"Billionaire investor Paul Tudor Jones has a message for Janet Yellen and investors: Be very afraid"

Victor Niederhoffer adds:

I will wager the billionaire investor is not long.

Jeff Watson writes: 

Articles like this are why I ignore financial editorials. Fallacies like the Argumentum Verecundia (appeal to authority) should never sway a spec. One wonders why, since March 2009, the financial media never published articles that said stocks were too cheap, predicting the S&P to go up 250% from the bottom. One suspects that articles like that would never get printed as they would be good advice to the investor, but bad for the broker's bottom line. 



 To say nothing about in my specific field the absurd and damaging impact of wearing protective eye wear and other stuff in racket sports, but how soon will it be that the jock strap manufactures pay a royalty to all the sports associations and the Olympic committee like the eye glasses do to insure that we all wear jock straps as a requirement before engaging in sports.



 Just got to Esfahan today. A lot of tourists, mostly Europeans. Hotels are very full here. I read somewhere that Americans can not come into Iran individually, they must join some kind of a group.

In general, hotels in Iran are quite expensive: $70 and above for a 3-star hotel. Condition is not too bad but for the money there are much better hotels in other parts of the world. And no popular booking sites serve for Iran hotels due to sanctions. One almost has to call individual hotels to book. Or one may work with an agency which then works with another agency etc to book hotels. Difficult.

Surprisingly, women in Iran are very lively.

People aren't poor. There are many cars on the streets. Most cars are of old or unknown models. But there are newer Japanese or European cars.

Roads and sidewalks are in very good conditions.

Commerce, particularly in the form of bazaars, are quite extensive. Artworks are wonderful.

Larry Williams writes: 

I've spent a lot of time there. It is a repressed society, and two faced. Most want to get out. I brought out an entire family that are now good hard working thankful Americans. Sure, it's a nice place to visit (we were tailed by secret police (not so secret) most places we went. Arrested a few times and detained…long story. Too bad it is not Persia any more. Unliberated. The Gummint hates Americans. The people, I found, loved us.



The safest way to get good-quality extra virgin olive oil is to pay up for California oil. Second is to get Spanish oil from TJ's or another trustworthy source. A good way to balance the omega-6 in olive oil is to get walnut oil, rich in omega-3's, and make a vinaigrette or similar with the two, in something like a 3 or 4 to 1 ratio, olive to walnut.



 Take a look at the late, great Dell computer. I started shorting it in the late 1990s using a statistical/valuation methodology that was predicated on volatility and the near certainty of a substantial correction. I was correct in that I eventually made money, but the mark-to-markets (and "risk adjusted return") were dismal. I don't use that strategy anymore…

Remember also that nearly every company (GE being one of the exceptions but for the grace of the Fed) eventually disappears either through acquisition, merger, or bankruptcy. So if you only look once every decade or two, and leave a GTC order to buy everything down 50%, you are very likely to get filled. But you are also likely to own a portfolio of losers.



Wondering if anyone can recommend an index that tracks the performance (or lack thereof) of short-biased or dedicated-short hedge funds.

It looks like there were some indices from Credit Suisse in this category that were discontinued in early 2017, presumably due to bad performance. (The performance might have been even worse than it looks — I don't know how they treat funds that "stop reporting".)



 GDP figures are "man-made" and therefore unreliable, Li said. When evaluating Liaoning's economy, he focuses on three figures: 1) electricity consumption, which was up 10 percent in Liaoning last year; 2) volume of rail cargo, which is fairly accurate because fees are charged for each unit of weight; and 3) amount of loans disbursed, which also tends to be accurate given the interest fees charged. By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are "for reference only," he said smiling.

"Fifth Generation Star Li Keqiang Discusses Domestic Challenges, Trade Relations With Ambassador"

Li's metric—since dubbed the "Li Keqiang index"—has declined for four of the past six years, recording an especially precipitous drop in 2015.

But, argue the authors, there are other indicators.

"Is Chinese Growth Overstated?":

Our results are consistent with work by Rosen and Bao, who argue that Chinese statistical services have chronically underestimated the size of the service sector. Rosen and Bao's hypothesis is consistent with our finding that rail freight growth should receive less weight than the other indicators in the Li Keqiang index. Hence, as the Chinese economy becomes increasingly service-oriented, the (conventional) Li Keqiang index will likely send increasingly faulty signals about the state of China's economy. In fact, our estimate for Chinese growth shows an appreciable acceleration in 2016, even as the official growth rate remained virtually unchanged.

John Floyd comments: 

The breadth of Stefan's ken continues to amaze. These are interesting sources of information to put in one's quiver for looking at China and the linkages with related markets. I would add a few points in terms of the data, timeline, and broader market implications:

- Veracity of the data
- Chinese economy is likely to hold up into the Communist Party meeting later in the year
- Important question is beyond that. For example will China follow a Japan style pattern of secular stagnation?
- Various paths China can take will have significant global market implications.
- GDP numbers have merged, but the US is still the largest elephant in the room, and there has been recent cooling. 



 QE is over, it's back to the same old money creation we've had for centuries — an idea which has actually levered the resourceful potential of man.

Your going to see a car drive in front of you as you stand on the curb, and it will be sans driver.

Your going to see a man in a drone, in a park, lift off the ground.

These things are here, and united airlines isn't in the game. Or any of the others for that matter.

And faster than you can gobble un croque monsieur, they will collide in a 3d, computer controlled "roadway," obsoleting cars and every minor roadway, parking lot and driveway,and traffic jams will be viewed as lice infestations of the past.

But it will take some forward-thinking and planning here. Wasting a trillion-dollar is rebuilding these roads, airports, etc. on an infrastructure plan, is not the equivalent social investment as building the interstate system in the 19 fifties was. This would be a trillion dollar simply to maintain that which we currently have, when the future is about to take an Abrupt turn. That's where we are to be funding things with public monies, as that's where the enormous multiplier in terms of social benefit derived from money spent will be seen much as it was when we built the interstate system originally. To spend that money an existing infrastructure which will soon become obsolete, is equivalent to porkulus, on a diluted scale.

Victor Niederhoffer writes:

Mr. Vince makes a subtle point that I think he means. The most valuable thing in the world is a person. They can make tremendous contributions that all can benefit from. Julian Simon is very good on providing statistics for this. And it is no accident that standards of living are so highly correlated coterminously with population like during the industrial revolution. As to which causes the the other, it's mute.

Ralph Vince adds: 

It is a bad bet to bet against the likes of Jonas Salk. But for every Jonas Salk, how many others of equal insight go untapped throughout their lives?

The population of the earth in 1960, five years after his vaccine was announced, was about 3 billion. It is now 250% of that. For every Jonas Salk of 1960, we would expect 2 1/2 of them….and for every untapped Jonas Salk….2 1/2 of those as well.

And virtually every varlet and their harlot(s) who are not the equivalent of Salk posses some sort of potential to add to the cumulative progress.

Why would you bet against the resourcefulness of man? All bear markets, since the invention of the hand axe, have been short-lived compared to their bullish counterparts, and every single market top over those millennia have been exceeded (save for 3/1/2017…..yet).

To bet against the resourcefulness of man is silly, ultimately futile, and it requires one to time things perfectly. It is a far easier proposition to load up long as when things are selling off, and manage your powder to see it through to the next new highs.

David Lillienfeld writes: 

Two thoughts:

1. There's lots of infrastructure spending to be done to support some of the newer technologies to which you refer. And it's beyond broadband. Just air traffic control alone could use a shot in the arm (well, more actually). There's also the reality that people like to physically move. And the way the society is configured, tire's no doubt that will figure out ways to do so as efficiently as they can within whatever infrastructure exists. Until motivations like sex or control disappear (which seems unlikely in the life span most of us associate with being on the face of the good earth), keeping the existing infrastructure going will also have its benefits. The interest in sex, for instance, isn't disappearing anytime soon, especially among those in their teens, who will do just about anything to get away from the clutches, eyes and ears, of their parents. That takes infrastructure.

2. I recall at the 1964 World's Fair, there was the ATT building in which there were picture phones with an assurance that certainly within 20 years, they would be omnipresent. Didn't seem to work that way. Ditto GM and the future of transportation. I've heard about the new technologies coming into use for more than 5 decades. Yes, the technologies do make it into use. But it takes a lot longer than anyone at first thought likely. Remember commercial supersonic aviation? I don't think it was ever fiscally viable. The story of how RCA came to dominate wireless communications is a case in point. Eventually, the new technology did triumph, but it took longer than anyone had considered likely.

Plank's law comes into play and is part of the explanation, inertia and lack of understanding of the potential of the new technology is another. Remember Amazon in the 1990s when it was starting to hit at sales at Books a Million and the other retail outlets? It still took 15 years for Amazon to practice its hegemony—which represented the triumph of the net over physical bricks and mortar. And even now, Amazon is putting up bricks and mortar. Isn't the internet supposed to displace such things?

anonymous writes: 

Sure trucks and jumbos full-o-junk and folks crossing oceans will still be needed.

But technology gets here in less than half the time anyone ever thinks it will.

And if we're going to spend 1-2 trillion on infrastructure, rebuilding existing assets will not pay off the way they paid off when they were first built; that's only a little better than giving it away to teacher's unions and far-lefty organizations. The electronic infrastructure for tomorrow's transportation would be a much wiser investment than rebuilding existing infrastructure.

J.T. Holley writes: 

Bruce's "Glory Days" lyrics give a beginning of explaining why throwing money at fixing all the decrepit bridges in Pittsburgh is a bad idea.

Now I think I'm going down to the well tonight
I'm going to drink to I get my fill
And when I get old I hope I don't sit around thinking about it
But I probably will
Yeah, just sitting back trying to recapture
A little of the glory of, well time slips away
And leaves you with nothing mister but
Boring stories of glory days

That is all that throwing 1 trillion is going to produce. Eventually just "boring stories". It's just to pacify the unions, steel, and cement industries. The Rust Belt vote will be needed in the future. Hats the only forward looking that is taking place.



 A nice story that appeared on CBS news last night. "Living Stronger: Centenarian a fixture in NYC neighborhood by caring about others":

'If it's Saturday night at Pasquale's Rigoletto, it's Joe Binder with the mic. "That is what keeps me going, when I make people laugh," Joe said. He's been entertaining people most of his time on this Earth, but on this day, it's everyone else's turn to sing. Joe just turned 107.'

Here is an article about his secrets to a long life: "no grudges", glass of wine, singing/music, exercise/activity and socializing at the fore.



 All journalists will know The Elements of Style by Strunk and White. William Strunk was a professor at Cornell and my grandfather had the good fortune to study under him as did E. B. White. White later went on to compile Strunk's notes into this gem of a book, as well as write many of his own books like Charlotte's Web. My grandfather, an admirer of both gentlemen, always kept a copy close by and recommended I do the same. Recently, I found a used copy at a bookstore and purchased it for one dollar, though I felt guilty the price was so low. Though not quite 100 years-old, it nonetheless qualifies as time-tested wisdom.

Heuristics add to the style of trading just as they do writing. In that spirit here are some of Strunk's and White's rules along with ideas on how they apply to trading. The whole book can be read in a few hours and is well worth the effort.



It is a bad bet to bet against the likes of Jonas Salk. But for every Jonas Salk, how many others of equal insight go untapped throughout their lives?

The population of the earth in 1960, five years after his vaccine was announced, was about 3 billion. It is now 250% of that. For every Jonas Salk of 1960, we would expect 2 1/2 of them….and for every untapped Jonas Salk….2 1/2 of those as well.

And virtually every varlet and their harlot(s) who are not the equivalent of Salk posses some sort of potential to add to the cumulative progress.

Why would you bet against the resourcefulness of man? All bear markets, since the invention of the hand axe, have been short-lived compared to their bullish counterparts, and every single market top over those millennia have been exceeded (save for 3/1/2017…..yet).

To bet against the resourcefulness of man is silly, ultimately futile, and it requires one to time things perfectly. It is a far easier proposition to load up long as when things are selling off, and manage your powder to see it through to the next new highs.



 Pre-Suasion by Cialdini is a book that resonates with all who wish to influence. The shocking part is that it's all about what you can do before you create the message to gain influence. There are chapters on (a) the critical moment to establish influence, what he calls the privilege moments (a good time is after you've done a favor for someone) (b) how to gain attention for your message by opening with a situation that puts the listener in a framework where he's ready to assent especially with favorable or unfavorable fragments (c) how to focus attention with sex, threats, mysteries, changes in environment (d) how causality comes from focusing attention (e) the proper way to seat yourself vis a vis others in the room and when to talk (f) how to compliment the listener, (g) how to shift attention to a field where your listener is likely to give a yes, (h) how to elicit content with the universal principle of influence-reciprocity, liking, authority, social proof, scarcity, and consistency (i) a new category of influence for Cialdini not covered in his previous book Influence, the important of unity with the crowd, especially if you can get the listener to join in on the bandwagon, (j) how to make your influence last by creating actions that set them on the road.

Each chapter is self contained, starting with an anecdote from Cialdini's undercover work at high pressure sales meetings, then discussions of how to use the ideas consistently to gain influence, academic studies that support the method of influence, and then a lead into the next chapter as to how to gain even further influence read the next chapter. At the end of the book are detailed notes on the academic papers and further examples to hit the point home.

Cialdini does not place much emphasis on the economic value of the methods of influence he suggests nor its costs. Nor does he reference the studies of direct marketers like Caples who have tested numerous forms of influence, or the craft and lessons that advertisers have learned in their efforts to influence.

He is mainly concerned with how to influence listeners before the message in day to day activity, in business meetings, in politics, and somewhat in advertising. These are all good and the anecdotes he tells especially about hostages, and the Holocaust will rivet you and stay with you forever.

Needless to say, I find that all the techniques of influence are used in the market. We could start with the moments when key announcements are made for their greatest desired effect on the listener, the importance of focusing attention at the open or the close, the role of gurus and experts talking their book, the part of messages left unsaid, which Cialdini says is one of the greatest influences. There are many others.

I can heartily recommend the book on all fronts to anyone who wishes to know how the world works, who wishes to influence his family, business associates, voters, threateners, and or improve his market performance.



 For the Chinese Communists North Korea is now what Cuba became for the Soviets after Reagan's election. Their mangy dog on a chain in the yard has barked and snarled on cue but the new neighbor's response has been rather different than President Carter's. Since the dog has never economically earned what it eats, its only value has been as a "threat" to the Americans' sense of being "in control". It had worked, in the 1970s to Central America and Southwest Africa, in the 2010s to Japan and South Korea.

But now? China already owns North Korea as the Soviets owned Cuba. Taking it over would be as risky and useless as the Soviets taking direct control of Cuba in 1981. The U.S. simply would not tolerate it. The Cubans in 1980 had no direct means of threatening the United States; the Soviets clearly did. The North Koreans do not yet have the military capacity to threaten even South Korea with a nuclear bomb; they clearly have the missiles and bombers to reach Seoul, but their "bomb" is still far too large and heavy a payload.

The Chinese have just been told that the neighborhood is going to be dog-free, either with or without their help. There is no reason to believe that the North Korean hierarchy has any semblance of rationality; they live in a world of their own information and, in their view, they are now winning the war. The country has survived the terrible famine of the 1990s (itself a product of the Americans' treachery), and it now has nuclear weapons and missiles. (Just as the Iraqi scientists believed in their "progress", the North Koreans' technical people believe in theirs; you do not survive in a dictatorship by thinking that the truth is something that can exists independent of ideology.)

The Chinese have a choice.

(1) They can risk an economic war with the United States similar to the British open blockade of Germany after 1914. The U.S. Navy can effectively seal off all maritime trade with China while staying well out of the range of any land-based anti-ship missiles. The U.S. carriers can do that job just as the British surface ships did and be safe from any submarine threat. The U.S. can immediately confiscate all Chinese holdings of American securities just as we "froze" and then (after 1917) confiscated all German holdings.

(2) They can agree to the Americans' removing the North Korean hierarchy and even offer to help, with their price being the "demilitarization" of the peninsula. (The South Koreans are likely to be willing to accept that at least in nominal terms.)

(3) They can invite Trump to visit.



 If data matters, coal miners should worry. It appears another round of layoffs is in the making. Reducing regulations won't help. While regulations are an issue, they are not the industry's greatest challenge.

Here's some data to consider:

National power production increased year over year since 1949. It wasn't until 1982 before the first decline was recorded. Growth resumed in the subsequent years until production reached its peak in 2006. Since 2006, production ceased growing.

For 60 years, coal enjoyed between 44 percent and 57 percent of the power industry's market share. From a percentage point of view, the worst years were between 1971 and 1978 when market share hit their low near 44 percent. The best years were 1955, 1985, 1987, and 1988. The peak year occurred in 1988 when coal hit 56.97 percent

Since 1988, coal's market share has been in decline. In 2011, the percentage punched through 44 percent. In 2016, it sank below 30 percent. The trend is lower.

Percentages are one consideration. Raw production is another. Since 1949, the amount of power produced from coal (coal power) increased year over year. While there were minor declines, the general trend was upward from 1949 until 2005. Since 2007, the year-over-year trend has been in a steep decline. From 2005 to 2016, 20 years of growth had been erased leaving the industry at 1980 levels.

Politicians have it wrong. Most coal industry jobs were lost in the 1950s. Peak employment occurred in the 1920s. By 1970, 80 percent of the industry's jobs were lost. In 2003, employment numbers fell below 100,000. By 2011, 40,000 new jobs had been added; the industry was restored to 1992 levels. Today, it's returned to 2003 levels.

It wasn't regulation that killed employment. It was economics and efficiency. In 1950, the industry required 3.2 employees for each gigawatt-hour (GWh) of coal power produced. By 1955, that number dropped to less than 1 employee per GWh. By 1978, the number sank to 0.25. By 2003, it had bottomed out at 0.05 employees per GWh.

Here's a surprise. Since 2003, employee counts have been increasing. Today, counts are almost 50 percent higher than 2003 lows (.073 employees per GWh). As such, it appears the cost may be too high.
It appears the coal industry is gambling on the power industry. Specifically, employers may be gambling that wholesale power prices will increase. With higher power prices, utilities might be willing to buy more coal or pay more for coal. Either way, miners might earn more.

If the industry's gamble is wrong, there could be a problem. Either mining companies will cut fat or the power industry will do it for them. If higher labor costs percolate into a constrained power market, more power plants will be idled or retired. More plant retirements mean less coal consumed. Less coal consumed means fewer jobs.

Finally, it's important to appreciate that most members of the energy industry want government interference and regulations. The coal industry wants the government to force consumers to pay more. The power industry wants the same. The only stakeholder not wanting regulatory interference is the consumer, unless it's about regulating power plant emissions.


Energy Information Administration (EIA), Mine Safety and Health Administration (MSHA) were the source of most data and analysis used in this discussion.  Their data appears to have an error rate near five percent.

Reliable power production data for 1948 or earlier was neither available nor relevant. Production for 1949 was approximately 290 GWh. Today, it's almost 4,100 GWh. Pre-1949 data had to be insignificant.

In earlier years, coal was used for heating. Heating coal was not considered in this discussion. That omission represents a flaw that could represent an error that's greater than five percent, particularly in pre-1960 discussions.



 According to Fortune, PepsiCo is moving into the premium water business with LIFEWTR, a purified water that is pH balanced with electrolytes. I stumbled across it in the local college cooler, and later on YouTube as the ‘Lifewater Super Bowl Commercial 2017′. So, I asked the stocker how the beautiful designer bottles are selling, and he said, ‘Life crazy!’

PepsiCo already owns the ‘billion dollar water’ Aquafina, which a U.S. Marine helicopter delivered to me on the open desert recently thinking I was thirsty, so why would they compete with themselves?

The answer is that they are not competing with themselves. According to the PepsiCo CEO, LIFEWTR’S greatest equity is in the bottle. I translate that as the water costs pennies per the bottle that costs a ton, if the marketing of it is thrown in. The LIFEWTR labels feature a rotating series of creative, exclusive designs done by emerging visual artists. They are quite attractive, like Southwest art.

I finally broke down and bought a $2.00 bottle to seek why it’s called ‘Inspiration Drops’, per the YouTube of the Super Bowl commercial of it raining colored droplets over Manhattan (that cost the company $5.5 million for the 30 second spot).

What is in it? The bottle label offers no ingredients other than purified water. The first page of online searches insisted it is just electrolyte water with no additives. However, I had bought and tasted the top neck of the bottle before discarding the rest in the college bird bath, and knew it wasn’t true. The sensation of drinking the water is surreal: it sent me into a tranquil altered state like a designer drug, or like getting hit with a tranquilizer gun that we used on obstreperous apes in vet school. I felt relaxed.

The online information still insisted it was just plain old water, until I searched deeper down and finally found two added ingredients: Magnesium Sulfate and Potassium Bicarbonate. Magnesium Sulfate, commonly known as Epsom Salt, is used to control eclampsia in pregnant women, children seizures, and encephalopathy (severe brain function problems) in adults. It is an anti-seizure medication, as well as a laxative. Potassium Bicarbonate is a standard treatment for acidic stomach and high blood pressure.

The large print in life makes you happy, and the small print makes you sweat it.



Uncle Howie lost in the finals of 49 separate handball finals. Some of the ways he lost are detailed I Education of a Speculator.

Sweden's Museum of Failure is opening this June in Helsingborg, Sweden. The museum seeks to de-stigmatize personal and professional failure.



If I am not mistaken, yesterday's S&P 20 point decline was precipitated by some smoke near the airport where Secretary of State Tillerson was landing in Russia, later attributed to, I believe, a local burning some garbage.



 Our members who are professional traders often write about the feel of the pits and how that information is now missing from any calculations about particular markets. As politics tries to become more and more a matter of computer calculation, there is a similar information loss. The data from what your precinct workers were being told by individual voters is now being discarded in favor of census-based projections.

Here is a war story from the election that suggests that the professional politicians may regret the loss.

"They [Democrats] just didn't have the data or the intelligence. They were using predictive modeling without that human component of knocking doors. They missed it because they assumed they had it. The night of the election, the Democrat chair and I—we spent a lot of time together, so after we finished interviews we said 'you tell me what your polling is saying and I'll tell you what my polling is saying.' Because my polling was saying that Trump was going to win by 8,000 votes, and that's the RNC. It was right. His said 'we're going to win by 5 points.' So when you think you're going to win a state by 5 points, of course you don't invest. You just don't. It changes your compass."

- Republican National Committee (RNC) chairwoman Ronna Romney McDaniel discussing the vote in Michigan



 A few times in every generation a person comes along that makes a significant impact on the world. Rare or lucky are those that can do this. And then there are those that can impact the world in more than one field as if it was just another day at the office. Ed Thorp is one of those very special minds, and he has done this with ease, grace and a calm and confident demeanor for the better part of 60 years. For those that don’t know, Professor Thorp was one of the original Wall Street Quants that got his start in a very atypical fashion–casino gambling.  In his new book A Man For All Markets, released Jan 24, 2017, Thorp chronicles his whirlwind life and gives a full and complete answer to the question “How did you do it?”.

Thorp's first book was published in 1962 and was titled Beat the Dealer. It was the first widely distributed publication that gave a purely mathematical derivation on how a player could beat the casino at the game of 21. This book started the revolution of Advantage Play–the practice where people reverse engineer games of chance for profit.  As professor Thorp stated: “I dropped a pebble into the ocean, and it started a tidal wave.”

Thorp's original thesis on beating blackjack paved the way for inquisitive minds to think of new and clever ways to attack casino games for profit. Every year professional gambling’s most successful players converge on Las Vegas to attend Max Rubin’s Blackjack Ball. The gala is hosted by long time organizer and advantage gaming legend Max Rubin. Every attendee has beaten the casinos at their own games, in most instances for several millions of dollars.

Every advantage player owes their start in one way or another to Professor Thorp.  As long time player and gaming author Henry Tamburin puts it: “For me to say that I owe my successful blackjack playing career to Dr. Thorp would be an understatement. I’m not alone in forever being grateful to him for his intellect, research, and dedication to discover a mathematically-accurate way to beat the casinos at their own game.”  Henry is author of the Ultimate Blackjack Strategy Guide that he published at the 888casino website.

Blackjack lobbies all over the internet use the conclusions derived from Beat the Dealer to help players improve on their own gaming strategies. At the 888casino, a highly reputable online casino website, the aspiring player can view Thorp’s original analysis in a modern framework using Tamburin’s Ultimate Blackjack Strategy Guide, and see if they too can beat the casino. One of the most vital aspects of Thorps analysis is that it can only be applied to live dealt versions of 21. This is true for both online and land based casino games. Some land-based and online casinos have blackjack video gaming machines with programs that use random number generators to determine the outcome. Thorp's work only applies to games that are dealt in the live section of casinos (online and land based) where played cards have been placed into a discard tray.

This accomplishment would be the crowning achievement of any person’s career.  Yet, Ed Thorp had no intention of turning off his analytical mind after one achievement. Thorp and Noble Prize winner Claude Shannon developed what internet users have deemed the world’s first wearable computer, which was used to beat the game of roulette. Thorp and Shannon developed the device while both were on faculty at the prestigious Massachusetts Institute of Technology (MIT). Thorp's early achievements in probability and predictive analytics provided the foundation for his equally earth shaking work in the stock market.

In the late 1960s Thorp took his understanding of probability and statistics to the biggest casino in the world, Wall Street. His main focus was identifying pricing anomalies in the securities market. Using his original research in the world of high finance, Thorp helped launched the first market neutral hedge fund in 1969. His concepts were also central to the creation of the derivatives market.

In his new book, Thorp puts forth a comparative analysis between casinos and Wall Street, where he concludes that gambling is a simplified version of investing, and explains how it’s possible to apply the same logic to both. Perhaps the biggest difference is that when you excel at making money in the stock market the “house” can’t ban you.

Thorp provides a thorough discussion of the risk involved in both endeavors. (He amazingly predicted the dangers of Long Term Capital Management, even foreseeing the Madoff debacle almost two decades before it happened. Where others saw opportunity for financial windfalls in the LTCM game, Thorp saw extreme risk, and the potential for fraud.)  

Thorp’s clients have been very happy over the years with his analytical approach to investing. In 1998 Thorp released a public statement stating that his personal investments have yielded in annualized 20% rate of return averaged over 28.5 years.  A number which one can safely assume is in the neighborhood of his assets under management portfolio.

Ed Thorp was honored at the 2017 Blackjack Ball. There he gave a speech where he discussed his truly remarkable life, and how it started with a trip to Las Vegas in the 1950s.  In a conversation with me, he elaborated on how remarkable his journey has been, and how supportive his wife Vivian was in all of his endeavors until her death in 2011. 

His life has come full circle. It all started on an off chance visit to Las Vegas decades ago, and now his story, and the lessons that he has learned is available for all to enjoy, admire and perhaps to be used as a guide for those that are on their own path to induce change.

At its core, A Man For All Markets is a personal look at the predictability of chance and how to walk the tightrope between risk and return. It’s a must read for anyone who wants a look into the mind of an out of the box thinker who has made a significant impact on the world in so many areas.  



 Milton Friedman - The Negative Income Tax - Firing Line with William F. Buckley Jr.

In this 1968 interview, Milton Friedman explained the negative income tax, a proposal that at minimum would save taxpayers the 72 percent of our current welfare budget spent on administration.

Stefan Jovanovich writes:

My Dad helped Friedman embark on the way to making serious cash in his later life. Dad published "Free to Choose" and helped Friedman find the TV producer (who deserves much of the credit for the success of that series by damping down Professor Milton's inclination to be obnoxiously pedantic). The book royalties were excellent, but what really helped Friedman become semi-rich was the fact that the series made him a "name" for the trade show lecture circuit. The fees he earned were nothing like those the Clintons and General Powell and others later earned; but they were, for the time, major coin.

Since no good deed by a publisher goes unpunished, it will not surprise the List to learn that Friedman continuted to think he knew more about elementary and secondary education than Dad did. I remember listening to several conversations they had where Dad tried to persuade Friedman that his voucher system was both bad politics and worse pedagogy. "Milton, the urban schools were failing (they still are) precisely because the actual students had no incentives. The middle and upper class kids are paid to do well in school - by their parents; my son the bum knew that he would be rewarded for swotting away. But the kids in the ghetto have no such encouragements. They lose money by going to class. Their truant friends could be out on the streets hustling or, at the very least, enjoying the rewards of freedom. This is what has changed with "modern" education. They system worked in the past because poor kids had the greatest personal incentives. Being allowed to skip farm work and go to school only if you got good grades was a real incentive. For you and me, as the children of immigrants, there were huge personal rewards. We were the prize boys in the family. Our parents wanted us to go to school so that someone in the house could speak "proper" English; hell, my older siblings had to sacrifice some of their prospects so that I, the youngest child, could afford to keep going to school."

Dad's solution was simple: pay children for achievement test results. Pay every child for taking the test and then pay them more for getting better and better results. Once people understood that the system was here to stay, parents would be making certain that their kids went to school - if only, Dad said, so they could drink up the money the children earned. (This may sound cynical but it was, in fact, wonderfully charitable; there was nothing "society" could actually do about preventing children from being exploited by bad parents but at least the children would be learning the skills that would allow them to escape as adults.)

Friedman seems to me to have had a similar blind spot regarding "poverty". He was right, of course, about the poverty industry; it is appallingly wasteful and corrupting. But the solution was not to allow the poor to believe that they were somehow entitled to the money, which is precisely what a negative income tax would do. You could eliminate the "helping" bureaucracies and offer the poor incentives to do better by following Dad's scheme, by paying the poor for good conduct. But, if you simply handed over the money and used the income tax as the mechanism, you would be undermining the tax system itself. The experience with the Earned Income Tax Credit is proof of that fact; if you are going to have an income tax at all, you have to treat all income equally and apply the lowest possible rates, even to the helping and disability payments. If the poor pay nothing, they have a permanent incentive to remain officially poor.



 The Airbnb Anti Asian prejudice story has much to do with the rise of Wall Street. The Dutch settlers like the commercial interests of today were only interested in greasing the wheels of commerce. They time and time again ordered the authoritarian governor Peter Styvesant to allow freedom of speech and freedom of religion so it would enhance the number of settlers and increase commerce so that the Dutch East India's revenues would rise. This is always the case. Commerce enhances freedom in all its forms.

A good enumeration of all the dutch did to make Wall Street the center of World Finance in the 17th century is contained in the excellent book Greater Gotham: A History of New York City from 1898 to 1919.



 The most erudite thinking on how the Delphi was able to maintain their forecasting site for 800 years aside from the convention aspects of it was that their forecasts were always non-infirmable. The fixed income twins have continued in this tradition. Especially the Upside Down Man who says such things as "as long as the the 10 year yields does not breach 2.5 for two weeks the bear market in bonds has not yet begun in full." Can't infirm it, and if it ever is above for 2 weeks it will be way above so it starts out way in the money. "A decisive victory will be won" is how Delphi liked to say it to the supplicants.



Aubrey likes to sing. He's at the park today with The Bronx and all of sudden he starts whistling "standing on the corner watching all the girls go by". The Bronx asks him "which one is it". He says, "the one with braids".



Some historical context is necessary. Let us remember that much of the current Syria situation can be attributed to Obama's "red line" and his naive agreement to have the Russians remove all chemical weapons. Does anyone remember that? Let us also remember that the flood of Syrian refugees is a direct result of the former too. Wouldn't it be nice if everyone could just "get along" and sing Kumbaya? Perhaps in our next life. But not in this one.

The missile strike is a calculated political signal; not a military one. It's how one sets the table for negotiations — not so much in Syria, which is now a lost cause — but much more importantly in North Korea and other places. And on that subject, Gordon and the others will surely change their views if and when Kim tests a Nuclear-tipped ICBM capable of hitting of San Francisco….

Stefan Jovanovich writes: 

Kim and I may be hopelessly biased; we think the United States' only sensible policy in the Middle East is to insure the survival and prosperity of Israel. To do that, the U.S. and the Israelis have to choose which side of the ongoing civil war among Muslims is the better bet.

It is not a difficult choice; the Sunni majority countries are the only ones that are not absolutely focused on the destruction of the Great and Little Satans.

What the missile strike - by its size and focus - has done is show the Sunni countries (many of whom just happened to be visiting the White House recently) that President Trump is not someone who believes in military gestures. He is actually willing to break things permanently. That air base is gone.

The fact that the missiles were in the air as the President sat down to dinner with the one country in the world - other than the U.S. - that can destroy North Korea's nuclear threat is, of course, a mere coincidence.

anonymous writes: 

Just like everyone else, you're entitled to your opinion, but please excuse us for questioning another unilateral action in the Middle East that does little to serve US interests. If anything, I would expect it to accelerate nuclear programs in both North Korea AND Iran.

You should be asking yourself who gains from this action, and why Little Marco and McCain are ecstatic about the news. I understand that anything that helps Israel is probably fine in your book, but I find it curious that noone seems to be questioning why a rational actor like Assad would be gassing people on the verge of a peace process.

A civil war has been going on in the WH between the populist platform that Trump ran on, and the globalist policies of the existing state apparatus via the proxy of Kushner. Based on these recent events in Syria, Bannon being stripped from the NSC, and the latest news that he and others may be out completely, things are not headed in the right direction for anyone who actually voted for change last election.

And so it goes…

anonymous responds: 

Your conclusions about how North Korea and Iran will view this are interesting — but are diametrically opposite to how I and many others may view this.

One must ask the question, why would Assad use chemical weapons right now? This is very odd timing, don't you think?

The only plausible explanation was as a test of Trump. And Trump's response was a calculated signal to the world.

You can argue what the signal meant. And you can reasonably argue that it's a bad message.

But for me, it meant several (good) things:
1) International standards (Geneva Convention) matter and we are not going to rely entirely on the "international community" or the UN or useless financial sanctions.
2) Violating deals and treaties have real consequences. This is a signal to Iran regarding their Nuclear accord with Obama.
3) We are not afraid to use force and we will not be intimidated by the playground bully.

Ultimately, you have to decide whether there is good and evil in the world and if there is, who are the "good guys" and who are the "bad guys" in the world. I will readily admit (and here I am being an idealogue) that I am one of the good guys. And I want the good guys to prevail in the least bloody way. And that means carrying a big stick.



 Back in the old days, if the market opened at 9:30, and there was no news…but traders showed up 45 minutes before the open and the pit started filling up 25 minutes early instead of the regular 5, one knew with 95% confidence that the market was going to rally. There were also many changing noise levels and tone levels that offered predictive value at that time. Nowadays, such visual clues are gone and in the absence of the moods of the floor, what modern indicators are useful to predict rallies in this electronic age? And can those indicators be tested?



 He was a fine gentleman who was a master of tactics. He started out by playing checkers and was very good at it. He taught all my daughters every Saturday for many years. He, Tom Wiswell, Steve Wisdom, and I would play combo chess and checkers each week for 10 or 15 years. He always had a smile and was a master at fixing his car which he drove from the Catskills through rain or snow. He did not oppose admiring the opposite sex and loved to socialize during matches. I arranged for him to give lessons to the Soros's at my expense and he enjoyed teaching that whole family in their homes. When Nigel was visiting the two of them liked to play and Nigel usually was the winner.

When we watched him in matches, we begged him not to talk to all his opponents. But he liked to watch everyone else play and generally took about 30 seconds for each of his moves. His autobiography contains some of his greatest games.

He was always a gentleman and one time in the US Open in the finals Bobby Fisher fell asleep and would have lost in time pressure as he was hustling for 50 cents a game the night before. But Art woke him up, and thereby Fisher represented the US rather than Bisguier. He worked as a consultant for IBM and was always interested in the latest in programming. When he came to the office, he liked to make a few trades. And for some reason his trades were always winners. We will miss him dearly and all who meet him in the next world can look forward to a good board game with him.

Here is the obit of a fine game player and gentleman. His favorite player was Bronstein who he said was the best player ever. 



 My Papa used to walk to town (8 miles round trip) just to get a RC Cola and a hot dog whenever the weather permitted.

I stayed with him during the Summer months as a kid and would join him for the walks.

He used to exclaim looking over at the streams while walking "The cows are up and walking. Good day to fish" or "The cows are down and laying. No fishing today."

I generally followed his sage advice in my adult life. It really did net more fish. Still does when I go to smaller streams and rivers when there are stretches with cows on the other side of the bank.

I asked him later in his life if it was just an ole wise tale or if there it had any truth. He exclaimed that it was sound. He let me know that when then cows were up and walking they stirred up all the insects. Swatting more flies as well as making grasshoppers make last second jumps. The fish know this and get excited.

It might not be sound science but I bought it. More observations like this were things that shaped my mind. Trial and error. Looking at outcomes from different attempts. Keeping things simple to get positive results.

Duncan Coker writes: 

Great post on many levels, about spending time with your father, fishing, nature, observing and prediction. I was trying to guess the connection before reading and thought it might have something to do with sunlight causing the cows to move seeking shade. Sunlight means the fish might be looking up feeding and easier for an angler to see them.

Statistically brings up good example, A (walking cows) are good predictor for B (catching fish). On the surface this seems an odd correlation, not causation, and tempting to disregard. But there is actual another factor C (insects) that is the explanation. Statistically, the cows are easy to see, small insects not so much. Question is even if we don't know about C or can't measure, should we still use the A as a predictor even if it does not seem to make sense. For fishing the answer is defiantly, yes

Charles Pennington writes: 

My fishing experience was mostly gained in Georgia, fishing for largemouth bass. That maxim seems right to me. On very hot summer days, for example, both the fish and the cows are listless from the heat.

Another bass fishing rule of thumb is that bass are total suckers for spring lizards as bait. The problem is that it's easier to catch a bass than to catch a spring lizard.



 Statistician, blogger, and author Andrew Gelman of Columbia University talks with EconTalk host Russ Roberts about the challenges facing psychologists and economists when using small samples. On the surface, finding statistically significant results in a small sample would seem to be extremely impressive and would make one even more confident that a larger sample would find even stronger evidence. Yet, larger samples often fail to lead to replication. Gelman discusses how this phenomenon is rooted in the incentives built into human nature and the publication process. The conversation closes with a general discussion of the nature of empirical work in the social sciences.



 Egged on by arguments raised by the recent change in Administrations, and the white-hot debates generated by the "climate change" brouhaha, a glance at the field of geomorphism, the science of how the Earth changes over time, its forces and contributors, seems a plausible and worthwhile effort.

The average citizen pays little attention to the less sexy but commanding aspects of erosion, relying unfortunately on the headline tropism that provides little in the way of actual explanations or in-depth nuance. Icecaps melting! Shout the tabloid media. Island sinking by 2015, foretold a former Vice President, now proven comically overbloated in his prognostications, highly remunerated speeches and fizzled films.

But let us consider more than headlines in regard to geomorphism, which might reclaim some measure of moderation in thinking about the hubbub over change over the planet.

The geomorphologist has to consider multiple factors in trying to interpret how hills and valleys came to be. This includes the timing of these erosive elements, and what these geologic features look like over the march of years. Erosion as an umbrella overall is a key tab, but occurs at differing rates within a delicatessen of timescales based on rainfall, climate,, vegetation, , composition and homogeneity of rocks, fractures, fissures, landslides,

avalanches, riverine sedimentation and carrying capacity and, often overlooked but supremely important, slope. Nor can the geomorphologist ignore sunrises, sunsets, and even persistent shadows cast by crags and crests, blanking out sunlight for large swathes of day.

Remembering, too, the silent gnomes: Moon and tides, vestigial but vestal.

Instances of data are mobile, note, where the rate of erosion at the surface is offset by the never-ending fores of uplift/gradual upheaval ongoing as constantly, if incrementally, in many latitudes. For word lovers, this is denudational isostatic rebound. (For analogy and lingerie lovers, this can be likened to cunning covered underwires, for bosom support architecture.)

There are some 'easier' rules of gauge—with higher ascents and steeper mountain ridges eroding relatively swiftly: the East Himalayas erode at a whopping 2 to 3 mm per annum, for example. Such erosional rates, themselves, will evolve over time, as well, to meet new equilibrial homeostasis–depending on weather and wear forces noted above. (Such erosional rates hold steady for all earthly features except, one can posit, stubborn body fat, which defies discernible erosion for decades, seemingly.)

"Don't think we'll ever find the single smoking gun of erosion," according to pooh-bah Eric W. Portenga, bishop of Earth & Environmental Sciences at the University of Michigan. "The natural world is so complex, and there are so many factors that contribute to how landscapes change over time." As his measurement paradigm manages to gain foothold in the field of geomorphology, we will glean a better sense of what variables are vital, and which are not, in the erosion saga.

For decades, it has been a geology truism that rainfall is erosion's master driver. Semi-arid landscapes with sparse vegetation, yet the occasional major storm were thought to manifest the greatest grids of wear. But an important study challenges that 'bedrock' idea.

"It turns out the greatest control of erosion is not mean annual precipitation," notes theorist Paul R. Bierman, of the University of Vermont.

Instead, regardez slope.

"People always thought angle was a big deal," says Bierman. "But the data show slope is really important." Who would have thought?

(As with phalli, the angle is critical, for impregnation, as well, of course, as pleasuring.) So the land's angle, the naked scree and tree-root tangle, all fall to the mean—entropy flattening at the smallest suggestion, evolution's Zamboni edge.

Some of course prefer more direct and more calculable methodologies, ways of measuring the vales and hollows and their duration or extinction. Practitioners in this still-emerging field draw from the arenas of physics, biology, chemistry and math to arrive at a more graphic understanding of terrestrial surface processes and the evolution of topography over short-term and longer-term timescales.

We are clearly not yet at the certitude we seek. Needed is a Dionysian, geologic Dian Fossey, the recent Sam Pepys of primatology. Geologists and statisticians need rules of less-than-dumb thumb for figuring the whys, hows and whats of Earth's dynamic surface, translatable to our Earthly rocky past. And hopeful learned future.

Scant evidence, we propose (tongue in left cheek), of a gneiss Deity?



Very good methods of hiding your evil intents in one of best books ever: The Art of Travel by Galton. A method often used by Governors and their inspector generals and other flexions.



Will it be the Golden Scale, Christy Mathewson, Ralph Vince or Rocky that determines market moves for rest of year?



At least Another quasi humorous utterance from the humorous chair lights a shuck down the self exonerating highway. But the more important question— the checker player, often an adversary of Tom Wiswell and Branch Rickey, points out "a man should always hold something in reserve a surprise to spring when things get tight". When will that crucial point in the market come when everyone hoping for the political situation to implode reacts to that crucial pitch, and which way will it go?

"Thorn: Re-reviewing 'Pitching in a Pinch' by Christy Mathewson"



 A good show without an anti business bias because it is about two women entrepreneurs rather than two men entrepreneurs is Warpaint. It provides a good review of consumer behavior during each decade of the 20th century. The music is all minor, but is good, and the two singers Patti Lu and Christine Ebersole play the parts of Helena Rubenstein and Elizabeth Arden well.



Like many aspects of biological systems, too much of a good thing may not work out so well. Although this is preliminary research, this is perhaps a cautionary tale as it looks like telomere length may follow a U shaped curve in terms of adverse health effects:

"Telomere Length Predicts Cancer Risk, According to Large Epidemiological Study"

Larry Williams writes: 

My telomere expert wades in on this:

There have been a number of studies that have shown the opposite of this result, but these other studies have not been focused on the really long telomeres so more studies are needed. This study on the surface seems like a lot of people but if you get down to how many had "unexpectedly long telomeres" it probably was not very many people. And another issue is how did these people get these "unexpectedly long telomeres"? Could there be some force at work there that also led to increase cancer?

The thing about having long telomeres is that no one taking cycloastragenol or doing anything else is getting anywhere near the telomere length we have in childhood. We are born with 15,000 basepairs. And yet cancer in youth is rare.

The cause of cancer seems to be DNA damage. But what often sets it off is running out of telomeres which leads to a cascade of events that allows the cell to go full cancerous. So keeping the telomeres from getting critically short is a very important way to prevent cancer.

One thing about the telomerase enzyme in a healthy cell is that there is a control mechanism that is much more likely to use it to create more telomeres if the telomere length is short and not if the telomere length is long. That is why people who are tested using the length distribution method, which indicates the percentage of telomeres under 4,000 base pairs, will see their short telomeres get long first (within a few months) and then only years later see their average move up.

So the increase of the telomerase enzyme in a healthy cell is used in a well regulated manner to make short telomeres longer but does not have that effect on longer telomeres.



 Europe and emerging markets are the favorite topic of all in the coming months. Osmotic pressure?

Ralph Vince writes: 

But Stef, why screw around with those markets when the US is in a monster bull market — bigger than anything seen in over 50 years, or maybe in modern times? The US and the earth may have de-linked, and the US is, at least, a sure thing. We are in SUCH a raging bull market it's silly. This may be MORE than 1982, and the reason I am certain of it is because EVERYONE is SO RISK AVERSE. A planet of absolute weenies now.

I had some stooge tell me the other night, as I went to our myself a glass of tap water from the faucet of a friends condo here, "I only drink distilled water." Are you f***ing kidding me?

A bike helmet society. Since 9/11 and the crash, everyone is insanely risk averse. "The Presidents first priority is to keep Americans safe!" has been a common theme. That appears NOWHERE in the US Constitution btw, and I'm certain its framers - who were individually certified badasses, would laugh at such a statement. If you step outside of the day, if you transcend the era we are in and look at the bigger picture, it;s clear that never have so many people, been so motivated by fear in my lifetime. Maybe in 1938/9 people in Europe were, maybe in the Spring of 387 they were, Do you think this is not manifesting in the markets? Does anyone think that fear has dispersed yet?

Youth is steeped in it, and now, must be conditioned, only trough painful, firsthand experience to NOT be so risk-averse. The markets have never accommodated everyone, why would it be different this time around? Yes, there will be fits and starts and sputters, but the next 20 years are up and up and up and it doesn't matter what happens politically–this is bigger than politics, but is the market's reaction to one-sided human emotion.

J.T Holley writes: 

I completely agree with you Ralph. Having been a Father of three, Athletic Coach, and Boy Scout Leader I can tell you that there are two generations of folks that would rather be risk averse and maintain a lower standard deviation with their lives than take even the surest of bet!

The only other generation that might have had more fear would be that of the 1950's after WWII. That generation or slice of generation were the ones who did bombshelter drills, got under desks at school, and were spoon fed propaganda. They feared total nuclear annihilation. That eventually faded.

Ralph Vince writes: 

We're finally seeing what we "feared" for a long time, that all this inflating would result in a giant asset-bubble. This is now manifesting, but nowhere near to the degree it would to be commensurate with the size of the inflating that occurred.

If people are risk averse, the late-boomers, people my age, mid 50s to early 60s. simply want to be able to hobble into "retirement." They are not taking any risks. The younger set has been programmed NOT to seek risks. People of wealth are and have been hunkered down for a long time. Bank prop desks are dissolved…so very few are taking serious risks in the equity of assets–an endeavor the vast majority of people think is about finished for a variety of weak, small minded reasons.

Kim Zussman writes: 

Ralph I admire your optimistic enthusiasm. So much, in fact, I would like to adopt you as my brother (along with a select group of spec listers)!

I somewhat get the point about pervasive fear. But as a devil's advocate (and I'm not particularly bearish):

1. There could be even more fear, including the acute variety, just thinking about risks involving N Korea, Iran, Russia, ad nauseum
2. Dems will do everything they can to stop the president from executing his pro-growth agenda, though he has and will continue to get some of it via executive order
3. Related to #2 (and to some extent with the same motives), the Fed is in tightening mode
4. Protectionism and withdrawal from international trade might not be good for many company's earnings
5. To the extent one cares about valuation, stocks aren't particularly cheap here
6. VIX has been quite low and spikes are smashed apace. Long time since 10-20% "correction"
7. Boomers are retiring and they can't eat their stocks. Many might be inclined to lock in asset values, but who will buy them?

You may point out these and other fears are bullish, and I agree. But we don't have anything like the fear of 08-09 that resulted in over a 3X - 9 year gain (and probably won't again in my lifetime).

Would you suggest all-in, or scale-in on dips?

Ralph Vince responds: 

Kim, my response to your points is below: 

1. There could be even more fear, including the acute variety, just thinking about risks involving N Korea, Iran, Russia, ad nauseum

This is already baked into the market.

2. Dems will do everything they can to stop the president from executing his pro-growth agenda, though he has and will continue to get some of it via executive order

Very likely they will do all they can to obturate things. But as I said, this saturnine, fearful sentiment is what drives markets, and it;s the same mechanism we saw, for the same reasons as in 09. Except the fear - at a deep and cultural level, has remained as an ocean of cash has been pumped into the system — still out there. The ascent of Trump merely gasoline on this deep, prolonged, over-arching cultural shpilkes.

3. Related to #2 (and to some extent with the same motives), the Fed is in tightening mode

At the short end. Mr market is telling us a differetn story at hte long end, where the free market for credit occurs. I'm looking for a 1 big handle on the thirty within a year.

4. Protectionism and withdrawal from international trade might not be good for many company's earnings

You're talking a zero sum game by definition. It may not be good for some, but people will still buy light bulbs.

5. To the extent one cares about valuation, stocks aren't particularly cheap here.

They aren't expensive either, the relationship being (earnings ^2 ) / ln(long rates). By this (linear) measure they ARE quite failry priced indeed, and at the 1 big handle on the denominator, well….

6. VIX has been quite low and spikes are smashed apace. Long time since 10-20% "correction"

And where SHOULD Vix be? Is the pre-November historical level……..is that same level where it should be? Everyone for months has been looking for Vix to spike. It will, of course, at SOME point,as stocks too will correct beyond a few percentage points, at SOME point.

As an aside — perhaps looking at outright vix levels is deceiving us, just as looking at absolute interest rate levels deceives us. Perhaps vix, like interest rates, should be looked at for the character of its term structure, rather than absolute levels? (and further, vix exhibits the character, ie.e the manner in which it moves, which is very similar to monthly unemployment — not that they move together, they do not, but they move with similar personality)

7. Boomers are retiring and they can't eat their stocks. Many might be inclined to lock in asset values, but who will buy them? We haven't seen Dr. Greed enter the picture yet. How many guys do you know well past retirement who love to take a spec on things? Boomers aren't going to leave this game en masse — where will they get a return?

You may point out these and other fears are bullish, and I agree. But we don't have anything like the fear of 08-09 that resulted in over a 3X - 9 year gain (and probably won't again in my lifetime).

We have similar fear today, and, just like 08-9, it is deep and culturally ingrained, far beyond the mere fear of capital market corrections. The difference is we've been further steeped in it, and the markets have continued higher, stoking hte fear further. By every metric, gun sales, political banter (on all sides, favoring "safety!") etc., we are a culture in a sort of tenebrous, deep fear, which has persisted well beyond a decade and a half now — I contend it is so deep and so ingrained that we aren;t even aware of it.

Would you suggest all-in, or scale-in on dips?

Timing dips is for dips who think they can. Why piddle when things are just going to keep making new all-time highs? Just buy and buy and keep buying. Come up with more money and buy some more. Add and add and ultimately cause yourself to have a bigger stake in it which has naturally averaged in. If you want you can protect it very cheaply for about 1-2% /year.



The last major change in Federal tax law (excluding 1986, which was not, IMNHO "major") the Economic Recovery Tax Act of 1981. It was also adopted into law in August by a newly-elected President.

There were a few differences. The ERTA had no serious opposition. It was introduced by the Democrats; Dan Rostenkowski, the newly-elected Chairman of Ways and Means, was the initial sponsor. The bill passed the House on July 29, 1981 (323–107), the Senate on July 31, 1981 (by voice vote), was reported by the joint conference committee on August 1, 1981; agreed to by the Senate on August 3, 1981 (67–8) and by the House on August 4, 1981 (282–95) and signed by President Reagan on August 13, 1981.

I have no doubt that the current bill will be introduced by Congressman Brady, the current Chair of Ways and Means, and that it will make it from committee to the House floor. The odds are also better than even that the Republicans will give it a majority vote; but there is absolutely no chance that the bill will pass the Senate on a voice vote.

So, the matter will come down to a guess on the likelihood that the Senate will adopt new rules or a precedent that will effectively nullify the ability of the minority to hold up legislation by talking it to death.

PredictIt makes Gorsuch's confirmation a near certainty.

It is difficult to see how the odds against "tax reform" will be significantly worse.

As to what will be the final compromise that produces the actual bill…. ERTA ended up being named Kemp-Roth, even though neither of its Republican sponsors thought it went nearly far enough towards gutting the absurdity that is U.S. income tax law.


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