Feb

9

1. A visit to the bookstores these day is reminiscent of those in 2003. At that time, all the books were about the coming bear market, and the only offset were the tons of worthless tomes with the sanctimonious bearish always, no one can do what I do, channeling of the Sage. Now the books are all about the coming financial panic, how things are going to get much worse, and how the only solution to our problems is to turn everything over to the commanders. I posit that the books these days will turn out to be as wrong in the aggregate as those of 2003. January is usually an up month, having risen 32 of the last 50 years. I hypothesize that there is a tendency for the Januarys that are down to be succeeded by a rally that brings the month-end close to a higher level than the previous year end December, i.e. one month ago. Such a hypothesis would have to take into account a year like 1974 when the market declined 30% from its January close without ever breaking the previous year-end level, and 2008 itself where the market declined some 35% from its January level without a break. Indeed of the 18 years in question, seven of them never achieved a rise above the December level. A strategy of holding to the first break of the previous December level or to the end of the year would have lost on average 4% on the 18 occasions it was triggered.

2. Yet another example of the theory of least effort comes from my son's acquaintance with three pools in the swimming facility he frequents. One is normally at 100 degrees, the kiddie pool at 83 and the main pool at 80. At first he was exposed only to the main pool at 80 and loved it and used it regularly. However, after being exposed to the hot tub pool, at 100, he now finds the main pool much too cold, and refuses to go into it without much incentives and or (I will not finish that sentence). I wonder if the market takes the least effort into account by finding the weakest link in a chain and using that to make its major moves. This is a fuzzy statement. but it can be quantified in some interesting ways that I will leave as an exercise.

3. The NY Knicks are truly a team without a foundation. I can hear Tom Wiswell saying, "checkers is a game of architecture — you need a strong base of operations," whenever I see them lose yet another game as they stagger aimlessly around without a game plan near the end of the game. On Sunday, they managed to lose a game by a point in the final second after being up by 13 with five minutes left in the game. The market mistress, I always suspect, looks at all the ways the Knicks can lose, and then uses the template of such a woeful loss as a model for how to make the specs lose that way. One could do well by taking account of the way the Knicks lose, waiting for the market to recap such a loss, like a big rise up to 3pm and then a small loss for the day for fun and profit.

4. I should know something about gain and pain because of my 12,000 competitive matches in racket sports. The main thing I know is that one should never lose without giving oneself terrible pain, putting everything one has into the loss. I hate to see a person quit and give up the ghost through want of effort and avoidance of pain in business or a match. The other thing I know about pain is that it's the extra little effort you put in that always leads to success, and that pain in the input is necessary for all those who are not naturals in the activity. When I practiced squash, I would always end my sessions against myself with something like an excruciating regimen of up to the front wall and back to the back wall and that stuff was always the reason that I can still count on my hands and remember every one of my defeats in squash. There's a difference of course between playing a match where if you lose it, it's all over and a market foray, where another game will always be playable if you have the capital.


Comments

Name

Email

Website

Speak your mind

5 Comments so far

  1. Gary Rogan on February 9, 2009 3:29 pm

    Why would any sort of a consensus about an impending catastrophe mean that there won’t be a catastrophe? Imagine there is an asteroid heading towards earth. If everyone believes that it will destroy earth, does that mean it will have no effect?

    The situation that exists today is unlike any post-1921 recession. The combination of interests rates and the US government indebtedness is unique. While the Keynesian experiment currently being attempted is not unique, if you combine it with the interest rate situation and the debt levels, it becomes unique. Certainly the last time it was attempted it produced results that are inconclusive at best and possibly disastrous. Until the current bad debts, exposed and hidden, are disposed of through a bankruptcy process, the situation is not likely to turn around. It doesn’t matter how many people beat the dead horse and how hard, it will not get up.

  2. Philip Larcombe on February 9, 2009 7:08 pm

    I enjoy reading daily speculator stories,often reading aloud paragraphs of inspiring editorial in the hope of deeper understanding of numerous metaphoricals written in the spirit and philosophy of this privilaged platform.

  3. Daniel on February 10, 2009 12:02 am

    I know who needs to give up "the ghost," it goes without saying. You missed the deflation trade before and this Briefly Speaking comes at a most inopportune time. My metrics say, c'est fini! For perspective, the Sentiment low (bearish) was October 10th when we put in an intraday low of 839.80 on the cash SPX and CLOSED at 899.22. Is the market letting every Tom, Dick, and Harry catch the bottom this time?

    Seriously…the "HUGE" rally already took place. It was in the Hang Seng and it rallied 48% in under 2 months. How do you suppose the Primary Dealers are going to distribute their astronomical future treasury inventory if people haven't sworn-off stocks forever?

    The "near" consensus of my mechanical (not ai/ii) and anecdotal sentiment data points is that we're in a bear market rally to somewhere between 1000 and 1150 on the SPX cash.

    Best wishes!

    D. PS - I fade sentiment.

  4. Steve Leslie on February 10, 2009 12:51 am

    George Allen was the legendary coach of the L.A. Rams and Washington Redskins before Joe Gibbs took over. He was known as coaching the over-the hill gang. He was extremely successful and largely overlooked as one of the great professional coaches in the history of the game. He was particularly known for his tenacity, grit, hip hip hooray and work ethic. In 12 seasons of coaching in the NFL, he never had a losing season. He has the 3rd highest winning percentage of all NFL coaches. There is nobody really for him to be compared to because he was unique in so many ways. In some ways, he was a combination of Tony Dungy, Bum Phillips and John Madden with a little of Jim Mora thrown in.

    http://en.wikipedia.org/wiki/George_Allen_(coach)

    I bet you, the chair would have respected George Allen.

    I remember he explained once how he trained himself when he worked out. He described things as such, when he did 50 push-ups he would always do at least one more for good measure. That always stuck with me. So when I went into body building and weight training, If my goal was to do 10 pull-ups I always tried to do one more. I was once told that anybody can work out when you feel like it, but the real growth comes from when you work out when you don't feel like it.

    One day, the chair must share with us how he has played over 12,000 competitive matches in his life. That just seems to be Chamberlain-esque numbers to me.

    I know the airwaves will be filled with the Alex Rodriguez mea culpa and I have but one comment. There really is no right way to do a wrong thing. I got that one from Mark Schlereth ESPN analyst.

  5. Nic Chalmers on February 10, 2009 8:59 am

    I would like to reccommend the book SQUASH RACQUETS: THE KAHN GAME by Hashim Kahn and Richard Randall. I am sure the book is long out of print but I think the lessons that are shared can be applied to all sports, life and in the approach one should have when trading. Nic Chalmers

Archives

Resources & Links

Search