Closing Time

May 25, 2021 | Leave a Comment

Sushil Kedia writes:

Closing TIme of key contracts, around the world has the same character feeding the vig. Irrespective of whether this character speaks Japanese, Korean, Chinese, Malaysian, Hindi, Pashto, Hebrew, German, English or American English. 

The compulsion to not carry a losing trade overnight, to square off excess positions that cannot be funded overnight etc. etc. provide a good enough number of hands who are willing to be forced out and required to be forced out at close. 

If I can spot, from my back-benches in global finance a ready made bunch of pigs to be slaughtered everyday, I am wondering why wont the 200 Billion Dollar Liquidity pumps whether run by a rocket scientist or by anyone would not be already squeezing them hour by hour as the sun moves from the East to the West? 

Wondering what is a good way to structure a study that tries to isolate statistical evidence for reversing extremas N minutes before the close of related exchanges. 

Say the Closing TIme of top 5 liquidity producing exchangs of crude future world over are noted down and a statistical study of N minutes before closing time and after closing time of each of these 5 exchangs throws up a pattern? 

And then if equity index futures that produce the top 10 volumes even if each equity index contrat is a distinct entity, is there a closing time ebb and flow that is being created by the Scientists' algorithms?  

Victor Niederhoffer writes

This is a very interesting and  an suggestive post. let's have some   feedback on ow to approach this query 

Jared Albert  writes

I think closing time/price as the sole predictor is too broad and noise will swamp any effect. 

So, to me,  the first step is classify the various conditions that exist before the close. For example, days up vs down, up/down on day, distance from x day max/min etc.

There are so many predictor variables that I don't think this is a frequentist kind of problem lending itself to logistic regression and lots of crosstabs for example.

So step one is a machine learning classification model to separate the states using the closing time movement as the target for training. 

IF it turns out that there are classifiable 'set-ups', then one could run analysis within the most promising classifications.



A flirt comes back, a true one does! But it goes when the host is convinced that it has come, for good. Who is a better flirt than Ms. Markets? So that was putting the Chair's Theory of Rounds with some colour. 
Now, there have been so many who suddenly found this pattern, that pattern, this yield that related contract justifying all together that the end of the world is now confirmed. But then the whole art and science of taking risks is that the Ms. will never allow many or any to be actually ever benefitting from what is confirmed. She is a flirt, she will come back again & then when the whole world will be again convinced its never going to end on a breach of 4000 there … she will go again. 



…..of the efficacy of betting markets predicting the real election outcomes, anywhere?
Can the Theory of Reflexivity not been hoped to work and the bets are manipulated? 
Both questions may appear related but are deeply apart.  



Huvve Soo

October 13, 2020 | Leave a Comment

Huvve Soo is a powerful expression of the markets at Dalal Street in Mumbai. A phrase from the more popular vernacular on this street, i.e. Gujarati language is chuckled up to mean literally Now what or so What! 
An expression that without the slightest of the twitch of the nose or lifting of the eyelids is slowly muttered out with a warm breath. 
So if Trump Wins, the traders on Dalal Street may say with boredom Huvvee Soo. 
However, if Trump loses, my surmise is the whole world may ask "Now what will happen?". 
This world has got aligned to having far right regimes across the globe. Arguably the most influential nation losing that far right stance will mean this wave of far right governments across continents is coming to an abrupt halt. Never in the 20th century, if my memory serves right, the difference between the GDP Growth Rate differential between China and the rest of the world was wider! While it was a point of global angst when everyone was doing well and China was doing too well, it is going to be hurting all sensibilities much more when China has begun to do well, being the only nation with a positive GDP growth rate and everyone else is hovering at -10% just now. 
I can go on and on to explain my bias that if Trump loses this wont be the same world I have been happy in for several years. But thats my own bias. 
In marketspeak, I place another surmise that the usual thing many a bettors on the bourses do around a major election that they use the election betting rink as a hedge to their market exposure will fail either ways this time! 
Whether Trump wins or he loses, markets are likely to do a Huvve Soo either side. Its another story politically i may feel happy if the aggressive big man with yellow hair wins & with that happiness I may still short the markets if a reversal works out with the typical huvve soo. 
But the point on the table for eventual dismissal after evaluation by the wiser on this list is: The election betting market will fail to predict the S&P this time round. Whatdyasay? 



Trailing Stops

September 11, 2020 | Leave a Comment

Zubin Al Genubi writes: 

I would like some advice on trailing stops.  Lets say a guy took a trade, 3 down days, buy end of day, hold for expectation period of 1 day, sell half, set a trailing stop on balance.  Where?  low of day? break even? 20 period ema?  And how is best to move it up.  Low of day? Ema?  Fixed trailing?  I realize it is not efficient but selling at the expectation period would lose a run like last month from 3000 of 16%.   Things seem "trendy" now.  Appreciate any good ideas.  Can this kind of thing be tested?  I doubt it, because normal tests don't seem to catch trends as they tend to mean reversion.  Thanks.   

Sushil Rungta writes: 

I use a % trailing stop.  Usually, once I buy a stock, depending on the stock and the expected volatility, I place a trailing stop anywhere from 8% to 25%.  That way I do not lose any of the upside.  And the % trailing stop keeps moving higher if the stock keeps moving higher.

I am a novice and not meant to be advice.  Just shat=ring what I do

Ralph Vince writes: 

I think it depends on the particular market. For equities, I've found nothing worthwhile that constitutes a mechanical trend following methodology I would risk money on

I have a lot of experience looking for it though! Perhaps  a temporal solution is manifesting in the quities indexes right now, which will oly be evident at some future point in time?

Experience in the markets teaches us nothing, and I doubt it has any value whatsoever. If fact, there is a toxicity to it in that we begin to believe we know something that day one participants aren;t burdened with.

We are tasked with finding which of the 9 sections of the tic-tac-toe board a ball will (randomly) appear in. We choose the center. It comes up randomly in the NW corner. (It must like corners?). We choose the SW corner, it shows up in the NE corner. (see, it likes corners,) We select the SE corner. It comes up in the middle (Ah, two corners, then a middle…..) and on and on ad on. 


"I have a good sense for where that ball will come up as I;ve been doing this for years." Or, better still, "I have a good sense of where that ball will come up - it;s mathematical! It;s somewhat deterministic," (as said the man walking into the convenience store to pony up for his next magic powerball number combination).

In markets, If you find something that works, and is working, it's about to evaporate. This is why I've migrated to longer and longer-term views on things, as it results in a longer time until things evaporate. Everything we think is true in the markets, is a delusion of our own making. Even the notion of drift: in equities, vanishes - first, for  decades or so, then, with the next fall of an empire. The probability of a drawdown, of any given magnitude, approaches certainty as the length of time given for it to transpire increases.

Most things in markets (as in all of life) that are real, often tend to be dull and tedious, require work to get our arms around,  and reside nowhere near where we are looking.

Ralph Vince writes: 

The point is everything we are looking at in terms of timing mechanism is ephemeral. I like longer-term models because they might outlive me (e.g. be long S&P500 when 90 day bills /  S&P500 div yield >1.8, which has batted 9 of 9 since 1980, below) before collapsing. The flipside is a much shorter-term model that will work, until it doesn't, then won't, until it does again!

I have never encountered anything in terms of equitisinexes that works in terms of trend-following, save for the notion of long-term, upwards drift. But as I say, once you are comfortable that something will always work, it is likely near-finished. The buy all dips / drift works in our favor mentality is not immune, but has had the good fortune of being a lugubrious beast.



A New High comes. So? Buying a new high will make money, all by itself? If this were true then after a new high another one will naturally come, always and then markets will be in a spiral going to infinity. 
Similarly, if a New Low of N days is in itself a recipe for making money, an unending series of newer lows will take that market down to zero. 
Neither zero, nor infinity have come. They wont come, we all know. 
So while Prime may be the King of Markets or say the Emperor of the Markets. It is the momentum or rate of change of prices that is the Empress of the markets. 
An emperor may sortee howsoever further into its adventures he must return back to his empress. Unless the empress is chugging along the emperor cannot keep foraying further. Any studies of price behaviour that try to emancipate mean reversion or any other haloed ideas of prices alone are incomplete. A study of how far can the Emperor and Empress digress from each other may have a few meals for a lifetime. 
How to define such a problem to make it convenient for quantification? 



There is one very famous Black Swan bug and he has around 400K followers on twitter so one assumes there would be a decent number of aspiring Black Swanists too.

The Black Swan Mafia Don tweeted that what keeps growing at 1% each day will grow to 38 times at the end of one year.

So do I understand the Black Swan Mafiosi aren't aware of the s-curve that works out in the spread of all memes and in pandemics too? And if this mafia is aware of this then he is just creating a lot of Black Swan crap to market an opinion that this world will be doomed?

Is he ever going to be bullish on anything properly?! He is bullish on the virus & so poorly!

Or is he just a marketing machine? A snake oil vendor? If anyone has battled for life and fought successfully from a life threatening illness such a soul would be one of the most exalted optimists and be a beacon of hope, courage, conviction and a hero in his thoughts, speech and actions.

Even after going through such an ennobling experience as battling death and coming out a winner why would any soul be keeping betting on doom?

Something is just not adding up. Horribly the algebra of this Black Swan is missing even an iota of consistency. Something is horribly missing in this "story".



A spy is so deeply ingrained with the emotion of commitment to duty that they remains unaffected by any other emotions. Any trader who has survived markets is also eventually ingrained with such a deep respect for risk and a deep duty to protection of capital.

Which spy movies do the pro speculators recommend for watching and taking notes from on the attitudes and attributes of a duty bound mind that is easily able to cross all limits on analysis, imagination, action that confine the usual human and still strictly follow the limit that no spy will ever breach?

If you can spare a few minutes in penning/clicking, what meals your recommended movie provides for a trader it would help set the priority in the list of spy movies to watch one by one even while there is a partial lockdown and get ready even better with a sense of deeper duty to protection of capital.



1 barrel = 158.987 litres 20$/barrel=0.1258$/Litre

A bottle of water costs cheaper now. So do I drink crude? At least on the trading desk!

Massive contango. Next Month is 35% higher and the month after is 60% higher. Isn't this a free lunch? So one is wondering if it is free then is there something that I haven't figured out that can end up making me the lunch?

Isn't the senator's ratio of price of anything / price of gold in case of crude at an all time low?



 Feigning weakness when there is strength. Deception thy name is Trading.

Hopefuls who always sermonize what the markets should do have started doting endless blogs on how a sustainable rally in equities requires crude to be low. Such Pontiffs fail to realize the correlation, even if some will call it spurious wrongly, between crude and equities. Not only the value of crude is measured in Dollars as much as equities are weighed against dollars and this multi-collinearity has a hidden layer of a variable switch of Risk-on /Risk-off. Often crude responds ahead of equities on the risk-on/off switch.

The same way the yields on apparently safer financial contracts goes down when businesses are unlikely to afford a higher cost of capital, the moves in crude too are of a similar nature. The cost of energy is the cost of doing business. But then scholars must be those who will theorise without testing if the horse pulls the cart or cart is pushing the horse.

Does anyone else see Sun Tzu and his able successors active in acquiring Oil Assets & crude contracts now?



From the back-benches of the university of mambo jumbo a 10 year pattern in crude is near finessing.

By any other erudite methods does anyone else see the possibility of light crude shooting to 60 and destroying bears forever before slipping under 22?

If such a dissonance between the prices and their 2nd order derivatives is visible in almost all other indices too is some corona solution is round the corner or all central banks together are about to apply the defibrillator sending a shockwave in the Bearland?

Tyler McClellan writes: 

Crude is a physical commodity. 



While I have spent most of my adult years doing EW, my two cents on this Fibonacci myth in markets:

Someone made the idea popular that a woman with 36-26-36 statistics is beautiful. But that doesn't mean every beautiful woman has such statistics. It also doesn't mean that to be beautiful every woman must aspire for and achieve these stats.

And then its euologised so well through ages, that beauty is in the eye of the beholder.

If I will sound more convincing that the quantum cat is dead or alive based on the process of observation, then let me tuck in a more intelligent sounding line.

However, if I can get away in making my point in sharing a joke, then here it is:

Once upon a time not so long ago, the favourite dog of the Superintendent of Police of Gurgaon (now a well developed city in India) got misplaced. The senior cop was furious, after all its my dog and how can and where can he lose itself? As the sun rose higher into the sky and morning turned into noon, there was near pandemonium in the police force in Gurugram that the favourite dog of the Superintendent must be found, right away. The force divided itself into smaller units and went about the whole town hunting for the Superintdent's dog. No one could find a trace. As Sun grew mellower and began pulling itself closer to the other horizon a bright idea struck the minds of one of the junior officers. He whispered in the ears of his senior who whispered it in the ears of his senior. The plan was finalized.

The force returned back before sunset before the Superintendent with a monkey. They told the superintendent here is your dog! The Superintedent boiled up and screamed this is not my dog it is just a monkey.

The force asked the Superintendent, "Sir, this definitely is your dog. Ask him!"

Superintendent locked eyes with the monkey. The poor monkey nearly came to cries and pleaded "Sir, I have accepted I am your dog and I request you to accept this too. Since if you don't sir, I am going to be beaten so badly again that I shall be everyone's dog."

Gary Phillips writes: 

Are you disagreeing with me, or the chart?

Because doesn't your story offer proof?

I have accepted I am your dog and I request you to accept this too.

If the watchers accept that level as support, won't those watching the watchers accept it too?

It may be a monkey, but it also may be self-fulfilling prophecy?



Russia was the erstwhile leverage cyclotrone, selling its primary produce the commodities below cost of production. Went bust.

China the next cyclotrone is even more aggressive. Not only the highest operating leverage anywhere in the world as an economy but the Chinese Gummint facilitated layers and layers of cross holdings and paddings within all balance sheets.

Today it's a house of cards. It can collapse. Everyone knows this can bit.

Question is how probable that is and what sort of time for the dragon to roll crumbling on the floor?

Peter St. Andre writes: 

What are the measures for "going bust"? Unless we have criteria, we'll be stuck in the domain of subjective opinions.

(I leave aside for now the question of whether the CCP provides accurate measures of economic activity.)

Jeff Rollert writes:


1) Abandoning their managed currency;

2) Significant nationalization of lending institutions;

3) Direct monetization.

Sushil Kedia writes: 

Going burst has a simple definition: unwillingness and /or inability to fulfill contractual obligations.

1st Failure has happened: They dug roads out of Wuhan and left their own people to die. Its the worst form of bankruptcy any state can ever undergo. Tell-tale signs that if they can kill their own with impunity, they will have no shame in reneging on any contract that they are compelled to.

A list of further signs would be, not necessarily in any order of gravity:

a) Letters of Credits issued by Chinese Importers lapsing & banks denying their fruition. (Is there some place on the net where it can be tracked?) b) Abandoning the currency peg would be of course a public confession of admitted weakening of their financial juggernaut & not a true case of going bust but a strong warning sign that the bust is coming round sooner. c) Failure to meet with any contracts for imports or exports by a Government agency or a Government backed enterprise.

Its simple. Mr. Tweeter should let the FED front-run the Chinese hoard of US Treasuries & send the US Yield Curve hurtling, now. As the Chinese are left with nothing else to pay with except their US Treasury holdings extricate a Trade Deal of the Millennium, offering support to the Chinese via a "friendly" QE.

And by the time its voting time he can tweet "Make America Great Yet Again" and push the S&P500 from 2200 back to new all time highs in a rocket like move. 

anonymous writes: 

I'm told that Chinese contracts with "force makeup" clauses are worthless, here and in China.

Tracking those is impossible, as far as I know, as they are usually very private. 

J.T writes: 

Can you even imagine the nuclear winter if they liquidated their holdings in U.S. debt? Not going to happen but it would make a great script.

Art Cooper adds: 

Cf. the 1981 thriller, "Rollover".



1. Triangles on stock charts or in love, both are the most complex states & can resolve any which ways. Don't anticipate in such.

2. Rebounds in love as well as in the markets are so soothing but best faded.

3. The mistress gets the better of the other in both love and in the markets.

4. Only the wiser can prevail at love as well as in the markets, those who have realized the diminishing marginal utility of intellect.

5. Timing is everything in both love and markets. You got to say I love you at just the right time.

6. Love rises from trust & trust rises from respect. A trader who has tested his system to the point of trust often kisses the market better.

7. Stay out when in doubt, whether in love or in the markets.

8. Love is action, neither a feeling nor a reaction. A trade is an action, neither a feeling nor a reaction.

What more items would the specs add to this list?

Victor Niederhoffer writes:

Never tell anyone about your trades or your romantic life.



Tradebot was an early HFT group that had a 14 year winning streak, more than 3400 winning sessions in a row. That streak was broken in 2017. There are many explanations of why their trading profitability has suffered in the past few years, with less volatility, not trading foreign stocks etc being some of the reasons. The main reason they are suffering because they have not adapted to the law of ever changing cycles. They are behind the form. It happens to the best.

Sushil Kedia writes: 

Change is the only constant in Markets.
Financial Markets are called Exchange. The purpose for which these markets got created is to facilitate exchange or produce liquidity. The market infrastructure propels this goal by enforcing only one constant, Change! Liquidity is generated by maximising the number of hands feeling the need for change. Those that get complacent with success or those who are lazy, they are the inferior DNA that the Darwinian nature of markets rejects & takes forward with itself agents of change. 
If anyone is keen on cussing speculators, they are lazy or complacent. The speculator thrives with change and is the chosen blue eyed boy of Change — the catalyst of all progress. 
If Stasis is not the anti-thesis of change, what is? The ease of finding an N day breakout, N day average, N day variable is the primordial human instinct to seek refuge in the regular rising and setting of the sun. Markets hand-pick women and men who can identify with, play with and grow with irregularity. The primordial hard-coding of the human mind to seek familiarity is so easily reflected in a normal tendency of men to seek the same table at their favourite restaurant! 
Familiarity may be breeding contempt and unwanted children yet is the most easily sought after human frailty. 
If Inventors and Discoverers propelled mankind forward by sailing with ease in uncharted waters, the speculator does it every moment. Isnt this true in, this time its different?!



N Day High or N Day Low are likely as good as only N Day Average.

Value of N is chosen by an observer of data.

Market has its own ever changing cycle. It is designed to maximise the number of hands that tremble leaving only very few hands having a firm grip on the cane.

What analytical thought processes may be free from an open-ended N and yet be testable?

Oscillators are a set of transforms that are bounded. They are not free radicals with an open and free N. That's one of the non N types even if the bounds of an N day Williams %R or an RSI is derived from some N but they may not run wild beyond a boundary.

Apart from oscillators what other thought processes may free a man in his observations from the imposition of his own imaginations that arose from "choosing N" ?

Are there any testable patterns that do not depend on a free N or a "bounding" N?

Hernan Avella writes: 

This is a good query. Consistent with the concerns you mentioned and others, I find some robustness in sticking with N=1.



 Rising Hemlines & Indices is a well discussed story. Now one notices the necklines of bollywood divas have fallen so far as can ever fall, right down to the navel! Nifty is still tottering at highs for over three months now.

One certainly has the least amount of required common-sense to know necklines cant fall below the navel. Beyond that the only people to lose clothing are the men in markets. 
What's holding this market up is a question that has baffled too many already.

This very interesting piece of statistical event study by Ajay Shah & Susan Thomas is simple to interpret that Indian Markets tend to be too charged up emotionally before the Union Budget. Except three occasions in almost last forty budgets, the returns after the budget have been significantly negatively correlated to the returns before the budget.

This year's budget is on Saturday, 1st February. Prior two days are event-intensive days in key markets of the world.

When a Unilver sells at a 19 P/E ratio in Britain but sells at 50 P/E ratio is India & all learned men have been leaning on the liquidity hypothesis for as many as a 100 days I am unable to ignore the fact that necklines cant fall any further.

The Senator has in prior years on the list mentioned an insightful comment that has provided salubrious perspective in looking through the mumbo jumbo graphics that I do, that markets dont top because the smart guys are selling, they top because all the dumb men who could have bought have already bought. The neckline can't fall any further. The last time neckline had fallen so much was in 2000 when Jennifer Lopez came to the Grammys that year. Now Priyanka Chopra, the Indian diva, Mrs. Nick Jonas has done an encore. Twenty years is a good enough time to be a cycle?

Jeff Watson writes: 

Necklines can't fall below the navel? Check out some clubs in New Orleans to quickly dispel that myth.

Which reminds me of absolutes in the markets. Some swear by them, giving them the same gravitas as they would the fundamental theorem of arithmetic, others, test them and try to eliminate falsehoods and ballyhoo.

A couple of examples:

Commodities cannot trade below cost or production, commodities cannot trade below government subsidy levels, grains cannot trade below the cost of carry, the price of onions will never go to zero. All of these have been bandied about from time to time and all have proven to untrue.

What other absolutes (old wives tales) can you think of?



Say someone discovers one day any one method to markets that can be proven to be consistently superior than any other method. Such a hero would be able to then trade the superior method for what it is alongside doing anti-trading or doing the opposite of what the inferior method is suggesting. This would create a guarantee of profits, consistently.

With a risk-free approach now under the belt, this gent can begin to borrow at rates closer to the risk-free rate or at least at the best rates at which anyone other than the Government can borrow. This leverage would expand profits & the ability to extricate more profits positively.

At some point this gent would clean out every one. Market will be shut down for the lack of any counter party or capital left with anyone else.

Thus for a method to exist, any method in fact, that is consistently superior than another method the market cannot exist, for long. A nullity arises. Therefore such a proof will never be found. Everyone has to undertake some form of and some amount of risk therefore.

One would thus argue that its futile to argue if any school of analysis or trading markets is superior or inferior. Each has to navigate oneself through the markets without gravitating ever to debilitating losses. To each his own. A pair of mind and its method together make for a unique apparatus in the markets. Comparing uniques is futile.




If I could find an online tool to run a poll, I would ask this you all to vote on this:

Assume you are the President of United States of America, the POTUS, in the avatar of Donald Trump.

Would you prefer:

1. A wildly rising market in a euphoric frenzy through this winter & become a responsibility to hold high through the spring and an almost challenging scenario to handle the election and the never-existent plung protection team together through the summer of 2020 or

2.  Let the market do what it has to, with positive expectations already built in through the panic of winter sabre-rattle about the supremacy of America, how it Make America Great Yet Again (Oh yeah MAGA must be MAGYA now) & pull off a strong deal through spring to have a market that is ricocheting upwards through into new highs from an abyss and make everyone feel America was, is and will always be great.

If I believe flexionism is dead I would vote in a specific way. If I believe flexionism can never die I would bet another specific way.

To hold this poll for voting anonymously I leaned on this online service and the poll is here.



This Sunday, the 22nd September, Prime Minister Modi is doing a public event in Houston. President Trump would be joining him in there, as well. Some are suspecting strongly by now in Dalal Street that while the Nifty / Sensex indices have been in a sustained decline this event can be a turning point with some massive announcements from both leaders that would combine the spirit of Make America Great Again from Trump & Make in India from Modi. Speculation is with the China USA Trade war in a waiting move status right now, the US Prez may announce with PM Modi a facilitation for American corporations to shift their manufacturing from China to India.

What do the spec-listers think are the prospects of such an occurrence (say what probability you place for such utterances) and what are the prospects (probability) of such really materializing from laboratory of good intentions out into reality?

Larry Williams writes: 

India stocks rally until 11/8 or so.

Sushil Kedia writes: 

Larry, some of your charts do amazingly well in foretelling the seasonal and related things. India rally into 8 Nov is so precise a point of time you are hitting at. Wondering what pattern/model/study you are hitting this with. Perhaps you will share.

Larry Williams writes: 

Cycle projection.

Sushil Kedia replies: 

Hon'ble Senator!

Which book of yours explains your cycle projection method. I bought all your books and you had autographed them. They have become more of a collector's item. Please do help which one to dig up and imbibe from. 

Larry Williams writes: 

No books on it still learning myself.



What do you think are the events or situations that may cause a hoisting upwards of the US Bond Yields curve?

The deceptive veils that Ms Market must always wear to find the easy suitors to give up their fortunes is one of the bases on which my mumbo jumbo reading of visual data propels me to frame this conjecture.

A) Whats the probability of this happening, soon? A rough number so to say to elicit your vote on this conjecture! B) If this happens, will the S&P500 yield not spike up?

Larry Williams writes: 

We are in a bull flattener now—critical that is understood.



What does this signify in the context of markets as they are now?

How does one put this datum to the trading terminal?

Why does this work?

Jordan Neumann writes: 

TA-35 has to make up for Thursday too. Makes it closer. If you look at the index, it started down and stayed there. We are all looking for tea leaves. Just another 90 minutes.

Alexander Good writes: 

CnhJpy is a good gauge these days for early move.



 One of the most popular pieces of #BullCrap is that when crude prices go down its good for economies like India that are dependent on large imports to fulfill majority of the crude consumption domestically.

Fundamentals are not funny'mentals, but the over-reach of intellect to fit things anyhow even if erring in fitting square pegs in round holes or putting the cart before the horse make it funny! The urge to find a reason for explaining a regularity in markets ends up reaching an extreme of imagination.

The popular opinion that crude down so India or similar economies will do well and our Sensex or Nifty Index should fly suffers from:

1.    Imagination that a critical commodity as energy is traded by Governments and large down stream marketing companies the same way as a trader in Chicago is trading futures.

2.    All expected demand for downstream products that forms the cracking hedge must be long for several months ahead to cause a zero disruption economy. So when a short term down move in crude futures at NYMEX happens actually these companies doing the cracking & marketing gig suffer that consumer is perceiving profiteering. Majority of oil products marketing companies are state owned and the Government comes under flak that Nymex Crude has come off 50% in 3 months and consumers on the street level gas stations are still buying at highest ever prices. So its neither good for the people on the street level gas stations, nor the people running the Oil Marketing companies, nor the people running the Government and the imaginary idea that significantly down crude prices are saving India money is a baloney of a high order.

3.    No one wants to talk about the oft present spurious correlation that prices of equities and prices of crude are both measured in Dollars and it is often the big moves in Dollar, as broadly reflected in the Dollar Index, or the selective beating down of emerging market currencies that are connected often to the downtrend in crude prices or uptrend in crude prices. An optical illusion in simpler words if the hoi polloi do not wish to encumber them to google up what the chair meant by spurious correlations.

4.    The bigger point most are missing is a conjecture I wish to place on the table before this august list of speculators. The futures price of crude is the speculatively contested price for delivery at Nymex. It doesn't reflect the real physical demand or supply worldwide on a day to day basis. So is a sustained down move (I didn't use the word trend!!) in crude a canary from the mines that risk-off bump is ahead on the road?



 Thirty years ago when I was just about finishing high school and entering college, the idea of professional speculation fascinated me. A few of my classmates were sons of established stockbrokers and their forays would cause me a confusion if I should consume several several more years into structured education or just drop out of the classroom routine to hang around the curbs of the Jute Forwards market at 5 Clive Row in Kolkata (Modern Speculation in India arose really from a very active derivatives market in Jute futures almost a 150 years ago & until my college years the Jute traders were the best & biggest in this country).

So I would often go and hang around the curbs of this commodity exchange where even in the deep after hours of the formal closing bell of the exchange there would be torrential trading on the pavements and the street outside. Not just testosterone but one would distinctly feel dopamine rushes in these jaunts.

On these visits I used to notice the biggest trader in Jute in perhaps last 50 years frequently pull out a small (very small) diary like pad to look into it, jot something and keep it back in his pocket, while his trading log was always spread on a table as bulky as him. I was intrigued what was that special tiny diary.

Then six years later I had networked enough to know the CEO of one of his companies and at my earnest request to meet with the big man I was introduced to him. I asked him after having had a chance to hear him on many things, whats that special small diary he seems to maintain so well.

He said its my ledger book of time. I got totally intrigued whats a ledger book of time. He said I do a double entry accounting for my time. Each transaction with any other person or object has two elements: (1) the task or goal (2) the other is timeline. So I have dedicated pages for people I continuously and regularly deal. That's the ledger/account of key individuals. Then I have a Sundry Account where I put all other individuals. I keep 30 pages for a month extra in this tiny diary and soon as I have decided upon, agreed upon or have been given a commitment for something I enter it in two places: on the page for the date ahead and a double entry on the page of the individual.

If I have to deliver something to a person I mark him credit and if I have to receive an outcome from a person I mark him debit. My date pages with corresponding contra debits and credits provide me a quick view of how much profit I am making on my time for each day. Any time left on any page is the amount of life I am left with for that day.

I am wondering now that everything is digital, how can we put this simple idea to code and have an efficient time management weapon.



 Russia collapsed. Did anyone anticipate it? Not many!

Why did Russia collapse? Common sense is uncommon. Russians kept selling commodities for more than two decades below cost of production. They were burning an enlarging hole in their real income statement but covering it up with managing artificial strength in their currency (balance sheet pumping).

What is similar to that scene of 1987 and the coming couple of years?

China has been selling everything, not just commodities, at a deep discount to cost of production. Whether this is to gain market-share or there will be another trader who may receive a presidential pardon in the last five minutes of the second term of a US President for having maneuvered the communists yet again to dig their own grave will be known later. The Chinese pegged the "volatility" of their currency to the Volatility of the US Dollar.

The Russian Communists had played the game of hiding their grave by pegging their IOU or their currency to US Currency, the Chinese have pegged the volatility of their currency to US currency. Everything else is same.

Complex explanations need not be better as we know adding more and more variables to a regression doesn't improve the R Squared. Commonsense of business is no one could avoid going broke selling below cost. All dandy accounting or engineering the books or currency can prevent the basics of business to play out.

Even while the CFA Institute taught in its curricula for the last 20 years that China and India will be amongst the top 3 economies of the world in terms of GDP as their growth rates due to demographics were sustainably superior while the western hemisphere was going the Japan way in demographics, the fact remains if you over stretch the binge to grab marketshare and keep hiding the real losses through balance sheet jugglery a day comes when Full Monty happens.

While I do anticipate their will be strong reactions to this simple post, likely in disagreement as much as in agreement I seek the minds of those who are able envision deeper and farther than a mere commonsense guy What If China indeed goes belly up at some point forebodes for the rest of the world since China is the largest holder of the US Bills? Can Great Britain that's getting out with a Brexit be the next bull run? Will the British Pound fetch 2.0 US Dollars in say by 2025 or 2027?

Has anyone ever heard the name of what the Chinese Intelligence Agency is even called? If not, are the very clever Chinese doing deep, detailed, deviant work world over? Is this going to remain merely a trade war? Where are the next big proxy battles going to be fought? Will it begin with the breaking up of Pakistan into a number of smaller states? Oh how badly I miss our all time giant Mr. E a.k.a. Krisrock! I hope he sends some of his intel that was always ahead of almost everyone else. But without him around implies we may have an even more onerous task to imagine more intensely. All forecasting is only imagination modulated, tempered and restrained with study of history.

Greg Van Kipnis writes: 

In a well ordered capitalist economy if a company is not covering its variable costs they will be bankrupt quickly once they exhaust their reserves and their credibility. The same is true for a country. From what I know, China is different from Russia in several important ways that gives them greater staying power. They have a positive trade balance, they have large currency reserves and there is little sovereign foreign debt. In the case of Russia the state was bankrupt and it could no longer afford to maintain the Soviet Union because most of the Republics were a drain on the treasury.

In the case of China I know little about the dividing line between the state and the personal financial interests of the mandarins (or whatever the heads of the party are called). These mandarins will be the first to rebel when their sources of income and borrowing from state entities dry up. The government can keep expanding domestic money and credit as long as the mandarins don't want hard currency and inflation doesn't explode (which it sure will after a time).

I believe internal financial stress has begun. I read that private borrowing in dollars is quite large and exceeds privately held dollar balances. This is good for the dollar and bad for the Yuan. Another indicator of private stress that is already starting to happen is the drying up of Chinese buyers of luxury real estate in the New York.

Sushil Kedia writes:

Keeping large forex reserves and maintaining a positive trade balance at the cost of selling everything below cost of production is the hope of the mandarins too that they can stay afloat longer. Irrespective of the length of survival time, a losing trading strategy is a losing trading strategy.

So a simple question whose answer needs imagined on priority now is: if there were continued losses in this trading strategy where are those losses hidden? Or China did not lose by selling everything below cost of production as the Mandarins would like us all to believe?

This is the known unknown, where are the losses hidden? Now coupled with this if capacity utilization dwindles the fixed cost of putting up the gargantuan cities, factories and everything else will weigh in down faster. 



 Humility, without a doubt, is a celebrated value for speculators. Not just here on Dailyspec but anywhere trading is a means to self-actualization.

A humble man is a learner. Taking responsibility for mistakes is the attitude that allows the flowering of the virtue of humility on the tree of cognition. But what if humility is the antidote to ego? Is humility the absence of ego?

No! Humility is a sub-set of the Anti-ego or Un-ego (kindly allow this word as anti- is an extreme and un- only a nullification).

A humble mind has only adapted to overcome one of the three primary perils of the human mind (hard wired over the journey from chimpanzee to man). That one peril is that the human mind is coded to prove its superiority.

The other two primary perils are that the human mind loves to posess and control on one hand and loves to enjoy. Those amongst the humble who haven't been working on addressing these two default states of the human mind are the Humbly Egoistic.

To overcome the desire to possess & control it seems one good approach is to be the custodian of the risk capital at disposal. Even if one is 100% shareholder of his firm, such a person sees the firm as a distinct entity from himself.

Such a person will be able to accord due respect to risk, risk capital and the human resources around. This creates a greater shift from ego towards un-ego than being just one who is quick at accepting mistakes.

The devil however, is the primordial wiring in each mind to enjoy. The pursuit of joy is not the same as pursuit of happiness. The pursuit of joy then naturally has to keep meeting with agony, disastrous drawdowns and such things. If one can start working on ignoring the neural circuits that motivate one to find joy one lays a conjecture the same neural circuits are the ones that create a sense of being evaluated, being judged, producing suffering. Abandoning a path that is sub-optimal is the iterative process to seek the optimal. For such a mind then work is a responsibility & fulfillment of this responsibility the stepping stone to satisfaction.

All the three states of humility, state of custodianship and abandoning the path of self-judgements combine together to create the ego-free man. The unegoistic trader (it's an asymptote obviously, of an idea and not the absolute ever) is then the one closest to reason. Any other man not working at freeing himself from each of the three primordial hard-wirings is then at risk of not acknowledging the most potent idiosyncratic risk, i.e. the self or the origin of ego.

Getting back to the first couple of sentences in this note now, the whole idea of self-actualization is a powerful oxymoron then. In actuating excellence the whole crux is in leaving the self aside! Is that what the Chair does when he leaves shoes outside his trading room?

Nature hasn't designed a single variety among the species with vision that can see itself. At most we can see our transposed mirror images. That's the natural design. So ego is a perception derived from observing with our three primordial mental lenses how the universe is treating us. That explains why traders prefer to trade alone, replace phone ring tones with beeping lights, mute the #NB# tubes etc. etc. No, its not being alone. Unegoistic state of mind is being without the imaginary perceived notion of the self.

For all the accusations of selfishness on a trader, the truth stands placed well thus, a trader has to be self-less to remain in the game. Neither humble, nor humbly egoistic and certainly not egoistic a trader true to his grain is self less. A trader is a state of mind where only a responsibility to capital and a focus on risk exist. Rest is left with the shoes, outside the dealing room.

Laurence Glazier writes:

Thanks for posting this. The question of ego is interesting, because it normally relates to expectations of society and colleagues, and in this sense it is a diversion, but a sense of self-worth would preferably not depend on the opinions of others.

Every work of art is in some way a self-portrait, and every trade reflects the trader, which makes the activity very useful for self-observation. And humility, aside from the basic truth (that, from a distance, we are dots living on a dot), helps remove noise from the signal. But beyond the floating bubble freed from ego, there needs to be direction and force, and it is there that resistance to progress is very helpful in developing the core, for without resistance can there be growth?

In fact, resistance appears to home in on every nascent growth, and tests our mettle. Ayn Rand had many rejections from publishers before Atlas Shrugged saw the light of day, though it should have been evident to them all that here was a fabulous book.

Sushil Kedia writes: 


Thanks for the thanks. But why only art? Every human output has some reflection of the self. That precisely is the point that the human mind has become hard wired with the 3 perils enumerated in the post. Goal for reaching a state that produces excellence is to overcome & bypass these three default factory states we come packaged with.

For example, the necessity of counting is to bypass the self. If counting validates a theses, a trade is fired. There is no self in this. The self is so tightly coded into our personages, for example, that soon a counting based trader will brag "I do not let any trade happen here that are not validated by counting". The I has to be cut down to the size it deserves to be. Not sure if many here give credence to NLP, it works out well at this end of the world. So this sentence when changed to "without validation from counting trades do not happen" removes the I.

In fact, with my EQ trainer who I have accepted as my Guru in every way, the pact is to avoid using three words in any conversation with him, "I, Me, Mine". Instead he has approved sentences such as "Sir, would you care to meet Sushil" and not "Sir, would you care to meet me".

As we practice being less and less conscious of the illusory perceived image of the self by not giving it so much importance the mind shifts closer to higher EQ states.

If it is the "I" that suffers fear, greed, lust, anger an endless spectrum of idiosyncratic emotions then this "I" is the most vulnerable piece of code that hangs around without due acknowledgment on the trading desk. Once acknowledged that it is the I that is the biggest source of idiosyncratic risk a trader starts getting trained to ignore it and focus on the defined processes.

A trade or piece of art that doesn't carry the reflections of the self is super. Let us acknowledge the shades of grey and paraphrase this line. A trade or piece of art that reflects less of the self is superior. 

Laurence Glazier writes: 

I would agree with a lot of this, and we might indeed abandon use of the words me and I, and refer to ourselves by our names, and perhaps even them place them in quotation marks, like "Sushil" or "Laurence".

We live in an age of automation, which started long ago and develops now with AI. A trading system which is fully automated with signals for going in, adjusting, and coming out, can be done by a machine, and it is a special interest of mine to be less like a machine and be more essentially like a human.

Removing the I, if such a thing is truly possible, would create a tabula rasa. How much great art has come from such a state? If such a blank slate is achieved, one might prefer to inscribed it with new patterns, a new identity informed by inner qualities rather than influenced by the culture and education of our childhoods. But such a planned approach may not be as good as natural development. I am all for the "considered life", however.

While trading is for many people an art for its own sake, art - in the sense of painting, writing and composing - can be a transcending activity. Charles Rennie Mackintosh put it well:

"Art is the Flower - Life is the Green Leaf. Let every artist strive to make his flower a beautiful living thing, something that will convince the world that there may be, there are, things more precious more beautiful - more lasting than life itself."

Picasso thought that every child is born an artist. A plant may flower in nutritious light and soil. Leonard Cohen wrote - there's a crack in everything, that's how the light gets in.

Being in a comfort zone is not always a spur to creativity. Without resistance, how can the spirit progress? In my experience questions are of much more intrinsic value than answers. Some questions from me:

Would you rather buy a painting or paint it? In what sense can a painting be owned?

I'm always glad of the opportunity to reflect on these things!



What inspiring ideas do speculators derive from palindromes and the Palindrome?



Dear Muskaan,

Soon, in a couple of months, you would step out of your teen years. Your daddy is very happy to find you have worked at configuring a fine personage. One has written to you a few years ago, a great mind works well in a healthy body & the two are held together well by a fine personality. While you are pursuing varied extra-curricular activities that range from numeracy skills to verbal to spatial I take note of the fact that you are moving forward in the Rubik’s cube championship in moving to the National round. Heartiest congratulations! The cube puzzle is a test of pattern memorisation, mind-body co-ordination and highest levels of focus! All three are a matter of practise. If possible, for preparing for the national round try to pick up a cube that resembles closest the one provided to you at the contest and buy several pieces of the same and set them up for different levels of smoothness and practise across all of them. This will provide you the familiarity with any cube piece you may get to work with at the National Round!


One draws immense satisfaction that you have worked at developing a vocabulary that is talked about much amongst your peers. Today amongst a few things daddy would like to first share with you how a powerful vocabulary can be delivered with unprecedented impact. Daddy has learnt from his Gurus those who are champions are economical in their movements & speech, on one hand. On the other it’s a well- known and widely known truth that body language is what brings impact to frugal speech. A rich vocabulary empowers you to express the closest hue of the most relevant emotion for the moment. The impact is brought in by emoting your words. I suspect, body language drives communications deeper for two reasons:

1. Mind processes things at the subconscious level much faster

2. Body language actions travel at the speed of light & reach faster than your speech that can travel only at the speed of sound.

In any Acting 101 class it is taught early to students of acting that if body language of physical actions accompanying speech are signalled out before the words are let out the acting becomes way more real. Likely the two facts enumerated above make this happen.

While there are a few good books always on the market on explaining body language, a fine personage that is always a student will continue to learn by constantly being observant. There are three perspectives from which any observation can be made as far as body language is concerned. To observe which physical expressions or signals of yours worked well in achieving your communication goals and which did not is one. To observe how others’ body language triggers positive & negative feelings in you is as good. To observe how one another impacts with her body language yet another even better. The best way is however none of these three. If you can train yourself to observe yourself as a third person in your interactions with any other person you will begin to minimize the self or ego and maximise the objective mind in you.

Ego is a construct nature built into all beings to give them a sense of identity so as they can practise with greater seriousness self-preservation, self-propagation & self-expression. One cannot thus and should not be ego-less. The problems of most relationships are a far heightened sense of self, i.e. an extra-ordinarily larger than required ego. All of us know what is wrong with most things. Few of us get the opportunity to learn from others or by self-deduction how to overcome the wrongs. One good way to minimize the self, down to only the necessary level is to be observing the self from another’s point of view at all points of time.

A heightened sense of the self or a larger than required amount of ego is also the origin of all passions or passive emotions. The switches that world can trigger within one make one easier to be manipulated into digressive emotions. To suffer pain & fear or to be taken over by lust or anger are all due to this larger than required ego.

When the ego is huge, the sense of entitlements is huge. In this world those living with a sense of entitlements undergo most denials! The switches of an ultra-sensitive person with higher sense of entitlements are dangling out in the open. Anyone can click those switches. Hide & fade away your switches. This can be done only by fading and minimizing “you” to just the required humble level!

So I urge you to think about this know-how that daddy just shared on how to dilute the self by containing the ego through always be observant of the self in third person. Such a personage is also able to generate feedback ahead of what the world will tell you about your “self”. You will be a step ahead then! Humility is one of the big outcomes of ego-reduction & it is the world’s most powerful currency that works even when money fails! It helps you provide a continued supply of put options that the world writes to you at your own follies! The other equally important outcome is annihilating the sense of entitlements. You are the daughter of a capitalist & one knows you have learnt today the communist ideas of entitlements make the whole life and not just economics, a paralysis.

Emotions are not at all bad. They are necessary. But the problem with emotions is only when we get driven by them, due to this ego, instead of driving our own motions / petitions / proposals / pitches to the rest of the world. You must not by any chance understand that daddy is an anti-emotion robot. No way! Emotions drive relationships & all engagement in human society. Yet one must ride the horses of emotions and not be dragged by them into a directionless whirl-wind of a life. However, any energies you draw from your well thought out principles for life & values are emotions rising from within and they will make you compassionate, honest, and sincere & therefore a happy & successful person. Let them prevail. The rest need to be left outside like you would leave your shoes.

Having discussed briefly emotions & how to emote, daddy has stated in passing that you would be a happier person in doing these effectively. Yet, the essence of life is not happiness, it is really how each will overcome suffering. Pain is guaranteed to each in some or the other form in some or the other intensity at all points of life yet suffering is optional. Those who can train them to choose to not suffer and handle pain really only as a signal requiring one to bring change are the ones who are successful at whatever they could choose to pursue in life. Pursuit of happiness is a chimera. The real pursuit of evolving as a human being is to be able to minimize suffering. Those who choose to not suffer are the ones who are happy. Else happiness becomes contingent on outcome of events and quality of objects & behaviour of other people. To have your locus of control right within yourself it’s important you switch your perspective today and now that the pursuit worth undertaking for this life is to minimize suffering. Daddy awaits to realize in the near future his daughter has become one of the strongest people, he has known, who chooses not to suffer!

Change is the only constant in the world we live in. A transitory, impermanent universe of objects, processes, people & ideas is what our world is. We have a finite beginning & a finite end. Our body continuously keeps changing and it can be proven that in approximately seven years every single atom in our bodies is new. So that brings to this concluding note for now, your body is not you. Your body is one of the key devices given to you by nature. You are an infinitely more potent force than can be seen, heard or perceived. So, while you must take care of this very important device your body, you have to be confident as this body changes over time that the real you is an infinitely more sophisticated and capable construct.

Today the world is getting swept by ideas of the internet of all things and the coming wave of artificial intelligence. There is excitement as well as fear that the coming AI Robotic age may destroy us humans. Elon Musk has often been tweeting about the dangers of Artificial Intelligence. You however might agree with me the term Artificial Intelligence itself is ultra-egoistic. No one can prove if we the humans are not already one layer of Artificial Intelligence brought into being by a higher degree intelligence that is often called God?! Perhaps AI should be renamed to Derived Intelligence? Irrespective, of the nomenclature, the fears are uncalled for. Perhaps mankind will learn to emote well enough with the coming AI Driven Robots & turn them emotional when required (wink, wink).

All I would tell you for now, fear again originates from a sense of entitlements and too much attachment to the idea of the self. The way evolution of species has propagated so far the best would survive. If AI is going to produce entities driving emotions and not driven by emotions then daddy has rested a compelling case on your desk now, emote better my daughter than getting emotional! You will then certainly be riding well through the age of AI & Robots also & until then more effectively with mere humans! Wink! Wink!

Proudly yours,




 He told me some time ago, before I woke up and while I was dreaming that Sell in May and go away is known to everyone including every cabbie anywhere in the world, even the ones in Namibia and Ethiopia.

So I asked him, what are you trying to say just tell me clearly. Can't you have some compassion for a man deep in sleep in a comfort zone that one earns after a day's hard work.

He smiled. Said once those who have read the book that is an Almanac of the past year's behaviours and have sold it out, the market mistress will inflict regret and then anguish. There will be many who sold by the book and will be forced to buy it back. That's when you sell at the end of May or even if it becomes early June.

I almost had woken up by then. Asked him now what is this way to startle someone and pose a riddle first and then surmise a conspiratorial idea as if now the flexions have also taken the cabbies within their matrix. He said well everything is possible but the simple idea is some always say "this time its different" and the mistress must keep them in the business as well to keep the infrastructure complete as ever.

So I had two choices. To fix a cup of coffee and abandon sleep and get back to some mumbo jumbo. The other choice was to leave this note on this erudite list and ask as usual another question. Would you care to think of what just this cabbie uttered and then vanished away in ether? Oh I forgot to tell you, he also had said if you can figure out Sushil what is the density of High of the Year in any given week number or month its not a bad thing to burn the midnight oil on.



In the last few days one of the economic talking heads commented on how he has "not seen volatility like this since" sometime in the past. I forget whether the former time was 1998 or 2008, but it doesn't matter, as there are many periods in the past with greater volatility.

My quick look at past volatility consists solely of looking at the height and duration of VIX in earlier periods. I took the standard measure (VIX) because of its relatively universal acceptance. I could use some of my own measures, but not without the risk of being flamed for subjectivity, despite the fact that they compare with VIX on a relative basis.

Question: Is there something I am missing? Is there some measure of vol that I am unaware of? Could the high volatility simply refer to the gentleman's equity balance? Could this simply be an effort to gain a headline, i.e. fake news? Any thoughts?

Gibbons Burke writes: 

The VIX seems skewed to being more sensitive to downside volatility and not so much to upside volatility, and it is based on one instrument: the S&P 500 index calls and puts and their ability to speak to the volatility of the underlying index.

The standard Historical volatility calculation of the same underlying instrument used as the input for option pricing models is somewhat more flexible in that it can be applied to any instrument since all it requires is daily closing prices, and the S&P 500 retroactively before the VIX was created.

The two measures, VIX and SPX historical volatility correlate closely—and most interesting is when they depart from that correlation, which shows that the options market is anticipating something which has not shown up in the movement of the underlying. You know all this of course, and have developed some very interesting work on options and their open interest already as it relates to the underlying, no?

In technical analysis realms, average range, and Wells Wilder's Average True Range (which considers the previous day's close as part of the day's range if it is above or below the high or low of the day, which captures post-close volatility and gap moves) has been used as a volatility measure for input into risk allocation components in trading systems, and as breakout bands for trading systems like one made famous by Larry Williams and others like Steve Notis.

A newer volatility measure which came out of chaos theory ideas when they became popular measures the total range (or true range) over some n-period window of previous market activity, and measures the sum of all the individual period ranges (or true ranges) as a ratio. Two instances of this volatility measure are Adam White's VHF index (vertical-horizontal f-something) and CTA Ed Dreiss' Choppiness Index. Both are solid conceptually, easy to calculate, and are already implemented in many systems.

anonymous writes: 

For the S&P, here is the mean daily High-Low range as a % of the Open, for each year since 1962:

year  /  mean daily H-L as % of Open

2018 -  1.44%
2017 -  0.51%
2016 -  0.95%
2015 -  1.10%
2014 -  0.86%
2013 -  0.85%
2012 -  1.06%
2011 -  1.62%
2010 -  1.36%
2009 -  2.00%
2008 -  2.74%
2007 -  1.17%
2006 -  0.85%
2005 -  0.88%
2004 -  0.95%
2003 -  1.41%
2002 -  2.08%
2001 -  1.75%
2000 -  1.84%
1999 -  1.54%
1998 -  1.58%
1997 -  1.42%
1996 -  1.01%
1995 -  0.72%
1994 -  0.82%
1993 -  0.71%
1992 -  0.82%
1991 -  1.11%
1990 -  1.31%
1989 -  0.95%
1988 -  1.22%
1987 -  1.77%
1986 -  1.12%
1985 -  0.79%
1984 -  1.00%
1983 -  1.01%
1982 -  1.60%
1981 -  2.03%
1980 -  2.21%
1979 -  1.55%
1978 -  1.60%
1977 -  1.37%
1976 -  1.60%
1975 -  2.16%
1974 -  2.58%
1973 -  2.06%
1972 -  1.53%
1971 -  1.54%
1970 -  2.09%
1969 -  1.74%
1968 -  1.78%
1967 -  1.62%
1966 -  1.77%
1965 -  1.26%
1964 -  1.16%
1963 -  1.26%
1962 -  1.73%

Sushil Kedia writes:

​VIX measures the price of volatility all are wagering on. Price is the weighted mean/vector sum of all individual values of volatility the various have for themselves. 
Combining a few well accepted ideas, here & everywhere else: 
Depending on where one is in the market food chain there are different versions of what is noise and what is tradeable information content. 
So a simple and effective & consistent to calculate the value of volatility for oneself is to objectively write down what is the minimum movement size below which you dont act. For a HFT robot it could be every tick & for "markets cannot be timed behemoths collecting only other people's money, a.k.a. long only passive funds" it could be 5%. Whatever it be define your sensitivity and lets call it your sensitivity unit move. 
Then each occurence of a move of a unit size is counted — as in counting by toes or a computer programme over any observed length of data. Count the absolute vaues of the Unit sensitivity. Divide the net change over the same length of data with the sum of absolute values of unit sensitivities observed. 
A straight line move would thus give you zero volatility or noise and a perfectly tradeable information content. If however over the observed length of data, on the other hand, net change is zero then there is only noise. 
I remember, many years ago Bill & few others had discussed here how Point & Figure method from the university of mumbo jumbo is an approach that is very similar to this thinking and a fantastic way to separate signal and noise relevant to each as per their forebearance within the food chain. 



The moment a tick changes, at that moment parties that transacted on the prior tick "experience" a zero sum game. If the same parties only continue to transact with each other with every further change of tick it remains a zero sum game.

However, soon as the "pool" of competing players changes in the pit, either by someone closing out all outstanding positions for whatever reasons and stepping aside or any new players entering the pit, the game changes. It creates a very interesting web of potential ways to lay out the game in a mathematical sense. This remains true for any further longer / larger time frames. Lets focus on this part.

The gains or losses made, lets call it impact for ease of language, by existing players is shared now with the new ones. But not only MTM impact that can be measured only at the present moment, this ultra sophisticated "game" must account for Opportunity gains / Opportunity losses or the Opportunity impact also.

The zero sum game can still be visualized as zero sum where the sum of all MTM Impact + Opportunity Impact = 0.

MTM or the present moment impact is simple and lets leave it aside. The real juice is this Opportunity Impact construct. Before we enter this labyrinth let us first choose to do a post mortem of those who left the game. Lets use the term "Out" for those who are out of the game. Lets use the word "In" for those who remain in the game up to any point of time.

The Out have taken an MTM Impact and gone! Right? No Opportunity Impact taken by them? Well if I sold out a position at 100 and became an Out, and the price becomes 125 in a year have I incurred an Opportunity Impact of 25? I have, since if i came back into the game a year down the line I would be shelling out 25 dollars more. Same way if price went down to 75 in a year I have an Opportunity gain impact of 25.

This is what makes the market appear like a variable sum game.

Things get a little more interesting and more realistic when we introduce one more final variable, Those Not yet In the game whom lets call for this note, whom we can say name as the Virgins. so for any stock, any contract, any investible or tradeable entity this world produces three types of Players: Ins, Outs, Virgins.

For an easier visualization lets assume we are only evaluating the game of playing the long term drift.

So the MTM Impact of Ins = -(Opportunity Impact of Outs + Opportunity Impact of Virgins)

This equation above is an over simplification and displays only a long only deliverables only contract. If we add the derivatives layer the left side of the equation will have instead:

MTM Impact of Long Ins - MTM impact of short Ins = = - (Opportunity Impact of Outs + Opportunity Impact of Virgins)

Finally if we will allow minds to now wander along a constantly fluctuating market that has the drift or some markets that are bereft of it, different time horizons, different risk-return optimal curve seeking individuals, different tax & liquidity constraints apart from the decisively different placements within the food chain causing differences in information seeking, processing and actionability skills the market can still be described as a zero sum game in terms of the net value of all actions taken, not taken, exposures taken, not taken, different skills, abilities, compulsions to be zero.

Obviously then such a zero is a philosophically provable construct that:

a) Skill pays in markets,

b) As much as luck might pay

c) No one is in a real sense out of the markets. Those without an exposure have a notionally negative exposure to markets! They are the one's who will get lured at some point.

d) Apart from maximising the number of hands feeling that they have a bad game, the tape is likely moving in ways to minimize the number of Virgins of markets left in this world, I surmise.

d) MTM is a game of money management (LHS) which derives its value from the Inability of all those who are not managing their emotions well (RHS)

e) Whether the universal prevalence of deception as an evolutionary tool pervading the markets or the flexions or the skilled they all are part of the grand design of the market mistress who indeed plays a zero sum game on N dimensions, not on a unidimensional game of just MTM.

f) As much as this is true in life that no one wants to die a virgin, the markets have achieved a constructal to fulfill this idea in the context. This is where the deception, the flexionic matrix works most silently.

anonymous adds: 

It is not a zero sum game. True value and wealth are being created in large part due to the liquidity and capital created in the capital markets. As the the prices rise, wealth is created out of thin air, out of confidence, out of technological advances, out of new ideas, out of new people, out of new people participating in the global economy. 



Is the S&P 500 falling because the Chinese wont let American companies profit as much? If this is the reason, why are the US Treasuries not falling? Can America become a safer and better economy (which is what rising Treasuries should mean) while American corporations are going to lose money or make less money?

Or are we being fooled by the tape to imagine that as the Chinese make more money they will buy even more of the US Treasuries? Aah so Ms. Market is trying telling us the Chinese are such fools they will buy more of safe assets in America while negatively impacting America's riskier assets with a long term drift due to the power of compounding the re-investment in growth?

A risk off kind of emotional feeling more than any rationale? Ok so in emotions everything seems as valid. Hmm.



We sit very close to an uptrend line of 35 years in the prices of the US 10 year Year Treasury (TY).

What does it signify?

a) A new world order is coming, with a breakdown below this line, keeping aside for a moment whatever the word trend is not supposed to be and thus its line?

b) Why has this drift persisted so long on the TY? What is not changed for this persistence to continue?

c) What can change to break down this persistence. Yes, let's not call it a trend line, but just a persistence.

An easy monthly chart shows it here.

Anatoly Veltman writes:

Btw, your chart data (which may be all that Chicago futures ever traded) doesn't go back far enough in actual 10y treasury's history, and thus it misses the actual chart's record low. Proper historical data will show your trendline already "broken". Not that such "break" vs "not break" makes any difference in my book.

35y was way too long to go one way. Some listers, incl. Jeff, Rocky, and possibly more, were not in agreement with me when yields were dancing around their terminal lows. I guess your concept of "drift" was appealing to them. Never to me. Again, 35y is plenty enough. I see no reason to keep pushing it, counting on "drift".

Steven Ellison writes:

A plausible reason for the trend of the last 35 years was the aging of the population in the US and other advanced economies. The demographic trend may level off at some point, but it shows no signs at all of reversing in the foreseeable future.

anonymous writes: 

A naive reading is that yields dropped because bogey-man inflation dissipated as major governments wanted it gone. Lately (2008-) there is worry about deflation. Now inflation again.

Whatever. If you have 50 years to live, maybe diversify between material goods and risk assets. Better yet, perpetuate your genes, bolster your family, and try to understand love.

In any case the financial literature's dependency on risk-free rate of returns looks like an ivory tower artifact.



Core CPI comes less than expected. Dollar drowns Euro spikes up. Wow! A less than expected inflation in America is good for America or bad for America? A less than expected inflation in America is good for Euro or bad for the Euro? If inflation is less than expected should gold spike lower or higher? It spiked higher.

Today we are in a world where anyone having a logical mind that is sound on what should happen is irrelevant. Today is a world where what is happening you must tag along and ride all illogicalities.

This has been around for a while. With close to zero cost of money in most key economies and in a few sub-zero cost of money, the entire logic of money is gone with the wind. We spoke earlier here on this forum how the Discounted Cash Flow model is only good monkies now, since if you are discounting to present value using a negative interest rate the longer durations become even better valuations implying that those holding a bleeding asset are going to be wealthier.

It's an upside down world.

Should one try to put one's wit to work in an unwitting world? Or should one take a good long holiday and travel around the world like the adventure capitalist?



 In a jam-packed life, with 24/7 markets and all other things to do, how do the voracious readers of this site, including the Chair, do so much reading?

Do you read word by word, line by line, or there are other reading techniques you use.

Overwhelmed eager minds to get back into good old days of lot of reading will benefit if you share your reading methods.

Larry Williams writes: 

I read 2-3 books a week. I used to speed read but now I skim a book to get the gist and if it looks good I plunge in. I read very few market books. Mostly history. I look to learn or be royally entertained—a few books do both. 2 I recently enjoyed were:

Today We Die a Little!: The Inimitable Emil Zátopek, the Greatest Olympic Runner of All Time

The Plains of the Great West and Their Inhabitants



 Indian equities have been smoothly chugging along. Flagship indices at PE of 18 and some pink papers writing its already the most expensive market in the world. Another headline that caught my eye today was that Market Cap of Indian stocks has reached 2 Trillion USD, whiskers lower than that of Germany & Canada.

No, I am not describing the current moment as a bubble, AT ALL. Yes this market seems valued and while it is flirting very very close to the first 5 digit round number, the magical 10000, there is a much deeper bubble building up and the current market is nowhere close even its onset.

Before I lay my two line thesis, at the end of this note, let me share an image that was circulating much through market-mens' whatsapp here today.

In the local market-colloquilism, the market operators are typically alleged to make the public wear stock at the tops. So when a wearable cloth image was going around on Whatsapps today, one could not miss recalling old posts on the list regarding the struggle ahead of a big round and its eventual release. Well thats a digression into the short term.

The real big bubble factors could be:

a) The world needs its next, bubble. This is a key surmise for one to guesstimate where the next bubble will rise. [More on this on a separate thread, why the world needs the next bubble]

b) Sobriquet of fastest growing economy already bestowed.

c) Political risk computes on India are at all time low with a uber-dynamic CEOesque Prime Minister. Valuations are a function of confidence and quality of management in any security. India was ranked as having the highest confidence in its Government amongst all countries recently, with 76% of the sample stating so, highest of all countries.

d) Cutting the long list of so many other potential factors that may appear to be mere bones, when I put this piece of meat on the table: The Government may very likely drop the Income Tax Rates from the current 32% to almost 12% or 10% before the General Elections in first half of 2019. It might do so by way of a policy to bring the Income Tax rate down in 5 years from 32% to 12%. Many reasons for the Government to do this:

i) Very low rate of compliance right now. The Laffer Curve may be put to play or expected to put to play. ii) Black Money, or unaccounted wealth of Indians, stashed in the banks around the Alps has been a key element of all political rhetoric. Destroy the device that motivates c reating black money, a.k.a. high Income Tax Rates so there will be huge jump in disclosure of incomes. There may be a huge flight of capital inwards into India too.

e) For now, the thing that may be important is, whether or not this much of a tax regime tectonic shift comes or not by 2019, these expectations will be taken very very seriously in the next eighteen months.

So while through the school of mumbo & jumbo, with this indicator or that indicator or this study or that study will keep pointing to a 5% dip for traders to keep playing, the huge huge short gamma, short delta risk on India will be out in the open pretty soon.

In the long run, before we all are dead, the expectable income is truly only gains in taxes and reduction in the cost of capital.

Alston Mabry writes: 

Thanks for the analysis, Sushil. I notice too that most estimates of currency valuations show the rupee as one of the most, or the most undervalued.

Peter Ringel writes: 

This sound like wonderful news for India!

I am quite a Modi fan boy myself. I am happy to read, that his administration has not lost it's drive yet.

I think there was a lot of FDI into India because of Modi – like a Trump-like catalyst and these tax reforms sound very healthy to me.

I am very surprised that Modi is able to do this.

After decades of socialism, related red-tape/corruption and state-sanctioned monopolies I had pretty much given up on India.

I was wrong and now I think the potential in India is huge.

Thank you for the update, Sushil.

Charles Pennington writes: 

As of January 2015, the Big Mac Index had the rupee 60% undervalued. The only two currencies that were more undervalued were the Russian and Ukrainian currencies, 72% and 75% undervalued, respectively.

By a long shot, the Swiss franc was the most over-valued based on the index, 57% over-valued. Second place — Norwegian krone at 31%.

Only 5 of the 57 currencies listed were over-valued against the dollar.

I was a little surprised to see Hong Kong at 49% under-valued. Supposedly a Big Mac costs $2.43 in Hong Kong and $4.79 in the U.S. The U.S. number seems high — does that include fries?



 Pakistani equities are down 20%.

It could very likely be a case of spurious correlation, yet worth taking a glance at.

Down 20% from the highs of the year, so far.

Interestingly, in the last 15 odd years that it's allowed foreign participation, it moves like the highest beta stocks would. Races up and comes down ahead of most other markets.



 The humorous one didn't inflict any joke hurting anyone, it seems.

Commodities Up, Bonds Up, Equities Up & even the USD Index Up.

Everyone is Happy. Capital Markets are trading like it's communism everywhere!

Or there can be a sustained move in the same direction everywhere?

So is there really no joke today? Or when is the joke going to be understood? Which of the four is the deception?

How does one try to figure out the answer to such questions?



 Does a single day large drop past 4 sigma imply:

a. short term horizon bulls are mostly all stopped out and supply curve at higher levels is all gone into the stops?

b. short term horizon bears have become fatter and at further dips, if they come, there will be a stronger demand curve nibbling in?

c. effects of one market over another, a.k.a. the pulley effect, should be ignored or such large drop in one segment of the market, Nasdaq in this case on Friday, has its Pascal's law effects on the bigger wider board N days later?

d. Such large massive one day drops in one specific market are an isolated event only or a yellow canary inside the coal mine?



 15th March. Debt Ceiling at 20 Trillion USD will be law?

Will it be Stop Loss day for America, deployed with discipline?

Or Trumpesque Trump-speak will unleash volatility violence world over?

Is this market an unstoppable train that is going to keep on its rails or an unstoppable train that will skid to stop?

What do you think?

Gold up, Dollar up, S&P Up has been a good nice happy game for all. Will all 3 keep moving up? Which one or two will tumble?

Negative interest rates in some parts of the world and unbelievable debt mountains in other parts of the world. Cognitive Dissonance is the new normal?

Is might going to be right or right is might?

Will Trump stick to the pre-defined stop loss for the balance sheet of the treasury? Or he is the savviest trader ever that we are yet to see who will break the rules to come out winner?

Is this a situation where sticking to the stop loss will bring more losses since Cognitive Dissonance is the new normal or sticking to the stop loss will keep the Equities train unstoppable?

Kora Reddy writes: 

Anything quoting Mr. Stockman suffers from at least 3 problems that I could think of:

1. "defensive attribution hypothesis"

2. as a counter in me says "a broken clock is wrong 22 times wrong" –> "David Stockman warns both Trump and Clinton could lead to 25% sell-off"

As we all know that on 4th Nov 2016 $SPY close is 207.33 vs. today's close of 237 roughly 30 points up or ~15%


ps: I hope I wont be banned from Dailyspec as I used nc-17 rated words like "zerohedge". 



 If one visualizes the equity markets as a passenger train and oneself as one of the passengers, many interesting insights can be gleaned.

Imagine a trader, always on the lookout for the next big pattern breakout. Such a trader is akin to a fellow running along a train that has already started to move out of the station. While raising his own velocity in running along the train, such a trader must touch the pole at the door ONLY if his relative velocity to the train is zero. He wont be able to touch the train if he is still running even a .01 mi/hr slower. He can very well touch the pole AFTER his own velocity has gone up by a .01 or a .001 mi/hr in excess of the train. Disaster happens if such a touch is made. The net relative momentum or force is calculated as the Difference in mass of the train and the person X the net relative velocity. The net relative velocity is actually -.01 mi/hr but because the mass of the train is almost infinitely larger than that of the over-smart runner the total force is a gigantic crushing pull that tears the runner under the wheels of the train!

Being early for a trader is being wrong? No, for a trader it can be suicide!

Since no trader will be trading a single lot only or plunge in his entire bid or ask at a go, diversification works not only across assets, but definitely across the time, even if in split seconds.   



 The cabbie with the car made of gold visited me right at midnight 40 minutes ago. I am not sure if I was sleeping.

He was weeping. Indians are going to be hounded by the Times Man of the Year, winner of readers' review, their own Prime Minister, very soon, by the end of this month, in getting to open their gold lockers. Married women can own 500 grams, unmarried can own 250 grams and men can have 100 grams. Any excesses will be taxed along with penalties for possessing unaccounted and untaxed wealth. Indians have been the biggest hoarders of gold. This will suck away the demand and might even create supply.

He was weeping what will happen to his car made of gold?

I told him to go away and to not be disturbed. But his weep was so sorrowful, I could not help but get out of the cozy mildly wintry wrap of the blankets and fix a cup of dark coffee. Sipping I pulled up my charts.

I smiled. The cabby need not be right every time.

The biggest hoarders if participating in the biggest panic is the bleakest point of demand. When their panic will settle and when they will come back with a vengeance, the flexions are not going to keep driving gold further 300 dollars down so that they can be charitable to them. The crowd will sell away into the bottom.

Do markets bottom out when there are no more fools left to sell? Or do they gallop up when the fools are forced to sell? In any case in a sterilized surgically sealed boundary physical sales of gold will be absorbed by another waiting within that membrane to absorb the physical. Inability by the hoi polloi of the gold pit to buy any longer is a reason for my dear cabbie to cry? Well if he knew how flexionomics works and how the wisdom of the crowd also is an inconsistent function of the same, he wouldnt be a cabby.

So I take out my cane at this hour? And rather than just throw the few coppers in the pocket onto the gold roulette, I insist on pawning my humble cane.



 It is crazy what is happening in India.

"How India's currency ban is hurting the poor"

The Prime Minister had given a cryptic warning during the month long Voluntary Income Disclosure scheme through October to disclose tax evaded stashes now "or else soon what I am going to do you will not be able to tolerate."

At 8 Pm on 8 Nov 16 when he announced on national TV the demonetisation unofficial gold bars prices traded at up to a 105% premium by midnight. Since then there been a very active market in this and premika have ranges between 20-25 percent.

Endless number of small and big accounting firms have been arranging "entries" at similar premia and these loan entries are to be reversed I'm next year financial.

Real estate lobby which was the biggest borrower and user of "cash" has been hit most. They have gone belly up in the 100 billion USD odd equivalent credit market in unaccounted cash directing the lenders to come back two years later. Bids in realty and rentals dropped 20 percent next morning with hardly any turnover since then.

Physical USD bills (God knows how many trillions of them in fakes are circulating all over the earth) are getting traded in a similar price trend.

The real targets have been 3 fold:

1. Massive supplies of fake currency were anticipated from Pakistan for funding terrorism. That rogue state is the primary supplier of most fake currency bills in Asia.

2. Entire left wing and center wing political spectrum that had fed on 60 years of deep corruption had been caught holding pants down. They deployed the very large number of poor people on India to throng banks to deposit the limited amount of old currency allowed per person.

3. This hoi polloi has found new joy in the manhood of Narendra Modi and this 70 percent voter population at the bottom of the pyramid that was always with the socialist political spectrum has suddenly found a new Messiah in the Right Wing political ruling party! The business community that always backed this right wing party in power today has become sour. The biggest coup of this Re-monetisatiom had been 180 degree reversal in the magnetic poles of the political spectrum. Modi is unlikely to abandon his traditional voter base and is too intelligent a person to lose it. Given the annual budget of the government this year has been preponed by 1 month leaving 2 months time to the end of financial year (budget was always 28 feb and this year will be on 1st feb and financial year ending remains at 31st March) I have an extremely strong hunch that this government will water down income tax rates in a Humongous way and not bug cut. A positive shock is very likely planned.

So to my mind Modi government has diluted the enemy of the nation across the border , enemy of the government (the entire political opposition spectrum) and snatched the voter base. 3 birds killed in one stone.

I am somehow having a deep lurking fear of a super bull market perhaps even a bubble to develop out of India into the next year, a further 10-12 percent equities drop in between notwithstanding.



Imagine a world that were perfect. Imagine such a world would have no approximations. No variations. No risk.

Such a world would have no humans, but only pre-destined robots that appear to be humans. Such a world would also have no opportunities. In such a world, enterprise would have no value. It would certainly be a boring, unchallenging place. Such a world would have no incentives.

So we should rather feel happy that we live in an imperfect world that makes us perfectly human, offers opportunities, and incentivizes enterprise. Uncertainty should never be eliminated. If it were possible to eliminate uncertainties it would be a world of the living dead.

Well, if uncertainties prevail, the only choice we have is either switching off for a while from active risk to passive risk and then switching back on. Risk cannot be eliminated. From choosing styles, instruments, level of exposure we are only able to make a choice to believe we are better off handling one type of risk over another. Returns originate out of risk and not vice versa, since whether or not there are prospects of any returns, risk will always be there.



 This is a very old adage: don't fight the central banks. That provides me the gumption to label them as the Gods of the markets. Einstein had quipped God doesn't play dice. Perhaps he felt the unmanifest, invisible, unascertainable authority in the universe is the creator of the universe and had control over its creation. Coming back to the manifest, visible and ascertainable behemoths of the marts a.k.a. the central banks, one is pushed to think that for the first time in recorded history they are sitting on trillions of dollars of negative yielding securities.

Are these visible Gods of markets playing dice or they are still the deterministic factor in the markets who will still determine what happens?


a) Keep dying a slow death losing small chips every year for a long time to come with the negative yields.

b) Raise yields and kill the balance sheet?

c) Inflate dramatically some asset to shore up the balance sheet while exercising option b to make financial assets have sense. In scenario c, the traditional asset of bonds is already inflated. In 5,000 years we have never had yields below zero. Equities are at all time highs. What else is not at all time highs? Again a real estate bubble? Or will it be gold sitting in the vaults beneath metro stations around the world? Gods wont let go of their stature to be Gods, even if these are man made Gods.

Now, after scenario c also plays out, since nothing is permanent and ever changing cycles will again at some point bring something down, what is it that is going to go down first and what is it that will go down most?

If the unthinkable of negative yields came in too, why can not the unthinkable and the least obvious scenario (a) persist? Imagine eventually people getting money to buy cars, homes, tuxedos, rolexes and receiving an interest for taking away the trash called cash from lenders, banks and Gods? This then is not an option that can persist for long? Or it can?

The whole earth is going the Amazon way!? Will Jeff Bezos be known as the pioneer of the new world, where you get paid to usurp and use up money that in any case is at a discount? Is the motor created by John Galt working now to produce energy from nothing? Who will cut this motor off? When? Why?

Is the motor already broken? The endless mint-churning has produced endless currency. This currency is akin to endless static charge that has accumulated. Its not creating motion. This currency is unable to and unwilling to move into the system. Why? Is it that the window dressing of every bank balance sheet that began in the aftermath of 2008 in the developed world is not yet complete? Only book entries are happening?

Why do I get illusions that the cigarette buts in my ash tray sometimes appear to have a $ insignia printed in gold? Well if I were to go by the wisdom of the Reflexivist that one makes big packets on betting on the unobvious, I call this Gold insignia bit an illusion since fundamentally gold is too obvious a bet.

Will the world return back to before Bretton Woods? Will every key central bank agree together to print only more currency equivalent to gold it has making the yellow shining bars jump up to 2200? Then chart reading pros and amateurs will find a divergence in momentum and short sellers will come in and the dream of the gold bugs would be fulfilled to have record shorts in the move from 2200 to 1800 so as a jump to 4000 will become feasible? Will that suddenly bring a solution that none of the banks are sitting really on junk anymore? Will it still allow the permanence of the Senator's observation that a good suit has always costed an ounce of Gold? Or then, a good suit will be available at half an ounce of gold?

Despite change being the only permanence in markets, few things have never changed. Of those unchanging ideas the infinitude of the abilities of mankind at struggle for survival, conceit, deception, keenness to find the next scapegoat don't seem will dissipate away with just negative interest rates. No one will believe that everyone will go down equally and in fair proportions. So who is the lunch now, when its almost lunch time?

Monkeys have been now using the Discounted Cash Flow model. Yes, the longer you hold negative yielding assets the larger becomes your Net Present Value. The more you are willing to bleed the wealthier you are now! If this negative yield quagmire has any shelf life in plain simple English (no Greek and no grammar-nazis required) no one will have an incentive to save. If there no savings incentivized why would investors be incentivized? Lord Keyenes we really wish this day has not come, yet it has.

The most illogical times have arrived. Why am I seeking to imagine the odds using any logic? Would an illogical unintended consequence save the world? Why don't we remember that in the yo-yo moment of 2008 when the biggest churning of the USD mints happened, the biggest flight of capital until then in the history of this world happened INTO the USA and not OUT of the USA?

Would logic have to prevail, eventually?

So I am sending out this humble hat to the spec-list citizens, please pour in your (ill)ogical bets into this seeking hat. If trend is your friend, until it bends or ends.



Release is a word I understood in a totally unique manner through the writings of Vic on the lists through the last decade.

Pent up emotions, that reach the bottled up state gradually over time, get released as any event that is scheduled to happen comes by.

For events that are unscheduled and happen suddenly emotions get pent up very quickly in the first place and then dissipate.

Whatever category of events we are inspecting, whether scheduled to happen or sudden, emotions are pent up and released.

Rational minds, systems, approaches, styles will focus on this process and aim to benefit from it and strive to be not part of this process. That's what perhaps the Reflexivist means when he says markets reward for playing the unexpected. He hasn't likely meant that the winner doesn't expect or speculate buy likely that the winning hands usually play the underdog.

At a scheduled event that has fear as theme puts are already expensive and when greed is around calls are already expensive. Do butterflies work well at the release moment of a scheduled event? When there are many butterflies in bellies, sell the butterflies?

For the surprise event types not talking here about how to handle existing position but leaning on Vic's favoured phrase of how a good trader has many rabbit holes should one be chinking the mind Into separate halves : the survivor and the opportunist working simultaneously? Find the rabbit holes for fastest risk control and simultaneously work on fading the pent up emotion when it arrives to play for the release ?



You may have heard the following quote:

Philosophy is like being in a dark room and looking for a black cat.

Metaphysics is like being in a dark room and looking for a black cat that isn't there.

Theology is like being in a dark room and looking for a black cat that isn't there, and shouting "I found it!"

Science is like being in a dark room looking for a black cat using a flashlight.

Spirituality is being in a dark room looking for a black cat with a torch and discovering "you" are not there.

I would like to add: 

Trading is like waiting for a bookie to get in a dark room first and yell out a spread and then not going into the room until you have locked up one leg of a wider spread, then going in and giving it to the bookie at the tighter spread he is holding on to. 

Of all ideas available, wherein non action is not a possible choice, then choosing the one where one may claim better understanding or lesser severity in testability to handle adverse incursions better, is defined as risk management. 

I disagree with the definition of science, since the moment you have a flash light on, the room ain't dark any more. So will instead settle if you kindly change that to looking for a black cat in a dark room using body heat sensors. 



When the amount of buying is always the same as amount of selling, it has been discussed many times before here that price behaviour is not a game of demand and supply but expected demand and supply. That is also reflexivity adjusted demand and supply.

At a tick, inside the last "exchange" in the pit what is it that is moving the tick this side or that side?

I would simplify for my mind and place on the table an idea that it is the "Path of Greater Impatience". Whether a white shoe firm is "aware" of impending larger clients orders and therefore bidding higher or lower or there is a Technical Analyst anticipating some breakout or reversal and therefore not willing to be patient or there is a news driven, a.k.a. fundamental trigger puller, or there is an HFT machine that is sensing the depths of the order book, anyone who makes impact on the next tick is the one willing to stake a claim that her impatience is justified and is going to be profitable.

Ticks arise on impatience. Prices propagate on impatience. When too many minds and wallets are left into the patience zone, the impatient "in the money" hands get into whipping a notion that the patient will eventually turn impatient. That is where the reversals, small and big happen.

I would leave this note with a cheeky surmise that patience ain't the virtue, knowing when to be not patient and knowing when not to be impatient is the virtue.

Wondering if there is a way to capture from data streams any metrics of what percentage of existing bids and offers in the order book are changing and if such a series of data could be established how would it enhance trading decision making. This could get even more interesting to plot / numerically analyse what percentage of bids and offers are changing closer or away from price, what percentage new bids and offers are coming in and what percentage bids and offers are going out of the order book.



 The search for happiness has a Heisenbergian aspect: the more certain you are about what you want, the less happy you will be attaining it. It seems to happen unexpectedly, and often only in hindsight.

There is also an "aspergian" aspect: like Viktor Frankl's "The doors of happiness open outward". I take this to mean searching and engaging with the world (rather than perpetual introspection), but it could also be the joy in helping others (as risky as it may be).

In markets it is very hard to find happiness, and it is probably foolish to look there. A good source of unhappiness, however, is limit orders. You place them with great hope and the market runs away and leaves you behind. Or you get filled and then it takes you way down. Or you're overjoyed to finally get out with a modest profit, only to find you sold too soon and missed the big one*.

*Holding losers long and selling winners short: the hardest thing not to do.

Sushil Kedia adds:

Happiness is life. It has a unique property. The conditional probability of happiness is a certainty if you have a happy nature else it is zero for every other variable.

Anything contingent on an outcome (event) or a property (belongings) is not happiness. Happiness is unconditional. Happiness is an absolute.

Happiness is neither a milestone nor the journey of life. Happiness is the fuel of life. By this assumption or understanding one can see pain is not the opposite of happiness. Pain is only a signal asking us to change something.

On a lighter note, obviously no one normally seeks happiness from a mistress. In Markets, you come for taking what you have come to take and not search happiness, since happiness is within. 

Ken Drees writes: 

"You never see the stock called Happiness quoted on the exchange."

"It is better to desire the things we have than have the things we desire".

-Henry Van Dyke



I solicit DailySpec members to write one interpretation of the phrase "ever changing cycles". Let's see what gets compiled.

My favorite one line description of what ever changing cycles are reflected most in is that the correlations of no contracts remain the same, they keep changing and often in gradual non erratic "tendency". (No please don't kill me, I didn't use the equally vague word 'trend', but only said tendency).

I also request, our generous host, the chairman of the list, and the one who coined the phrase ever changing cycles, helps elicit as many responses as he can and then shares with us his own notion of the mystical ever changing cycles.

Gibbons Burke writes: 

Two words: random walk. 

anonymous writes: 

Are the cycles ever changing?

I'm not certain, I think the cycles are always there but they get accentuated from one time to another. It is what causes them that is the great mystery which has caused me to pound my head into the wall many times late at night. That helps, occasionally I get a glimpse of something going on that is causing this.

However no clarity yet on that point.

Paul Marino writes: 

Mr. Mac, the most practical thing that you ever did in your life would be to shut yourself up for three months and read twelve hours a day at the annals of crime. Everything comes in circles – even Professor Moriarty. Jonathan Wild was the hidden force of the London criminals, to whom he sold his brains and his organization on a fifteen per cent commission. The old wheelturns, and the same spoke comes up. It's all been done before and will be again.

- Sherlock Holmes

The Valley of Fear
, Arthur Conan Doyle

I see ever changing cycles inside the big cycles, demographics, interest rate regimes, etc.

The President of the Old Speculator's Club writes: 

The inability of law enforcement to police the streets effectively provided Wild with the perfect conditions in which to build his new business. Victims of theft generally had little chance of getting back what was stolen from them, let alone catching the thief. Through Wild's new service, however, owners of lost or stolen property could apply to him for help in recovering their possessions for a fee that fell below what it would cost them to replace the objects. His business proved to be extremely popular.

Wild benefited from this policy by collecting a fee every time he was able to prosecute a criminal. His office, then, essentially served as the de facto "Scotland Yard" of the day. Jonathan Wild, the man supposedly responsible for clearing the streets of criminals, was in point of fact the head of a vast criminal empire and a well-oiled criminal machine. Wild's Lost Property Office was actually a clearinghouse for stolen goods that members of his own organized gang had themselves acquired. The thieves he apprehended, supposedly for the good of the community, were fall guys; they either belonged to rival gangs, or were members of his own gang who had tried to double-cross him, quit his business, or ceased to be more valuable than the 40-pound reward given by the government for capturing and convicting a criminal.

This new [Transportation] Act gave judges the option of removing felons from the streets and jails without having to take away their lives in the process. As a side benefit, the Act seemed to offer help with the American colonies' desperate need for cheap labor. Settlers in America faced the problem of securing labor at a cheap enough price for them to grow their businesses, mainly because anyone who had sufficient means to make the trip overseas from Great Britain to start a new business in America had no intention of working for anyone else…convict transportation killed two birds with one stone: It rid the Isles of unwanted criminals and provided cheap labor for the American colonies.

A provision in the draft of his Transportation Act aimed specifically at curtailing Wild's organized criminal activities. This provision made it a crime for anyone to take a reward for returning stolen goods to their owner without at the same time capturing and giving evidence against the thief. Failure to turn in the criminal could subject the person taking the reward to the same punishment as the thief, assuming the latter was ever caught. This provision was so clearly aimed at Wild that the Transportation Act also became known as "The Jonathan Wild Act."

Since the Transportation Act made it a crime to collect a reward for returning stolen goods without turning in the perpetrator as well, Wild shielded himself by using transported convicts to return stolen goods and collect the reward from their owners. Returned convicts not only provided Wild with protection from the provision in the Transportation Act aimed directly at him, but if they ever tried to betray him, he could easily turn them in for a large reward, and they would receive an automatic death sentence.

From Bound with an Iron Chain (The Untold Story of How the British Transported 50,000 Convicts to Colonial America) by Anthony Vaver



There are endless applications of the concept of gravitational waves to markets and much more easier to perceive every minute, every hour, every day that one might even state that market folks are humbler in not stretching their own perceptive lenses to theorize physics and wait for scientists to do their jobs.

Market Cap Gravitational Waves: Very large cap stocks make a sudden wobble, indices wobble, sentiment wobbles, most stocks move with the wobble. A large mass stock wobbling the volume price fabric of endless other stocks and dramatically the smaller ones.

Earnings Gravitational Waves: Earning Season is witness to undue anxiety or excitement. The prevailing Volume/OI - Price Fabric is already constructed and the extension of this fabric, i.e. immediate next bet, is much more largely a function of the existing V/I-P Fabric. Yet, a lot of volume or change in OI continues to be witnessed on most widely researched large cap names that are good fades. Rarely do quarterly earnings ever alter permanently the existing "fabric" but most often create a temporary wobble.

Contested Gravitation Waves: Significant change in Volume or in Open Interest, both reflect a significant change in the level of contest for discovery of price. Large dramatic moves or wobbles in High Volume or High OI pits put gravitational distortion on other pits. Margin selling or contgations as their extreme are observed in falling markets and complacent buying into un-understood unanalyzed trophy adventures as a wealth effect in rising markets. Market is a casino where players' behaviours alter with the level of House Money.

Food Chain Gravitation Waves: The waves, the unduluations, the idiosyncratic movements, the never at equilibrium but tending to equilibrium behaviour of prices are all a matter of the big fish (the White Shoe Firm included) nudging with their Gravitational Waves the small fish to be swimming hither and thither. The never wavering permanently rising equity curves of some of the rarest wealth creators in markets is what one would notice at the top of the food chain. Whereas the brownian motion equity curves are at the bottom of the food chain. Gravitational Waves are working from the top down to the bottom of the chain.

So on and so forth, every perspective in markets is explained by ideas similar to gravitational waves. I should leave this note open for others to help tautomerize further.

What perplexes me much that marketmen have evolved in their thinking far ahead of the evolution of Physics. When you think about Reflexive Gravitational Waves as an idea that is routine in our "universe" wherein the Space Time Fabric itself is exerting Gravitational Waves on the future events and keeping the ecosystem in a self contained completeness, will a future discovery in Physics be guided by this imagination that the endless expansion of the Big Bang Universe is not for a reason beyond this Universe, but the Universe is the reason and that the Universe is the influence on the Universe?

Peter Grieve responds: 

From the LIGO wiki page:

"Gravitational waves that originate tens of millions of light years from Earth are expected to distort the 4 kilometer mirror spacing by about 10−18 m, less than one-thousandth the charge diameter of a proton. Equivalently, this is a relative change in distance of approximately one part in 1021"

The gross world product is estimated at $76 trillion, a fluctuation with the same proportion world be 7.6 millionths of a cent.

Which is not to say they haven't detected something, but is (in my mind) a good reason to wait for more confirmation. I hope it comes. Imagine detecting a black hole coalescence!



 Gold is glittering one more time.

The question that comes to mind and one not normally asked in popular press is is gold only a super currency or does gold behave sometimes as super currency, sometimes as a super asset and often in normal times as another asset, which many pundits love to dismiss as a latent unproductive asset.

If one were to run correlations of gold across these varying regimes, how can we have a logit or a probit model where a probability distribution of risk-off factor is included.

When risk is a bad word in the markets, does gold first behave as a super currency and only later as a super asset or is it vice versa? Or there is a more likely scenario that the super currency vs super asset status also has a localised idiosyncracy that can be modeled using another function?

anonymous writes: 

It is a manipulated asset. Study the structure of the Futures market, the term "Paper Gold", and the dominance of the handful of bullion banks in the delivery process. Look at the international shifts in holdings, and question the "reality" of the Ft. Knox inventories.

More importantly, who do you trust? Central bankers, governments, and economists all have biases, some with monstrous financial incentives to have bases for their pronouncements.

You might want to describe what you mean by super asset, since that is not a term used around gold that I know of.



Anyone see a 20% move up in SHCOMP by Counting or by Mumbo?

There is consensus that China will take this world down. If there is such a rally, is the world also going to rally by the same amount?

If not can ideas similar to bond convexity be applied to inter relationships between key equity markets and all equity markets and if such convexities shift and or change over time what import do such shifts carry for either quant forecasting or for mumbo jumbo?



 I read a few days ago on a website that no more evolution is possible beyond the human form, until consciousness is worked upon. I interpreted that nature kept forcing a biological evolution & brought us into human form and hereon for remaining relevant in the continuing evolution, for improving the lot within this and the next live(s), one will have to raise the envelope of one's consciousness.

If I connect this idea to another idea that we cannot let people press the wrong switches in our being, causing either morbid fear or fatal attraction, then I have a combined thought that for my evolution to continue I have to de-activate the wrong switches in my consciousness such as outside of me other forces cannot trigger them. Only inward flow of intelligence into any action or thought switch has to activate any.

This leads me to a thought that if God is the supra-intelligence design that Governs this Universe and every Universe, then there is a tendency for the human world to keep becoming more and more vigorous, intense in the stimuli each next generation will keep getting. The one effective in a world that will have more and more intense stimuli are then going to be those who are stronger in the face of such stimuli. The same way that progressive resistance training builds the muscles on our body, progressive resistance training to information stimuli may develop Emotion Intelligence.

More information, more TV channels, more internet, more books, more facilities, more attractions & eventually more frustrations and at an increasingly faster speed is the trend within this life. To evolve and become more effective than others is a goal of the process Darwinian Evolution, then each life we get is a preparation for the next one is one view. To be given birth in a much faster, more enticing, more opulent world one might be then actually getting eligibility by effectively training received in a lesser / simpler / easier world to respond less and less to external attractions and frustrations.

So if I let this process of imagination propagate forwards, undergoing evolution of the Emotionally Intelligent side of our brains we may one day become eligible to be given birth into Heaven and if we keep failing the tests of Emotional Intelligence we may keep receding into lower worlds and reach Hell too.

Yet, who knows if all universes are co-existent and time is a mere illusion that causes a sense of separated-ness and time provides a mythical yarn on which our mind travels, then Heaven and Hell may both be very well existent within this life and many have been to both several times within this life.

May I therefore conclude, those amongst the human specie that are able to restrain an impulsive response to stimuli more than others are on the way to building their Heavens, while those who respond more impulsively than the rest are accelerating their journeys towards Hell. This is felt most truly in the profession of trading, that provides unambiguous instant feedback with each piece of action and inaction, yet may be true in every human enterprise since this is the path of the ongoing evolution.

I am hopeful you will allow me an indulgence that, mere Intelligence is for those who are afraid of handling the journey to hell and emotional intelligence is for those who are making a successful trip back from hell with a determination to get to heaven on this leg. Perhaps, the passport to heaven, for getting in and staying there, is a high EQ and not a mere high IQ.

Gary Phillips writes: 

One can never count on the consequences of their actions, yet one can always count on the motive(s) of the action. The trader needs to take responsibility for the consequences of his own choices. The market demands objectivity and precision which is directly quantifiable. The ego is completely different from the market, and can only be measured subjectively and qualitatively. Why not simply, look at life as a flash of beta? There isn't any measurable premium to be paid to insure compensation or avoid retribution for the kind of earthly life one lead before one's option expired. Trite but true, "not everything that counts can be counted, and not everything that can be counted counts."



If the last couple of years the DXY and the SP500 rose together, a parallel from the 80s was justifying that the US economy is improving and hence both money and the assets this money can buy can appreciate together.

Usually in the developed markets, say the G-7, a regularity has indeed prevailed that the value of money and assets do not move together.

So during the last couple of years, where indeed all key central banks have been steroid fountains (naah the throwing cash from helicopters is phrase that everyone has forgotten so I will use this one) pumping up their supremacy in dictating markets, there have been countries in Europe where equities went up despite the underlying Euro declining.

So this set of arguments is therefore either contradictory or inconsistent or incoherent.

In trying imagining (forecasting begins with an imagination which is eventually restrained with the aid of studying the statistics of data originating in the past) how this present world will find coherence, I have three questions:

a) Is the more important Money going to be gold for now, the super-currency that will get acknowledged as having this status with the reality cheque now being shoved up on every desk?

b) Can the steroid factories drive value of both Gold and Equities together now, while in the last couple of years DXY and Equities indeed drove together?

c) If Price of Crude is better visualized as anti-money and not money, since the world has to consume it to produce wealth, will it drive along with the prices of equities or against them, hereon?



If Volume as well as Open Interest are indications of the amount of struggle for the discovery of price, which seems a likely good way to look at these two important variables in market data, then price gaps or price jumps must be occurring at moments of high consensus and low struggle.

Consensus fades. A point of high consensus, if identifiable, is a good point to search for fading trades.

Then, how come a market as Hong Kong continues to display for long years continued gaps on the daily price plots? If indeed these opening gaps are a strong consensus developing with overnight news (I wonder why should only in the Hong Kong market the news-vendors are so efficient, chuckles) then why are the daily candles not displaying too many hanging mans and the faders are unable to prevail? This leads to a disturbing instinct, that the gaps in Hong Kong are something else and not points of low struggle high consensus price jumps. Those price jumps are something else.

What is underlying this "regular" opening gap behaviour in Hong Kong that is "irregular" in the context of how other large markets are?



 It would probably never happen, but journalists should have to pass a regulatory exam of basic market sense. Maybe that way they would stop abusing the idea of freedom and liberty.

So journalists get the poetic license to spew such bunkum as rise in gold prices by 5% will reduce demand. The whole world reads such comments and gets affected, forgetting totally that Gold is a "Giffen Good" where the economic utility is derived by possessing it and not by consuming anything of it. The more the price rises, the more demand rises…. a.k.a. the tulip mania. But Liberty must be allowed to be abused by those holding the pen.

So this morning in India, when I noticed a certain Business News Channel that has been hollering all the last 20 days that gold is drowning, gold is drowning suddenly without any rhyme commented the overnight jump in gold prices will "reduce demand in the festive season ahead", I pulled my handkerchief and collected the small nickels I had wagered on the gold wheel and pocketed a humble profit.

I wonder if Liberty would be breached at all, if regulators world over made it mandatory that newspapers should only supply news and stop behaving as views-papers. All publications and broadcasters should have well defined separate sections called the "views-paper" wherein only those journalists who have passed a regulatory exam that measures if the candidate has an IQ of 100 or above should be entitled to publish.

A typical news supply source, whether a newspaper or a TV channel are today very difficult to be separated from what in yesteryears we used to call a tabloid. 5% news, 35% views, 10% gossip, 10% titillation and the rest of the bandwidth choked with advertising.



I am happy that even counting has limitations. I am happy that everything has limitations except the human folly and human imagination. Because if there were any way in this universe, in this market, in this life that was totally bereft of any adventure and therefore any risk, there would be hardly any difference between the living and the dead.

Uncertainty is life. Uncertainty is evolution. Uncertainty is the fuel of progression. Uncertainty is the reason that learning, knowledge, enterprise and effort have value. Without it, a stone and a man would be identical at best. Perhaps the stone would be at peace and man still restless. It is uncertainty that makes the restlessness of man the fuel for transporting us into the future. Certainty, the chimera that all chase, I am happy exists in non-existence only.



 I was waxing nostalgic when I was reminded of one of Vic's favorite precepts…

Not that it was anyone's business, and not that anyone really cared, but after the trading day was over, one was often asked matter-of-factly, "so how'd you do today?" even back-in-the day (on the floor of all places) traders doled out socially accepted responses to this very probing question. These responses were realistically based on a hierarchical assessment of one's intra-day p&l.

Ranging from bad to worse, were the losing days…

- they got me
- got killed
- at least I got my health

Ranging from good to better, were the winning days

- not a bad day
- got 'em
- had a nice week today

A gentleman never kisses and tells; and a trader does not provide full disclosure about his performance; the trader should instead exhibit humility. For those on the right, humility may be seen as political correctness by a different name, while those on the left may see this as a way of stifling free expression. However, like a poker player without a tell, one should never be able to discern if a trader had a good day or a bad one. A trader shouldn't whine, or proffer excuses on bad days; and there should be neither bragging, nor hubris tendered on the good ones. Trading makes strange bedfellows. Individuals from disparate backgrounds with varying opinions, beliefs, and backgrounds are brought together by their passion for trading. But, what should also unite them is a shared belief that humility is not only there to protect them, but is a kind of moral compass that should always remain a virtue.

Anatoly Veltman writes: 

People would never guess so after the close, if I just made some easy six figures. I never-ever thought of the reality of that cash (for me, the winner). People would hear me going off at "that silly market", which just did so unprofessionally today.

Reminds me of one Robin Hood's trading idea to never cover if the market let his contrarian position recover back to break-even. His logic was that if "they" were covering themselves so aggressively as to even forget "to force me out first"–then my initial premise must have been reeeeally good, and is bound to go a long way!

Jim Sogi adds: 

My second cousin is a pitcher for the Dodgers. He and every other baseball player has daily, game by game, lifetime, yearly statistics kept and prominently displayed whenever his name appears. Why don't professional traders have this type of info if they are running a public fund or ETF? I think it would be good.

Sushil Kedia writes: 

In my earlier years, there was a dream job I wanted to get hired for. Interview processes lead me to the final round with the big man, who has been an idol nearly for me for close to two decades now.

At the deeper end of what most would consider to be a long interview by his standards, since he had already given me twenty minutes he asked me to tell him one exceptional quality I have in me which would be really difficult to find in most others and how it is relevant to the job of running his billion dollar book.

I told him humility is my most effective quality. He asked why. I told him that it is the most powerful currency that can ever be invented. He stared at me and asked why. I told him, without spending any cash of any type, it is very effective in seizing a put option from the world of your own short-comings, follies and errors. He said, this may not always work, as some will be so good that they will still encash your short-comings. I wasn't sure if he didn't like what I said. Then with a long pause he asked, what more ways can you justify saying that humility is the most powerful currency. I said it helps you see others' cards often better without revealing most of yours. He smiled. He asked, tell me a third way in which humility is a currency. Told him, the same way that deception minimizes struggle for the discovery of the deal zone, humility also reduces the required effort for closure. He said you are hired, subject to reference checks.



 Andy Lo (paper link here) studied varied technical formations and concluded that the Head & Shoulders isn't useful for the universe of stocks. His paper didn't address the gold market.

I am not a professional chartologist (but I play one on TV), and a cursory look at the gold chart from November 2014 to present sure looks like a head and shoulders. If you believe this stuff, closes below 1150 should project to $1000/oz and below. Certainly, the strengthening dollar, rising real US interest rates, and various other stuff (like the Chinese reserve report released yesterday) and oil prices are not particularly friendly for gold bugs. Also, the long term gold price is still ahead of the M1 and CPI — but it will look fairly in line at 950-1000/oz.

Specs may recall that I very publicly rode the gold bull market for several years and exited in early 2013. I still occasionally trade around it for fun, but I am structurally flat. If you held a gun to my head, I'd rather be short than long right now for a trade. For now, I'm waiting for the GDX to trade at zero before I stick my toe in the water. ;) These are big cycle, macro economic moves — and that gold didn't catch a bid during the Greek crisis or Puerto Rico panic says it all.

Perhaps more interesting than gold is platinum — which just broke $1000/oz. It's pretty rare for platinum to trade at a discount to gold. I know Vic likes to trade big round numbers.

And definitely more interesting than either are GOOGL and NFLX — neither of which I own. Ugh.

Sushil Kedia responds: 

Mumbo jumbo being acceptable on this site for one moment, the head and shoulder argument is good for prospecting how much bearish opinion might be existing here and there. The truth from the university of mumbo jumbo is that momentum as measured by rsi is making higher lows and price has been making lower lows, commercials have the largest long position ever, and if at all someone must look for mumboistic patterns there is a terminal triangle on a c wave. A rocket will fire up soon…. 



This article at Trader Planet says commercials are record net long and in the past such has resulted into large up moves.

Without invoking the testing or testability of such a thought process yet, I seek the Senator and other CoT experts on the site to help define in the least ambiguous way how to filter out the True Commercials, The True Speculators and the True Small Traders.

Is the COT data so straightforward to leave a free lunch on the table for the whole world?

I also wish to twist this one thread in evaluating why would this tool of thought also not suffer from the ever changing cycles?

Also indulging in the more routine task and the more mundane task of imagining the future: once the pent up emotions of a Greece that was greasy for last five years having been released, with equities everywhere in the world been ho-hum for a good time, with an iPhone in the pocket of every college kid in India, is the world complacent enough here for a regime change? Oh, yes with peak oil ideas being forgotten completely, the world has also been quite happy in imagining 45 for the Nymex Light crude is also not going to hold, oil will be free some day very soon.

Anatoly Veltman writes: 

The article is (surprisingly) erudite: commercials are mean-reversion, while small specs are trend followers. This always explains increased commercial Long after decline, and diminished small spec Long. Not really predictive, except if you believe in mean reversion anyway…

The only COT-specific signals are in fact trend-following, and occur rarely: divergence. Divergence is one situation only: when commercials have NOT countered the move. Recent move was down, and if commercials have NOT increased Long, then it would be a rare signal "to sell!". But, of course, no signal right now. If Gold embarks on long rally, and commercials will NOT sell into it - there will be "buy!" signal.

All other COT interpretations are coincidental or superficial. Commercials should not be followed because "they know better"; but following them is safer because "they don't care", i.e. will not be force-liquidated! (It did happen to them twice in 35 years: during Hunt silver corner in 1980, and during Ashanti failed financing in 1999).



 Every kid in college in Mumbai, who is either paying for fees by loan or by leaning on parents, has an iPhone on hand.

Has the 'me too' club become full or are there more pockets for Apple Inc. to keep taking out more dollars from still?

The phone heats up. Accessories pucker. You can't upgrade the memory. There is more loss per phone per dollar in Apple than Android etc. etc.

In 2009, if you didn't have a blackberry or two you were not good enough. In 2014 if a college kid doesnt have an iphone he is not good enough.

What is the thing for 2019? I want to buy the stock of the company that would put a 'me too' in the hands of every college kid in Mumbai in 2019, by next year.



 One of the most frustrating things in trading is when you research a (qualitative, not a systematic) trade, stay up late figuring out how you want to express the idea to maximize gain and minimize loss, and then the next day when you want to put on the trade that stock is up near 3%.   

Considering it has done nothing for months you figure, "I will wait till to buy on a decline a bit lower".  Then the next day you see it is up 8% and the options you had looked at were would be up 60% in a few days had you conceived of the idea just 1 day sooner. 

I think at such times (similar things have happened to me 3 times so far this year) one is very prone to going on tilt, such as finding some other market to chase, or otherwise do something out of frustration that is not logical and end up losing what you would have made had you been one day sooner.   

I am wondering if there is any way this sequence of events can be generalized beyond specific circumstances of one trader, to general market phenomenon, maybe even events that lead to predictable circumstances.

Jeff Watson writes: 

Whenever I go surfing, I miss a lot of good waves. I either am in a wrong position, miss it completely, or just blow it off thinking a better one will be behind. I never feel bad about missing a wave because there will always be another wave sooner or later. I look at trading exactly the same way I look at surfing.

John Floyd writes: 

Agreed, put another way as someone once said to me “there is a bus every 5 minutes”.  Also importantly in terms of the limits of time and energy don’t spend it worrying about missed moves, focus on what is ahead.  

I read a poignant quote recently in The Joyful Athlete: ”Second tier athletes tended to beat themselves up for mistakes, while the champions simply noted their errors and moved on, wasting no energy on self-recrimination.” 

Stefan Jovanovich writes: 

I have the same problem. Sometimes I wait on a trade too. I think it is greed, the desire to seize the least/highest perfect. So I remember: "Luke, trust your instincts!"

Anonymous writes: 

I strenuously disagree with the philosophy that "there is a bus every five minutes." (My late great father used to say, "there's always another street car.")
This is a rationally flawed analysis. Because it treats an opportunity cost as economically different from a realized cost.  The reality is that the P&L from an opportunity cost is real, and it compounds over time. And this is true so long as one is consistent regarding timeframe, methodology and performance benchmarking. The most pernicious thing about this street car delusion is that it can be hidden,  rationalized and forgotten.
By way of example, our fellow Spec Lister and Bitcoin Booster, Henrik Andersson declared on March 12: "Crashing commodity prices, currency war, crashing yields (with a big chunk of European debt trading at negative yield), surely this can't be because everything is so rosy in the world, this cant possibly be 'good' news. Couple this valuations close to ATH  and I have for the first time in 25 years sold everything (I started investing when I was 12). Everything." 

Since this declaration, the SPX, Dax and Nikkei have all risen between 3 and 6% — and the DAX is at an all time high.  If Henrik measures his performance on a daily or weekly basis, this is a bona fide opportunity loss of substantial note. But if Henrik measures his performance on a long term, multi-year basis, it is way too early to render a verdict and this opportunity cost may well morph into an opportunity gain.

John Floyd comments:

Point well taken and a good one. I was afraid my quick comment might garner the need for elaboration.   The point I was trying to make is if you “miss” a trade you should learn from the experience and move on, while trying not to repeat the same error in the future. Juxtaposed against expending energy lamenting the perceived lost opportunity, which also has a cost. Assuming this is done with some degree of improvement I think it is both rational and sound.  In this way the opportunity cost is treated as real and minimized over time. If there is improvement made then returns are compounded in a positive fashion as opposed to a pernicious one.  In anonymous’ example that might even mean Henrik recognizes what may or may not have been an incorrect thesis and “buys” everything the minute he read anonymous’ post.  

Sushil Kedia writes: 

My two cents on the table:

Opportunity costs as well as realized costs are both known and quantifiable only after the market has moved. At the instant of a decision as to whether to decide to take a trade or not, both are unknown.

Since a real P&L is a progression of a series of unknown infinitesimally sized but infinite number of moments, it is likely a flawed debate to undertake whether or not opportunity costs compound, since if those said opportunity costs actually turned out to be realized losses they too would compound.

Transliterating approximately what the Senator has said often in the past, the purpose of a trader is not to be in the market, but to come out of the market, one would like to tune one's mind to focusing on how much could one gain without losing beyond a point. For each this is a unique set of numbers despite the market being same for all. This uniqueness comes not only from different skills, but different restrictions on the types of trade one is allowed to take, the different marketing pitch each has to use for garnering risk capital (oh we keep transaction costs low), the different risk tolerances each must remain within etc. etc.

So each needs to focus on how one will travel from an infinite series of infinitesimally small pockets of time in deciding when to not decide. 

Paolo Pezzutti writes: 

With regards to missed opportunities, I have two observations.

Firstly, I think our mind is biased in focusing on the good trades that one could have made. We tend to forget the bad calls. It is true, however, that if your trading methodology is systematically not "efficient" then your performance will eventually be sub par.

Secondly, if you continue to miss opportunities, you may have an issue in pulling the trigger when it is the right time to do it. I have a long way to go to improve my trading and I think I have to work on both these areas. My trades are inefficient, because I can spot good entry points but my exits too often get only crumbles that the market mistress is willing to leave on the floor after a lavish dinner. Moreover, one tends to be afraid of taking the trade right when the risk/reward is more convenient, that is when fear is the prevalent sentiment in the market, the moment when you should "embrace you fears" as Larry Williams would say.

As a final comment, I have to commend the market mistress for her naughtiness and deceitfulness. The employment report on Good Friday released with markets closed saw prices of stocks plunge seriously (20 pts in 1 hour) to get 30 pts back on Monday.  Many opportunities during the Easter weekend in stocks, bonds, currencies, commodities because of ephemeral end deceptive moves. Who knows if they were orchestrated or simply "random". 

I went short gold on Thursday at the close (1715) at 1202.6. The first price  printed on Monday was 1212.7. I eventually took a loss later that day of about 14 points. After 2 days gold was down at 1994. Focused on my potential loss, I did not exploit the huge opportunities offered. Afraid of even bigger losses, I liquidated my position instead of trying to close the big gap printed at the open. Moreover, I did not buy stocks or bonds to trade the obvious lobagola move. Double damage.

It is a matter of mindset.  There are coincidences, situations; there is the ability of a trader to translate into action tests, statistics related to these conditions created by the market mistress. The more extreme the conditions, the more compressed is the coil, stronger and more powerful it will be the reaction in the opposite direction. Much to learn.

Duncan Coker writes: 

I have always had a hard time reconciling opportunity costs/gains with realized costs/gains, though I know in economics they are comparable. For example, a casual friend offered me a private investment opportunity which didn't smell quite right and I declined and I left the money in cash earning -1% real rates. Shortly thereafter the enterprise went bankrupt and all would have been lost. I suppose on an opportunity basis it was a huge success for me, 100% gainer, and yet my cash account is the same earning -1%. Every day trading is a missed opportunity to be fishing on a nearby river which is easier for me to grasp and adds to the overall cost of the trading endeavor. Being able to forget and move on is a useful thing in trading. A swim or run at the end of the day does it for me.

anonymous writes: 

I do believe one can go broke from taking profits. Maybe if one has very few positions at a time this could take a while to notice (the benefit to marketing a long term strategy of any sort– few observations) but everyone will fail.

Think of football, a defense might determine that if they can hold the other team to 17 points that they have won their part. What if the offense deploys their secondary after 14 points? May your successes be larger than your defeats.

We are playing an unbounded game, we have no idea the amplitude of future gains or losses, let alone their frequency. Taking profit when unwarranted may not give us a chance at tomorrow.

As for opportunity, we all balance the fear of missed opportunity with the fear of loss. The more successful traders I've known are slightly more fearful of leaving money on the table than losing money. Slightly.

But that depends on the difference between the value and utility of the opportunity. Duncan, you bring up the ultimate question about the purpose of life. Way to make this a deep conversation.



Many thanks for indulging my post.

Allow me to stretch some thoughts on Reality & its Perception.

Say, a star is said to be 4 light years away from us. If it is assumed for a moment that, it would be possible to travel at the speed of light or slightly less than the speed of light at some point in the coming future, then too it will take one to reach that star a little more than 4 years. To know the reality of the star for sure, one would thus be separated from its reality by the distance and the limitation on the velocity of cognition. One will therefore know only much later after the star ceases to be in existence when it so happens. Without the assumption of the travel at the velocity of light, all minds — scientific or otherwise — are limited by a fact that for an entire 4 years all could be only perceiving a star to exist that has actually ceased.

Same way, for any other observation of reality, there are perceptive limitations. Limitations brought about by the limited availability of tools of observations and the necessary and unavoidable lag on the one hand and limitations brought about by impositions of our unique minds (that are self organizing pattern seeking systems) on the other hand.

As economic agents, we are not required to and are often unable to work on the challenges of improving up on the available tools of observations. But as economic agents we are required to and all the time observe with the limited tools. We have a freedom to overcome our minds or succumb to them. Traders are those who overcome the mind. The rest are merchants, sales-traders, sales persons, research analysts, strategists. Each of the other agents in the financial markets is allowed to and encouraged to exist in their respective ivory towers of imagination, self-justified values and beliefs. Traders are neither allowed to exist in ivory towers nor do they choose to live there. Traders respect markets more than any other agent and the maximum weightage they attach to any inputs are the inputs provided by the behaviour / activities of the markets. In this simpler sense, traders are the ones who observe markets closest to the purest state of observation, while all others evaluate markets from their perceptive screens.

This connects the dots well with the idea that traders thrive and not just survive the intense frequency of feedback that markets produce. Those others farther down the perceptive efficiency chain (the food chain), ignore a lot of signals of the markets that are eeking red lights at them, since those others choose to not handle the intense feedback mechanism. This is true, according to my "mind", of any participants on any frequency / time horizon in the markets.

Traders, in fewer words, act spontaneously along with the market. All others act after imposing their beliefs. Some continue to live in Abelsonian denial.



A random number generated price chart would be dismissed by the one who created it due to his knowledge that they are generated by random numbers, even if the conclusion that such a chart is random may or may not be verified by the creator.

A person who does technical analysis could be accused of trying to apply his mind to such a chart, without the knowledge that it was generated using random numbers and not a real price chart.

The creator of a random number generated chart suffers from the illusion of knowledge. The Technical Analyst at worst suffers from the impulse to be curious.

Curiosity however may still lead to making some money, even if the performance can be explained by money management and not by any predictive ability of either the Technical Analyst or the chart. Data does not predict. It is the human enterprise, whether scientific or artistic, that predicts.

The creator of such a random number generated chart will however not make any effort to make money from such a chart, because of the illusion of knowledge.

To completely illustrate the point, the logical construct here is akin to putting the same random number generated chart in real time and beaming it to a pool of traders who may or may not trade on it. Some will, and some will make money. Some will lose money.



Ed Dunne was an endless number of different people for the endless number of different people in this world. Appropriate to each and appropriate for every occasion.

My initial year on the list led me to a feeling that he is a Samurai, ever ready for a battle with a massive sword, on any idea that touches speculation remotely. As I got to eventually know him somewhat closer, I realized he was an even greater Monk ready to give as well.

Full of wisdom, his fatherly advice was encouraging, realistic and purposeful.

I will recount just one anecdote, how he always set examples for one to emulate:

The first and the only time I met him in person was in the summer of 2011. I was packing my bags from a hotel off Wall Street to leave for India and meet with Ed Dunne for an hour before I set out to the airport. I was expecting a man in his 30s with the body of a baseball player.

He walked in to the Hotel Lobby and I found a man with the body of a baseball player at 70 perhaps. Yet, the same energy, the same vibrancy as he always emanated on our Googletalk chats (he used to love offering as gifts free accounts on gmail.com to everyone), phone calls and emails was radiating.

During this meet-up I realized he personally drove down 200 miles as his scheduled car pick up failed on him. He didn't want me to go back disappointed without meeting with him and kept his word.

While he appeared to have very strong views against any specific persons, it was to my mind his penchant for just skimming the truth. He always loved you. Even during the days that it seemed you and he are at odds, he would be ready to gnaw the flesh out of any face that may even begin to utter anything unseemly. Yes, I knew it from the very moment he has immense love and respect for you. When he one day asked me about you, I hesitated at first and then eventually told him, "When two big boys appear to be at odds on the school soccer field, stay apart has been my mantra since eventually the two big boys are the two big boys." He fumed back, " you are too smart" and then after a pause recounted endless stories of your and his camaradries and how you both went out of your ways to care for each other over a long time.

How will I ever find anyone who can take his place?

- Sushil



 Bio-feedback is a science that is around for sometime already. A computer game where no inputs are possible from the keyboard, mouse or any such human input device, but where a set of sensors measure the galvanic current on the skin of your fingers to estimate your mind-state is what Wild Divine offers.

I had bought this close to five years ago and gave to my daughters. They did play it sometimes. Discovered it in recent months again from their closet of abandon toys from "junior years" & began fiddling with it. Results are amazing.

I find this a constructive use of time, unlike the broad spectrum of other computer games. The only situation in which I could really observe my own emotions and had to practise rousing specific emotions to solve specific situations to meet game requirements.

If life too is a game and where deploying my emotions rather than succumbing to them is key, this package is a good beginning for taking such an approach to life.

Try it. There are delights to savour even purely from the perspective of refining one's cognitive skills.

DISCLAIMER: I otherwise do not like the soup of big words that one of the pop-philosophy Gurus behind this project, Deepak Chopra, spews. Yet a decent working invention of bio-feedback relevant for a trader who is nothing but a pure mind-worker.



The Path of Least Resistance seems to be an oxymoronic idea if not an irresponsible usage of words. Any meme, theme, passion, fashion that has the least resistance has already come to the point of expiration on the philosophy of ever changing cycles.

An idea that has the least acceptance will be the one that will find the most universal supply favouring those who have accepted it. This excessive supply or liquidity from disbelievers is what compensates the minority or rare thinkers and doers. Any idea that has least resistance will suffer from universal demand. If say an ongoing meme is downwards movement (for whatsoever reasons) then there are more put buyers than writers, there is more size at the ask than at the bid etc. etc.

Similar holds true for other data that indicate mind of the market. For example a rising volume or a rising open interest is a reflection of rising struggle for the discovery of price and thus for the acceptance of the meme.

Again, I do run the risk of ending up construing meaning of words inappropriately in my mind. Rather than trying to rest the case on the table, I seek from the erudite why is the phrase "Path of Least Resistance" in such vogue? What does the Path of Least Resistance really mean?

Jeff Sasmor writes: 

Sushil was asking, what does the Path of Least Resistance really mean?

In electrical engineering terms, and when there are multiple paths with differing ohmic resistances, linearly proportionally more current will flow in paths with lower ohmic resistances. However, that's strictly true only for a DC circuit.

If you're talking about markets and money flows it might be more apropos to think about AC circuits with their complex impedances. In this sense, current flow is dependent on the *frequency* of *both* the voltage and the current. Further, the currents themselves create magnetic fields which have their own time-variant effects on the flows. Talk about flexionic!



The total risk in a trade can be deconstructed as the sum of market risk, process risk and idiosyncratic risk wherein each risk element originates respectively from the trade, the process of trading, and from the trader. This is akin to the idea that any observation has only a partial perspective if the focus is only on the observed. A complete perspective will incorporate the observation process as well as the observer.

The same trade of entry in to an X quantity at a Y Price with an exit at Z price when undertaken by any two different traders or by the same trader through any two different trading infrastructure has different risks.

Given, estimations of probability distributions for process risk are similar to those used in operational risk and are less easily believable and the distribution for idiosyncratic risk close to being conjectural / randomness, most of the time any discourse on risk amongst traders ends up focusing only on price or market risk.

Is systematic trading the answer to eliminating idiosyncratic risks borne out of the trader? Can the total amount of risk be reduced for the same expected return level or one is only modifying the type of risk from idiosyncratic to a larger process risk? Or is it that systematic trading trims down both the left as well as the right tails of returns distributions?

This thinking can be tautomerised to ask a deeper question: Is there ever a reduction in risk feasible or it is always a modification of the type of risk? If a money management overlay, whether self-monitored by a stand-alone trader or by an elaborate risk-management department, is eliminating the idiosyncratic risk borne out of a trader in discretionary trading approaches, is there an advantage that while the left tail is aimed to be trimmed the right tail is left intact? If total risk never changes, is there an unaccounted for expansion of process risk that the risk management systems will end up following the Peter Principle?

While good risk taking is what analysts, strategists and commentators also do as traders do, it is the skill at avoiding bad risk taking or winding up a risk-exposure that is going bad that separates traders from all other market-citizens.

While all bad risk taking can be avoided by actually doing nothing and holding on to the theoretical cash, the moment one begins to even trying good risk taking, the skills at avoiding bad risk taking must come along.

Finally for now, if the value of risk at a moment is unique to each individual, firm, system, approach yet its historical value (focusing only on the market risk as explained earlier) common for all does it all boil down to "to each his own"? The right combination of good risk taking skills and avoiding bad risk taking skills is then as idiosyncratic as each trader is?



 Dear Muskaan,

Daddy is proud, despite his strong belief in the value of humility, at your fantabulous accomplishment.

At this school leaving examination, which also happens to be the first public examination you have taken in your life & conducted by the Indian Council of Secondary Education, you have accomplished what none so far have in your gerontocracy. Your score on each of the subjects is higher, into the high 90s, than your father could achieve or his forefathers could. Well surely you indeed have also scored higher than any other student in your school.

Soon as the results sprung out on the internet, all over the country there was a frenzy of several million test-takers discussing their accomplishments with their peers. Yet within such a busy patch of time, even as a budding teenager, you have been resplendent in speaking to me for such a length of time, even if in five pieces of conversations. This assures me, your values are deeply family driven. The simplicity with which you can internalize a big moment deserving a big celebration as this was proven yet again, when you chose to order Pizza from Dominos and savour your victory just with your family. This is touching.

Yet, as you step forward further to be much more on your own, the value of networking and connecting can hardly ever be over-emphasized. Education and performance at exams are often solitary sojourns, wherein a good student puts in endlessly long hours working on her own abilities. Wisdom however, will be in being able to apply it. The more adept you hereon become in connecting and building on your rapport with everyone, the more you will be able to utilize your learnings.

Your leanings towards numbers is apparent right from your early schooling days wherein you scored a perfect 100 in maths and high 90s in science subjects many times through years. Yet, at this key public examination, I am gratified to note, that you have done equally well in languages. The power to express is definitely as important as the power to ideate, visualize, observe, calculate, infer and deduce. The big difference between those who end up spending their entire life-times in laboratories and those who create products that fill up stores worldwide with customers is their ability to take their work to masses. I urge you to keep growing your repertoire of expressions, vocabularies, diction etc. throughout your life. Not only for enriching your ability at communications, but also for the fact that literature is the mirror of society, do invent some time to read some of the finer classics. I also urge you to begin reading Ayn Rand with a goal of triggering your own thoughts around her ideas. Yes, you got it right that while you have been progressing well on Java, C++ etc. etc. you must not lose out to any other on your ability at the old world languages as English and Hindi.

Since you do have a clear focus to put in your entire might into seeking an admission to the top Engineering Colleges in the country couple of years down the line, I will share a few recommendations of some of the finest books from an era gone by long ago and yet these are still likely the best.

To master Differential & Integral Calculus, hunt down the two volume compendium by N. Piskunov that was originally published by Mir Publishers but now out of print. An amble around the old and used book-stores markets to ferret out such jewels is yet another indulgence an erudite person must begin to savour. Over the years, the nourishment your soul may find in the company of old and difficult to find books, will surely drive your passions to be not just a good but a great learner.

To get an in-depth grip on High School and beyond Physics locate the book by Resnick & Heliday. It may subsume your mind, but it surely is worth it to create a solid foundation that will last with you.

Yet another out of print book, but surely a master-piece on Organic Chemistry was written by I M Finar. Locate it.

While you delve deep into grasping concepts, you must recognize that it is practice and practice alone that makes not just men but women as well perfect. Solve as many computations as you can each day. Go down to the steps where you went wrong and it at these steps you will iron out the wrinkles in the crevices of your sub-conscious mind so that your thinking processes are evolved through this humbling process of knowing where do you err, in advance.

An old world saying, that a good mind lives in a good body. So, I am sure you will be keeping an even focus on keeping building a good health. Yet, with the evolution through my and your generation, it may be apt to believe that a good mind and a good body are held together by a great personality. So, somehow do find the time to indulge in competitive activity on the stage (in college) and surely at the sports-field.

Lastly, yet most importantly, I gave you the name Muskaan. Your name derives from the Urdu word that means a beautiful smile. Over these years, trust me, not just because your are my daughter, I have and others have felt you have been gifted with a smile that is rare. Yet, in the recent several months in the run up to your exams perhaps, there is a recurring frown on your forehead way more than your magnetic smile. Please learn right away, early enough in life, that consistent and sustained achievement is seldom feasible while existing at extremes. The concept of optimality applies to every human endeavour. In any case, the goal of life is the pursuit of happiness and to lose your miraculous smile for sub-goals of life is something I will want you to avoid. The same way that you balanced your achievements across languages and numerical subjects, I wish for you, that you achieve a life where work and play are so finely inter-woven that each journey of achievement is as much a joy for you as each milestone will bring.

While your immediate goal and focus for the next two years is the Engineering College Entrance test in India, which without an argument is the most competed for exam in the world, since God made too many of us in this part of the world, I need you to study Statistics and at least one human science at an appropriate time. Even while the study of natural sciences is so much complete in itself, each of us will use our abilities within the human dilemmas. What can be cognized by man is what truth is. Everything else is within the domain of postulates. So the approximations and the imperfections, that create all the opportunities, must be studied well too.

The first time ever someone's eldest child writes a public examination and beats daddy in each and every subject is a joy that comes to only some. What a bliss you have brought me. Hereon, while you keep beating me in every next exam you write, I need you to know, you will create a happiness multiplier function, should you achieve with elan, grace, happiness and health.

Here's to my rock-star, a big congratulations! Keep moving forward, with your focus, zeal and hard work and yet do it with happiness, health and a continuously growing personage.

An amazed father!



If Round Numbers, perhaps because they are the easiest multiples of other numbers, attract attention and thereby either a struggle or a release of pent up tension occurs around them, then the antithesis of a round number may likely be a prime number.

Do markets move past prime numbers with least activity/least resistance? If that is so, there should be evidence that the often talked about supports or resistances are observed to occur much less frequently around such numbers than may be in a consistent with randomness world.

If the numbers are a human invention (the choice of the base that all of us stick to is surely a convention, since the mathematics of the universe still remain the same whichever base of numbers any may choose), due to which variable behaviour around different types of numbers observed in prices may only be explainable, then such behaviour may be observable in time too and not just prices.

Perhaps the Senator has studied behaviour of markets through prime numbered years? Perhaps Kora may quickly run through his numbers cannons a study on prime numbered trading days from the lowest low in the last century?

Do markets move more than consistent with randomness or less around prime numbered prices? Similarly do markets move or less than consistent with randomness in prime numbered price bars?



 Risk facilitates exchange and all prospects of any gains arise from change. If there was no room for any uncertainty or risk, then no exchange would ever occur. In a risk-free world if a decline is guaranteed no one will buy and if a rise is guaranteed to happen no one will sell. Thus no one will be able to gain even if it was guaranteed that a fall or a rise is going to come, due to absence of any exchange.

Therefore, those who are ready to lose only have a prospect of winning.

How much is one entitled to lose is something each must assess, on a single trade, in a single period of time, in a single window of measurement etc.

Yet most end up focusing on forecasting. Now forecasting to my mind is nothing but studied imagination of the future refined with the help of analysing the past. It is this nature of forecasting, that there is imagination involved not foreknowledge prepares one to accept existence of risk and the need to manage it.

Whether one uses tea-leaves or frequency-leaf-diagrams, it therefore is critical to practice your chosen form of art or science with humility.

If anyone believes humility is the most powerful currency to prevent the market-mistress from collecting a toll larger than you should pay, then there is respect for risk. If there is any other who refuses to respect risk, the mistress then clearly finds a gaping hole in such personae to serve humiliation.



I surmise, for the New Year, that this year shall be:

1. much more kind to the permabears in equities,
2. much more kind to the wounded Gold Bugs
3. more kind to the Greenback
4. an affirmation of Labogalas, almost everywhere
5. definitive in affirming the permanent value of humility & establishing the evidence that complacence suffers.

What are the surmises of Daily Spec readers?



 Driving on my way back from work, at a traffic signal just at the boundary of the business district in Mumbai, it struck me that each and every advertisement is for swank, upmarket housing. The only other billboard was from a bank offering housing loans at "attractive" rates.

With realty stocks at all time lows in India, one wonders if such advertising is a sign of the coming crash in realty prices or the bankruptcies in the debt-laden realty sector companies or both?

What kind of signs have investors noticed in other economies in the world before realty bottomed out or the realty stocks bottomed out?

keep looking »


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