear brain teaser: Bond prices fall as traders sell bonds to buy relatively cheap US stocks.. .interest rates rise, consumer sentiment falls, bonds rise on slowdown fears, stocks rise due to lower interest rates and future uptick in consumer spending, bonds fall as traders sell bonds to buy stocks. Market rallies 6 weeks in a row on short covering.

We watched Yes Men last night. The movie is a Sundance comedy. A couple of jokers start a website to mock the WTO. To their delight no one actually reads the website and offers them speaking engagements. They mock “free trade” and the “government of, by and for the corporation.” Their last speech they had to regrettably cancel their presentation to Australian accountants. Their reason for a program change was the WTO was to be disbanded. The post interviews with the seminar participants was hilarious. “its great to see an organization admit their faults, scrap the program and restart from scratch.” I was laughing so hard my wife called upstairs to see if I was okay! I said yea this skit is hilarious. Now the sad joke. She says, “that is good Jimmie, that is the first time Ive heard you laugh in 6 weeks” yes Jennifer as you have heard, the markets were strait up for 6 weeks.

About two weeks into the fall rally, the headlines read Ford Motor company might go private. All the talk of how bearish and difficult SBOX is for public companies we thought, wow a double bullish whammy for the indexes. IPOs are far more difficult, the cash flow rich, no growth, dead money stocks are going private, a simple reduction in supply. All that index money must be reinvested in the market. Ill buy the next pull back. What if there is no pullback? Joke is first down move was after a huge “made in China,” bank IPO.

Speaking of Chinese stocks…Is it possible to make an ETF of Chinese stocks that are unregisterable on the NYSE, yet float the ETF as a “Chinese investment”. Oh the joke is an ETF on private equity.

The daytraders joke they are never right, why bother? The funniest joke is everyone can be right if they wait long enough. You might go broke waiting, but eventually you can be right. Funny debate between admitting your wrong or the market is right vs. your right, just too early. Of course we strive to be rich rather than right, until your rich, right?

The worst market joke. Get even post from Mr. Clive. From the Yra Harris interview….Inside the house of Money:

The worst thing you can do in a trade is try to get back to even. I call that the “prayer trade.” I can spot guys on the floor who have it on because they shake back and forth, basically in prayer, mumbling, “oh, please God, just let it come back to me. Let me break even.” What is that? Break even? That’s a loser. I’m not in this business to break even. There’s always opportunity in the markets, so forget breaking even. If breaking even is your goal, you’re not trading anymore.

Rick Foust on traders:

Here is a short one that reminds me of some trades/traders.

Question: What is an Ohno bird?

Answer: A bird with 5 inch balls and 3 inch legs. When he comes in for a landing…

Quick followup.

I have this placard on the instrument panel of my Cessna.


Craig M. shares a market truism:

The best joke of all is that the market allows you to think you actually know what you’re doing at times, and while you may profit during these times you never ‘make enough’ and when you lose it seems even worse. The actuality is that you never really knew anything in the first place.



When I first started deer hunting, I didn’t have a clue what I was doing. I borrowed a friend’s 30/30, he gave me a half full box of shells, I bought a $7 tag, and off I went to my Grandma’s farm in Steeleville, MO.

My very first morning I went out, I didn’t have anything to sit on, so I grabbed one of the kitchen chairs and dragged it out into the woods. I must have been quite a sight.

I set the chair next to a big oak tree and waited.

Within 30 seconds, a deer appeared up the hill from me. It was moving parallel to me. I waited until it stopped and then shot. I had no comprehension of my gun, its range or its capabilities. I couldn’t tell you if I hit the deer or not. All I know is it ran off and I started to chase it. I chased that deer for about a mile. It kept stopping and looking back. Every time it stopped, I would stop and shoot. Finally, it just turned on the afterburners and was gone. In hindsight, that was very atypical behavior for a whitetail.

Frustrated, I went back to my kitchen chair to sit down and continue my hunt. I couldn’t find it. Having not developed any sense of woodmanship, I was completely and utterly lost. It took me about an hour, but I did find way back, after I stumbled onto one of my hunting buddies who told me which way to go.

Arriving back at the chair thoroughly exhausted, sweaty and cold, I sat down to wait for the next deer.

About 30 seconds later I heard a noise behind me. I turned around to see three deer coming. Man, deer hunting is easy!

One of the deer was coming right towards me! I sat patiently waiting, with my gun resting on a branch. It came closer and closer and closer. I waited patiently for the deer to turn sideways so I could shoot it through the chest, as I had been advised by the brothers back at Sigma Chi fraternity house. It never turned.

So I had this deer facing me, straight on, at about the feet. Yes, three feet! I figured I could shoot it straight-on at that distance, so I shot. The deer did a black flip and landed on its back. I jumped up and down in exaltation. My first deer!

Then the deer got up and started to run! Remembering what had happened only a short while ago, I was having nothing to do with that. So I worked the lever on the 30/30, aimed and shot the deer again, right in the butt. It did a front flip this time and went down. I jumped for joy. I had my first deer!

Then it got up and ran again. Enough of this! I shot it again. And down it went.

Not taking any more chances, I decided to not jump for joy, but instead to jump on the deer. I dove for the deer, which was still only about 10 feet away, and landed on top of it, determined to hold it down.

It didn’t get up!

I then began the task of field-dressing the deer. I was totally clueless. My Sigma Chi fraternity brothers told me to cut its guts out, but neglected to go into any useful details as to procedures.

So I did my best, which wasn’t very good.

When I thought it was completed, I slung the gun over my shoulder and looked at the kill before me and then realized that I had to get it back to the cabin. So I started dragging it, and dragging it, and dragging it, until I realized that I was not going to make it back to the cabin in the near future. So I enlisted my friend to help me. Two dragging a deer is whole lot easier than one.

We got it back to the cabin, and a neighbor came by and showed me how to complete the job of field dressing the deer. I had thought I was done, but he showed me how far from done I was.

I threw the deer in the trunk of my car, drove it to my Grandpa’s and let him butcher it.

We got some great freezer meat out of the deer. We’d have had more if I knew anything about how to shoot a deer.

Here’s an economic note. That deer cost me $7 for the tag and less than $15 for the gas for the trip. So the entire deer cost me basically around $20. We probably got around 40 pounds of meat off of it. That’s $0.50/pound for the meat. Not bad!

Nowadays when I shoot a deer, the freezer meat we get costs more per pound than weapons-grade plutonium.

J. T. Holley adds:

The first thing I ever shot was a 20 lb. groundhog that kept invading my PaPa’s garden, eating up all the veggies. I begged PaPa from a young age to teach me how to hunt. The summer of ’80 he handed me a .22 rifle and said “If you can’t hit that big ol’ whistlepig then I ain’t teaching you how to hunt anything else.” I came through. It wasn’t easy to say the least. Took me two days, but I finally got him.



For those interested in the recent move up in agricultural products like wheat and corn, you may enjoy this read by Jim Sloman. Here is an extract:

The Great Plains of the United States is the world’s bread basket. Half of all the grain exported in the entire world comes from the U.S. Great Plains.

Beneath the Great Plains is a vast underground reservoir of water called the Ogallala Aquifer, laid down through eons of geological time. Water drawn from this aquifer through millions of wells has helped to greatly increase grain yields in the last half century because the water can irrigate crops whenever and wherever desired.

Similarly, there are vast underground aquifers beneath the farmlands of China and India-who along with the U.S. account for half the grain grown on the planet-as well as in many other countries around the world.

The experience in the United States is being replicated in these other countries. That is, water from these gigantic aquifers has been tapped in the last 50 years to greatly increase crop yields worldwide, particularly on lands that are dry or somewhat dry.

However, there’s a catch. The increased use of electric and diesel pumps since 1950 has hugely increased the amount of water that can be brought to the surface, but in doing so the amount of water in these deep aquifers has been dropping.

I certainly know that things here in Australia (the drought) haven’t been this bad for a very very long time, from the West to East Coasts almost all areas — cotton, wheat, and fruit crop lands –are in dire straits and most have had only one decent season in six years. And the weather and rainfall are worst than ever. (Sydney has just had its hottest October ever with consecutive days of 35C)

Prof. Gordon Haave replies:

This story is a little bit alarmist, at least as far as the U.S. goes. The U.S. has been harvesting its aquifers for a long time now, and the decline has been slow (although I suppose that is a relative term). What is obvious, although not mentioned in the article, is of course that aquifers are replenished over time. Now, we might be taking water out faster than it is being replenished, but it’s not like one day the water runs out and there is no more. The required cutback might be rather small.

The real problem, of course, is simple economics. Scarcity dictates that the sum of wants for any particular good that is free is greater than the supply. Property rights, the free market, and the rule of law overcome the scarcity problem.

However, property rights have not really been extended to aquifers in any meaningful sense. Extending property rights in some form or another will solve the aquifer problem, but of course those who get something for free have a strong interest to lobby the government to keep it that way.

J. T. Holley replies:

I would definitely like to say that the “invisible hand” of Smith shall take care of overage of price and the underage of water. Latin America is slowly and rather quickly in other aspects becoming the “bread basket” of the World. In the “Global Economy” in which we all chip in, food is Latin America’s contribution. Need I mention most U.S. restaurants in the last five years having “Chilean Sea Bass” on their menu’s? Also, Julian Simon if alive might make a bet with you concerning the upswing in prices of corn, wheat and such? I certainly will sell you some long term calls if you’d like? Desalination will most certainly be a technological breakthrough in years to come with entrepreneurs flooding (no pun intended) the space in my opinion. If we can produce “grass seed” for my yard to make “drought resistant seed” then I assure you that corn and wheat can be accomplished in the same manner.



Academic resumes — itemizations of where you went to school, your grades and (even) your test scores — became common only after World War II. Before that time the questions on any job interview were about what jobs had you worked who you knew. My Dad attributed the change to the GI Bill, and he wisely anticipated that the change would lead to a dependence on standardized testing not only for schools, colleges and universities, but also for all licensed occupations. However, the rule that he followed as an extremely smart student and a future textbook publisher was not "parrot the textbook." He was shrewd enough to know that every teacher prided himself on being smarter than the textbook. The key to straight As was to attend every lecture, take copious notes and "parrot" exactly what the teacher said. Following that rule and working at it industriously each day earned him a Phi Beta Kappa key just as it has earned his granddaughter one. "Thinking for yourself" is fun and has its own rewards, but it is guaranteed to get you a 2.7 GPA. That has been the state of American education for over half a century. It is the reason the "rednecks", among others, have lost their faith in "education". They see it as an extended exercise in obsequiousness. They are right, of course. They are also right to be skeptical about the benefits of academic certifications. Getting a Class 4 license has proven a much more profitable investment over the past decade than completing a graduate degree. In my limited travels here in Northern California I see any number of signs for "Truck Drivers Wanted". I have yet to see a single advertisement reading "PhD in (Gender Studies, etc.) wanted; Steady Pay; Great Benefits". Instead, I see the poor grad students trudging to their classes at the local universities like so many helots marching to the silver mines.

Prof. Charles Pennington responds:

I guess Stefan is using hyperbole, but just in case: PhDs do not do all that badly out there, and better than truck drivers. I had a high school friend who became a truck driver for a while, and he confirms that it's quite stressful and boring and not really all that well paid.

The students who got PhDs in my group have jobs at Pfizer, Intel, University of Hawaii (Associate Professor, not post-doc!), Varian, the Mayo Clinic, Keithley Corp., and Intermagnetics. I don't know exact salaries, but I think they're probably centered around $100K. They do interesting work, too. Most of them are doing things with magnetic resonance imaging, including "functional" magnetic resonance imaging where you literally watch what's happening in someone's brain while he's thinking some designated thought.

I agree though, sort of, on the topic of how to get As from professors. The most efficient way to get As is to attend all the lectures, and, as a first priority, write down everything that's said out loud and written on the chalkboard. If you can understand it in real time, fine, but if you can't, review your notes as soon as possible after the lecture, and try to figure out what was being said. You might figure out 90% of it then and there. Later you'll still have to cram for the test, but you'll be miles ahead.

Professors always feel like they're trying to give everything away, leading the horses to water and begging them to drink. I always tried to design my tests so that a student could get 80% of the answers through diligence alone, though it did require above-average diligence. 15% required some thinking, some creativity, and some aptitude, and maybe 5% could be answered by only the top one or two students in the class.

Sure, there's a lot of alcohol and 420 consumption at universities, but if you looked around at the students at Ohio State, you would find much to admire (insert Professor/coed joke here). Many, many students there had jobs working 20 or more hours per week along with their full course loads, and the curricula, at least in science and engineering, were not designed with that in mind. Plenty of students really do develop their minds and abilities more than they ever thought possible going in, and they experience much satisfaction from that. It is much better to go to college than to become a truck driver.

Stefan Jovanovich responds:

For those lucky and skilled enough to be in your rather select group, the rewards of serious scientific academic study are unquestionable. The point I thought I was making was that for "ordinary" people the traditional academic game is proving to be an increasingly bad bet. For those for whom the choice is "education" in the generic sense of survey courses, breadth requirements and a non-rigorous major vs. a Class 4 license, the Class 4 license is currently looking to be a better deal. That is clearly the conclusion of the masses who are voting with their feet in favor of junior colleges and trade schools. I apologize if I am stepping on someone's rice bowl, but I doubt very much that the current relative values of a certification to operate heavy machinery vs. a B.A. in Anthropology can be questioned, given their respective acquisition costs and likely future incomes.

The utility of formal education must be measured in more than monetary terms, but for the people taking out student loans (whose repayment, under the new bankruptcy laws, cannot be so easily ignored) the question of what a degree is worth and what it costs is hardly academic. As you acknowledge, "the curricula, at least in science and engineering, (are) not designed" for students who have to work to pay their way through school. That is a change for the worse and testimony that the land grant public universities no longer offer genuine opportunities to the poor, bright student. My Dad bussed dishes at the dining hall to make it through the University of Colorado, and my father-in-law slung hash in the kitchen of a fraternity to earn his undergraduate and masters degrees in geology at Texas and Oklahoma. I have never been either as poor or as smart as Dad or Buster; but, if I had not worked a job serving process, I would not have been able to afford to make it through law school at Cal (and the world would have been spared one more tax attorney).

One of my father's very few serious regrets at the end of his life was that in the early 1980s he could not persuade the directors of the public company that he ran to go into the for-profit education business and offer "trade school" educations. The directors feared that the public school teachers would rise up in anger and boycott their textbooks. Dad thought the risk was worth taking since he saw the profit margins in the textbook business evaporating before the advance of high-speed copiers, readers and used book resellers. The capital markets have proven him to be right. The upstart University of Phoenix and its cohort of U.S. for-profit publicly-traded educational companies - which were just being started 3 decades ago - now have a greater market capitalization than all of the world's textbook publishers.

J. T. Holley replies:

My father was a truck driver for 25 years. Boring it's not (regular change of scenery), and the pay is great compared to other jobs in rural areas. But I'll grant it's stressful due to the other drivers on the road. For a young man in the rural U.S. to leave and go to the "U", he must ask a deep deep question: "do I leave my family?". It's easy for those raised in the city or town that the "U" is in, but those living in towns like Grundy, Damascus or Martinsville in Virginia don't make that decision as fast. Being a truck driver allows them the opportunity to "get out" and come back weekly and be around the family. This is usually one of the highest paying jobs in the area if it exists. Now, I'd rather be the "dumb human than the smart pig" as Plato proposed, but in rural redneck America the smart pig might be the better option. In a small town, having a PhD might get you a loan from the bank to start a business, but that's about it. I had a kid from Kansas on my ship in the Navy. He couldn't swim. He asked me why I joined the Navy and I gave him the usual "college money" reply. Feeling a sense of obligation I then asked him why he joined. He said "to see the ocean". Seeing the seriousness on his face I asked him if he'd ever heard of a vacation. He said "It just doesn't work that way up in the Smoky Hills".

Russell Sears responds:

Perhaps I misread the post. But as the good teacher, Adam Robinson says in his book, the smart student learns to parrot the textbook. After all its generally the teacher ego that picks one book over another. Perhaps it has not quite sunk into this "quant" that in the real world you need to think for yourself. That this was an exercise in peer review, not textbook writer worship.

If I am right what is sad, is the state of education at MU. Perhaps, a word of "real world experience" could change this youths direction.

GM Nigel Davies adds:

Consider the incentives in education. What is taught in the classrooms is not necessarily what is required by the world at large, but rather the interpretation thereof by people who are elected and/or appointed to decide such matters. The students have an incentive to toe the line and will be unified in saying that the system/their qualifications are good because it gives them an edge in the jobs market. And the establishment has an incentive in making the system look good in order to maintain funding. Who's going to question its value? Looks like it's only Ken Smith, some truck drivers and maybe a Grandmaster or two.

Greg Rehmke responds:

Whether driving a truck or pursuing a PhD, I suspect results turn on what people read, discuss, and write. Audio tapes from Books-on-Tape, The Teaching Company, and Knowledge Products can provide both truck drivers and commuters a wide-ranging education. I especially recommended is the "Giants of Political Thought" series available from Knowledge Products.

As truck-drivers relax after meals or before sleep, what they read shapes what they understand and how they think about the world. If they read, for example, William Easterly's recent book White Man's Burden, or Rodney Stark's The Victory of Reason, they will better understand why the western world prospered while Africa and Latin America are still stuck with poverty. If, instead, they read the New York Times and watch the evening news, and if they listen to talk radio and NPR instead of thoughtful audiotapes, their minds will be full of some combination of things that aren't true and things that don't matter. (I listen to NPR sometimes because I enjoy it, so I end up with a fair number of not true/doesn't matter items bouncing around my head.)

Graduate work can expand understanding and insight, as well as research and writing skills. But most Masters programs in the social "sciences" waste time, money, and minds. I remember a stand-up comic telling of a professor encouraging him to pursue a Political Science Ph.D. after finishing his undergraduate degree. "What do Political Science PhDs do?" he asked. "They teach other students about political science" was the answer. "What do they do with their political science degrees?" he continued. "They teach still others" was the reply. The comic concluded that political science was a giant Ponzi scheme. And so, unfortunately, are many of the social "sciences."

I am enrolled in the Masters program in Economics at San Jose State University. Classes are in the evenings and most masters students work full-time. At least a dozen SJSU economics profs are accomplish market-oriented scholars (Jeffrey Hummel, Mark Brady, Ed Stringham, Ben Powell, Lydia Ortega, Edward Lopez, and others, many with Austrian/Public Choice educations from George Mason University). Each semester hundreds of undergraduates learn economics, but also learn Austrian and public choice insights that usually remain hidden from students at higher-ranked universities.

In the end we each choose whether we pursue our own course to wisdom and understanding, or just float along in the media mainstream. We could spend a decade in college, as thousands do, but learn little either true or useful. Or we could spend a decade crossing the country by truck accompanied by the greatest thinkers in world history.



Just as books like The Godfather teach us that an individual in his different roles can be very good or bad, like the Don's being so good with the grandchildren, but willing to kill you for a dime without a trial, the rednecks can be very good in one role and very bad in another. I know of a man whose views on things are as bigoted as those of the rednecks — yet he is a very good fisherman, always willing to share his catch with you, and would give you his views on the market without any charge or a hamburger for free if you were hungry and drove to his store. I found the same kind of people as the rednecks on the juries I have had the displeasure of facing. They all have relatives who are policeman or firemen, and you can't ever expect them to decide against the authority of the police. At a more fundamental level, the average person, the average G-d fearing, quarter acre owning, two child parent, high school educated, 40 years old, earning $40,000, has more common sense and compassion than the average prince of Wall Street because he has participated in a series of voluntary mutually beneficial transactions that have taught him that life is benevolent.

Craig Cuyler replies:

Your point reminds me of something I read once that said "the qualities that make you a good businessman are the same that make you a bad human being and vice versa."

Through various friends of mine and work I have come into contact (as am sure most of you have) with quite a few people worth in the hundreds of millions of dollars and the one common trait that they seem to share is their lack of real friends. I've often been to these people's homes for birthdays, New Years, Christmas parties, etc. and they don't seem to have a close circle of friends other than the ones that they have become acquainted with in the last year or two. Most of the so-called average people that I know have large circles of close friends that they have known for years. I don't know if your experiences are the same but is something that my friends and I have often commented on.

Dr. Kim Zussman responds:

To borrow from another scientist, true friendship is an asymptote. The best illustration of this was my friend Mr. Clean (the tarantula), who died without ever issuing a nasty bite with his quarter inch fangs.

Another relation is |F(T)| = 1/$. The absolute value of true friends is inversely proportionate to your net worth (hasten to note this conclusion from too little n, but in that depicted net can be easily conned, you can test the affected sycophancy).

J. T. Holley responds:

My PaPa passed away in 1995 at the age of 98. He lived in a house that he built himself. The only running water was the kitchen sink. The outhouse was conveniently downhill 50 yards from the house and downstream from the creek that ran beside it. He had a Barn that had twelve bear hides on its outside with turkey claws hanging from the tin roof and had every tool known to man inside for survival. There was a cellar underneath the house that had a blacksnake named "Jake" that guarded canned goods and potatoes from rats, mice and men. He didn't have a high school education and never possessed a driver's license in his life. This aside he was probably the closest thing to a true scientist and empiricist that I've met in my life thus far with his handwritten notes, journals, calendars and such. He taught me to trap, hunt, fish and have a love and passion for NASCAR, football, John Deere, Remington, Buck knives and that life wasn't fair and you have to be tough, callous, persistent, and independent in all endeavors to succeed. Knowing my rural upbringing I feel qualified in making a few points about rednecks:

1. There's a lot more of them than you and it's easier for them to become like you than for you to become like them.

2. They really don't care for your opinion or how you do things.

At the same time my PaPa passed away I was ironically knee deep in textbooks teaching me of Plato's "allegory of the cave", Kierkegaard's "stages of life's way", Sartre's "existence precedes essence", Thoreau's "men live lives of quiet desperation", Plato's "mixed metals", and Heidegger's concept of throwness (pure choice except parents and death). Having that deep rooted upbringing and the benefit of a liberal arts education I can tell you the following:

"You are outside the cave, not everyone is. Just because you've chosen to advance your life along the way doesn't mean everyone else has and remain still inside the cave. They like being aesthetes and have not seen the need for logic, ethics, religion, and empiricism at the levels you choose. In their bliss they don't understand that they are suffering just like you are, and realized that they can choose like you choose and decide on a daily basis. For some reason we are all different but yet the same. The fact remains that we are here and that eventually we aren't going to be here anymore at some point. This bothers you more than them and you create value and meaning to cope and deal with your existence just as they strongly hold on to their essence, but this doesn't necessarily make you better than those in the cave when it comes to survival."

One thing that I've learned is the fact that nobody cares about your new found skills of countin' except a handful of people on this List. My wife doesn't care about "normal distributions", my Dad doesn't ever want me to utter the word "heteroskedasticity" in another conversation while playing checkers, while sitting watching football with friends don't ever mention that West Coast offense's edge is being "arb'd away" due to the "law of everchangin' and the adaptation of Defensive Coordinators, "randomness" is something that most people use as a creed, but the most, most, most ever importance is make sure that you and your Mom are on the same page when the words "Fat Tail" come rolling off your lips.

For those wishing to further their understandings on the topic of rednecks, simpletons, the "common man" located predominately in the South or at least having roots traced there, I would strongly suggest reading every single book in the Foxfire trilogy. These books are both educational and give tons of insights into the world of Speculation.

The other important thing is that rednecks or Southerners have a great "dumb act"; Vic conveniently pointed this out to me when I first gave him an "Awe shucks" comment. This is something I can't shake and to even "appear intelligent" is that which makes me feel naked and nauseated. Deception comes in all shapes and sizes.



The local Stew Leonard's sells a 12 pack of 12 ounce canned Coke for $2.40. That's 20 cents a soda, about what I paid 40 or 50 years ago for a bottle. When one thinks of the many steps involved in getting that Coke to the customer, the cans, the filling, the packaging, the transportation, the printing, the sealing, the advertising, the warehousing, the refrigeration, that's an amazing example of efficiency and value showing many things, e.g. that there's incredible competition in the world, and that even the most branded and famous of all products, can't escape from substitutes and the inexorable decline of commodities and commodity type products and formulations to a Julian Simonesque 1% a year increase in price.

J. T. Holley replies:

Furthermore it's a testament to the traders/hedgers of KO who have been able to hedge the costs even when they vary from that normal 1% a year increase.

All to keep the price the same.



Daisy May's BBQ USA | 623 11th Ave | At 46th St

Daisy May's is, according to Zagat's (as quoted by the restaurant) the "Best BBQ in New York City," and proprietor Adam Perry Lang has appeared on Oprah, in the NY Times, etc. He originally sold BBQ from a pushcart, and, in the spirit of a Yiddish folktale, did well enough to open his own store!

We stumbled on it by serendipity, but would have sought it out anyway, "had I known" it had such a pedigree.

The food is good, in general, but expensive'ish. Mr. Lang eyeballed my family and graciously selected about the right amount of food for the four of us, saving my having to order item-by-item.

The brisket was excellent, and the chicken was good, though the pulled-pork sandwich was loaded with slaw that blended with the pork into a sloppy, and not so appealing, amalgamation. The sides were the strongest point, creative and well-prepared.

But I am not sure about the whole Gestalt. In my NYC years, BBQ was about kitsch. I think of places like the divey Brothers BBQ in Greenwich Village (before it moved to a bigger, airier space) where the food was an afterthought. BBQ is an immigrant cuisine in NYC: comfort food for homesick "immigrants" from the heartland who have come to the Big City to grab their main chance. It that sense, it is like Indian or Korean or Puerto Rican food.

But Daisy May is earnest, not kitsch. Mr. Lang is proudly a "Daniel Boulud-trained chef" (!?) and uses ingredients like sel-de-mer (?!) in his cooking. And given his earnestness, the food should somehow, maybe, be better than it is.

The atmosphere was picnic tables in a high-ceilinged room with big-screen TVs overhead tuned to Country Music Television — the night I visited, a NASCAR retrospective. But NASCAR on the TV is no substitute for real NASCAR chatter in the dining room, and there was none among the grab bag of hipsters, families, tourists in attendance. Ersatz, yes, but not kitsch. Somewhere in no man's land.

J.T. Holley adds:

My family has a pet hermit crab and we utilize sel-de-mer for its sustainability. Flip upside down its shell, fill it with water, mix in a little sea salt and it is like cat nip for the old Pincher. It is good to use near and after the molting process.

Also, I forgot the name of the establishment but the BBQ was fair to middling at some joint near Broadway. The cornbread was made with a touch of sour cream, which is one of my favorites.



 Why is it that when oil rises from $60 to $75 per barrel, interest rates from 4.5% to 5.5%, and gold from $500 to $700, 99% of the commentary is how bearish and 'Steve Roach like', this is for the stock market and real estate? Also, how come the Fed has 'no choice but to tighten', even though when the reverse happens, (because of the effects pointed out in our review of the bestselling travel book, and most recently regarding the first stop being the best), there is supreme quiet about things being bullish.

Andrew Moe comments:

The authors of these bearish articles have absolutely no idea what the forward direction of the market will be. Instead, they are most interested in getting eyeballs to their pages and this is done via sensationalized stories of imminent demise.

As quants, we are already trying to drive our car by looking in the rear view mirror. Introducing news is like putting a blindfold on and trying to drive by listening to a backseat full of drivers who are each looking in a mirror of their own — many of which do not even point to the road behind.

"Watch out for that grain silo"
"Don't hit the canyon"
"A herd of cows is in the way"
"Wow, I look good today"

GM Nigel Davies adds:

One has to ask: what is the motivation of the bears? In most cases they have no positions in the market, instead deriving their income from their views.

What will they choose to write about? Well, nothing attracts attention quite like disaster (car crash, plane crash, market crash), probably because it is an affirmation for those who never take risk. The market may go up a million percent without them, but they get to delight in a 5% drop, or at least salivate over the thought of it.

J. T. Holley offers:

Those who disregard paths of least resistance, Gresham's Law, the Law of Ever Changing Cycles, etc, and cling to "black and white" fixed trading systems seem to always have a sense of permanency to the direction of markets. The exception to this is when everything is running its natural course and they "think" they will try being a contrarian, just at the wrong time. DailySpeculations, more importantly than anything else, has a spirit of teaching and espousing "seeing things as they are" and utilizing tools to do so. Other authors do not do such, as it is easier for them to attach their feelings and decisions to those things that are in the direction of loss or some voodoo formula.

When oil goes from $20 to $40 to $60 to $80 it is easy to not do any math on supply and demand and project it to $400 a barrel, and then have fiction fill in the lines. With the markets it is so easy to be a bearish contrarian and cherry pick evidence from days of yore, and to do this at the wrong time when the odds just do not have it in the stack of cards, and the game has changed. I have always wanted to ask someone what he would do if he timed a 60-90% downside move and shorted everything "under the sun" (no explosion) and also bought every single available put option while it was happening? "So you won, everyone is broke, the banks cannot pay you because of their own runs at the doors, pestilence, vermin, and gloom is the theme and you are going to tell me you have a smile on your face?"

It is the sense of permanency that they attack, and their disregard for change.

Scott Brooks mentions:

Three things sell best to the masses; envy, greed and fear. Therefore, if you want to sell your writings to publishers, you must employ one of these methods.

As I sit around at holidays listening to my relatives (who have a very blue collar mentality) talking, I have to bite my tongue to keep silent (risk being murdered by my wife if I start another debate with the mentally unarmed) listening to the sky is falling mentality. These people love fear.

I also listen to them talking about greed. Their new get rich quick schemes or poorly thought out business opportunities. Or complaining about all the money that is being made by someone who does not deserve that much money ("no one is worth that much money" … as I sit there and smile and hold my tongue).

So the masses will greedily chase returns from the investments that they wish they had purchased last year (as is probably true of the highly intelligent "accredited investor"). They will over-react to anyone telling them the sky is falling and run away from what they should be embracing, or embrace what the should be running away from. And they will elect politicians that will stick it to those that "have more than they deserve".

That's what the writers like Abelprechursaskyisfallingallthetime are selling too; fear, greed, envy. And it works (well, for them to earn a paycheck, at least!)

Thomas Miller contributes:

When the commentators get particularly bearish, it seems no one mentions the incredible growth and upward trend in corporate earnings, which are still growing nicely. To test this I suppose one would have to count and track the number of bearish articles in numerous publications and "experts" on CNBC and compare that to market actions over time. It would really be another sentiment indicator. Probably time consuming, but my guess is that it would be of value.

Jeff Sasmor adds:

I would submit that stocks are products sold to various types of customers. Like autos, so your stockbroker is actually a new/used car salesman. I am not being flippant.

My attitude is based on being someone having gone through the IPO and road-show process as a company officer and becoming quite friendly with one of the underwriters.

Sushil Kedia comments:

Behavioural Finance is a website with a long list of plausible explanations for the Permabears maintaining their stoic silence now, but mounting the rooftops the moment their original framework appears on the markets' horizons. Some of the ones that caught my attention immediately were:

  1. Cognitive Dissonance
  2. Communal Reinforcement
  3. Illusion of Knowledge
  4. Curse of Knowledge
  5. Selective Thinking
  6. Self Deception
  7. Framing

Ronald Weber adds:

Following Mr Sushil Kedia's comments on behavioral finance, may I mention the Investment Office website which contains (among others) information on behavioral finance on the left side of the navigation, under "market characteristics" (not yet optimized for Apple!).



The food chain seems to be adjusting and the effects are starting to run rampant. I have to learn how to predict the tectonic shifts of laws passed? Frist sneaked in a piece to a Bill on Friday to ban US banks and credit cards from dealing with online gaming. Equally, important the private equity/hedge fund world comes out and announces its intentions of buying HET out for around 15 billion just three days later today? Assuming that all those that "love to lose" and need their fixes cannot sit on their tales at home anymore within the U.S. borders means that Vegas and Atlantic City will be hot tickets again, as if they ever were dented? Horse Tracks and Lotteries should see a possible increase as well? Are Vegas, Horse betting and lotteries better moralistically than poker or online gambling? So so convenient too that Tennessee Frist may be behind in the polls and needed to appease Mr. Falwell and Mr. Robertson here in Virginny. The President cannot expect a 6-8 billion dollar industry to roll over can he? Politicians ruin everything it seems.



Both my grandfathers bought Exxon in some distant time. As my mother is fond of reminding me — it paid for her and my father's parents' retirement, funded some of my parents' endeavors (house, cars, etc.), paid for college for three children, (sadly) enabled her divorce, is now funding her and my father's (separate) retirements, and now is partially in the portfolios of the grandkids', where, presumably, it will be used to further fund great-grandchildrens' education, a retirement or two, etc. Exxon has been very good to my family on both the maternal and paternal side. A colleague tells me about how Disney stock has been very good to her family.

Buy and hold has been a very good thing indeed for me and mine. I hope I will have opportunity to gift my SBUX to a future generation as well. And before some spec comments — regardless of where it has been this year or last year or even 5 years ago, it is still way higher than what it was bought for and it has split several times (I stopped counting at the 3rd split, I think it was). Stocks may not progress in a straight line up but the line is clearly up over time.

That said, we will refrain from making much mention of the Bethlehem Steel stock in the family portfolio, though I imagine Exxon gains substantially outstrip the BS losses. I think.

Vic comments:

As the Abelprecbifurcflecprudents would say, there is little employment in Bethlehem right now, and many unused warehouses and railroad sidings.

J. T. Holley adds:

Yeah, and those Woolworth employees and their shelves seem very empty as well, not that there are umpteen million times more people shopping at Wallymart than ever shopped at the ole' Wooly.

Not to worry about the railroad sidings either, their foundations are put to good use across most of the U.S. through the Rails to Trails program. At least the labor that produced those tracks didn't die in vain!

Tom Larsen mentions:

Here is a buy and hold story that I think comes from a book edited by Charles Ellis called Classics: An Investor's Anthology

A money manager was called by a client's widow, who asked to meet with him about some stocks she had found in her husband's safety deposit box. When he examined the certificates, he came to the realization that the deceased had a financial secret. The money manager realized that each time he had bought a new stock in his client's managed account, the client had bought some more stock elsewhere and had it delivered out to be put in his safety deposit box. He had done this for many years. Many of the stocks were issues the manager had sold periodically for all of the usual good reasons, but that the client had put away permanently. The manager was amazed at the value of many of the individual issues in the box that he had sold over the years for small profits. So the manager was a good stock picker, but the client was a good stock holder.



The passing of golf great Byron Nelson reminded me that with all the games we play our legacy will still be the imprint we leave on our fellow man. Reading about his accomplishments on the golf course is mind boggling … 11 straight victories and 18 in total in 1945 with a scoring average of 68.33, 113 consecutive cuts made in his career and several major championships to his credit. However, this was only a small part of his legacy. The true measure of the man lies with his charitable nature, notably the $94 million dollars raised for various charities by his PGA tour event in the Dallas area.

One anecdote I heard tells you all you need to know about the man. Apparently he and fellow pro Ken Venturi used to playing various matches at clubs throughout the nation. It is said that the first question he would ask on the first tee was what was the course record and who held it. If it was held by the local pro, he refused to eclipse it. He was supposed to have said," He lives here, we are just passing through." He passed through leaving very large footprints.

J. T. Holley adds:

One thing that isn't getting the "wow" headlines or, it's just in passing that it's mentioned, is the fact that at age 34 this Great Man had the inner courage to say "I'm done", and walk away at a very high point. This reminds me of the other J. T.'s lyrics "the secret to life is enjoying the passage of time". Mr. Nelson with a lot of chips on the table and a grandiose set of accomplishments decided that being at home on the range was more meaningful to him as an individual than continuing a sport that he had dominated. The irony is that many probably thought it was too early and he had much more to earn, the greater legacy is that he got out to be able to enjoy his family and watch his "legacy" compound for another 60 some years "enjoying that passage of time". Talk about a great example of create, buy and hold, and watch compound.

How many money managers are willing at a young age to step aside after compounding client fees and incentives in a relative short amount of time, to devote time to what they truly feel as individuals is really important?

David Higgs adds:

So often it takes the sad passing of an individual before his/her accomplishments are widely magazine-ized or hard bound. Wow, he did all this in 1945. Yet who are the Byron Nelson's of 2006? One immediately thinks of Tiger Woods and rightfully so. Yet, why is it so often that only in hind sight are such events/accomplishments recognized. The truth is, there are many Tiger Woods on the courts, the fields, the lanes, the diamonds. Thanks to technology, the mechanics of individual super stars of their fields are studied to the point of ultra refinement. By studying swings, strokes, strides, young muscles can begin to emulate those of the great. I suspect there will be many Byron Nelsons and the likes to come. We yearn our roots in many respects.



A phrase that comes to mind when looking at the fate of the original Jack Schwager’s Market Wizards, is ‘A pat on the back is a few small vertebrae away from a kick in the rear end.’ Countless times no one sees the ass whoopin’ coming due to the warm feeling they feel for being on top or the taste of success, resting on laurels.Every time someone is mentioned in an article, book, or put up on a pedestal for the World to emulate and trade after, the edge vanishes, the trader goes bust or has his first down year, standard deviation increases dramatically, his wife leaves him with half of his wealth. When does Vic suggest to Count or test those strategies of our colleagues? After the pat on the back or the kick in the rear?

Do these things happen simply due to the fact that they happen to everyone in life and we are just forcing a correlation? Maybe. Is it because a pat on the back is the magic formula to hoodoo someone, the abracadabra of forced failure?

I do not know, but I do know that one of the most powerful principles that Mr. Bill espoused was anonymity. It is a word in the namesake of A.A.. Anonymity keeps one out of the light and focused on current affairs, wax still clinging to wings. Want to quit smoking, do not tell a single soul! The more people you tell you are going to quit, the more people you will have asking you if you are thinking about a cigarette, which triggers a craving. It is the same thing with positions taken during the day, week, month or quarter. You know the significance points, the edge, but if you share your new found trade with everyone then they call you on the down ticks, adverse headlines and such and once again trigger your ’switching’ cravings.

I would just rather keep my name and face out of the books, TV, award ceremonies and stadiums and stick to doing what got me there anyways. It is easy for me because I suffer from fear of success, but anonymity is powerful in so many ways. Principles before personalities.

How many CTAs, Hedge PMs or Speculators do you know that run from the press, keep below the radar, do not accept awards, and donate and give anonymously or without fanfare? Are they always doing it to conceal and protect positions, net worth, personal information and liberties? No. I say they know and fear a little bit, the fear that comes from that ‘kick in the butt’ after the ‘pat on the back.’ There is no upside from being a part of financial pornography, but discretely sharing and learning amongst friends who practice the same principles as you do is priceless. That way we grow as speculators and individuals and maintain our edges for the most efficient amount of time.

Rudolf Hauser adds:

Part of the problem is the tendency to engage in grand projects or take greater risks to keep up the reputation established by publicity, but I suspect that to a greater extent this is just a symptom of overconfidence in one’s ability as a result of great success. This leads to exaggerated expectations of what one can get away with in terms of risks, grand assumptions, and a reduction in the fear that keeps one sharp and trying harder. These attitudes can exist without the publicity as well, and of course, it is a natural human tendency to attribute success mainly to one’s abilities and insufficiently to luck when one is doing well, and the reverse when one is doing poorly.

Dr. Janice Dorn comments:

It is posts such as this one that elevate the spirit, give pause, put so much into perspective, and remind us to be, always, in gratitude and humility. Thank you, J.T..

In his early writings on market psychology, circa 1912, Selden said that the man with a million dollars is a silent individual, the time when it was necessary for him to talk is past, and now, his money does the talking. The one thousand men with one thousand dollars each however, are conversational, fluent, verbose to the last degree.

Steve Leslie offers:

Here are my two cents:

I heard Lou Holtz the great football coach once say “Things are never as good as they might seem, nor as bad, they are always somewhere in between.”

‘Pride Goeth before a Fall.’ Pride is considered by Pope Gregory to be the the most severe of the Seven Deadly Sins.

I saw an interview with Greg Raymer WSOP Champion of 2004. He said that when he won the WSOP bracelet he did not let it go to his head. He realized that it was more a reflection of great fortune and luck for one week, than the fact that he was that much better than the field. He did not want to be one of those who won the title and then went broke the following year, so he plays within himself.

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