It's my contention that except for the move from 9/19 or 9/26 to 10/10 when the S&P moved down from 1248 to 1216 to 890 (with 843 low that day — thanks for the macadamia nuts that day to my friend who visited), it was a normal year with everything behaving in a very orderly fashion. Nothing regular happened those two weeks and no one who follow the ecological nature of multiple time series fomented around here could have predicted this. Yet, according to some, they got it (especially for their own account but not their big public funds). What models from other fields, what insights might they have to offer? There is one field I'm thinking of particularly that I don't like to mention as it's like religion, and not fit for discussion until you die from it.

Victor Niederhoffer adds:

I believe that chronic inflammation is a major cause of reduced longevity. Such inflammations occur in markets, and produce responses that can lead to the replication of the wound in a market and spreading by the blood and lymph systems to other markets. When the inflammation is not cured quickly, and the natural defenses against it don't work, a situation such as the 25% decline in 2 weeks in early October can occur. Quantification of the inflammation process can lead to a longer life on this earth and the markets.

James Lackey writes in:

J ChambersWhat did we miss this year? We ignored the internal combustion engine or rotating assembly of the Bond markets. It was easy with your experience in buyouts to see Chambers's paying a million per engineer on buyouts as silly. It was a good investigation of yours that showed how the secret silo society always managed to beat by a penny on earnings to unleash their insider sell or buybacks to cover the non expense option incentive expenses.

But what happened in debt land… frankly I had no clue. Some of the tactics used in Structured Finance were no better, but over all worse than giant size penny stock scams. It was a simple pump and dump debt scheme that became a huge meme supported by Washington on Wall Street, so large that even the originators were caught with inventory… It was so bad that even the day trader's tipoff "Goldman was a seller!" was taken down in the vortex.

Seemingly no one believed the mark to market rule for all would ever become the law of the land and stand. After all, the bankers knew that if everything had to be marked the entire system was insolvent. Texas hold em meets the NY and DC rule makers. It was a good bluff, but they went bust. So they get new backers and are right back at the tables. The tournaments are simply moved to new casinos.

Don Chu observes:

“If a man should happen to reach perfection in this world, he would have to die immediately to enjoy himself.”

-Josh Billings





Speak your mind

11 Comments so far

  1. Anatoly Veltman on December 28, 2008 4:27 pm

    I don't even know where to begin:
    1. "except for" "normal year" "very orderly" - who ever decided that speculator should be seeking out orderliness?
    2. "none who follow… could have predicted" - well then either it's not best to "follow"; or "follow" but somewhat differently!
    3. so 2008 was a year of trendfollowing?! why is it OK to follow uptrend in almost all years - but not downtrend once?

    "What insights?": one such was depicted by 12/16/08's overlay. It turned out that using C.O.T. Bearish divergence as a filter, one would not be caught Long holding on to any "value" before Nov end!

  2. Marguerite Chandler on December 28, 2008 8:31 pm

    “There is one field I’m thinking of particularly that I don’t like to mention as it’s like religion, and not fit for discussion until you die from it.”

    That is a super-interesting puzzle, Victor. Thank you. One of “my sayings” is: If you find something which has reached absolute perfection - it is most likely dead.

    Or: To note, something reaches the perfection of it’s ripeness, just before it rots.

    Also, Things one does not want to talk about reminds me of your story of the unlucky losers who no one wants to run into on the street near the stock exchange. If I remember correctly the jinx hung-out at the front of Trinity Church? Forgive me if I remember wrong.

    Reading “Good-by to All That” now - the section on trench warfare, and Graves mentions that under threat superstitions emerge.

    After these digressions I finally get to my contribution to your inquiry: Penrose Tilings.

    I am studying tessilations now since I’m planning to paint the area outside my loft with some creativity. I’m fascinated by non-periodic tilings. It was from a site called “Dr. Matrix’s Programming Challenge” that I, yesterday, found this quotation which bears on your question, and tangentially through the website “Quasig,” as I was researching for my tiling project.

    Apparently non-periodic tiling patterns of the Penrose variety have something to do with Pi and with the number called “Golden Ratio.”

    “Although it is possible to construct Penrose patterns with a high degree of symmetry (an infinity of patterns have bilateral symmetry), [] [Penrose] patterns, like the universe, are a mystifying mixture of order and unexpected deviations from order. As the patterns expand, they seem to be always striving to repeat themselves but never quite managing it. G. K. Chesterton once suggested that an extraterrestrial being, observing how many features of a human body are duplicated on the left and the right, would reasonably deduce that we have a heart on each side. The world, [Chesterton] said, “looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.” Everywhere there is a “silent swerving from accuracy by an inch that is the uncanny element in everything . . . a sort of secret treason in the universe.” The passage is a nice description of Penrose’s planar worlds.”"

    And of the markets between September the 19th and October 10th?

    quotation from the K. Duffy site called “Quasi Crystal Generator”

    All the best,

  3. vic on December 29, 2008 8:48 am

    It was good to hear those philosophical and augmenting thoughts of M. Chandler and she and other good people who wish to be part of our dinner party should join our speclist by writing to me vic2009 at [change at to @ in the email address]. There are many ghosts at Trinity Church but those that frequent our dinner party on the speclist are all striving to improve themselves by augmenting their knowledge and trading. Regrettably, I was thinking of the instigation, cloning, and extension through the blood vessels in the presence of cox and lox extenders that characterizes the non-healing of a wound during the process of the dreaded disease.

  4. Craig Bowles on December 29, 2008 9:28 am

    Sunspots aren’t really fit for discussion. The total remains around zero, but the estimated number dropped off and hit a low around 10/1. (For some reason, volcanic activity on earth acts inversely and we’re getting more intense eruptions.)

  5. Anton Allostrat on December 29, 2008 12:37 pm

    If chronic inflammation is a personal health concern, or if you suffer from an autoimmune disease, get out in the sun (do not allow a sunburn though) or take vitamin hormone D supplements. Unlike many dietary and lifestyle claims, there is science to back this one up.

  6. Steve Leslie on December 29, 2008 1:54 pm

    Speaking of inflammations how is it that nobody mentions a 10 year bond at 2%. I would be fascinated to see a chart of the 10 year bond. I have to believe this is a horrible investment moving forward. If you can't come up with something better than that for a 10 year investment, then I am speechless. Everyone thinks they are smart enough to switch in time to another vehicle but in reading Blodget's piece in the Atlantic few are.

    Interesting fact. In surveys people always tend to overestimate their intellect relative to others.

    FWIW, With respect to inflammation we have a wound care hyperbaric chamber in Melbourne. Long used as a method to treat "the Bends" an affliction when a scuba diver rises to the surface too quickly, It has been clinically proven that treatment of a wound along with a pressurized chamber dramatically improves the healing process. Along with the hyperbaric chamber the patient breathes 100% oxygen.

    Fact: I have an associate who was bitten by a recluse spider on her arm on a Friday. By Monday,the poison had necrotised a patch on her arm many inches in diameter and the destruction was spreading. She was at risk of losing her entire arm. The physician placed her on massive antibiotics and hyperbaric therapy. It was through these very aggressive measures that they were able to save her arm and her life. Diabetes patients are also using hyperbaric chambers to treat their advanced stages associated with this disease. Some use it as a holistic method for anti-aging and some years back, Michael Jackson was rumored to sleep in a hyperbaric chamber perhaps as a treatment for his massive plastic surgery abuse on his face.

    home models can be found on ebay for $8000.

  7. florin on December 29, 2008 2:08 pm

    vic and laurel, how can one get a copy of your books outside usa? amazon won't ship to my country and all I could find on the internet was a version in russian, but i don't speak the language and the on-line translators are way off the original message.

  8. vic on December 29, 2008 2:28 pm

    yes. dr. raymond chang recommends that if you took one supplement at all it should be vitamin D3. I have read all the scientific studies and I have seen others say it's high dose fish oil. Surely one would not believe that I would have posted on such a subject as inflammation or the Shinya diet without reading all the scientific studies. vic

  9. Anton Allostrat on December 29, 2008 3:11 pm

    My comment on vitamin hormone D must have had an unintended tone. My objective was to provide information on a subject very important to me, not to impugn any author in Daily Speculations.

  10. John on December 29, 2008 6:24 pm

    The chain reaction of declining housing prices, leading to losses on debt magnified by leverage, leading to a reduction in lending again magnified by leverage was very predictable. The question has never been what will happen next, but when. We all knew this was going to happen, and we all know that a new bull market will take hold (if it hasn’t already) before the economic recovery is apparent in the data. What convinced me personally (I only run my own money) to become more conservative was oil. When Israel bombed the Syrian nuclear facility and oil had no reaction, it was a major red flag that there was a sea change ahead/underway. When it started dropping I knew the jig was up. I often hear people commenting on this site about memes and how and why they are wrong. While I agree, noticing when the usual memes do not take hold can also be useful. If oil had been up that day, it would have been attributed to “geo-political tensions” but since it wasn’t, no comment was made. I’m sure the artist above would agree that good use of negative space is as important as the use of positive space.

  11. George Parkanyi on December 30, 2008 11:27 pm

    Well, the world money supply is like a great circulatory system. The recent heart-stoppage, hemorrhaging, and desperate CPR and transfusions have offered no choice but to focus on keeping the patient alive and perhaps save a kidney (GM et al), but alas, the extremities are on their own, and if limbs must be lost, so be it.


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