Dec

30

 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


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