Many years ago I paid the Big Apple a visit for a weekend, staying at the apartment of an uncle who spent the weekends in the country. It was an amazingly, even frighteningly, neat apartment. For some reason that Sunday morning, in the dining room, curtains closed to avoid sun damage to the antiques, I remember reading a lengthy article in the Sunday New York Times.

A doctor wrote it about his own father. It was about the end-of-life indignities and useless and seemingly unending expensive tests, the fitful flurry of prodigal procedures, and the futile activities. The motive, in the writer's opinion, is eagerness to get as much spent as possible before the patient expired.

It was a gripping tale, particularly as the son was a doctor himself, and still was unable to stem the tide of pre-last rite spending. Curious to read an article on Mahalanobis today, so little different from that of twenty, maybe even thirty, years ago.

Greg Rehmke adds:

This may not be the same article, but is probably a similar story and followed from the same poor incentives of government-regulated, third-party payer heath care.

I remember the article because health care reform was the national high school debate topic and we reprinted this article in our monthly publication for high school debate clubs.


Making a Living Off the Dying


It has been more than a year since my father died, and I have come to believe that the circumstances of his death demonstrate much of what is wrong with our medical system.

As I grew up, I heard so much about what a good and gentle physician my father was that at first I ran from the idea of becoming a physician myself. But at 35, I was well along in my own medical career and with pride brought him to Britain to hear me deliver a paper. He had trained there and wanted to find out what had become of his classmates. He seemed to lose some vitality when he heard they were all dead. In perfect health his whole life, he began to complain of back pain. … 



 This paragraph, from a New Yorker magazine article titled "Spider Woman," (March 5 issue, "A Reporter at Large" segment) resonates with a few favorite market themes:

A single spider can inject its victims with as many as two hundred compounds: proteases that dissolve flesh, gelatinases that dissolve connective tissues, neurotoxins that short-circuit nerves, slow the heart, and freeze the limbs. A spider's venom offers a window onto its evolution, Bindford says — a chemical record of its most successful experiments at killing prey.



This paragraph, from a New Yorker magazine article titled "Spider Woman" (March 5 issue, "A Reporter at Large" segment) resonates with a few favorite market themes:

"A single spider can inject its victims with as many as two hundred compounds: proteases that dissolve flesh, gelatinases that dissolve connective tissues, neurotoxins that short-circuit nerves, slow the heart, and freeze the limbs. A spider's venom offers a window onto its evolution, Bindford says — a chemical record of its most successful experiments at killing prey."



Looks like a thoughtful and remarkable piece of work . The gist of this article is that coaches should go for it on 4th and short more often. I don't know pro football (I last watched a game in 1986) but the behavioral parallel to "taking a small profit" in the markets, i.e., the field goal rather than staying in for the full move, the touchdown, leaps off the page.



In considering support systems in markets, one would certainly not wish to overlook Thigmomorphogenesis ( which I believe formed the basis of the modern boy wonder's systems) which are height and thickness responses to strong winds to make the tree more stable.

One often finds that after a big move in an individual stock or market, there is much backing and filling, reversals, and gravitational moves to the close of the big move, before further growth or decline ensues. The question is whether such phenomena are predictive and how to test. Perhaps in the spirit of David Brooks, who better to ask then the specs. We have foresters and technicians among us.

Vic further adds:

Many trees are supported by roots attached to the trunk as seen here. I am wondering if this natural phenomenon, used widely in architecture and engineering, has its counterpart in markets, and whether this can be quantified and whether it creates for more stability. I wonder what other support systems exist, their prevalence and function.

J.T. Holley comments: 

As mentioned before on the List, while I was in Wilmington, NC a few years back, the Bald Cypress trees have a wonderful support system and are a great metaphor for the markets. Not only do they have the buttressing effect with their bottom trunk, but they also possess "knees" that serve both to get oxygen to the roots and to further support the tree in the silt laden waters. 

Mentally, picture the bids and asks around the market price of a stock. They too are the "knees" that feed oxygen to the price. I will try to type a rudimentary picture:

b = bid      a = ask      x = price

       X     a
 b     X     a
b b b b X a a a a

As the bids and asks move together in compromise they feed the price, adjusting upwards and also downwards. The bids and asks can form the "knees" by having a larger size than that on either side of it, bringing either strength or weakness towards the price inwards. The key in attempting to quantify might be to see how "fat" the price attributing to the buttressing effect is. Do round numbers have more of a buttressing effect and stability? Do low beta stocks have fat buttressing? 

For what it's worth, the Bald Cypress lives along the water's edge. I've been told that trees that have large and big leaves act as "sails on a boat" when hurricanes blow through and they get easily knocked down. The Bald Cypress seems to be well adjusted in the South in combating Mother Nature's breath by having well adapted leaves for this theory and the buttressing is the kicker. They are the most amazing trees next to the Sequoia's that I've witnessed in my life.

Scott Brooks adds:

Based on the link Vic provided, we've learned that trees don't collapse on their weight. This is incongruent with trading as stocks collapse all the time from their own weight (i.e. tulip mania, .com bubble, etc.)

What I found interesting in the wikipedia search is that the more a tree limb is rubbed, the more their growth pattern is altered and as a result the limb gets thicker (and stronger I assume). This may be analogous to a stock building a base before moving up (growing). There seems to be a disconnect here as a stock that is heavily traded (rubbed) would likely move strongly in one direction. Stocks seem to build bases when there is a lack of excess interest in one direction or another (interest in buying is equal to interest in selling). It's not until there are more buyers lined up to buy than there are sellers willing to sell that the base is broken to the top side. The inverse is true for breaking to the downside.

Thigmomorphogenesis is the response by plants to mechanical sensation (touch) by altering their growth patterns. In the wild, these patterns can be evinced by wind, raindrops, and rubbing by passing animals.

M.J. Jaffe discovered in the 1970s that regular rubbing of bending of stems inhibits their elongation and stimulates their radial expansion, resulting in shorter, stockier plants.

Growth responses are caused by changes in gene expression. This is likely related to the calcium-binding protein calmodulin, suggesting Ca2+ involvement in mediating growth responses.

Mark Goulston offers:

Here is another interpretation of thigmomorphogenesis. “The more a tree or plant is rubbed, the more its radial vs. elongated growth increases” is a metaphor for "the more hits that life smacks you with, the wider your stance better be to endure subsequent ones." This is not unlike cowboys circling the wagons when under attack, or animals hunkering down to diminish their exposed area to repeated attacks. The question is how much this is a reaction to attacks vs. an anticipation of future attacks where the most Darwinian evolved to withstand future attacks (that actually occur vs. merely a bubbameister) will out survive peers. On the other hand, if there are no future attacks, such an increased girth or widened stance will limit your movement and flexibility.

The interpersonal equivalent is that when nobody is attacking you and you act defensively, you are perceived by the other as being on the offensive.

No wonder the world will always needs shrinks and lawyers.

John Kuhn comments:

There is a giddy feeling when one of one's holdings experiences the "long bar" lurch. One is almost helpless to push the sell button. Yet as with those vomitous feelings engendered by unimpeded collapse, so with the inebriating joys of rapid equity advance … many an optimal moment for action is signaled in the emotion. As a counting incompetent, many of my best moves are in fading the long bar, and more of my worst, by failing to do so.

Jack Tierney adds:

What I found interesting in the wikipedia search is that the more a tree limb is rubbed, the more their growth pattern is altered and as a result the limb gets thicker (and stronger I assume).

I wasn't aware of this (or of much else), but this comment triggered a memory that goes back to a high school literature class. One day one of my fellow students popped up with the following rhyme: 

A woman, a dog and a walnut tree, the more you beat them, the better they be. 

As I recall, Mrs. Rigsby wasn't terribly amused and even less so when the offender couldn't name the source. The rest of us didn't much concern ourselves with that - instead we pondered how such treatment could benefit a tree (it was an accepted truism for the other two). 

Scott's remark moved me to Google the line which remained buried in the recesses of my mind. It's attributed to Thomas Fuller, a "British Clergyman and Writer, one of the most prolific authors of the 17th century. 1608-1661." 

So it only took 50 years or so to find a possible answer; I'm not sure that there's any market applicability involved.



When I feel like some self-flagellation I do on occasion repair to programming in the R statistical environment. This works depressingly well to deflate any hubris or the mis-appelation or appropriation of clever authorship, which completely fortuitous stock selection always, despite knowing better, engenders in me. When I’m done tussling with what for someone with even modest intelligence is probably the simplest of tasks in R, I inevitably long for something more direct and possibly less painful, such as a chain with a bunch of very sharp knives attached.

Backgammon victorys will go to the better player “in the long run,” but that can mean quite a long time and some suffering, if you play for too much money in the meanwhile. The other day, in a tantalizing but rare victory in R, i managed to roll a pair of dice six thousand times to determine the percentage of either seven or eleven coming up. That roll out gave the answer as 19.2%, 3% below the correct “long term” result. It kind of reminded me that in backgammon and in the markets “The best laid schemes o’ mice an’ men Gang aft a-gley.” Or as the Chair told me many years ago about the realities of statistical trading, “when they take you, they really take you.”

I’ve played backgammon for over 40 years, a bit longer than I’ve been in the market. In my youth, there was easy money in the game. Now, also somewhat like the market, the dream of low lying fruit has attracted so many clever players that the free bucks are extremely hard for the average or slightly above average player to find. Years ago more than a few folks I know made a living from the game. Those that are still professional gamblers now play poker, and I imagine the freebies are fast vanishing in that arena as well.

Now I play vs. robots almost exclusively. They play very well, very fast, and don’t whine about improbable but inevitable adverse dice outcomes. In addition to being far better at calculations than I, some are even mischievously (I’d say malevolently) programmed to insult your particularly dumb plays with the one number that turns your error into instant and ignominious burial.

Fortunately in the stock market i get to wager with a few benefits not present when facing a powerful neural net. In backgammon I’m the idiot, but in the market even as an idiot i can buy brains, not compete against them. I can even buy “the grind” as holdings in AB and GS and MER over the past few years pleasantly demonstrate. So even in a world of giants, in the stock market there still is plenty of room and profit for lesser beings, thank goodness.

incidentally, for outstandingly good robot or human backgammon competition I’d recommend gamesgrid. There are also many free backgammon sites.



Every year I venture back to my roots to visit the Geauga County Fair where it often seems that time has almost stood still. Hoover's fudge has been selling the best fudge in the world to locals since the beginning of time; the corn dogs are hand dipped; the fries greasy and skinny and drenched with vinegar. The 4-H animal husbandry competition is always robust, the draft horses huge and wonderfully tricked out (the agricultural version of Harleys), the Amish kids are almost always found by the grandstand sneaking cigarettes. This year there seemed to be a few more veteran tents, the Dems still had a lousy location, the GOPers had prime real estate but both tents seemed a little empty (maybe everyone was getting corn dogs and fries and too sugary lemonade).

This year did bring some changes, though.

First, a couple of new Walmarts opened in Geauga County, one smack dab in the middle of Amish country and another at the other end of the county. I expected long faces but the locals appeared happy about it. The feeling seemed to be that existing clothing shops such as Peebles would sell more discount "upscale" goods (Woolrich, Tommy Hilfiger, et al.) and let Walmart have the very low end; Giant Eagle might feel it but since their produce is not so hot and their prices are not all that cheap maybe they deserve to go out of business, and Heinen's, the upscale grocery store, would be fine. Meanwhile, everyone was tickled about the low prices. Johan and I ventured into one of the Walmarts, my first visit to the establishment, and I have to say I loved it! I loved the greeter, loved the merchandise, and really loved the prices. It was bright and while not hip in the manner of Target, the goods were nicely displayed. The stores seemed to be doing decent business though it was a bit slow on Labor Day but that was because nearly the entire county was at the fair or stuck in traffic trying to get to the fair (we hit the fair early and took the secret back way, figuring that the wet weather earlier in the weekend would lead to high attendance).

The second change took place at the fair. This year we were fortunate to see the new coon hound races whereby three coon hounds chase a fake raccoon across a large pond and up a tree. It was a crowd pleaser and also offered some interesting lessons. In the first race the hound that seemed to have the greatest lead gave it up because his front legs were too high in the water and he was not properly using his back legs. He was fast, but not using all his equipment led to loss. In the final heat where the three previous winners faced off, two of the hounds were neck and neck the length of the pond. As they neared shore they started snipping at each other. Meanwhile, the dog that everyone had given up for loser and that appeared to be swimming in the wrong direction materialized out of nowhere to beat the other two to the tree. While the "neck and neck" hounds were busy snipping at each other, the apparently really smart hound swam the shorter distance to shore and then ran the rest of the way. Lesson: taking the shortest distance to the prize will not necessarily get you the win; it's important to play to your strengths (dogs run faster than they swim); and, finally, while you are busy looking at your closest competition someone else is bearing down out of left field. The crowd loved it and roared.

Ohio now has two of the poorest 10 big cities in the country (Cleveland and Cincy) but life in Geauga looked to be on an upward trajectory. A fair bit of building, some of it still in the planning stages, more businesses in most towns (though not all). Real estate prices not out of control. You can get a nice farm house, updated, with 6-12 acres in Middlefield for under $400k, and a sizeable ranch or colonial in a very desirable village in Cuyahoga County for $300k or less. One local realtor informed us that it is a buyer's market at the moment, softer than it has been since 9/11, but she is still selling homes. Over on the northwestern side of the state the fields were flush with nearly ready to harvest crops.

Folks looked to be happy and enjoying life. Maybe it was the $2.29/gallon gasoline in Chesterland or the agricultural subsidies. Maybe they are just too fat and happy to know otherwise. Or maybe more rural folks are naturally optimistic or see that life outside an urbanized view of things is not so bad. Anyway, it was nice to go home again and see that the standard of living continues to rise for most.

John Kuhn mentions:

Talk about memory lane: I caught my first calf in a calf scramble at the Idaho State Fair when i was around 11. 1953. Named him "Sir Cumference." Sold at .33/lb. An outstanding price as he weighed over 1000 lbs by the end of the summer a year later. Pretty good ROI, (small rope burn) for an 11 yr old. He had a nasty disposition however, even before the hideous heel flies began to emerge (the 2" long grubs migrate from eggs laid on heel up and out thru the back which ugly emergence irritated even the most docile beast. We would paint the stock in creosote but did not always get 'em soon enough). I got to show him and talk to the folks on the Sheriff Spud TV program too that year. I figured I was pretty much a celebrity what with the TV appearance and being the President of the "Pick and Shovel" club. 4H.

Geeze, makes me want to go out and buy me some cotton candy and fried dough. But now all you can get downtown where I live is mocha lattes. That standard of living thing.


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