April - 2026
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
1
 S&P +47.00
 USB -0.05
2
 S&P +4.50
 USB +0.07
3
4
5
6
 S&P +47.25
 USB +0.11
7
 S&P +5.75
 USB -0.12
8
 S&P +167.00
 USB +0.22
9
 S&P +39.50
 USB -0.02
10
 S&P -8.00
 USB -0.11
11
12
13
 S&P +67.50
 USB +0.09
14
 S&P +82.00
 USB +0.19
15
 S&P +55.75
 USB -0.10
16
 S&P +16.50
 USB -0.19
17
 S&P +84.50
 USB +0.27
18
19
20
 S&P -13.50
 USB +0.02
21
 S&P -48.00
 USB -0.15
22
 S&P +71.25
 USB -0.01
23
 S&P -27.75
 USB -0.10
24
 S&P +51.25
 USB +0.05
25
26
27
 S&P +11.25
 USB -0.10
28
 S&P -35.00
 USB -0.05
29
 S&P -3.00
 USB -0.27
30
 S&P +75.75
 USB +0.05

May - 2026
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
1
 S&P +14.25
 USB +0.08
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Copyright Dailyspeculations.com

Feb

10

Gambler: Secrets from a Life at Risk, by Billy Walters. A spectacle of compulsive gambling in every field by a very flawed individual with a template of ever changing factors that influence football betting.

Andrew Moe agrees:

Would also recommend Gambler, by Walters - in particular for the two chapters where he details his method of handicapping NFL games. He uses a variety of factors to build his own line and compares that to the public line. The bigger the difference, the bigger the bet. Lots of quantitative factors, for example being the home team on a Thursday night game is worth 0.4 spread points. If home and away have different playing surfaces (grass/turf), it's worth 0.2 spread points. A great team coming off a bye and away is worth 1.6 points - if they are home off a bye, it's worth 1.4 pts.

Big Al writes:

I have read various pieces re online sports betting recently. I also have been listening to season 4 of Michael Lewis's podcast, Against the Rules, which is all about sports betting.

The podcast reinforces points made by others, the main one being that Draft Kings and Fan Duel weed out the winners and allow only losers to make bets. Pros try to find ways around this, but amateurs are just suckers. Also, thanks to software, the system is largely automatic.

When I compare this to markets, I think of market makers on one side, and retail traders on the other, along with the whole ecology of touts that try to get retail's attention and make you think you should be buying this or selling that.

One specific bit from the Lewis podcast I thought was interesting: A pro was talking about prop bets on individual player performance and he said that people like to see things happen as opposed to not happen, so usually betting the under is advantageous because the over is over bet.

Asindu Drileba comments:

I think the days of the bookies are numbered. I am confident the future of sports betting rests in prediction markets like Khalshi, Poly Market, Smarkets etc. The odds will be better, will change in real time, and best of all, there will be no need to kick out winners. It will be like the futures market.

Only two reasons why bookies still exist: 1. The infrastructure for these "Event Derivatives" has not yet been built. 2. Regulatory hurdles.

Big Al offers:

A very interesting deep read:

Why prediction markets aren’t popular, by Nick Whitaker & J. Zachary Mazlish:

Rather than regulation, our explanation for the absence of widespread prediction markets is a straightforward demand-side story: there is little natural demand for prediction market contracts, as we observe in practice. We think that you can classify people who trade on markets into three groups, but each is largely uninterested in prediction markets.

Savers: who enter markets to build wealth. Prediction markets are not a natural savings device. They don’t attract money from pensions, 401(k)s, bank deposits, or brokerage accounts.

Gamblers: who enter markets for thrills. Prediction markets are not a natural gambling device, due to various factors including their long time horizons and often esoteric topics. They rarely attract sports bettors, day traders, or r/WallStreetBets users.

Sharps: who enter markets to profit from superior analysis. Without savers or gamblers, sharps who might enter the market to profit off superior analysis are not interested in participating. They also largely don’t need prediction markets to hedge their other positions.

Update: Asindu Drileba remains confident:

I see the article was written in May 2024. Towards the US presidential election, close to $2B in real money was placed on Polymarket. Polymarket is extremely difficult to use (you need to buy the right crypto, install the proper wallet, just to get it working). Last year Americans spent $100+ Billion on sports betting.

Sports betting books can simply be restructured to work by having their odds computed by a prediction market and not bookies. It would also be the best way to buy insurance. On say hurricanes, earthquakes, fires. I see a lot of catastrophe insurance gravitating towards prediction markets.

If someone asked me. "What trillion dollar business is no one building?" I would respond, "A well done prediction market." Trust me, the demand is there.

Vic's X/twitter feed

Feb

9

For those who don't have a statistical mind or who have not been exposed to card games or gambling, the possibility of a random explanation for many phenomena is hard to grasp. Simply put, what we observe in real life is a sample from a population. Even if the sample is random, the mean of the values observed from the sample is likely to differ from the population mean. The differences observed for many market phenomena are merely due to sampling variations resulting from the large number of samples taken and the high variability within the population.

Consider, for example, the world famous Superbowl indicator. Germany watches it like a hawk. If the winner of America's Superbowl is a team that hailed originally from the NFL, the signal is bullish. If a team originally from the AFL wins, the signal is bearish. The moves in stocks in the 12 months following the NFL and AFL wins are enumerated and summarized in table 3.3.

The results are striking. The total change in the DJIA during the 12 months following victories by teams originally in the NFL has been 4412.08. The average change is 259 Dow points. During years when AFL teams were victorious, the total DJIA change has been -7.3. Reviewing the average ranks of changes in the Dow with respect to the two origins of winners, it turns out that differences as large as these could be explained by chance only once in 300 occurrences. But how many different sporting events could be served as a benchmark predictor with equal plausibility? The World Series, the NBA Championship, the NHL Stanley Cup, the New Year's Day bowl games, or the won-lost record of the Chicago Bulls or the New York Yankees over a single season? Each of the winners might provide an independent prediction of the Dow. Reformulating the question: Since 1967, what are the chances that, in five major annual sporting events, the win by one of the 10 competitors will be associated with the DJIA's rising at least 250 points in that year? The answer, determined by simulation, turns out to be about 1/2. And if not predictive of the Dow, how do bonds match up with the winners?

The Superbowl analysis shows why the random walk or efficient markets model is often consistent with many of the effects found by technical analysts or the more dressed up retrospective anomalies of the academics.

When people ask me whether markets are random, I feel as I did when people asked me who, in my opinion, was the best squash player of all time. "Jack Barnaby, my coach," I always replied.

- The Education of a Speculator, pages 78-82.

Feb

9

American Rascal: How Jay Gould Built Wall Street's Biggest Fortune, by Greg Steinmetz

If you needed to pick out major figures of the Gilded Age, such characters as Rockefeller or Carnegie immediately come to mind. If you were in the midwest, you might include Armour in that list. When I was growing up in the 1960s, Jay Gould might have gotten a mention, but chances are good that he certainly wouldn't have been the first to come to mind. This is unfortunate, insofar as Gould was one of the wealthiest Americans of his day, leaving a fortune of some $75+ million in the 1890s. While some like the Vanderbilts (arguably with a greater net worth) succeeded in one major industry in railroading or Carnegie in steel, Gould's success was in multiple industries, including railroading, telecommunications (think Western Union), finance, and fashion (his early success was in leather goods). Gould not only had an impact in these industries, his actions had national impact, triggering panics, new means of communication (not the technology so much as the scale), political scandals (one of the more stark scandals of the Grant Administration, though that's probably subject to some argument), and even the manner in the US financial world grew on the world stage (though surely not at the scale that JP Morgan or Jacob Schiff did). He left an indelible mark on the United States during a crucial time in its immediate post-Civil War period as the industrial revolution was taking hold in the US.

Steinmetz offers a brief, easy-to-read biography of Gould. Some might argue it's a little too easy to read. It is definitely more of an overview than a deep study of the financier that was Gould. Gould was one of the foci around which some of the more colorful scoundrels that defined Wall Street in the post war period assembled. Daniel Drew, for instance, or Jim Fisk as another. The problem with this biography is that it is good only as an overview. And if that's what you seek, it functions perfectly well. But as Steinmetz did with his biography of Fugger (The Richest Man Who Ever Lived), there's just enough meat to do more than whet the appetite.

If you would like to learn more about the Erie War, there's The Scarlet Woman of Wall Street - not light reading but a tad more insightful than Steinmetz. Or the first Black Friday, when in 1869, Gould tried to corner the gold market, and had all the success that the Hunts would later experience in trying to do the same with silver a century or so later. Steinmetz gives just enough to whet one's appetite, but not enough that one is casting about looking for something meatier. Gould was the force behind Western Union's dominance of the telegraph industry, the world's first internet. He was one of the creators of an empire of transcontinental railroads, as well as elevated local train transit in New York City. Any one of these could be the subject of an in-depth study, but Steinmetz doesn't provide enough to forestall someone from having to consult another book or two.

Some might say that Gould epitomized the Robber Barons on the age, but he actually had little use for any sort of cabals. Sure, he appreciated a monopoly as much as any, but like Commodore Vanderbilt, with whom he waged war of a sort during the Erie War, he ran his businesses with a focus on profitability without necessarily having a monopoly or oligopoly. There are some instances where Gould drove the price of the product down, not hiking it. In building his empire, he demonstrated a shrewd sense of timing and of the anticipated direction of human events.

Jeff Watson writes:

I enjoyed that book. Here’s a lagniappe:

Dark Genius of Wall Street, from Jeff Watson

Stefan Jovanovich adds:

People liked him, and he was - until facial neuralgia destroyed his looks and tuberculosis robbed him of his general health - a charmer.

In 1879 Thurlow Weed said this about him: “I am Mr. Gould’s philanthropic adviser. Whenever a really deserving charity is brought to my attention, I explain it to Mr. Gould. He always takes my word as to when and how much to contribute. I have never known him to disregard my advice in such matters. His only condition is that there shall be no public blazonry of his benefactions. He is a constant and liberal giver, but doesn’t let his right hand know what his left hand is doing. Oh, there will be a full page to his credit when the record is opened above.”

Feb

7

As we get older, we remember all our victories whether they happened or not. -Tom Wiswell (and many older men).

T.W. again: At 83, I've lived life. I've done my work. Now I will take my hat and go.

Andrew Carnegie: A Hero of Capitalism

Andrew Carnegie’s life, if conceived by an imaginative novelist, would be difficult to believe. It is perhaps the greatest example of an individual rising from “rags to riches” via talent and productive effort, a rise enabled by the essentially free market system of 19th-century America.

Vic's X/twitter feed

Feb

7

The Licensing Racket: How We Decide Who Is Allowed to Work, and Why It Goes Wrong
by Rebecca Haw Allensworth

A bottom-up investigation of the broken system of professional licensing, affecting everyone from hairdressers and morticians to doctors, lawyers, real estate agents, and those who rely on their services.

Pamela Van Giessen writes:

When my dad was suffering from dementia and it was too stressful on him to go places, I called in a podiatrist to take care of his feet and toe nails. I asked the doctor if he could also clip my dad’s fingernails, at least on his right hand which suffered constant trembles from a stroke. I did not feel confident doing it with the tremors.

The podiatrist informed me that he was not licensed to clip fingernails. I asked who was licensed and was told that in IL only manicurists and nurse aids in care homes can clip fingernails. I asked him if he thought it would be a good idea to take my dad to a manicurist (or have one come to dad) given his tremors. Dr said “no, and probably no manicurist wants to trim your dad’s fingernails.”

I called the state licensing board to complain and was told this rule existed for a good reason to protect people like my dad. I told them that this was absurd and not protective of anyone except this bizarre bureaucracy. I was told that I was being disrespectful and they hung up on me. Fortunately the podiatrist took pity on the situation after seeing my dad and broke the rules.

Licensing (and certification) is a racket. It is meant to keep some out and it is also a lucrative racket for states, licensing boards, and non-profit organizations. The CFA Institute makes over $275M annually on the CFA certification (and it costs less than 1/2 that to administer the program).

Sushil Rungta comments:

Agreed! Licensing is a racket and in many instances, unnecessary. Often, it is nothing more than a means to generate revenues for the licensing authority!

Rich Bubb writes:

I completely agree with the 'license Non-sense' of some (ahem) rationales. My basic take is that if some institute was involved, they were rarely better than learning-by-doing types (eg., me). When I was working thru attaining six sigma black belt (SSBB looked good on the resume), the major quality name (withheld) institution was over-hyping their SSBB program only as some sort of easy-to-attain achievement, [but] with their seminars/classes/literature/mentors/videos/etc., only. Truth to tell, I knew so-called 'withheld-name'-SSBB-certified wingnuts that knew nearly 10% of what I'd literally done already. Oftentimes by doing deep research and generally trying to learn more about More.

Henry Gifford provides the NY POV:

In New York City a plumbing license is like a license to print money. More and more work requires a permit, and therefore a license. Hire a licensed plumber for an agreed-on price of $10,000, usually the bill comes in at about double. Hire by the hour and keep careful track of the hours and you still get a bill for double. After you pay you notice the permit is not closed out (signed off by the licensed plumber), which becomes a violation on the property, and a bar to clean title at sale. Want it signed off? Maybe another $10K?

Word is that the number of licenses is fixed - they give them out only at the rate that licensed plumbers die. Applying for a license requires seven years of "experience", which is defined as being an employee of a licensed plumber - basically sons and nephews, someone with ambition who buys a van and tools and goes to work is nobody's employee, thus never can get a license. Then comes the written test.

Not long ago the written test had a drawing of all the drains in a building, with inch sizes marked next to each piece of pipe. The question required calculating how many ounces of lead are required to pour molten lead into all the joints in the drain pipes to connect them - something not done regularly for 50 years at the time of the test. The drawing was a copy of a copy of a copy, not legible - required guessing at the pipe sizes, or else buying the answer for cash.

Then comes the practical test, which not long ago required melting lead pipes together, but without the help of a propane torch or any other torch. Thee equipment supplied is a cast iron kettle and a stove - melt some lead or solder in the kettle, throw the molten lead at the joint, wipe it smooth with an asbestos rag or similar.

I know a guy who got his experience and passed both tests, but the city didn't give him a license. He went to court and sued the city, and after much time and expense finally won - hooray! The judge ordered the city to give him a license. But, last I heard, he still didn't have a license.

Other parts of the US are catching up. Most professional licenses cannot be transferred to another city. A friend of mine in NYC married a guy in Vermont who was a counselor to juvenile delinquents. His experience in Vermont was not transferrable to NY State - he would have to start all over, thus she moved to Vermont.

Does this system benefit anyone but holders of existing licenses, and the powers that be? I don't think so.

Stefan Jovanovich gets historical:

The licensing presumption goes back to the royal charters of the English kings and queens. The sovereign has the (God-given) authority to decide who has the right to practice a trade. The Saddler's Company received theirs from Edward I in 1272.

Gyve Bones writes:

Very interesting account of how the plumbers' trade operates in NYC. It reminded me of Mark Twain's account of how the Pilot's Association formed on the Mississippi River. Samuel Clemens, before he took the pen name "Mark Twain", was a riverboat pilot, and a member of the Association so he knows and tells the story well in Life on the Mississippi. He shows how at first the really good pilots avoided joining the Association out of pride and because they had such a good reputation they didn't need it. And the Association became the refuge of B and C rank pilots… at first. But Twain shows how the Association provided an information edge about the current state of the river conditions which the "outsiders" could not match, and were able to develop a monopoly once the underwriters found that Association pilots were better at avoiding claim losses.

Here's a link to Life on the Mississippi, Chapter XV which contains the story.

I think there are excellent insights in this story how any sort of trade establishes a guild system that protects the trade, creating moats to competition. We see it with doctors, lawyers, undertakers, nail salons, barbers, electricians &c. &c. ad infinitum. Lots of the work of legislatures is creating laws for these associations to institutionalize the moats with the force of law for the various guilds.

The previous chapters detail very interestingly on how riverboat pilots do their jobs, which is a fascinating context if you want a deeper dive. It's one of my favorite books of all time.

Feb

6

This documentary is a necessity for those interested in markets.

The South Sea Bubble - The First Financial Crash

Khilav Majmudar adds:

The South Sea bubble spared no one, even Isaac Newton! Here is a detailed paper written on his interaction with the bubble, written by a mathematician with a more-than-passing interest in the history of technological and financial manias:

Newton’s financial misadventures in the South Sea Bubble

A very popular investment anecdote relates how Isaac Newton, after cashing in large early gains, staked his fortune on the success of the South Sea Company of 1720 and lost heavily in the ensuing crash. However, this tale is based on only a few items of hard evidence, some of which are consistently misquoted and misinterpreted. A superficially plausible contrarian argument has also been made that he did not lose much in that period, and John Maynard Keynes even claimed Newton successfully surmounted the South Sea Bubble. This paper presents extensive new evidence that while Newton was a successful investor before this event, the folk tale about his making large gains but then being drawn back into that mania and suffering large losses is almost certainly correct. It probably even understates the extent of his financial miscalculations.

Humbert B. offers:

UK Natl Archives: The South Sea Bubble of 1720

Feb

4

Travel times from London in 1881 (click for full view in new window):

Feb

3

What causes inflation? Suppose we define inflation simply as the rise in prices of commodities, stocks, real estate etc. What causes it?

1) A generic explanation people offer (acolytes of Milton Friedman & Margaret Thatcher for example) is to blame monetary policy. Simplified as, inflation is caused by "too much money chasing too few goods."

Many people blamed President Trump's COVID stimulus packages for the rise of prices during that period. It seems specs in this list agree upon this when it comes to stock prices, i.e., lower interest rates (higher money supply) -> Higher stock prices (inflated stock prices).

2) An alternative explanation is that higher prices are caused by supply chain issues.

So they would claim that higher commodity prices were so because it was extremely difficult to move them around during lockdowns, let alone processing them in factories. A member also described that egg prices may be going up because of disease (a chink in the supply chain) not necessarily monetary policy. I am thinking that supply chain issues are more important to look at, than monetary policy.

Larry Williams predicts:

Inflation is very, very cyclical so maybe the real cause resides in the human condition and emotions. It will continue to edge lower until 2026.

Yelena Sennett asks:

Larry, can you please elaborate? Do you mean that when people are optimistic about the future, they spend more, demand increases, and prices go up? And then the reverse happens when they’re pessimistic?

Larry Williams responds:

Just that it is very cyclical— as to what drives the cycles I am not wise enough to know…though I suspect…some emotional pattern dwells in the heart and souls of as all that creates human activity—along the lines of Edgar Lawrence Smiths work.

Read the complete thread.

Feb

1

The Emergence of Probability: A Philosophical Study of Early Ideas about Probability, Induction and Statistical Inference, by Ian Hacking.

From Chapter 12, Political Arithmetic:

Statistics began as the systematic study of quantitative facts about the state. From 1603 the City of London kept a weekly tally of christenings and burials. Desultory records had existed earlier but a desire to know about the current state of the plague made it necessary to set out the figures in a more regular way. Most of the people 'who constantly took in the weekly bills of mortality, made little other use of them, than to look at the foot, how the burials increased, or decreased; and among the casualties, what had happened rare, and extraordinary, in the week current'. Or so John Graunt [1662] tells us in the preface to his Natural and Political Observations upon the selfsame bills. He and William Petty - whose various essays on 'Political Arithmetic' make him the founder of economics - seem to have been the first people to make good use of these population statistics.

Why did no one do so earlier? It is plausible to suppose that inference from statistics evolved slowly because there were few data, but this is not the whole story. It is true that once Graunt had made plain the value of statistics, the capitals of Europe copied London and so data became more ample. For example, Paris started its tabulations in 1667, the year after Petty reviewed Graunt's book in the Journal des Sçavans [Petty, 1666]. But plenty of data were already in existence. Annuities had been an established method of national or local fund-raising for a very long time. The records of pay-offs from annuity funds provided ample information about the population. There was a good motive to examine this data, namely to determine whether annuities were profitable to own. But no serious analysis of such material was provided before John de Witt made his presentation to the Estates General of Holland and West Friesland in 1671.

Jan

31

in reading The Origin of Species yesterday along with Scribners 1895 concerning the evolution of the bicycle industry to cars and airplanes I was struck with how the transformation of industries was similar to the move of varieties to species.

Having always had this mild mania for flying, I was much impressed a few years ago when some one said to me: “If you want to come as near flying as we are likely to get in this generation, learn to ride a pneumatic bicycle.” Then I began for the first time to take a serious interest in the bicycle upon which my eldest boy was so fond of scurrying around the country; and today I am only too willing to say all that I can in its favor. When one begins to tell why the bicycle is one of the great inventions of the century, it is hard to begin, because there is so much to say. A bicycle is better than a horse to ninety-nine men and women out of a hundred, because it costs almost nothing to keep, and it is never tired.

- Philip G. Hubert, Jr., in Scribners 1895.

apparently this subject has been well researched:

The Evolution of Industry 1.0 to 4.0 and Beyond

People have been revolutionizing the production and manufacturing industry for as long as mankind has been around. The changing of items being made and distributed in the home to transitioning to them being mass manufactured and distributed using machines and new technology is what we call the Industrial Revolution. There are four main Industrial Revolutions: coal, gas, electronics and nuclear, and currently the internet and renewable energy. These are also known as Industry 1.0, 2.0, 3.0, and currently 4.0. At the rate technology and knowledge is going though, is an Industry 5.0 soon to follow? If so when and what will that entail? Let’s look into each Industry and see how they have each helped shape and create the next.

the best description I can think of for the way the sp attempted to break the round at 6100 and waited to do so decisively was the way Jimmy Jacobs played handball, waiting 30 shots to hit a killer. can you think of a better example?

Vic's X/twitter feed

Jan

30

Some recently discovered proverbs of Tom Wiswell that apply to markets:

1. Often by the time the opening is over what is going to happen in the ending is already happening and cannot be reversed.

2. It isn't only the number of games you win that counts. It's the number of drawn games you don't try to win. In short, don't overplay a slight edge.

3. All the wins and draws must be in your head before they can be at your fingertips (or else how can you beat those who beat you to the price and pay 1/10 of commissions as you - VN).

4. Some players study too much and play too little. Unless you are an isolated player in the country, you should play and study in equal parts. Studying is the planning, play is the doing.

5. Games in commerce are usually won or lost in the first 10 minutes (moves). Have a good plan.

6. Take a writing pad with you and record your game. Go over the games - especially the losses - or you'll surely repeat them.

Tom Wiswell says that the greatest influences on his career were having his father reading Tom Sawyer to him.

Here is the DailySpec archive of Wiswell's proverbs.

Vic's X/twitter feed

Jan

29

Book Review: Mind Set! by John Naisbitt, from Steve Ellison, April, 2007

Some interesting bits:

- One trend is the continuing growth of China, which Mr. Naisbitt points out is quite decentralized: “Beijing pretends to rule, and the provinces pretend to be ruled”.

- While some fear that American culture is obliterating local cultures, Mr. Naisbitt asserts that the world is changing America more than America is changing the world, as more than 1 million legal immigrants per year enter the United States.

- In an intriguing tidbit, Mr. Naisbitt quotes Alan Greenspan as expecting private currencies to return by the end of the 21st century.

Steve Ellison updates:

That book was written in 2004, before bitcoin was invented (speaking of "private currencies"). Mr. Naisbitt is no longer with us, having passed on at age 92. The last thing I noticed him doing, in 2010 or so, was touting the emerging world as the most important story. In my opinion, A LOT has changed since then. We have macro experts on the List who would have much better insight, but I would start with Rocky's accurate prediction in 2016 that the Brexit vote was the canary in the coal mine for the post-Cold War global elite and their policies of globalization, mass immigration, and "cling[ing] to the religion and arrogance of knowing what is best for the common man — and which often also involves rejecting common sense and facts in evidence."

The decentralization of Chinese government finances is today a key reason why a massive economic stimulus from Beijing, as urged by many Western economists, simply cannot happen. The critical mass of government spending is in the provinces, and their governments are starved for revenue after the real estate bust. Christopher Balding writes frequently about all things China on X as @BaldingsWorld.

Jan

28

An anecdote which gave me a lot of pleasure: Darwin wrote the origin in 1868 and in 1869 there was tremendous fervor and a meeting of 1000 people at the British Museum was called. Huxley as a defender of the evolutionists cause was persuaded to attend. Bishop Wilberforce was there. Professor Henslow was the chairman. The then Admiral Fitz-Roy, still and ardent fundamentalist was there. Darwin was absent. The Bishop spoke for half an hour and ridiculed Darwin and Huxley "but all in such dulcet tones, so persuasive a manner, and in such well-turned periods." However, the bishop showed himself to be quite ignorant of the details of Darwin's book and said, "I should like to ask Prof Huxley, who is sitting by me and is about to tear me to pieces when I have sat down, as to his belief in being descended from an ape. It is on his grandfather's or his grandmother's side that the ape ancestry comes in?"

The bishop concluded with the point that Darwin's ideas ran counter to the revelations of god in the scriptures. Huxley was reluctant to reply but eventually he said, "I am here only in the interest of science and I have not heard anything which can prejudice the case of my august client." He then demonstrated the bishop's poor understanding of Darwin's thesis and concluded with a reference to his descent from a monkey. "I asserted and I repeat that a man has no reason to be ashamed of having an ape for his grandfather. If there were an ancestor whom I should feel shame in recalling, it would be a man, a man of restless and versatile intellect, who not content with an equivocal success in his own sphere of activity, plunges into scientific questions with which he has no real acquaintance, only to obscure them by an aimless rhetoric and distract the attention of his hearers for the real point at issue by eloquent digressions and skilled appeals to religious prejudice."

The Bishop's remarks remind of chronic bear of the stock market and other useful idiots that I have not refrained from quoting.

Vic's X/twitter feed

Jan

26

First, Prof. Tau on the Philippines Grand Lotto.

An unusual lottery result made the news recently: on October 1, 2022, the PCSO Grand Lotto in the Philippines, which draws six numbers from {1} to {55} at random, managed to draw the numbers {9, 18, 27, 36, 45, 54} (though the balls were actually drawn in the order {9, 45,36, 27, 18, 54}). In other words, they drew exactly six multiples of nine from {1} to {55}.

Then, Prof. Tau on Bayes.

The Bayesian updating makes me think of predictions for the S&P for 2024 and how one would have updated these as the year progressed.

Asindu Drileba wonders:

Suppose the S&P can only return two values +1% and -1%. If it has returned +1% for day one and -1% for day two. The dataset would day the s&p returns are +1%, -1% so:

- Probability of going up (+1%) is 0.5
- Probability of going down (-1%) is also 0.5

Given the 2 day dataset of +1%, -1%. Now, suppose it is day 3 and the market goes up (+1%). How do we use Bayesian techniques to update the probability? In the ordinary way. The dataset would be (+1%, -1%, +1%). So update probability:

- Probability of going up, 2/3 (0.666..)
- Probability of going down, 1/3 (0.3)

I am not saying this is how Bayesian updates work. I am trying to ask members how it work's given the above toy dataset. There is a related video by Julia Galef called Bayesian thinking.

Khilav Majmudar writes:

I've learnt more about Bayesian probability from these two Tao posts than anything else I've encountered online. Thank you.

George McPherson responds:

I think this falls into the category of the law of small numbers. Relatedly, I just finished reading The Hot Hand by Ben Cohen and enjoyed it very much.

Jan

25

Teller of tales

January 25, 2025 | Leave a Comment

the book Teller of Tales: The Life of Arthur Conan Doyle depicts an energetic man with many talents, many of them shared with Sherlock himself.

This compelling biography examines the extraordinary life and strange contrasts of Sir Arthur Conan Doyle, the struggling provincial doctor who became the most popular storyteller of his age when he created Sherlock Holmes. From his youthful exploits aboard a whaling ship to his often stormy friendships with such figures as Harry Houdini and George Bernard Shaw, Conan Doyle lived a life as gripping as any of his adventures.

Vic's X/twitter feed

Jan

24

Anonymity, Signaling, and Collusion in Limit Order Books
Álvaro Cartea, University of Oxford; University of Oxford - Oxford-Man Institute of Quantitative Finance
Patrick Chang, University of Oxford - Oxford-Man Institute of Quantitative Finance
Rob Graumans, University of Oxford - Oxford-Man Institute of Quantitative Finance; Autoriteit Financiële Markten (AFM)
Date Written: January 03, 2025

A key feature in the design of a limit order book is the anonymity of limit orders. However, we analyze data with trader identification and find that market makers break the anonymity of limit orders. Market makers use limit orders with large volumes to signal themselves to other market makers to avoid trading with each other and to snipe retail limit orders. We explain the behavior of market makers with a model that considers competitive and collusive equilibria. The model shows that the behavior of market makers we observe in the data is consistent with that in a collusive equilibrium where market makers use signals to avoid sniping each other's limit orders. Signaling enables market makers to share the benign flow from retail limit orders, and to share the additional benign flow from impatient investors who otherwise would have traded with a retail investor’s limit order.

Asindu Drileba writes:

I wonder how the markets would change if order books were opaque.

Jan

23

Biological Evolution

Price on evolution is a beautiful informative book that every person interested in markets should read. magnificent summary of the three main stepping stones in Darwin's discovery: Lyell's Geology, voyage of beagle, study of Galápagos.

Here is Price's summary of what Darwin would say: "variation between individuals occurs in all species and is caused by the variability of environments to which a population is exposed - the slight variation that benefits an individual in its struggle for existence enables it to survive longer and reproduce more successfully than others." apply this to markets especially stocks.

Carder Dimitroff writes:

For those interested in historical details, Charles Darwin credited William Charles Wells as one of his precursors in natural selection and biological evolution.

[Wells] distinctly recognises the principle of natural selection, and this is the first recognition which has been indicated.

- Origin of Species, 4th edition

Stefan Jovanovich offers:

Pioneer of Natural Selection: William Charles Wells of Charleston

Vic's X/twitter feed

Jan

22

Morris Ranger: The Rise and Fall of the Liverpool Cotton Market’s Greatest Speculator, 1835 to 1887
by Nigel Hall

In the period 1878 to 1883 there was heavy speculation in the Liverpool raw cotton market associated with a trader named Morris Ranger. Little has previously been written about Ranger and his background. Ranger was born in Germany and emigrated to the United States in 1855. He initially traded in tobacco but branched out into cotton during the American Civil War. He settled in Liverpool in 1870. His cotton speculations were enormous, but he fell bankrupt in 1883. The speculations associated with Ranger involved other Liverpool traders and drew heavy criticism from the spinning industry. The speculations played a part in a reorganisation of the Liverpool market and attempts to circumvent it, including the building of the Manchester Ship Canal.

This caught my eye because it was a parallel to what happened in NY during the Crews era with the railroads and the Adams' brothers Chapters of Erie.

In the late 1860s, the spectacular growth of the American economy created an unprecedented concentration of power. The corporate directors that emerged possessed tremendous amounts of economic leverage, and often they flagrantly abused it. The Adams brothers, Charles and Henry, were appalled by this unscrupulous behavior and sought to expose the financial machinations behind it. Charles examined the practices of those running the Erie Railroad while Henry focused on the efforts of Jay Gould and Jim Fisk to corner the gold market. The results of their work are the articles presented in Chapters of Erie. While the term "investigative journalism" did not exist in the Adams brothers' time, their essays show fine examples of it. The Adams brothers' well-researched, perceptive, and sometimes sardonic writing will appeal to anyone interested in the history of big business in the United States and how it affected economics and politics. Students of journalism, especially those with an interest in early muckraking, also will appreciate this groundbreaking work. All readers cannot help but notice a striking similarity between the corporate leaders of the 1860s and the financial power brokers who dominate today's headlines.

Jan

20

Price gouging

January 20, 2025 | Leave a Comment

price gouging - This week’s news affirms earlier reports from all of human history that price controls discourage producers, reduce supply and impose shortages that cause consumer suffering (wsj).

In Praise of Price Gouging
When demand far outstrips supply, unfettered prices are just what we need.

We should praise price gouging, not ban it. Yes, we should pass a new federal price gouging law—one that nullifies the many state laws prohibiting it.

The Problem with Price Gouging Laws
Is optimal pricing during an emergency unethical?

Many people feel price gouging is morally wrong. The remarks of newspaper columnists and state legislators provide ready evidence on this topic. Survey research by Daniel Kahneman, Jack Knetsch, and Richard Thaler, published in the American Economic Review, further establishes this point: most respondents found price increases during difficult times to be unfair, except in cases in which retailers were only passing along cost increases.

More recent research suggests that these unfairness judgments are driven primarily by emotional responses to the price increases. Careful examination of the ethics of price gouging raises questions for these emotion-driven judgments. The ethical case for limiting price gouging is weaker than it may appear.

The Speculator As Hero

Vic's X/twitter feed

Jan

19

Here is the original thread.

All of the agents show their reasoning so you can see how they work.

1 • Market Data Agent: gathers market data like stock prices, fundamentals, etc.
2 • Quant Agent: calculates signals like MACD, RSI, Bollinger Bands, etc.
3 • Fundamentals Agent: analyzes profitability, growth, financial health, and valuation.
4 • Sentiment Agent: looks at insider trades to determine insider sentiment.
5 • Risk Manager: determines risk metrics like volatility, drawdown, and more.
6 • Portfolio Manager: makes final trading decisions and generates orders.

Here is the GitHub repository.

Why would this work or be good at? Why would it not work? I don't think it will work since the same model will be used my many if successful and the gains will be cancelled out.

Larry Williams comments:

Ultimate curve fit - wait a year to know.

Hernan Avella writes:

This is absolutely the way to go, but there’s a bit more to what we get to call “Agent”. Also his quant module is looking at dumb shit.

Julian Rowberry responds:

horses had a good track record before cars. AI is making key opinion leaders redundant too.

Jan

17

Cold outside (and in)

January 17, 2025 | 1 Comment

In Galton's autobiography of 1909 he discussed a time in his Rutland London address when he felt it necessary to wear 15 articles of clothing to keep himself warm as there was no heat in his house. two of his prized monkeys died in that cold.

I had a similar experience in Conn on Thur Jan 16; the temperature dropped to 5 Fahrenheit and I had no heat nor a wife as she was in London. I froze all over. In a similar event in Chicago 65 years ago my pet Macaque died from the cold.

Vic's X/twitter feed

Jan

17

Why Scientists Are Linking More Diseases to Light at Night

Glaring headlights, illuminated buildings, blazing billboards, and streetlights fill our urban skies with a glow that even affects rural residents. Inside, since the invention of the light bulb, we’ve kept our homes bright at night. Now, we’ve also added blue light-emitting devices — smartphones, television screens, tablets — which have been linked to sleep problems. But outdoor light may matter for our health, too. “Every photon counts,” Hanifin said.

For one 2024 study, researchers used satellite data to measure light pollution at residential addresses of over 13,000 people. They found that those who lived in places with the brightest skies at night had a 31% higher risk of high blood pressure. Another study out of Hong Kong showed a 29% higher risk of death from coronary heart disease. And yet another found a 17% higher risk of cerebrovascular disease, such as strokes or brain aneurysms.

Nils Poertner comments:

Sleeping in a fully light-blacked-out room is indeed relaxing for the optic nerve and the brain.
That is why expensive hotels have proper curtains and cheap ones often don't. We can't change society but we can make individual adjustments (or at least at home).

Jan

16

the hope of the bears was that jan 31 close would be LOWER than dec 31 close of 5935 so they could tout the Jan barometer showing bear and they could attribute it to their feminine champion not being there to raise service rates.

a good book by a good man:

My Years with General Motors, by Alfred P. Sloan, Jr.

My Years with General Motors became an instant best seller when it was first published in 1963. It has since been used as a manual for managers, offering personal glimpses into the practice of the "discipline of management" by the man who perfected it. This is the story no other businessman could tell - a distillation of half a century of intimate leadership experience with a giant industry and an inside look at dramatic events and creative business management.

but how the divisions survived with all those reports and restrictions one doesn't know. perhaps this is why they needed a bailout in 2008.

Vic's X/twitter feed

Jan

15

How to Gamble If You Must: Inequalities for Stochastic Processes

This classic of advanced statistics is geared toward graduate-level readers and uses the concepts of gambling to develop important ideas in probability theory…. Following an introductory chapter, the book formulates the gambler's problem and discusses gambling strategies. Succeeding chapters explore the properties associated with casinos and certain measures of subfairness. Concluding chapters relate the scope of the gambler's problems to more general mathematical ideas, including dynamic programming, Bayesian statistics, and stochastic processes.

And a more recent paper:

How to Gamble If You Must
Kyle Siegrist, Department of Mathematical Sciences, University of Alabama - Huntsville

In red and black, a player bets, at even stakes, on a sequence of independent games with success probability p, until she either reaches a fixed goal or is ruined. In this article we explore two strategies: timid play in which the gambler makes the minimum bet on each game, and bold play in which she bets, on each game, her entire fortune or the amount needed to reach the target (whichever is smaller). We study the success probability (the probability of reaching the target) and the expected number of games played, as functions of the initial fortune. The mathematical analysis of bold play leads to some exotic and beautiful results and unexpected connections with dynamical systems. Our exposition (and the title of the article) are based on the classic book Inequalities for Stochastic Processes; How to Gamble if You Must, by Lester E. Dubbins and Leonard J. Savage.

Jeff Watson comments:

Only play cards with suckers, and never try to fill an inside straight. Never sit in a poker game with a guy named Doc. Never lay the points, stay away from sports betting altogether, never be the bank in a casino baccarat style game. Stay away from slots, casino pit games, you will get ground down by the vig.

There are only two bets I can afford in a casino. One is betting the pass/no pass line in craps, the vig on the pass is 1.414% and 1.36% on the no pass. Plus you can get bets behind the line. The other is the banker bet in baccarat where the house has a 1.06% edge. Even with the commission, it’s a good bet. Still, no matter what, play the game long enough and the vig will kill you.

The banker bet can be real good. Playing for an entire session as banker can cause one the embarrassment of losing everything then having the game boss ask very politely, “How do you plan to settle the commission?”

Jan

14

"i see you referenced technical analyst as a job that might vanish in the next 50 years. How could you say that when Stanley Druckenmiller sold out his longs in Oct 1987 because the months of 1987 were similar to 1929?" and Bill Gross has been bear since 1950 Dow 800.

don quixote part 1, chapter 47: "it is you who are crazy not me for failing to see the value of moving averages and fibonacci series and head and shoulder patterns. even andy lo has found them significant as long as you don't consider the last 10 or 20 prices."

"have you not read Technical Analysis by John Magee? it you had the pleasure of seeing his 20 or so wize old men with slide rules and protractors following the trends and moving averages as I did in 1964 you wouldn't dare to question its staying power."

Mite I suggest that Dr. Magee's former headquarters in springfield mass 1 block away from Pembroke College be named as a National Monument and that he and his band of Brothers be placed in the t.a. Hall of Fame with the full honors that were accorded to Joe Granville.

Vic's X/twitter feed

Jan

13

Assessing causes

January 13, 2025 | Leave a Comment

an excellent study explaining moves of over 2.5% in all markets attributing the moves to monetary factors:

What Triggers Stock Market Jumps?
Scott R. Baker, Nicholas Bloom, Steven J. Davis and Marco Sammond, 9 December 2024

We examine next-day newspaper accounts of large daily jumps in 19 national stock markets to assess their proximate cause, clarity as to cause, and geographic source. Our sample of over 8,000 jumps, reaching back to 1900 for the United States, yields several novel findings. First, news about monetary policy and government spending triggers twice as many upward jumps as downward ones and a highly disproportionate share of all upward jumps. Second, upward jumps due to monetary policy and government spending are much more frequent after a stock market crash. In this sense, the “Fed put” emerged decades before the 1990s, extends to other central banks, and characterizes fiscal policy as well. Third, greater perceived clarity about the reason for a jump foreshadows lower market volatility. Clarity trends up over the past century and is unusually high for jumps triggered by monetary policy. Fourth, leading newspapers attribute 38 percent of jumps in their own national stock markets to US economic and policy developments. The US role in this regard dwarfs that of Europe and China.

daily moves of 2.5% in the HBS study but explanations of reasons for moves are retrospective and can't be objective. its a "monetary" reason rather than ineluctable random reason following a major decline.

one was looking for research on the fate of markets. one believes that underneath the upward drift of 10000 % per 125 years there is a fate factor that brings markets to fates like 100000 in bitcoin and 50000 in dji, 7000 in sp.

Vic's X/twitter feed

Jan

12

Perhaps the basis for Lonesome Dove:

We Pointed Them North: Recollections of a Cowpuncher

Edward Charles "Teddy Blue" Abbott was born in England in 1860. He came to the United States in 1871, with his parents, settling around Lincoln, Nebraska. Teddy Blue is hailed as one of the greatest of the cowboys who brought herds of Longhorns north from Texas. His charming looks and rebel ways have forever etched him into Montana history.

Gyve Bones offers:

If a storm came along and the cattle started running — you'd hear that low, rumbling noise along the ground and the men on herd wouldn't need to come in and tell you, you'd know — then you'd jump for your horse and get out there in the lead, trying to head them and get them into a mill before they scattered to hell-and-gone [The cowboys would attempt to make the cattle run in an ever-tightening circle until they could no longer move.] It was riding at a dead run in the dark, with cut banks and prairie dog holes all around you in a shallow grave…

One night it come up an awful storm. It took all four of us to hold the cattle and we didn't hold them, and when morning come there was one man missing. We went back to look for him, and we found him among the prairie dog holes, beside his horse. The horse's ribs was scraped bare of hide, and all the rest of the horse and man was mashed into the ground as flat as a pancake. The only thing you could recognize was the handle of his six-shooter. We tried to think the lightning hit him, and that was what we wrote his folks in Henrietta, Texas, but we couldn't really believe it ourselves. I'm afraid it wasn't the lightning. I'm afraid his horse stepped into one of them holes and they both went down before the stampede.

The awful part of it was that we had milled them cattle over him all night, not knowing he was there. That was what we couldn't get out of our minds. And after that, orders were given to sing when you were running with a stampede so the others would know where you were as long as they heard you singing, and if they didn't hear you they would figure something happened. After awhile, this grew to be a custom on the range, but you know, this was still a new business in the seventies and we was learning all the time.

- Teddy Blue Abbott, We Pointed Them North, Recollections of an Old Cowpuncher, 1939

Jan

11

UBS Global Investment Returns Yearbook 2024, Summary Edition

The online version contains the entire Chapter 10 from the full book:

Corporate bonds and the credit premium

Corporate bonds are a major asset class with an outstanding value of some USD 44 trillion, almost half that of the value of global equities. The return to a higher interest rate environment has led many investors to re-consider their merits. This new chapter is thus timely in presenting long run evidence on corporate bonds since the 1860s from both the US and UK. Even very high-quality corporate bonds have offered a significant credit risk premium. The premium from high-yield (or junk) bonds is appreciably higher. Yield spreads of corporate over government bonds incorporate this premium but are not a measure of the expected premium because they also encapsulate expected default losses. This chapter reports on default and recovery rates over the long haul and reviews the determinants of yield spreads and default rates. Finally, it examines whether factors can help boost corporate bond returns and provide positive premia.

Charles Sorkin wonders:

The $44T estimate of the market value of corporate bonds sounds suspect. (To me, at least). I see that UBS cites some SIFMA data to produce a donut chart of US outstanding debt, but one wonders if they are including all manner of dubious Chinese securities that are effectively beyond the scope of most developed market investors.

Jan

10

I believe 2024 will be remembered as the year of great awakening. First, the so-called "hydrogen economy," pushed by several administrations and countries, is struggling. Plug Power, Ballard Power, Bloom Energy, and Hyyvia have all experienced losses and related financial challenges. Wood Mackenzie warns that green hydrogen projects are near collapse, with several projects likely to be canceled or deferred (how does it make economic sense to consume electricity to make hydrogen, compress it, move it, store it, and then consume it to make electricity?).

Second, Big Tech is colonizing local power grids at a scale and speed few anticipated. Policymakers are slowly realizing that demand is eclipsing supplies, and at the current rate that demand grows, supplies will quickly be exhausted.

Third, there are unrealistic expectations that the industry can respond in time to avert troubles by increasing supply. Many assume that energy supplies are commodities and can respond to market forces. With new baseload power projects taking at least five years and an average of ten years to initiate and complete, the only realistic option is to manage demand. This conclusion presents significant implications for Big Tech and local consumers.

Like biotech, the electric and gas industries will face an uncertain future in 2025. In the United States, states and Regional Transmission Operators have ultimate control, with the federal government's role limited to providing economic incentives. Consequently, the nation will likely witness various responses depending on local interests.

In any case, Big Tech's demand for power may be severely checked. If investors see unlimited growth in AI and related technologies, they may want to consider the challenges.

The alternative is less pleasant. If Big Tech successfully colonizes the nation's grids to the needed levels, the price of electricity and gas for other industries, commercial properties, and residential consumers will jump, resulting in more inflation.

Either way, the current situation is not sustainable. Solutions will be implemented in 2025 and beyond, but new nuclear power and transmission lines will not be among them for several years.

Remember that there are always winners and losers in energy; there's rarely an easy win-win opportunity. Higher prices produce substantial margins for those previously invested. For cost leaders, supply-demand mismatches present a happy outcome at the bottom line. Even marginal assets, like old nuclear and coal, could become more attractive. However, pipeline capacity issues could create growing challenges for natural gas assets.

The consumer is at risk. Self-generation is attractive to upper-income consumers. Avoiding the purchase of any watt-hours at any time of the day could produce significant savings.

Stefan Jovanovich writes:

The appeal of the income tax was that it promised a tiered system of pricing - i.e. the rich would pay more. There could be an Americans First progressive movement in this century that demanded the same system of pricing for electricity, health care and other services that have become rights. The "average" Americans could pay one rate; the corporations and wealthy users could pay a higher one.

A question for CD. Assuming that politics produces an Americans First tiered system for utility and other pricing where the "average" Americans are guaranteed priority over the large volume consumers, what would the effects be for the utilities? Don't current rate structures give large users a unit discount because they provide so much more demand?

Carder Dimitroff responds:

Remember, a utility's primary mission is/should be to rent its wires or pipes. Every wire and pipe used by utilities in the United States is economically regulated to ensure its owners earn a margin above its levelized costs. Theoretically, utilities' gross margins for wires and pipes are guaranteed no matter how individual tariff books are constructed.

In states where utilities have not deregulated their power plants, utility commissioners may create sophisticated tariffs where utility returns consider the combination of wires, power plants, commodities, and services. If a utility upsets its state commissioners, it could see margins thinned. This frequently happened with nuclear utilities when they delivered new power plants late and over budget. But the penalty is temporary; their full returns were restored later.

Tariffs are [intentionally] complicated. Large power users are frequently offered a break on their energy costs. However, they pay more for services that are not charged to residential consumers. Historically, one hefty example has been the utilities' demand charges, which large consumers hate. Another is for power factor charges, which require large customers to actively manage how they consume energy. In addition, many states require large power users to pay the utility for their capital costs to place transformers on customers' properties and to compensate utilities for stringing high-voltage power cables to those transformers. However, every state is different, and utilities within states negotiate different tariffs.

Big Al adds:

AI Needs So Much Power, It’s Making Yours Worse

AI data centers are multiplying across the US and sucking up huge amounts of power. New evidence shows they may also be distorting the normal flow of electricity for millions of Americans, threatening billions in damage to home appliances and power equipment. 75% of highly-distorted power readings across the country are within 50 miles of significant data center activity.

Jan

9

The Money Masters by Bill Still

Documentary about the creation and history of the modern central banking system. I learned so much from it. So many interesting reading recommendations, historical insights. It's my exact kind of documentary. Very long (3 hrs +), almost no cliché information & made before the year 2000. It checked all my boxes.

Jan

8

Winning Ugly, reviewed by Vic

After my recent writings on such things as social insects, evolution, cladification, hydraulics, technology, roulette, marketing, herding, communication theory, herding, piracy, military strategy and opera, I felt it was high time to return to the one thing that I really know about — the lessons from racquet sports. Thus, it was a pleasure to come across the 1993 book on the mental game of tennis, Winning Ugly by Brad Gilbert and Steve Jamison. We all have much to learn from any book by a player who beat Conners and was confronted by him in the locker room afterward in his jockstrap shouting, "You shouldn't be on the same court with me!" and whose victory over McEnroe prompted McEnroe vow to quit the game forever at the age of 27 (and actually do so for six months) or who beat Boris Becker while Becker cursed in German about the humidity and the low-flying planes.

Indeed, the subject of the lessons from games is one of the most valuable for all specinvestors because games are developed to teach us through childhood play the universal things that will help us become competent in our life. To keep it simple, here are 11 useful lessons that I learned from Winning Ugly:

1. Keep the eye on the ball. Gilbert recommends forgetting about the player and following the ball on the serve. I tried it and found that it gives you a split second of extra starting time that is key to proper positioning. I would suggest that this is analogous to watching the open rather than the call. So often , we wait for that great or terrible opening call to be realized, or that terrible reaction to the number that you know should ensue, and miss the trade entirely.

2. Bring proper equipment to the game. Gilbert has a list that for openers includes water, eight rackets (including two with lower and higher tension), energy food, Ibuprofin, Flex-All, chemical ice, towels, sweatbands, extra grips, shoelaces, Band-Aids, cap with visor, dry shirts, socks and sneakers, and pen and notebook. What do you bring as a trader to the opening of the game? Might I suggest that if Gilbert will go all out to win $5,000 in a match, your own efforts to prepare for the trading session might be just as careful? Be prepared with everything you conceivably might need — make up your own list — but strangely, many of the same items that Gilbert mentions might be useful. I would add such things as studies, financial numbers, position sheets, previous games against your trading opponent, a plan for the day, a limit as to how many and where you will trade, alternate communication links, a backup personage for when you leave the room, a phone intercept, music and food.

3. Keep a notebook handy at all times to record your thoughts about your opponent. Gilbert does this during the game, and I would suggest that this would be an excellent thing for specs to do — but your good ideas will come to you at all times. Carrying a notepad has the further advantage of convincing those you have contact with that you are a man of respect.

4. First points are key. Gilbert says that among top players, the person who takes the lead first wins 85% of the time. He believes that an early lead gets the adversary to play defensive and overly pressing tennis. I believe that in trading when you start out with a profit you become much stronger during the rest of the match as you can withstand a greater loss, and the adversary has to extend himself much greater with his mini-booms and busts to squeeze you out.

5. Practice hard before you play. Gilbert has a most unsportsmanlike workout he likes to go through which I deplore, involving getting your opponent to hit it to you first at the net, then hit you lobs and cross-courts and serves so that by the time you play the game you're thoroughly warmed up. I like the idea of preparing everything in advance, even to the extent of entering your orders before the session starts so that you won't, in the heat of the moment, miss the big ones. Certainly you should go over all conceivable contingencies before the game starts.

6. Some points are much more important than others. Gilbert believes that these are the advantage points and the points that lead up to them. My friend Martie Riesman, the champion table tennis player, believes the same thing, and so did Christy Mathewson in Pitching in the Pinch. To me, every point is key, but who am I to argue? Certainly there are key times in the market, I would include the first 20 minutes, the intervals before 11 a.m., and the opening relative to the call as key points here. Also what the market does at the beginning of a period versus the end.

7. Recognize your opportunity. Analyze what's involved, then capitalize on it. That's the Gilbert formula that he applies before, during and after the match. I guess this would be similar to what I consider the key to the spec world: Ask the right questions and then test. But the recognition part, trying to keep an open mind as to when, what and where the questions come from, would augment my guidelines, and it's something that I'll try to improve upon.

8. Be your own doubles partner. Partners in a good doubles team talk to each other about 90 times during a match. Do remind yourself to do the right thing, to prepare for your opponent's strengths, to move to the right position, to give the key points your all during the trading day.

9. Play to your opponent's strengths and weakness. This is key to Gilbert's success. And he has guidelines for playing against the retriever, the player with speed, the attack to your backhand, the good server, the excellent return of serves, the serve volley player, the weak server, the lefty and the heater (the player who makes the point last less than 3 seconds the way they do at Wimbledon). Think of who is on the other side of your trades — is it a dealer or a market maker, a chronic, a charlatrendist? — and act accordingly. Have a plan for dealing with each.

10. Learn from the experts. Gilbert has a chapter on what he learned from Agassiz (hit them on the rise), Lendl (vary the pace), Connors (go for the opponent's weaknesses and return serve properly) Becker (go for the lead and be aggressive). There are many books about how the experts trade. I would think that most of the material in such books is promotional or misinformation, but occasionally in an interview or by analyzing their objective actions, say in the positions of trader's reports, you can glean some information that is not out of date or designed to mislead.

11. Be tournament-tough. Here's a potpourri of catchwords from Gilbert: desire, dedication diligence, mental management, get the early edge, play smart, don't let the other player upset you, have a plan for every aspect of your tennis, mental preparation, stretching warm up, the start of your match, don't rush. All these things are key to success.

Gilbert is to be complimented on a masterful book. Everyone who's seen Gilbert play has the same reaction: "How the Hades did this man win? He hits like a caveman!" I can think of no type of player better to learn from. Anyone who reads Winning Ugly and applies the lessons to his own games and pursuits will find many beautiful outcomes arising from this ugliness.

Jan

7

Tips

January 7, 2025 | Leave a Comment

the sage says don't follow tips, and the palindrome cautioned me not to follow his tips, especially when they were on tv. yet the most successful investor I knew in my 65 year foray into investments followed every one of them very successfully.

i have two tips I received at a recent lunch with a very successful and knowledgeable biotech investor - Crispr and Biomarin - both are down about 1/3 last 12 months.

the worst experience i had on tips came when I was writing for MSN with Miss Kenner. the tip was to buy a company that was a consolidator. their last consolidation involved a garbage disposal company. i posted this in my column. the next day the stock opened -15%.

it turned out the tipster took the occasion to unload his holding of the stock the next day. He had recently recovered from a year in Jail with his only complaints being they didn't serve kosher food. he sensed how easy it was to sucker me.

i used to trade 2000 gold contacts with impunity. the position reached a critical stage in 1981 in the midst of the Polish crisis. fortunately I had as a partner at that time a Prof at Harvard who was very close to the dean who had been an ambassador to Hungary.

My partner transmitted to me that Russia had to combat this insurrection. I sold out my long position based on this tip. the next day Russia didn't go in and gold went up 10%. as this happened some 50 years ago, some of facts may be off but the gist is true.

bring bak to mind the old horse racing tip joke of 78 years ago. it ends with not following a tipster's suggestion that turned out rite 3 times in row. finally he asks me for pop corn and I bring him bak cracker jacks. "you know I cant digest cracker jacks. i have false teeth."

"i thought i should fade you this time"

Vic's X/twitter feed

Jan

6

AI-Powered (Finance) Scholarship
Robert Novy-Marx, Simon Business School, University of Rochester; National Bureau of Economic Research (NBER)
Mihail Velikov, Pennsylvania State University - Smeal College of Business; Pennsylvania State University
Date Written: December 16, 2024

This paper describes a process for automatically generating academic finance papers using large language models (LLMs). It demonstrates the process' efficacy by producing hundreds of complete papers on stock return predictability, a topic particularly well-suited for our illustration. We first mine over 30,000 potential stock return predictor signals from accounting data, and apply the Novy-Marx and Velikov (2024) "Assaying Anomalies" protocol to generate standardized "template reports" for 96 signals that pass the protocol's rigorous criteria. Each report details a signal's performance predicting stock returns using a wide array of tests and benchmarks it to more than 200 other known anomalies. Finally, we use state-of-the-art LLMs to generate three distinct complete versions of academic papers for each signal. The different versions include creative names for the signals, contain custom introductions providing different theoretical justifications for the observed predictability patterns, and incorporate citations to existing (and, on occasion, imagined) literature supporting their respective claims. This experiment illustrates AI's potential for enhancing financial research efficiency, but also serves as a cautionary tale, illustrating how it can be abused to industrialize HARKing (Hypothesizing After Results are Known).

X. Humbert comments:

Fitting an Elephant

Jan

5

Two investors

January 5, 2025 | 2 Comments

A very wise investor and an old washed up man

Vic's X/twitter feed

Jan

4

Alfred Thayer Mahan: “The Influence of Sea Power Upon History” as Strategy, Grand Strategy, and Polemic, by Thomas Jamison

No book has had greater effect on the composition of and justification for industrial navies than Alfred Thayer Mahan’s 1890 The Influence of Sea Power Upon History, 1660-1783. Indeed, it is likely true that no other piece of “applied history” has been as successful (for better or for worse) in the making and shaping of U.S. national security policy; George F. Kennan’s 1947 “X Article” comes to mind as a comparable example. Written during a period of U.S. naval reform and expansion, Mahan’s research is at once a parochial argument about the need to revitalize U.S. “sea power,” and a broader account of the relationships between the ocean, trade, and national strength. Many critics have read Influence as transparent propaganda for a domestic audience or a set of dated prescriptions about naval strategy. True, the book is both of those things, but Mahan’s account of Atlantic imperial rivalries is also more valuably an “estimate of the effect of sea power upon the course of history and the prosperity of nations.” That form of comparative and nomological history makes Influence a strategic classic of enduring relevance.

This essay leverages Mahan’s personal correspondence, archival sources, and an extensive body of commentary to explore the content, creation, and reception of Influence. In doing so it encourages readers to consider the text through three lenses: polemic, naval strategy, and grand strategy. Like a piece of stained glass held up to the light, the Mahanian concept of “sea power” is many things at once, depending on one’s perspective. In a narrow sense, Influence is a specific argument—a polemic—aimed at fin de siècle “navalists” about the necessity of expanding the United States Navy (USN). As an analysis of purely naval strategy, it is also a thesis emphasizing concentrated battle fleet engagements as a means of achieving command of the sea. Most importantly, however, it is an outline of a grand strategy bound up in a national turn toward the maritime world.

Vic's X/twitter feed

Jan

3

1 GW = about 1 nuclear power plant

Five-year US load growth forecast [for power] surges to 128 GW

U.S. electricity demand is forecast to increase 15.8% by 2029, according to a new report from Grid Strategies. Six regions of the country are driving the growth

The report's load growth estimates are based on annual planning reports submitted to the Federal Energy Regulatory Commission by electric balancing authorities and updated with additional data from utilities and planning regions.

Consider this question from another list member: What would happen to the grid if Silicon Valley companies found technologies a decade hence that would provide similar server services with less electric power?

Answer 1a: The utility could face stranded assets, including underutilized power plants, transmission lines, substations, and distribution systems. Remember that most utility investments are 30-year-plus assets, are leveraged, and have their levelized costs, plus margin, firmly embedded in utility bills.

Answer 1b: How would investors hedge their position if they considered building a $1 billion gas turbine in states that deregulated their power plants?

David Lillienfeld responds:

Basically, you're going to see a mismatch between where demand from data centers are and where there's generating capacity. You can build demand a lot faster than you can build supply though, and if you get efficiency on the demand end, you have overpriced supply relative to the ability of the region to pay for the power generated. At some point, someone's going broke.

But here's the curious question–how much economic activity can be attributed to a server building? It's like a parking lot for data–nothing more than that. And if there isn't that much taxable revenues that it's generating, what's the appeal to governments–the risk for the electorate of holding the bag at the end of the day is non-trivial it would seem. So what's the appeal?

Henry Gifford writes:

In other industries power saving strategies are known but not adopted yet, but could be at any time without much warning.

Take cars for example. I heard that in about three years the whole car industry in Europe is going to switch from the now-standard twelve volt electrical system (actually about fifteen volts) to seventy-six volts. One advantage of voltage about five times higher is that electric motors can be about one-fifth the size they are now. This includes the starter motor used to start the engine, the motors used to raise and lower the windows, the heating/cooling system’s fan motor, the engine’s cooling fan motor, the alternator (which is basically a motor wired to work in reverse), and others. As motors are made in large part from Copper and rare earth magnets, smaller motors can save a lot of money. Another advantage is that the wires, usually made from Copper, can be about one-fifth the cross sectional area. Another advantage is that some things typically driven directly off the engine by rubber belts, such as the air conditioning system’s refrigerant compressor and the power steering pump can instead be driven by a small electric motor that can be located anyplace the designer chooses, instead of now having to be located in line with a belt wrapped around part of the engine. Shrinking all these things would make the car lighter, saving fuel. Voltages higher than seventy-six would of course extend these advantages in an ever-diminishing way, but be more capable of going through a person’s skin, thus seventy-six is thought to be the best choice.

The problem is, I heard the three year prediction about twenty years ago, and a few times after that, but not more recently than about ten years ago. So maybe it won’t happen anytime soon, or ever, but the technology and advantages are well known and waiting to be used.

Similar changes could gradually or suddenly drop the power used by data centers.

Jan

2

Maybe Jesus, in his hidden character as humorist and Zen master, was telling us to savor what’s really good for us.

Read Laurel's full post.

Jan

1

Laurel’s musical New Year’s card

Laurel Kenner performs 1st movement of Mozart Sonata in F major, KV 332.

Dec

31

Lions in winter

December 31, 2024 | Leave a Comment

in a discussion of U.S. strength in Scribner's jan 1900 they point to not only the cost of Europe's 4 million soldiers but the loss of productive activity from these young men. How many in the 3 letter agencies are contributing to our loss in productivity and current expenditure?

a resonant character from the past: In "East of Eden," the father figure who is considered to have a "fake" persona is Cyrus Trask; he presents a facade of a strong, military hero but is revealed to have exaggerated his war record and suffered a debilitating hit.

Cyrus is the Papa Bear. He's a one-legged ex-soldier who takes his brief military career very seriously. He destines his favorite son, Adam, for the army—whether Adam wants it or not—and lets his other son Charles tend to the farm or whatever. All of the nation's military higher-ups take Cyrus very seriously, and Adam is just about the only one who sees through his dear old dad for what he really is: a fraud. It eventually comes out that Cyrus probably did something shady because when he dies he has way more money than he should have.

from 2010 to 2025 there have been 12 years with sp up more than 10% - the next year was up in 11 years up about an average of 20%.

Biden is an 82-year-old lion in winter who fills his public and private meetings with war stories from a long career and reminders of his achievements. He seeks to burnish his legacy, infusing even the most rudimentary of White House events with a retrospective look at his career.

Vic's X/twitter feed

Dec

29

Chance, luck, and ignorance: how to put our uncertainty into numbers - David Spiegelhalter, Oxford Mathematics

We all have to live with uncertainty. We attribute good and bad events as ‘due to chance’, label people as ‘lucky’, and (sometimes) admit our ignorance. In this Oxford Mathematics Public Lecture David shows how to use the theory of probability to take apart all these ideas, and demonstrate how you can put numbers on your ignorance, and then measure how good those numbers are.

Coffee cup he got from MI5 showing verbal-numerical scale they use.

Also: The Art of Statistics

William Huggins offers:

i like to give this guide to my students for whom English is a 2nd/3rd (sometimes 4th+ language).

Kim Zussman is unimpressed:

David Spiegelhalter was Cambridge University's first Winton Professor of the Public Understanding of Risk.

Translation: He is the most qualified of the vast array of those who don't know WTF they are talking about, but are knighted to tell us.

Peter Grieve responds:

I heard a story a decade ago about one of the big decision theorists, I think it was a Harvard professor. He was offered a position somewhere else, and was agonizing about whether to accept it. A colleague suggested he use his decision theory, and he said "Come on! This is serious!" I've no idea about the veracity of the story, or who was involved.

Alex Castaldo clarifies:

You are talking about Howard Raiffa. The story was told by another professor, although apparently Raiffa later denied that he had said it.

Dec

27

50 Photos of The Last Free Place in America

Hidden in Southern California’s desert is a small squatter’s paradise affectionately known as “The Last Free Place in America”.

More on Slab City

Slab City, also called The Slabs, is an unincorporated, off-the-grid alternative lifestyle community consisting largely of snowbirds in the Salton Trough area of the Sonoran Desert, in Imperial County, California. It took its name from concrete slabs that remained after the World War II Marine Corps Camp Dunlap training camp was torn down. Slab City is known for attracting people who want to live outside mainstream society.

Dec

26

Cons

December 26, 2024 | Leave a Comment

i have fallen victim to more scams than anyone. let me describe some of them. the typical one was a big con that a bookseller from Pennsylvania pulled on me. first part was to have all my good books removed because of "mold" etc.

a part of the book seller bib con was to have another independent autograph and bookseller assure me that the best thing for me was to remove all my books and send them to Penn. unknown to me was that he was receiving a fee from the supposedly independent but sickly Penn.

There were many other strands in this big con which particularly hurt me since books was a a sin qua non of my parents. I have not gone into my library since I fell into the con. I hope one of my siblings doesn't fall victim to another big con.

Vic's X/twitter feed

Dec

23

So now we're going to get an interesting experiment in what happens when you impose tariffs on your neighbor. To wit:

1. The DEW Line? Probably going to be history very quickly
2. The Keystone Pipeline? The first pipeline to nowhere (why would Canada bother?)
3. Drug interdiction? I doubt the Canadians are interesting in dealing with drug gangs, but they will also have little reason to look kindly on us.
4. NATO? It's a goner already.

I'm not sure that we gain all that much in this tit for tat, but it will be interesting to see what's conjured up.

Carder Dimitroff responds:

It's more than oil from the Keystone Pipeline. As the name suggests, TC Energy (formerly TransCanada) is a Canadian company that exports significant amounts of oil and natural gas to the United States and US natural gas to Canada.

TRP's oil map

TRP's NG map

The Keystone Pipelines and the oil they transport are assets owned by Canadian companies rather than US companies. New tariffs on Canadian oil and natural gas traversing TC Energy's pipelines could increase wholesale energy prices within the US. Of course, higher prices help domestic producers.

The US produces more oil and natural gas than it consumes and is a net exporter of natural gas, oil, and byproducts. However, exports could decline if US wholesale feedstock prices increase relative to global markets.

Dec

22

Alfred Cowles

December 22, 2024 | Leave a Comment

A stock market person who is always sensible, with a memorable reference to Harold Davis:

Alfred Cowles

Dutch biochemist Charles H. Boissevain…advised him that multiple-correlation analysis could be applied to economic research and recommended that he speak to Harold T. Davis, a mathematician at Indiana University who spent his summers in Colorado Springs and a member of the fledgling Econometric Society. Cowles called Davis to ask if it was possible to compute a correlation coefficient in a problem involving 24 variables. Davis suggested that the calculations could be performed by Hollerith punch card machines, developed by a company that would later become International Business Machines (IBM). Cowles acquired a Hollerith computer and worked with Davis on the problem. When it turned out that the machines were ill-suited to the task, Cowles decided to perform a series of linear regressions to test the hypothesis that market analysts using current estimation techniques could not outperform random guessing.

Can Stock Market Forecasters Forecast?, By Alfred Cowles 3rd, December, 1932

This paper presents results of analyses of the forecasting efforts of 45 professional agencies which have attempted, either to select specific common stocks which should prove superior in investment merit to the general run of equities, or to predict the future movements of the stock market itself. The paper falls into two main parts. The first deals with the attempts of two groups, 20 fire insurance companies and 16 financial services, to foretell which specific securities would prove most profitable. The second part deals with the efforts of 25 financial publications to foretell the future course of the stock market. Various statistical tests of these results are given.

Harold Thayer Davis, a forgotten great and his time series book was the first to calculate the distribution of runs of all lengths.

Vic's X/twitter feed

Dec

21

An Investigation into the Causes of Stock Market Return Deviations from Real Earnings Yields
Posted: 6 Dec 2024
Austin Murphy, Oakland University - School of Business Administration
Zeina N. Alsalman, Oakland University
Ioannis Souropanis, Loughborough University

This research demonstrates that the simple difference between the current earnings yield on the S&P500 and the long-term real TIPS yield has significant forecasting power for excess returns on that stock market index over both short-term and long-term investment horizons. For all time frames, deviations from that theoretical identity for the equity premium are positively related to current economic slack in the economy. Over annual horizons, those excess stock return deviations are negatively (positively) associated with recent inflation rates (money growth). Inflation is found to be positively (negatively) related to monetary policy restrictiveness (long-term real profit growth) in the future.

Vic asks:

is this bull or bear?

Dec

20

How Old Are You? Stand on One Leg and I'll Tell You

I’m always interested in ways to quantify how my body is aging, independent of how many birthdays I have passed. And, according to a new study, there’s actually a really easy way to do this: Just stand on one leg.

Pamela Van Giessen writes:

I slipped on black ice a few years ago and broke my wrist. It was awful and I exclaimed that I would do everything possible to avoid that happening again. I have never had great balance to begin with. I started doing lots of planks. Minor improvement. This year I started running and walking backwards for ~10 mins/day (and I increased the planks to 4 mins). I have been doing this at least 5 days/week since January. I also do about 3 mins/day (7 days/week) sideways leg lifts (one leg at a time and then alternating) with my eyes closed.

HUGE improvement. On recent hikes I was able to rock hop over creeks without my usual falling on my rear and walked several round tree trunks over creeks (like a balance beam) successfully. Two yrs ago I would have had to scootch over those tree trunks on my butt.

Falls are one of the leading causes of mortality as we age because when people fall and hurt themselves it takes longer to recover and they get really nervous about it happening again so they become more sedentary. Peter Attia spends a lot of time discussing this in his book and podcast.

Larry Williams offers:

I had this in my February letter:

We are all aware of how dangerous falls can be for older people. I did not realize it was this dangerous; “The mortality rate for falls increases dramatically with age in both sexes and in all racial and ethnic groups, with falls accounting for 70 percent of accidental deaths in persons 75 years of age and older.” Am Fam Physician.

Most say older people fall because they lose their balance, surely that is part of it. But, there’s another part you can start working on now that costs nothing.

When you start to lose your balance, your body immediately corrects it with how you are standing. Weak ankles, as I see it, are the problem. I first realized this when training for the Sr Olympics. Faster sprinters have stronger ankles. Weak ankles mean you can’t “catch yourself” as you start to fall. To strengthen your ankles, walk barefoot. Walk on your toes, then walk on your heels (careful) to build up these muscles and protect you from falling. Lots of YouTube videos on this as well. Strong people fall less. Muscle loss and ankle strength will keep you upright.

A good exercise is to rock back on your heels, may want to hold on to something, to develop balance and strength

Andrew Moe adds:

Walking backwards uphill, dragging a big weight sled backwards and doing squats on an incline board are all favorites of the Knees Over Toes guy. He's an innovator who believes in building strength from the ground up. Also combines strength and flexibility. Worked for me and is now part of my regular exercise.

Dec

19

The service rate

December 19, 2024 | Leave a Comment

two heroes of speculation and investment are both receiving cheers all over. but left out is the one common factor they have. a better relation with service as well as better commission and margin structure.

how can someone paying 3.5 a round trip compete with someone who pays zero - and if you buy a company that was paying dividends and then you stop on grounds that your secretary pays a greater %.

what was average service rate over previous 15 years for these fossils? (one still living)

Vic's X/twitter feed

Dec

18

Vanished occupations

December 18, 2024 | 1 Comment

some occupations that have vanished in the last 150 years (eric sloanes america): stagecoach driving, chimney sweeping, town crying, aviation barnstormer, ice cutters, snow rollers, drovers, keel boatmen, grindstone man, sandwich men, etc. When will technical analysts vanish?

Eric Sloane's America

An informative guide to the vanishing landscape of America's forefathers includes brilliant photography of the barns, covered bridges, road signs, country inns, and steepled churches that they left behind.

Vic's X/twitter feed

Dec

17

In a few books I have noticed a pattern of the author insinuating people not to conform to the herd. Here are some examples:

"My resistance to conformity has been the bedrock of my speculative persona." — Education of a Speculator, The Chair

"Copper the public opinion" — Secrets of Professional Turf Betting, Robert Bacon

"The most contrarian thing of all is not to oppose the crowd but to think for yourself." — Zero To One, Peter Thiel

"Whoso would be a man must be a nonconformist. " — Self Reliance, Ralph Emerson

"If you suggest a doubt as to the morality of these institutions, it is boldly said that “You are a dangerous innovator, a utopian, a theorist, a subversive; you would shatter the foundation upon which society rests.” " — The Law, Frederic Bastiat

Are there any other books you know of that advise their readers not to be conformists?

Vinh Tu adds:

A connected concept is the minority game.

Humbert H. writes:

In markets, simply being contrarian is a recipe for losing money because "the herd" is often correct and markets are almost always efficient. Unlike the El Farol Bar problem, to be successfully contrarian one has to have insight into either something fundamental "the herd" doesn't see or anticipate a change in direction for whatever reason while having a correct insight into the timing. Game theory in its basic form doesn't seem to be very useful.

Asindu Drileba responds:

Yes, the minority game (El Farol Bar Problem) is just a toy model. So it may seem to be detached from reality at times. There is an ecological model that zoologists have come up with. I don't know it's exact name but it is described as follows.

Environment 1: If you're a buffalo and feed on the same grass plains with 1,000 other buffalos (herd members). The quality of grass you will feed on will be lower, since your competing with 1,000 herd members. Fortunately the odds of being eaten by a predator are lower. If a lion/cheetah attacks, your individual odds of being eaten are 1/1000.

Environment 2: If you're a "contrarian" buffalo, i.e move alone without your 1,000 friends. The quality of grass your eating will be higher since you don't need to share with anyone. But the odds that you are eaten, on the condition that the predator is successful are 100% i.e 1 in 1, cause you're the only target and possible victim.

So to the prey: The contrarian buffalo should figure out a way to not be eaten if it is to enjoy higher quality grass. To the predator: Education of a Speculator, describes retail people like me (the public) as the primary food for superior predators. Remember the more buffalos that join a herd the bigger it becomes and the higher the probability of a predator catching a meal.

Hernan Avella offers:

Conformity in Large Language Models

The conformity effect describes the tendency of individuals to align their responses with the majority….In this paper, we adapt psychological experiments to examine the extent of conformity in state-of-the-art LLMs. Our findings reveal that all models tested exhibit varying levels of conformity toward the majority, regardless of their initial choice or correctness, across different knowledge domains.

Humbert H. comments:

There are a couple of reasons why I like my own version of buy-and-hold, but really buy-and-hold in general: whatever happens you're not food for any predators in the market. You can be a victim of financial shenanigans, but when diversified that's not a big problem. The other is the drift. Same reason I never became a physicist: I always found physics really easy, and was always good from my high schools in the USSR and the US where I was the physics teachers' "pet" to college. But early on I figured out that to really make it in physics you needed to be a genius, and I was not, so there was not point in going that way. I don't feel I can beat the predators in the market because the top ones are both smarter and have more resources, so I don't even want to try. I admire those on the list who are trying, but to quote Dirty Harry "a man's got to know his limitations". I do have a couple of strengths for my version of buy-and-hold: I like to buy falling knives, which very few people like, so that's contrarian, and I can lose (or gain) value without any emotions other than "this is fun to watch".

Dec

16

Relevant quotes

December 16, 2024 | Leave a Comment

Some relevant Sherlock Holmes quotes, included at the beginning of each chapter of the brilliant statistics textbook Statistical Inference (Second Edition) by Casella and Berger:

"How do all these unusuals strike you, Watson?"
"Their cumulative effect is quite considerable, and yet each of them is quite possible in itself."

"I confess that I have been blind as a mole, but it is better to learn wisdom late than never at all."

"You can, for example, never foretell what any one man will do, but you can say with precision what an average number will be up to. Individuals vary, but percentages remain constant. So says the statistician."

"We want something more than mere theory and preaching."

"I’m afraid that I rather give myself away when I explain. Results without causes are much more impressive."

"We are suffering from a plethora or surmise, conjecture, and hypothesis. The difficulty is to detach the framework of fact - of absolute undeniable fact - from the embellishments of theorists and reporters."

Vic's X/twitter feed

Dec

15

Whither the weather: predicting weather patterns helps predict LNG demand and prices.

Asia and Europe in a contest to attract LNG cargoes:

US LNG exports to Europe surge in November on higher prices

U.S. LNG exports to Europe surged in November as the world's largest producer of the superchilled gas sent more cargoes to the continent and fewer to Asia and Latin America, according to preliminary data from financial firm LSEG. European natural gas prices climbed in November to their highest levels in two years on fears remaining Russian pipeline supplies to Europe will be halted or face further curtailment.

LNG tankers divert to Europe from Asia after Russia halts supplies to Austria's OMV

LNG traders divert cargoes from Europe to Asia as eastern demand strengthens

Meanwhile:

U.S. inventories enter the winter with the most natural gas since 2016

Rising LNG terminal costs to make new US projects less competitive

FYI, U.S. LNG producers must buy natural gas at market prices. Many competitors pay only lifting costs.

Dec

14

Father and son

December 14, 2024 | 1 Comment

a 63-yr differential between us. My father always said he would be the happiest man in the world when I could beat him at almost all things. I feel the same about Aubrey. (Until my stroke I could beat him at most racket sports.)

Vic's X/twitter feed

Dec

13

A Quixotic President, by Daniel Tenreiro
Wed, January 13, 2021

“The thing is to turn crazy without any provocation,” Quixote tells his sidekick, Sancho Panza, when asked what compelled him to give up his quiet countryside existence and playact knight errantry in the mountains of Spain. A rich bachelor wasting away on his vineyard in La Mancha, the protagonist of Miguel de Cervantes’s novel grows frustrated with the smallness of life. He yearns instead for the toil, anxiety, and arms of the chivalric romances he spends his days reading. Unable to make his dream a reality, Quixote opts to pretend: He mounts a ragged horse, costumes himself in a rusted breastplate, and sets off in search of eternal fame.

when you see a person registered for one party proclaiming views completely opposite - is it a case of false deception or the stockholm syndrome or sinking into the swamp or…

Vic's X/twitter feed

Dec

12

Want to Live a Long and Fulfilling Life? Change How You Think About Getting Old
Research consistently shows our attitudes and beliefs influence our health and longevity.

Data is mounting, much of it from research by Yale epidemiologist Becca Levy, about the impact our attitudes and beliefs have on our health and longevity. Levy’s interest in the connection began in the 1990s, when she traveled to Japan to try to understand why the Japanese had the longest lifespan in the world. She was familiar with explanations that attributed this longevity to diet—Japanese people consume less meat, dairy products, sugar and potatoes than other wealthy countries. But what stood out to her was how the culture respected and celebrated older people.

“It struck me as very different to what I had observed in the U.S.,” she told me. “So I began to wonder if these positive age beliefs could contribute to the longer lifespan in Japan.”

Nils Poertner writes:

Psychology plays a huge role here - eg. excessive nostalgia means one does not appreciate the moment - in my view it is also linked to far-sightedness (went farsighted at the age of 15! which is rare and then recovered). there is somewhat a placebo in life - and the joke is on us really.

Big Al comments:

There are maybe complicated issues around causality, e.g., do people with a positive attitude live longer and better, or do people with underlying factors that promote health and longevity tend to have a positive attitude? But I will stipulate that we might as well try it. Which leads to the issue of people feeling like they have failed if they *don't* have a positive attitude. Perhaps as a way of avoiding this pitfall, we could be given information on how to *practice* a positive attitude. Then, over time and with practice, we might see a benefit.

Dec

10

Grandfather Martin liked to encap stock market moves as an example of theory of least effort. Elmer Kelton applies the theory to the explosion of oil in a mine.

Any explosion will follow the path of least resistance. We want its main force to go out to the sides of the hele, to break up the formation. We don’t want it wasted, comin back up the open casing like a blast from a shotgun barrel. So we tamp a yard or so of pea gravel on top of the charge.

-Honor at Daybreak, by Elmer Kelton

Principle of Least Effort

I sat besides a stream of water in complete tranquility wondering about life, its purpose, “who am I?” and such esoteric thoughts. Abruptly, my left brain kicked in and started wondering about well, more left-brain things, like how water finds its own level and how it flows along the path of least resistance. That took me back to my college days when I first learnt about the path of least resistance in the context of electrons flowing through a wire creating electricity. This concept stayed close to my heart as I naively related it to my own disposition of doing things that took the least effort. Later on in life I figured that this Principle of Least Effort (POLE) is actually prevalent in all of nature.

much more work should be done on applying this principle to the stock market in the last 100 years after Granpa passed.

what examples of markets displaying theory of least effort ($1000 reward for best example).

[More on the math/physics side: Action Principles]

Vic's X/twitter feed

Dec

9

Payroll Tax Receipts growth:

More charts (click for full view):

Payroll Tax Receipts growth with a leading indicator

Employment: full-time vs part-time

Dec

8

Is This Wildly Overvalued Stock Market Doomed? Yes, but Maybe Not Yet -WSJ

the wsj foregoes the Dow theory, and the drift, and the seasonals, and the tendncy for the best to continue to do the best.

another great from Elmer Kelton with a million similarities of the path of mining for oil to markets:

Honor at Daybreak

very quietly the 30-year bond future price has hit a 32-day high. this has been insanely bullish for the S&P. in the last year for example S&P 40 days later is up 154 big points (up 80% to 100% of time) true for all back intervals thru 2001. no wonder wsj is bear.

Vic's X/twitter feed

Dec

5

I listened to Sex and the City over the weekend and the NY Times Sunday edition was like another version of it. here was a man who kept dozens of ratings of sex in city types on past dates and rated them 1 to 10 on how far they'd go more recently. He's a vac denier who ran for Pres in 2024.

continuing the coincidence of sex and city and nytimes there is big article about the Financial District Hip Mystery Tower and the cool x sex and city types who are leasing space there at 1/10 the going rate. somehow my chapter in Edspec on sex and the market is very relevant.

Vic's X/twitter feed

Dec

3

Roughing It

December 3, 2024 | Leave a Comment

for the past week ive been reading Roughing It and Following the Equator. It is amazing how much Mark Twain knew and how amusing it is. I particularly liked his analysis of the German Language, the Mormon migration and the booms and busts in the silver mines.

[Below, a market story from Roughing It. - Ed.]

A youth of nineteen, who was a telegraph operator in Virginia on a salary of a hundred dollars a month, and who, when he could not make out German names in the list of San Francisco steamer arrivals, used to ingeniously select and supply substitutes for them out of an old Berlin city directory, made himself rich by watching the mining telegrams that passed through his hands and buying and selling stocks accordingly, through a friend in San Francisco. Once when a private dispatch was sent from Virginia announcing a rich strike in a prominent mine and advising that the matter be kept secret till a large amount of the stock could be secured, he bought forty "feet" of the stock at twenty dollars a foot, and afterward sold half of it at eight hundred dollars a foot and the rest at double that figure. Within three months he was worth $150,000, and had resigned his telegraphic position.

[ And Twain analyzes The Awful German Language, from A Tramp Abroad. ]

Vic's X/twitter feed

Dec

2

(1) When Do Stop-Loss Rules Stop Losses?
EFA 2007 Ljubljana Meetings Paper
51 Pages Posted: 5 Mar 2007
Kathryn Kaminski, Massachusetts Institute of Technology (MIT)
Andrew W. Lo, Massachusetts Institute of Technology (MIT) - Laboratory
for Financial Engineering
Date Written: January 3, 2007

In this paper, we develop a simple framework for measuring the impact of stop-loss rules on the expected return and volatility of an arbitrary portfolio strategy, and derive conditions under which stop-loss rules add or subtract value to that portfolio strategy. We show that under the Random Walk Hypothesis, simple 0/1 stop-loss rules always decrease a strategy's expected return, but in the presence of momentum, stop-loss rules can add value. To illustrate the practical relevance of our framework, we provide an empirical analysis of a stop-loss policy applied to a buy-and-hold strategy in U.S. equities, where the stop-loss asset is U.S. long-term government bonds. Using monthly returns data from January 1950 to December 2004, we find that certain stop-loss rules add 50 to 100 basis points per month to the buy-and-hold portfolio during stop-out periods. By computing performance measures for several price processes, including a new regime-switching model that implies periodic Flights-to-quality, we provide a possible explanation for our empirical results and connections to the behavioral finance literature.

(2) Stop-Loss Orders And Price Cascades In Currency Markets
C. L. Osler, New York Fed, June 2002

In this paper, I provide evidence that currency stop-loss orders contribute to rapid, self-reinforcing price movements, which I call "price cascades." Stop-loss orders…generate positive-feedback trading. Theoretical research on the 1987 stock market crash suggests that such trading can cause price discontinuities, which would manifest themselves as price cascades. My analysis of high-frequency exchange rates offers three main results that provide empirical support for the hypothesis that stop-loss orders contribute to price cascades: (1) Exchange rate trends are unusually rapid when rates reach exchange rate levels at which stop-loss orders have been documented to cluster. (2) The response to stop-loss orders is larger than the response to take-profit orders, which generate negative-feedback trading and are therefore unlikely to contribute to price cascades. (3) The response to stop-loss orders lasts longer than the response to take-profit orders. Most results are statistically significant for hours, although not for days. Together, these results indicate that stop-loss orders propagate trends and are sometimes triggered in waves, contributing to price cascades. Stop-loss propagated price cascades may help explain the well-known “fat tails” of the distribution of exchange-rate returns, or equivalently the high frequency of large exchange-rate moves. The paper also provides evidence that exchange rates respond to non-informative order flow.

Dec

1

what can one say about the seasonals for December? the seasonals are bullish when the prev 6 months are up and bearish when then prev 6 months are down. recently a rise in the last day of November has been bullish.

a book by a stubborn and deep thinking man - highly recommended:

A Personal Odyssey, by Thomas Sowell.

Vic's X/twitter feed

Nov

30

When do we start seeing the effects of AI show up in national economic data? If you had invested $5K in a laptop and a word processing program, you could replace a secretary at multiples of the cost. When the web came in, there was Amazon squeezing out the costs of the middlemen.

But I don't see the savings for AI. I see lots of talk, some free programs, but in terms of real productivity, not so much. I'm also told that it's early days and I'm asking for too much in posing such a question, but I think we're now getting far enough into AI that it's not an unreasonable matter to bring up.

One thing that's clear is that AI isn't going to generate employment the way the last tech push did. But if it's going to really change the world as its advocates suggest that it will, those productivity gains should be apparent by now.

M. Humbert writes:

However AI productivity gains are measured, it’ll have to account for the productivity loss due to its high energy consumption. For the Austrian economics fans here. I’ve found Copilot to be a helpful time saving tool, so others probably do as well, so time savings definitely are occurring from AI use today.

Laurence Glazier responds:

Using it all the time, huge experiential benefit. Chatting to GPT every morning while reading Thoreau. Instant context. The other big breakthrough is spatial computing. All in the service of art.

Asindu Drileba comments:

From my experience, co-pilot and other LLMs, have not solved anything that could not already be done via ordinary Googling. Looking up solutions to code issues on stack overflow is no different from LLMs. And stack overflow is still better for some tasks (fringe computer languages like APL for example). LLMs are impressive, but are mostly just gimmicks. The only thing it has actually saved me time on is generating copyrighter material and filler text.

Jeffrey Hirsch adds:

Just had that discussion today about ordinary google still being even better than LLM Ais in finding info. Had some fun with AI editing and embellishing copy.

Asindu Drileba adds:

I suspect that the bad SWE job market is due to high interest rates, no AI. The SWE job market is enriched mostly by VC money. And VC money dried up when LPs withdraw to earn risk free money in treasuries instead of betting on start-ups whose success is on probability. I expect it to recover if interest rates come down to previous levels.

I think the LLM narrative was just something that tech executives parroted to show they had an LLM strategy. It's, Like how in 2018/2017 every executive had a "Blockchain" strategy. A lot of businesses assumed that LLMs would replace simple customer support jobs but they just saw their tickets pile up. Even the $2B valued, Peter Thiel financed, code assistant that would make you money on Up work as you sleep turned out to be a blatant scam.

Steve Ellison writes:

I don't have an answer for Dr. Lilienfeld's question about when AI effects will show up in productivity statistics. But I do hear anecdotally through my professional networks that AI projects are adding real value.

At the same time, Asindu is correct that the bad job market for techies, myself included, is more a consequence of rising interest rates–and I would add overhiring during the pandemic–than positions being replaced by AI. As Phyl Terry put it, "But this company [that announced layoffs] wants to go public so the better story is 'we are smart leaders using AI to become more efficient and profitable' vs 'we were idiots during the pandemic and have to lay off some people because we messed up.'"

Gyve Bones writes:

I find that the AI's ability to interpret my request and put together a coherent synthesis of several sources to be very helpful. Grok is nice because it provides a set of links to sources relevant to the prompt, and to related ??-posts and threads.

Laurence Glazier asks:

I usually have audio conversations with GPT rather than the older typed-in input/output. I just subscribed to X Premium to get access to Grok. Any good links for learning good usage? How nice Musk names it from the Heinlein novel.

Gyve Bones responds:

Check out the sample prompts Grok supplies on the [ / ] section in ??. The news analysis prompts for trending items is pretty cool.

Bill Rafter writes:

My business partner and I are in the process of marketing a new software application. Although we are rather literate, we have been running all of our marketing materials through Copilot, and we are amazed at the improvements Copilot makes to our text. It results not only in improved communication, but is a real time-saver. We even asked it to write a business plan, and it came back with a better one than our original.

Peter Penha offers:

I have not (yet) been on Grok but have found that the prompts do not differ very much across LLMs:

A Primer on Prompting Techniques, June 2024.

Prompt engineering is an increasingly important skill set needed to converse effectively with large language models (LLMs), such as ChatGPT. Prompts are instructions given to an LLM to enforce rules, automate processes, and ensure specific qualities (and quantities) of generated output. Prompts are also a form of programming that can customize the outputs and interactions with an LLM. This paper describes a catalog of prompt engineering techniques presented in pattern form that have been applied to solve common problems when conversing with LLMs. Prompt patterns are a knowledge transfer method analogous to software patterns since they provide reusable solutions to common problems faced in a particular context, i.e., output generation and interaction when working with LLMs. This paper provides the following contributions to research on prompt engineering that apply LLMs to automate software development tasks. First, it provides a framework for documenting patterns for structuring prompts to solve a range of problems so that they can be adapted to different domains. Second, it presents a catalog of patterns that have been applied successfully to improve the outputs of LLM conversations. Third, it explains how prompts can be built from multiple patterns and illustrates prompt patterns that benefit from combination with other prompt patterns.

This is earlier/shorter February 2023 paper - I am also a fan/follower of Prof. Jules White’s classes on Coursera why I flag the shorter/earlier paper as well.

Separate on the subject of AI - Eric Schmidt has a new book Genesis with Dr. Kissinger as a co-author (his last work before his passing) but Schmidt did a Prof G Pod Conversation released Nov 21st - in the podcast Schmidt goes over the threat from LLMs that are unleashed and noted that China in his view has open sourced an LLM equal to Llama 3 and that China instead of a being three years behind the USA on LLMs is a year behind. That China comment can be found here at 26:30.

Finally if anyone wants a great book I have read, on the history of the race to AGI going back to 2009: the Parmy Olsen book Supremacy on the histories of Sam Altman and Demis Hassabis is a wonderful read. Also breaks the world down between the AI accelerationists and the AI armaggedonists.

Big Al adds:

I do use Bard to learn or refresh my memory with R. For example, I am trying to use the "tidyverse" set of packages, and Bard is very useful when asked to write code for some task specifically using, say, tidyquant. The code almost never works first time cut & paste, but I can see how things are done differently and figure out what needs fixing. And I get answers to simpler problems faster than on Stack Exchange which is better for more complicated issues.

Laurence Glazier comments:

It's an inverted Turing test situation. The things that AI can't do help identify our humanity, our birthright.

Nov

25

Book Review: How To Become a Professional Con Artist
3/25/2005

Dennis Marlock opens his "How To" book with a testimonial:

As a law professor, I have read countless books, articles, and dissertations on fraud and deception. This, however, is the first time I have elected to endorse any author's work. The book is indeed an academic gem worthy of inclusion in university curriculums throughout the nation.

The beautiful thing about the professor's testimonial and the related, "I first bought the book hoping to discover why a cop would tell people how to commit fraud. Having read the book, I must now ask why he didn't write it sooner" is that they were both short cons written by the author.

The book lacks the scholarship, timelessness, humor and general principles of David Maurer's classic The Big Con, which I would recommend as one of the seven best books for market practitioners right after Ben Green's Horse Trading. Nevertheless, it is replete with cons and techniques we are exposed to in our day-to-day work in the market. The most relevant topic is chapter 4, "Tools of the Trade," which lists such essentials as "How to Talk Without Saying Anything." An example of this would be market talk such as "1040 is a key level." Yes, if it turns at that level and goes up it was key, and if it hits that level and goes below, why that proves that it didn't hold. A variant of this is the "the market is good as long as stays in the 1025-1075 range."

An important sub-technique is to "use abstract and otherwise equivocal and meaningless rhetoric." I have already written about this, and California Phil's precis of the earthquake "professor" is a classic here. But the market confidence man in general does always frame his thoughts in ways that cannot be disproved or refuted.

One loves the discussions of power laws in this context, as there's no way to differentiate a normal distribution from a power law with any degree of confidence for any samples involving 750 observations or less, and by then the situation has changed so much that one can always rely on Oct 19, 1987.

One must always appear confident as a confidence man and "I am completely confident that you will be totally satisfied with this necklace" is a phrase that the confidence man uses often. This is even more effective when you receive this assurance from a friend of the confidence man. I recently read an interview about a large man who has lost billions of dollars for his investors in publicly reported funds, yet the interviewer refers to the millions he has made the 30% a year internal rates of return, and the nine-figure amount that his followers made applying the techniques that the large man proudly boasts he took the lions share of , and the amazing returns he himself is making at the very present time, despite the difficulties he apparently has in making money for customers.

One of my favorite passages in "How to Become a Professional Con Artist" is the depiction of the big businessman as the ideal mark. "They're cows waiting to be milked," Marlock writes. "They are in abundance, they don't complain when being milked, they provide useful products, and they are used and abused by almost everyone. They are abused daily by employees, lawyers, stockholders, customers, suppliers, lenders, accountants, partners, tax collectors, and competitors. except for the stiff competition, bus schemes are the easiest, safest, and most profitable.

Read the full post.

Nov

24

Contrary to what has often been repeated on this esteemed list over the years, the art and process of trading is fundamentally the art and process of setting the right stops. Simpletons may claim that adding stops to a system (trading ES) reduces profitability, but that's only because the system itself is flawed, with laziness baked into its design. Setting the right stop is an integral process—it involves gauging current and expected volatility, weighing potential paths, and accounting for the bias.

Steve Ellison writes:

One of my best experiences with this list was that at the sparsely attended Spec Party in summer 2009, the 20 or so of us who were there had a very spirited discussion in Victor's living room about whether it was advisable to use stops or not. Many excellent points were made both pro and con.

Speaking for myself, I usually don't enter stop orders because they become part of the market, but I have mental stops. On the rare occasions when I actually have a profit, I am determined to not let it turn into a loss. And if a trade goes against me (by a nontrivial amount), that's new information that apparently my original analysis missed; in that case I am determined not to let a small loss turn into a big loss.

To put it another way, I entered a trade because I thought I had an edge, but the market moved in the wrong direction. Maybe something bigger is going on than, say, my analysis of the last 10 post-options-expiration weeks.

Big Al offers:

Stop Orders in Select Futures Markets
Nicholas Fett and Lihong McPhail
Office of the Chief Economist
Commodity Futures Trading Commission
August 29, 2017

This paper analyzes trade and order book audit trail data to provide a detailed summary of the use of stop orders in select futures markets; specifically E-mini S&P 500 Futures, Ten Year Treasury Note Futures, and WTI Crude Oil Futures. Recent flash rallies and the ever increasing speed of futures markets have called into question the appropriateness of traditional stop order strategies. By utilizing metrics related to both placement of and execution of stop orders, we show that stop orders are being used in these futures contracts with varying frequency and the strategy of stop order placement varies greatly by participant. As expected, trades involving stop orders are found to be highly correlated with intraday price volatility. Existence of stop orders is generally unknown to market participants as stop orders are not visible in the orderbook but must be triggered by a trade in the market at the corresponding price. More importantly, our analysis indicates that many traders are not only using stop orders for hedging purposes but also using them for latency reduction strategies. We provide a background on the usage and depth associated with stop orders in selected futures markets.

Larry Williams responds:

THANKS FOR THE POST. This should dispel the notion "they are going after my stops."

Asindu Drileba writes:

I don't actually use stops at all. My position size is my stop. I only bet a maximum of 3% of my bankroll. I really only get out of the market when I am liquidated. I sleep knowing that if I am to loose, my maximum loss is capped at 3%. I don't even respond to margin call emails. I often want to capture the moves between the daily open and the close. So what happens in between is something I usually ignore.

Nov

23

Deems Taylor

November 23, 2024 | Leave a Comment

this satirical bit brings to mind a Deems Taylor story. He came in for the second piece of concert that was complete programmatic movement. Deems thought the first piece was being performed. and all the allusions were wrong. Mark Twain in Roughing it writes of many mistakes like this.

father of the great libertarian scholar and editor Joan Taylor.

Deems Taylor: A Biography, by James A. Pegolotti.

Composer, critic, author, and radio personality, (Joseph) Deems Taylor (1885-1966) was one of the most influential figures in American culture from the 1920s through the 1940s. A self-taught composer, the New York City native wrote such pieces as the orchestral suite Through the Looking Glass and the acclaimed operas The King's Henchman and Peter Ibbetson, the first commissions ever offered by the Metropolitan Opera. Taylor's operatic works were among the most popular and widely performed of his day, yet he achieved greatest fame and recognition as the golden-voiced intermission commentator for the New York Philharmonic radio broadcasts and as the on-screen host of Walt Disney's classic film Fantasia. With his witty, clever, charming, and informative but unpatronizing manner, he almost single-handedly introduced classical music to millions of Americans across the nation.

Vic's X/twitter feed

Nov

22

All affectation is bad.
Something is better than nothing.
Between friends sharp eyes.
He who leans against a good tree finds good shelter.
The ass laden with gold mounts lightly up the hill.

Well-gotten wealth is lost, but with the ill-gotten the master is lost too.
The wheel of fortune turns quicker than a mill-wheel.
That which costs us little, is valued at even less.
Where one door is shut, another opens.
He who seeks danger perishes in it.

There are no birds in last year's nest.
A sparrow in the hand is better than a vulture on the wing.
Many littles make a Much.
Patience, and shuffle the cards!
All is not gold that glitters.

He who does not intend to pay is not troubled in making his bargain.
He who buys and lies, feels it in his purse.
One misfortune calls another.
Who goes ill, ends ill.
To draw one's beard out of the mire.

Where you least expect it up starts the hare.
The reputation of the master reveals that of the servant.
The ball is drawn up by the thread.
A single swallow does not make a summer.
The dry throat can neither grunt nor sing.

Fortune favors the brave.
What hath been, hath been.
Where duennas intervene, nothing good can come of it.
Make a bridge of silver for a flying enemy.
Upon a good foundation a good building may be raised, and the best foundation in the world is money.

Diligence is the mother of good fortune.
You cannot catch trout with dry breeches.
Here come the Bulls for certain!
Time is the discoverer of all things.
With life many things are remedied.

Vic's X/twitter feed

Nov

21

The Incredible Brain of a Poker Player

A true social phenomenon, poker is not just a game of chance and money. From a scientific perspective, we can think of it as a sporting discipline, requiring numerous biological and mental resources. Winning, losing, thinking, bluffing, resisting stress…each of these events results in specific brain activity. By combining testimonials from some of the best players in the world with insights from scientific experts and unique experiences, this documentary will allow each of us to understand the internal processes that govern our risk-taking, and each of our decisions.

Nov

20

Howard Hammer

November 20, 2024 | Leave a Comment

Vic and Howie Hammer being inducted into paddlable hall of fame. Howie at 88 the founder.

Howard Hammer – PFA Paddleball Legend of the Game Profile

Howard Hammer is the first inductee into the PFA Hall of Fame, and rightfully so. He was not only one of the greatest players the game has ever seen, but he also contributed more to the game than anyone I know. No one else is more associated with paddleball than Howie. Therefore, the title “Mr. Paddleball” is really appropriate.

Video: Paddleball Shots: Fundamentals, by Howard Hammer

Book: Paddleball: how to play the game, by Howard Hammer, 1979.

Vic's X/twitter feed

Nov

18

while Don quixote is voted the best novel of all time, and its humour and anecdotes are considered sui generis, not many have commented on the wisdom of this book as great as its wit. I have found the proverbs contained within - all very short, salty and sententious - the perfect companion to the book itself. the companion by Ulick Ralph Burke, Sancho Panza's Proverbs, is the perfect partner to the duo and is a work of masterly scholarship. In addition to the saltiness of all proverbs, there is an underlying Spanish diffidence and pregnancy to all the proverbs that enhances the novel.

Nov

17

the authors of this study should receive a Nobel Prize. the study is magnificent and the conclusions are useful and surprising. I would add that the studies do not take into account the theory of ever changing cycles. current conditions differ from the 19th century.

Long-run Asset Returns
Annual Review of Financial Economics, volume 16, issue 1,
2024[10.1146/annurev-financial-082123-105515]
David Chambers, University of Cambridge - Judge Business School; CEPR
Elroy Dimson, University of Cambridge - Judge Business School; European Corporate Governance Institute (ECGI)
Antti Ilmanen, AQR Capital Management
Paul Rintamäki, Aalto University
Date Written: October 10, 2024

The literature on long-run asset returns has continued to grow steadily, particularly since the start of the new millennium. We survey this expanding body of evidence on historical return premia across the major asset classes-stocks, bonds, and real assets-over the very long run. In addition, we discuss the benefits and pitfalls of these long-run data sets and make suggestions on best practice in compiling and using such data. We report the magnitude of these risk premia over the current and previous two centuries, and we compare estimates from alternative data compilers. We conclude by proposing some promising directions for future research.

Vic's X/twitter feed

Nov

16

Favorite piano

November 16, 2024 | Leave a Comment

my favorite piano work at my favorite venue by my favorite non-family woman who I've known for 50 years:

Pianist Rorianne Schrade plays Eduard Schütt's Paraphrase of J. Strauss Tales from the Vienna Woods

Rorianne Schrade YouTube channel

Rorianne's website.

Vic's X/twitter feed

Nov

15

A case for BTC

November 15, 2024 | Leave a Comment

a very resonant and helpful piece highly recommended:

Get Rich While Saving the World! Baby Tristan's Case for Bitcoin

one wouldn't be surprised if Tristan's middle name was Victor.

Vic's X/twitter feed

Nov

14

Should the market cap of crypto currencies be included in money supply for macroeconomic purposes?

William Huggins replies:

I'd you cant use it to pay taxes it doesn't count (just another asset, like a stamp).

Kim Zussman asks:

Why not? They add because if you pay taxes with fiat you can buy merch with crypto.

William Huggins responds:

you can barter wine or chocolate for a ton of things online too but we don't count those either. if money is "anything taken as payment" then we have to get very serious about "degrees of moneyness" (hence m0,m1,etc). in that spectrum, its pretty clear that the only things on the list are legal tender so unless you live in the land of bukele, it doesn't count (also, whose money supply does crypto count as exactly?)

Peter Penha:

I will volunteer that there is no moneyness to crypto as it was determined a 100% haircut asset by the DTC.

I think this leaves Blackrock and other crypto ETF managers in the interesting position that they cannot include crypto ETFs in one of their asset allocation funds or a target date fund, etc - inclusion would pollute.

Crypto in the USA appears to be a walled garden - the only contagion I can see to the financial world would be to holders of Micro Strategy Convertible Debt.

Stefan Jovanovich writes:

The question you all are raising here has a history - how far can "the law" go to monetize promises to pay? Originally, the answer was not one step. The Constitution says that legal tender can only be Coin. Article I, Section 8.

The lawyers have been working around that limitation ever since. Their greatest difficulty has been getting around the literalist non-lawyer Presidents who keep following the actual instructions the People established by vote as "the law".

Success came with the Aldrich-Vreeland Act which authorized banks with Federal charters to form "currency associations". Those were given authority to issue emergency currency could be backed by securities other than U.S. bonds, including commercial paper, state and local bonds, and other miscellaneous securities.

Section 18 of the Act: "The Secretary of the Treasury may, in his discretion, extend from time to time the benefits of this Act to all qualified State banks and trust companies, which have joined the Federal reserve system, or which may contract to join within fifteen days after the passage of this Act: Provided, That such State banks and trust companies shall be subject to the same regulations and restrictions as are national banks under this Act: And provided further, That the circulating notes issued under this Act shall be lawful money and a legal tender in payment of all debts, public and private, within the United States."

Everything since 1908 has been a variation on that theme - "lawful money" can be whatever Congress says it is.

Bill Rafter comments:

I started this question because I am working on a slight variation of digitally quantifying inflation. With the loose definition of inflation being “too much money chasing too few goods”, then the “money” part should include all that can conceivably buy the “goods”. Since one can increasingly buy a whole lot of stuff with crypto, then crypto deserves inclusion. If one were to fast-forward to a time of massive currency instability (this is just a thought experiment), having included the cryptocurrency might have facilitated greater forecasting.

Stefan Jovanovich adds:

For me the paradox of Bitcoin is that it has been a spectacularly successful asset - like a share of Berkshire Hathaway stock bought in the days before Buffett even went public - but it has never been a money. If I had Bill's brain and cleverness, I would try to include in the calculations the sum of personal and corporate credit that the lenders cannot easily pull away from the table (the potential moneyness supply) and the amount of credit actually used; and then seek the correlations to the fluctuations in that spread. In the days before central banking, speculators watched the net supply of commercial paper as such an indicator.

Nov

12

Sporting anecdotes

November 12, 2024 | Leave a Comment

Sporting Anecdotes (1923) shows us what the state of sports was like in England in 1800's. much betting on walking races, boxing, horse racing. and here is the greatest fives player of all time: john cavanaugh, much fighting of badgers, etc; great match of walking 1000 miles in 1000 hours; gouging match in america; fidelity of a dog; curious wager - walking against eating; throwing cricket ball 100 miles to deliver a post and win a bet; wisdom of Pliny who lived 100+ years.

Vic's X/twitter feed

Nov

10

Tariffs

November 10, 2024 | 1 Comment

The Old Right Opposed Tariffs

The Old Right was a principled band of intellectuals and activists, many of them libertarians, who fought the “industrial regimentation” of the New Deal, and were the first to note that, in America, statism and corporatism are inseparable.

Despite some current claims, however, these writers ardently defended capitalism, including big business and corporations, celebrated the profit motive, and took a strict laissez-faire attitude towards international trade. They loathed tariffs, and saw protectionism as a species of socialist planning.

Humbert H. writes:

Current restrictionist trade theories in the conservative movement, therefore, are not those of the Old Right. Their intellectual legacy is more likely British mercantilism.

The British did pretty well under mercantilism. I have always supported free (meaning from both sides) trade with equally situated countries, like US and Canada, but I love restrictionism and tariffs imposed on countries like China. It's crazy, in my opinion, to have "free trade" with a country that can and routinely does restrict imports, has slave labor, no "social safety net", steals intellectual property in a variety of ways, and can chose to focus on any trade area to bankrupt it's counterparts in a "free" country. The ability to produce a variety of goods is fundamental to the strength of the country. In wars, pandemics, and trade wars the other country starts having domestic capabilities is crucial. When this debate was first discussed in France, restricting the imports of oranges from Spain and Portugal into France was used as an example of what not to do, and that's a poor example compared to importing steel and semiconductors.

Larry Williams comments:

Hamilton's use of tariffs made America great.

Stefan Jovanovich writes:

Hamilton made his living as a private attorney in New York representing the marine insurance companies whose policies required shippers to be "woke" - i.e. perfect observers of their policies' neutrality warranties.

Pamela Van Giessen adds:

Silent Cal Coolidge the Vermonter was also good with tariffs and preferred them to income taxes.

Along with Secretary of the Treasury Andrew Mellon, Coolidge won the passage of three major tax cuts. Using powers delegated to him by the 1922 Fordney–McCumber Tariff, Coolidge kept tariff rates high in order to protect American manufacturing profits and high wages. He blocked passage of the McNary–Haugen Farm Relief Bill, which would have involved the federal government in the persistent farm crisis by raising prices paid to farmers for five crops. The strong economy combined with restrained government spending produced consistent government surpluses, and total federal debt shrank by one quarter during Coolidge's presidency.

Michael Brush responds:

Smoot-Hawley worsened the Great Depression.

Humbert H. cautions:

That's not really a fact, it's a debatable point. There's a range of opinions there from "it caused it" to "it did nothing to worsen it". It's one of those things like "what caused the fall of Rome" that can't be decisively proven.

Stefan Jovanovich offers:

Effective date of Smoot-Hawley Tariff: June 17, 1930
Tariff collections:
Fiscal Year 1931: $378,354,005.05
Fiscal Year 1932: $327,754,969.45
Fiscal Year 1933: $250,750,251.27
Total tax collections by Treasury:
Fiscal Year 1931: $2,118,092,899.01
Fiscal Year 1932: $2,118,092,899.01
Fiscal Year 1933: $2,576,530,202.00

Pamela Van Giessen writes:

Amity Shlaes goes into detail about how the depression was extended (or recovery didn’t come) in The Forgotten Man. She attributes the worsening of the depression, especially in the late ‘30s, to a combination of government interventions that included the Smoot-Hawley tariff, government (and union) demands to keep wages high, banking regulation, over-regulation, and FDR’s new deal, among other government interventions. In short, there doesn’t seem to be just one cause though it seems reasonable to blame each of the interventions.

Art Cooper adds:

I also found Murray Rothbard's America's Great Depression to have worthwhile insights.


Archives

Resources & Links

Search