At the Tea Centre in Mumbai, where every possible variety of tea leaf is sold and perhaps where every possible way of making tea is practiced as an art form, I had the occasion today to experience the Buttered Apple Tea.

Droplets of rejuvenation appearing to straight pour into the cuppa is what I would still recall of the experience. Ripe Apple Juice, Orange Juice, Nutmeg, (powder was added I was told upon inquiring) honey, and Tea Liquor blended together with a hint of butter and was served very hot. Ummmm… it was an experience I have decided that must be shared with my better half. Soothing, rejuvenating, and definitely with many hints of romance in the cup.

Oh yes, the two long sticks diced out of a fresh apple and floating in the tea-flask added to every feeling well.



Dear readers of this site,

I have written a paper about using statistical classifiers to distinguish bear market rallies from initial rallies in a new bull market. If anyone is interested email me  and I will send you a PDF file.

[address is not clickable]



 The Golden Cross has received a great deal of publicity. It is composed of two moving averages, the 50 day and 200 day respectively. When the 50 day crosses above the 200 day that is a buy signal. When the 50 crosses below the 200 day that says sell. Notably the 50 has crossed below the 200 in the turmoil last week.

As with everything this must be tested.

First I looked at the 200 day average alone for the daily Dow since1928. When the Dow closes below its 200 day MA then the return the next day is -.00665%. When above the 200 dma the Dow returns +.03968%. These compare to +.023% for all days. The p values for these two signals were each 7%. So they are not quite significant but you are not crazy if you still want to believe in the 200 day MA.

The question remains, what kind of improvement do we get when we add the 50 day crossover to the mix? On the sell side the 200 dma gave us an expected next day return of -.00665. But the 50 day golden cross sell signal gives a return of +.010%. It loses money!

The same thing happens on the buy side. The 200 dma returns +.03968 versus the golden cross return of .030%. In both cases adding the complexity of the 50 day average reduces return relative to just using the 200 dma alone.

David Aronsen replies:

This is interesting Phil… I just want to be sure I understand what you tested. In the simple case using just the 200 day MA, did you look at the next day return for ALL day's whose close as < MA200 vs. ALL day's whose close was > MA200. Or did you look at only those days were the close moved across the MA200. I suspect the former as the number of crossing days would be very small in number.

With regard to the 50 and 200, I gather you looked at next day's returns for ALL days when the MA50 < MA200 vs. ALL days when MA50 > MA200. Yes?

As to the folks who say the golden cross is as valuable as gold (rather than the other thing) is that the returns from playing the crossings is what is of value, vs. let's say buying and holding or random signals with a similar frequency. Anybody know the data on that one?



a rogue waveThe futures markets have limits on how far a market can move in one day (both up and down). Why not the same for stocks? You could make it % based from the previous day's close (say 10%-20%). You could hold the limit for the day, or perhaps a set period of time intra-day. Enough for participants to review outstanding orders, margin situations, and so on. It might mess with day-trading and automated trading algorithms somewhat, but it would certainly prevent the type of liquidity-related rogue moves we saw last Thursday. Showing the stacked up bids or offers at the limit price would also provide useful information for traders on how to offset the impending damage in other stocks/markets. Options would have to be subject to the same controls. These policies would have to be implemented on all interconnected markets so order flows are not unknowingly routed to the most illiquid by trading platforms.




This week is a 10-week low in DJIA. Going back to 1929, checked for instances when this week's close was a 10 week low, AND it was the first 10W low in 10 weeks (a dip). Then checked the return going forward, for the next 10W, 20W, 40W, and compared the mean returns for such "dip-buying" with the means of non-overlapping periods of 10W, 20W, 40W.

(This study is not statistically (or politically) correct, as there is overlap with some of the dip-buying and the data is not strictly independent. However assuming an investor bought at all the stated points, comparison of mean return to dip buying vs buying every 10W, 20W, 40W is valid)

Here are the comparisons of mean returns to dip-buying v automatic buying:

Two-sample T for 10W ret vs all 10W

              N    Mean   StDev  SE Mean
10W ret  132  0.0108  0.0915   0.0080  T=-0.15
all 10W   425  0.0122  0.0860   0.0042

Two-sample T for 20W ret vs all 20W

             N   Mean  StDev  SE Mean
20W ret  132  0.022  0.136    0.012  T=-0.15
all 20W   212  0.024  0.121   0.0083

Two-sample T for 40W ret vs all 40W

              N   Mean  StDev  SE Mean
40W ret  132  0.039  0.190    0.017  T=-0.40
all 40W   106  0.048  0.169    0.016

All of the "buy the dips" returns were lower than equivalent auto-buy periods (though not significantly). Note also the stdev of dip buying was higher (though NS, F-tests not shown): the result of buying in declining/more volatile markets.

How could buying after declines give lower returns than buying all the time? By missing periods of high momentum (eg 1990's), when stocks go up for long periods without making many 10W lows. (From a T and A perspective, this is equivalent to missing the returns above long-term moving averages).

If profit were simple we'd all be rich.

Craig Mee comments:

British Politics in hung parliament, US struggling with oil disasters, Aussie politicians trying to bring in a 40% extra mining tax because the miners are making too much dough and should share it, (where was the government, showing gifts when gold and raw materials where going nowhere for 20 years. They want their hand in the cookie jar, after shocking mismanagement) Europe struggling and debt across the board globally, and as Vic said retail accounts coppering a hammering. No doubt anyone close to retirement who rode the last equity wave up will be thinking of any bounce, and I'm going to cash.

I'm all for contrarian trading, but as Larry has outlined once before, wait for the setup, in price, and volality (just as it did on the recent high). Wash outs no doubt provide a key guide. 



VIX closed at 40.9 Friday- doubling in 4 days to a 1-year high - after closing at a 1-year low less than a month ago on Apr 12.

Also interesting that despite relative calm Friday compared to the day before, Friday's VIX close was higher than Thursday's high (Yahoo data):

Date          Open      High    Low     Close
5/7/2010        32.8    42.2    31.7    41.0
5/6/2010        25.9    40.7    24.4    32.8
5/5/2010        26.0    27.2    23.8    24.9
5/4/2010        22.5    25.7    22.5    23.8
5/3/2010        22.4    22.4    19.6    20.2

Vince Fulco writes:

I've been thinking for some time, which solidified watching Thursday's action, that there could be parallels to mkt instability and earthquake prediction. Something along the Arias Intensity measure could be created with index members acting as observation stations. I'm doubtful the existing vol indices do the job:

The Arias Intensity (IA) is a measure of the strength of a ground motion.[1] It determines the intensity of shaking by measuring the acceleration of transient seismic waves. It has been found to be a fairly reliable parameter to describe earthquake shaking necessary to trigger landslides.[2] It was proposed by Chilean engineer Arturo Arias in 1970…

Barking up the wrong tree or some theoretical underpinnings?




 For those interested, PBS is running a 2 hour documentary on the history of whaling titled "Into the Deep" tonight, Monday 05/10/10.

The focus is one that should be familiar to readers of this site, the 1820 wreck of the Essex by a sperm whale, but it covers the history of American whaling up until its decline post-Civil War.

Pitt T. Maner III writes:

This was a very interesting and enjoyable program. Thanks to Mr Distasio for the notice. Whalers as explorers, skilled manufacturers, salesmen, and spreaders to some extent of American democracy.

One wonders if we are not nearing the end of the petroleum era now (say 50-100 more years, Peak Oil possibly being close at hand). Ironic that we have a massive environmental release to go out on the tail end. The use of baleen as an almost plastic-like or fiberglass-type substance centuries ago was mentioned. Further googling indicated it was used extensively for awhile in women's hoop dresses. It was valuable material before plastic. Here is a somewhat amusing history from the 1870s NYT.

A strange whaling story was noted in the PBS show–the loss of the last old time US whaling ship The Wanderer in a hurricane in August 1924 after a large, nostalgic crowd came to see it off for a final trip. No crew was lost. But another one not mentioned was the sinking of a whaling ship by a sperm whale just before the publication of Moby Dick. Very strange.

The Ann Alexander was a whaling ship from New Bedford, Massachusetts that was rammed by a wounded sperm whale on August 20, 1851 near the Galapagos Islands. Her sinking may have contributed to the success of Herman Melville's book Moby-Dick. Melville was quite surprised to hear of the above:

For some days past being engaged in the woods with axe, wedge, & beetle, the Whale had almost completely slipped me for the time (& I was the merrier for it) when Crash! comes Moby Dick himself (as you justly say) & reminds me of what I have been about for part of the last year or two. It is really & truly a surprising coincidence — to say the least. I make no doubt it is Moby Dick himself, for there is no account of his capture after the sad fate of the Pequod about fourteen years ago. — Ye Gods! What a commentator is this Ann Alexander whale. What he has to say is short & pithy & very much to the point. I wonder if my evil art has raised this monster.

Letter to Evert Duyckinck, in response to news of the sinking of a whale ship by a whale, November 7, 1851

Melville, as noted in the PBS program, faded as a writer after the publication of Moby Dick and turned to poetry–not very successfully according to some, but he did continue to tackle deep themes and thoughts. One poem on the shark and pilot fish seems apropos (ah but to be a nimble pilot fish and avoid the jaws of Fate!)

The Maldive Shark 

About the Shark, phlegmatical one,
Pale sot of the Maldive sea,
The sleek little pilot-fish, azure and slim,
How alert in attendance be.
From his saw-pit of mouth, from his charnel of maw,
They have nothing of harm to dread,
But liquidly glide on his ghastly flank
Or before his Gorgonian head;
Or lurk in the port of serrated teeth
In white triple tiers of glittering gates,
And there find a haven when peril's abroad,
And asylum in jaws of the Fates!
They are friends; and friendly they guide him to prey,
Yet never partake of the treat -
Eyes and brains to the dotard lethargic and dull,
Pale ravener of horrible meat

—-Herman Melville



Scarlet Johansson in Iron Man 2I R O N M A N 2

Directed by Jon Favreau

You start with a comic book hero. The first flick in the new franchise is a runaway hit. So you go whole hog on Iron Man Deux, including casting a compendium of crème de la crème stars: Gwyneth, Scarlett, Samuel Jackson, Don Cheadle, Gary Shandling, Sam Rockwell, even Jon Favreau himself, doing a few self-mocking comic turns. Plus the 'Russian' Mickey Rourke, who is outstanding as a villain to die from, in a part tailor-made for his post-WRESTLER mastery, physique (and dissoluteness). Stan Lee, the originator (along with Jack Kirby) of Spider-Man, The Fantastic Four and X-Men classics during the 1940s and '50s, makes a cameo appearance. (We met him last year at Comic Con at the Javits. He was gracious, kind and personable.) You have units in Monaco, Washington, Moscow and snazzy loci in California.

The crashes, explosions, anti-gravity take-offs and landings, battle royales between adversaries and friends are straight out of Marvel, but they are pitched to the 'tweens, the Gen X, Y and Z's, as well as to actual adults. The SFX and CGI are unbelievable, but fun. War Machine, IM and Rhoadey fight Ivan Vanko's creatures. Flashing. Lasers. Broken plate-glass walls cascade.

Making it all more digestible and fun is the deadly serious demeanors of all the characters toward Stark, Mr. Iron Man, versus the easy sarcasm and offhand debonair sotto voce raffishness of Robert Downey, Jr. RDJ is the inheritor of the mantle of Sean Connery's ne plus ultra Bond, except that Downey gets bashed, smashed, scary-toxic blood levels and ruffled with desire.

What's the plot: Does it really matter? Billionaire Tony Stark, now outing himself as the epic Iron Man from round one, contends with deadly issues involving the avid US government, demanding his impervious weaponized suit for defensive purposes, his dubious friends, as well as unexpected enemies accreted by his superhero persona ego.

Snippet of dialogue: Tony Stark (consulting ScarJo's resume): Look, she speaks Yiddish, Arabian, Russian, Latin… Latin? Who speaks Latin? Pepper Potts (a classy Paltrow): No one speaks Latin. It's a dead language.

Film cost the aggregate of a really good small-town hospital or the national debt of a modest third-world country. It provides a seamless mesh of eye-candy, great lines, gorgeous aerial shots of the Monaco races, and funky phoenix-like rehabilitated protagonists. Sleek Gwyneth is charm and responsibility. Johanssen is amazingly enigmatic, wackily lethal, and the instruments of death-dealing are a hoot. (We went with our Second Amendment expert firearms pro.)

The midnight show, and the theatre was almost completely full. Usually people flee as soon as the credits roll, but for some reason, the audience stayed put, excitedly discussing the film until the last logo tag-end. The credits are long, but don't leave until they are done, because there's a teaser you don't want to miss.

Is it Kierkegaard or Wittgenstein? Uh, no. But there are very few expletives, a modicum of blood, zero sex or nudity, and it's not terrible for kids. Rourke keeps a toothpick nocked into his lip-corner, but nobody smokes.

Every meal is not high-nutrition vitamin-enriched super-acai berry broth. Sometimes you just like a dollop of high-fructose junque. You could certainly do worse.



Zero Hour with Zero MostelZero Hour At the DR2 Theatre

Play directed by Piper Laurie

For those unfortunately unacquainted with the great comedic actor, Zero Mostel, who died in 1977, at only 62, he is best known for his portrayal of beloved comic characters such as Tevye onstage in Fiddler on the Roof, Ulysses in Ulysses in Nighttown, Pseudolus both onstage and onscreen in A Funny Thing Happened on the Way to the Forum, the rhinoceros in Ionesco's Rhinoceros, and, especially, thanks to frequent plays on TCM and elsewhere on late-night TV, and the schvanz-faux producer Max Bialystok in the original film version of The Producers. Blacklisted during the 1950s, his staunch testimony before the now-infamous House Un-American Activities Committee (HUAC) was well-publicized. Among his many encomia, he was a Tony and Obie award recipient. More than that, he was the independent comic genius who had merely to walk down the street for one to break out into grins of anticipation.

Under the capable direction of actress/director Piper Laurie, and with subtle lighting mood painting by Jason Arnold, the outsize life-force of Zero Mostel, born Samuel Joel Mostel, is brought again to feisty, hilarious life by writer/performer Jim Brochu. It is a 2-hour tour de force, as Brochu peoples the stage with theatre greats, HUAC betrayers, stage performers, people just a few moons behind us, but living still in the Brobdingnagian life of Broadway. Brochu says in his bio that he "was born six miles and 30 years from the Brooklyn house where Zero was born" in 1915.

Among Brochu's many acting credits and plaudits, we found most amusing the fact that due to his having appeared as a dancing raisin for a Post breakfast cereal, and as a lemon from outer space for soap product Palmolive, along with being a petulant peach for Hawaiiian Del Monte, he earned the nutritiously enviable title of "Most versatile fruit in show business." More important than his chops as victuals, however, is the artful way he looks disarmingly like the great Zero, sounds like him, and weaves a remarkably accurate picture of Mostel's episode-stuffed life into a nonstop fascination for the audience to drink in.

One of his tantrums, in a rare departure from picturesque and pointed hilarity, concerns the harsh lives of the actors and artists caught in the no-win vise of HUAC's congressional inquisitions. Anent one of those who blabbered away with names of men and women who may not even have been communists at all, Jerome Robbins, Mostel quips, "Loose Lips [Robbins] was the Babe Ruth of stool pigeons."

Certainly, beyond the chuckle and guffaw quotient to be had in the art studio of the great Tevye and Pseudolus, a master of "how butterflies look when they are resting," the life of this showbiz comic-kazi deftly chronicles for us the life of New York's artistic, martial, societal and proscenium pages for the decades during which he created mirth and merriment from the '20s until his regrettably premature death in 1977, during Philadelphia rehearsals for the new play The Merchant (in which Zero played a re-imagined version of Shakespeare's Shylock). Diagnosed with a mild respiratory disorder that should have spelled no danger, on September 8, 1977, Mostel complained of dizziness and lost consciousness. Attending physicians were unable to revive him. It was later decided that he had suffered an aortic aneurysm.

Jim Brochu shows us the Falstaffian "Z" (to friends), before the decline into lesser billing for handsome pay cheques. The play doesn't go there, though. Brochu's encyclopedic biographic familiarity and embodiment of the great Zero brings the marvelous funnyman to life for two rich hours. Director Piper Laurie, herself an honored actress, sculptress and performer, masterminds a flawless show, not for a second boring or overdone.

It disabused us of one of our all-time personal favorites: We always thought he got his name because his father looked at him one day and uttered the Yiddish malediction, "Vet zein ah gornischt!" (You'll be a … nothing.) Apparently, in truth, his nickname came straight from…his agent.

For the L.A. production of Zero Hour, Brochu was nominated for Best Solo Performance by the L.A. Drama Critics; ZH was also awarded 2006 Best Play by the L.A. Ovations. His caricature was installed on Sardi's storied walls in 2001, a tribute to his 40-plus years as a playwright and performer par excellence.



 A while back the NYSE had a glitch where trades got held up in a bottleneck due to software malfunctioning — I am sure someone knows the exact date. I was watching the screen and saw the amazing drop when the software was rebooted and the trades that were hung up all executed. It was like a wall of water. The explanation for that event made sense because it seemed to happen that way. Yesterday was different, it was just wave after wave coming through. Nothing seemed unnatural except the overall size of the drop and that it seemed to be happening much faster in terms or recent drops. We have computers just doing what they do and flashing faster and faster orders than ever before. Were program buys at the 50 week MA (Chart -  S&P Futures) the lucky ticket to turn it around? The NYSE should check out those collars and revamp for today's technology.

Fat finger? No way. Colonel Mustard in the dining room with a candlestick seems more believable.



Danny AingeNoted in my morning's rag that Celtics GM Danny Ainge was fined $25,000 for tossing a towel to try and distract Cavalier forward J.J. Hickson as he shot a free throw! A really visible example of very poor sportsmanship. Perhaps the NYSE floor traders need to hire him to try and distract the sellers the last couple of days?

Kim Zussman replies:

The 1930s created a generation of retail investors who decided equities were fool's bets (and one could argue that the next unadulterated generation, coupled with a fortuitous lack of major wars, explains much of the bull market 1980-00).

One wonders how many broken hypotheses, market glitches, scams, sovereign/municipal defaults, real-estate which never drops, and government interventions it will take to persuade the 401Kaboomers who are starting to retire (often without choice) that assumptions about investment vehicles makes asses out of…



Since according to the regulators nothing adverse happened from a systems perspective [on May 6, 2010], are we to bake into our models the potential for a 50+ point swoon at any time and in vastly more compressed windows than ever seen before? The risk/return scenarios turn completely lopsided.

Riz Din asks:

I'm not familiar with the details of trading systems that may have been behind the move, but if they are just as happy buying as selling, can we then assume that there is an equal chance of a similarly mammoth sized swing to the upside? 

William Weaver writes:

I doubt we could ever see the same type of vol to the upside simply because we're dealing with much more than computers, we're dealing with humans. Prospect Theory states that an investor who realizes a gain and a loss of equal magnitude will value the loss as much as twice that of the equivalent gain. This can be graphed by plotting the one day changes in the SPX on the x-axis (gains function) and the inverted one day changes of the VIX on the y-axis (value function). After calculating a least squares regression on both the positive days and the negative days (individually; two regressions) it is apparent that the slope of the losses is steeper than that of the gains.

We would need the entire world to be stuck short to see that kind of vol. But it would be fun to trade– of course I say that with a caveat; yesterday was a hell of a lot of fun to trade… after the fact. During it was survival even if you were raking it in!



Mount St Helens

The post-eruption lake followed a pattern Crisafulli would see many times in the blast zone. New organisms colonize the virgin environment with dramatic success, only to burn themselves out or be checked by predators, parasites, or competitors. This was the second revelation of St. Helens: When there's a blank slate, ecological succession is a cycle of boom and bust.

from "Mountain Transformed: Thirty years after the blast, Mount St. Helens is reborn again" by McKenzie Funk (a highly recommended article and pictures with beautiful descriptions of biological and biochemical events in nearby Spirit Lake)

Chair has mentioned the multitude of lessons to be learned from nature as they relate to markets. Surtsey and Mount St. Helens (there's a bag of ash around here somewhere from when I was a true geologist) came to mind during the previous market upsets and may be useful examples to reflect upon while the current unpleasantness runs its course.

So in that regard, nature in recent decades has provided two wonderful laboratories in which to observe, research, and quantify the many changes that occur over time due to the processes associated with ecological succession — the two areas being Mount St. Helens in the Pacific Northwest and the Icelandic, volcanic island of Surtsey. Understanding primary succession and secondary succession, the two types of ecological succession, is important for determining how nature best responds to destructive events–either man-made or natural. This knowledge is important to mankind's attempts to save and restore habitat.

Surtsey arose from the Mid-Ocean ridge in the Atlantic Ocean between 1963 and 1967 as a natural tabula rasa of molten basalt. It had to cool first before nature could exploit its many newly-formed and vacant niches. It was a chance for biologists to see primary succession in action in the North Atlantic. The news reports and black and white videos taken of the new, erupting island were shown over and over during the Saturday morning TV cartoon times and were fascinating to scientifically-inclined youngsters at the time. Volcanoes and dinosaurs–it doesn't get any better.

Primary succession on Surtesy has patiently proceeded with time — diatoms on the sandy beaches and flying insects in 1964, the first sea rocket plant in 1965, then other terrestrial plants borne by the wind or dropped as seeds by marine birds, seals in 1983. Dense seagull populations in 1986 expedited the spread and varieties of plants. The first earthworm was seen in 1993, 26 years after cessation of volcanic activity. An upward steady drift towards higher forms of multicellular life.

The infant Island of surtseyDr. Roger del Moral at the University of Washington, has noted many similarities between natural processes that occurred after Surtsey formed and after the violent Mount St. Helens 1980 eruption. Dr. del Moral notes, "Primary succession requires colonization, establishment, development and biotic interactions." Another key factor is facilitation: "Without facilitation, both Surtsey and Mount St. Helens would have scarcely developed. Seabirds deposit nutrients in and around their colonies. Wind carries in organic matter to Mount St. Helens and now birds and large mammals contribute nutrients. However, winds reaching Surtsey carry much lower nutrient loads and Surtsey also lacks vascular plants that can fix nitrogen. On Mount St. Helens, two Lupinus species and Alnus contribute to improving fertility. Both volcanoes demonstrate the importance of soil fertility to the rate of succession."

Dr. del Moral has written extensively on Mount St. Helens research findings and he has applied statistics to try to better understand primary succession, particularly with respect to plants. He writes that, "Primary succession is controlled by a combination of landscape and habitat factors whose actions may be stochastic or deterministic."

On predicting development over time: "The sequential development of different plant communities after severe disturbances remains an intriguing mystery, despite a century of examination. How communities assemble is so complex that there is little agreement on even general patterns, although carbon certainly accumulates and community structure becomes more complex." del Moral on destructive volcanic activities: "The effects of pyroclastic events and air-borne tephra depend on intensity, scale, and the impacted biota. Forests are more resilient after tephra events than are shrub or grassland vegetation since trees often survive impacts that kill other growth-forms. Forests are also resilient to pyroclastic events since growth form diversity enhances the possibility that some individuals survive."

Here's hoping we are all trees during the current market disruptions and succeed like success moving forward.



NASDAQ TO CANCEL ALL TRADES GREATER OR greater than or less than 60% away from the last printed price prior to 2:40 pm eastern time, up to 3 p.m.

Recall my comment on snipers the other day… This seems to be a classic example of my friend's observation of the enemy sneaking behind you to put the revolver against your head while one is busy staring through the scope. 



 If you are speechless it is probably just because you have some lower body parts stuck in your throat from yesterday's roller coaster plunge. After all it was the worst drop since 1987. The latest theory sees to center on a fat finger Citi trader who entered a B (for billions) instead of an M. The stock in question was probably Proctor & Gamble which went from 62 to 39 and is now back to 60 as this is written. More here.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008.



The range for May 6, 2010 was 1168.75 to 1056.00 on the S&P futures.

On Tue, Apr 13, 2010 at 9:05 AM, James Lackey wrote:

Would one of you big fish please buy, sell, or short the markets
please? The movement and ranges are too small. The joke around here is
day traders can't even find a way to lose money…much less make.

Dear Lack, this proves that the round trip distance to G-d is 23 light-days ( assuming v(prayer) = c ) 



In a concerted effort to keep sane when a trading thesis blows up, I simply say, “wrong or early, no difference” and we just exit our positions. I may keep an eye on the idea and try to work it through a bit more, but it’s very easy for me to get sucked into the vortex of "Why, Why, Why"; over time, losses stemming from this type of target fixation have taught me that this must be avoided at all costs.

I learned of this concept when I started to ride a motorcycle. For those who have never been on a bike, given a bit of throttle it will simply go in the direction that you’re looking at.

Target fixation is when newer riders lock their eyes (and their brain) onto the very thing they need to avoid. By doing this, they fail to make the steering adjustments necessary to miss the pothole that’s right in front of them. This can land the rider in a precarious & even life threatening situation.

Experienced riders will see a danger ahead & immediately adjust their eyes to the escape route so that their body (and their brain) will move the bike away from the hazard.

With regards to trading; it’s too easy to keep your mind tied up on why something isn’t working. You can continue to trade a broken thesis in an effort to correct for prior efforts (a form of revenge trading maybe). You get closer and closer to the pothole (& your ability to save yourself) when you need to be getting further and further away from it.



nVidiaI'm wondering if anyone has much experience running trading apps or data crunching on Amazon EC2, etc.? Real heavy-duty analysis where you can bring 16 cores to bear on the issue. It would be helpful if anyone has tips on using Mathematica, R and Bloomberg in such an environment, especially if you've seen trading apps operating real-time.

Phil McDonnell writes:

For the princely sum of around $100 one can get something like 250 cores to do parallel processing. Software is available for R and some other packages and languages. I don't know about Bloomberg. It's all done with the nVidia graphics GPU. It is programmable from the main CPU and massively parallel. The technology allows applications that would otherwise take weeks to happen in minutes or seconds.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008.



BP's stock price is up, while oil and oil stocks are down. My guess is this means those expert companies and brave underwater Red Adair-types in the Gulf will have the spill staunched a lot sooner than the media expect.

Pitt T. Maner replies:

You are probably right given that the following division of Superior Energy Services (SPN) is involved and has done subsea interventions before. Media reports have highlighted that coffer dams have been used mainly in shallow water situations but the Wild Well web page suggests otherwise. Oil service companies are master fabricators and extremely creative — especially when constructing fishing tools to pull things out of boreholes.

Interesting though that T. Boone Pickens this morning thought it would take four to five months to drill the relief well to remedy the situation. There are still a lot of unknowns but smart analysts, engineers and attorneys will be able to sort out the HAL, RIG, CAM, and BP et. al. downside risks.

Wild Well by the way was one of the first competitors to Red Adair and crew (Boots and Coots) that we discussed a couple of weeks ago.

Subsea Intervention Wild Well Control has helped Clients to resolve subsea blowouts and well control problems through direct intervention in water depths up to 6000'. Some of these projects include:
· Blowout through broach at the seafloor in 1700' water depth
· Blowout through broach at the seafloor in 5400' water depth
· Direct intervention planning for blowout in 5500' water depth
· Subsea blowout in 2000' water depth
· Subsea well kill with use of additional BOP stack in 600' water depth
· Direct intervention and well kill in 6000' water depth after riser failure
· Direct intervention into wells laying on the seafloor with coiled tubing in 100' water depth
· Direct intervention into subsea BOP with special high pressure riser and snubbing unit

Rocky Humbert writes:

In the past few months, we have had three important corporations suffer substantive adverse headline/litigation/business news: Toyota, Goldman Sachs, and now BP/Transocean. It seems that the headline effect wears off quickly — consistent with an efficient markets theory — but this needs to be quantified, and consideration given to whether there is negative forward-looking alpha. (Remembering : Philip Morris, Merck, Cendant, et. al.) Are there any good studies on this?

Rocky Humbert, quantitative analyst, speculator and master chef, blogs as OneHonestMan.



 The 'Code': Ten unwritten baseball rules you might not know

By Jason Turbow

Ed. note: Jason Turbow is author of the new, critically-acclaimed book "The Baseball Codes." It's available for purchase through the book's Web site.

Last month, when A's pitcher Dallas Braden called out Alex Rodriguez for cutting across the Oakland Coliseum mound, the country was informed of a small slice of baseball's Code that had lain mostly dormant in recent memory. It was only one of a litany of unwritten rules that covers major leaguers' actions, designed essentially to preserve a baseline level of respect between competitors. They constitute the moral fabric of the game. The best known of these rules tells players not to steal a base when their team holds a big lead in the late innings of a game. Others include barring overt displays of exuberance in all but the most extreme circumstances; the hitter who watches his own home runs is the most egregious of violators in this category. Many fans have heard of these rules (Alex Rodriguez himself was unaware of one). Some sections of the Code, however, fly under the radar (even for baseball insiders, to judge by the number of people within the game who had never heard the rule about restraint from crossing the pitcher's mound). So, without further delay, here are 10 of baseball's more obscure unwritten rules:

1. Don't swing at the first pitch after back-to-back home runs.

This is a matter of courtesy, respect for a pitcher who is clearly struggling, offering just a sliver of daylight with which to regain his senses. When Yankees rookie Chase Wright gave up back-to-back-to-back-to-back homers against Boston in 2007, the guys who hit numbers three and four — Mike Lowell and Jason Varitek — each watched a pitch before taking a cut. "Let him know, okay, I'm not swinging," said Hal McRae. "I know you're out there trying to do a job, and I have to do a job — but you've just given up back-to-back home runs. So I take the first pitch."

2. Don't work the count when your team is up or down by a lot.

This is true for both pitchers and hitters. Nobody wants to see the fifth guy on a bullpen's depth chart nibbling on the corners in the late innings of a blowout. Similarly, hitters are expected to swing at anything close. It's an effort to quickly and efficiently end a lopsided contest.

3. When hit by a pitch, don't rub the mark.

This one is all about intimidation or lack thereof. It's a hitter's way of telling the pitcher that his best shot — intentional or otherwise —didn't hurt. Pete Rose made a point of sprinting to first base after being hit, to ensure that he stripped all satisfaction from the pitcher. "It's a macho thing, like a fighter who gets clocked in the mouth and shakes his head like it didn't hurt him," said Rich Donnelly. "But believe me, it hurts." Lou Brock was the only hitter Sandy Koufax ever threw at intentionally, and despite the fact that his shoulder was fractured by the pitch, forcing him from the game, never once did he rub the spot. The Washington Post once reported that Don Baylor "was hit by 267 pitches yet never rubbed, even once. Of course, several of the balls had to be hospitalized."

4. Don't stand on the dirt cutout at home plate while a pitcher is warming up.

Just as Braden dismissed A-Rod's attempt to enter his sacred space, the area around the plate is meant only for the hitter, and then only when it's time for him to hit. Should a pitcher be getting loose before an at-bat, it's strictly off-limits. "I stay as far away from the cutout as I can when the pitcher is warming up," said Ken Griffey Jr. "If they could, they should put the on-deck circle in left field to make me happy. I don't want anything to do with messing with the pitcher when he's getting ready."

5. Don't walk in front of a catcher or umpire when getting into batter's box.

This is respect, pure and simple. If the line from your dugout to the batter's box takes you between the pitcher and the catcher, walk around. Like the A-Rod incident, you'll likely never hear about this one until a player is called out for brazenly violating it.

6. Don't help the opposition make a play (bracing them from falling into the dugout, etc.)

In 1998, Dodgers left fielder Matt Luke braced Arizona's Andy Fox as the third baseman staggered into the Los Angeles dugout while chasing a pop fly. He knew the Code, but he had also been Fox's roommate in multiple levels of the Yankees' minor-league system, and was so tight with him that Fox had served as an usher in his wedding. Even then, he had his limits. "I waited until he made the play," said Luke in the Riverside Press Enterprise. "I wanted to prevent an injury. We're competing out there, and not for one second do I want to help the opposition."

7. Relievers take it easy when facing other relievers

The caveat to this piece of the Code is that for the most part, relievers don't step to the plate in close games, which gives their counterparts on the opposing team some leeway in their approach. "You'd probably give them all fastballs," said Dave LaRoche. "It was just a professional courtesy type of thing. Here it is — I'll give you a chance to hit it if you can."

8. Follow the umpire's Code when addressing them on the field.

This is a book in itself. How one talks to umpires goes a long way toward getting favorable calls, or at least not getting thrown out of a game. ("That call was horse—-" is generally acceptable; "You're horse—-" is never acceptable.) Some savvy teams go so far as to post headshots and bios in the clubhouse for the umps working that day's game, so that players can butter them up a bit. Still, there are ways to express anger without getting tossed. After umpire Shag Crawford called Dick Groat out on a play at second base, Groat told him, "You're still the second best umpire in the league." Then he added that the other 19 umpires were tied for first.

9. Pitchers stay in the dugout at least until the end of the inning in which they get pulled.

This is purely about respect for one's teammates. "I know you're having a tough day, but give your teammates the respect to stay out here until the end of the inning," said Sean Casey. "You don't want to show that you think the game's already lost."

10. Pitchers never show up their fielders.

This doesn't happen frequently, but when it does, players notice. One pitcher who made a habit of excessive body language on the mound was Gaylord Perry, who would put his hands on his hips and stare down fielders who made errors behind him. "That bothered me because nobody glared at him if he gave up a home run or something like that," said Dave Nelson, Perry's teammate on the Rangers. "I always felt like I deserved the same respect because I'm out there busting my butt just like he is, and if I make an error, it wasn't because I was doing it on purpose." Perry's teammate in Cleveland, Oscar Gamble, had a different take: "If you don't do right, if you miss a ball you should have caught, you expect the fans to boo you," he said. "And this fan, Gaylord, was a player. That's the way I looked at it." Perry, however, was occasionally able to find his fielders innocent of wrongdoing. Once, after shortstop Todd Cruz fielded a grounder and air-mailed the ball into the stands, Perry withheld judgment. "Too much stuff on the ball," he said after the game.

For more on baseball's unwritten rules, visit



The next meeting of the Junta will be Thursday, May 6th at 7:15pm at the Mechanics Institute (20 West 44th Street between 5th and 6th. Avenues) with Dr. Alex Tabarrok from George Mason University talking about the efficacy of medical regulation.



 · Don't get too far ahead if you want to keep the other player in the game.

· Don't break the windows of the neighbor's house or they will call the police.

· Always take the referee out to Chinese dinner after the event is over. Do thank him profusely for his good work and express your confidence in him.

· Bring good equipment into the game especially things to protect the hands and feet.

· Stay around the good players so that you can learn from them, and curry favor with them and perhaps share some of their rewards.

· Aim below the legs when you are hitting someone so that they can come back and don't demand immediate retribution.

· Be sure that you don't pay too much attention to the attractive other gender as it will distract you from game the same way many of the 1930s reconstructionists got sidetracked with their younger assistants.

· Do pay much attention to the media as they will help you get the rules bent in your favor because everyone will want you to be in game. Also good for prestige and recognition.

· Don't try to grab all the money at once as you want the other side to come back with more from their siblings and parents and jobs.

· Keep records of all the good and bad so you can improve, but be sure not to document any of your bad stuff.

· Court an aura of humility so that you are well liked and properly respect the other side.

· Stay clean. Especially do wash your hands before and after playing and brush your teeth before and after, and wear good socks and change them so you don't get blisters.

· Use your own man gambit to show that the other side is wrong by showing them that one of their own agrees with you.

· Maintain the appearance of fairness as it might lead to punishment if you are overtly getting good calls from the referee.

· Know the endings of the "one potato two potato three potato four" choosing thing so you always get the good players on your side.

All these are applicable to current things in market but I must be missing many. Please augment and improve.



Here is a check on the evolution of "Sell in May". SP500 Nov1-Apr30 mean returns were tested against zero, by decade ("00" = 2000's, "90"'s, etc):

Test of mu = 0 vs not = 0

Variable   N   Mean   StDev   SE Mean     95% CI            T      P
N-A 00    10  0.0105  0.0912  0.0288  (-0.0547, 0.0757)  0.36  0.724
N-A 90    10  0.1154  0.0871  0.0275  ( 0.0531, 0.1777)  4.19  0.002
N-A 80    10  0.0830  0.1055  0.0333  ( 0.0075, 0.1585)  2.49  0.034
N-A 70    10  0.0648  0.1233  0.0390  (-0.0234, 0.1531)  1.66  0.131
N-A 60    10  0.0576  0.1246  0.0394  (-0.0314, 0.1468)  1.46  0.177
N-A 50    10  0.0790  0.0841  0.0266  ( 0.0188, 0.1392)  2.97  0.016

All positive, 3/6 decades significantly greater than zero.  Here is the same test for May1-Oct31:

Test of mu = 0 vs not = 0

Variable   N     Mean   StDev   SE Mean     95% CI             T      P
M-O 00    10  -0.0152  0.1514  0.0478  (-0.1235, 0.0930)  -0.32  0.758
M-O 90    10   0.0442  0.0657  0.0207  (-0.0027, 0.0912)   2.13  0.062
M-O 80    10   0.0429  0.0979  0.0309  (-0.0271, 0.1130)   1.39  0.199
M-O 70    10  -0.0272  0.0683  0.0216  (-0.0761, 0.0216)  -1.26  0.240
M-O 60    10  -0.0064  0.0760  0.0240  (-0.0608, 0.0479)  -0.27  0.794
M-O 50    10   0.0414  0.0871  0.0275  (-0.0208, 0.1038)   1.51  0.166

3/6 decades were negative (however not significantly different than zero), 3/6 were positive (only the roaring 90's significant).

Russ Sears writes:

Having heard "sell in May" for eleven years, it is time to put paper to pencil. For the S&P index,

First day, whole mnth, month, year

1.30%,        ?        5      2,010  

0.54%,      5.17%  5      2,009 
 1.70%,      1.06%  5      2,008 
 0.26%,      3.20%  5      2,007 
-0.41%,     -3.14%  5      2,006 
 0.46%,      2.95%  5      2,005 
 0.92%,      1.20%  5      2,004 
-0.07%,      4.96%   5     2,003 
 0.88%,      -0.91%  5     2,002 
 1.35%,       0.51%  5     2,001 
 1.08%,      -2.22%  5     2,000

First day 9 positives, average 0.73%, worst -0.41% 2006, best 1.70% 2008,  Cumm. Binomial Dist 99.4%

Whole month 7 Positives, average +1.28%,  best 5.17% 2009, worst -3.14% 2006, Cumm. Binomial Dist 94.5%

No wonder this dogma seemed annoying.



The DailySpeculations.Com calendar has been advanced to May 2010.  A curious but possibly insignificant fact is that there were no red days in April 2010.  A red day is a day when both S&P futures and Tbond futures are down. The other possible colors are: blue (S&P down, bonds up), orange (S&P up, bonds down) and green (both up).

You can look at past months' calendars here:

January 2010

February 2010

March 2010

April 2010



When ideas that seem to hold promise intuitively don't pass the acid test, you wonder whether you left something out which may have been the key, eg, X-day high, index vs individual stock, different definitions of volatility, various lags, what other markets have been doing, which prior period assumed analagous, yield curve, inflation rate, tax regime change, seasonality, etc. Eventually you are likely to find something, and maybe put on a full-Kelly trade based on it. Then, as it goes against, you wonder whether you have overfit the data, or had so many hypotheses that you fooled yourself. Or, maybe just unlucky or unsuited to gambling?

Dr. Zussman is a trader, astronomer, philosopher and periodontist from Los Angeles.



ant holeI always had a special kinship with ants, having made and observed colonies as a kid. I performed many behavior experiments with ants and learned a lot. In college, we used to boil ants to extract the formic acid they use as defense. Ants have ideal defense mechanisms since formic acid is better than any tear gas or mace for incapacitating an attacker. I used the formic acid in many nefarious experiments and research. Another thing to note is that the collective works best with the ants as they are single minded, and it is my hypothesis that the collective only works for those who live life through ritualistic behavior.

Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MOTU.

Douglas Dimick adds:

Here in China, there is the "anthill" dynamic developing among university graduates who can only find low-paying work (2000 RMB per month). Graduates are renting rooms in apartments and living among collectives of similar fated new-to-the-market job seekers. See this China Daily article.

Riz Din writes:

Ants have an interesting relationship with aphids, treating them as a living food source to be farmed. Also, there are more of them than we think. Apparently they make up 15-25% of living terrestrial animal biomass.



 A recurring topic on this site is the study of market anomalies surrounding round numbers. Perhaps this idea can be extended to interesting ticker symbols. In the US ticker symbols are formed from letters and thus whether a symbol is 'round' or interesting is largely a subjective matter.

However in Hong Kong the symbols are numbers. So could there be an attraction to round numbered easy to remember symbols? A simple way to look at this is to take all the even hundred symbols and compare them to the Hang Seng index. The following study looked at 0100, 0200, … through 0900 but some symbols were not associated with a stock. Performance for the last twelve months was as follows:

Hang Seng +51.27%

Stocks with Round symbols Avg. +172.61%
Std 108.77
t-stat 3.89
n 6

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008.

Easan Katir comments:

It seems all too common that a number, whether a price or an account value, approaches or touches a round number, then retreats slightly. Pure chance would suggest it would be over the round number or under equally, but it seems to be slightly under more often. Is this just my wishful thinking, or is there some corollary to Benford's Law. And here is Wikipedia's usual tour de force on Benford's Law.



lilac bushIt's not barbecue, but today I had the pleasure for the first time of tasting lilacs. I was inspired by a kid's book that said that to find out why bees like the taste of sweet things you should squeeze the nectar of some nettle plants. I took Aubrey to the Bronx Botanical Gardens and we smelled the lilacs. By far the best-smelling were the hyacinth lilacs. To me it's the best smell in the world, and it stops time and elicits every romantic spring personage that one could ever imagine.

Inspired by the reverie, I couldn't resist tasting a number of the small flowers. I found that the white ones on the top of the trees were superior in taste and smell to the red ones, especially lilac poincare and lilac common. The taste is like a mixture of raspberries and sweet peas. A slight tartness at first, but then a beautiful saladly green with sweet overtones.

I've seen some recipes for lilacs subsequently, but surprisingly nothing on the actual taste of lilacs, indeed almost a googlewhack. I highly recommend that all speculators take a break from their trading before or after the daily fray and sample a few in their area.

Phil McDonnell writes:

As a home gardener I have been amazed at the number of flowers that can be eaten and are considered delicious gourmet treats. For example, zucchini flowers. Zucchini plants have two types of flowers, male and female. The male flowers stand erect and tall as is only proper. The female flowers are short stemmed and demurely lower. Even though the two flowers look similar, I find it very easy to remember the difference.

The taller male flowers are the first to be found by the bees. They next visit the lower females, thus facilitating fruiting. If bees are lacking, then the higher male flowers can pollinate the lower female flowers simply through wind action. After the male's job is done the gourmet can harvest the male flowers for a real treat. Just sautee in butter, salt, garlic and onions. Each female will give you a zucchini.

Vincent Andres adds:

Reading Vic's post, I was thinking exactly on that: "fleur-de-courgette" and I didn't know it translated as "zucchini flowers". Thanks Phil. I'll be growing some in my potager every year. Beignet-de-fleur-de-courgette is a terribly good (and not so difficult) flower recipe. Here is a video.  I expect to have my own olive oil in the coming years to made it 100% with raw home products. 

Bruno Ombreux writes:

May I recommend a French delicacy: Crystallized violet flowers.

They are very easy to make. These are the flowers you use.



Coach WoodenEvery sport has those figures that are great performers but use the prestige and honor that comes with that distinction to degrade the sport and bring it down and trash it in a feeble attempt to prove that they are better than the sport. Some simply never learn how, as Coach Wooden teaches, "Team is greater than self."

Some are just cocky jerks that are great talents but troubled souls nobody can live near. Often these guys are publicly praised, but those who know the sport despise their cockiness. Their cockiness is an open secret. They are the OJs of their sport. Others are cheats, like Marion Jones, living a lie. While there is no doubt she was better than her competition, she took illegal short cuts to get that edge. They knowing how to remain one step ahead of the testing.

In many sports judges can be either outright bought or simple out spent or wined and dined. One of my fondest treats to my second tier national status in marathoning was being on the inside to learn what some of the stars of the sport were like. While most were wonderful people you would love your daughter to marry, the few who were jerks dominated the inside conversation and also often the press. To some this may appear to be idle gossip and petty jealousy, but to those of us that loved the sport like I did this was deeply troubling talk. These people were destroying something we loved… it was not idle chatter. To get ahead in the sport they no doubt paid a great sacrifice, but they ruin it for the rest of us. Many also paid a great price to try to get ahead but were not labeled "a winner." No doubt in my mind that the same applies to the sport of investing… however, it has many more ramifications than a simple game, and this needs to be vetted and discussed beyond the win/loss scores.



He has made his investors' fortunes…

How has Mr. Buffet actually been doing? On July 1, 1998 BRK-A was 78,000. Today it is about 115,000 per share.

That is a gain of 43% over roughly 12 years — about 2.8% per annum compounded.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008.

Kim Zussman writes:

Regressing the last 10 year's monthly returns for BRK-A vs SPY (with dividends, etc), BRK-A's alpha is positive but not significant:

Coefficients  Standard Error     t Stat    P-value
Intercept      0.008     0.005    1.583    0.116
Slope           0.436     0.106    4.113    0.000

However slope (beta) is 0.44, so you could say BRK-A out-gained SPY with less market exposure.

Rocky Humbert comments:

Math is fun. BRK-A has outperformed AAPL!

Total compounded returns (dividends reinvested) since 12/31/87:

BRK-A 18.2%

GE 10.4%

AAPL 15.5%

MSFT 22.7%

SPX 9.66%

And this is all-the-more-remarkable when one considers that AAPL returned 123% over the past 12 months.

As I said, "math is fun."

Rocky Humbert, quantitative analyst, speculator and master chef, blogs as OneHonestMan.



 I strongly believe that ventilation and outdoor sports have a significant impact on longevity. However, I have scanty scientific evidence for it. How would readers suggest I come up with some proper support for my theory?

Pitt T. Maner suggests: 

The first dose-response study for the positive effects of Nature. There has to be a Vitamin D angle too…a highly promoted vitamin at the moment. As long as your not on the golf course (not the healthiest place anyway) the mind/body stress relief benefits seem significant:

Just five minutes of exercise in a green nature setting, like these beautiful hills in Vermont, can boost mood and self-esteem.

Credit: Michael Bernstein, American Chemical Society

How much "green exercise" produces the greatest improvement in mood and sense of personal well-being? A new study in the American Chemical Society's semi-monthly journal Environmental Science & Technology has a surprising answer. The answer is likely to please people in a society with much to do but little time to do it: Just five minutes of exercise in a park, working in a backyard garden, on a nature trail, or other green space will benefit mental health. Jules Pretty and Jo Barton explain in the study that green exercise is physical activity in the presence of nature. Abundant scientific evidence shows that activity in natural areas decreases the risk of mental illness and improves the sense of well-being. Until now, however, nobody knew how much time people had to spend in green spaces to get those and other benefits. "For the first time in the scientific literature, we have been able to show dose-response relationships for the positive effects of nature on human mental health," Pretty said. From an analysis of 1,252 people (of different ages, genders and mental health status) drawn from ten existing studies in the United Kingdom, the authors were able to show that activity in the presence of nature led to mental and physical health improvements. They analyzed activities such as walking, gardening, cycling, fishing, boating, horse-riding and farming. The greatest health changes occurred in the young and the mentally-ill, although people of all ages and social groups benefited. All natural environments were beneficial including parks in urban settings. Green areas with water added something extra. A blue and green environment seems even better for health, Pretty noted. From a health policy perspective, the largest positive effect on self-esteem came from a five-minute dose. "We know from the literature that short-term mental health improvements are protective of long-term health benefits," Pretty said. "So we believe that there would be a large potential benefit to individuals, society and to the costs of the health service if all groups of people were to self-medicate more with green exercise," added Barton. A challenge for policy makers is that policy recommendations on physical activity are easily stated but rarely adopted widely as public policy, Pretty noted, adding that the economic benefits could be substantial. Policy frameworks that suggest active living point to the need for changes to physical, social and natural environments, and are more likely to be effective if physical activity becomes an inevitable part of life rather than a matter of daily choice.

Provided by American Chemical Society

Riz Din adds:

Ventilation has a pretty clear impact on longevity when it comes to the transmission of infection. This study looks at TB infection rates in different ventilated spaces  and finds that sometimes, simplest is best:

Facilities built more than 50 years ago, characterized by large windows and high ceilings, had greater ventilation than modern naturally ventilated rooms… Even within the lowest quartile of wind speeds, natural ventilation exceeded mechanical (p < 0.001). The Wells-Riley airborne infection model predicted that in mechanically ventilated rooms 39% of susceptible individuals would become infected following 24 h of exposure to untreated TB patients of infectiousness characterized in a well-documented outbreak. This infection rate compared with 33% in modern and 11% in pre-1950 naturally ventilated facilities with windows and doors open.

Closer to home, this resource looks at ventilation rates and health and performance (work and school) outcomes. The general findings are in line with expectations i.e. ventilation is perfomance enhancing. One last memorable finding comes from the EPA web-site, which says "The average person, through the natural process of breathing, produces approximately 2.3 pounds (1 kg) of carbon dioxide per day."On that note, I'm heading out for a brisk walk in the sun (and wind), before knucking down to some more studies! 

In another commentary, Frances Kuo who is a director of the Landscape and Human Health Laboratory at the University of Illinois, does point out that "None of the studies involved taking people and assigning them to different ‘doses’ of nature; rather, they looked at how people who sought out nature on their own responded to nature.” All in all, it doesn't look all that newsworthy, although I can't see the actual study which may be more enlightening than suggested by the media reporting.

This is veering a little off tangent as it neither relates to ventilation or outdoor sports, but I did find a previous study from Pretty that involved putting subjects on a treadmill and measuring their responses when exposed to images of different landscapes; subjects did show better responses when exposed to the green landscapes.



I am reblogging an od post on the site titled "persecution as a spur to achievement".

I noticed a fascinating comment from Rocky Humbert only today. My comment to his comment is posted underneath.

Rocky Humbert on October 31, 2009 5:02 pm

The author’s choice of the word “persecution” is unfortunate and incorrect. Persecution is defined as the systematic mistreatment of an individual or group by another group.Short-term speculation is a zero sum game, and a trader willingly, and without coercion, places a bet. The author’s logic suggests that in a wager, the winner persecutes the loser. That is absurd on its face.Even if one accepts the author’s plausible supposition (that persecution can ultimately lead to achievement), he neglects to mention that persecution requires SYSTEMATIC mistreatment. Among speculators, only fools and masochists subject themselves to systematic mistreatment. A speculator facing genuine persecution would simply walk away …Lastly, let’s please keep a bit of perspective here. How does being on the wrong side of a trade in Hong Kong compare with being on the wrong end of a Turkish death march, facing a Russian pogrom, being sent to a Gulag, and countless other examples of discrimination, abuse, atrocities and crimes against humanity? Fairly insignificant and uninteresting, is my answer.

Sushil Kedia on May 2, 2010 12:57 pm

ASS-u-ME is one way of spelling assume and means as much. Winners persecuting losers as you rightly said is not persecution. But if large volume pumps have access to the central server of an exchange without the same privilege being shared by all other market participants. Big volume producing pools tilting the bid-ask pressure against the scattered retail positions is persecution.Is there a single stock exchange in the world where an information audit is being ordered and conducted by any regulator in the world? There would in such a way of thinking hundreds of ways in which persecution may have been playing out in the markets which is just one single word expressing the idea that the public loses more than it should be losing.



 I recall reading somewhere that 18% of the US oil comes through a terminal in the Mississippi delta down river from New Orleans. If shipping can't get through because of the oil slick, would oil and gasoline prices not go through the roof?

Disastrous earthquakes around the world, aircraft-stumping volcanoes, man-made environmental disasters… makes you wonder how long we can keep taking these torpedoes in these economic conditions…

The short side in equities suddenly looks attractive (but not attractive enough to forego really tight stops). The long side in grains and sugar perhaps also. The times they are a changin'.

Jeff Watson adds:

They're expecting that if this thing doesn't get capped, that the clockwise currents in the Gulf will ultimately be putting an oil slick on my front yard. Still, the gulf is a pretty big place and 200,000 gallons a day is not a lot of oil, especially since only a percentage of it actually makes the slick. I'm not worried about any environmental damage, and will accept whatever happens. The bright side is that the tourists stop coming.

Jeff Watson, surfer, speculator, poker player and art connoisseur, blogs as MOTU.



 In my travels today I noticed four vehicles loaded to the gills with furniture and mattresses. Three were pick up trucks and one was a car pulling a loaded trailer.

In renting units I always dread a person calling me and saying at months end they have to move now. This usually is a bad omen.

One couple called me today who got burned out of their unit two weeks ago and wanted to rent from me but never called me back till today. I told her I had already rented the unit. She told me they had a terrible time getting back their deposit till today. Likely their former landlord did not have the money on hand.

Victor Niederhoffer comments:

An alternate take on the i -95 bearish route.



sniperWhen discussing today's market action with a friend, the following chat conversation took place:

me: Market's crazy again.

friend: Yep i noticed…herd mentality causing kids to run from one side of the playground to the other.

me: Fine by me. Opportunity to play sniper in the market again and take advantage of people being dumb.

friend: one of the hardest things about being a sniper is not neccearily the distance from which you shoot, or the accuracy required when you shoot, or finding that perfect location, it's probably being too focused through the sights of your scope to not notice the private that snuck away went arround you and is now standing behind you with a gun to your head.

Wise words indeed…

Ken Drees writes:

That's why snipers work in teams–to watch prey and to cover rear guard.

Bruno Ombreux comments:

I was told that the spotter is not technically needed. He is only there to share the psychological burden arising from killing too many people.

For the same reason, some Investment Banks praise teamwork, notably in their structured finance department.

Peter Grieve writes:

Not sure this is relevant, but I heard that snipers never ever make it to prisoner of war camps. When an identifiable someone has been deliberately targeting your friends as individuals, accidents always seem to happen in the prisoner-taking process.




 One way or another, I found my way to this fascinating and colorful sample chapter of Swindled: The Dark History of Food Fraud, from Poisoned Candy to Counterfeit Coffee by Bee Wilson.

One chapter tells the story of Frederick Accum (1769–1838), who published 'A Treatise on Adulterations of Food, and Culinary Poisons'. His work provided a great service to the public by applying scientific method to prove that inumerable foods of the time were suffering adulteration. Describing just how pervasive food adultery has become in this era, Accum says: "It would be difficult…to mention a single article of food which is not to be met with in an adulterated state; and there are some substances which are scarcely ever to be procured genuine." Bee observes that because food had started passing through so many hands before reaching the final consumer, it became easy to adulterate the food and escape detection, although Accum does at least point out that "so inextricably are we all immersed in this mighty labyrinth of fraud that even the vendors of poison themselves are forced, by a sort of retributive justice, to swallow it in their turn. Thus the apothecary, who sells the poisonous ingredients to the brewer, chuckles over his roguery and swallows his own drugs in his daily copious exhibitions of brown stout. The brewer, in his turn, is poisoned by the baker, the wine-merchant and the grocer."

There is much here that chimes with the current crisis. My favorite passage of the chapter concerns the adultery of peppercorns:

Some forms of adulteration were crude—such as "P.D." or pepper dust, a "vile refuse" swept from the floor of the pepper warehouses that often got mixed in with ground black pepper. An even worse version was known as "D.P.D.," short for "dust of pepper dust," the very grimiest, nastiest floor sweepings of all. There was little art in this deception. On the other hand, some truly intricate labor went into many of the more outrageous forms of adulteration. Real black peppercorns—which many consumers doubtless bought in preference to ground, thinking, wrongly, that there was no way to adulterate the whole spice—were sometimes padded out with "factitious peppercorns," which seem to have been the work of an artisan to make. First, blackish "oil cakes" were taken (the residue left over after pressing linseed oil) and mixed together with common clay and some cayenne pepper (to give the "corns" some bite so that consumers might really be fooled by them). Then this paste was pressed through a sieve and rolled in a cask until it formed little pellets. Making these tiny balls of fake "pepper" must have been highly laborious, and swindlers couldn't get away with adding very many to the real peppercorns before suspicion was aroused—around 16 percent was standard—yet evidently it was still worth the swindlers' while to do it. Labour was cheap and spice was expensive (the duty on a single pound of pepper was 2s. 6d., a tax that was reduced in 1823), and there was no shortage of workers to carry out this peculiar trade.

It looks like there is much to be learned from this book, and the reviews I've come across are glowing.



The fitbit--a popular self tracking toolThere is a very interesting article in the NY Times Magazine on quantifying how one's life is spent. Perhaps some nuggets in there applicable to trading:

Humans make errors. We make errors of fact and errors of judgment. We have blind spots in our field of vision and gaps in our stream of attention. Sometimes we can’t even answer the simplest questions. Where was I last week at this time? How long have I had this pain in my knee? How much money do I typically spend in a day? These weaknesses put us at a disadvantage. We make decisions with partial information. We are forced to steer by guesswork. We go with our gut.

That is, some of us do. Others use data. A timer running on Robin Barooah’s computer tells him that he has been living in the United States for 8 years, 2 months and 10 days. At various times in his life, Barooah — a 38-year-old self-employed software designer from England who now lives in Oakland, Calif. — has also made careful records of his work, his sleep and his diet.

A few months ago, Barooah began to wean himself from coffee. His method was precise. He made a large cup of coffee and removed 20 milliliters weekly. This went on for more than four months, until barely a sip remained in the cup. He drank it and called himself cured. Unlike his previous attempts to quit, this time there were no headaches, no extreme cravings. Still, he was tempted, and on Oct. 12 last year, while distracted at his desk, he told himself that he could probably concentrate better if he had a cup. Coffee may have been bad for his health, he thought, but perhaps it was good for his concentration.

Barooah wasn’t about to try to answer a question like this with guesswork. He had a good data set that showed how many minutes he spent each day in focused work. With this, he could do an objective analysis. Barooah made a chart with dates on the bottom and his work time along the side. Running down the middle was a big black line labeled “Stopped drinking coffee.” On the left side of the line, low spikes and narrow columns. On the right side, high spikes and thick columns. The data had delivered their verdict, and coffee lost.

Riz Din comments:

Interesting article. I've tried a few tracking experiments such as strict calorie counting, but it gets really obsessive because it is such an active process (I carried a little pen and pad around with me for a month). At present, logging activities such as time spent doing activity x, foods eaten, exercise taken, etc, has a strong reflexive element as the act of measuring interferes with the normal course of affairs. Even tracking tools on smart phones require a manual input element, which will distort affairs and can burden (as well as enlighten) the mind in many ways. On the upside, this is all great when you are striving to achieve a set goal over a short period of time, just less so when you are just getting on with life and want feedback on yourself. Because of this, I think data driven living will really take off when the data is collected passively and can then be reviewed periodically. I can imagine, for example, a technologically wired up house filled with sensors that silently logs your whereabouts and activities and produces a monthly report.

My favorite realizations from tracking exercises are that I tend to overweight recent experiences, and also that I am often caught in repetitious cycles. Another key benefit is that list keeping/tracking serves as a kind of photo album of memories: I've kept a booklist (in Google Docs) of all books read over the past five years or so, with a simple five star rating system, and by filtering to see my favorites I am able to see what type of person I was and the type of person I may be becoming. All very interesting.

Russ Herrold writes:

Here is an interesting read for those interested in a life ruled by numbers:

"Ubiquitous self-tracking is a dream of engineers. For all their expertise at figuring out how things work, technical people are often painfully aware how much of human behavior is a mystery. …"

This is not specifically applied to numercially driven trading or investing, but the emphasis on accurate and contemporaneously generated records mentioned in the latter pages of the article resonate with what our aspirational selves may seek to attain in the financial markets:

- trade from numerically validated setups ['Past results may not be indicative of future results' vs. 'History does not repeat, but it sure does rhyme a lot']

- do post-analysis on what worked, and when a plan was followed, and when it was not ['If you cannot put a number on it, it is an opinion, not science']

- Kelly criteria for binomial trades; Optimal-F for N-way position sizing; with the known problem of non-Normality of financial markets 



DJIA weekly returns (1928-p) were used to look for runs of consecutive up-weeks, such as the recent run of 8 consecutive (ending week before last). As a check on whether longer up-runs end in bigger declines, regressed the run-terminating down week return (the week ending the up-run) against the count of consecutive-ups ended:

Regression Analysis: week ret versus run up wk

The regression equation is week ret = - 0.0155 + 0.000405 run up week

Predictor       Coef       SE Coef       T       P
Constant   -0.015497   0.001188  -13.04  0.000
run up wk   0.000405   0.000319    1.27   0.204

S = 0.0131489   R-Sq = 0.3%   R-Sq(adj) = 0.1%

Conclusion: No significant correlation between run-terminating decline and length of up-run.
The attached chart compares means of run-terminating decline weeks, by length of prior up-run. As with the regression, there are no obvious differences between run-ending decline week returns as a function of run length. (If any of the decline means differed significantly from the global mean, it would be beyond the red confidence interval limit-lines. The lines diverge as run-length increases because there are fewer long runs than short ones).



 I am writing a letter to Aubrey on his fourth birthday and as part of my introduction where I emphasize the importance of a proper foundation, something that will take account of the load and settling, and the variations when the temperature and water changes, and taking into considerations Galton's method of starting the day with shaving and brushing the teeth as a proper way to start, and all good scientists who keep a lab book with their previous days' effort, and where they left off, and every trader's proper foundation of writing down what happened over night since he left off writing down what happened the previous day, I want to emphasize to Aubrey the importance of taking good care of your teeth. I believe that very much of life expectancy and health depends on good teeth as germs start there and migrate. But I don't have any evidence. What is the best way to make this point?

Scott Brooks comments:

Be a good example and do it with him every morning, noon, and night. Kids watch what we do far more than they listen to what we say.

Make it fun for him. Don't just make it about brushing his teeth, make it your time with him. Talk about things that are important to him, and make it fun by talking with your mouth full of tooth paste and a tooth brush….i.e. so your speech sounds funny (kind of like when you try to talk to a dentist with a mouth full of cotton swabs).

And be consistent. Give him 'marker phrases', things that will stick with him his entire life (I don't know that "marker phrase" is the technical term, it's just the term that I use).

For instance, a marker phrase I say to my kids constantly is, "What happens when you listen to Dad? Good things! What happens when you don't listen to Dad? Bad things!" And then every single time they do what you tell them to do, reward them somehow and say (with a smile), "what happens when you listen to Dad?" (and they will say "Good things!"). BTW, the reward doesn't have to be anything other than a smile or acknowledgment that you know they did something good. And when they do something wrong, say to them, "What happens when you don't listen to Dad?" Much of the time they won't say "bad things" but they'll understand.

Here's another "marker phrase" that I use with my kids. Every night before I put them to bed (or if I'm out of town I call them and do this over the phone), I say this to them (we call it the Brooks Success Creed):

Remember, in order to be successful in life, you have to be:

A man of good character

A student to the best of your ability with ambitious purposes

of congenial disposition

Possessed of good morals

Having a high sense of honor and a deep sense of personal responsibility

You must always do unto others as you would have them do unto you

And above and beyond all else never get up (they usually say that phrase)

And remember, if you ever need me or mom for any reason, we'll always be there for you, we'll always take care of you, we'll always love you forever and ever unconditionally, no matter what. You can always count on us, you can come to us with anything, we'll always help you, we'll always take care of you. And remember, I'm your protector, I'm your Knight in Shining Armour! I Love You!

There are, I believe, many meals for a lifetime in that creed. But the key to it is that, embedded within it, are many key marker phrases that you can reference for the child. For instance, lets say that I'm having a tender one on one moment with one of my kids, I will say something like, "you are really becoming a 'man of good character' and I'm so proud of you". Or if they are struggling with something and eventually fight their way through it (i.e. a math problem), I always praise them and say something like, "You did so good figuring that out. And do you know how you did it? You 'never gave up'! You can even do this when they do something wrong. For instance. "When you behave like that you're not having "a congenial disposition".

Back to brushing one's teeth. If you want Aubrey to develop the good habit of brushing his teeth, tie brushing his teeth back to one the many "marker phrases" that you share with him multiple times a day and every night before he goes to bed. When he brushes his teeth, especially when he does it on his own, make a point to say something like this: "Aubrey, you are such a 'man of good character' for brushing your teeth? Brushing your teeth and taking good care of yourself really shows me that you have a 'deep sense of personal responsibility'! I'm proud of you, son!" Ingrain the marker phrases into his mind by consistently saying the phrases over and over and over again. Bed time is critical as are other tender one on one, moments. Tie activities to the marker phrases by pointing them out to him in real life/real time situations so he will attach the activity to the "ideal" of the marker phrase.

I'm no child rearing expert or anything, but I do know that this is what my wife and I have done with our kids and they seem to be turning out ok…although we do have to remind the younger one's to still brush their teeth from time to time! 

Ken Drees writes:

This reminds me of billboards I saw in Jamaica: "Remember to Brush your Teeth", next to a picture of a toothbrush and a smiling child. It also reminds me of the site's traveling hobo who said that if he could have a suitcase full of toothbrushes when he was in the Amazon, he would be rich. 

Pitt T. Maner III writes:

Based on the amounts of money spent the diamond analogy is not too far off. Sealants may be worth investigating…

Oral Health Facts:

* Tooth decay (dental caries) is the most common chronic disease of childhood.
* Only 1 in 3 of all U.S. schoolchildren and only 1 in 5 of children in families with low incomes have received dental sealants.
* In the United States, 53 million children and adults have untreated tooth decay in their permanent teeth. Much of this problem could have been prevented by greater use of fluoride and timely application of dental sealants on chewing surfaces of back teeth.
* African American and Mexican American adults have twice the amount of untreated decay as non-Hispanic whites.
Oral Health Problems are Costly
* Each year, Americans make about 500 million visits to dentists.
* In 2009, an estimated $102 billion was spent on dental services in the United States.

Marion Dreyfus comments:

Buy a poster of the body's blood system, capillaries, veins, and show by tracing down from the rich supply in and to the mouth how germs make their way from the mouth's cavities and capillaries down to the heart and elsewhere. The same poster will also serve to show how drug addiction and the use of tainted needles carries the poisons from injection site to the far reaches of the brain and everywhere else. 



The Saratoga Tree NurseryI spent the weekend planting 150 baby trees on our property.

The trees of Westchester and Fairfield County suffered mightily during the spring storms, and many of our wealthy neighbors purchased large shrubs and full-grown trees to mitigate the aesthetic damage. One neighbor's estate now looks like a Christmas Tree farm.

In contrast, I planted dozens of random six-to-nine inch tall native species seedlings — and for the price of two Home Depot shrubs, I left a bequest to future generations. Even if there is only a 10% survival rate, it will provide an awesome return-on-investment.

The NY State Department of Environmental Conservation runs the Saratoga Tree Nursery, and since 1902 has produced and sold more than 1.6 billion seedlings at a low purchase price.

Surprisingly, NY State says that the major cause of seedling mortality isn't wildlife or competing plant species. It's lawn mowers.

For more information about this excellent resource, go here.

Other states probably have similar programs.

Scott Brooks comments:

 Although I'm not expert, here are a few tips from a guy who's planted more than a few trees in my day.

I don't know what it's called, but it looks like an inverted cereal bowl that you put over your tree and slide it to the ground (bowl side down). This keeps sunlight from hitting the ground under the "bowl" and thus keeps weeds and grass from growing right around the base of the tree and competing with the tree for water, nutrients and sunlight.

Use a "tree tube" (that's what I call the) and put them around the tree to protect them from wildlife eating them. It also makes it easy for the person on the lawnmower to see them. It also doesn't hurt to tie a piece of surveyors tape to the top of the tree to make them easier to see.

Fertilize the hole you are going to put the tree in, then fertilize around the drip line, but don't over fertilize (NB: small seedlings won't have a "drip line" yet, but when they do, fertilize around the drip once or twice a year). Then dump a bucket of water on it. If it's been particularly dry, feel free to water the seedlings.

Don't be shy about weed whacking around them to knock down any weeds or grass.

Rocky Humbert adds:

If you have a bad back, they sell a device that allows arborists and forest rangers to plant seedlings while fully erect. And if you are planting thousands, you can rent a mechanical planter.

Nigel Davies comments:

Yuk. 450 minutes on one's knees is precisely 30 minutes worse than being a pawn down for seven hours…

Russ Sears writes:

Indiana has a similar program. When each daughter was young I planted several hundred trees– 700 trees in all on our 2 acres. Walnut and oak mostly. Pine trees were planted between rows of hardwood to make them grow. By the time we sold the house the hardwoods were just beginning to over take the smaller pines. The kids loved marking time by the size of the trees as both the trees and they grew the 12 years we lived there. It also turned out to be profitable as the buyer said they wanted the house for the trees. Plus, on visiting an old neighbor, each neighbor bought several large trees from them. A super Walmart moved behind them bringing with it multiple fast food joints, etc. This ruined the lovely view, rustic trails and the low traffic runners love, which were the things that made me buy the place to begin with. It left an island of nature that hides the modern development. 



most likedOver the past several years I have been in four reading groups. In that time a number of selections have been duplicated. Most selections receive mixed reviews. A few appeal to just about every reader, a few others bomb with most.

Only one book was more enjoyed than "Water for Elephants"– "The Book Thief" (an honorable mention to "1000 Splendid Suns.")

The runaway winner on the Most Disliked List: "The Lovely Bones" (with a dishonorable mention to "The Friday Night Knitting Club").

Regarding the Sage's views of GS. CNBC has a program (the name of which currently escapes me) that immediately follows Bartiromo. Melissa Lee has four regulars (with an occasional substitute) commenting on different aspects of that day's trading. On the Mon. or Tues. following the initial GS the substitute was a former employee of that concern. When the question of Blankfein being dumped came up, he confidently said it would never happen. His reason, which went unchallenged: in the Sage's covenant with GS on the $5 billion loan, is a clause that gives the Sage an out should Blankfein leave.




Documentary by Alex Gibney

This is a scathing, carefully researched Dorian Gray portrait of super-lobbyist Jack Abramoff, from his youth in college as a handsome, gung-ho GOP political activist, to the pariah disgrace of his recent years anterior to his imprisonment.

The topography of the film covers an unprecedented mapwork of unlikelies: Indian reservations, Russian operatives, Chinese sweatshops and mob Mafias in Miami. The film proffers a vast archive of clips, photos, recorded speeches, talking associates and former colleagues, newspapers–the whole array of the documentarian today, hewing not into alarmist territory, but managing to coolly limn the way monetary influence molds and corrupts the political process. Not news, certainly, but glaringly obvious in the unspooling of this riveting docu. Proof again that newspaper and TV have yielded the high ground on exposes and longitudinal coverage to the deft (well-funded) filmmaker/documentarian.

Oscar-awardee Gibney paints how the nature of politicians' campaigns and continuous scratching for re-election most probably distorts the entire politics of the American enterprise. Interesting and undeniably fun footage of college kegger times of such latter-day luminaries as Tom De Lay, George Bush the younger, Karl Rove as a cherubic sage with hair, pols of the left and right of the past four decades, CASINO JACK is hard to deny as a marathon tale of untrammeled entrepreneurship, flackery and greed.

One tries to be cynical about the reportage, but it disarms us with its cumulative argument, and claims our undivided attention.

Maybe somewhere in the country's attic, Abramoff is still the uninflected buff promising guy he started out to be.



Watching the German chancellor rabbit on…

How often is the initial chat bullish for the markets as the pollies try and talk it up, and then as soon as question time begins YOURS..

Though as always this must be tested.



Franz Marc's The BullFor the first time since October 2006 there were no declines of 1% or more in the month of March 2010. One hypothesizes that the number of such declines will increase from the three in April 2010. Indeed, one hypothesizes that a month with zero such declines like March 2010 is inordinately associated with the end of a bull market in Birinyian terms – assuming such exist.

Kim Zussman writes:

To clarify, these dates are for 21D periods which had one or more daily decline <-1% and were following a 21D period which had no declines <-1% (like March and April 2010). The first column after "Date" is count of declines <-1% in that period. Next col is that 21D period return. 3rd column is count of declines <-1% in the next 21D period, and the last column is the return for the next 21D period.

The last 4/5 mean returns for subsequent 21D periods have been negative:

Date    count -1%   21d ret  nxt 21-1% nxt21 ret
05/31/07        1        0.030     4       -0.018
01/30/07        1        0.001     1       -0.018
11/27/06        1       -0.005     0        0.032
04/28/06        1        0.006     4       -0.039
01/27/06        1        0.022     1       -0.002
10/26/05        3       -0.020     1        0.065
08/26/05        1       -0.031     0        0.009
11/26/04        1        0.051     1        0.026
07/29/04        2       -0.031     3        0.007
03/29/04        5       -0.020     3        0.000
01/28/04        1        0.030     0        0.015



Rose Wilder LaneThe book Old Home Town by Rose Wilder Lane is a vivid and beautiful tale of the origins and foundations of the Americana character from small towns to American values. It is highly recommended to be read along with books about the importance and influence of small towns.

And of course one should look at the performance of companies based on the size of the towns they have their headquarters in, as well as their years of incorporation.



Live CowsJust made some killer BBQ sauce: tomato sauce, Worcestershire sauce, molasses, brown sugar, cinnamon stick, garlic salt, liquid smoke, chili powder, rice vinegar, Jack Daniels, fine chopped onions, clove powder. Soak braised ribs for a couple hours before heating in the oven or over coals. Oh my gosh, "Broke da mouth" as they say in Hawaii.

Jeff Watson adds:

If you were to sauté the onion and garlic in butter instead of oil, the chemistry dictates that the onion will be sweet instead of bitter.



the two blades of the scissors come togetherOne of the hallmarks of a terrible decline in the fortunes of a company besides skyscrapers and hubris is an acquisition binge. A certain non-bank company with extensive financial interests and a tall chief headquartered near me that has made thousands of acquisitions and does not talk to analysts except when they are in trouble comes to mind as well. Much too often the acquirer sells out when it sees the handwriting on the wall. Many of the big banks bought with abandon before their own fight with the death spiral.

The other side:

One has seen this happen often times when I was in the finder business with buyers trying to cover up their own lapses by buying to boost lapses in their own business. Often the two blades of the scissors come together with the buyer trying to pull the wool over the seller and the seller over the buyer. The net result to me has always been that companies that make it a principal part of the business to buy companies seem to me to have inordinately poor performance. I have seen innumerable conglomerates in my day go from great to dismal. The companies that say they are in the business of acquiring and use the word "tuck in " acquisitions or some such are all prime candidates for a fall in my experience. Of course every one of these acquirers says that their mantra is "we leave the acquired company alone to run its own business. Look at how small our headquarters is."

All these thoughts come together when I saw a quote from a sagacious business man in the Midwest saying "I am ready to spend 11 figures on Monday if I get a call from the right acquirer." How has he held back the Canutian tides? All these thoughts must be quantified.

George Parkanyi writes:

I'm not sure how counting as such would work here. Perhaps you could do an analysis of company performance as a function of accounting goodwill. Beyond that, I think it ultimately comes down to human nature. People don't easily identify with being part of a big monolithic entity. They understand that their individual impact is heavily diluted. My experience has been that the best teams are small, tight, and focused, and conglomerates by definition are not tight or focused. The so-called "synergy" that acquisitions are supposed to create is usually just a euphemism for "layoffs", particularly to the working ranks. Muy anxiety. And/or sometimes the entire heads of acquired companies are cut off and new ones screwed on, muddying the career paths of those just experienced managers just below. Large organizations in general also feature a wider communication gap and disconnect between senior management and front lines. To me this is a solid prescription for poor morale, and subsequent mediocre to poor productivity.

Another type of company to watch for are the ones that are constantly re-organizing. Re-organizations more often than not, in my experience anyway, tell me that a company is not tackling its problems head-on, but rather just papering over previous poor decisions by shuffling people around.



There is a horse running in the Derby tomorrow called Stately Victor. 30-1. I think that I'll splurge and slap two dollars down on this thing in your honor, though I've ever bet on a horse before. This should be interesting as I imagine there are few things in life more obvious than a guy who's never been in one before trying o look nonchalant in an OTB, amongst the cognoscenti therein. Especially a guy asking a two dollar bet. I look forward to the experience.

Victor Niederhoffer says:

In my honor you should bet only a buck, as that's the figure that Bacon liked to bet.

Tom Marks replies:

Well, I'm in. Followed your risk parameters as well… Still made my two dollar wager to win, but went partners with my friend's mother at a buck apiece. All of which made for an educational scene in the OTB.

I approached some guy who, judging by his expressionless bearing, gave off an air of insider ennui. I've come across many a person with a been-around-the-block look about them, but it seems there's nothing quite like an OTB been-around-the-block look. This guy had it, rolled-up newspaper, pencil, and all. I've always sensed such resigned weariness while walking past the window of one of these places in NYC, as it's like looking inside a box of sadness.

Anyway, I asked him how to do exactly what I wanted to do. He proceeded to walk me through it, after which I mentioned that I was partnering with my friend's mother on the investment. With that he sighed deeply and shook his head, telling me that now he had to bet on Stately Victor. He didn't explain exactly why, but I got the impression that he didn't feel entirely comfortable with running his "system" up against the chances of two people with possible beginners' luck. It seemed as if he was now hearing a little voice in his head and would never forgive himself if he didn't heed it.

Superstitious bunch.



Wayne GretzkyHere's a quote from the Sage:

We are ready to act. If I get a call on Monday on a 10 billion deal and I like it, I'll say yes. We're interested as ever. We wrote a big check and issued shares in connection with Burlington.

The query is this quote is reminiscent of some other highly hubristic utterance before the fall, but I can't put the finger on what it was.

Pitt T. Maner III asks:

Was it the October 17th, 2008 op-ed?

'In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”'…..

"I don’t like to opine on the stock market, and have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities. "



Past performance charts for various markets showing their positions in the last two 2-month "races" at half-month intervals. Which asset will perform best in the next two months?

Cotton           1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change (currency
Mar-Apr               7       5       7       6           3.7%
Jan-Feb              11      10       6       1           9.6%

Gold             1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr               8       8       4       4           6.4%
Jan-Feb               3       5       4       3           3.7%

Silver           1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr               2       2       1       1          13.8%
Jan-Feb               1       8      11       7          -0.3%

Soybeans         1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr              10      10       5       5           4.1%
Jan-Feb              12      12      12      12          -7.2%

Euro             1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr               3       6       9      10          -1.3%
Jan-Feb               8       6       9       8          -3.3%

British Pound    1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr               9       7       6       8           1.2%
Jan-Feb               7       4       8       9          -3.9%

Sugar            1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr              13      13      13      13         -30.7%
Jan-Feb               2       1       1      10          -4.8%

Corn             1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr              11      11      11      11          -5.2%
Jan-Feb              13      13      13      11          -6.7%

Crude oil        1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr               4       3       3       3           8.2%
Jan-Feb              10      11      10       6           0.5%

S&P 500          1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr               1       1       2       2           8.8%
Jan-Feb               5       7       7       5           1.1%

Natural gas      1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr              12      12      12      12         -20.2%
Jan-Feb               4       9       5      13         -11.0%

10-year T notes  1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr               6       9      10       7           1.3%
Jan-Feb               6       2       2       2           4.8%

U.S. Dollar      1/2 mo    1 mo  1 1/2 mo   2 mo   2 mo change
Mar-Apr               5       4       8       9           1.0%
Jan-Feb               9       3       3       4           1.8%

« go back


Resources & Links