Jul

3

Not that the market needs an excuse for a drop, one may be coming courtesy of Vietnam. It sounds as though VN is going to make a stand. Will the Chinese do likewise? Probably. The result will make for some interesting fireworks.

There is a very, very big round number for the S&P 500 only 27 points away.

Jul

2

Thursday July 3, 2014 the NYC Junto will feature Tyler Cowen, of MarginalRevolutionUniversity.Com and George Mason University. His latest book is Average is Over.

Meeting starts at 7:30pm, speaker at 8:00pm. General Society Library, 20 W 44th St btwn 5th & 6th Aves, New York, NY 10036.

All DailySpec readers are invited.

Jul

2

 There is a passage in Memoirs of a Superflous Man I believe from Turgenev about a lake that appeared so beautiful but was deceptive about the coming terrible storm. Sort of like Caesar trying to calm the senate before becoming dictator. I will try to find that passage which Nock used to describe the calm and deceptive serenity before World War I's outbreak. And angler fish uses it in a form of aggressive mimicry. The movement of crude today at the open, the only market down among 30 on my screen to the constructal number of $5.00, strikes me as such a fish. Amazingly I will not buy it today. What other deceptive calms arise to lure you in before devouring you for the kill?

Update: I found the beautiful passage from Ivan Turgenev's "Clara Militch":

"Evil is coming… and here is the lake, isn't it blue and smooth? And here is a little boat of gold. Will you get into it? It floats of itself."

Now I sound like the bearometer. But I mean it merely for the one market that's down today. What is the performance for example of the 10 worst stocks of the day when the market is way up?

Allen Gillespie writes: 

 This is my favorite bull to bear passage from one of the best books ever written, Lonesome Dove by Larry McMurtry Chapter 91.

"But a week passed an they saw no Indians. The men relaxed a little. Antelope became more common, and twice they saw small groups of buffalo….The country began to chnage slightly for the better. The grass improved and occasionally there were clumps of trees and bushes along the riverbed…He felt the threat of drought was over…Traveling became comparatively easy…

The next day, as they were trailing along a little stream that branched off Crazy Woman Creek, Dish Boggett's horse suddenly threw up its head and bolted. Dish was surprised and embararassed. It had been a peaceful morning, and he was half asleep when he discovered he was in a runaway headed back for the wagon. He sawed on the reins with all his might but the bit seemed to make no difference to the horse.

The cattle began to turn turn too, all except the Texas bull, who let out a loud bellow.

Call saw the runaway without seeing what caused it at first. He and Augustus were riding along together, discussing how far west they ought to go before angling north again.

"Reckon that horse ate loco weed or what?" Call asked, spurring up to go help hold the cattle. He almost went over the mare's neck, for he leaned forward, expecting her to break into a lope, and the mare stopped dead. It was a shock, for she had been quite obedient lately and had tried no trciks.

"Call, look" Augustus said.

There was a thicket of low trees along the creek, and a large, orangish-brown animal had just come out of the thicket.

"My lord, it's a grizzly," Call said.

Augustus didn't have time to reply, for his horse suddenly began to buck. All the cowhands were having trouble with their mounts. The horses were turning and running as if they meant to run to Texas. Augustus, riding a horse that hadn't bucked in several years, was almost thrown.

Call drew his rifle and tried to urge the Hell Bitch a little closer, but had no luck. She moved, but she moved sideways, always keeping her eyes fixed on the bear, though it was a good hundred and fifty yards away. No matter how he spurred her, the mare sidesteeped, as if there were an invisible line on the prairie that she would not cross.

There was confusion everywhere. The remuda was running south carrying the Spettle boy along with it. Two or three of the men had been thrown and their mounts were fleeing south. The thrown cowhands, expecting to die any minute, though they had no idea what was attacking, crept around with their pistols drawn.

"I expect they'll start shooting one another right off," Augustus said. "They'll mistake one another for outlaws if they ain't stopped."

"Go stop them," Call said. He could do nothing except watch the bear and hold the mare more or less in place. So far, the bear had done nothing except stand on its hind legs and sniff the air. It was a very large bear, though; to Call it looked larger than a buffalo.

"Hell, I don't care if they shoot at one another," Augustus said. "None of them can hit anything. I doubt we will lose many."

He studied the bear for a time. The bear was not making any trouble, but he apparently had no intention of moving either. "I doubt that bear has ever seen a brindle bull before," Augustus said. "He's a mite surprised, and you can't blame him."

"Dern, that's a bit big bear." Call said.

"Yes, and he put the whole outfit to flight just by walking up out of the creek." Augustus said

Jul

2

Within the "dark pool" of the market's ecosystem, there exist top feeders who like to provide bottom dwellers with 'insurance' policies. This "magnanimous" activity manifests itself in the provision of such products as options and more 'complex' structured products.

Clearly, as with all insurance policies, the seller of the policy has no intention to pay out upon the risk if it eventuates.

One noticeable element of these structures is the inability to get out of them in a timely fashion.

An examples should suffice:

In 2008 one was fortunate enough to have bought an AUD Put / JPY Call. As the AUD/JPY cross rate declined (and, for those who remember, Armageddon approached) not only was the 'delta' of the position increasing but the 'Vega' was too! A rare occurrence in option-land for TWO of the 'Greeks' to be in one's favour. At a time when I wanted to cut the position with a reasonable gain, the counter parties in the options market made a volatility spread so wide, that to have sold the structure back would have entailed losing money even though I had bought a low volatility and the spot had moved massively my way. To have simply bought back the delta and ridden it to expiry would have led to massive illusory PL swings because of the way options are revalued by the seller. The upshot is that I was unable to collect on the 'insurance policy'

Even in today's 'it can only go up/ prosaic times', market insurance policies are a scam.

Some things for speculators to consider:

1. Is there a level of volatility at which markets become 'untradable'? On the upside, I believe there is a level - or put differently, there is a quantifiable rate of change in the cost of insurance after which the spreads are impossible to deal at (In the above AUD/JPY example the volatility spread was 30% / 130% !!!!)

2. Is there a certain minimum level of volatility that the ecosystem requires? The answer might be different for different markets but overnight implied volatility in the major currencies hit the lowest in more than 20 years yesterday at circa. 5.5% annualised so who knows.

3. As alluded to above, should one watch the bid/offer spread on insurance as a predictor of bad/good times ahead. The magnitude of the spread in At The Money options markets certainly widens as the underlying approaches the point at which the big sellers might have to pay out thus making it hard or impossible to exit.

4. The amount of inbuilt spread in structured product in the street at the moment is genuinely appalling. But it is selling VERY WELL because large over regulated investors are being required by their 'consultants' to deliver 'stability' at all costs….. Not a single one of these structures is fit for purpose.

Lifting a line from EdSpec - '…..are there any words in the English language that mean 10000 times less than zero..' is a good way to explain the probability of the buyers of these products being made whole if the worst happens.

Jordan Neuman writes: 

It is a fear I share when I buy out of the money puts. I recently corresponded with OCC about their "Doomsday" procedures and found out they don't really have anything concrete. How do you plan for option settlements under total chaos? And I do remember the 30%+ spreads on plain vanilla S&P options in the fall of '08.

I recall in the original Market Wizards Jim Rogers advised shorting Japan but said that while you might be able to get some money out on the initial decline, if you wait until the ultimate collapse you won't.

Ed Stewart writes: 

Awesome post with much food for thought.

For the health of the market I would think that two environments are critical -environments that best feed market makers, and environments that most encourage commercial participation. If a market becomes too stable there is less need for commercial hedging, less transactions for market makers, and the range for speculative profit to profit dries up. I see it as speculators "crossing the bridge" between commercial buyers and sellers - the profit incentives motivate us to find ways of doing this. If the path is too short we can't make any money to cover costs.

A notion that I like is that the best speculative markets are where commercial interests have just been pushed to their uncle point in terms of pricing - at that point there is a very strong need for speculators and certain premiums develop - one can see this dynamic if you read the reports of (for example) commodity processors after a large price move.

Also which side of the trade is weak (buyer or seller) might depend upon who is on which side is the speculator vs. the house, or alternatively which side can take delivery vs. the side that needs to offset over a certain time horizon. The edge to the first party grows as (say) first notice approaches.

Jul

2

 I feel like a Spanish conquistador on a small scale. My past vanquishes from seven trips to Peru include malaria, elephantitis, amoebic dysentery, hepatitis, and last year three fly larva with sprouting wings crawled beneath the skin looking for a way out. Once any disease is identified, the treatment is straightforward and efficacious, as with these. Each ailment, if one is able to study and feel it in progress, is an honor with a merit badge of antibodies or sash of resistance. I was ready for the next exotic disease.

However, I got blindsided yesterday with the diagnosis of chronic anemia from a worm infestation I had pined for since veterinary school out yonder in the Michigan countryside on call at the barnyards (our offices). There the extracurricular dogs, wasted and grown so thin they were shadows of dogs, except with hanging pot bellies, were dosed with worm medicine before we went on to the big jobs of treating the cows and horses. I grew fascinated with intestinal parasites but had no idea that the chronic anemia the suckers caused could nearly kill a person.

Anemia is a decrease in the number of red blood cells or less than the normal quantity of hemoglobin in the blood. Hemoglobin is a main part of red blood cells and binds oxygen. If you have too few red blood cells, or your hemoglobin is low, the cells in your body will not get enough oxygen. Breathing is like drawing air out of a paper bag. The name is derived from Ancient Greek ἀναιμία anaimia, meaning 'bloodlessness'. Because hemoglobin (found inside RBCs) carries oxygen from the lungs to the capillaries to every cell of the body, anemia leads to hypoxia (lack of oxygen) with varying degrees of anemia fostering a wide range of clinical consequences. Anemia is the most common blood condition in the U.S. affecting about 3.5 million Americans, while the 2014 issue of Blood magazine for medical practitioners reported that the global anemia prevalence in 2010 was 33% or 2.3 billion people.

Chronic is a condition that persists and has been present for at least three months. I'm certain my anemia was contracted nine months ago In Peru when I was unable for one month to escape the delivery boat of a demented captain far up the Rio Tigre and ate and hobnobbed with a string of villagers where hookworms are indigenous and zoonotic among their runt animals that made my earlier Michigan barnyard dogs and cats look like champions of show.

In collecting evidence on a medical subject there are three fronts: observation of the client, his history (more difficult for animal patients), and laboratory reports. My Peruvian doctor said I was as white as a ghost, and then began the history. A physician who takes a good history and a patient who gives one nearly always and quickly solve any mystery that we call illness. I learned the first rule is to take the history chronologically, and the pieces of the puzzle fall together into a diagnosis before the mercury is shaken down into the thermometer. Then he gasped as my lab reports popped up on his computer monitor. 'You'll be a very sick man if you're alive one month from now without treatment.'

My hemoglobin is 6.3 gm/dl while the adult male's normal range is 14-18 gm/dl. In the laboratory test hemoglobin (Hb) is measured as total hemoglobin and the result is expressed as the amount of hemoglobin in grams (gm) per deciliter (dl) of whole blood, a deciliter being 100 milliliters. My hematocrit by volume is 22% whereas the norm in males is 40-50%. Hematocrit is the ratio of red blood cells expressed as a percentage by volume of the blood. It can be said that I'm existing on less than half the oxygen of what the normal reader is.
The lab report supports my suspicion for the past two months that I am hypoxic; however I thought it due to a heart or lung condition and estimated the reduction of available oxygen at 30%. Unless you have been there, it is hard to explain how a desert dweller develops a skin like a coyote nose that detects water at a distance, and how an athlete who has jogged eight miles a day for twenty years owns a palpable cellular sensation for the presence, or absence, of oxygen. The three symptoms for the past two months have been dizziness, fatigue, and shortness of breath. To climb a flight of stairs has created the same oxygen debt as fifteen minutes of wind sprints with the similar inclination to keel over. Twice I've lost consciousness during uphill walks with the faint echo of the inspirational lyrics from The Impossible Dream, 'To try when your arms are too weary…to reach the unreachable star'.

I could never have imagined that a legion of vampire worms could cause such hypoxia to deprive an adequate oxygen supply and cause a near death experience. There have been a half-dozen instances when I felt I could 'will' myself to die as the old folks in homes that I used to do volunteer work at claimed was possible, and in Indian circles. It's a floating, paradoxical REM sleep. A person may die when, scientifically speaking, he ought to have lived if he is in an almost heaven. Yet, each time as consciousness drained like a liquid from lack oxygen in the brain, a spark ignited alertness perhaps due to old timers urgings such as 'This ain't a dress rehearsal, Sonny', and 'Get out and milk life dry.'

My nemesis is Uncinaria, a large family of hookworms that infects man and dogs, with frequent zoonotic transmission between them. These hookworms are present throughout the world, and especially in warmer climates. In the United States, hookworms are found everywhere and commonly along the East. Worldwide, zoonotic hookworms are found in tropical and subtropical regions where the parasite is better able to survive in the tropical conditions. Their mecca is the Amazon where they grow three times as large as anywhere else in the world to 1.5 inches.

These nematodes are slender beasts with bent heads like a hook for leverage of a hammer claw and a mouth with cutting plates and an inner single pair of teeth to bury deep in the intestinal mucosa to gnaw through the walls to the capillaries. All hookworms suck blood, and the Amazon variety are capable of removing 0.2mls of blood per worm, per 24 hour period. They are in competition with themselves for space and blood along the walls like bickering tenants in a skid row hotel, or old revolvers in newly opened mining districts so that when they do want RBCs, they want them badly. Dogs have been known to carry thousands of worms in their intestines, and I suppose given the chronic anemia that I may harbor as many.

The Uncinaria were positively identified yesterday in a microscope slide report at an Iquitos clinic that was tardy relative to the other results which had provided a clean bill of health. The lab report didn't quantify the infestation beyond 'heavy', and was supported by a greatly elevated eosinophil count of 27% (eosinophils usual account for less than 7% of circulating leukocytes) which makes it a textbook case of parasitosis, according to my Peruvian doctor who has seen several as severe.

The patient has two sleeves, one containing a diagnosis and the other a therapy. The diagnostic lab is my favorite area to place the first sleeve, and in vet school I worked six illuminating months as a budding medical Sherlock Holmes, as we all were, diagnosing diseases by a battery of tests – blood, fecal and a few others. The laboratory spun with tubes and slid with slides like a rock concert. The medical lab is the bastion of the fight against disease where the etiology of each is identified by the tests. Sometimes the lab reports weigh as much as the emaciated patients, so much the better. Reading them is exactly like perusing an Ellery Queen mystery such as The French Powder or The Dutch Shoe mystery and solving for the crime before the last page is turned. (By the way, Ellery Queen is both a fictional character and pseudonym used by two cousins from New York.) The laboratory is a palace of probability that few pathogens can sneak by undetected, and once fingered they stand little chance of survival.

'This is Good Medicine!' I cheered the doctor, on the way out the door, and he understood that modern medicine had diagnosed and would conquer another microscopic army that had tried too hard to infest a human body. If more smartly evolved, the worms would have allowed me to remain asymptomatic while sucking me dry instead of my plan to load for bear to kill them and then taking the advice of the oldsters to suck life dry.

Hippocrates advised, 'The physician must be able to tell the antecedents, know the present, and foretell the future — must mediate these things, and have two special objects in view with regard to disease, namely, to do good or to do no harm.' That is exactly what this seasoned tropical doctor did, and I walked out his office on lighter feet. He was a general physician, and It must be understood that no one can be a good physician who does not perform surgical operations. There is as great a difference between a physician and surgeon as between a mechanic who has learned from texts and one who has lifted hoods and had his hands in the muck. Never settle for a doctor or specialist who is not also a surgeon. Even in middle age he seems astonished at being paid for doing something as enjoyable as solving daily medical mysteries and curing. Wherever the art of medicine is loved, there is a love of humanity.

The doctor proposes that my severe condition, which he's seen in villagers that have a 20% incidence of hookworms, requires no blood transfusion. In the USA, in contrast, a severe anemia is defined as hemoglobin of 8.0 or less with symptoms present and is considered life threatening and prompt treatment is required. In U.S. my case would probably be met with a blood transfusion, which currently is controversial with a circulating slogan 'Anemic patients should know they have the right to speak up for a transfusion.' However, I've seen thousands of potbellied people and pups around the world looking more bedraggled than I, and don't worry a bit about the diagnosis. The anemia is a blessing, but a change, and requires a moment in the thick of the crisis to check the flow and redirect the focus.

After the diagnosis comes the treatment, as he penned two prescriptions in striking calligraphy: Albendazole and Confer. The former is a broad-spectrum anti-helminthic for roundworms, hookworms, threadworm, whipworm, pinworm, flukes, and other parasites that works by killing the worms straight out from the blood. It doesn't taste badly to me and I suspect something is added to intoxicate the toothy heisters. This really is war, with my life at stake, and theirs. Despite their sophisticated mouthparts, and a nervous system that may also deliver an almost heavenly state of consciousness, these bloodsuckers have no excretory organs and no circulatory system, that is neither a heart nor blood vessels.

I'm not a pill Frankenstein tampering with nature, but there are many bull's-eye synthetic and natural medicines that are literal miracles that I will take, and otherwise would be dead a few times over if having lived in the time of Tarzan a century ago. Albendazole is an efficacious one. It is commonly prescribed worldwide, and particularly in USA for zoonotic infections. It's on the World Health Organization's List of Essential Medicines, a tally of the most important medications needed in a basic health system. In 2013, GlaxoSmithKline, the principal international marketer of the drug, donated 763 million Albendazole tablets for the treatment and prevention of parasitic infections in developing countries such as Peru, bringing the total to over 4 billion tablets donated since 1998. Closer to home, since 2010, and for understandable reason, the U.S. price of Albendazole has increased by 4000% to over US$100 per 200-mg tablet. Disease is the biggest money maker in our economy. I paid 20 cents a tablet yesterday for my two-tab a day supply for one week totaling about $3.

In addition, I filled a prescription for an oral iron supplement called Confer. Unlike salt licks, you may not find the nearest igneous outcrop and expect to lick usable iron. Because iron is the principal component of hemoglobin, consuming a supplement and iron-rich foods will raise your hemoglobin levels. Dietary iron must be attached to either animal meat or plant tissue to be absorbed by our intestines, and the supplement probably contains both. I've also started eating iron rich seafood, red meat, and leafy green vegetables. The doctor assures that my 6.3 hematocrit will increase two units per month so that in four months I'll reach the low norm, a triumph as complete as Operation Detachment in the Battle of Iwo Jima.

But I also have my own ideas about disease recovery to cure. Walking is first rate medicine and is my first thought to accelerate the doctor's prescriptions. Healing is a biological process and there are few ailments that do not respond immediately and expansively to the increased circulation of a vigorous walk. Walk in increasing increments with escalating weight to let the clean air blow the cobwebs from your body.

In the aftermath, there's money in the bank to cover the cost of the trip to Peru and lots of salads and seafood. The medical expenses totaled $US200. In the USA it would have cost twenty times that, with additional superfluous tests and requisite specialists, and taken weeks instead of two days. One well-trained physician of the highest type will do more for a patient than ten specialists because everything medical within the body is interrelated and cannot be separated.

A Darwinian view of medicine makes disease more meaningful. Diseases arise ultimately from past natural selection. It's a continual war within one's lifetime, and over the centuries, of the forces of pathogens vs. the soldiers of the immune system. They evolve after each skirmish, and then counter-evolve like in Mad magazine's wordless black comic strip 'Spy vs. Spy'. Paradoxically, the same capacities that make us vulnerable to disease often confer benefits. The capacity for suffering in itself is a useful defense After all, nothing in medicine makes sense except in the light of evolution.

Nature didn't find the perfect place to hide the little assassins in my gut; but rather the Uncinaria developed through epochs of struggle and earned their position. Now they have revealed themselves and will die. Perhaps a few during the Albendazole fusillade – one in 10,000 - will adapt, survive, and reproduce resistant pathogens. Such is life.

Through hard traveling and having contracted and beaten a string of diseases that remain like untied knots the emotions have been, 'I love you. I hate you. I like you. I think you're a loser. I think you're wonderful. I don't want to be with you. I want to be with you. You should have believed me.' Health and disease, unlike what you may have been taught in middle school Health Science 101, are the same thing – vital actions intended to preserve, maintain and protect the body. There is no more reason for celebrating health than disease. After vet school my body became like an aquarium to me and I always carry a fishing pole to catch and squeeze every ounce of information I can out of each condition. I´ve had and recovered from nearly 33% of the ailments listed in the physician´s bible called the Merck Manual only to conclude that life is so short to learn so long a craft as disease cure.

In a subsequent medical text of alternative cures that I wrote, a certain pleasure is revealed that came from nudging the ill layman in the direction of terror, and bringing him back safely and happily and licking his wound. It´s too bad, but given the conventional medical wisdom that's the sort of paradigm shift required to accept like a Third Worlder that disease is a normal course of life. We don´t have to get as sick nor as often in the First World, but our attitude can become saner by accepting rather than fleeing in dread from the knock of unfavorable conditions at the door.

If you 'listen' to your body and intuition, they'll guide you well through sickness and into better conquering forthcoming illnesses and old age. You´ll gain wisdom about anatomy, physiology, biology and the mind. There are countless ways to develop the listening skills such as sports, dancing or drumming, but most of all by awareness through disease, while keeping a journal. Read about it in texts. It's more interesting to examine an ailment in onset, flow, and remission than it is gazing at virus Facebook.

The public bladder about medicine is that one must see a specialist and get a battery of tests when actually as much and almost instantly for free can be gleaned from recovered peers at an online chat forum for specific ailments. Such a well-chosen anthology of case histories is a complete dispensary, as well as studying the progress of one´s own conditions. Always pick a physician who is older, seasoned, a surgeon, preferable a sports medicine practitioner, and lord help you if he is busy. The profits will follow a good physician to the grave, but he is more difficult to find nowadays in USA, and all the more reason to seek professional treatment at a fraction the cost in other countries. Perhaps this is the only solution to whip the ill American health care system back to health.

As for Global Anemia, already the dead worms are evacuating, and I say, 'I tried to tell you. You said you didn't care, remember?' Today we fight. Tomorrow we fight. The day after, we fight. And this disease plans on whipping us, but if we have paid close enough attention they had better bring a sack lunch for the extra innings.

Victor Niederhoffer writes: 

A rather heroic friend I have.

Marion Dreyfus writes: 

One of the most useful posts I have read. I am sending it to a friend who has been battling Pneumonia contracted while she was in Paris, and had collapsed lungs and hypoxia when she was admitted to Roosevelt for a week. Thanks for troubling to write all this down, Bo. She is now completing her regimen of O2, and can begin to ambulate again like a regular person again.

Bo Keely writes: 

In any respiratory distress the first line of defense is a simple technique few doctors will prescribe. One must have lived in the North where pipes freeze to think of it. It´s loosely wrapping a towel or scarf around the neck & knotting it while sleeping all the night. This heats the air going down the trachea and into all parts of resp system. It cuts healing time by half and prevention is about the same 50%. Tested and proven by Michiganers. The other thing she should do that even the best doctors may not suggest is during recovery, when able, she should be walking or bicycling to keep things moving inside the body which promotes healing.

Jul

2

 There are hugely important issues concerning firms' culture and overall purpose, management's core responsibilities, and the future of capitalism. Related to this, here is a video of a presentation I have been making to business students at DePaul University titled "Capitalism and Management's Core Responsibilities."

Key Points:

1. We are increasingly following a path of crony capitalism which eventually leads to a social environment like Italy or Greece. In contrast, free-market capitalism enables consumer choice and competition to work to the benefit of all, especially the least well off.

2. There is a wall of miscommunication, with words having strikingly different meanings, between those in favor of maximizing shareholder value and those opposed—better to shift attention to management's core responsibilities.

3. Running their businesses in ways consistent with the recommended five core responsibilities would enable management to both create wealth and earn the moral high ground.

4. Analysis of firms' historical track records provides a lens to understand capitalism from the ground up; i.e., customers, employees, and shareholders have mutual, long-term interests. This is illustrated via three company examples using Credit Suisse/HOLT company data used by worldwide money management firms and by Barron's for the annual Barron's 500 Scorecard.

5. The public's low level of trust in corporations results in a lack of faith in capitalism. Who can lead in moving the corporate world to better deliver on their core responsibilities—one of which is to promote free-market capitalism? Large asset owners (pension funds, sovereign wealth funds, endowment funds, and the like) have a vested interest in the long-term success of free-market capitalism and are in a unique position to reorient how firms are managed to create long-term wealth that benefits all stakeholders.

Jul

1

 Even I am starting to take note of the moves in the grains, logabola and then some.

Like the taxi driver commenting on stocks he is buying unsolicited by passengers, this must be some sort of indicator and I offer it as a free fade to the pros on the site.

Jeff Watson writes:

When you think about it, Ceres is the most important market mistress, because everyone has to eat. Even the insiders tread lightly around her, the medieval devices of torture she still employs are very painful.

Jul

1

 "We thought trees and fungi were socialist, but they're actually capitalist"

The coexistence between trees and fungi is supposed to be very peaceful. Fungi grow on the roots of a plant, providing nitrogen to it in exchange for carbon, in a nearly perfect symbiotic exchange. Each individual fungus, traditional wisdom holds, works in tune with the root it grows in tandem with. But a new study presents a different model: The supposed buddies are actually acting like buyers and sellers in a capitalist market.

Led by IIASA Ecosystems Services and Management researcher Oskar Franklin, theSwedish study (paywall) started with a surprising observation. Root fungi were actually working to maintain nitrogen scarcity in the forest. When less nitrogen was available in the soil, fungi gave up less nitrogen to the trees. But when nitrogen was abundant, they built up their stores like speculators cornering the market in a commodity, effectively forcing the trees to get their nitrogen from the fungi no matter what.

"The new theory pictures a more business-like relationship among multiple buyers and sellers connected in a network," Franklin said in a press release. Instead of being a cooperative trade of carbon and nitrogen between organisms, trees are forced to export large amounts of carbon in order to unlock nitrogen stores from the fungi.

What's more, fungi can play clients off against one another. When different plants get their nitrogen from one fungal partner, the study states, the allocation of nitrogen to each of those plants isn't dictated by need or fairness. Instead, the fungus seeks the best possible return on investment. "Having multiple symbiotic trading-partners generates competition among both the fungi and the plants," Franklin said, "where each individual trades carbon for nutrients or vice versa to maximize profits, not unlike a capitalistic market economy."

This gives trees an incentive to offer up more carbon than their neighbors. The trade isn't always beneficial for both parties. In fact, plants and fungi could get locked-in to a mutual trade agreement that isn't optimal for either party. The authors compare this to carbon lock-in, where industries are stuck in a fossil fuel-based system, even when other energy options are superior.

And while trees may thrive from this exchange, the fact that the fungi hoard nitrogen "traps the whole forest in nutrient limitation," Franklin said. In general, the authors stated, how fungi collect and distribute resources is largely unexplored.But this should change. If we don't understand the market structure of the fungi and trees, Franklin said, won't really know how forests will react to the changes in carbon availability that climate change could bring about.

Jul

1

 First day of the quarter goes up about 65% of the time since 2000 versus 52% of the time on other days. As if the market likes to establish an early lead. So any fund managers, investment advisers or traders who were prudently on the sidelines are forced to play from behind for the rest of the quarter. When you're playing catch-up in any sport or game, like tennis, eventually you have to take riskier shots. While your opponent, in this case the market, can just keep hitting them high and deep to the backhand, waiting for you to make an error.

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