Nov

23

 1. Walking east across 56th Street from 9th to 6th Avenues the other day, at 5:15 pm, I noted 50 cars parked there, with drivers in the drivers seat waiting, slumbering… It wasn't an invasion of the body snatchers. Just people waiting for the 'no parking till 6 pm' to pass. They save 15 bucks for the night at the cost of an hour or so, valuing their time at less than $15 an hour. I wonder what the implicit price of time is in various cities now as a function of the recent diminution in wealth and loss of jobs.

Along the same lines, I recently received an offer from Icon which has a few hundred parking lots in NYC to park one's car on a monthly basis for $220 a month with "further discounts available" if you call. This might be a good way for the city and others to save money through obvious substitutions.

Fifteen dollars after tax translates to $22 or more pre-tax depending on the bracket. Moreover snoozing or reading have their own value, so the $15 could also be interpreted as the marginal difference in comfort between reading/napping in one's car versus doing the same in another environment. Nonetheless, the point remains: whether these people have anywhere better to be. Such Millhonian observations are enlightening and a reminder of the complexity of the economic system in which even the smallest actors are constantly performing economic calculations, the results of which feed into larger calculations.

I hope these people are reading some mentally enriching material, or at least taking power-naps or meditating, or somehow increasing their human capital, and that this is not complete deadweight loss.

2. At x pm every day, an announcement is made. The market moves to a level. The move is attributed to the announcement. The question is whether the move would have occurred regardless of the announcement. Also, whether the announcement was planned to make the move. For example, at 3:02 on 11/21, an announcement that the new Treasury Secretary was appointed occurred and the market moved up 6% in 59 minutes. Similarly at 3:10 last Friday, the announcement from the current Secretary that he believed everything was under control. The market set a new high and then dropped 6% in 50 minutes. We know that the news follows the price. Also, that the news is often now as "new" as we believe. The proverb comes to mind "the ____ will do what he can do." Also, the ephemeral nature of the news and those who know about it in advance. Is it fate or chance when such moves occur? And does the market do what it's going to do regardless? How would one approach this question and its tests and what insights can be drawn from such a traverse?

3. "The Game" between Harvard and Yale was won 10-0 with Yale limited to 90 yards. Yale previously had allowed just 95 points through 9 games. If the market can't be predicted, let us at least use the market to predict other things. Scores in baseball are always lower during bear markets. That's well known. Can we expect the same in basketball and such others as "What time is it, Mr. Fox?" and does the well documented predictive relation between low scores in baseball still continue to predict the market as previously enumerated in Practical Speculation?

4. Sometimes the kind of language used is a signal of vast underlying unearthed issues and problems. Times of crisis provide many nice examples of these and here a few which should be quantified and tested. In talking about his meeting with the former head of the investment bank who seamlessly moved to the chair of Treasury, the head of the now bankrupt investment bank said, "Our brand with the Treasury is very good." A Canadian central banker said about his meetings with senior bank executives, "If you were having a meeting with a central banker such as I and the conversation drifted to opera or the ski slopes at Davos or some such social setting, I think that's an issue." In discussing his tenure as consultant the former Treasury Secretary who seamlessly moved to consultant of the troubled bank, said  "When you have a risk book…, you can't earn more unless you risk more," and he according to others asked to "bulk up" the book. Others involved said that, "as long as you grow revenues you can grow bonuses," and apparently the risk manager and the risk taker in CDOs were once stranded together on a "boat on a lake that ran out of gas" on a fly fishing trip. (That's not exactly language but it recalls the similar incident of the server CEO who was stranded on a boat with his assistant during a survival exercise before the comparable plummet in his stock after they bought an interest in a company he owned for 1000 times revenues or so). In talking about the risk controls, a former president of the troubled bank said "our reputation with the public and the regulators must be an asset." These are paraphrases just to set the ball rolling, and I would be interested in other telltale uses of language that reveal deep truths below the surface.

Gregory van Kipnis replies:

You can not read too much into the fact that 60 cars are waiting for the "No Parking" period to expire so they could park overnight for free. I live in that neighborhood and such a sight has been seen every night for seven years. Perhaps if you knew if there was an increase in the number of cars that didn't get one of those spots you might have a hardship barometer.

Much more revealing, however, is that two weeks ago everyone who parked on the street got a flyer on his windshield, saying he could park for $211 per month, guaranteed for one year, at an undisclosed garage, just call (212) xxx-xxxx. That's a $150-200 per month saving over the prevailing monthly rate in the neighborhood, and was being offered by one of the leading garage chains. I took the deal and wound up in a better garage than the one I left.

It appears that in anticipation of reduced demand for parking and an increase in space capacity, one of the garage chains is trying to cannibalize as much business as possible from the other chain operators, and lock them in for a year with the low teaser rates. After a year they start jacking up the monthly rate by $25 a clip every few months. The assumption must be that the frictional costs of searching for a cheaper deal and adapting to a new location will be high enough to retain most of the new customers while they transition them up to full market rates.

I haven't see parking rate warfare since 9/11/01.

Kim Zussman ponders point 2:

One thing news-related market moves can do is reveal a hidden question or tension. The big jump on Geithner (along with the post-election slump) suggests there was worry about if/how BHO would address the crisis.

I wonder what would have happened had he tapped Volcker? Maybe the same.

Recall the big up open when they caught the other Hussein; then an all-day decline.

It seldom makes sense, which is one reason it's so frustrating to ask logic to predict. If the market were logical, the logical would be rich. If the market were a puzzle, the clever would be rich. If the market were a symphony, Mozart would not have died poor.

There are enough stars to make a thousand constellations, and by design enough movement in the market to keep people believing in a rhyme or reason.

Andrew Moe replies:

A MoeUnderneath the belly of the beast, we had options expiration on Friday, and it seemed that the 750 strike was running the table for much of the day, creating extreme gains for those on one side of the trade and extreme losses for their counter-parties. Just days before, these levels seemed unthinkable, so emotions were running high on both sides. At 3pm, the market seized upon the Geithner news to speed directly to the 800 strike, delivering comeuppance and salvation in one swift blow. I believe this move was in the can all afternoon as the mistress alternately teased and taunted before finally making a decision as to what news would carry the banner for the advance.


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16 Comments so far

  1. Ethan Vale on November 23, 2008 5:10 pm

    RE: Father Figure Post:

    “Strong father figure”, indeed, is interesting, and makes sense, especially in the patriarchal context of US hegemony, (but that’s another thought). Regarding HP bowing, and the lack of market confidence resulting, I must point out the root of Father Figures and family squabbles (which is really the dialogue of the current downturn, no?): implicit in Father Strength is Father Denial, the false posturing and preening, Darwinian and tribal (and frankly, a bore after all of these years, wouldn’t you say?) The market, IS ONLY about trading, and all trading is based on acumen, courage, hubris, and competition. To compete in the market is to partner with collusion and greed, regardless of any libertarian leanings. Accumulation of profits is the measure; whether greed is the motivation, that’s not the point (often it is not), but profit marks the scorecard. Wall Street’s support of GWB over AG, and JK shows the error of Victor’s Father Figure musings. We chose GWB because he helped with scorecard possibilities, NOT because of his Father Figure Strength Quotient. We all sensed his weakness, insecurity, yet picked him to lead. We chose game playing, personal gains and strutting over Family Health. Denial in families is tragic, common and often leads to pain and discord. Won’t ANYONE cop to mistakes, huge mistakes, core/motivational mistakes, and the rigging the game, because the best competitors cheat, right? Ayn Rand would chuckled at our sudden need for outsiders (Fathers etc.) to help bail us out. Corporate Welfare is the squash game never really played. We’ve supped at the table, and the check has arrived. Oh, you left your wallet in the locker room did ya? Well…they’re waiting, the waiters, that is…who will pick up the tab, and bus the tables, and polish the discolored trophies. Pardon the obvious club metaphor, but exclusivity reduces variety within the gene pool, which portends mutation. Word. Look forward to your response.

  2. Perry E. Metzger on November 23, 2008 7:52 pm

    In addition to Greg van Kipnis’ comments, let me note that the price of overnight parking in the neighborhood in question (when purchased on a daily rather than a monthly basis) is significantly higher than $15.

    Greg notes, correctly, that such things are not a recent phenomenon. As an undergraduate at Columbia, I would watch people wait for half an hour or longer in the morning for the expiry of street cleaning rules, and that was in an era where garage parking in the neighborhood was far cheaper compared to the prevailing wage.

  3. lon evans on November 24, 2008 7:06 am

    So Vic, you step out beyond what is comfortable. There was the day when what you speak of was so beautifully your approach. I'm heartened to know that you've found some means to embrace the past.

    Lon talks, and dismal talk it is. We are now beginning what will soon enough be a global credit collapse. If one can secure cash, do so.

    I welcome the disparagement of the 'crabs.' They've proven themselves, as Chairman Mao once observed, "empty cannons."

    Cash is, and will be more so, King. The previous year has been kind to me, very kind. I've cash to spare.

    Anatoly, I trust that you can claim the same?

    lon

  4. Craig Bowles on November 24, 2008 8:13 am

    The alternate side parking used to be twice a week, so at least only one day now. The only way around it is to find the midnight to 3AM swept streets. Not too many folks are up at 4-4:30AM, so there’s no sitting in the car for 45 minutes or an hour 2 times in the same day. (Tuesday on our block, they move across the street and sit for the appointed time in the morning and then again in the evening.) Better have a good book if doing that.

  5. Steve Leslie on November 24, 2008 9:39 am

    Speaking of parking I think of the hilarious Seinfeld episodes most notably the one where George takes over for a man for a bit who moves cars in the neighborhood for residents to take advantage of free parking spots. George of course totally ruins everything. If one wants anecdotal evidence of a slowing economy, look to Restaurants. In Florida, our "senior citizens" love the early bird specials. These are the dinners from 4-7 PM. Typically they flood a local spot such as Olive garden Red Lobster Cracker Barrell to save a $1 or $2. Once they clear out one gets a gauge of the paucity of customers. That I can assure you is dwindling.

  6. Anatoly Veltman on November 24, 2008 3:51 pm

    thank you lon; but I only care to discuss time/price at which to long/short a liquid instrument next

  7. Matt on November 24, 2008 5:45 pm

    The phrase "as bad as the Great Depression" has been used quite liberally in the media and by some government officials. I understand there is an irrepressible need for exaggeration in our culture, but can't we at least wait until the unemployment rate approaches 25% before we make such claims? I've been surprised at how few stores and restaurants have closed here in Philadelphia. My guess is that many are hanging on, hoping to be saved by Christmas spending. I suspect the next (big) wave of closings will come shortly after Christmas, when the spending doesn't materialize.

  8. Manuel Bravochico on November 25, 2008 2:25 am

    Wow, more intellectual material that will be totally useless for speculating in markets. Anatoly, I second that. This babble and a nickel might get us a cup of coffee at Starbucks, if we’re lucky.

  9. Kok Wai on November 25, 2008 3:49 am

    As far as I can understand, I would have also applied the same theory that the market moves before a major announcement is made either positively or otherwise. From what I know, either major players in the market are related to the party that made the announcement or people close to them that is holding to a large amount of the stock will have been informed earlier about the news that will be announced. Therefore, they would have made the first move in the right direction first before anybody else in the market. Subsequently, it will snowball into a larger move in the direction of the news and up until the news is announced, it will have already been discounted and it will be left with those uninformed people who received the news last to make the final move if any.

  10. David on November 25, 2008 8:25 am

    Manuel, I second that too. Actually, I notice that the posts that are relevant to markets and speculation receive little to no attention. In fact, I go to the extent of saying that the most useful information is contained in the comment section that often does not make the front page of the blog… for instance… I find the ongoing discussions between Mr. Veltman and Mr. Humbert insightful and filled with ideas for testing. The rest of the blog is just a bunch of "intellectual" mumbo jumbo with absolute no application to the markets. I hypothesize that the "intellectual content" of posts is directly related with performance in the markets… and that correlation being highly negative in my view. The simple "cut and dry" individual should be fairly quick to admit his/her error and cut losses short. As for the "intellectual" type of character… he/she is more prone to engage in an "argument" with the market and hold on to losers much longer than he/she is willing to admit. I believe that the recent market plunge should serve as a perfect example for the readers of this blog… go back to posts prior to the big collapse in financials and one can find plenty of happy campers here buying "for the long term" jewels such as CountryWide a la Omaha guru style. Ironic that the Omaha guru is not viewed with great eyes in this community… but lo and behold… financials sounded like a good deal several months ago.

  11. vic on November 25, 2008 3:22 pm

    It is good to have such a critique as David's. But I believe he mises a central point. It's a meal for a lifetime here, not for a day. All the daily meals would be completely vitiated by second handers, armchairists, and formers. But one should never be disrespectful of the mentors and good people here who try to reach for the stars subject to this very necessary limitation so as to maintain the Franklinian spirit of this effort to "deflate ballyhoo and provide meals for a lifetime." v

  12. Udo Dirkschneider on November 25, 2008 4:56 pm

    Steve… if the paucity of customers is dwindling, does that mean the economy is getting better?

  13. Steve Leslie on November 25, 2008 7:42 pm

    I did not write that very well sorry. I deal with a lot of restaurants and other entertainment establishments. My casual observations is that people in general are much tighter with their entertainment dollars. They are stretching their dollars and not spending as much. This is what I am hearing from the servers I know. My business is holding up but I own a popular bar so I hold on.

    My ex is in the mortgage business at a local bank and their money is tight.

    There is an Art Festival this weekend in Cocoa Beach and this may give me an idea as to how the consumer is responding. I will have more to comment then.

    I hope this is helpful. BTW this is coming into the high season for us and the next six months tend to be good ones for me.

  14. Steve Leslie on November 25, 2008 10:08 pm

    When I worked at Merrill 20 years ago, I remember a comment by our regional manager. He said we don't want to be all things to all people, we want to be all things to some people. Meaning:

    One website will not nor cannot accomplish all things for all people. If you are not finding what you want here:

    A go to other websites that offer what you are looking for. There are dozens many by contributors who send material here. There are hundreds more free and for a fee that offer trading ideas and speculation.

    B Become part of the solution rather than a pure critic. Offer original ideas and original posts. Do some work on your own. Contribute material. Originate thought that will elicit feedback.
    I know for a fact, serious contributions are given serious reviews. This is not a sycophantic website. Those who are redacted are those whose goal is to derail the goals of this particular site. This reminds me of the story of the person who sat in front of a Vermont Casting fireplace and kept saying "give me warmth." However he forgot to put the firewood in it and light a match.

    C If after all that work if you still are unsatisfied become entrepreneurial, start your own website. Put out your own time, money and effort to elicit ideas.

    One final comment. This website uses allegory, illustrations, parables, allusions, esoteric comparisons, statistical interpretations, comedy, caneology, to help expand the readers mind and perhaps look at something a bit differently. You will be presented with discussions about waves, trees, fishing elephants, surfing,music, game theory, chess, checkers, backgammon, darts, poker strategies and many more to help along the journey. Hundreds of books will be recommended some from unusual sources, such as L'Amour, O'Brien, A. A. Milne and others.

    Have a very nice Thanksgiving!

  15. Udo Dirkschneider on November 26, 2008 11:55 am

    Steve, I apologize if my English is not very good. Although I used to travel the US extensively in the 1980s it has ben a while since I have spoken very much English. Thank you very much for your comments. I always prefer websites that have excellent moderators like yourself to guide the process.

  16. Steve Leslie on November 27, 2008 11:19 am

    To Udo: Very appreciated comments indeed even though you may be in the minority camp with your view of me. I studied German all through college. It was considered important to study because of my studies in the pure sciences. I find it to be a very exact language and beautiful on many levels. Some think of German in the context of the powerful and grand Hitler speeches of the 30s and 40s that he used to instill National pride. Some may also think of a Wagner opera most notably Die Walkure. However there are many magnificent opera and songs that may sweep one away given the opportunity. Of particular note especially during this time of the year is Handel's Messiah. Mozart's later works The Marriage of Figaro and Cosi Fan Tutti are beautifully refreshing. One last comment, a subject that we have not visited lately is Barbecue. I would love to hear about a special recipe or sauce to try on baby back ribs. I am quite taken with Sweet Baby Ray's barbeque http://www.sbrbbq.com/elk_grove/default.asp but want some variety. Are there any volunteers who care to share?

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