Feb

21

 The book Gotham by Burrows and M. Wallace details the changes in the fortunes of the American economy and New York from 1600 to 1900. As it moved from Dutch rule to English rule and from whig control to republican Jeffersonian control. It is amazing how many panics and complete major depression in the economy came almost every several years. All the depressions were recovered in the next year or two.

A recent visit to Muir woods shows the same dynamics to the growth of trees after fires although the fires were not as frequent. Indeed there hasn't been a major fire there in 150 years. Apparently the trees have developed resistance to fires.

Feb

14

 I've been surfing for many decades and once was the Grandmaster Champion of my island. We had some big waves a week ago, and it was one of those magic sessions where the wave comes right to where you are sitting in the ocean, you turn take a couple of strokes and drop in and ride to the end. I got three big waves without even getting my hair wet. A perfect session. As traders, you all know the feeling.

But things don't always go so well. Positioning and timing are the key elements in surfing and catching a wave. If you are not perfect, you can be off balance. You are less able to compensate for wind chop, or warbles in the waves. If you are too late, you might get thrown 20 or 30 feet through the air. Or if you are too far inside the outside set can catch you and you get "caught inside". Or you can just get thrown off balance on the drop in by a small chop. The initial place where the wave breaks is usually the most violent with the most energy. The energy from huge hurricanes in the mid Pacific have traveled thousands of miles and focus on you.

 As you fly through the air upside down you have time to think about the vicious thrashing in store and have to brace for the impact with the water and the hundreds of tons of water flying through the air with the consistency of cement about to snap your neck and arms off. People have broken bones in wipeouts and worse. You also try to get a breath of air to survive the hold down. Upon impact with the water, often as not, your breath can get knocked out, as you are driven down up to 30 feet deep. The water throws you around like rag doll inside a washing machine. Everything is dark. You have no idea which way is up or down. The key here is to relax and conserve oxygen. Though the biggest waves are only 20 seconds apart, if you don't catch a breath at the end of the first wave, drowning becomes ar real possibility. Your board is attached to your leg by an elastic cord and will drag you backwards at high speed. Better, the board will float towards the surface and pull you up from the depths towards the surface. At the surface, the foam can be a foot or two thick making it hard to catch a breath. The air in the water does not float your body as you struggle to catch a breath. As you break the surface, the worst thing to see is another 20 foot wave looming directly overhead ready to smash you down again. You know you are in trouble as your head starts spinning from lack of oxygen. You feel like vomiting. You fight panic and fear. Eventually within 20 to 40 seconds, as you know it will, the waves pass and you catch a wave.

At that point you are utterly exhausted. Your life force is near zero. However, its not over yet. By this time, the currents and waves have pushed you near the rocks and you have summon your last strength to paddle as hard as you can to avoid being smashed to death on the rocks. After catching your breath, you paddle out to rinse and repeat. I love surfing. As traders, you all know this feeling of the wipeout as well.

Feb

14

Why So Many Men Die at 62

Researchers think the reason is linked to Social Security and retirement

About one-third of Americans immediately claim Social Security at 62 and 10% of men retire in the month they turn 62, according to researchers.

Stefanie Harvey writes: 

Locally, this was called "Lockheed" syndrome because so many men who retired from Lockheed in Northern California (usually at 65) died within a few months.

Perhaps there is utility in the gig economy (/sarcasm).

anonymous writes: 

I think in order to get a more robust picture of what's really happening here, the researchers need to dig deeper into the demographics of the people involved.

They hinted at that with the comment about laborers retiring young.

I've done a lot of work with laborers of the country in my 31 years in this business. One recurring theme I've noticed about those laborers (blue collar types) is that their bodies are broken down and stop working around 60. Really, to be fair, their bodies are broken down in their late 30's and early 40's. If you've ever seen a bunch of union laborers, one thing you notice is that by the time they're around 35 - 40, they look 10 years older than white collar workers of the same age group.

These blue collar workers live a hard life, they party hard (smoke, drink, get DUI's), and eat in a less healthy manner…and die sooner. 

anonymous writes: 

This phenomenon was also observed, anecdotally, by certain friends of mine and I with respect to the retirement of senior NCOs - Sergeants Major (SGM) and Command Sergeants Major (CSM). They seemed to, despite their fitness and stoic outlook on life die uncommonly young (late 50s and early 60s). Virtually all of them had, in the latter 75% of their career, virtually abandoned the alcohol consumption that so often characterizes pre-E-5/E-6 time, and none were smokers.

Larry Williams writes:

My psychiatrist son adds: "Don't forget, studies also show delaying retirement also delays onset of alzheimer disease."

 

Pete Earle writes:

 

You are going to die either way.

The idea would be to make enough the SS was a rounding error and you can do whatever the hell you want for as long as you want.
 

Feb

14

The current VIX is priced above both the first (F1) and second month Vix futures (F2). I looked at times  when Vix>F2 and the subsequent moves of SP500 holding until Vix<F2, since 2012, non-overlapping.


Nbr of trades             :  40
Total points              :   475.00
Avg points                :    11.88
Stdev                     :        26.92
Z                         :              2.79
Pct Win                   :        0.73
Max Trade P&L             :    81.00
Min Trade P&L             :   -81.25
Avg PL Win Trades         :    24.09
Avg PL Lose Trades        :   -20.32

The average length of the trade is 3 days.  The current trade was entered on 1/31, 9 days ago and down -160  points and not included above because it is still open.  After this long it is another 11 days on average before the term structure flips back to contango and this trade would be exited.

Feb

14

There has been some comment on the timing of the so-called "smart money". Just how good are our betters at trading these exciting markets?

While we have no specific knowledge of who bought when, we have an algorithm that identifies when the average "smart money" goes from bullish to bearish, and vice-versa, while at the same time the amateur money is betting in the opposite direction. This link will give you its recent history.

This is a sentiment indicator and it has its theoretical roots in the Efficient Market Hypothesis. It plots the best fit over successive N days, where N varies from very short term to say more than a year. The best of the best fits are the smarties, and the worst of the best fits are the amateurs. The smarts are attentive and the amateurs tend to be complacent. This model is not perfect but it tells some interesting tales. At the most recent peak, the smart money turned bearish as of the close on January 30th. They have not yet turned bullish as of February 12th.

Feb

13

Since 2006, I find 13 non-overlapping instances in which the S&P 500 was down 5% or more since 5 trading days ago. The average net change during the next 5 days was 2.5% with a standard deviation of 3.7% and a drift-adjusted t score of 2.32.

   Date        5-day change   Next 5 day change
   1/22/2008          -7.8%               4.0%
   10/7/2008         -14.0%              -0.3%
  11/11/2008         -11.0%              -3.0%
   2/17/2009          -9.2%              -2.1%
    3/3/2009         -10.3%               3.8%
   5/24/2010          -5.6%              -0.1%
   6/29/2010          -5.1%               2.3%
    8/8/2011         -13.2%               7.8%
   8/22/2011          -6.3%               7.5%
  11/22/2011          -5.7%               5.3%
  10/15/2014          -5.9%               4.2%
   8/24/2015         -10.9%               5.2%
    1/8/2016          -6.1%              -1.9%

            Average                       2.5%
            Std deviation                 3.7%
            N                               13
            t                             2.32
            Drift                         0.2%

Feb

10

An interesting metric to be tested from a Bloomberg article in a vein similar to Bill's metrics.

"This Unusual Link Between Stocks and Volatility Says the Turbulent Times Aren't Over"

The entire VIX futures curve is in backwardation, a signal that investors expect more volatility in the near-term. That's seen in the contract pricing, where front-month contracts are more expensive than second-month. The inverse is normally true.

"The M1-M2 VIX futures spread can be used as another temperature gauge for the market, just like spot VIX," said Dave Roberts, an independent trader of volatility derivatives and associated products. "That graph works really well in tight time frames when the curve is in extreme backwardation (like now) because the M1-M2 spread is currently very sensitive to the S&P 500's movements (both up and down)."

Feb

10

 “Inflation is About to Appear ‘With a Vengeance’ Paul Tudor Jones Says”

Larry Williams writes: 

I’d defer to Hoisington Capital over PTJ on inflation.

anonymous writes: 

Hoisington has an interesting comment about the low savings rate now vs the normal 8%. Ancedotally I’m seeing lots of consumer spending and travel due to the “bull market” euphoria.

Feb

6

 A 20 year old chess associate of mine has asked me about a possible career in markets. He's International Master strength at chess (close to getting the title), a second year maths undergraduate, has an interest in poker and was in the Bolton Wanderers soccer academy until he was 16.

I've suggested he reads up on the field and sent him links to the Daily Speculations book list. What other steps should he take?

Peter Pinkhasov writes: 

Not that I know anything, but I lost my roll a few times with all the money I've saved up from folding towels at the jewish community center from grade 7 trying to lever it up my last year in college. I think $ is a product of work for which discovering that one doesn't have the emotional capacity to do could be costly in terms of time value. I wasn't blessed with having a mentor when I started but it would have saved me a lot of time and efforts if I had read Education of a Speculator many years earlier. I think trying it yourself with self capital is good start.

anonymous writes: 

Take up some sports. It teaches you how to lose regularly and hopefully with grace and dignity. I suppose chess does that, but the physicality of sports, and trading, makes it helpful.

Feb

6

 A graduate of Evergreen, the school that treated Eric Weinstein’s brother Brett so badly, has set up a Feminist Business School. Instead of profit seeking, students are taught to “adopt more feminine traits such as gratitude, intimacy, and connecting with nature.” An article further describes this folly as “shunning the profit seeking motive of traditional commerce.”

One postulates that their graduates will not be recruited very heavily by the Fortune 500 companies. They cobbled together an addled brain mission statement that includes:

“We endeavor to topple the patriarchy, internally and externally. We see business as a site of personal power, radical creativity, and meaningful social change. We know that we can survive and thrive in business without compromising our values. We believe work can be fun. We hold fast to our declaration that……..

A BUSINESS CAN BE A MODEL FOR A NEW SOCIAL AND ECONOMIC ORDER.”

Here are two delightful testimonials from their website and course description.

This was a life changing experience. I learned so much about the economy, business, feminism. But most importantly, I learned about myself. If you feel out of place in the capitalist economy, you’ll likely feel at home here. — Tina C Jenn

[the school] helps us gather tools OUTSIDE the patriarchy, so we can tear it down with some efficacy. These tools are already within us, they are us. We have been so disembodied that we have picked up the tools of the patriarchy to survive, this is about rediscovering our resilience, our natural resources, ourselves; and in doing so, we find the strength to create a new way of being in the world and in business. — Caitlin M Maybe

The mere existence of a “school” like this is part of the downside of legalizing weed.

Feb

5

 I am in Hokkaido, Japan, skiing. There is a Sumo Championship going on. It's interesting to watch the wrestlers. 77% of the bouts are won on the initial charge when one of the sumotori is pushed out of the ring or to the ground. In each bout there is a tipping point at which one of the sumo fighters gets the other off balance and wins the fight after gaining the advantage.

In markets there is a tipping point when the momentum or balance shifts. It's also interesting to identify that tipping point when it happens. It's been a bull market for years now. I wonder when and where the tipping point will be.

In sumo TV coverage there are always replays so one can see if you identified the tipping point in real time.

Feb

4

 I certainly do recognize that trees can only grow so tall, also the base is much larger than the top while the root structure is equal to the width of the branches above ground and most trees.

So there is a lesson there… all things end.

Just like hurricanes… After living through two of them here I understand them a little better. The take away points are that they are predictable in a general sense but exactly where there will land no one seems to know.

All the hotshot weather forecast systems did give us ample warning to prepare but nobody got it right as to exactly where they demolished these islands.

Even at that several friends had their homes totally destroyed while there neighbor's house, just a few yards away, was not touched. As they say in real estate: location, location, location.

What my hernia doctor said was, "hurricanes are great for my business" and that explains some of my lack of recent posts. Not only that (the recovery has gone quite well, everything is fine) but I also have have been very confused by the stock market.

I know we are in a bull market and prices will go higher but I did not participate in the last part of the rally. That frustrates me.

Now however another buy point is being set up hopefully I'll figure that one out. I think we have seen the top of the trees for a while but there is a base in here for much more growth.

It ain't over yet no fat ladies have sung.

Happy trails to all.

Feb

3

An interesting question arises now. The market has declined 115 points in last 5 days. That's incredibly bullish up 2.5% next two days, but on the Fridays it happened one of them was down 101 points the next days on 8/21/2015. How to combine?

Alston Mabry writes: 

 Here is a take, using the SPY daily data, calculating the 5-day move into the close as a %, and then the 2-day forward move, and then sorting all the days by 5-day moves and getting means for the deciles. 

Feb

3

 Markets can experience contagion. I remember from trading futures (nee commodities) that a crash in one market tended to bleed through to others. We would always remember it as though someone who had a great position in beans would sell it out to meet a margin call in silver that should have been dumped. That is, cutting your profits to let your losses run.

In that vein I wonder how much the recent hit in Bitcoin contributed to the equities decline.

Jim Lackey comments: 

Ben K Green Horse Trading.

Bitcoin the gypsy trade
Currency Rebel Commander 
Nazz Maniac Mule

Feb

2

For all the 200dMA lovers:

Feb

1

"Are Longboat Key Cameras an Invasion of Privacy?"

A scary advance of the state surveillance apparatus. Don't let this fool you, these cameras are a printing press of revenue. Don't drive in this town if you ever even jaywalked, they will use anything as a pretext to detain you and search you and your car. There is a bright side, just think how safe you will be.

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