Jan

16

  I have renewed my acquaintance with checkers in the last 2 weeks. I find checkers much more a real exercise in logic than chess. The moves of a binary nature right or left duplicate the logic gates that go into all arithmetic operations of computers. The rules are very simple and thus correspond with extensions to all binary decisions in life. We all know that Tom Wiswell has written 5,000 proverbs covering the relations of checkers to life and they are invaluable and worth an extensive publication and study. However, what I have learned is quite rudimentary and not for all posterity like Tom's. Briefly, here are some lessons:

1. Prepare before you play

2. Don't move in haste

3. Play only certain lines and leave off playing when you don't know

4. There is high frequency playing in checkers same way there is in our our markets. Don't play against the high frequency but play for the 30 minutes games/ the high freq people have better equipment that you can't compete against

5. Only play lines that you know and don't wing it

6. Write your major plays down before hand and play them only

7. There are some players much better than you. Don't compete with them

8. Your wins and losses tend to form clusters, i.e longer runs than expected. So don't play after two losses in a row 8. Exercise before you play for at least 10 minutes

9. Study the play that was good 100 years ago and use it

10. Don't do things by rote as things are always changing and your opp

11. The play in the morning is very different from the play in the afternoon. The players are different. I find checkers a good antidote to loss of memory and a good hobby which for me is resonant as my father played much with 10 Scotties and it brings back the glory days with my dad and Tom. Hobby for the old age.

Jan

16

 Conrad Leslie (d. 12/25/18) has been described as the nation's leading private crop/harvest forecaster. His numbers moved markets and were, in many cases, more accurate than those of the USDA.

1. Restrict your market position to those which are in keeping with sound basic market fundamentals. When season supplies are inadequate, relative to probable demand, trade only the long side of the market. When season supplies are excessive, trade only the short side. If you think the price level is correct, remain on the sidelines.

2. Never buck an established market trend. The market may know more than you know. Give up your opinion before you give up your money. Don't sell in an uptrend, don't buy in a downtrend.

3. Recognize that the greatest difficulty in trading is knowing when to liquidate. Most everyone knows when price moves are starting, but the point to identify is where they have stopped.

4. Mark price charts each day. Successful traders believe that visual pictures are an additional way to see and evaluate price.

5. Never establish a position in the market until you see the potential for a large profit as opposed to a small loss. Never trade in a situation where the possibilities are about in balance.

6. Be prepared mentally to make several attempts at boarding a major price move. A trader's major market approach should be that of carrying out probing attempts which will will result in his being on board during major price moves. Be prepared to take small losses. Avoid the common thought that to take a small loss will reflect poorly on your IQ.

7. Do not trade many commodities at any one time. Some traders have so many irons in the fire that they are unable to devote a reasonable amount of attention to any one of them. Two or three are enough.

8. Do not attempt to trade in commodities about which statistical information is vague or difficult to obtain. It is preferable to trade US commodities.

9. Do not develop an overextended market position. To take either an individual or total position larger than the risk of failure justifies is to invite disaster. Plungers trade rashly and usually self destruct.

10. Restrict your trading to commodities which consistently return profits. Confine your trading to those commodities at which you are a success.

11. Commodity traders who transact business through brokerage firms should direct their efforts towards capitalizing on major price moves. Professional traders earn their livelihood by capitalizing on hourly news developments. Anyone earning a living another way should not attempt to compete in this type of day-by-day trading.

12. Go with the market as it makes new highs or new lows. The act itself indicates a basic change is taking place. Though the reasons may not be clearly recognized by the public, they are of sufficient force to establish a new price record.

Jan

16

 I had a weird dream last night. The chair likes to compare the various commodities to picking horses on the day. We analyze the turf, weather and prior runs of each horse to speculate on the best pick. However the turf is flat and the markets are not a linear process.

For some reason I saw a lot of mountain goats climbing up the side of a very steep cliff. Some fell off, got back up but chose the wrong path to get back up and had a hard time returning to the herd. The ones who are up high are subject to winds and other predators like eagles or rifles.

I think the ecology here has some parallels to how prices move. Sometimes one goat falls and picks the wrong path, i.e like bonds are down a lot but crude has been up ten dollars in the past week. Or the stocks have climbed so high away from the pack that they are susceptible to predators. There seems to be some kind of harmonious equilibrium about the movement of a herd in my dream.

Jan

16

Professor Damodaran's updated date set for 2019 is now available.

Jan

16

400 free Ivy League university courses you can take online in 2019.

I sometimes explore online courses looking for interesting lecture videos that I can either watch or convert to mp3's and use as podcasts.

Mr. Isomorphisms writes:

Their list doesn't have a couple of my favourites. Aiken's compilers course at Stanford and MIT's xv6 lions commentary on unix.

Recent mathematical finds:

-a locus with 25920 linear transformations by H F Baker (archive.org)

-ikosahedron by Felix Klein (archive.org)

-slodowy: platonic solids, kleinian singularities, and lie groups

-Elie Cartan: theory of spinors (more readable than you might think; written in the autumn of his life)

-Park & Yang: yang-baxter equations. (on arXiv, written for an encyclopedia)

The A-D-E stuff is probably the most interesting mathematics ever found. (Mathematicians get to leverage the enormous and relatively obvious differences between platonic solids to make inferences about other structures.)

I'll say this, MIT OCW (started ~2002, no productivity gains so far) is higher quality than Sam's Teach Yourself C++ at Barnes & Noble.

Competition in general has benefits, but 30 cold medicines yet none of them work is just more confusing things to try. Speaking of cold medicines that don't work and competition/markets, I would contrast Guatemala to the U.S. in this way. Guatemala has genuine markets–small merchants who will negotiate on price–whereas the U.S. has CVS (posted-offer, negotiations behind the scenes by eg Procter & Gamble vis-a-vis CVS). CVS will carry fewer cold medicines but they will work.

Back to education and MOOC's: delivery of a higher-quality product happens online than Barnes & Noble (or public library), with youtube (Federico Ardila), PDF's hosted on someone's site (Andrew Ranicki), or Rails/post-Rails MOOC's. More people know about more stuff because of youtube documentaries; that's already happened. It just won't improve work output, other than–we've yet to see how this pans out–millennials deciding that programming is the only decent career, and that they can teach themselves (including 25-year-olds who have held 1-9 jobs teaching for General Assembly).

Jan

16

Humility, without a doubt, is a celebrated value for speculators. Not just here on Dailyspec but anywhere trading is a means to self-actualization.

A humble man is a learner. Taking responsibility for mistakes is the attitude that allows the flowering of the virtue of humility on the tree of cognition. But what if humility is the antidote to ego? Is humility the absence of ego?

No! Humility is a sub-set of the Anti-ego or Un-ego (kindly allow this word as anti- is an extreme and un- only a nullification).

A humble mind has only adapted to overcome one of the three primary perils of the human mind (hard wired over the journey from chimpanzee to man). That one peril is that the human mind is coded to prove its superiority.

The other two primary perils are that the human mind loves to posess and control on one hand and loves to enjoy. Those amongst the humble who haven't been working on addressing these two default states of the human mind are the Humbly Egoistic.

To overcome the desire to possess & control it seems one good approach is to be the custodian of the risk capital at disposal. Even if one is 100% shareholder of his firm, such a person sees the firm as a distinct entity from himself.

Such a person will be able to accord due respect to risk, risk capital and the human resources around. This creates a greater shift from ego towards un-ego than being just one who is quick at accepting mistakes.

The devil however, is the primordial wiring in each mind to enjoy. The pursuit of joy is not the same as pursuit of happiness. The pursuit of joy then naturally has to keep meeting with agony, disastrous drawdowns and such things. If one can start working on ignoring the neural circuits that motivate one to find joy one lays a conjecture the same neural circuits are the ones that create a sense of being evaluated, being judged, producing suffering. Abandoning a path that is sub-optimal is the iterative process to seek the optimal. For such a mind then work is a responsibility & fulfillment of this responsibility the stepping stone to satisfaction.

All the three states of humility, state of custodianship and abandoning the path of self-judgements combine together to create the ego-free man. The unegoistic trader (it's an asymptote obviously, of an idea and not the absolute ever) is then the one closest to reason. Any other man not working at freeing himself from each of the three primordial hard-wirings is then at risk of not acknowledging the most potent idiosyncratic risk, i.e. the self or the origin of ego.

Getting back to the first couple of sentences in this note now, the whole idea of self-actualization is a powerful oxymoron then. In actuating excellence the whole crux is in leaving the self aside! Is that what the Chair does when he leaves shoes outside his trading room?

Nature hasn't designed a single variety among the species with vision that can see itself. At most we can see our transposed mirror images. That's the natural design. So ego is a perception derived from observing with our three primordial mental lenses how the universe is treating us. That explains why traders prefer to trade alone, replace phone ring tones with beeping lights, mute the #NB# tubes etc. etc. No, its not being alone. Unegoistic state of mind is being without the imaginary perceived notion of the self.

For all the accusations of selfishness on a trader, the truth stands placed well thus, a trader has to be self-less to remain in the game. Neither humble, nor humbly egoistic and certainly not egoistic a trader true to his grain is self less. A trader is a state of mind where only a responsibility to capital and a focus on risk exist. Rest is left with the shoes, outside the dealing room.

Jan

15

My view is that most algorithmic trading success is based on payment for order flow arrangements… meaning regulations have, as ever, dictated winners and losers. I point to the ratio of lit/dark trading (US, MiFID 2, Australia) as evidence.

Jan

9

In the appendix of Irving Sprague's Bailout, Sprague lists all FDIC bailouts up to Continental Illinois by size. Continental Illinois was the largest rescue at only $41 billion. Second largest was First Penn at $8.4 billion. Bank of the Commonwealth, near Detroit (a chapter about the shady dealers of that bank's ownership) required only $1.2 billion in 1972. Bailint out Farmers Bank of the State of Delaware cost $360 million in 1976. No other bailouts are tabulated, although 7 other kinds of action (assisted mergers and payoffs) are tabulated.The minimum size of a G-SIFI today is $100 billion.

Jan

7

There are 400 free Ivy League university courses you can take online in 2019

I sometimes explore online courses looking for interesting lecture videos that I can either watch or convert to mp3s and use as podcasts.

Mr. Isomorphisms writes: 

Their list doesn’t have a couple of my favorites, including Aiken’s compilers course at Stanford and MIT’s xv6 lions commentary on unix.

Recent mathematical finds:

-A locus with 25920 linear transformations by H F Baker (archive.org)

-Ikosahedron by Felix Klein (archive.org)

-Slodowy: platonic solids, kleinian singularities, and lie groups

-Elie Cartan: theory of spinors (more readable than you might think; written in the autumn of his life)

-Park & Yang: Yang-Baxter equations (on arXiv, written for an encyclopedia)

The A-D-E stuff is probably the most interesting mathematics ever found. (Mathematicians get to leverage the enormous and relatively obvious differences between platonic solids to make inferences about other structures.) 

Jan

5

 Quite a few of the richest people on earth have houses here in the Kona area.

Each year I like to count the number of private jets to get an idea of how the rich people are doing, and what they think of the the coming year.

This year I counted only 45 private jets, and there were a number of empty spots.

In prior years the parking lot was overflowing with over 75 jets and being sent to Maui.

This year the jets are mostly bigger jets like G5's or larger which leads me to believe that the poor guys flying the small lears are suffering.

According to this indicator things don't look so good.

Jan

5

 Just a follow up to see how this has tracked the past week to see if we're in a 'predictable' market regime. Sometimes when the media is flailing around saying markets are chaotic and unpredictable, I test to see if markets are behaving similarly to the way they have over the past 10 years or so. If not it can be prudent to reduce risk. I don't like taking risk down when vol goes up because my transaction cost to pnl ratio improves. How do other specs tend to size up/down? PNL? Market conditions? 

I just broke into Ralph Vince's book (which came highly recommended from my mentor) because my position sizing feels fairly novice.

If a risk unit is a 10 vol targeted unit and weights were as of the 24th and total capital is 14 units:

spy    0.02
xlu    0.66
eem    0.42
fxi    0.40
vxx    0.20
ief    1.29
shy    1.69
fxe   -0.27
fxb   -1.10
fxy    1.24
gld    0.89
gdx    1.20
uso   -0.87
ung   -1.92
 
- so you'd be short 2 risk units of UNG, so a $240 position on $1000 of capital whereas you'd need $2,900 of 10 year futures for a 1.29 unit posi

- Hit Rate: 71%
- When right, made avg of 1.4%
- When wrong, lost .36%
- Portfolio return of .86%
- Qualitative bets: long Gold, Yen (+1%) vs Sterling -.25% = Actual return of .75%

So despite media complaints we've been in a predictable market.

Jan

5

 Deep Survival by Laurence Gonzales. I'm re-reading it, and I'm glad I was, especially over Christmas eve, which was a survival situation. The book is a classic and must read for outdoors adventurers and investors.

Simply put, either stay out of trouble or find what it takes to survive.

Your amygdala and other hard wired parts can overcome your conscious and rational mind and get you into trouble or make a situation worse. They prevent you from perceiving the obvious. You do stupid things. Learn to understand and overcome the emotional pitfalls. Overcome fear, confusion, hesitation, and confusion.

Get skills to stay out of and get out of trouble. In trading maybe it's lowering your basis in a falling market or controlling your leverage. Have a plan, have a backup system and platform. Take decisive action, but avoid impulsive behavior and don't hurry. Know your odds, your niche, your market. Have the right information. Ignore the news. Learn from others mistakes. Be humble.

Bail out before dying.

When in trouble have a positive mental attitude. All survivors engage in a self talk dialog, as do traders. Get your self a good mantra and get yourself out of trouble. On Christmas eve my mantra was not, "you're stupid for getting into this mess", instead my mantra was, "you're smarter than the masses; you're doing the right thing and you'll make a good profit when this thing jumps back up". That helped a lot. Have fortitude.

Celebrate your successes. Believe in your success. Surrender to the pain.

Never give up.

Jan

5

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