I first saw the 'dead eyes' look of a poker player/loser when I was 13 or so. Still gives me restless nights and I know I cannot become that way.

My dad took me into the "stockman's bar" in Billings, Montana to impress upon me what degenerate, greedy people turn into.

Probably another sleepless tonight tormented by that devil.

Gary Rogan asks: 

What is the real difference between gambling and speculation (if you take drinking out of the equation)? Is it having a theory about the odds being better than even and avoiding ruin along the way?

Tim Melvin writes: 

I will leave the math side of that answer to those better qualified than I, but one real variable is the lifestyle and people with whom one associates. A speculator can choose his associates. If you have ever been a guest of the Chair you know he surrounds himself with intelligent cultured people from whom he can learn and whom he can teach. There is good music, old books, chess and fresh fruit. The same holds true for many specs I have been fortunate to know.

Contrast that to the casinos and racetracks where your companions out of necessity are drunks, desperates, pimps, thieves, shylocks, charlatans and tourists from the suburbs. Even if you found a way to beat the big, the world of a professional gambler just is not a pleasant place.

Gibbons Burke writes: 

 Here is something I posted here before on this distinction…

Being called a gambler shouldn't bother a speculator one iota. He is not a gambler; being so called merely establishes the ignorance of the caller. A gambler is one who willingly places his capital at risk in a game where the odds are ineluctably, mathematically or mechanically, set against the player by his counter-party, known as the 'house'. The house sets the odds to its own advantage, and, if, by some wrinkle of skill or fate the gambler wins consistently, the house will summarily eject him from the game as a cheat.

The payoff for gamblers is not necessarily the win, because they inevitably lose, but the play - the rush of the occasional win, the diversion, the community of like minded others. For some, it is a desire to dispose of money in a socially acceptable way without incurring the obligations and responsibilities incurred by giving the money away to others. For some, having some "skin in the game" increases their enjoyment of the event. Sadly, for many, the variable reward on a variable schedule is a form of operant conditioning which reinforces a compulsive addiction to the game.

That said, there are many 'gamblers' who are really speculators, because they participate in games where they develop real edges based on skill, or inside knowledge, and they are not booted for winning. I would include in this number blackjack counters who get away with it, or poker games, where the pot is returned to the players in full, minus a fee to the house for its hospitality*.

Speculators risk their capital in bets with other speculators in a marketplace. The odds are not foreordained by formula or design—for the most part the speculator is in full control of his own destiny, and takes full responsibility for the inevitable losses and misfortunes which he may incur. Speculators pay a 'vig' to the market; real work always involves friction. Someone must pay the light bill. However the market, unlike the casino, does not, often, kick him out of the game for winning, though others may attempt to adapt to or adopt his winning strategies, and the game may change over time requiring the speculator to suss out new rules and regimes.

That said, there are many who are engaged in the pursuit of speculative profits who, by their own lack of skill are really gambling; they are knowingly trading without an identifiable edge. Like gamblers, their utility function is not necessarily to based on growth of their capital. They willingly lose their capital for many reasons, among them: they enjoy the diversion of trading, or the society of other traders, or perhaps they have a psychological need to get rid of lucre obtained by disreputable means.

Reduced to the bare elements: Gamblers are willing losers who occasionally win; speculators are willing winners who occasionally lose.

There is no shame in being called a gambler, either, unless one has succumbed to the play as a compulsion which becomes a destructive vice. Gambling serves a worthwhile function in society: it provides an efficient means to separate valuable capital from those who have no desire to steward it into the hands of those who do, and it often provides the player excellent entertainment and fun in exchange. It's a fair and voluntary trade.

Kim Zussman writes:

One gambles that Ralph and/or Rocky will comment.

Leo Jia adds: 

From the perspective of entering trades, I wonder if one should think in this way:

speculators are willing losers who often win; gamblers are willing winners who often lose.

David Hillman adds: 

It is rare to find a successful drug lord who is also a junkie. 

Craig Mee writes: 

One possible definition might be "a gambler chases fast fixed returns based on luck, while a speculator has time on his side to let the market decide how much his edge is worth."

Bill Rafter comments: 

Perhaps the true Speculator — one who is on the front lines day after day — knows that to win big for his backers, he HAS to gamble. His only advantage is that he can choose when to play. 

 Anton Johnson writes: 

A speculator strives to be professional, honorable, intellectual, serious, analytical, calm, selective and focused.

Whereas the gambler is corrupt, distracted, moody, impulsive, excitable, desperate and superstitious.

Jeff Watson writes: 

I know quite a few gamblers who took their losses like men, gambled in a controlled (but net losing manner), paid their gambling debts before anything else, were first rate sports, family guys, and all around good characters. They just had a monkey on their back. One cannot paint with a broad brush because I have run into some sleazy speculators who make the degenerates that frequent the Jai-Alai Frontons, Dog Tracks, OTB's, etc look like choir boys. 

anonymous writes: 

Guys — this is serious, not platitudinous, and I can say it from having suffered the tragic outcomes of compulsive gambling of another — the difference between gambling and speculating is not the game, the company kept, the location, the desperation or the amounts. The only difference is that a gambler, when asked of his criterion, when asked why he is doing this, will respond with "To make money."

That's how a compulsive gambler responds.

Proper money management, at its foundation, requires the question of criteria be answered appropriately, and in doing so, a plan, a road map to achieving that criteria can be approached.

Anton Johnson writes: 

It's not the market that defines whether a participant is a Gambler or a Speculator, it's his behavior.

Gibbons Burke writes: 

That's the essence of my distinction:

"gamblers are willing losers who occasionally win"

That is, gamblers risk their capital on propositions where the odds are either:

- unknown to them
- cannot be known

- which actual experience has shown to have negative expectation
- or which they know with mathematical precision to be negative

They are rewarded for doing so on a random schedule and a random reward size, which is a pattern of stimulus-response which behavioral scientists have established as one which induces the subject to engage in the behavior the longest without a reward, and creates superstitious as well as compulsive behavior patterns. Because they have traded reason for emotion, they tend not to follow reasonable and disciplined approach to sizing their bets, and often over bet, leading to ruin.

"speculators are willing winners who occasionally lose." That is, speculators risk their capital on propositions where the odds are:

- known to have positive expectation, from (in increasing order of significance) theory, empirical testing, or actual trading experience

They occasionally get unlucky, and have losing streaks, but these players incorporate that risk into the determination of the expectation. Because their approach is reason-based rather than driven by emotion, they usually have disciplined programs for sizing their bets to get the maximum geometric growth of their capital given the characteristics of the return stream, their tolerance for drawdown.

If a player has positive expected value on a bet, then it is not a gamble at all. The house does not gamble. It builds positive expectation into its games. It is a willing winner, although it occasionally loses.

There are positive aspects of gambling, which I have pointed out earlier in the thread and won't belabor. To say that "all gambling is bad" is to take the narrowest view. Gamblers who are willing losers (by my definition all are) provide the opportunities for willing winners (i.e., speculators) to relieve gamblers of the burden of capital they clearly have no desire to hold onto, or are willing to trade in a fair exchange for the excitement of the play, to enable their alcoholic habit, to pass the time, to relieve their boredom, to indulge delusions of grandeur at the hoped-for big win, after which they will quit playing, or combinations of all of the above.

Duncan Coker writes: 

I found Trading & Exchanges by Larry Harris a good book on this topic and he defines all the participants in the exchanges and both gambler and speculators have a role to play. Here is something taken from page 6 that make sense to me: "Gamblers trade to entertain". Speculators to "trade to profit from information they have about future prices."

He divides speculators into those that are well informed versus those that are not. One profits at the expense of the other. Investors "use the markets to move money from the present into the future". Borrowers do the opposite.



 I should add that many people mistakenly come to me to ask for advice on trading. At the junta, where I turned over the moderation to Gene Epstein, he likes to refer to me as a philanthropist. So at the end of each junta, about 20 people crowd around me asking me for philanthropy to them. Another 20 request a meeting with me to get my advice. But I don't have good advice. And I don't have a minute in the week where I'm not trading or parenting with my 7 kids. If one had a minute, it would be nice to say hello to the significant other, especially when one doesn't have a losing position. However, that's so rare that it's not worth talking about.

Many mistakenly see that on occasion I luckily beat the odds and make a small profit and come to me for a little guidance as to how to take out a little profit from the market. It seems so easy and the hourly wage is so great relative to what they make. I note that my average swing from day to day is often greater than my father's total earnings in his life time. That's a terrible lure to many people. But you can't make a profit nor have I ever seen one who could unless you buy and hold, unless you have a tremendous quantified and updated date taking account of all sorts of statistics and randomness and ever changing cycles. Then you have to be there 24/7 to implement it because the swings that are good only last for seconds and if you have job or like to have lunch or dinner, that's incompatible.

Of course other than buy and hold you can always invest with a hedge fund. But… but… but… . By the time, an operator pays his sales force, and his administration, he has to charge 20- and 2. Okay, suppose he can overcome 1- % a year vig, and make 2 % more than the market's 10%. That gives you 12 % before fees and 10% before vig. What's left for you the investor? I reiterate, one feels like telling those who wish to join the fray, come with me to Rockaway or the Hamptons to the ocean. And I'll hold up my hands like King Canute and say, "I am as incapable of helping you, and you are as incapable of making a profit other than buy and hold as I am to stop the waves".

Jeff Watson writes: 

I tell people they are better off going to Vegas then trying to trade. At least if you blow a couple hundred grand, the pit boss will give you some comped meals, a couple of shows, a room, hooker etc. The market mistress doesn't even give you a kiss before or after she "takes advantage of you", and you certainly don't get comped. 

David Hillman writes:

When people ask me how I make a good living out of my business and appear to work so little at it, I say "If you have 35 years to listen, I will tell you every detail of my career and if you can figure out how to make that work for you, maybe you can do the same." Thankfully, I get no takers.

When people used to ask for investment advice during the salad days when a monkey with a computer could make 30%+ with 'buy and forget', I would say "Oh, here's what I'm doing." I stopped with that and started saying, "Sorry, I don't give anyone investment advice anymore." Now, I say exactly what Blodget says in this piece [forget Task, he's the straight man]. It is nothing really new or different from what many advise, but it cuts to the chase, lays it out and makes the case in a very impactful way. If you have 5 minutes, it's worth a look….I wish every investor could see this.

Peter St. Andre writes: 

I don't see that Blodget's conclusion follows from his premises. Yes, the short-term trading game is rigged, but that doesn't necessarily mean that index funds are the right approach for individual investors — maybe long-term / dividend investing is best, maybe permanent portfolio, maybe other things (depending on the investor's mindset, patience, discipline, intelligence, etc.).

David Hillman writes: 

I won't debate this, because I'm not here to try to convince anyone of my correctness nor of Blodget's, nor do I care what anyone else thinks, but I will comment.

I don't think it's BS at all. While I can't put the stats on the table, I'd bet something close to the 80/20 rule applies to whom he's speaking when he talks about the "average individual investor" and those who could be investors.

The suggested alternatives, stock picking, dividend investing, etc. require, if not a lot, at least some knowledge and sophistication. Most have little to none of either.

Unlike the astute types here on the list, there's Billy Joe Tireiron, who has an 8th grade education, works second shift at the plant and picks up a few shifts a week at the 7-11 in order to sock a little away. He's not a dummy and may know a little about saving, but knows a nothing about investing.

And, there's the systems engineer who is highly educated, brilliant at his job and spends 80 hours a week at it, but knows nothing about investing and has no time to learn.

There are plenty of individuals like those out there who are smart and good at what they do for a living, they may know about wine, sports, history, art, whatever, but are clueless about investing. I'm sure we all know a ton of them personally, I do.

So, when do these guys have the time to learn about stock picking and/or dividends, and where're they to go to get good advice that is in their best interest? What the heck do they know about investment strategy, short or long term?

When the chair and I first met 11 years ago, I told him the story of a family member, a well-educated person with a master's degree and whose well-educated engineer husband handles their investments, who said to me "We made $1,000 in the market today." I told her they only 'made' $1000 if they sold and took their money off the table. These are very bright people and somewhat market knowledgeable, but still didn't realize there is an important difference between paper money and cash.

Or take a guy who knows very little. He hears dividends are the way to go. So, he buys 100 shares of a commercial REIT at $10/share that's been consistently throwing off a dividend of $1.20 for years. He thinks "well, this is a consistent 12% return, it looks safe, and it's better than the index fund that averages 9%. When the share price falls to $8.00 and the dividend remains $1.20, his yield rises to 15% and he thinks "wow, my dividend is up 25%", but then fails to consider his depreciation of 20% which gives him a net negative total return.

What are the alternatives available to the average guy, one of the 80-percenters, who wants to invest? They can buy into the marketing hype of online brokerages that tell them 'we'll give you all the tools you need', but still have no time to learn and understands half or less of what they're reading. They dive in nonetheless and lose.

Or, they buy some hot stocks or funds because some personality screams a recommendation at them on TV or they read about them in a financial rag a few months after the fact when they're no longer hot. Or, they're sold an annuity by a bank which benefits more than the client from that option, or a whole life insurance policy by an insurer as an 'investment', which we know it is not.

Or perhaps they go to a commission-based financial planner who takes their 6% off the top and they're upside down from the get-go on every dollar they invest. That may be better than the others or not being in the market at all, but why start out upside down? Instead, they can, as Blodget advises, invest in a low-cost index fund, paying 1/30 the 6% entry fee and taking advantage of the long term drift.

Blodget may be generalizing, which is all one can do in a 5 minute webcast, but he does quite clearly make the distinction between the disadvantages of short term trading and the advantages of long term investing for a pretty broad audience. He's making the same case the chair was and has been has made for years.

If one doesn't buy into the drift, fine. But, it's not 'big bad wolfing' nor bad advice to say "hey, average guy……don't swim in a shark tank, don't buy into the hype, instead, play it safer, minimize your costs and go with the drift." Besides, there are some morons out there who should be scared into caution rather than gamble their family's future.

If we want to nitpick, Blodget may fail in saying "the ONLY way for the average guy to make money in the market long term is low cost index funds" rather than to say "there are other reasonable long term strategies that may work for some, but if you have no idea what you're doing and have no time nor inclination to learn, going with low-cost index funds is the best bet to maximize your return over the long term."

And, he probably also should have said "this advice does not apply to the Spec-List where everyone is brilliant and knows what they're doing and many will think this is BS." ;-)



 For about 3 years, I've been monitoring the trend in public notices of foreclosures and sheriff sales in the local newspaper. These have gone from nearly a full section 2-3 years ago, to several pages a year ago, to near zero today. Similar observations in other locals while traveling have been made.

It looked a couple of years ago that goo would be flushed from the system by the second half of this year. The upward trend in new construction, home prices and building materials in the last half of last year caught me by surprise as well.

Out here in the boonies [at least in my boonies], we were not hit nearly as hard as the coastal regions in either the housing or employment markets. In reviewing and measuring housing, let's not forget……geography matters, as does what is selling.

I wanna think maybe this is a combination of having paid down or reorganized our debt, learning our lesson about over-extending and being house-poor, having begun to save and invest and spend more wisely again, and with the market up we're feeling better about our fortunes and the future, we notice there are still vestigial housing deals out there as well as new ones, recognize they might not be there for long as home prices are increasing, and figure the time is right to buy again. Kind of like recognizing a market bottom has occurred and buying in at the beginning of the upswing.

I don't think this is a head fake, but a certain amount of prudence is not ill-advised, because, as we saw in 2007, nothing lasts forever.

Henry Gifford writes:

One time I was negotiating to buy a house and I told the seller "Your house is in mint condition." The broker in the background was cringing, and repeatedly recommended I hire a home inspector, and the only thing that would quiet her down was explaining that the home inspectors have an association, which has a magazine they read to learn about what to look for when they inspect a house, and the latest issue had a cover article I had written.

I told the seller I was going to make an offer to the realtor within the hour, and my offer would be contingent on me not dying. No mortgage contingency, no inspection, no nothing. We agree, we sign, we close.

My offer was lower than other offers that day. We closed soon after without hassle.

When selling property I generally ask for an "as is" contract, to avoid the games.

The legal side of it all says that a seller is more obligated than a buyer because "specific performance" says the seller is promising something very specific (a unique house) while they buyer is not. As a practical matter, a buyer can threaten to sue for some obscure term of the contract, tying the property up indefinitely if they are not refunded all their money.

It is all just another way honest people are at a huge disadvantage in life, but it is the life I have chosen.

Jim Lackey writes:

A hold back near nashvegas: rent exceeds the cost of carry here. Even @ 0% down FHA rate + tax tag and title (yet minus the unknowable maintain costs) if you rented it yourself, no management fees, i.e, rent 1500 per month, cost of carry 1200 on 4br all brick nice hood and schools. Yeah, if it was a cash buyer it is grocery store, wait AMZN margins so it can trade 100X earnings. lol. I just figured it out as a few of my friends have moved (bought new new) and held on to their old house and we have renters in the hood. Yet, it's still cheaper to buy new vs. used. Hipsters are in deep buying East Nashville tear down/ guy rebuild. My buddy told me it was dead 20 years ago. His new wife as a college kid bought dead homes for 3,000 bucks. Yes, you can imagine correctly.



 Have you ever heard the saying, "if half a spoonful will kill you, then why not a whole cup"?

It means that if the Fed were to buy every asset that the banks have, with constantly increasing prices until the banks had trillions additional of profits, that it might be good for the economy as the banks used all this high powered money to make loans to the non- banks.

Vince Fulco writes: 

Reminds one of the Dr. Doolittle story re: the push-me-pull-you but this one may have a very unhappy ending. Monetary pulls in one direction, Fiscal yanking in the other…Everyone can't be right. 

David Hillman writes: 

One might have much more faith that the bankers would instead find creative ways to the additional trillions off the table in the form of bonuses instead of lending to us business chumps. of course, that is good for the economy as they would use it to create jobs by building personal castles and buying stuff from Bulgari…..



 If cheapskating is going to increase, we might consider whether individual stocks that cater to cheap skates might have inordinate returns. This is the kind of things that my kids might make money with in terms of the category of stock, rather than its financial characteristics. Perhaps. On another front, I believe it is important to be especially cheap after having a good year. I think of Rimm every day with grave loathsomeness.

Art Cooper writes:

It's been a market theme for quite some time to buy stocks like Family Dollar Stores, Dollar General, etc. instead of retail stocks which cater to the middle class. The high-end retail market is a different market, as it responds to different forces. 

Jeff Watson writes:

I'm always accused of being a cheap person and try to not be penny wise and pound foolish. I never pay retail for anything and try to buy only stuff that will hold value. Herb Cohen is a person I look up to. He might look a little seedy, but he makes great sense and teaches sound methods of bargaining. His first $19.95 book I ever bought was probably the best investment I ever made, saving at least a million bucks, by bargaining with some of his techniques over a 30 year period. That's a hell of a return and his techniques work…

Pitt T. Maner III writes: 

 Cheapskating is likely to be an increasingly popular topic as hidden inflation and taxes go up. Perhaps there is an opportunity for a "Global Skinflint"!

"Jeff Yeager, dubbed "The Ultimate Cheapskate" by Matt Lauer on NBC's Today show, is a very cheap guy. He re-cants, as opposed to decants, the wine he proudly serves his dinner guests, funneling cheap box wine into premium-label bottles. He believes you should never spend more than USD 1 per pound on food items. And to save time and energy costs, he soft-boils his morning eggs along with the dirty dishes in the dishwasher."

And then there is the TLC show :

"Be aware of what you're using. Victoria Hunt, who retired from her accounting career at 48 has been tracking her expenses and her income on a spreadsheet since 1989. "Every minute of every day has something to do with how I can make a better decisions financially," she points out."

Rocky Humbert writes: 

Mr. Yeager is either wasting money on his super-heated dishwasher or he's stretching the truth about his eggs. Dishwashers (generally) do not heat the water about 140 degrees. See this article on naturalhandyman. To get the egg white solid, it requires about 180 degrees. Even my Miele doesn't get the water to 180 degrees! This does not compute! (That is, he's making his money selling books. Not cooking eggs.) I would suggest that he should instead put his Pop Tarts and morning sausage on his car engine's manifold. By the time he gets to work, he'll have a well-cooked breakfast. (And he can similarly roast hot dogs on his drive home.)

Dr. Johnson writes: 

Ballyhoo? Like any good Spec, one must test, and test I did, the claim that an egg can be cooked in a dishwasher during a normal wash/dry cycle.

Equipment- Miele G5775.

Note: Perhaps not the ideal brand for testing a cheapskate's assertion.

Eggs= Phil's Fresh Farms Free Range Large 42F wrapped in plastic film.

Max Water Temperature Wash5F Max Air Temperature Dry= 185F

Time to complete cycles= 54 min wash & rinse, Dry 22 min.

Results: Egg removed immediately at end of the cycles= Yolk 134F thick and slightly flowing, settles to 1/4 height, white 151F at shell boundary with firm consistency.

Egg removed after 10 Min.= Yolk 141F thick and settles to 1/2 height, white 141F at shell boundary with firm consistency.

Conclusion: Not Ballyhoo! One important consideration for those cheapskates who want to try this method is that egg shells are semipermeable, therefore unless the taste of detergent combined with a menagerie of old food waste is to your liking, sealing the egg in plastic wrap is advisable (also which at +140 F will transmit unwanted substances).

David Hillman writes: 

Yes, let us commend Dr. Johnson both on his testing and on his using Phil's Farm Fresh Free Range eggs, the chicken egg of preference at Casa DGH…..cage-free, no chemicals, natural whole grain feed, laid in nests, and certified humane!

That said, even though my Bosch heats water to 160F and air dries at what seems to be 1200K if one opens the door during the 'sanitize' cycle and is met by a blast of superheated air, this whole business of cooking eggs in a dishwasher seems a bit impractical.

One, it seems like using a sledgehammer to place a pushpin in a cork board. Two, while the dishwasher here is run every 2-3 days, typically in the evening, eggs are a daily breakfast staple. What to do on 'accumulation' days? Three, counting time to heat water or a pan, it takes about 10 minutes to fry, poach, baste, scramble or soft boil eggs on the range. Why wait 76 minutes? Four, dishwasher cooking uses a heck of a lot of water and electricity v. range top cooking, multitasking notwithstanding.

For those who feel the need to multitask in the kitchen, there are what seem to be more practical alternatives to cooking one's breakfast eggs in the dishwasher, though at $90, this might not be thought of as 'cheapskating' …..

Pitt T. Maner III adds:

 A few older links, but possibly of interest to those seeking to find ways to ride the money-saving trend and as a possible example of a company that finds quickly (identifying trends) and uses new inventions from private inventors. Khubani the CEO started with ad in National Enquirer.:

1) From 2010: 'A.J. Khubani, the man behind many “As Seen on TV” gadgets such as the PedEgg foot scraper, is making cheapskate gimmicks a priority at his company Telebrands, one of the nation’s top direct-response TV marketing companies.

More than half of Telebrands’ gadgets, sold online and at 90,000 stores, are now focused on helping shoppers be cheap. Khubani, who has been traveling around the country to meet inventors, is speeding up the number of new products he’s launching to every 30 days from every 60 days. “The mood of the country has changed,” said Khubani. “We’ve had tremendous opportunity with this recession.”'

Since 2007, Telebrands’ revenue has doubled to several hundred million dollars, he said.

Read more.

2) The current lineup of brands.

3) From 2012: "For the first time in our company's 29 year history, TeleBrands had 15 products ranked in a single year including our most recent hits like, Slice-O-Matic, Plaque Blast, Slim Away, OrGreenic and Bake Pops," said TeleBrands' CEO/Founder, AJ Khubani. "Each year, we continue to solidify our spot as the largest and most successful marketer of DRTV products aimed at solving everyday problems and reaching mass audiences at affordable prices. In 2011 alone, we rolled-out 12 products — the most in a single year in our company's history."

Read more.

4) On Khubani from 2011:

"The son of Indian immigrants, Khubani started out at 23, spending a few thousand dollars on an ad inNational Enquirer — a move that led to his first big hit. Since then, he's sold hundreds of millions of "As Seen on TV" products, including AmberVision sunglasses, the PedEgg and Doggy Steps. He has bolstered the careers of ubiquitous TV pitchmen, including the late Billy Mays, who enthusiastically hawked products now found on the shelves of more than 100,000 retailers. Today, Khubani is the leader in the $20 billion direct consumer marketing industry, turning out more "low-tech" products than ever before."

read more.

5) Not all have been appreciative of Khubani's methods:

"But will anyone care about dust mites? Khubani wasn’t achieving much traction among his Telebrands staff with his bed-spray idea, when along came a proposal for an anti-dust-mite pillow, from a colleague Khubani mysteriously describes only as “a business associate.” It’s hardly a new concept—there are several such pillows already marketed to allergy sufferers and asthmatics. But so far, nobody has had the brilliance to incite a national panic around flesh-eating creatures that feast on human remains—and lurk in the pillow of every man, woman, and child. “The hum you sometimes hear at night?” Khubani asks eerily. “That’s the sound of 2 million dust mites eating your dead skin.” Or perhaps it’s the sound of one man in Fairfield, New Jersey, homing in on your next anxiety. "

Read more. 

Victor Niederhoffer adds: 

 Of course the main virtue about cheapskating is that it prepares you for such activities in your business. As the oil magnate said, "I am not smart enough to act one way in my personal life and another in my business. My margin is 8%, and if I gave away 8% on everything my 200,000 employees would be out of a job. So I make them pay for their telephone calls." Regrettably, the oil magnate was victimized by old man's disease (the same disease as the sage), and he was locked up in England for 20 years, with his retinue preventing him from going back to us for fear that he might change his will, and he was soporifisized by many nubile girls and other attractive women he would meet at museums. 

Funny. More important even then the fine posts with examples and tests of cheapskating is the query I have received from many of the younger hearted on the list. "Where are those museums that the oil magnate frequented?".

Gary Rogan suggests:

I suspect the Getty museum is a good place to start.

Stefan Jovanovich writes:

I hope Gary means the original one in Malibu, the villa whose design Getty himself supervised but never saw. The monstrosity built on top of the landfill by the 405 is absolutely the worst place in LA for the amusements Getty had in mind. If he were alive today and living in SoCal, he would be going to OCMA to appraise the latest generation of lovelies.

Jim Sogi adds:

Eggs can be cooked sous vide at 144 -155 for 20 plus minutes for a wonderfully cooked smooth soft boiled egg with a consistent texture throughout.

Food grade hydrogen peroxide diluted to a 3% solution is an excellent way to sanitize kitchen and utensils and not toxic like chlorine. 



 I was looking at the book The Physics of Wall Street on Amazon.

It couldn't have a better recommendation:

"Beautifully written, with clarity, understanding, and a broad view that is rare in these domains. Even those of us who are unconvinced physics has played an important role in finance will be carried along and learn from this engaging book."

—Stephen M. Stigler, Ernest DeWitt Burton Distinguished Service Professor of Statistics, University of Chicago

Here's another book on unusual physics applications: The Physics of Superheroes

Seemed somehow related. An enjoyable read, though it might have been better if Taleb, Sornette, Mandelbrot, Gross and Greenspan had been included.



 A couple of days ago, my neighbor knocked on the door to tell me he had just hired some guys to take down several trees on his property. Knowing I wanted several knocked down, too, he thought I might be interested. I said 'sure', but was on the way out, though I'd listen to their spiel and an estimate when I got back.

There were three guys, a father and son and a friend of the father's. These were 'natives' off the 'rez' about 50 miles away who were driving around town looking for dead trees, then approaching home owners about cutting them. I had no problem with that, they said they'd been doing this all their lives and showed us an insurance cert. It seems the father and son had their own company and the friend had his, but they collaborated.

Upon return, they had taken down half the neighbor's trees and he was satisfied to that point. We watched them take down the rest of neighbor's trees and found them quick and very deft at the task, scampering up and around the trees with lineman's spikes, ropes and saws. They cleaned up the property, piled the wood and brush for removal and basically did everything they said they would.

While the son and friend worked on my neighbor's property, the father popped over, took a look at my trees, described how they would take them down so as not to destroy anything else, said they'd cut the trees into nice firewood, and he gave me a quote that was 1/10th of what I would expect to pay a more high-powered company for the same work. Cash, of course. Given what I had seen, I gave him the ok and he said he would return the next day to cut my trees.

Several times as we talked, he mentioned that if his friend came over and approached me, I should not listen to him, because while they were life-long friends, the friend was the kind of guy who frequently would try to cut the father/son team out of deals. I told him not to worry, we had a deal. Later, with his friend out of earshot, he reiterated several times the complaint about his friend to both me and my neighbor.

Nonetheless, early the next morning, the guy gave me a call to let me know they were on the way and to ask if the friend had called to try to weasel the business. I said no, we had a deal. He replied that if the friend just showed up, I should not let him cut anything. I said fine.

After our phone call, I thought about this paranoia and wondered if it was a cultural thing, natives having been screwed in broken treaties, etc., and wondered why, if this guy was so worried about his friend, he would work with him. No answers, but good to think about, and in the end, not my problem.

When the father and son showed up, the first thing out of the father's mouth was 'did the other guy show up wanting to cut?' No, he hadn't. The father continued on with the stuff about under-cutting, etc., I asked where his buddy was and the father said he had told the other guy not to come because they wouldn't need him that day. In other words, while they didn't 'need' him, they could have used him, but they didn't. They then set about working and did a very nice job.

Now, part of the agreement with both my neighbor and me was they would have a third party come to remove excess wood and brush from both our properties when the work on both was complete. When the work was done, we learned they didn't really have a deal with the third party to remove brush, only the wood. My neighbor talked with the removal guy, who said he'd remove the brush for what amounted to a little extra cash. No problem, we withheld a little money from the cutters, agreed to pay a little premium for the removal, and both my neighbor and I were happy to have the work done.

A bit later, after the cutters had left, the guy shows up to do the wood and brush removal. He, too, did a very nice job and all was well. We talked with him about the job and the cutters and such. As it turned out, my neighbor had known him for some years, so he spoke frankly. He told us, without being prompted, that the 'friend' cutter was a straight-up, good guy, but he thought one ought to be careful of dealings the father and son. While they did nice work at a good price, many around wouldn't work with the father, as apparently, he was the one who had a history of doing to his friends and colleagues exactly what he had told us the friend might try to do to him and that customers occasionally wound up on the short end of the stick as well.

As I thought about this inside dope later, it occurred that we had gotten what had been promised and except for the clugey deal with brush removal, everything had gone off well and we were satisfied. But the truth of the relationship between the two collaborating cutter friends was reminiscent of something learned long ago that applies to contracts, hand-shake deals, boyfriends and girlfriends, car salesmen, politicians, and most everyone else for that matter.

That is, the biggest cheats are easy to spot. More often than not, they're those who are overly worried about someone else cheating them, even those they call friends.

And, that also reminded once again of the truth in Anais Nin's thought that 'We don't see things as they are, we see them as we are.'



 It's amazing how smart the public is, and how ridiculous all the experiments of the expert's breakfast friend are that duplicitously show how irrational the public is when confronted with contrived situations with deceptive self serving to the academics answers. They always sense when someone knows what he's talking about and pay attention as they did to my lessons from hard ball squash, giving more responses than any other of my posts except the one about Lady Gaga and what she can teach us about the idea that has the world in its grip.

Okay, I have to give some more lessons from the one thing I know about.

7. Never hit a soft drop shot. The opponent will be able to get there near the end of a game and kill it. It's especially bad near the end of a game, when the opponent will run for anything, do or die. Lobs are sure losers near the end of a game also for the same reason. Don't ease into your positions. You'll only get filled when it breaks out, and that's the only time that the opponents will certainly have the weather gauge. And don't arabesque into trial positions in small markets just to get your feet wet as the Pelicans at the top of the pyramid will always eat your bait, as they don't allow outsiders to dine at their expense, especially when the resources are limited.

8. Don't try to win the point with the same shot over and over. Your opponent knows when they run you up to the front right, on your rightie forehand that you are going to hit it cross court. If you happen to catch the perfect angle so that your opponent can't intercept it, and belt it down the backhand wall, for sure it was luck or he'll try harder the next time and you will lose the point. Always be ready to return the straight drop to the right side wall down the wall instead. Please don't try to make money from the market the same way two times in a row. How foolish do you think the adversary is to allow you to take his chips twice in a row. He was only setting you up for the big kill. Most people have a very good memory of what happened the last time, especially if it was a vivid loss. They are so angry that they will put their resources against you the next time, without hesitating to take billions of bail out money which they have received, or use costless loans from their past, current or future cronies at the Fed to go against you.

 9. Please learn from racquetball and jai alai how to hit a proper backhand. The swings of the racquetball players on the backhand, very nicely memorialized by the Hobo are infinitely better than the squash swings. They have 5 separate torque in there to give it exponentially more power than the placid Philadelphia, old boy English swing. And the Philadelphia swing is 10 times more powerful than the ridiculous backhand that the old Harvard players were taught in the hard ball game with the slice backhand with hardly any backswing, and no torque at all. I shudder at how high a % of the games I lost came because of the weak Harvard backhand I was taught and was too foolish ever to change, possibly because the only one that could beat me was Sharif. Martie Hogan's backhand in racquetball was a thing of beauty and since that time, it's been improved upon every 3 years or so by the next generation of racquetball players. Pedro Baccalo had the best backhand in squash which he learned from jai alai, and he could hit it 5 times harder than any other player because of all the torques in it. Learn from these improvements instead of watching the placid, effete swings of all the old time squash players and as far as I can see, the current crop of Internationalists. Okay, for crying out loud. The best lessons in markets and any field come from the borders where it meets another field. You'll learn more about markets from studying checkers or ecology or statistics or sports betting than you will from all the books on markets combined. Study the greats in other fields, e.g. Bronstein, or Armstrong or the Globetrotters to see the secrets of winning in markets.

The first six lessons:

I often get asked to talk to kids about the good old days of squash when you could make a point with a sharp angled shot and a long point only lasted 30 seconds. At a recent occasion talking to Hopkins kids I tried to relate the lessons of squash to wider endeavors. While doing it, I found myself in a dream world where flashes from markets, life, business, and school, circled around, crossed over, and fed back on each other. Since this is the one subject I know about, I thought it might be useful if I turned the tables and tried to think of the lessons that I learned from squash and how it relates to markets.

1. The game is always changing. Who would have thought that hard ball squash would now be as dead as squash tennis, or court tennis. There were once 2,000 court tennis courts in France before the revolution, but now say 10 in the world. There were once 10,000 hard ball squash courts in the world. Now, hardly any as they've all been converted. The markets you are trading now are likely to be very different from the ones you'll trade in 25 years. The rules and equipment will have changed. Electronic speed and international standards will replace manual method. I find it hard to believe that the things I traded 10 years, ago, foreign exchange, bonds, options, are no longer viable for me. How many others will find this out to their cost if they don't prepare for it.

 2. The officials, the rule making body, the association in squash, will always be like most such associations a body devoted to maximizing the power, perks and profits of the officials. Time and again, they stood in the way of professional play on the grounds that it would weaken the amateur spirit of the game, the English way of stiff upper lip, poverty for the serfs, and noblesse oblige. If you wanted to be successful in squash, it was very important to stay in the officials' good side so that they wouldn't keep you out of the good spots and good tournaments, as they so often did to me and Gardner Molloy, and countless others. If you want to be successful in the markets, be sure that the rules are not stacked against you. That you will not receive margin calls so that the officials can take the other side against you, that the members will not be able to get the edge on you thru access to unlimited capital, flexionism, and self serving decisions like those that arise when you go to arbitration on an Exchange, where the referees, and judges are invariably chosen by the exchange itself. How can you expect them to rule against their friends and cronies.

3. Counting and record keeping are crucial. A good squash player, should know exactly where the ball will land, when he hits any shot, given his current position on the court, the angle of the wall he aims for, and the velocity of the shot. You could work it out by geometry given starting with the angle of incidence equaling the angle of reflection. Very few players take the trouble to figure it out, or even think about it. How many good market players don't know what the expected volatility is on their trades given how fast and the direction it's been going in the past?

4. The first blow is half the battle. The player that gets ahead by 2 or 3 points is inordinately likely to win the game. The importance of a good start and good preparation are paramount. Bronstein once waited 2 hours before deciding on his opening move while the clock was running. The first blow in markets is still crucial. The expectations are much higher when the first x minutes are up compared to down.

 5. One of the keys to winning in squash is never to stretch. When you stretch you can't hit a hard shot, and you're limited in where you can hit it, so you're opponent can always anticipate perfectly where the shot is going. The other side is that you should always take the extra step so you'll be in position to hit any shot. It's so enticing to stretch because it saves you the step and enables you to get the ball in play but so certain to lose to losing. How many time do you stretch in markets. Put on too big a position, take a regularity that only has happened 3 of the last 5 times and run with it? How often do you end up leaving yourself vulnerable to an adversary who knows exactly how extended you are, and come into full force against you? Certainly one of the worst errors in markets.

6. I could never figure out why Sharif Khan had a winning record on me. He was sure to make at least 5 errors a game, and had a weak backhand that turned over the ball whereas I could go a whole match without making a single error. Then I realized he was the only person that could make 7 winners a game against me, where the ball bounced twice before I could touch it. Then I realized that what he did was to take every shot on the half volley. He worked off my power so that the ball came back at a higher velocity. He also didn't give me time to set up to return the ball. Most important though, by violating the stricture we had learned to wait and make the opponent commit, he prevented one from anticipating his shot and tucking in to retrieve it. Since that time Agassi and even the more loathsome sportsman Connors have pioneered using the half volley in tennis to beat players with much better equipment than they in tennis. Nowadays it's de rigeur in tennis.

Taking it on the half volley in markets means not waiting until the afternoon to put your positions on, not waiting until every market that 's a pilot fish for your market is in the right direction, not waiting for the announcements to reduce your uncertainty. If you want to speculate you have to speculate. Only the house can wait and grind you to oblivion. Taking it on the half volley in markets is getting in way before the pivot has occurred, way before the trend has changed. It's the secret of success of great players in racket sports and markets. Come to think of it, it was the secret of success in handball also.

The old time handball players are so much better than the current ones. Why? For one they hit the off the wall with deadly precision. Artie had a fantastic off the wall shot, and somehow his football killed arm was able to miraculously get back to its youthful vigor when he hit it. He always said that Ralphie Adelman was the best because he could hit everything off the wall for a killer. I now see that Martie Hogan is espousing standing in front of the service line on each shot in racket ball as the key to success there. Some day someone will teach the handball and racket ball players of today that the off the wall killer is key in games and markets.

Chris Tucker writes:

Point 5 is the similar to using power tools as I mentioned in "On Taking Down a Tree":

Never extend your reach beyond what is comfortable. Using a tool at more than arms length puts you in a position that prevents you from reacting quickly if something goes wrong. It puts undue stress on you and the tool. It removes whatever leverage you have on the tool. It also prevents you from "feeling" properly through the tool. When using a power tool you receive signals about the material you are cutting and the nature of the stresses on that material. You can always tell when a branch is about to go if you are listening carefully to the tool. That feedback is denigrated by reaching too far or by using only one hand.

When developing skills you must, occasionally reach beyond your current level. This is different from overextending your reach. But it is important to do so incrementally as overstepping your bounds too egregiously can result in devastation and trauma. Taking small steps into new areas or higher intensity or greater complexity allows you to learn while remaining close to your comfort zone. Yes, you have to reach in this sense, but you want to do it in such a way that you don't destroy yourself in the process. When you push yourself in this way you also expand your comfort zone and your skill set. This can be the translated into taking on larger size, increasing leverage, having more trades on at one time, or introducing new instruments to your repertoire.

John Floyd comments: 

 I think Ari would say, "you should set goals that are constantly reaching further, but attainable, then gradually keep moving forward. If you have a stumble then pause and evaluate why. If you set a goal too far out of reach you may be faced with disappointment at not getting it".

Charles Pennington writes: 

Steve Sailer has a nice illustration of the problem with some of Kahneman's questions.

Apparently the following background information is NOT supposed to convince you that Jack is more likely to be an engineer:

"Jack has a B.S. degree from Purdue. At work, Jack wears a short-sleeve button-front shirt with a pocket protector full of mechanical pencils, just like most of Jack's coworkers on his floor. Jack always wears a tie clasp to keep his necktie from getting smudged by the blueprints when he leans over a drafting table. Jack's favorite line from Shakespeare is, "The first thing we do, let's kill all the lawyers." In fact, that's the only line from Shakespeare he knows. Jack wanted to name his firstborn son Kirk Spock, but his wife wouldn't let him."

David Hillman comments:

From Forbes' "Five Leadership Lessons from James T. Kirk" (applies to lone wolves and markets as well) :

“You know the greatest danger facing us is ourselves, an irrational fear of the unknown. But there’s no such thing as the unknown– only things temporarily hidden, temporarily not understood.”

“One of the advantages of being a captain, Doctor, is being able to ask for advice without necessarily having to take it.”

“Risk is our business. That’s what this starship is all about. That’s why we’re aboard her.”

“Not chess, Mr. Spock. Poker. Do you know the game?”

“‘All I ask is a tall ship and a star to steer her by.’ You could feel the wind at your back in those days. The sounds of the sea beneath you, and even if you take away the wind and the water it’s still the same. The ship is yours. You can feel her. And the stars are still there, Bones.”




 It is always marvelous to consider how in 162 games played over 6 months time, the margin of victory can be so minute, and how often that it so.

Not only is it true in baseball, but in many sports, e.g., thousands of laps and tens of thousands of miles driven in 36 Nascar races run over 10 months, 21 stages and 1800km of the Tour de France run over 23 days, etc. And the slim margin of victory is evident in individual events as well, e.g., hundredths of a second in the 100m dash, or 10ths of a second after 500 miles of auto racing, a last second walk-off field 50-yard goal after 60 minutes of football, a tennis tournament coming down to deuce in the last game of the 5th set of week-long play, winning a 1.5 mile horse race by a nose, or sprinting the last few hundred yards of a 26 mile marathon to win by seconds.

So the Redsox and Rays, and Cards and Braves, respectively, find themselves with identical records after 161 games. Two of these teams are going to the playoffs with either a 0.6% or 0.3% margin of victory, depending upon today's wins/losses. Even the Brewers who are assured of a playoff spot have a margin of victory of only 6 games over 161, which amounts to 3%.

And, the NL batting title is going down to the wire with Ryan Braun of the Brewers and Jose Reyes of the Mets separated by hundredths of a percent after stepping up to the plate 600 times during the season.

All this reminds of how difficult it is, as the sample grows in size, to accrue sizeable percentage gains, even when one's winning percentage remains high. It reminds of driving a couple hundred miles on the freeway yesterday, then seeing the gas mileage drop by a percent after driving a few miles in town. It reminds of a past colleague explaining 93% of an observation with a few variables in the first data cut, then spending 6 months adding and subtracting other variables to improve that explanation by less than a percent.

It also reminds of John Wooden famously instructing his players how to properly put on their socks. He showed them how to roll the sock, place it over the toes, then how to tautly unroll it over the foot and up the ankle so that there were no wrinkles in the sock. His explanation was, to paraphrase, wrinkles cause blisters, blisters lose games, losing games loses championships.

It goes to show that the old saw "the race is won in the last few yards" is frequently very true, and with the margin of error, or victory, in many cases being so slim, how seemingly unimportant details and decisions we make can affect the outcome of events in our lives, even many days, months and years down the road.



 Phillies general manager Ruben Amaro is quoted in Sports Illustrated saying, "Baseball has made a U-turn. We've gone back to pitching and defense and speed. You don't see the power numbers of 15, 20 years ago. There's a change in how games are won."

Tom Verducci writes in the same article, "National League teams are averaging the fewest runs per game (4.09) since 1982. American League teams (4.29) haven't scored at a worse clip since 1973, and the league's batting average (.254) is the worst in the 38-year history of the designated hitter."

David Hillman writes: 

Well worth a look-see. A thought…..perhaps the home run indicator should have, as should the home run records have, an asterisk for those years.

On a related note, here's a nice piece on a genuine player. The mention of another 3000 hit club member who played his entire career with one team and lived an honorable life is appropriate, and is also, for many of us who were around then to see him play, heartwarmingly nostalgic.

Another thought…..In the spirit of 'asking the right question', it seems I feel differently about the game now than I did in my youth, but I wonder if it's the game that's changed so much, or if, instead, I've done the changing?

Stefan Jovanovich writes:

The "old guys" on the Giants - Aubrey Huff, Pat Burrell, Miguel Tejada - see things this way.

The young pitchers now know how to change speeds without tipping their pitches and they only throw to corners. "The kids maintain the same arm angles, body turns and strides for all the stuff they throw. You can't read them." Madison Bumgarner, who helped the Giants win the Series last year at the age of 21, is representative; he throws everything on the black. When he doesn't, he gets lit up just the way pitchers always have if they can't throw 98+. Against the Twins recently he tied the Major League record for futility by a pitcher at the beginning of a game. "Bumgarner faced 10 batters and retired only pitcher Carl Pavano, becoming the first player in baseball's modern era to allow as many as nine hits while recording fewer than two outs in a 9-2 loss to the Twins at AT&T Park. The Twins' stunning, eight-run first inning went like so: Single, double, single, double, single, double, single, double, strikeout, double." In his next start against Cleveland he went 7 innings, struck out 11 (his career best) and gave up 1 run.

When either the plate umpires or the batters take away the corners, the home runs will come back. They always do. What we will then see is a return of knock-down pitches and fights. We had a preview yesterday in the Baltimore-Red Sox game.



 One has to wonder why this whole "college is a waste of time" meme has suddenly become so prevalent. Is it because so many people have trouble with college loans? Too many writers who have nothing more to say about O's birth certificate?

Thinking one can predict the future based on what one does in the present is a persistent human foible. For sure a lot of kids go to college who don't need to. But is this truly something new? Would anyone sensible make a decision based on what they read about this subject? Unfortunately some probably will.

It remains to be seen how employers of the future will react to resumes that state "I am really smart but I didn't go to college because I read online that it was BS; but I really am smart."

One of my kids is 1/2 way through college and the other is just entering this fall– and I don't spend any time at all thinking it's a waste of time or money; it's been a path to prosperity in my family where none of the previous generation had any education past high-school (if indeed they finished that at all).

On the other hand my wife and I went to CUNY at a time where the cost was $35/semester. That's not a typo.

But I still wonder what's behind the impetus to discredit higher education?

Ken Drees writes:

I get the vibe that the intent is more of a cost justification issue. You don't send a kid to college who gets middle of the road grades and majors in marketing anymore. The job market out of college is poor and will continue to be poor. College now will set you back serious money as a percentage of household income and there will be serious debt burdens on the student and parents upon graduation. You can't put the college payments on the credit card or the home equity loan anymore.

I believe that a college bound child needs serious career planning up front, which is tough to do since kids sometimes do not know what they want to do prior to going off to the higher education arena. Like the union bubble which is feeling the backlash from the debt riddled state pockets empty reality, colleges need to step back, cut back, stop the pay raises–else enrollment is going to crater and the pie shrinks.

Victor Niederhoffer comments:

 A college education will always serve as a signaling device to employers and partners and parents that one is capable of being admitted under highly competitive circumstances and then has the fortitude to stick with the program, and finish the requirements, and the moral fiber not to have been kicked out. The signaling will always be of value and the rate of return from college should stay relatively constant.

Russ Sears comments:

Very similar qualifications could be said about homeownerships, commitment to paying a mortgage and good citizenship of being a good neighbor. When a persons limit to leverage has no bearing to what they could reasonably expect… many with nothing to loss will gamble with somebody else's money. This of course creates a bubble in some areas where there will be large oversupply of X degrees. For instance everybody will think in 2022, "what were they thinking taking forensic science and $100 grand of loans?"

The problem is when you use the argument that is it "should" be worth it to argue that everybody has a "right" to upgrade there lives. Further when you grant this "right" to any 18 year old capable of getting a high school degree you are bound to get many that should not have been given this privilege without working a few years and tasting responsibility. I still believe orginially there was a segment of responsible people that were granted sub-prime loans. These people however, proved to be the exception to the rule when everybody was given this right.The difference may be that those youth that are the sharpest will see the "bubble" within these areas and avoid them.

Could we be looking at the class of 2011? on a resume and subconsciously think what a deadbeat?

James Goldcamp writes: 

 I agree with chair's analysis of the signaling value of education, but one also wonders at what cost. I would find it hard to believe the return on invested capital has not gone down with both greater real costs and general degree (volume) inflation over time. It occurs to me that a rigorous self study program with standardized tests against which one could be compared might provide some lesser but nonetheless valuable signaling vehicle at 1/20th the cost of the current college education. Interestingly, one hire we had years ago was more known for his perfect SAT than his multiple Ivy degrees.

Thomas Miller writes:

This anti college education and anti home ownership "debate", seem to reflect a negative attitude that is growing in this country. The theme seems to be "dont even bother to go to college or strive to own your own home. it's not "worth it." just give up and settle for less." Of course college education or home ownership is not for everyone, but those that propagate these defeatist platitudes, (especially the ones that do it on internet blogs read by a large audience), are doing a great disservice to young people. "just settle for less" is not the attitude that made this country great. A generation ago, many that chose not to pursue college could get a decent job with benefits and be fairly sure of being able to retire from that job. There are very few of those jobs available now. The gap between those with a college degree and those without will continue to widen.

Russ Sears comments:

 I believe those that are "anti" college are saying take more risks start a business instead.

And for those that it will not turn out for the better, it's not good government to guarantee the loan. More responsible decisions will be made if they have to compete for access to loans like anyone else.

Ralph Vince replies:

I cannot speak for others, but I am not advocating a "give up," or defeatist attitude here. I speak with those who have children of college age frequently, as well those who ARE of college age frequently too. One of these day, I'm going to stop speaking to people who don;t take my advice (most people are incapable of taking advice, we simply have to learn things the hard way, and usually more than once)

I hear an awful lot of talk from all of these people that a college education is necessary to enter the American job market, as though it were a ticket to the dance, a means to an end as it were.

(I should point out in full disclosure I do not have a college education. I am self taught. When I decided I should learn math, I started with algebra, geometry, trig, analytic geometry, calculus, topology…..eventually stochastic differential equations, which is used (with near exclusivity) to model prices with (a nice target for a math track for someone interested in the markets, but I find these methods model prices with a degree of reality akin to Oz modeling Kansas). When I wanted to learn literature, I started with Homer, then Virgil….through to the 1950s. Of course one cannot study everything and anything, you have to make selective, intelligent decisions (which is where talking with others comes in) and someone must WANT to dispal their ignorance (and this is the key attribute, the acknowledgement of our ignorance and a desire to overcome that — whether formally educated or not).

The last time anyone ever asked me about my educational background was probably when Reagan was running against Carter.

So when I look at what people are learning, and WHY they are learning it, I DO come away in MOST cases with a "Why bother with that?" attitude.

So once we acknowledge that there are two reasons for edication:
1. To dispel our ignorance, and ultimately, to study material we are passionate about, should have such good fortune, and
2. To make ourselves, personally, a marketable product (i.e. posses a marketable "trade," be it electrician, brain surgeon, or truck driving certificate)

people can make better decisions. Unless they are fortunate enough to be a trust fund kid, they need #2. A mere college degree does NOT provide that — this is a wives tale that floats about America wherein a lot of money is being wasted in its pursuit.

#1 is a luxury — one must have the good fortune of finding what fires their jets at a young age, aside from pornography, and find a way to pursue it. If they have the resources and time, college is the way to go. If not, anyone with a spark and a modicum of resourcefulness will find a way to pursue it.

I've spoken of this before. The number of persons from the 2000 census to the 2010 census is up 20%, the number of households, nowhere near that amount. Clearly, in the not-so-distant future, either much housing must be created or much work must be done to convert the "cul-de-sac development" McMansions into 2 and three household homes. What young person is a yeoman plumber out there, or plasterer? Not many, certainly not many over the past 10 years — but it is the fastest track to acquiring #2, above, for most.

And most need #2. Not everyone needs #1, and if they have that luxury, nothing will stop them from pursuing it. But the notion of borrowing a lot of money for a ticket to a dance based on some parent's misguided model of reality (Oz!) is something the educational institutions feed on, benefit by and play to.

Jim Lackey writes:

 College is the time to meet your mate, your equal. For the fortunate men, it's  the better half you spend life with.

In your college years, there is only so far you will go…. Either to fake it, to fit in/get ahead or rebel against, to get off easy and/or explore the adventures of danger. The gist is how you act when no one you know is looking. Sin may resurface later in life. For certain people, the hypocrisy of life will rear its ugly head. If a married couple knew each other during these years of growth and uncertainty it's near impossible to argue later the lack of full disclosure prior to marriage.

A grievance can always be resolved. A slight, an imaginary hurt, the lack of full disclosure–the "I thought I knew that person". That person will hate you til the day they die.

My guess that is how/why bitter divorces ruin families… vs the much higher than average success rate of current marriages from my anecdotal evidence of family, friends and cohorts that married some one they knew from school.

Jeff Sasmor writes:

Good article on "What's a Degree Worth" :

What Are You Going to Do With That?

For the first time, researchers analyze earnings based on 171 college majors

By Beckie Supiano

Tuition is rising, the job market is weak, and everyone seems to be debating the value of a college degree. But Anthony P. Carnevale thinks these arguments are missing an important point. Mr. Carnevale, director of the Georgetown University Center on Education and the Workforce, has argued that talking about the bachelor's degree in general doesn't make a whole lot of sense, because its financial payoff is heavily affected by what that degree is in and which college it is from.

Now, new data from the U.S. Census Bureau sheds light on one big piece of Mr. Carnevale's assertion: the importance of the undergraduate major. In 2009, the American Community Survey, the tool the bureau uses to collect annual estimates of population characteristics, included a new question asking respondents with a bachelor's degree to give their undergraduate major.

After combing through the data, Mr. Carnevale says, it's clear: "It does matter what you major in."

Laurence Glazier writes:

After the signalling provided by college qualifications, the deliberate undertaking of full-time employment may signal the willingness to allow creative fruit to wither on the vine. A shibboleth of perspective. So many wait for retirement (which may not come) to allow vent to such aspirations, but the law of the farm dictates regular irrigiation throughout a lifetime.

To this end there would be much benefit to all if full-time work became less the norm. The end of government subsidy of unsound housing loans would reduce the pressure on people to suppress their finest qualities.

The Harry Potter books emerged not in spite of the writer's modest circumstances, but aided by them.

David Hillman writes:

Very astute observations.

A laborer can be trained to dig a ditch to a certain depth. A monkey can be trained to dance to the organ grinder's tune. Even a plant can be 'trained' to grow in the desired fashion. But few of the former are, nor neither of the latter can be, trained to *think* and creatively problem solve.

One might speculate that emphasizing skills, specialization and technology in educational curricula and employment qualifications may be the culprits.

While a college education being increasingly available only to the affluent because of financial considerations is, indeed, an issue, perhaps another of our chief concerns should be that we are creating a nation of people who are trained, rather than educated.

Kim Zussman writes:

The "education ruins thinking" argument has value, but simply looking at dollars a college degree pays more than just HS diploma. BLS stats below shows increasing income with formal education: about $400/week more for college grads - which of course does not include harder to value assets like volume of learning, tutored critical thinking, facility of life-long learning, status, access to better mates, good memories, signalling, etc.

One would need about 10 years of the additional (median) college grad salary to pay for 4-year private degree (ignoring taxes). Would the degree be worth it if it took 20 years to pay off?

Unemployment rate     Education attained        Median weekly earnings
in 2010 (Percent)                     in 2010 (Dollars)

1.9%            Doctoral degree            $1,550
2.4            Professional degree         1,610
4.0            Master's degree             1,272
5.4            Bachelor's degree         1,038
7.0            Associate degree           767
9.2            Some college, no degree           712
10.3            High-school graduate           626
14.9            Less than a high school diploma       444

8.2                     All Workers                        782

Note: Data are 2010 annual averages for persons age 25 and over.

Earnings are for full-time wage and salary workers.

Source: Bureau of Labor Statistics, Current Population Survey

Rudolf Hauser writes:

The question of a rate of return on a college education is not that easy to measure. For one, it will vary greatly on the college attended both by cost and quality of education. It would also vary greatly by the course of study and how much a person actually learned as opposed to just getting by and having fun. Even taking account of these variables, it is not an easy question to answer. The math is a simple discounted present value calculation, but the inputs are something else. For one, the attributes of those attending college and those not attending will differ. Those with an interest in learning and working hard, more personal discipline and more ambitious are more likely to be attending college than those who are not. Those people are more likely to earn more than the group that does not go to college even if they had not gone to college. So while the value of the education is the difference in what they earn in the future compared to what they could have earned had they not gone to college, one cannot just assume the latter is what those without a college education currently earn. In addition what is actually earned will not be a single average or medium figure but will have a wide distribution around it based on good or bad fortune, who you know, and countless factors beyond one's control. Costs while being educated in addition to direct costs of tuition ,books include difference in living costs relative to what they would be had one not gone to college and opportunity costs of lost potential earnings from working rather than going to school. Then there is the question of how much of the difference is due to signaling as opposed to the value of what was learned and contacts made during school. That is real but could change if the marketplace found alternatives to such signaling. If lower education had more strict criteria for graduation and grades the signaling value of a college education might lessen as employers had more confidence in that and prior work experience. The cost of loans may also vary, so that how the education is financed will matter a great deal.

In addition to monetary economic measurement, there are other benefits that might be gained. Meeting a spouse has been mentioned by list members as one such benefit. Learning about many areas and learning how to learn, may enrich one's life as a person, contributing to the value one has to society and family and to one's personal richness of life and happiness. But if prospects do not turn out as one hoped, it can also lead to unhappiness. The question then is how much one wishes to pay for these other potential benefits or negatives (i.e., the probability of disappointment). Some areas of study such as general liberal arts, might be expected to have a higher risk of low or negative economic returns than more specialized fields, but specialization runs risks if those skills become of less use to society.

On a personal level, I do not believe it make sense to send a kid to college unless they are actually going to work hard to learn. If not, it might be best for them to work for a time and see how difficult life can be without a college education. Often they may then go to college and actually make the most of it rather than going at a younger age and goofing off.

I might also add that education need not be in the classroom. The time spent learning on one's own is also education. One need not attend college to learn. It might not have much signaling value but it certainly helps in many areas. The cost is the value of the time spent either in terms of the value of one's leisure or economic opportunity cost.
The ability to learn might be enhanced by a formal education. One of the things I would advise a person attending college to learn is how different disciplines think. The way a lawyer thinks about problems, the way a scientist does, the way a creative writer thinks , the way an economist thinks differ and are specialized in some ways that takes a time to learn. The first course in microeconomics is difficult for many students, for example. The more ways of thinking one understands, the broader ones ways of understanding the world, understanding other people and in solving problems. Some of the great innovations come from taking of advantages in knowing something about other areas of learning that provide insights into the problems in your area of interest.

David Hillman writes:

Ok, then, I meant the focus to be on the point of training versus education. If it requires more updated or timeless references than those to the 20th Century, so be it, and I beg pardon.

(1) Backhoe operators are *trained* to operate them, but there are many instances of heavy equipment being stuck because the operator failed to *think* about the application.

(2) Musicians can be *trained* to play an instrument, but without a proper foundation, i.e., *education* in music theory, history, etc., while the music may be technically correct, it is often dry and mechanical, uninspired and with an 'off-the-shelf' feel.

(3) An air traffic controller can be *trained* to direct aircraft, but when an emergency arises, he/she must *think* of how to resolve it, not unlike,

(4) A 9-1-1 operator being *trained* to follow protocol, but when that protocol does not apply, hopefully, that individual may be capable of *thinking* of a way to prevent loss of life.

And, what of entrepreneurs like you and me? How can one be *trained* to brainstorm an idea out of thin air, then take it from the drawing board to reality? But, one can certainly be educated broadly enough to think creatively, make connections, take calculated risks and solve problems. Even in strategic planning, one can follow a plan, but the successful execution of it requires feedback from the real world and adjustment, which requires the ability to think, not just the ability to follow an SOP manual.

Clearly, a liberal arts education is not for everyone and the rise of tech schools and alternative forms of education and training should be applauded. For those who require training, the more well-trained they are, the better off will be all of us who depend upon their services. But, one should not necessarily depend upon them to do anything other than the job for which they've been trained, nor to be able to *think* creatively when faced with a situation or event for which they have not been trained. Trained mechanics may depend upon a diagnostic computer and trained line cooks upon a recipe, whereas a great mechanic might 'feel' a rough idle and a great chef might improvise a dish. The latter two have the ability to think and create, some of which is natural, but a good deal of which may also come from an education.

Nor is a college education always the right thing for someone at any given time. There are plenty of examples of individuals who failed to perform well in college as a recent high school grad, but did stellar work 'going back to school', my own being one of them.

Some eschew those who are 'too educated' as being 'troublesome' precisely because they can think. However, if I knew nothing of one's natural intelligence, and had to choose, I'd probably go with the educated over the trained.

That said, neither education nor training has much to do with 'smarts.' For that, you either are, or you are not. Some of the dumbest guys I've known have had PhD's, but so have some of the smartest. Likewise, some of the least educated have been the smartest and most capable, but there have been many that are dumb as a box of rocks.

As someone once told me, "it's better to healthy and rich, than to be sick and poor." I'm kinda thinking it might also be better in the long run to be smart and educated, than to be dumb and trained.

Stefan Jovanovich writes:

David is right. If there is any fault to his argument, it would lie in his optimism about the capacities of higher education. But, then, my cynicism about schooling comes from having literally grown up in the business and from being a 2nd generation academic bum. (There are not many fathers and sons who share the distinction of having gone to graduate school in English literature solely because they had no better idea of what to do and the GI Bill would pay for it.) School, like most things, is what you make of it. My difficulty is that "education" is now what "national defense" was in the 50s and beyond; an open-ended appeal for more money that is always justified in the name of some higher good that is incapable of being questioned.

Jeff Rollert writes:

I concur with Ralph, and if you believe in the concept of singularity, then a repetitive answer method is most likely to be replaced by a machine.

For me, I believe that standard problems will have standard solutions already applied to them before I'm even aware of the problem. So if one were to find employees who where good at sensing/finding the "unknown-unknowns" then they would have to have a non-standardized approach - in other words a non-academic approach.

Lastly, in a logic sense, how can something be a "value" but still be "expensive"? Aren't these mutually exclusive?

Tim Melvin writes: 

We have dealt with both sides of the college issue here in the past few years. My daughter on her quest to be the world only libertarian teacher had no choice. To teach you must have three degrees and credentials. She has on semester left and has pulled a 4.0 throughout. She may have learned some basic teaching techniques she did not know but the general education element was lost on one who reads like her. When I look at the top 10 majors in US colleges I have a hard time seeing what we are producing except middle managers. Teaching and nursing are the only to that offer a truce vocational choice. I would love to have had four years to study literature, but I question the employment value of the degree itself. The top tier schools may be different but is seems to me that our universities are teaching fixed values and information, not how to think. How to think has to be either installed by your parents or learned on your own. I cannot see where this can possibly be worth the cost today. Perhaps Colonel Depew can add a though on this but I think teaching the young to read the Great Books Curriculum would go farther than the current middle management factory that are most schools today.

I never went to college. Truth be told I dropped out of high school at the enthusiastic recommendation of the local authorities. What education I have I obtained from between two covers in the style of Louis L'Amour– I suggest that book as a manual on learning to think by the way. I read constantly when I was a kid. My mother was wise enough to let us read anything we wanted regardless of content. If there was something we didn't understand she made us find the source material to explain it..and this was back in the day when Encyclopedia Britannica was still the source of knowledge not the internet. I have continued to read ravenously all my life. I read anything and everything. I have found that even fiction often contains lessons for life and can be a source of knowledge. As an example, I read two or three of Robert Parker's excellent Spenser series. Great detective books, but read a few and you will learn two or three good quick dinner recipes, several literary quotes worthy of further research and how to win a fight. Many of us on the list have followed the chair's lead and studied the great lessons of Monte Walsh, Don Quixote and Patrick O' Brian. Randy Wayne Whites Doc Ford novels often contain insights into the biology of floridian waterways and the everglades. Knowledge is everywhere if you know how to think. I fear today's world of standardized testing and assembly line universities may not be teaching that valuable skill.

Think about this. The two greatest innovators and business men of the past thirty years both dropped out of college. Some schools may be worth the price tag. I suspect most are not.

My son on the other eschewed school in favor of making a few bucks. He discovered he had a real talent for and love of business. Within six months or so of going to work at Boater's Worlds he was managing one of the top producing stores in the company…at the age of 20. We talked about school and he told me flat out "I can't see the value of spending the money. I have two MBAs working for me now because they can't find jobs that pay enough, and my part time staff includes a phd in English." He moved on when the Ritz family folded the chain. His former district manager brought him over to his new company and he is moving up the rank there. He just undersands the art of working hard and making money. He may need a few accounting classes some day but four years at some state university would have been a waste of time and money.

We need more thinkers who have a passion for knowledge and more curious explorers and fewer managers and chair holders. That's on us as parents as much as the schoools. If our children go onto college make sure they know how to think and the univerisity allows them to do so.

Stefan Jovanovich writes:

Dropping out can be useful even for scholars. Peter Green (the #1 biographer of Alexander the Great) did it.

So did Eddy's favorite professor who didn't teach art history.

Eddy's most treasured legacy from 4 years at Cal was giving Professor Jacobson the recording of her version of the Super Mario tune. He had heard her play it on the UC Carillon and wanted it for the ring tone on his phone.

Dan Grossman writes: 

Found this interesting blog post by Steve Sailer proving the value of higher education:

 A column on a new Gallup Poll asking "Just your best guess, what percentage of Americans today are gay or lesbian?"

"The mean guess was a ridiculous 24.6%. Only 4% said less than 5%, which is probably the best guess.

Polling companies seldom ask questions on which people can make obvious fools of themselves, since those can raise questions about the value of opinion polls.

Looking at the demographic crosstabs, it's evident that low intelligence people were most likely to wildly overestimate the percentage of homosexuals: 53% of people making under $30,000 annually said that at least 25% of the population was gay, and 47% of those with no more than a high school education. 43% of Democrats versus 24% of Republicans got the question wildly wrong.

In general, people are terrible at estimating or remembering demographic statistics. A 2001 Gallup survey, right after the release of 2000 Census results, found that the average American estimated that 33% of the population was black and 29% were Hispanic. That adds up to 62%, but who's counting? Not most people.

In that 2001 survey, nonwhites estimated that 40% of the population was black and 35% was Hispanic (adding up to 75%). In contrast, people claiming postgraduate degrees estimated that 25% were black and 24% Hispanic (only about double the Census numbers), which proves the value of advanced education."



 The op/ed page of yesterday's local rag noted that our utility company, a well-run organization with a penchant for developing alternative sources of power, would install solar panels to light a downtown park. These are not your run-of-the-mill static panels, they're axially mounted, so can articulate to capture max sunlight. Pretty nifty.

The utility company will pick up the entire $25k-$30k tab, including the install, operation and maintenance. Sure, they admit this is pocket change for them, it will promote the company and its mandate of developing cleaner energy sources, and they hope the visibility in a prominent location will inspire private enterprise to invest in other similar projects.

On the other hand, estimates are the city will save between $550 and $700 per year in lighting costs. Always cool to save some money, but in this case, the city pays the utility company less because of a system the company installed and paid for. So, by investing in the solar system, the utility actually loses money up front and on an ongoing basis. Sounds like health care economics.

But, let's assume for a minute we don't care about who pays for what and do some math. Rounding for convenience, we have a $30k cost divided by $600/yr in savings, i.e., the breakeven is 50 years.

Whoa! Fifty years! As a guy who learned 'guns and butter' the first day of Econ 101 and has lived by that principle almost religiously ever since, I'm trying to wrap my arms around this.

It's kinda like trying to justify the purchase of a Toyota Prius. No matter what, over the life of most cars, if one buys a vehicle of average cost that gets reasonable mileage, you can't make up the difference in purchase price with the savings from reduced fuel consumption. So, you pay more up front and less in the long run, but your reward is psychic, 'cause overall, you're paying more to get around than in a conventional vehicle.

The state of technology today is such that, two years ago, I turned in my expensive 21mpg leased SUV, bought a low-mileage off-lease 33mpg upscale wagon w/ a certified warranty for less than half the price of a Prius, and haven't looked back. I figure an immediate 50% increase in mileage and concomitant 37% decrease in fuel costs are pretty good returns. Reduces my operating costs and I get to help with the problem of limited oil resources without doubling my cap cost to buy a Prius, which would leave me with much less to blow on other goods and services. So, the choice was a win-win for me and a win for the greater good.

Thinking on, one begins to wonder why we are willing and able to justify spending exorbitant amounts of money on luxury items that are essentially meaningless, when we're not able to justify the same sort of over-expenditure on an item that might actually produce a return of some sort, like the solar install in the park.

Take Rolex watches, for instance. It makes absolutely no sense to me to spend $10k on one of those when it does not tell time one iota better than does a Seiko Premier with a $375 street price. And, I know better to accept the argument that it has an automatic movement [Seiko Premier's kinetic mechanicals are some of the best around for the price], that it's hand-made [Rolex makes a million watches per year. Handmade? Sure, some of their very best are, but these are not all individually hand-crafted items to be sure], or any other of the standard technical arguments.

The truth is, when one buys most any second tier luxury watch, more than half of what one pays for is hype. And good bit of the remainder is simply the jewelry value of the watch.

And, there it is. The whole deal in a nutshell. It's about value. We spend our money on what we value. Some value glitz. Others value cleaner air. Both fair propositions. Frankly, I value a fat bank balance far more than I do stuff. If I'm going to spend, I'd rather spend on seeing some part of the world I haven't seen yet and on making a memory than on hard goods. And, I'm almost always happy to exchange a physical asset for $$$$. Not everyone's built that way, but that's what makes the system work.

What's more is that system is capitalism. Capitalism it isn't about Ayn Rand. It isn't about heroes and villians, nor about big business versus the common man. It isn't about government interference, taxation and sharing the wealth.

Capitalism is about our ability to value the capital we have and exchange it with another for something else we value. A free market enables each of us individually to define what that value is and exchange it unencumbered. It's capitalism that allows us to spend or overspend if we choose, and it's what gives a utility company the ability to spend $30k for a $600 annual return inuring to someone other than itself and a 50 year breakeven if that's what it chooses.

Unfortunately, the simple idea of capitalism is too often intermingled with the ignominious behavior of high-profile market actors and con men, giving the impression the system itself is undesirable or so flawed as to require a heavy hand rather than an invisible one. But that impression is simply misguided.

What's wrong with capitalism is the same thing that's frequently said about democracy……."it's messy." Yeah, it is. And, it's imperfect, but all things considered, it works pretty well and it's just too damn grand for words.

Stefan Jovanovich writes:

In my not so humble opinion, David has explained beautifully why the authors of the Constitution had an explicit prohibition against direct taxes. Allowing the tax code to favor particular transactions over others undermines liberty itself.

Henry Gifford writes:

The numbers in the article are probably not accurate. In my experience, solar electric systems have an ATR (Average Truth Ratio) of about 10. That is, actual payback is about 10 times reported payback.
For panels that do not move to follow the sun, the cost (according to sharpUSA, claimed largest supplier in the US) is about $9 per installed Watt of capacity. What is a Watt of capacity? One Watt at solar noon, less at all other times. Maps of annual noon-equivalent sun hours stopped being published about 30 years ago, but for the 48 states, 1,200 hours per year is a rough optimistic value, yielding about 1,000 hours when losses in wires and electronics are subtracted. Utility companies call one Watt for 1,000 hours a KiloWattHour, and sell it for 9 cents (2007 US average), yielding a 100 year payback.

But, this is not even realistic, as it assumes perfect angle and perfect orientation and zero shading.

Real world, imperfect installations have much longer paybacks.

And, the above figures are for estimated production, with measured production typically at least 20% lower, even if installed perfectly. Finding data on actual measurements is almost impossible.
Some well known and frequently photographed systems had problems being connected, and were never even connected electrically, yet still produce grant money and publicity year in and year out.
Fancy systems that move to track the sun have mostly been abandoned as even more costly and too complicated and unreliable, although the claimed yield is higher.

Back in the real world, solar thermal systems that make some, but not all of a building's domestic (faucet) hot water have much better paybacks, and an ATR of perhaps 3 to 5, although assessing yield is much more complicated, as it requires assumptions regarding hot water use volume and patterns.




 A close friend, a three-time Grammy-nominated jazz artist [twice for best jazz vocalist, once as best jazz arranger], Todd Buffa, has released a new album after a decade-long hiatus from touring and the studio. During that time, he kept busy teaching, adjudicating jazz competitions, writing and singing gigs in local venues. Over the past month or so, we've been working on branding while he readies a second album and contemplates a European tour later in the year.

This first album is a collection of covers of influential jazz and rock artists, including jazz arrangements of a number of songs most of us would find familiar. Bob Dylan's 'All Along the Watchtower', The Zombies 'She's Not There', Brian Wilson's Beach Boys hit 'The Warmth of the Sun', and an arrangement of Otis Blackwell's 'Great Balls of Fire' among others.

Here's a link to the CDBaby download site and to Todd's site.

This is not a solicitation. Would simply appreciate a preview listen and would be happy to have any thoughts or brief review off-list.

Disclosure: Have been helping my friend as an unpaid, unofficial publicist and business consultant. I have no financial interest whatsoever. Just the pleasure of introducing a fine artist to my musically astute friends here known to appreciate same. Enjoy. Many thanks.



 In the summer reading vein, I very much enjoyed Alex Berenson's first novel, The Faithful Spy, with his main character, John Wells. The next two books in the series, The Ghost War and The Silent Man, were very good, too. The next book, The Midnight House was just okay, and Berenson's most recent effort, The Secret Soldier, is unfortunately a failure.

Jim Sogi writes:

My son turned me on to the spy series by Vince Floyd, including Transfer of Power, The Third Option, Extreme Measures. The books are surprising well written current historical fiction with three dimensional characters with full backstories and touching personal details. The bad guys are complex but the series has a decidedly non PC attitude, so that's fair warning. Its good entertainment though and hard to put the books down. Great for airplane or vacation reading. The main character is an assassin but has realistic doubts and feelings. I briefly compared it to Clancy, but it is astonishing how the technology just a decade back seem so archaic and outdated. I have them downloaded to Kindle for iPad.

David Hillman writes:

And given our particular interest in markets here, one might enjoy the David Liss's "Benjamin Weaver" series. Set in early 18th Century London, Weaver is a former pugilist and highwayman come "thief-taker", i.e., private detective. The son of a Jewish Portuguese stock jobber, his cases involve intrigue and deception revolving around the relatively newly formed stock exchanges, combinations, Bank of England and corporate giants of the time.

Liss' has also written "The Coffee Trader", set 50 years before in Amsterdam, the locus of which is cornering the market in the newly discovered "coffee fruit" and "The Whiskey Rebels", set in America just after the revolution focusing on the attempts of those whiskey rebels on the western frontier attempting to bring down Alexander Hamilton and the Bank of the U.S.

Liss began by writing his first Weaver novel, "A Conspiracy of Paper" while a doctoral candidate at Columbia. All are well written and offer looks at finance and markets, many pretty familiar, not to mention murder, a large cast of ne'er-do-wells, prostitutes and a pretty frank look at the cultural and social biases of the time. He even has a Watson-like sidekick for Weaver, Elias Gordon, a likable bounder of a Scottish surgeon given to bleeding and such, who also schools Weaver in scientic method and probability. A lot going on, fun and good stuff.

The Collab writes: 

William Gibson plays with the theme of pattern recognition in his technologically edgy, subversive books. One of the books, in fact,is called "Pattern Recognition." I have devoured all of them as soon as they come out. The newest one, "Zero History," contains the throwaway insight that when/if someone succeeds in aggregating order flow, the market will cease to exist. Hubertus Bigend — not a hero or a bad guy, but rather a nexus — is one of the most fascinating and ambivalent characters in fiction — comfortable with unpredictability, glinting Bertelsmann, Ralph Lauren and Goldman Sachs.



 My home is built on land carved out of what was once a large, hilly, wooded urban park. The property undulates a ways from the back of the house, slopes down about 30', flattens into a glen, then rises to a ridge about 50' in height. The area is populated with tall elms, poplars, birch and ash with a few pines, locusts and other native trees in the mix.

A small herd of about a couple of dozen whitetail deer share these woods with the human residents. The area provides great cover for them. It's also a good source of food, and they forage around the house and surrounding woods most days.

It is well known that deer actively feed in the early morning, at dusk and on moonlit nights. Many evenings around dusk, weather permitting [by that I mean temps > 0 degrees, no rain or blinding snow, and wind less than gale force], I walk out onto the deck to contemplate, drink a glass of wine and/or smoke a good cigar. This is also a perfect time to observe the deer feeding in the woods on shoots and leaves of woody plants which they generally do in groups of about three to six.

Having grown accustomed to humans, they wander the neighborhood, frequently stopping to stare though a kitchen window and regularly can be spied walking single file down the middle of the street without trepidation. But, when feeding, the deer are alert and wary and they move stealthily through the woods, often freezing at unfamiliar or sudden sounds and scents. At times, they'll spook and move with dispatch, covering a great deal of ground very quickly, only to freeze and look around the glen three times. As they feed, they tend to cluster withing a few yards of one another. Safety in numbers, I guess.

Often, one will stray from the group for a while, then others follow and they cluster again. Rarely does one that strays return to the group. It is almost always the other way around, as if the stray was the point man or was scouting the next stop on the buffet. When they move as a group, it is almost always single file. One might characterize the movement of these observed groups as being in fits and starts, and along paths from node to node.

Observing deer in the forest at dusk is not an easy task. If they move quickly, one can hear a rhythmic rustle of leaves and try to use that sound to locate them. Unfortunately, it's not unlike the sound of the gray squirrels frolicking, so one can easily come up with nothing but tree-rats by using that method.

And, deer have evolved to blend into the natural habitat, even in winter when there is no foliage. In color, they are very similar to the gray-brown bark of trees with mossy highlights, making it very difficult to discern the deer among the vegetation. Walking to an observation point, standing very still and staring into and through the stands of trees produces very few observations, even if the deer are in relatively close proximity, so well do they blend in. But, one can increase one's chances if one thinks a little differently.

What I've found works nicely [for me] in locating these particular deer unaided by optics is to look for specific shapes.

The trees in the habitat are strongly vertically oriented, except those that have fallen to the forest floor. Deer, on one hand, have long slender legs that at a distance look very similar to saplings or small diameter tree trunks. In other words, they are vertically oriented and virtually invisible. On the other hand, deer bodies are long, thick and horizontally oriented.

I've found that peering into the woods, focusing on a small section at a time, attempting to distinguish horizontal shapes approximately the size of a medium tree trunk, i.e., a couple of feet in diameter, from the vertical noise is a pretty effective method of finding a deer among the trees. Even though their coloration is nearly identical to the forest of tree bark that surrounds them, while standing, the deer cannot hide their predominantly horizontal bearing. And, except for the few fallen tree trunks, there are far fewer horizontal shapes in these woods than vertical, and virtually none at three to five feet from the ground.

The trick seems to be to focus first on any horizontal shape rather than looking for the complete shape we know to be 'a deer'. The latter offers too much distracting information and angles that more easily blend in to the cover, while the former allows one to drill down to the basic configuration by immediately eliminating a great deal of superfluous data.

Last evening, using this method, it took about 30 seconds to find four feeding deer hidden on the side of the ridge. Thinking through this feeding and discovery technique while watching them feed, I wondered if good market or trading opportunities cluster. Or if they are fluid, moving sometimes with stealth, sometimes with abandon. Or if they hide among lesser opportunities, camouflaged and appearing to be something they're not. Yes to all, I suppose.

But, I wonder if the better question is, when looking for the profitable side of a trade, or the right stock, or the market's path in amongst all the possibilities, we might not be well served as often as not by looking for the horizontal shapes among the vertical.

A couple thoughts before closing;

1. This post is not about deer hunting, about which I know less than zero.

2. BP = d/ [1+ square root of p1/p2], Reilly's Law of Retail Gravitation………..(stats on the table.)

Victor Niederhoffer writes: 

Brilliant post by Hillman. Reminds me of L'Amour's story similar to the godfather Bastian where a master leader of rustlers teaches his son every thing. First thing he has to learn after fixing the faro wheel and shooting straight and of course boxing is to catch a deer by the tail the way Indians do without the deer knowing your there. 

David Hillman writes: 

The Indian way conjures up thoughts of the little guys trying to grab the tail of the flexions, just to get a little piece of the action before the flex notices you're there and kicks you in the face. 



Composing in an art studio, I have tried a few ways of showing music alongside paintings. What I am thinking of for the next occasion in June is to put my music on the wall as flattened scrolls, to be read from left to right.

A notice would tell people to text a code to a number, which would result in them automatically being sent an MMS message inviting them to hear the piece on their phone. This would give an immediate, independent and private experience, preferable to the jukebox programs I have been using till now (which needs me there all the time to tell them what to do), and preferable to giving them links to online sources (in the context of an exhibition).

I have found out how to send music files to phones - the missing link for me is how to set up a service which responds to the person sending a text message code, which is common in business (e.g. talk radio auctions "text your bid to this number . . ." so I wondered if anyone on the List can shed light on how to do it.

Another approach which comes to mind involves those mysterious square boxes which look like Aztek patterns, but which I gather enable a smartphone user to point their device at the pattern and then be directed to a weblink, which I would of course ensure led to music - has anyone information about said patterns (I have only been noticing them for a few months)?

Dylan Distasio comments:

Hi Laurence,

I can't really help with your first question, but I can hopefully point you in the right direction on the second.

The Aztec looking patterns you're referring to are what is known as a 3d barcode. There is pay software that will generate these, but it sounds like for your purposes, this free web barcode generator will work. It lets you enter a URL and will generate the corresponding barcode for you to print, copy, etc. When users scan it with their phone camera and barcode software it will translate back to the url.

Hope that helps!

David Hillman elaborates: 

 Not to nitpick nor be contentious in any way, but to be precise, as I wrote Laurence off list this morning, the Aztec codes, including the QR code to which Dylan refers, are in fact what we in the industry refer to as 2D barcodes, i.e., they're constructed to contain data in the X and Y axes and are read by 'imaging' the code rather than 'scanning' it.

The difference is that, in imaging, an image of a 2D code is taken and decoded into digital data, where as in scanning, light emitted by a laser [typically] is shown onto the code, then reflected back to the scanner, where the difference in the reflectivity between the spaces and bars is measured and decoded.

The more traditional barcodes one sees, e.g., UPC codes found on retail product, are referred to as linear or 1D barcodes, i.e., the data encoded therein can be read only along the x axis by scanning and decoding the variations in the vertical bars and alternating spaces.

One might correctly observe that a linear code has a second dimension. Yes, technically, there is the y axis. But, data cannot be encoded vertically in a linear code, thus, we refer to a code's dimensionality by the number of axes along which data may be endcoded and stored. Think of chess. A traditional board has both an x and a y axis. 3D chess, however, having a z axis as well, is played in 3 dimensions. So it is with barcodes.

In addition, there are 'stacked barcodes' which are in fact a series of linear 1D barcodes stacked upon one another along the y axis presenting the general appearance of a 2D code, when in fact, it is not. Because these are 1D, they can be scanned rather than imaged by passing a laser slowly across the code from top to bottom.

There are indeed 3D barcodes, also called "bumpy barcodes", but those must have dimension beyond the x and y axes, i.e., a z axis. Therefore, for a barcode to be 3D, it must be embossed on [or depressed into] a surface in a process called direct part marking, or DPM, so that all three axes are present. 3D codes are then read by special devices designed to detect variation in height as well as along the horizontal and/or vertical axes.

There is another twist, though, which is the addition of color to a 2D barcode, including the QR of which we speak, which gives that code another dimension, however non-spatial it may be. I believe the use of color on QR codes was pioneered by the Denso Corp. of Japan, but I do not deal with them or their products, so I cannot speak informatively to that technique.

The Aztec code in question was developed in 1995 by Andy Longacre [quite a brilliant fellow, btw, a mathematician and pretty fair operatic singer] of Welch Allyn, a company with which I dealt for many years prior to its being subsumed by Handheld Products and that then by Honeywell a few years back.

That code as well as all other varieties are referred to as 'symbologies' and there are scores, some more or less industry specific, e.g., UPC used in retailing, while others are more widely utilized. The most widely used 2D codes are the 'matrix' codes, but Longacre's code, which is now in the public domain, was one of the first.

The advantage of adding a dimension to a barcode, from 1D to 2D, or from 2D to 3D, is that each added dimension greatly increases the amount of data that can be encoded. For instance, while a 1D code may hold 9 or 10 digits in a horizontal inch or two, a 2D code that requires less real estate than a postage stamp may hold 200 to 300 characters, and a 3D code in the same space may contain thousands of characters.

It is also important to understand that while imagers designed to read 3D and 2D codes can read a 1D, a laser scanner designed to read a 1D linear barcode cannot read a code with more than one dimension. It is critical in designing a system or application to ensure that a proper scanner is employed. The consequences of not doing so should be obvious.

That said, as far as I know, there are no smart phones currently capable of imaging and decoding what we in the industry call a 3D code. Given that new technology is released at the speed of light and I am not a telecom guy, there may well be some of which I am not aware. However, there are many phones very certainly capable of imaging a 2D code, including the one I wear on my belt that sports such an application.

The crux of the issue here is that when planning to use barcodes there are a few things of which one needs to be aware.

1. Barcoding isn't rocket science, but it can be complex and takes expertise to get it right. Seemingly inconsequential factors such as too much ambient light, refraction of reflected light, the angle at which scanners are held, inadequate contrast of the bars and spaces in a code, and near-invisible abrasions among many others can all make the difference between success and failure.

2. There are many people, including trained IT folks and engineers, who think #1 is BS. Among these are the many who call a pro to fix what went wrong when they tried to do it themselves and failed. DIY can be frustrating, not to mention extremely costly.

3. There is much misinformation regarding barcoding out there and the lingo is often misused, even by some quasi-professionals.

Otherwise, it appears Dylan has done his homework and the online barcode generator he has referred looks as if it may work nicely for Laurence given one's understanding of what he wishes to do. The only argument I have with the reference is the use of the term 3D barcode instead of 2D to refer to QR, which one sees referenced incorrectly on any number of websites, but it is still incorrect according to AIM [Association for Automatic Identification and Mobility, the preeminent trade organization] standards.

It may seem like a small point, but I make it given the 3 above items and in the hope of saving potential confusion and frustration in Laurence's endeavour, which, FWIW, I happen to think is brilliantly conceived and is something I'd love to experience.

One other thing learned in almost 25 years of doing this. Paraphrasing Dave [Richard Dreyfuss] Whiteman in 'Down and Out in Beverly Hills' speaking about owing his wealth to manufacturing coat hangers……barcoding ain't sexy, but somebody's gotta do it and it keeps a nice roof overhead.

Still, there are wistful moments during which I think it might be a bit more fun and exciting to be an international jewel thief. It's always about risk/reward, n'est-ce pas?



On the subject of parenting, one aspect that has forcibly struck me (very forcibly in fact!) is the opportunity for personal development. I've found that my time management and organisational skills have improved hugely since becoming a father, not to mention patience. One specific aspect may be particularly interesting from a speculative/chess point of view, the need to constantly improvise new plans and adjust my 'fatherhood game' according to constantly changing situations. I don't think it works to go in with an overly dogmatic and detailed plan, instead I've found it better to improvise within the overall mission statement of fostering junior's development.

This is certainly highly analogous to chess in which multiple adjustments are vital. And I wonder if this is also the experience of speculator parents.

David Hillman writes:

This is certainly true in traditional business and strategic planning. Basically, one creates a mission and vision, sticks a stake in the ground out on the planning horizon, develops goals and objectives, creates action items to achieve them, and proceeds. Then, at specific points or at random, one reviews and analyses data, i.e., produces feedback, measures progress against benchmarks, uses that info to re-evalute one's plan, then adjusts accordingly.

From the onset, we know the initial plan is pretty much smoke and mirrors, a wish list, as it were, as none of us knows exactly what the future holds or if the plan will be successful as written. In fact, if we're smart, we expect it won't be. It's essentially a road map, and as we know, Rand McNally doesn't illustrate every pothole in the pavement or provide up-to-the-minute traffic and weather reports in its road atlases. We only know about those things when we buckle up and hit the road, then we adapt our route and driving as necessary. If we do this successfully, we reach our destination, but it may be by a different route or in a different time frame.

Much as I've never seen a kid that came an instruction manual, I've never seen a kid that came with a proforma [if they did, perhaps people would be more cautious in considering parenthood], but I'm kinda thinking that, like applying geophysical models to finance, the basic strategic planning framework is pretty much transferrable across enterprises and that would include parenting.



 My friend Kim sent me this article "Climate of Hate" by Paul Krugman. It got me thinking.  Why is it every 'news' outlet seeks out the opinion and commentary of the then current media darling on each and every topic, regardless of that darling's expertise and/or knowledge thereof?

One should be perfectly happy to include Krugman's thoughts on 'the economy' in the body of economic literature one reviews/studies, whether one is aligned with his thinking on same or not. He has exhibited his expertise in the discipline and, at the very least, he provides a legitimate counterpoint.But, when exactly did Krugman become a learned sociologist, psychologist, political scientist, etc? Not that he's not entitled to personal opinion. Certainly, he is, as much as are the rest of us. But why should any of us find his opinion on a topic in which he has produced no body of scholarly or practical work any more credible or influential than that of anyone else? If we do, shame on us for being influenced.

Why is Sean Penn asked for his thoughts on Cuban relations? It's pretty clear he has demonstrated his stellar acting abilities. But, does activism and meeting with dictators for a couple of hours here and there constitute expertise? Is there no one with greater insight into these matters?

Why are/were Sornette's and Mandelbrot's thoughts on finance sought out? Is there no financier more credible? [Ok, this is an attempt at levity. Everyone knows that after Stephen Hawking, these guys are/were the smartest guys on the planet and everything they say/said about anything should be taken as gospel.]

It's a given that many are quite broad and reasonably deep in a number of subjects. But those who are generally have a record of clear accomplishments in, not just an abiding interest in, more than one discipline. Elizabeth Brown Pryor, Ken Dryden and Wayne Rogers [whose thoughts might very well have helped prevent what led to the recent recession, if only Congress had heeded his 1991 testimony urging it not to repeal Glass-Steagall] are a few that come to mind.

The point is, as much as we ought take great care in who we nominate and elect to public office, we ought also take great care in evaluating opinion pieces, and we ought always consider the source. Not that an accomplished individual cannot have a reasonable thought regarding a discipline or event outside of one's area of expertise. They can, just as much as they are entitled to express them and to be published. But, one might think that authority should be earned, not bestowed, and that credibility requires a greater standard than fleeting popularity with the media or general public.

I, myself, have no idea what motivated this gunman to shoot innocent people in Tucson. We may never know. But, if we do, it likely will be Mr. Loughner himself, not Mr. Krugman, nor Glenn Beck, who tells us what that was.



UPDATE 1/31/2011:

Contestants Summary:

- 31 Spec-listers contributed to the 2011 Investment Contest with "specific" recommendations.

- Average 4 recommendations per person (mean of 4.2, median and mode of 4) came in.

- 6 contestants gave only 1 recommendation, 3 gave only 2 and thus 9 out of the total 31 have NOT given the minimum 3 recommendations needed as per the Rules clarified by Ken Drees.

- The Hall of Fame entry for the largest number of ideas (did someone say diversification?) is from Tim Melvin, close on whose heels are J. T. Holley with 11 and Ken Drees with 10.

- The most creatively expressed entry of course has come from Rocky Humbert.

- At this moment 17 out of 31 contestants are in positive performance territory, 14 are in negative performance territory.

- Barring a major outlier of a 112.90% loss on the Option Strategy of Phil McDonnell (not accounting for the margin required for short options, but just taking the ratio of initial cash inflow to outflow):

- Average of all Individual contestant returns is -2.54% and the Standard Deviation of returns achieved by all contestants is 5.39.

- Biggest Gainer at this point is Jared Albert (with his all in single stock bet on REFR) with a 22.87% gain. The only contestant a Z score greater than 2 ( His is actually 4.72 !!)

- Biggest Loser at this point (barring the Giga-leveraged position of Mr. McDonnell) is Ken Drees at -10.36% with a Z Score that is at -1.45.

- Wildcards have not been accounted for as at this point, with wide
deviations of recommendations from the rules specified by most. While 9
participants have less than 3 recommendations, those with more than 4
include several who have not chosen to specify which 3 are their primary recommends. Without clarity on a universal measurability wildcard accounting is on hold. Those making more than 1 recommendations would find that their aggregate average return is derived by taking a sum of returns of individual positions divided by the number of recommends. Unless specified by any person that positions are taken in a specific ratio its equal sums invested approach.

Contracts Summary:

- A total of 109 contracts are utilized by the contestants across bonds, equity indices (Nikkei, Kenyan Stocks included too!), commodities, currencies and individual stock positions.

- The ratio of Shorts to Longs across all recommendations, irrespective of the type of contract (call, put, bearish ETF etc.) is 4 SELL orders Vs 9 Buy Orders. Not inferring that this list is more used to pressing the Buy Button. Just an occurence on this instance.

- The Average Return, so far, on the 109 contracts utilized is -1.26% with a Standard Deviation of 12.42%. Median Return is 0.39% and the mode of Returns of all contracts used is 0.

- The Highest Return is on MICRON TECH at 28.09, if one does not account for the July 2011 Put 25 strike on SLV utilized by Phil McDonnell.

- The Lowest Return is on IPTV at -50%, if one does not account for the Jan 2012 Call 40 Strike on SLV utilized by Phil McDonnell.

- Only Two contracts are having a greater than 2 z score and only 3 contracts are having a less than -2 Z score.

Victor Niederhoffer wrote:

One is constantly amazed at the sagacity in their fields of our fellow specs. My goodness, there's hardly a field that one of us doesn't know about from my own hard ball squash rackets to the space advertising or our President, from surfing to astronomy. We certainly have a wide range.

May I suggest without violating our mandate that we consider our best sagacities as to the best ways to make a profit in the next year of 2011.

My best trades always start with assuming that whatever didn't work the most last year will work the best this year, and whatever worked the best last year will work the worst this year. I'd be bullish on bonds and bearish on stocks, bullish on Japan and bearish on US stocks.

I'd bet against the banks because Ron Paul is going to be watching them and the cronies in the institutions will not be able to transfer as much resources as they've given them in the past 2 years which has to be much greater in value than their total market value.

I keep wondering what investments I should make based on the hobo's visit and I guess it has to be generic drugs and foods.

What ideas do you have for 2011 that might be profitable? To make it interesting I'll give a prize of 2500 to the best forecast, based on results as of the end of 2011.

David Hillman writes: 

"I do know that a sagging Market keeps my units from being full."

One would suggest it is a sagging 'economy' contributing to vacancy, not a sagging 'market'. There is a difference. 

Ken Drees, appointed moderator of the contest, clearly states the new rules of the game:

 1. Submissions for contest entries must be made on the last two days of 2010, December 30th or 31st.
2. Entries need to be labeled in subject line as "2011 contest investment prediction picks" or something very close so that we know this is your official entry.
3. Entries need 3 predictions and 1 wildcard trade prediction (anything goes on the wildcard).

4. Extra predictions may be submitted and will be judged as extra credit. This will not detract from the main predictions and may or may not be judged at all.

5. Extra predictions will be looked on as bravado– if you've got it then flaunt it. It may pay off or you may give the judge a sour palate.

The desire to have entries coming in at years end is to ensure that you have the best data as to year end 2010 and that you don't ignite someone else to your wisdom.

Market direction picks are wanted:

Examples: 30 year treasury yield will fall to 3% in 2011, S&P 500 will hit "x" by June, and then by "y" by December 2011.

The more exact your prediction is, the more weight will be given. The more exact your prediction, the more weight you will receive if right and thus the more weight you will receive if wrong. If you predict that copper will hit 5.00 dollars in 2011 and it does you will be given a great score, if you say that copper will hit 5.00 dollars in march and then it will decline to4.35 and so forth you will be judged all along that prediction and will receive extra weight good or bad. You decide on how detailed your submission is structured.

Will you try to be precise (maybe foolhardy) and go for the glory? Or will you play it safe and not stand out from the crowd? It is a doubled edged sword so its best to be the one handed market prognosticator and make your best predictions. Pretend these predictions are some pearls that you would give to a close friend or relative. You may actually help a speclister to make some money by giving up a pearl, if that speclister so desires to act upon a contest–G-d help him or her.

Markets can be currency, stocks, bonds, commodities, etc. Single stock picks can be given for the one wildcard trade prediction. If you give multiple stock picks for the wildcard then they will all be judged and in the spirit of giving a friend a pearl–lets make it "the best of the best, not one of six".

All judgments are the Chair's. The Chair will make final determination of the winner. Entries received with less than 3 market predictions will not be considered. Entries received without a wildcard will be considered.The spirit of the contest is "Give us something we can use".

Bill Rafter adds: 

Suggestion for contest:

"Static" entry: A collection of up to 10 assets which will be entered on the initial date (say 12/31/2010) and will be unaltered until the end data (i.e. 12/31/2011). The assets could be a compilation of longs and shorts, or could have the 10 slots entirely filled with one asset (e.g. gold). The assets could also be a yield and a fixed rate; that is one could go long the 10-year yield and short a fixed yield such as 3 percent. This latter item will accommodate those who want to enter a prediction but are unsure which asset to enter as many are unfamiliar with the various bond coupons.

"Rebalanced" entry: A collection of up to 10 assets which will be rebalanced on the last trading day of each month. Although the assets will remain unchanged, their percentage of the portfolio will change. This is to accommodate those risk-averse entrants employing a mean-reversion strategy.

Both Static and Rebalanced entries will be judged on a reward-to-risk basis. That is, the return achieved at the end of the year, divided by the maximum drawdown (percentage) one had to endure to achieve that return.

Not sure how to handle other prognostications such as "Famous female singer revealed to be man." But I doubt such entries have financial benefits.

I'm willing to be an arbiter who would do the rebalancing if necessary. I am not willing to prove or disprove the alleged cross-dressers.

Ralph Vince writes:

A very low volume bar on the weekly (likely, the first of two consecutive) after a respectable run-up, the backdrop of rates having risen in recent weeks, breadth having topped out and receding - and a lunar eclipse on the very night of the Winter Solstice.

If I were a Roman General I would take that as a sign to sit for next few months and do nothing.

I'm going to sit and do nothing.

Sounds like an interim top in an otherwise bullish, long-term backdrop.

Gordon Haave writes: 

 My three predictions:

Gold/ silver ratio falls below 25 Kenyan stock market outperforms US by more than 10%

Dollar ends 10% stronger compared to euro

All are actionable predictions.

Steve Ellison writes:

I did many regressions looking for factors that might predict a year-ahead return for the S&P 500. A few factors are at extreme values at the end of 2010.

The US 10-year Treasury bond yield at 3.37% is the second-lowest end-of year yield in the last 50 years. The S&P 500 contract is in backwardation with the front contract at a 0.4% premium to the next contract back, the second highest year-end premium in the 29 years of the futures.

Unfortunately, neither of those factors has much correlation with the price change in the S&P 500 the following year. Here are a few that do.

The yield curve (10-year yield minus 3-month yield) is in the top 10% of its last 50 year-end values. In the last 30 years, the yield curve has been positively correlated with year-ahead changes in the S&P 500, with a t score of 2.17 and an R squared of 0.143.

The US unemployment rate at 9.8% is the third highest in the past 60 years. In the last 30 years, the unemployment rate has been positively correlated with year-ahead changes in the S&P 500, with a t score of 0.90 and an R squared of 0.028.

In a variation of the technique used by the Yale permabear, I calculated the S&P 500 earnings/price ratio using 5-year trailing earnings. I get an annualized earnings yield of 4.6%. In the last 18 years, this ratio has been positively correlated with year-ahead changes in the S&P 500, with a t score of 0.92 and an R squared of

Finally, there is a negative correlation between the 30-year S&P 500 change and the year-ahead change, with a t score of -2.28 and an R squared of 0.094. The S&P 500 index price is 9.27 times its price of 30 years ago. The median year-end price in the last 52 years was 6.65 times the price 30 years earlier.

Using the predicted values from each of the regressions, and weighting the predictions by the R squared values, I get an overall prediction for an 11.8% increase in the S&P 500 in 2011. With an 11.8% increase, SPY would close 2011 at 140.52.

Factor                  Prediction      t       N    R sq
US Treasury yield curve      1.162    2.17      30   0.143
30-year change               1.052   -2.28      52   0.094
Trailing 5-year E/P          1.104    0.92      18   0.050
US unemployment rate         1.153    0.90      30   0.028

Weighted total               1.118
SPY 12/30/10               125.72
Predicted SPY 12/30/11     140.52

Jan-Petter Janssen writes: 

PREDICTION I - The Inconvenient Truth The poorest one or two billion on this planet have had enough of increasing food prices. Riots and civil unrest force governments to ban exports, and they start importing at any cost. World trade collapses. Manufacturers of farm equipment will do extremely well. Buy the most undervalued producer you can find. My bet is
* Kverneland (Yahoo: KVE.OL). NOK 6.50 per share today. At least NOK 30 on Dec 31th 2011.

PREDICTION II - The Ultimate Bubble The US and many EU nations hold enormous gold reserves. E.g. both Italy and France hold the equivalent of the annual world production. The gold meme changes from an inflation hedge / return to the gold standard to (a potential) over-supply from the selling of indebted nations. I don't see the bubble bursting quite yet, but
* Short gold if it hits $2,000 per ounce and buy back at $400.

PREDICTION III - The Status Quo Asia's ace is cheap labor. The US' recent winning card is cheap energy through natural gas. This will not change in 2011. Henry Hub Feb 2011 currently trades at $4.34 per MMBtu. Feb 2012 is at $5.14. I would
* Short the Feb 2012 contract and buy back on the last trading day of 2011.

Vince Fulco predicts:

 This is strictly an old school, fundamental equity call as my crystal ball for the indices 12 months out is necessarily foggy. My recommendation is BP equity primarily for the reasons I gave earlier in the year on June 5th (stock closed Friday, June 4th @ $37.16, currently $43.53). It faced a hellish downdraft post my mention for consideration, primarily due to the intensification of news flow and legal unknowns (Rocky articulated these well). Also although the capital structure arb boys savaged the equity (to 28ish!), it is up nicely to year's end if one held on and averaged in with wide scales given the heightened vol.

Additional points/guesstimates are:

1) If 2010 was annus horribilis, 2011 with be annus recuperato. A chastened mgmt who have articulated they'll run things more conservatively will have a lot to prove to stakeholders.

2) Dividend to be re-instated to some level probably by the end of the second quarter. I am guessing $1.00 annualized per ADS as a start (or
2.29%), this should bring in the index hugging funds with mandates for only holding dividend payers. There is a small chance for a 1x special dividend later in the year.

3) Crude continues to be in a state of significant profitability for the majors in the short term. It would appear finding costs are creeping however.

4) The lawsuits and additional recoveries to be extracted from the settlement fund and company directly have very long tails, on the order of 10 years.

5) The company seems fully committed to sloughing off tertiary assets to build up its liquid balance sheet. Debt to total capital remains relatively low and manageable.

6) The stock remains at a significant discount to its better-of breed peers (EV/normalized EBITDA, Cash Flow, etc) and rightly so but I am betting the discount should narrow back to near historical levels.

Potential negatives:

1) The company and govt have been vastly understating the remaining fuel amounts and effects. Release of independent data intensifies demands for a much larger payout by the company closer to the highest end estimates of $50-80B.

2) It experiences another similar event of smaller magnitude which continues to sully the company's weakened reputation.

3) China admits to and begins to fear rampant inflation, puts the kabosh to the (global) economy and crude has a meaningful decline the likes of which we haven't seen in a few years.

4) Congress freaks at a >$100-120 price for crude and actually institutes an "excess profits" tax. Less likely with the GOP coming in.

A buy at this level would be for an unleveraged, diversified, longer term acct which I have it in. However, I am willing to hold the full year or +30% total return (including special dividend) from the closing price of $43.53 @ 12/30/10, whichever comes first. Like a good sellside recommendation, I believe the stock has downside of around 20% (don't they all when recommended!?!) where I would consider another long entry depending on circumstances (not pertinent to the contest).

Mr. Albert enters: 

 Single pick stock ticker is REFR

The only way this gold chain wearing day trader has a chance against all the right tail brain power on the list is with one high risk/high reward put it all on red kind of micro cap.

Basic story is this company owns all the patents to what will become the standard for switchable glazings (SPD smart glass). It's taken roughly 50 years of development to get a commercialized product, and next year Mercedes will almost without doubt use SPD in the 2012 SLK (press launch 1/29/11 public launch at the Geneva auto show in march 2011).

Once MB validate the tech, mass adoption and revenues will follow etc and this 'show me' stock will rocket to the moon.

Dan Grossman writes:

Trying to comply with and adapt the complex contest rules (which most others don't seem to be following in any event) to my areas of stock market interest:

1. The S&P will be down in the 1st qtr, and at some point in the qtr will fall at least

2. For takeover investors: GENZ will (finally) make a deal to be acquired in the 1st qtr for a value of at least $80; and AMRN after completion of its ANCHOR trial will make a deal to be acquired for a price of at least $8.

3. For conservative investors: Low multiple small caps HELE and DFG will be up a combined average of 20% by the end of the year.

For my single stock pick, I am something of a johnny-one-note: MNTA will be up lots during the year — if I have to pick a specific amount, I'd say at least 70%. (My prior legal predictions on this stock have proved correct but the stock price has not appropriately reflected same.)

Finally, if I win the contest (which I think is fairly likely), I will donate the prize to a free market or libertarian charity. I don't see why Victor should have to subsidize this distinguished group that could all well afford an contest entrance fee to more equitably finance the prize.

Best to all for the New Year,


Gary Rogan writes:

 1. S&P 500 will rise 3% by April and then fall 12% from the peak by the end of the year.
2. 30 year treasury yields will rise to 5% by March and 6% by year end.
3. Gold will hit 1450 by April, will fall to 1100 by September and rise to 1550 by year end.

Wildcard: Short Netflix.

Jack Tierney, President of the Old Speculator's Club, writes: 

Equal Amounts in:

TBT (short long bonds)
YCS (short Yen)
GRU (Long Grains - heavy on wheat)
CHK (Long NG - takeover)

(Wild Card)
BONXF.PK or BTR.V (Long junior gold)

12/30 closing prices (in order):


Bill Rafter writes:

Two entries:

Buy: FXP and IRWD

Hold for the entire year.

William Weaver writes:

 For Returns: Long XIV January 21st through year end

For Return/Risk: Long XIV*.30 and Long VXZ*.70 from close today

I hope everyone has enjoyed a very merry holiday season, and to all I wish a wonderful New Year.



Ken Drees writes:

Yes, they have been going up, but I am going contrary contrary here and going with the trends.

1. Silver: buy day 1 of trading at any price via the following vehicles: paas, slw, exk, hl –25% each for 100% When silver hits 39/ounce, sell 10% of holdings, when silver hits 44/ounce sell 30% of holdings, when silver hits 49 sell 60%–hold rest (divide into 4 parts) and sell each tranche every 5 dollars up till gone–54/oz, 59, 64, 69.

2. Buy GDXJ day 1 (junior gold miner etf)—rotation down from majors to juniors with a positive gold backdrop. HOLD ALL YEAR.

3. USO. Buy day 1 then do—sell 25% at 119/bbl oil, sell 80% at 148/bbl, sell whats left at 179/bbl or 139/bbl (whichever comes first after 148)


Happy New Year!

Ken Drees———keepin it real.

Sam Eisenstadt forecasts:

My forecast for the S&P 500 for the year ending Dec 31, 2011;

S&P 500       1410

Anton Johnson writes: 

Equal amounts allocated to:

EDZ Short moc 1-21-2011, buy to cover at 50% gain, or moc 12/30/2011

VXX Short moc 1-21-2011, buy to cover moc 12/30/2011

UBT Short moo 1-3-2011, buy to cover moc 12/30/2011

Scott Brooks picks: 


Evenly between the 4 (25% each)

Sushil Kedia predicts:


1) Gold
2) Copper
3) Japanese Yen

30% moves approximately in each, within 2011.

Rocky Humbert writes:

(There was no mention nor requirement that my 2011 prediction had to be in English. Here is my submission.) … Happy New Year, Rocky

Sa aking mahal na kaibigan: Sa haba ng 2010, ako na ibinigay ng ilang mga ideya trading na nagtrabaho sa labas magnificently, at ng ilang mga ideya na hindi na kaya malaki. May ay wala nakapagtataka tungkol sa isang hula taon dulo, at kung ikaw ay maaaring isalin ito talata, ikaw ay malamang na gawin ang mas mahusay na paggawa ng iyong sariling pananaliksik kaysa sa pakikinig sa mga kalokohan na ako at ang iba pa ay magbigay. Ang susi sa tagumpay sa 2011 ay ang parehong bilang ito ay palaging (tulad ng ipinaliwanag sa pamamagitan ng G. Ed Seykota), sa makatuwid: 1) Trade sa mga kalakaran. 2) Ride winners at losers hiwa. 3) Pamahalaan ang panganib. 4) Panatilihin ang isip at diwa malinaw. Upang kung saan gusto ko idagdag, fundamentals talaga bagay, at kung ito ay hindi magkaroon ng kahulugan, ito ay hindi magkaroon ng kahulugan, at diyan ay wala lalo na pinakinabangang tungkol sa pagiging isang contrarian bilang ang pinagkasunduan ay karaniwang karapatan maliban sa paggawa sa mga puntos. (Tandaan na ito ay pinagkasunduan na ang araw ay babangon na bukas, na quote Seth Klarman!) Pagbati para sa isang malusog na masaya at pinakinabangang 2011, at siguraduhin na basahin kung saan ako magsulat sa Ingles ngunit ang aking mga saloobin ay walang malinaw kaysa talata na ito, ngunit inaasahan namin na ito ay mas kapaki-pakinabang.

Dylan Distasio comments: 

Gawin mo magsalita tagalog?

Gary Rogan writes:

After a worthy challenge, Mr. Rogan is now also a master of Google Translate, and a discoverer of an exciting fact that Google Translate calls Tagalog "Filipino". This was a difficult obstacle for Mr. Rogan to overcome, but he persevered and here's Rocky's prediction in English (sort of):

My dear friend: Over the course of 2010, I provided some trading ideas worked out magnificently, and some ideas that are not so great. There is nothing magical about a forecast year end, and if you can translate this paragraph, you will probably do better doing your own research rather than listening to the nonsense that I and others will give. The key to success in 2011 is the same as it always has (as explained by Mr. Ed Seykota), namely: 1) Trade with the trend.

2) Ride cut winners and losers. 3) Manage risk. 4) Keep the mind and spirit clear. To which I would add, fundamentals really matter, and if it does not make sense, it does not make sense, and there is nothing particularly profitable about being a contrarian as the consensus is usually right but turning points. (Note that it is agreed that the sun will rise tomorrow, to quote Seth Klarman) Best wishes for a happy healthy and profitable 2011, and be sure to read which I write in English but my attitude is nothing clearer than this paragraph, but hopefully it is more useful.

Tim Melvin writes:

Ah the years end prediction exercise. It is of course a mostly useless exercise since not a one of us can predict what shocks, positive or negative, the world and the markets could see in 2011. I find it crack up laugh out loud funny that some pundits come out and offer up earnings estimates, GDP growth assumptions and interest rate guesses to give a precise level for the year end S&P 500 price. You might as well numbers out of a bag and rearrange them by lottery to come up with a year end number. In a world where we are fighting two wars, a hostile government holds the majority of our debt and several sovereign nations continually teeter on the edge of oblivion it's pretty much ridiculous to assume what could happen in the year ahead. Having said that, as my son's favorite WWE wrestler when he was a little guy used to say "It's time to play the game!"

Ill start with bonds. I have owned puts on the long term treasury market for two years now. I gave some back in 2010 after a huge gain in 2009 but am still slightly ahead. Ill roll the position forward and buy January 2012 puts and stay short. When I look at bods I hear some folks talking about rising basic commodity prices and worrying about inflation. They are of course correct. This is happening. I hear some other really smart folks talking of weak real estate, high jobless rates and the potential for falling back into recession. Naturally, they are also exactly correct. So I will predict the one thing no one else is. We are on the verge of good old fashioned 1970s style stagflation. Commodity and basic needs prices will accelerate as QE2 has at least stimulated demand form emerging markets by allowing these wonderful credits to borrow money cheaper than a school teacher with a 750 FICO score. Binds go lower as rates spike. Our economy and balance sheet are a mess and we have governments run by men in tin hats lecturing us on fiscal responsibility. How low will they go Tim? How the hell do I know? I just think they go lower by enough for me to profit.

 Nor can I tell you where the stock market will go this year. I suspect we have had it too good for too long for no reason so I think we get at least one spectacular gut wrenching, vomit inducing sell off during the year. Much as lower than expected profits exposed the silly valuations of the new paradigm stocks I think that the darling group, retail , will spark a sell-off in the stock market this year. Sales will be up a little bit but except for Tiffany's (TIF) and that ilk margins are horrific. Discounting started early this holiday and grew from there. They will get steeper now that that Santa Claus has given back my credit card and returned to the great white north. The earnings season will see a lot of missed estimates and lowered forecasts and that could well pop the bubble. Once it starts the HFT boys and girls should make sure it goes lower than anyone expects.

Here's the thing about my prediction. It is no better than anyone else's. In other words I am talking my book and predicting what I hope will happen. Having learned this lesson over the years I have learned that when it comes to market timing and market direction I am probably the dumbest guy in the room. Because of that I have trained myself to always buy the stuff that's too cheap not to own and hold it regardless. After the rally since September truly cheap stuff is a little scarce on the ground but I have found enough to be about 40% long going into the year. I have a watch list as long as a taller persons right arm but most of it hover above truly cheap.

Here is what I own going into the year and think is still cheap enough to buy. I like Winn Dixie (WINN). The grocery business sucks right now. Wal mart has crushed margins industry wide. That aside WINN trades at 60% of tangible book value and at some point their 514 stores in the Southeast will attract attention from investors. A takeover here would be less than shocking. I will add Presidential Life (PLFE) to the list. This stock is also at 60% of tangible book and I expect to see a lot of M&A activity in the insurance sector this year and this should raise valuations across the board. I like Miller Petroleum (MILL) with their drilling presence in Alaska and the shale field soft Tennessee. This one trades at 70% of tangible book. Ill add Imperial Sugar (IPSU), Syms (SYMS) and Micron tech (MU) and Avatar Holdings (AVTR) to my list of cheapies and move on for now.

I am going to start building my small bank portfolio this year. Eventually this group becomes the F-you walk away money trade of the decade. As real estate losses work through the balance sheet and some measure of stability returns to the financial system, perhaps toward the end of the year the small baileys savings and loan type banks should start to recover. We will also see a mind blowing M&A wave as larger banks look to gain not just market share but healthy assets to put on the books. Right now these names trade at a fraction of tangible book value. They will reach a multiple of that in a recovery or takeover scenario. Right now I own shares of Shore Bancshares (SHBI), a local bank trading at 80% of book value and a reasonably healthy loan portfolio. I have some other mini microcap banks as well that shall remain my little secret and not used to figure how my predictions work out. I mention them because if you have a mini micro bank in your community you should go meet then bankers, review the books and consider investing if it trades below the magical tangible book value and has excess capital. Flagstar Bancorp(FBC) is my super long shot undated call option n the economy and real estate markets.

I will also play the thrift conversion game heavily this year. With the elimination of the Office of Thrift Services under the new financial regulation many of the benefits of being a private or mutual thrift are going away. There are a ton of mutual savings banks that will now convert to publicly traded banks. A lot of these deals will be priced below the pro forma book value that is created by adding all that lovely IPO cash to the balance sheet without a corresponding increase in the shares outstanding. Right now I have Fox Chase Bancorp (FXCB) and Capital Federal Financial(CFFN). There will be more. Deals are happening every day right now and again I would keep an eye out for local deals that you can take advantage of in the next few months.

I also think that 2011 will be the year of the activist investor. These folks took a beating since 2007 but this should be their year. There is a ton of cash on corporate balance sheets but lots of underperformance in the current economic environment. We will see activist drive takeovers, restructures, and special dividends this year in my opinion. Recent filings of interest include strong activist positions in Surmodics(SRDX), SeaChange International (SEAC), and Energy Solutions. Tracking activist portfolios and 13D filings should be a very profitable activity in 2011.

I have been looking at some interesting new stuff with options as well I am not going to give most of it away just yet but I ll give you one stimulated by a recent list discussion. H and R Black is highly likely to go into a private equity portfolio next year. Management has made every mistake you can make and the loss of RALs is a big problem for the company. However the brand has real value. I do not want town the stock just yet but I like the idea of selling the January 2012 at $.70 to $.75. If you cash secure the put it's a 10% or so return if the stock stays above the strike. If it falls below I' ll be happy to own the stock with a 6 handle net. Back in 2008 everyone anticipated a huge default wave to hit the high yield market. Thanks to federal stimulus money pumping programs it did not happen. However in the spirit of sell the dog food the dog will eat a given moment the hedge fund world raised an enormous amount od distressed debt money. Thanks to this high yield spreads are far too low. CCC paper in particular is priced at absurd levels. These things trade like money good paper and much of it is not. Extend and pretend has helped but if the economy stays weak and interest rates rise rolling over the tsunami f paper due over the next few years becomes nigh onto impossible. I am going take small position in puts on the various high yield ETFs. If I am right they will explode when that market implodes. Continuing to talk my book I hope this happens. Among my nightly prayers is "Please God just one more two year period of asset rich companies with current payments having bonds trade below recovery value and I promise not to piss the money away this time. Amen.

PS. If you add in risk arbitrage spreads of 30% annualized returns along with this I would not object. Love, Tim.

I can't tell you what the markets will do. I do know that I want to own some safe and cheap stocks, some well capitalized small banks trading below book and participate in activist situation. I will be under invested in equities going into the year hoping my watch list becomes my buy list in market stumble. I will have put positions on long T-Bonds and high yield hoping for a large asymmetrical payoff.

Other than that I am clueless.

Kim Zussman comments: 

Does anyone else think this year is harder than usual to forecast? Is it better now to forecast based on market fundamentals or mass psychology? We are at a two year high in stocks, after a huge rally off the '09 bottom that followed through this year. One can make compelling arguments for next year to decline (best case scenarios already discounted, prior big declines followed by others, volatility low, house prices still too high, FED out of tools, gov debt/gdp, Roubini says so, benefits to wall st not main st, persistent high unemployment, Year-to-year there is no significant relationship, but there is a weak down tendency after two consecutive up years. ). And compelling arguments for up as well (crash-fears cooling, short MA's > long MA's, retail investors and much cash still on sidelines, tax-cut extended, employee social security lowered, earnings increasing, GDP increasing, Tepper and Goldman say so, FED herding into risk assets, benefits to wall st not main st, employment starting to increase).

Is the level of government market-intervention effective, sustainable, or really that unusual? The FED looks to be avoiding Japan-style deflation at all costs, and has a better tool in the dollar. A bond yields decline would help growth and reduce deflation risk. Increasing yields would be expected with increasing inflation; bad for growth but welcomed by retiring boomers looking for fixed income. Will Obamacare be challenged or defanged by states or in the supreme court? Will 2011 be the year of the muni-bubble pop?

A ball of confusion!

4 picks in equal proportion:

long XLV (health care etf; underperformed last year)

long CMF (Cali muni bond fund; fears over-wrought, investors still need tax-free yield)

short GLD (looks like a bubble and who needs gold anyway)

short IEF (7-10Y treasuries; near multi-year high/QE2 is weaker than vigilantism)

Alan Millhone writes:

 Hello everyone,

I note discussion over the rules etc. Then you have a fellow like myself who has never bought or sold through the Market a single share.

For myself I will stick with what I know a little something. No, not Checkers —

Rental property. I have some empty units and beginning to rent one or two of late to increase my bottom line.

I will not venture into areas I know little or nothing and will stay the course in 2011 with what I am comfortable.

Happy New Year and good health,



Jay Pasch predicts: 

2010 will close below SP futures 1255.

Buy-and-holders will be sorely disappointed as 2011 presents itself as a whip-saw year.

99% of the bullish prognosticators will eat crow except for the few lonely that called for a tempered intra-year high of ~ SPX 1300.

SPX will test 1130 by April 15 with a new recovery high as high as 1300 by the end of July.

SPX 1300 will fail with new 2011 low of 1050 before ending the year right about where it started.

The Midwest will continue to supply the country with good-natured humble stock, relatively speaking.

Chris Tucker enters: 

Buy and Hold


Wildcard:  Buy and Hold AVAV

Gibbons Burke comments: 

Mr. Ed Seykota once outlined for me the four essential rules of trading:

1) The trend is your friend (till it bends when it ends.)

2) Ride your winners.

3) Cut your losses short.

4) Keep the size of your bet small.

Then there are the "special" rules:

5) Follow all the rules.

and for masters of the game:

6) Know when to break rule #5

A prosperous and joy-filled New Year to everyone.



John Floyd writes:

In no particular order with target prices to be reached at some point in 2011:

1) Short the Australian Dollar:current 1.0220, target price .8000

2) Short the Euro: current 1.3375, target price 1.00

3) Short European Bank Stocks, can use BEBANKS index: current 107.40, target 70

A Mr. Krisrock predicts: 

 1…housing will continue to lag…no matter what can be done…and with it unemployment will remain

2…bonds will outperform as republicans will make cutting spending the first attack they make…QE 2 will be replaced by QE3

3…with every economist in the world bullish, stocks will underperform…

4…commodities are peaking ….

Laurel Kenner predicts: 

After having made monkeys of those luminaries who shorted Treasuries last year, the market in 2011 has had its laugh and will finally carry out the long-anticipated plunge in bond prices.

Short the 30-year bond futures and cover at 80.

Pete Earle writes:

All picks are for 'all year' (open first trading day/close last trading day).

1. Long EUR/USD
2. Short gold (GLD)

MMR (McMoran Exploration Corp)
HDIX (Home Diagnostics Inc)
TUES (Tuesday Morning Corp)

PBP (Powershares S&P500 Buy-Write ETF)
NIB (iPath DJ-UBS Cocoa ETF)
KG (King Pharmaceuticals)

Happy New Year to all,

Pete Earle

Paolo Pezzutti enters: 

If I may humbly add my 2 cents:

- bearish on S&P: 900 in dec
- crisis in Europe will bring EURUSD down to 1.15
- gold will remain a safe have haven: up to 1500
- big winner: natural gas to 8

J.T Holley contributes: 


The Market Mistress so eloquently must come first and foremost. Just as daily historical stats point to betting on the "unchanged" so is my S&P 500 trade for calendar year 2011. Straddle the Mistress Day 1. My choice for own reasons with whatever leverage is suitable for pain thresholds is a quasi straddle. 100% Long and 50% Short in whatever instrument you choose. If instrument allows more leverage, first take away 50% of the 50% Short at suitable time and add to the depreciated/hopefully still less than 100% Long. Feel free to add to the Long at this discretionary point if it suits you. At the next occasion that is discretionary take away remaining Short side of Quasi Straddle, buckle up, and go Long whatever % Long that your instrument or brokerage allows till the end of 2011. Take note and use the historical annual standard deviation of the S&P 500 as a rudder or North Star, and throw in the quarterly standard deviation for testing. I think the ambiguity of the current situation will make the next 200-300 trading days of data collection highly important, more so than prior, but will probably yield results that produce just the same results whatever the Power Magnification of the Microscope.

Long the U.S. Dollar. Don't bother with the rest of the world and concern yourself with which of the few other Socialist-minded Country currencies to short. Just Long the U.S. Dollar on Day 1 of 2011. Keep it simple and specialize in only the Long of the U.S. Dollar. Cataclysmic Economic Nuclear Winter ain't gonna happen. When the Pastor preaches only on the Armageddon and passes the plate while at the pulpit there is only one thing that happens eventually - the Parish dwindles and the plate stops getting filled. The Dollar will bend as has, but won't break or at least I ain't bettin' on such.

Ala Mr. Melvin, Short any investment vehicle you like that contains the words or numerals "perpetual maturity", "zero coupon" and "20-30yr maturity" in their respective regulated descriptions, that were issued in times of yore. Unfortunately it doesn't work like a light switch with the timing, remember it's more like air going into a balloon or a slow motion see-saw. We always want profits initially and now and it just doesn't work that way it seems in speculation. Also, a side hedge is to start initially looking at any financial institution that begins, dabbles, originates and gains high margin fees from 50-100 year home loans or Zero-Coupon Home Loans if such start to make their way Stateside. The Gummit is done with this infusion and cheer leading. They are in protection mode, their profit was made. Now the savy financial engineers that are left or upcoming will continue to find ways to get the masses to think they "Own" homes while actually renting them. Think Car Industry '90-'06 with. Japan did it with their Notes and I'm sure some like-minded MBA's are baiting/pushing the envelopes now in board rooms across the U.S. with their profitability and ROI models, probably have ditched the Projector and have all around the cherry table with IPads watching their presentation. This will ultimately I feel humbly be the end of the Mortgage Interest Deduction as it will be dwindled down to a moot point and won't any longer be the leading tax deduction that it was created to so-called help.


Short Gold, Short it, Short it more. Take all of your emotions and historical supply and demand factors out of the equation, just look at the historical standard deviation and how far right it is and think of Buzz Lightyear in Toy Story and when he thought he was actually flying and the look on his face at apex realization. That plus continue doing a study on Google Searches and the number of hits on "stolen gold", "stolen jewelery", and Google Google side Ads for "We buy Gold". I don't own gold jewelery, and have surrendered the only gold piece that I ever wore, but if I was still wearing it I'd be mighty weary of those that would be willing to chop a finger off to obtain. That ain't my fear, that's more their greed.

Long lithium related or raw if such. Technology demands such going forward.


Long Natural Gas. Trading Day 1 till last trading day of the year. The historic "cheap" price in the minds of wannabe's will cause it to be leveraged long and oft with increasing volume regardless of the supply. Demand will follow, Pickens sowed the seeds and paid the price workin' the mule while plowin'. De-regulation on the supply side of commercial business statements is still in its infancy and will continue, politics will not beat out free markets going into the future.

Long Crude and look to see the round 150 broken in years to come while China invents, perfects, and sees the utility in the Nuclear fueled tanker.

Long LED, solar, and wind generation related with tiny % positions. Green makes since, its here to stay and become high margined profitable businesses.


Short Sugar. Sorry Mr. Bow Tie. Monsanto has you Beet! That being stated, the substitute has arrived and genetically altered "Roundup Ready" is here to stay no matter what the Legislative Luddite Agrarians try, deny, or attempt. With that said, Long MON. It is way more than a seed company. It is more a pharmaceutical engineer and will bring down the obesity ridden words Corn Syrup eventually as well. Russia and Ireland will make sure of this with their attitudes of profit legally or illegally.

Prepare to long in late 2011 the commercialized marijuana and its manufacturing, distribution companies that need to expand profitability from its declining tobacco. Altria can't wait, neither can Monsanto. It isn't a moral issue any longer, it's a financial profit one. We get the joke, or choke? If the Gummit doesn't see what substitutes that K2 are doing and the legal hassles of such and what is going on in Lisbon then they need to have an economic lesson or two. It will be a compromise between the Commercial Adjective Definition Agrarians and Gummit for tax purposes with the Green theme continuing and lobbying.

Short Coffee, but just the 1st Qtr of 2011. Sorry Seattle. I will also state that there will exist a higher profit margin substitute for the gas combustible engine than a substitute for caffeine laden coffee.

Sex and Speculation:

Look to see go public in 2011 with whatever investment bank that does such trying their best to be anonymous. Are their any investment banks around? This Boxxx will make Red Box blush and Apple TV's box envious. IPTV and all related should be a category that should be Longed in 2011 it is here to stay and is in it's infancy. Way too many puns could be developed from this statement. Yes, I know fellas the fyre boxxx is 6"'s X 7"'s.


This is one category to always go Long. I have vastly improved my guitar playin' in '10 and will do so in '11. AAPL still has the edge and few rivals are even gaining market share and its still a buy on dips, sell on highs empirically counted. They finally realized that .99 cents wasn't cutting it and .69 cents was more appropriate for those that have bought Led Zeppelin IV songs on LP, 8-track, cassette, and CD over the course of their lives. Also, I believe technology has a better shot at profitably bringing music back into public schools than the Federal or State Gummits ever will.


Long - Your mind. Double down on this Day 1 of 2011. It's the most capable, profitable thing you have going for you. I just learned this after the last 36 months.

Long - Counting, you need it now more than ever. It's as important as capitalism.

Long - Being humble, it's intangible but if quantified has a STD of 4 if not higher.

Long - Common Sense.

Long - Our Children. The media is starting to question if their education is priceless, when it is, but not in their context or jam.

Short - Politics. It isn't a spectator sport and it has been made to be such.

Short - Fear, it is way way been played out. Test anything out there if you like. I have. It is prevalent still and disbelief is rampant.

Long - Greed, but don't be greedy just profitable. Wall Street: Money Never Sleeps was the pilot fish.

I had to end on a Long note.

Happy New Year's Specs. Thanks to all for support over the last four years. I finally realized that it ain't about being right or wrong, just profitable in all endeavors. Too many losses led to this, pain felt after lookin' within, and countin' ones character results with pen/paper.

Russ Sears writes:

 For my entry to the contest, I will stick with the stocks ETF, and the index markets and avoid individual stocks, and the bonds and interest rates. This entry was thrown together rather quickly, not at all an acceptable level if it was real money. This entry is meant to show my personal biases and familiarity, rather than my investment regiment. I am largely talking my personal book.

Therefore, in the spirit of the contest , as well as the rules I will expose my line of thinking but only put numbers on actual entry predictions. Finally, if my caveats are not warning enough, I will comment on how a prediction or contest entry differs from any real investment. I would make or have made.

The USA number one new product export will continue to be the exportation of inflation. The printing of dollars will continue to have unintended consequences than its intended effect on the national economy but have an effect on the global economy.. Such monetary policy will hit areas with the most potential for growth: the emerging markets of China and India. In these economies, that spends over half their income on food, food will continue to rise. This appears to be a position opposite the Chairs starting point prediction of reversal of last year's trends.

Likewise, the demand for precious metals such as gold and silver will not wane as these are the poor man's hedge against food cost. It may be overkill for the advanced economies to horde the necessities and load up on precious metals Yet, unlike the 70's the US/ European economy no longer controls gold and silver a paradigm shift in thinking that perhaps the simple statistician that uses weighted averages and the geocentric economist have missed. So I believe those entries shorting gold or silver will be largely disappointed. However in a nod to the chair's wisdom, I will not pick metals directly as an entry. Last year's surprise is seldom this year's media darling. However, the trend can continue and gold could have a good year. The exception to the reversal rule seems to be with bubbles which gain a momentum of their own, apart from the fundamentals. The media has a natural sympathy in suggesting a return to the drama of he 70's, the stagflation dilemma, ,and propelling an indicator of doom. With the media's and the Fed's befuddled backing perhaps the "exception" is to be expected. But I certainly don't see metal's impending collapse nor its continued performance.

The stability or even elevated food prices will have some big effects on the heartland.

1. For my trend is your friend pick: Rather than buy directly into a agriculture commodity based index like DBA, I am suggesting you buy an equity agriculture based ETF like CRBA year end price at 77.50. I am suggesting that this ETF do not need to have commodities produce a stellar year, but simply need more confirmation that commodity price have established a higher long term floor. Individually I own several of these stocks and my wife family are farmers and landowners (for full disclosure purposes not to suggest I know anything about the agriculture business) Price of farmland is raising, due to low rates, GSE available credit, high grain prices due to high demand from China/India, ethanol substitution of oil A more direct investment in agriculture stability would be farmland. Farmers are buying tractors, best seeds and fertilizers of course, but will this accelerate. Being wrong on my core theme of stable to rising food/commodity price will ruin this trade. Therefore any real trade would do due diligence on individual stocks, and put a trailing floor. And be sensitive to higher volatility in commodities as well as a appropriate entry and exit level.

2. For the long term negative alpha, short term strength trade: I am going with airlines and FAA at 49.42 at year end. There seems to be finally some ability to pass cost through to the consumer, will it hold?

3. For the comeback of the year trade XHB: (the homebuilders ETF), bounces back with 25% return. While the overbuilding and vacancy rates in many high population density areas will continue to drag the home makes down, the new demand from the heartland for high end houses will rise that is this is I am suggesting that the homebuilders index is a good play for housing regionally decoupling from the national index. And much of what was said about the trading of agriculture ETF, also apply to this ETF. However, while I consider this a "surprise", the surprise is that this ETF does not have a negative alpha or slightly positive. This is in-line with my S&P 500 prediction below. Therefore unless you want volatility, simply buying the S&P Vanguard fund would probably be wiser. Or simply hold these inline to the index.

4. For the S&P Index itself I would go with the Vanguard 500 Fund as my vehicle VFINXF, and predict it will end 2011 at $145.03, this is 25% + the dividend. This is largely due to how I believe the economy will react this year. 

5. For my wild card regional banks EFT, greater than IAT > 37.50 by end 2011…

Yanki Onen writes:

 I would like to thank all for sharing their insights and wisdom. As we all know and reminded time to time, how unforgiven could the market Mistress be. We also know how nurturing and giving it could be. Time to time i had my share of falls and rises. Everytime I fall, I pick your book turn couple of pages to get my fix then scroll through articles in DSpecs seeking wisdom and a flash of light. It never fails, before you know, back to the races. I have all of you to thank for that.

Now the ideas;

-This year's lagger next year's winner CSCO

Go long Jan 2012 20 Puts @ 2.63 Go long CSCO @ 19.55 Being long the put gives you the leverage and protection for a whole year, to give the stock time to make a move.

You could own 100,000 shares for $263K with portfolio margin ! Sooner the stock moves the more you make (time decay)

-Sell contango Buy backwardation

You could never go wrong if you accept the truth, Index funds always roll and specs dont take physical delivery. This cant be more true in Cotton.

Right before Index roll dates (it is widely published) sell front month buy back month especially when it is giving you almost -30 to do so Sell March CT Buy July CT pyramid this trade untill the roll date (sometime at the end of Jan or begining of Feb) when they are almost done rolling(watch the shift in open interest) close out and Buy May CT sell July CT wait patiently for it to play it out again untill the next roll.

- Leveraged ETFs suckers play!

Two ways to play this one out if you could borrow and sell short, short both FAZ and FAS equal $ amounts since the trade is neutral, execute this trade almost free of margin. One thing is for sure to stay even long after we are gone is volatility and triple leveraged products melt under volatility!

If you cant borrow the shares execute the trade using Jan 12 options to open synthetic short positions. This trade works with time and patience!

Vic, thanks again for providing a platform to listen and to be heard.


Yanki Onen

Phil McDonnell writes: 

When investing one should consider a diversified portfolio. But in a contest the best strategy is just to go for it. After all you have to be number one.

With that thought in mind I am going to bet it all on Silver using derivatives on the ETF SLV.

SLV closed at 30.18 on Friday.

Buy Jan 2013 40 call for 3.45.
Sell Jan 2012 40 call at 1.80.
Sell Jul 25 put at 1.15.

Net debit is .50.

Exit strategy: close out entire position if SLV ETF reaches a price of 40 or better. If 40 is not reached then exit on 2/31/2011 at the close.

George Parkanyi entered:

For what it's worth, the Great White North weighs in ….
3 Markets equally weighted - 3 stages each (if rules allow) - all trades front months
3 JAN 2011
BUY NAT GAS at open

BUY SILVER at open

BUY CORN at open
28 FEB 2011 (Reverse Positions)
SELL and then SHORT NAT GAS at open

SELL and then SHORT SILVER at open

SELL and then SHORT CORN at open
1 AUG 2011 (Reverse Positions)
COVER and then BUY NAT GAS at open

COVER and then BUY SILVER at open

COVER and then BUY CORN at open
Hold all positions to the end of the year

3 JAN BUY PLATINUM and hold to end of year.


. Markets to unexpectedly carry through in New Year despite correction fears.

. Spain/Ireland debt roll issues - Europe/Euro in general- will be in the news in Q1/Q2

- markets will correct sharply in late Q1 through Q2 (interest rates will be rising)

. Markets will kick in again in Q3 & Q4 with strong finish on more/earlier QE in both Europe and US - hard assets will remain in favour; corn & platinum shortages; cooling trend & economic recovery to favour nat gas

. Also assuming seasonals will perform more or less according to stats

If rules do not allow directional changes; then go long NAT GAS, SILVER, and CORN on 1 AUG 2011 (cash until then); wild card trade the same.

Gratuitous/pointless prediction: At least two European countries will drop out of Euro in 2011 (at least announce it) and go back to their own currency. 

Marlowe Cassetti enters:

FXE - Currency Shares Euro Trust

XLE - Energy Select

BAL - iPath Dow Jones-AIG Cotton Total Return Sub-Index

GDXJ - Market Vectors Junior Gold Miners

AMJ - JPMorgan Alerian MLP Index ETN

Wild Card:


VNM - Market Vectors Vietnam ETF

Kim Zussman entered: 

long XLV (health care etf; underperformed last year)
long CMF (Cali muni bond fund; fears over-wrought, investors still
need tax-free yield)
short GLD (looks like a bubble and who needs gold anyway)
short IEF (7-10Y treasuries; near multi-year high/QE2 is weaker than



 The other day, I was forced to attend an amateur showing of Dickens "A Christmas Carol." The production was well executed, the stagecraft was excellent, and the scenery was first rate. I've seen the Dickens classic so many times, I either just nod off, daydream, or try to improve my mind. During the show, I started to think of how the author, Charles Dickens, really hated capitalists and was a socialist at heart. He portrayed Ebeneezer Scrooge as the prototypical capitalist of the day, but his real "sin" was that he was a miser, only interested in his self, mistreating everyone. The fact that Scrooge had a bad attitude and dour personality did not work in his favor and was a great device used by Dickens to generate hatred for capitalists and the rich in general.

This got me thinking on many levels. For one thing, Scrooge was a businessman who earned his money fair and square. He cheated nobody and expected his contracts and debts to be paid as per any previous agreements, Scrooge ran a tight ship, to the point of being called miserly. He was a demanding employer of his clerk Mr. Cratchit, who accepted the employment contract with Mr. Scrooge with good cheer. Much has been said and written about the evil Mr Scrooge, his name has become part of the lexicon of the definition of an evil capitalist. Even the people in the neighborhood made disparaging remarks about Scrooge, and this mistreatment and lack of respect added to his dour personality. There was no evil to Mr Scrooge, and his unfavorable treatment was a literary device, a populist reaction by the left, the socialists who portray all rich as greedy, evil people who allow people to suffer while they live rich, extravagant lives. 

As I said before, Mr Scrooge had an employment contract with his clerk, Mr. Cratchit who was a man of good cheer. Cratchit's wife constantly complained that Scrooge was an old miser with a flinty heart of stone. She neglected to mention that Mr. Cratchit was free to seek employment elsewhere if his working conditions were so bad, but this aspect and so many others were left out by Dickens. As for Scrooge's miserly description, some would call his miserliness thrift, which is an esteemed Franklinian virtue.

Scrooge's refusal to participate in a festive dinner with his nephew and wife was his business and he certainly didn't deserve the ridicule heaped upon him by the women folk, nor was he required to offer an explanation or apology. He was merely exercising his freedom to do what he wanted, and if he chose not to celebrate Christmas, that was his natural, god given right. During Scrooge's pre ghost phase, he was a hard nosed flinty business man, albeit a bit ill mannered. There is no law against being ill mannered, dour, mean, or miserly. Scrooge was free to do whatever he wanted, with no worries what society would think as long as he behaved within the law and remaining scandal free.

Every good story likes to make a case of human redemption, a change from self interest to the interest and service of the collective. In popular culture, rich are inherently evil, their gains ill gotten off the backs of workers, and the poor always triumph over the rich. Dickens masterfully pulled this off when he had three ghosts visit Scrooge on Christmas Eve to scare the hell out of him and change his evil ways. His powerful scare tactics caused Mr Scrooge to abandon his own self interest, abandon his personal freedom for the good of society, destroy the profitability of his business, and spend his hard earned wealth on charity to repent for his earlier miserliness.

The messages Dickens made in a Christmas Carol were very clear. Productive people must give to the more deserving poor to be considered worthy, rich people are not happy due to guilt, producers must abandon self interest in order to satisfy the needs of others in a society who don't work as hard, businessmen must run their personal business for the sole benefit of their employees, conversely to the detriment of the stockholders. And finally one must give exorbitant sums to the poor, provide medical care for the employees, and give retroactive raises to allegedly underpaid employees. Benevolence is not a virtue in this world, it is a requirement. Scrooge was manipulated into this transformation by the three ghosts creating immense guilt and fear, and by the end of the story Mr Scrooge was more concerned with what people thought of him, his personal image, than the real work of creating profits, creating jobs, growing a business, and contributing to the general business climate.

At the end of the story Mr. Scrooge was a transformed man. He was happy, benevolent, highly thought of, giving,almost giddy, much like a person who has had a drink or ten. A good case could be made that he was a better man, but w hat he lost was the real tragedy. Scrooge lost his independence, his freedom, became dependent not on profits, but on the opinions of others. He was required to give money away, raised expectations of others, and caused economic imbalance by changing the market pay scale of employees in his business. In a way, Scrooge's new found largesse probably was bad for the economy as a whole a la the theories of Hazlitt. On another note, happiness tends to be fleeting much like health and I suspect that with Mr Scrooge, old habits die hard.

When the curtain closed, everyone was cheering. I felt a bit of sadness, as here's another story of poverty trumps wealth, rich is evil while poor is good, and being a second hander is more important than being a real, virtuous free man. In the end, Mr. Scrooge was the real loser and the real story was the transformation of a rich, productive man into a welfare state.

Rocky Humbert comments:

Dear Jeff:

Considering "A Christmas Carol" to be an indictment of Victorian Capitalism is not a novel idea, yet I still find your words and spirit to be sad, indeed.

While you are free to intrepret Dickens however you see fit, you have no such freedom with respect to core Judeo-Christian values, which parts of Dickens' play embodies. The principles which you lament are the core principles of Judaism and Christianity.

What you find lamentable, I find laudable. When you find trivial, I find grand. In short, I celebrate the charity and goodness toward man that Christmas celebrates, while you mock it as political correctness.

I wish you a happy holiday, and hope that you someday discover what Scrooged learned– that there is no greater joy than bringing happiness to others.

Scott Brooks adds:

 Let's not confuse charity with force of threat.

Scrooge offered a fair deal at a fair price. The way we can infer that this is the case is that people came to him, and willingly signed a contract. Scrooge performed his half of the contract by loaning them money. What is wrong with him expecting that they honor their portion of the contract?

And, let's not confuse what Scrooge did for charity. Giving to other under threat of force…..i.e. the spirits (under the direction of Dickens) threatened him with the threat of eternal damnation if he didn't commit business suicide.

Another problem with "A Christmas Carol" was that the story ended on December 25th. Let's flash forward to the "The Week After Christmas":

Bob Cratchit shows up at work on the 26th only to find that he doesn't have a job. Why? Because Scrooge, in his "fit of charity to bring happiness and joy to others" tore up all the debts owed to him and there was no more accounting work for Cratchit to do.

Later that day, and throughout the next week, a bunch of former Scrooge customers come to the office to borrow more money, only to find it closed because Scrooge has no more money to lend out. If he did, it would be evil (under Rocky's view of the world) to unfairly loan out money. And he couldn't just keep the money, he would have to give it away to atone for his supposed sins.

Therefore, the vital role that Scrooge played in the community…i.e. loaning money to people that had need of a loan for whatever purpose they felt they needed a loan for (and that Scrooge deemed as a good "loan risk")….that vital role was no longer available in the community.

And what happens when credit dries up in a society….well, I think we can all agree that that's not a good thing.

Sorry Rocky, but you're wrong in your assessment. This is not charity or Christian/Judeo ethics. This is a story by a man who didn't like Capitalism, that slams capitalism. It could have been written by most any journalist or university professor in today's society.

David Hillman writes:

 And then, there's the contrarian point of view

….which makes as much sense as does the interpretation of A Christmas Carol as an indictment of Victorian Capitalism [which, by the way, was far different from what we generally think of as 20th Century capitalism, i.e., the kinder, gentler Fordist model or the so-called millennial capitalism that has been evolving since the 1980s.]

I don't know much, but two things I know, 1) what Dickens' meaning and intent in A Christmas Carol was is about as clear as what the founding fathers intended in the Constitution, or as clear as whether the origin of the universe was a God or a Big Bang, and 2) we don't see things as they are, we see things as we are.

That said, I would posit that one's interpretation of A Christmas Carol, or just about anything else for that matter, tells us far more about the interpreter than it does of Dickens. 

Gary Rogan writes:

It's interesting that with all of his supposedly anti-capitalist novels, Dickens undertook two trips to America mostly to lobby for copyright enforcement. He also blamed his bankruptcy and later health and financial problems close to his death on being deprived of his rightful royalty stream. Somehow various American software companies and their hyper-liberal billionaire founders fighting intellectual property theft in China come to mind, although they are all in decidedly better financial shape.

Kim Zussman chimes in:

It's not every day you see Jewish pro-Christmas arguments against Mormons; a market top indicator?

The 1938 Christmas Carol is a great film, and if you don't tear up your trading accounts are definitely too flush.

Scrooge's encounters with ghostly futures cause us to ask what is really important. It is difficult to balance the race for money with taking time for things and people who will too soon be grown, old, or gone.

Stefan Jovanovich writes:

"A Christmas Carol" is far less about what our List calls "capitalism" - i.e. pricing by competition - and far more about Dickens' wanting the world to have a universal catcher in the rye and not be like the America he saw in 1842. He was appalled by our slavery and by our insane "push". He was also upset by the fact that, like the East Asians today, Americans were notorious copyright pirates. We were also the source of his growing wealth by being the best customers for his books. During his visit to New York his American publisher and his admirers (Washington Irving, William Cullen Bryant) held a gala in his honor, with 3000 people attending.

Dickens knew almost nothing about business by 1843 (the date of A Christmas Carol's publication) from direct experience or observation. His father had worked in the Navy Pay office and lived on a family inheritance. Dickens' only job in any "dark, satanic mill" was a few months sticking labels on bottles of shoe polish. He then went back to school. After school he worked in a law office as a clerk, taught himself the new short-hand and became a court reporter through a family connection. That led to political journalism. Sketches by Boz - his first book published in 1836 - is a collection of his political pieces for the Morning Chronicle, covering the Parliamentary elections.

The socialism Jeff finds in the story is there; it is the same socialism you find in Thoreau. It came from the same source - Unitarianism - which Dickens became interested in while visiting the U.S. And, capitalism in its modern forms was still in its infancy. It would be another decade and more before limited liability was formally recognized in Britain in the legislation of 1855-1856.

Gibbons Burke writes:

A Christmas Carol is not anti-Capitalist as such. But it makes a case strongly against Capitalism run by capitalists who serve Mammon rather than God. Scrooge, who initially perfectly represents that anti-human form of Capitalism at its worst soul-less excess, is the perfect picture of a seemingly-self-satisfied soul roasting in a Hell on Earth of his own devising, and he seems certainly destined for the eternal flame pit until his heart is converted later in the book. At that moment he becomes filled with the Joy that is the gigantic secret of the Christian (according to Chesterton).

Here is Dickens' initial description of old Scrooge - which seems to have plenty of editorial voltage:

Oh! But he was a tight-fisted hand at the grindstone, Scrooge! a squeezing, wrenching, grasping, scraping, clutching, covetous, old sinner! Hard and sharp as flint, from which no steel had ever struck out generous fire; secret, and self-contained, and solitary as an oyster. The cold within him froze his old features, nipped his pointed nose, shrivelled his cheek, stiffened his gait; made his eyes red, his thin lips blue; and spoke out shrewdly in his grating voice. A frosty rime was on his head, and on his eyebrows, and his wiry chin. He carried his own low temperature always about with him; he iced his office in the dog-days; and didn't thaw it one degree at Christmas.

External heat and cold had little influence on Scrooge. No warmth could warm, no wintry weather chill him. No wind that blew was bitterer than he, no falling snow was more intent upon its purpose, no pelting rain less open to entreaty. Foul weather didn't know where to have him. The heaviest rain, and snow, and hail, and sleet, could boast of the advantage over him in only one respect. They often "came down" handsomely, and Scrooge never did.

Nobody ever stopped him in the street to say, with gladsome looks, "My dear Scrooge, how are you? When will you come to see me?" No beggars implored him to bestow a trifle, no children asked him what it was o'clock, no man or woman ever once in all his life inquired the way to such and such a place, of Scrooge. Even the blind men's dogs appeared to know him; and when they saw him coming on, would tug their owners into doorways and up courts; and then would wag their tails as though they said, "No eye at all is better than an evil eye, dark master!"

But what did Scrooge care! It was the very thing he liked. To edge his way along the crowded paths of life, warning all human sympathy to keep its distance, was what the knowing ones call "nuts" to Scrooge.

The book is available in several illustrated editions for free on Project Gutenberg.

Jeff Watson responds: 

So, in other words, while Scrooge was unpopular, he enjoyed total freedom. That sounds pretty good to me. At least If I had his rep, I wouldn't have to say no to 30 requests for donations a day. Can you imagine how refreshing it would be to perform an essential service, perform admirably in business, deliver superior service, and not give a damn what people thought of you? That would make Hank Reardon proud. It is not a crime to be disagreeable, a skinflint, self serving or any other eccentricity. If we punished men for their eccentricities, Henry Ford would have never created and revolutionized the automobile business, J.P. Morgan would never have risen beyond the level of margin clerk, the old Commodore Vanderbilt would have probably died in a house of ill repute, Barney Frank would have been hanging out on…, and Bill Clinton would probably be in an Arkansas … for a very youthful indiscretion. 

John Tierney writes:

In 1899 Elbert Hubbard viewed the "Scrooges" thusly:

We have recently been hearing much maudlin sympathy expressed for the "downtrodden denizen of the sweat-shop" and the "homeless wanderer searching for honest employment," & with it all often go many hard words for the men in power.

Nothing is said about the employer who grows old before his time in a vain attempt to get frowsy ne'er-do-wells to do intelligent work; and his long patient striving with "help" that does nothing but loaf when his back is turned. In every store and factory there is a constant weeding-out process going on. The employer is constantly sending away "help" that have shown their incapacity to further the interests of the business, and others are being taken on. No matter how good times are, this sorting continues, only if times are hard and work is scarce, the sorting is done finer- but out and forever out, the incompetent and unworthy go.

It is the survival of the fittest. Self-interest prompts every employer to keep the best- those who can carry a message to Garcia.

I know one man of really brilliant parts who has not the ability to manage a business of his own, and yet who is absolutely worthless to any one else, because he carries with him constantly the insane suspicion that his employer is oppressing, or intending to oppress him. He cannot give orders; and he will not receive them. Should a message be given him to take to Garcia, his answer would probably be, "Take it yourself."

Tonight this man walks the streets looking for work, the wind whistling through his threadbare coat. No one who knows him dare employ him, for he is a regular fire-brand of discontent. He is impervious to reason, and the only thing that can impress him is the toe of a thick-soled No. 9 boot.

Tim Melvin comments:

 The question of scrooge and how we view him is one that men of business have wrestled with since the damn story was published. The thing is that Dickens does not paint Scrooge as the example of every businessman. We tend to take much of the Scrooge story out of context, I think. Business itself is not painted as evil or wrong. Was not Fezziwig the owner of a prosperous and successful business when young Ebenezer was employed there in his youth. Judging by the Christmas party it was prosperous business indeed. Yet Fezziwig was a generous soul to his employees who treated then well and asked for a fair days work for a fair day's pay and got it it cheerfully from those in his employ. Scrooge described his time employed there and his boss thusly, "The happiness he gives, is quite as great as if it cost a fortune ."

In contrast Scrooge underpaid Bob Cratchitt and treated him poorly. To say that Mr. Cratchitt could simply look for other employment is as ridiculous a statement as it is heartless. With a large family and a sick child he would be foolish to change what employment he did have by seeking other employ. Given the hours he toiled when would he had the time anyway?

Scrooge is indicted not for being a man of business but for being a man who shuts out the world and pursues only business in a mean spirited way. I greet my lender when I see him on the street. Scrooge was harsh man who was probably the lender of last resort and treated his customers poorly. Good business is a win win were the partied walk away feeling that both have scored a victory in my experience. To have your neighbors ignore you in the street and cackle over yor corpse does not paint the idea that he did business fairly in my mind. To be sure we all have probably made some enemies along the way, but we have made friends as well who would mourn our passing/ not so in this case.

Scrooge is indicted of closing his heart to all of humanity. He chooses commerce over the love of a woman and the potential for a life and a family. He helps no one with a kind word, a gentle lesson or a shared idea. The concept of charity is unique to us all. But hard asses as all of us are, as libertarian and objectivist rooted as we are, would we hesitate to assist a friend, relative or even employee who had an ill child if we had the resources to do so? Which of us would not give our nephew, our only family a visit on a holiday eve or at least a kind word, a lesson in the ways of the world that might help them succeed in life?

Scrooge was not indicted and sentenced to haunting for being a business man. He was convicted of living without love. The love of a child, of a woman, of humanity. He hated himself as much as he hated the rest of the world. Scrooge's crime was not being a business man but for failing to appreciate the wonder that life actually can be. I like so many other readers of this site detest the corporate charities, and I say no quickly and clearly in my best bah humbug fashion. But just like everyone else here there are charities and causes I believe in and donate my time and money. I do not buy the in the give to all philosophy or faceless giving anymore than the rest of you. I do believe in libraries, special olympics and a few other causes and I give. So do you whether it's a church, a cause, a philosophy of a friend in need so quit pretending your are an objectivist hardass who helps no one. Not only is that so much BS, it's a heartless life that would create a scrooge like existence and so far I have met no spec who fits that description.

Scrooge's crime was not business. It was living with love, without the touch and hear of another, without a child's smile, a lover kiss or the hand of a friend. By Dickens account he denied himself all the makes life special. There is no account given of good food, or beautiful music or even good books. Scrooge's crime was not one of business. He was guilty of crimes against life itself. 

Jeff Watson responds: 

(While I agree with much of Tim's premise, I'd like to see the statutes Scrooge violated regarding the aforementioned crimes). If those are indeed crimes that Scrooge committed, I fear the state is on the road to becoming more totalitarian if they feel the necessity to regulate those areas of normal but eccentric human behavior. Again, it's not against the law to be a total dick, nor should the government concern itself with forbidding person to be rude, self absorbed, cheap, hated, or mean spirited. I certainly can't find anything in the constitution addressing this issue. 

Stefan Jovanovich writes:

Dickens wanted women to stay in the kitchen; Hubbard wanted them to own the restaurant.

His company - Larkin Soap - gave Frank Lloyd Wright his first big commission. The friezes on open galleries of the building had these mottoes: GENEROSITY ALTRUISM SACRIFICE, INTEGRITY LOYALTY FIDELITY, IMAGINATION JUDGMENT INITIATIVE, INTELLIGENCE ENTHUSIASM CONTROL, CO-OPERATION ECONOMY INDUSTRY.

Here is Hubbard's story of how he started the Philistine magazine and the Roycroft shops. Begins at page 309



 This kid makes one proud to be a human being.

"Keith Fitzhugh chose operating trains over a shot at a Super Bowl. The free-agent safety turned down an offer to join the New York Jets to remain a conductor with Norfolk Southern Railroad and stay on track financially while helping support his parents in Atlanta.

Fitzhugh's father, Keith Sr., is disabled and unable to work, while his mother, Meltonia, has been struggling to make ends meet."

'tis the season…..



 When starting out in business 30-some years ago, a mentor, one of the top 2 or 3 salesmen I've known in my life, taught me a number of things that stuck. Among those high on the list were "pigs get fat, hogs get slaughtered" and "a good deal is one where everyone wins". I've come to understand, perhaps 'believe' or 'hold' are better words here, that the only good deal is one where everyone wins.

This can be a pretty unpopular view in this cut-throat, dog-eat-dog, zero-sum game world in which we live, and one has often been vilified and ridiculed for it, not to mention being conned a time or two. But, the latter can be precluded by tempering trust with reasonable skepticism, and having done a great deal of business on a more-or-less handshake basis, this lesson's served me well.

Here's some interesting scientific evidence…..not proof, mind you…..this adage may very well hold some water:

The neuroeconomist Paul Zak is driving west along Interstate 10 on a gorgeous Southern California morning. As we pass emerald hillsides, glowing from recent rains, and the snow-blanketed ridges of the San Gabriel Mountains, Zak talks about how standard economics neglects the biological mechanisms of trust that underlie myriad human interactions. "Why people cooperate - why people are altruistic - is a huge question," he says. "When you think about how much of the world works on a handshake or on holding a door open for somebody in an airport, all that kind of falls through the cracks in economics.

Zak and his collaborators at Claremont Graduate University have found that oxytocin, a hormone produced in the brain that promotes human bonding, plays a powerful role in shaping how generous people are. He calls it "the moral molecule." "It's a whole different model," Zak says. "It tells us why global commerce works– because there is a motivation to reciprocate."



 The leading historian says that he'll buy me a $ 8 cup of coffee under certain considerations. And I don't know much about coffee. But I've had occasion to have coffee at Stumptown Coffee, an Oregon firm with branches in New York now, and it's far and away the best coffee i've ever had. Next in line is the coffee at Kaffe that Mr. Florida surfer has recommended. The web mistress is a vegan, and I don't pay her that much to do all the editing and picturing so she usually doesn't put our stuff on barbecue up unless I get her mother on the case, which isn't that effective since she doesn't believe in coercion. Let us expand our mandate from bar b que to good beverages like coffee and tea.

Vince Fulco comments:

I wouldn't say THE top tier but for solid, day-in, day-out coffee, a NYC mail order institution which we order from is portorico. It's been around for over 100 years and we especially like their couple times a year sale with numerous versions of beans $5.99-7.99/lb, a veritable bargain when retail goes for similar prices for 10 ounces. They also have a weekly sale of one kind or another.

Jeff Sasmor writes:

For NJ suburbanites, the local roasting of primo beans and a nice college town quasi-hipster atmosphere is provided by Small World Coffee in Princeton. In spite of a Starbucks opening around the corner, Small World has actually grown larger.

David Hillman writes:

Stumptown is among best ever drunk here, too. We have a pound or two shipped in regularly. They ship the same day they roast and deliver in about 2-3 days, so coffee is very fresh. Currently in the cabinet is Indonesia Sulawsi Toarco and the African's are exceptional this year. An admirable direct trade business model worthy of support.

 Also, when in Portland, breakfast at Mother's. They serve Stumptown varieties in a french press at the table. That and the wild salmon hash is more than worth the long weekend a.m. waits.

Boom Bros. in Milwaukee is also happily recommended. Excellent roastmaster, their Velvet Hammer is the 'every morning' coffee at Cafe DGH.

Another favorite is this coffee from the D.R. Very cheap, very good. Best drunk in a cafe on the beach in Sosua. Maybe there's a Caribbean store of some sort in NYC?, but if not, there's always Bonanza:

"…..Always the most fresh production guaranteed! Manufacturer send my orders 3 times a week…..Thanks for looking!!!"

Chris Cooper writes:

Coincidentally, I have recently embarked on a quest to brew (consistently) the best cup of coffee. I have started roasting my own beans, and now it is evolving to importing my own green beans. Next month on the container arrives 300 kg of single-origin green beans from Indonesia from five farms. We call them Bali Kintamani, Java Jampit, Aceh Gayo, Sumatra Lintong, and Torajah Kalosi. I guess this may become more than just a hobby.

 While Mr. Surfer and family visited not so long ago, we served some Kopi Luwak, famous due to the journey of the fresh beans through the digestive tract of a civet. It turns out that there are various grades of Kopi Luwak, and since that time I've found a verifiably authentic version, which is rarer because often the growers will mix in other beans. I may try to import that as well, but it's very, very expensive, and I can probably only get 10 kg per year. The taste is really different, much earthier.

Larry Williams comments:

My cup runneth over with coffee from these guys, but thanks for the tips. I will begin my journey again for greatest java.

By the way, seems to have the best deals on espresso machine.

T.K Marks writes:

All this talk of coffee has gotten me nostalgic for one of my life's more squandered opportunities.

There was this little coffee spot on the Upper West Side, just a stone's throw from Lincoln Center, called Cafe Mozart. I used to spend much time there.

I would get a pot of coffee. Once even this thick Turkish stuff that perhaps made one look of Left Bank sensibilities, but tasted like tar. Would while away the hours there with reading, backgammon, or chess. It was a peaceful place.

So one night I'm sitting alone at my table reading when walks in and approaches, a woman.

A woman with a very fetching smile.

Bob?…she asked hesitatingly, as one would when meeting a blind date.

I stood up politely, smiled at her for a few seconds, and, No, was all I said.

Till this day I regret not lying through my teeth.

Had nothing to lose.

Jeff Watson writes:

 Many of my friends are coffee experts but I am sadly lacking in that department. One thing I do know is how to make is one of the better pots of coffee on the planet. The following recipe will even make even the most mediocre coffee taste good, and good coffee taste……delicious.

1. Wash an egg then break it into the bottom of an old fashioned metal campfire coffee pot, beating the egg slightly, leaving egg, shells and all in bottom of the pot..

2. Add a cup of very cold water to the pot, covering the egg and then add a pinch of salt.

3. Pour in a whole cup of course ground coffee to the water and egg mixture, and stir it up.

4. Pour enough boiling water over the coffee, egg, mixture to almost fill the pot up, and stir until mixed.

5. Cover the pot and plug the spout with a dish towel.

6. Put the coffee pot over a fire, heat it up to a gentle boil, back off, then let it simmer for a couple of minutes.

Take the pot off of the fire, let the coffee settle for a couple of minutes then add a cup of very cold water to precipitate the coffee grounds/egg mixture. Let the coffee settle for another minute, then serve.

My grandfather was taught to make coffee this way from some real cowboys when he went to the Arizona Territory for a trip sometime before 1910. He taught me how to make coffee when I was around 7 or 8, and put me in charge of the coffee every time there was a family picnic or outing. The secret to wonderful coffee is the egg, the pinch of salt, and good water. Coffee prepared in this manner evokes many good memories, and the good smell alone will attract any friends or neighbors in the near vicinity. Once in a great while, I will make this coffee on the stove and it's almost as good as on a campfire.

I have often wondered what a Kona coffee would taste like if prepared in this manner.

J.T Holley writes:

 I'm not a professional roaster or barista, but the keys that I learned in the 8-9 years that I mentored to roast, grind, and brew coffee are the following:

1) The time between roast and grind needs to be minimal (oils of the roast and storage important)

2) Method of brewing important to your individual tastes (percolate, press, or electric drip)

3) Water is 99% of a cup of coffee! Good tasting waters need to be used and free of chlorines, flourides, and impurities

4) Filtration choice and cleanliness of the brewer of choice imperative for consistent cups of good flavor

5) Once pot is brewed then stirring the pot and stirring the cup is important regardless of cream and sugar for consistency of coffee.

That's the basics!

All good shops should know this regardless if its a private house, private shop, franchise or friend.

Kim Zussman queries: 

How can coffee gourmets taste fluoride but not civet excrement?

Jim Sogi writes:

Chris's special Java java was distinctive and earthy. A treat especially in the palatial surroundings.

The key to brewing good coffee from whatever origin, is:

1. Be sure the parchment is sun dried, not machine dried. It has a much mellower smooth flavor.

2. Roast your own coffee. My favorite roast is 462 degrees, 11 minutes give or take based on humidity and ambient. Roast until the oil just starts to show, but is not oily. The oily roast is more for show. Roast only what you can use in 3 days.

3. Grind your own fresh roast. This is the most important of all. Don't try to freeze coffee beans.

When brewing in filter, only pour a little, not boiling, water through at a time.

Oh yes, Kona Coffee is without doubt the best in the world.



It's generally accepted that large electric utility stocks are interest rate sensitive. They also have earnings growth based on a regulator-sanctioned "acceptable return on capital." The stocks are considered cheap when they are trading near book value (not now), and also when their yields are relatively high versus treasuries and bonds (yes now). There's some economic sensitivity to electric demand of course– but the stocks are still very low beta.

I posit that at their current relative prices, a basket of quality utility stocks should outperform TIPS… with similar risk and reward. The reason is not that utility stocks are particularly cheap, but rather because many TIPS have trivial and/or negative real yields. In a rising inflation environment, utilities should be able to get regulator approval to raise prices [to maintain their statutory ROE]– and in the current status quo environment, the stock yields will exceed the TIP yield.

At this moment, the 5yr Treasury has a 1.1% nominal yield, the 5 year TIP has a -0.50 real yield, and the UTY has a 4.34% nominal yield.

What am I missing here? Other than regulatory risks, in what environment will the UTY significantly underperform a 5-year TIP held to maturity?

Mr Krisrock comments:

In his book on theory, Ray Dalio of Bridgewater theorized that "stress testing" an investment theme by asking other unsuspecting traders their views, in effect is a surreptitious poll, as we note here in this textbook case of pedestrian "street begging".

Rocky Humbert responds:

Perhaps Mr. Krisrock will be so kind as to put a penny in this beggar's cup with an insight using all of his over-sized frontal lobe (and not just the amygdala).

I thank the speclisters who kindly pointed out (offlist):

1) During the 1930's depression, utility stocks held their dividends… And people who paid their bills saw higher rates to compensate for the people who did not pay their bills.

2) The TIPS will return par at maturity — there is no similar guarantee for utility stocks.

3) Because TIPS are currently trading at a premium to par, outright deflation can be injurious to their returns.

4) Utilities are taxed as corporations — and are also subject to the risks of cap&trade etc. However, the state rate-setting boards may/may-not compensate for the increased costs of cap&trade with rate hikes.

The daily and weekly statistical correlations between utes and tips are quite poor. But as the attached chart shows, they do seem to move in the same directions.Perhaps foolishly, I'm least worried about technological innovation– because the primary motivation for investing in a regulated utility is that they set rates based on a statutory ROE….

Jeff Watson writes:

Wireless electrical power transfer has been around since Leyden, Franklin, van de Graaf, and Tesla, just to name a few. Radio waves are a wireless electrical transmission system….just ask me, as a ham radio operator I have gotten many very nasty RF burns when my system wasn't properly grounded, or I stood directly in front of a beam antenna when someone keyed up the transmitter putting 2KW through the antenna. Further back was the study of charged amber by the ancient Greeks and the ability to turn static electrical potential into kinetic energy. The thermoelectric effect has reputedly been described since the middle ages. Now, the newest commercial application of wireless electrical transfer is with those new cellphone and iPod chargers where you just lay them on the pad and it magically charges the batteries with no electrical circuit. One might expect for more practical applications as time goes by and the market demands the convenience.  

Mr. Krisrock adds:

In India, for example, there are many rural areas without electricity or the likelihood of same. Some years ago we partnered with Reliance and built cell towers with solar panels that allowed locals to plug in their mobile phones into the cell towers to recharge them. Until we did this they had to send them back to the cell phone company to recharge them…clearly some pennies for the beggars cup…. 

Tyler Mclellan comments:

You're missing this. The future nominal rates are the sum of the short rates (at least to some point on the yield curve). If you finance the position at overnight money (which many marginal buyers do), you cannot lose money if the sum of the short rates is less than the yield. I repeat, no matter what happens to inflation etc…you cannot lose money so long as the short rates one finances at are less than the yield. Through one more iteration, TIPS work the same way.

So i suspect the answer to your question has to do with the nature of "return".

David Hillman adds:

Once we could not imagine a wheel nor a printing press nor telescopes nor electricity, nor steamships, nor the camera, nor the radio, nor the automobile, nor the incandescent light, nor telephones, nor submarines, nor television, nor computers, nor endoscopic surgery, nor nanotechnology.

The 4 ounce, 4.75"x2.5"x0.5" device clipped to my belt is a GPS, a voice recorder, an 8MP camera, a calendar, an alarm clock/stopwatch, a music/video/tv player, a language translator, a dictionary, an encyclopedia, a library, an internet browser, it allows remotely operating a computer half-way across the globe, it connects to gmail, to WiFi, it recognizes touch commands and voice commands, it will both convert the spoken word to text and vice versa, and oh, yes…'s a telephone, too. The cost of entry is $99 + $55/mo. Such a device was not imaginable as recently as 20 years ago.

A world without a power grid depends upon a collective will to have it, vision, investment, R&D, innovation, efficient production, practicality, affordability, and profitability.There are many individuals moving "off the grid" now, some adopting current [no pun intended] technology, wind, solar, water, other renewable, that allows same, others eschewing that technology in favor of more basic passive and mechanical means, horsepower and elbow grease.

But while basic technology exists, instead of pursuing advancement in earnest, we persist in taking the easy, short-sighted, petroleum-based way out, screwing ourselves in the process.Still, given the history of technological advancement, one might suggest somewhat optimistically that, someday, we will will it and the question is less "could there be?" than it is "when?" Until then, we'll just plod along from crisis to crisis as we humans are wont to do. Plus ca change….. 

Jeremy Smith comments:

You wrote, "It's generally accepted that large electric utility stocks are interest rate sensitive. They also have earnings growth bas…"

"Generally accepted" is statistically incorrect, at least since 1994, which is a long time. Correlation to bond prices is actually negative. Utility dividends also increase. They can estimate 3-4% increase for an index of these, more for the better companies. Of course the longer you hold a higer yielding stock with dividend growth, the more hopeless fixed income is by comparison, especially with regard to income generated. As income rises it forces higher the value of the instrument producing the income, all other things being equal.

Phil McDonnell comments:

I do not think that it is generally accepted that utilities are negatively correlated with bonds but that appears to be the case. I picked idu for utils, tlt for 20+ treasuries and shy 1 yr treasury. For last 105 days of daily net changes we have the following co-terminal correlations:

idu    tlt idu
tlt    -59
shy - 54 74

Perhaps the utility– interest rate connection is more complicated than upon first reflection. 1. They are heavy borrowers for their capital equipment financing so one would think they are hurt by higher rates. 2. Their are regulated, so when their regulators are convinced that rates have risen they will often give them rate relief which means higher rates are eventually mitigate. 3. The stocks sell in competition for investment dollars with other income producing assets such as bonds etc. So they must be priced to yield competitive returns. 

Steve Ellison writes:

Could it be that there is little interest rate sensitivity when rates are very low? Or that the correlation was arbed away when everybody knew about it? Last year, I noted a similar regime change in the correlation of stock prices and interest rates.

Tyler McLellan writes:

Look, stocks and bonds have been Correlated negatively in price terms since 1999/2000, I would bet that utilities have been correlated enough to the market as a whole that they've been at least partially along for the ride.

One reason to suspect this? Maybe if equity price are set my marginal preferences of equity investors if tech stock a goes down and that makes people want to sell some ute b to buy more, it might not matter that bonds are twenty bps lower, especially when the bond buyers don't care about either.

Rocky Humbert writes:

I played with the data a bit more, and it looks like the Tyler and Steve's observations account for most of the the regime change. The Ute's stock market beta/correlation dwarf their bond market beta/correlation (notwithstanding the low stock mkt beta of Utes.) Since stocks versus bonds have gone their separate ways over the past 12 years– the ute's regime change riddle is mostly solved.

There is one last data point worthy of mention: more than 65% of the UTE's total return is due to their dividends…and the attached chart graphically illustrates investor preference for utility dividends versus bond market dividends. This chart highlights the fact that the mean dividend yield for utes is 69% of the bond yield … and we are currently 3 sigma cheap…on a yield comparison basis. But that's true of many stocks…

My intuition remains that Ute's will probably outperform 5-year TIPS from these relative prices, but it appears that this intuition is a restatement of my bias that stocks overall should outperform bonds from these relative prices. If Ute's get whacked because of a hike in dividend tax rates, this may provide an attractive entry point for Ute's on their own absolute-return merits.

I'd like to thank everyone for contributing their thoughts (especially when they disagree with my thesis). It's a pleasure and privilege to interact with a group of such intelligent, independent-thinking people.

Jim Sogi comments:

Undistributed power using local generation, solar, wind, battery, water will be what undermines the monopoly just as cell phone undermined the phone land grid. 

Stefan Jovanovich replies:

I think it is an exaggeration to argue that the cell phone has "undermined" the phone land grid. The "land" grid is, in fact, the backbone that now connects all the cell towers; if wireless were truly able to handle the data rates, the towers would be off the grid. They are not; and the "wholesale" wireless technology– microwave– has been the greatest single casualty so far during this wireless revolution. 



 The realization is is often faster than the anticipation. Or as they say in chess "the threat is worse than the execution".

William Weaver adds:

And many times less satisfying. 

Anatoly Veltman writes:

Yes, I always remembered that one, since my coach mentioned it when I was 6; but I couldn't quite implement till I turned 12– and only then won first title.

David Hillman writes:

Like Fedex next day air. More often than not, when we ship coast to coast and the client says 'email the tracking number', I say 'you'll have the package before you have the tracking number'. Given system limitations, human intervention, variance in 'normal business hours' and time zones, Fedex makes it possible to physically move a package 3000 miles faster than we can get tracking data to the client electronically. One of the more satisfying examples of 'rapid realization'. Any market parallels? 



Susan Edlinger on surfboardWith waves up from the hurricanes, surfers will be out…and they will need to know their abilities well to safely handle bigger waves and strong currents.

A good video and article by Mrs. Edlinger follows about taking up surfing later in life and the associated benefits of and lessons learned from the sport.

My limited personal experience has been exclusively with body surfing and even then you have to evaluate the wave fairly quickly (if it is going to break too fast, too steeply and wipe you out with little water out front to cushion the blow) and feel the pull just before it begins to break and launch, swim, and kick yourself into the proper position/angle and use your hands like fins to control your trajectory. You are always trying to decide whether to go with the first wave of a set or the second one and one tends to become a waveform critic because you want to have a ride that is worth going in on and that makes it worth expending the energy to get back to the break area. On rare days you get big glassy, slow breaking, wonderful waves for body surfers. Its always a bit scary though on the bigger waves when you sometimes get driven downward and finally come up for air only to have a second wave wash over you as you try to grab a quick breath—there is a half second of panic you have to learn to control. Pro surfers obviously train to stay down underwater and work through downward water column pressure for extended time as the movies show.

All in all it is good exercise and you get a lot of twisting, turning and stretching, and tend to sleep quite well that night.

But as Mrs. Edlinger shows even midlifers can learn to get on a board, overcome fears and have fun:

Paddle Smarter, Not Harder!

by Susan Edlinger, M.Ed.

"You're never going to catch a wave paddling like that!" a strong male voice bellowed from behind me. He sounded angry, as if my paddling skills were a personal affront to him. "Great," I thought, "I'm already padding as hard as I can!"

My self-appointed surf coach paddled up and reiterated, "You're never going to catch a wave the way you paddle!" and proceeded to do a not-so-funny re-enactment of my paddling style. Watching him, I realized that by now I should be used to this when I'm surfing. As soon as my board hits the water, I become a part of the community, where although you may feel alone, you never are. Surfers, as a group, are a loosely formed coalition of people who share a passion, and that passion binds us, for better or for worse. Chances are, this gentleman felt these connections particularly strong this morning.

Coming back to reality, I mused, "Why is he talking to me", and more importantly, "Why does he seem so mad?" What then ensued was a brief conversation and demonstration of how I should be paddling vs. what I was actually doing.

"You've got to DIG, and FAST, not just paddle." Then as quick as he appeared, my surf coach turned to catch the next wave, with this sweet grumbled parting, "I just want to see you catch some waves."

Relief! He wasn't angry after all. He was just frustrated watching my incompetent paddling attempts (I secretly believe that good surfers are like artists, they become aesthetically offended at the sight of clumsy, unrefined effort.) Nonetheless, I was thankful for his advice. And I must add, it's not as if I am a total "kook". I do catch waves, but in all honesty, my personal ratio of waves caught to effort expended is embarrassingly low.

As the next few waves approached, I practiced my newly learned paddling skills, but no success. Then I heard another voice rising above the waves, "Wait till the wave almost breaks on you!" My new mentor glides over to me, "These waves are slow, take off only when they look like they are going to break on top of your head!" I smiled, nodded and wondered, "Was there anybody in the water who didn't have something to say about my surfing?" I knew what I was doing wrong, but still couldn't master the skills. Knowledge and application were oceans apart.

Finally, I caught a wave, to the whooping and hollering of my surf comrades. I was pleased and as I turned to paddle back out, I saw another surfer heading my direction. As he paddled by, he commented briskly, "It's not about the paddling, it's more about the ANGLE."

"Oh no, what's this"? I thought. Another secret other surfers know that I had to learn. I quickly paddled inside to my newest teacher to hear more of his wisdom. "Your board is like a kid's teeter-totter," He told me in-between taking every ride on the inside, "When you're paddling for the wave, keep you're back arched, then when the wave gets to about your ankles or calves, put your head quickly down on the front of your board and angle downward". To me this sounded vaguely like a surfer version of the political slogan, "It's the economy, stupid." It became "It's the angle, stupid."

For the next hour I practiced. Digging instead of simply paddling, watching my timing, and most of all, angling on my board. Surprise, surprise, I caught waves. I had fun. Strangers cheered.

So, what's the point of my story? Well, as I later contemplated that morning surf, I found myself reflecting on what I had learned, both in terms of surfing skills, and also how it reflected on my life. I was reminded again of the maxim 'how we do one thing, is how we do all things.'

I was behaving the way I typically behave when frustrated by something not working; I try harder. I do the same thing over and over, thinking I'm going to get better results if I just put in more effort. In this case, if only I paddled harder, I'd catch those waves. Wrong.

The definition of insanity, I've heard, is doing the same thing over and over again and expecting different results. If an ounce of something doesn't work, maybe a gallon will? Like so many areas in my life, I needed to learn to paddle smarter, not harder. There was more to catching a wave than how hard I paddled; I had to dig fast, watch my timing, and lastly, pay attention to the physics of board leverage.

I also relearned several other things that morning in the surf. People are essentially good; we want to help each other. There is a joy we all share in watching someone else be successful; watching another surfer catch a great wave. This is called community.

I remembered once more that life can be easier, less strenuous, and more successful when I allow myself to actually listen to what other people are trying to tell me and then simply do what they say!

The road to learning is paved with humility and there are teachers everywhere. I learned that being stubborn about my paddling and trying harder and doing more of the same was not going to result in my catching a wave, only getting more tired. I had to try something different. I needed a community to learn to 'paddle smarter, not harder.'

What about you? Where can you 'paddle smarter, not harder?' What do you need to do differently, and who can teach you?

Susan Edlinger, M.Ed. is a certified Executive and Life Coach, living in Woodland Hills, and practicing her art wherever waves and people meet.

Victor Niederhoffer writes:

One must be aware of being knocked unconscious by body surfing as "Uncle Howie" was recently. It is nice to be able to afford the time and luxury of such activities in the fullness of time also.  

Chris Tucker writes:

As Captain Aubrey, "always a hand for the ship", one must always "keep an eye for the waves." 

Jeff Watson adds:

Any type of surfing is very addicting and has similarities to heavy drugs. Surfing is our form of crack, and we start getting tweaky when away from the waves or beach for a long time. Most mid-life surfers get hurt a lot, at least the crew of geriatrics that I surf with do. We view the aches, pains, sprains, and broken bones as part of the cost of doing business. In my case, I have had an injury every year for the past ten years that has resulted in some sort of medical treatment or hospitalization. In fact, I'm out of commission right now but my injury is skateboarding related, not surfing, and skateboarding and surfing are closely related in the surfing tribe.

My crew has similar experiences, and our eldest member is 69 years old, I get asked all the time why I still surf. My answer is that I just never quit. On that note, here is a good movie, "Surfing for Life" that describes the lives of many senior citizens that still surf seriously. I gave The Chair a copy and he said that he enjoyed the movie which I found to be one of the most uplifting documentaries of all time.

Interesting that the surfing tribe would be worthy of a study by Mead. Here's a very good MA thesis that an acquaintance wrote back in 1976 describing the surfing tribe of Santa Cruz, CA.

"Uncle" Howie Eisenberg corrects:

You neglected to mention not to bodysurf a wave that has become whitewater as uncle Howie did in winning the worlds stupidest bodysurfer award. I did not become unconscious. After "breaking my fall" with my head snapping my neck back, I emerged from the sea a bloody mess with tingling from my wrists to my shoulders, picked up my sandals, walked to the lifeguards who placed me on a wooden board, was ambulanced to a hospital where 3 CT scans, especially the brain scan showed nothing.

David Hillman writes:

at the chiropractor this a.m for an adjustment…

Doc says, "took my 6 year old son to the waterpark yesterday afternoon for an 'end of summer' day."

"How did it go?" asks I.

"Really well, first we went on Lazy River, a slow meandering stream one paddles down leisurely, then we went for a few runs down the big slides."

"Oh, knowing him, he must have really liked the action down the big slides."

"Yes, he does, so it was really a big surprise when he said 'Dad, let's go back down the Lazy River.' It surprised me because it's usually a little too tame for his liking. But we put the raft back in the Lazy River and we're paddling downstream a little when he says 'DAD! Do you see that lifeguard?' I take a look in the direction he's staring in agape and here's this beautiful blonde college girl lifeguard in one of those form-fitting Speedo suits. Six years old and it's already ingrained in him."

We laughed a bit, and, "Then, on the way home in the car," says Doc, "my son says to me out of the blue, 'Thanks for the best end-of-summer day ever, Dad."

Yes, yes…..always a hand for the ship and an eye for the waves….

Craig Mee adds:

Don't forget the change in tide either. It can get you into trouble if you have not taken into account the change in water depth at the front of a wave when attempting to pull off.

A bit like the markets.



On a related note, not to diminish from the honoring of any one of our own, but perhaps to add to it, may I remind the list that two weeks ago today, August 9th, was the 3rd anniversary of the passing of our dear friend, John Kuhn.

I had intended to note that anniversary on the date, but for the life of me, could not. It was simply to difficult to write about it on that day. Please excuse the personal anecdote, but I do recall sitting in a hotel room in Milwaukee that day in '07, slumping in my chair, stunned to read Laurel's note advising of JK's death. My wife, who was in the room on a conference call at the time, noted my distress, and mouthed 'what's wrong?' I wrote her a note, simply, 'my friend John Kuhn died.'

JK was different than Bill, as we are all different from one another, but, also very much like him in that he was a man among men. Always that infectious beaming smile and a kind word for those he called friend, JK was a decent and generous spirit. He shared information willingly and contributed to our betterment with his insightful thoughts. John was one of those refreshing individuals who was never divisive nor derisive, who never preached nor engaged in pettiness. Nor did he toss about platitudes or hyperbole. JK was a good listener and very simply spoke when he had a question to ask or something meaningful to say, a quality all of us might strive to achieve.

I'd been thinking a lot about JK during the month of July and figured it must have been the coming anniversary of his passing that had crept into my head, though I couldn't remember the exact date. In a computer crash, that email had been lost from the archives, so I asked our good friend Dr. Lack, whom I suspect would not view this next as a betrayal of confidence, he said "August 9th 2007 Laurel wrote to list John passed", then he added, "I loved that dude."

It can't be said any better or more succinctly than that. Yes, as we loved Bill, so did I love JK, as did many others here who knew him, especially Jeff, his dear friend and business partner. And, yes, JK and Bill will both be missed, but they will not be forgotten.

Thanks for the indulgence in the middle of a trading day.

Victor Niederhoffer adds:

John was a giant like a Rabelaisian Gargantua. Knew everything about life. Loved all sports. Great intellect. Beautiful mind. Appreciated all aspects of life to full. Knew everything about the high and the little. Always ready to experiment and add his creative touch. Had many pleasant visits with him on his trips to perfect his table tennis game. Gave me the pleasure of saying that while he had visited the homes of many centions, had never seen a museum home like one in Weston. But had a compliment of that nature that would leave one beaming for life for everyone. 



Powell's books in PortlandSome of my favorite places in the world are Powell's Books in Portland, The Ohio Book Store in Cincinnati and the Renaissance Book Shop in Milwaukee, among other like retail monuments to the written word. Imho, there is nothing quite like browsing a bookshop for hours, squeezing through narrow mazes of underlit, overcrowded shelves, savoring every breathe of must and dust and dry-rotting pulp, hoping to find an overlooked first edition [doubtful anything so rare and glorious as a copy of Poe's 'Tamerlane', but there are finds to be had].

Unfortunately, indeed, the handwriting is on the wall. Ebooks are the future and even old book scouts like us are contemplating Kindles.

Some visitors to the house a while back walked into the library and said 'My, look. Books all over the walls. We're out of our league in the brain department'. I said, 'Not to worry, we don't really read, it's just a big mural we had painted so we look like readers'. Everyone laughed, but in 5 years, it may very well not be a joke. Instead, they'll ask 'Oh, my, a Kindle. What version of firmware do you have?'

It may be the future, but it just ain't the same…heavy sigh…



An organ transplantI was engaged in a discussion with a statist, collectivist friend of mine about the merits of organ transplant, organ donation, state ownership, and government regulations of our bodies. He was of the belief that the government does not own our bodies, and I disagreed. My main argument was that if we are not allowed to sell our organs for profit, to be transplanted, we don't own them. My hypothesis is that if you really own something, you should be allowed to sell it any time for any reason, like any other personal property. Since there are laws in this country forbidding the sale of organs, especially for profit, we really don't own our bodies.

If we were allowed to legally sell our organs, the supply of available organs would increase, costs would come down and the lives saved would increase. Government regulation of the "organ market" has distorted the market, made for lengthy waiting lists, and increased the costs in regulation and transport.

I made a few other points regarding the illegality of suicide and the taking of drugs being a control by the state over our bodies, but my statist friend didn't buy it. Although he was unable to give a rational response to my hypothesis, he left feeling that he had won the argument. I wonder what type of state would have to exist in which we, not the state, would own our bodies. Does such a state exist in today's world? Do we own our bodies, or do we merely rent them?

Rocky Humbert writes:

If your main argument was that if we are not allowed to sell our organs for profit, we don't own them, it's not clear that the sine qua non which defines "ownership" is the unfettered ability to sell that item for profit, as it ignores ethics and regulation.

For example, the Government imposes regulations on markets (for better or worse). I can own certain ivory and switch blade knives, but I cannot "sell for profit" ivory and switch blades. But as possession is "9/10th of the law," my inability to sell switchblades and ivory does not mean that I don't own my ivory and switchblades.

Another example is that I can own a dog or cat, but it is generally unlawful to starve and torture the pets which I own. Also, I am not permitted to sell a "sick" cow to a slaughterhouse for profit. But there's no question that I own the dog, cat and cow.

And of course, the abortion/murder/etc discussion illustrates the profit question too. A woman may "sell" her eggs or body (as a surrogate mother), but if she is pregnant, the fetus at some point is considered a separate human being, and the discussion goes down a different path– where the mother's rights of ownership conflicts with the fetus' rights of self-ownership… etc.

A final example is conscription and coercion. You can be threatened by a mugger to give up your wallet. But that doesn't mean you didn't "own" the wallet before you handed it over. Likewise, when the Government calls you up to serve in the Army….

Lastly, you use the word "profit" in a strange way. In order to have a profit, one needs to have a cost basis. What is the cost of a kidney for sale? How does he know that he's not selling a kidney at a loss (instead of at a profit)? How does one account for the investment and depreciation?

Obviously, traditional accounting doesn't work too well in this genre.

Nick White comments:

Lord PannickI remember in law school learning that you can't patent your genes or "own" property in them, but a drug company can patent/ own a derivation of your DNA / biological material if you sign some obscure consent during some procedure that allows your DNA to be used in research. Inevitably they discover some miracle cure for xyz that they then Venter into billions whilst you continue to struggle with a terminal case of athlete's foot or whatever you originally went to be treated for.

The law is a twisted, inconsistent creature and, like any human creation, will be imperfect no matter how we decide it. For more, I would recommend the work of some legal philosophers who wrestle(d) with such things– amongst them Lon Fuller, HLA Hart and, in our day, Richard Posner. Bastiat will be familiar to most here, but he also had much to say on property rights etc etc.

Slight diversion, but best legal columnist and, I believe, one of the very sharpest legal minds in the world today is Lord Pannick, QC who writes for The Times of London…unfortunately, Uncle Rupert now charges to access his stuff, but you can find access to some of his court arguments by following links here and his wiki profile here. In terms of literal "human rights" and state authority over them, Pannick has argued it all.

And, of course, one of the best reasoned arguments for state ownership of anything (though, in the specific it deals with tax) can be found here– "Tax Avoidance in Practice" by David Goldberg, QC. Generous hat-tip to Nozick, John Rawls et al also necessary.

Victor Niederhoffer comments:

Since the purpose of life is to do good for others, according to the
idea that has the world in its grip, a personage of superior
sensibilities far above our own selfish volitions must make that

David Hillman writes:

 I suppose some might oppose Jeff's hypothesis arguing that freedom to buy/sell one's body parts would lead to wholesale profiteering by individuals, families, persons of influence, predatory brokerages, etc. but, if we should not be free to sell organs/parts privately or on some exchange, why, then, are we encouraged to give blood and why can anyone pop into the local bloodbank three times a week and 'donate' plasma for $20-$30 a visit? I suppose it has something to do with plasma being regenerated, as well as societal mores and fear of things that go bump in the night, of Igor and of the ghoulishness of sectioning the body.

The 'personage of superior sensibilities' seems to dictate that personal profit motive is out, and 'in the name of science' is the threshold of acceptability. But given the present state of the law, as Nick points out, one wonders if the state isn't acting less as an owner of our body parts than it is as an enabler of corporate profiteering from of same….'in the name of science', of course….?

In regard to the question at hand, may I suggest reading The Immortal Life of Henrietta Lacks, Rebecca Skloot, Crown, 2010.

From Skloot's website:

Her name was Henrietta Lacks, but scientists know her as HeLa. She was a poor Southern tobacco farmer who worked the same land as her slave ancestors, yet her cells-taken without her knowledge-became one of the most important tools in medicine. The first "immortal" human cells grown in culture, they are still alive today, though she has been dead for more than sixty years. If you could pile all HeLa cells ever grown onto a scale, they'd weigh more than 50 million metric tons-as much as a hundred Empire State Buildings. HeLa cells were vital for developing the polio vaccine; uncovered secrets of cancer, viruses, and the effects of the atom bomb; helped lead to important advances like in vitro fertilization, cloning, and gene mapping; and have been bought and sold by the billions."Henrietta's family did not learn of her "immortality" until more than twenty years after her death, when scientists investigating HeLa began using her husband and children in research without informed consent. And though the cells had launched a multimillion-dollar industry that sells human biological materials, her family never saw any of the profits. As Rebecca Skloot so brilliantly shows, the story of the Lacks family-past and present-is inextricably connected to the dark history of experimentation on African Americans, the birth of bioethics, and the legal battles over whether we control the stuff we are made of.

If her mother was so important to medicine, why couldn't her children afford health insurance?

free at Google Books.

Wiki reference.

Ryan Bickley adds:

I am actually reading The Immortal Life of Henrietta Lacks as required reading for my freshman year at Johns Hopkins. I'm about halfway through and second David Hillman's recommendation. It's a very well told story with an engaging plot that reads almost like a novel, except that it's completely true. It gives a good history of how cell research has evolved over the years and all of the problems that scientists and patients have faced over consent, the owning of tissues/cells, and the profits of this research. 

Femi Adebajo asks:

Let's look at those climes where there is a thriving underground market in organs then. India comes to mind. How have these forces of demand and supply shaped the market there then? I won't bore you but there were some interesting articles on this subject in the British Medical Journal a few years ago on this subject. I can send you references if you'd like them.

I'll just be as keen to hear your thoughts about what the response should be to those who choose to sell essential organs, in the knowledge that their removal will result in their death.



 We haven't done too much on maps here lately, so I thought maybe it was time. Frank Jacobs authored Strange Maps last year and in addition to many other useful and informative topics, his very entertaining work can be found on the Big Think blog. There's nothing earth shattering here in terms of new projections, etc and some of the offerings are cartogrammatic rather than cartographic, but cartograms are usually more fun and entertaining, and that's what Jacobs seems to be going for anyway. Among the interesting titles of these creative visual treats are, Map of One Arm Waving, Slapstick on a Map: The Three Stooges Starvania, Marge Simpson's European Adventure, and my personal fave…Area Codes in Which Ludacris Claims to Have Hos



McChrystal Relieved of Duty; Petraeus Tapped - News Item

Old soldiers never die — they just fade away.

When politics trumps winning a war only the troops in harms way suffer.

David Hillman comments:

By exhibiting extremely poor judgment in allowing those things reserved for locker room utterance to be spoken in public and on the record by both himself and his staff, he busted the chain of command. Any professional military man/woman will tell you that simply is not to be tolerated. Period. If one questions one's superior's capabilities, orders, strategies, etc., do so in private and ask for a transfer. His transgression was egregious, especially for one of his rank and experience. This sort of behavior may play well to self-entitled Gen Y'er's, but as Boomer with 34 years of service in, he should have known better. Btw, imho and in that of many ranking generals asked to comment today, David Petraeus, the 'replacement', is not a downgrade. Consider him 'the ace of trump'. Now, can we, once and for all, adhere to the Chair's well known and oft ignored wishes and refrain from the political?

Ken Drees writes:

[Did you] ever think that he used this opportunity to get out–consciously or sub-consciously? I love how people automatically assume that it was a lapse in judgement. I love how the media plays up their own –how Rolling Stone snuck into the general's camp ala' the spy capturing the marshall in stratego–

He is a general. I am sure he ruminated day and night upon his situation the way a general would. I mean this isn't Gunnie from Heartbreak Ridge after a 12 pack of Michelob shooting his mouth off about his CO. I will give the general credit for getting himself relieved of command. Who knows what timing and or circumstances were behind the scenes to influence how this went down or why. If it was subconscious–then he got what he wanted afterall.



agroforestryFrom St. Louis Post Dispatch, 6/03/10:

When most people think of farmland, they think of open fields lined with long, neat crop rows. But some farmers and researchers picture something else: trees."The practice of combining farming and trees, known as agroforestry, has caught the attention of more farmers in recent years. And Missouri, with its ample forests and one of the country's premier agroforestry research centers, is leading the way into the woods.

"Proponents say agroforestry allows small-scale farmers to earn much needed extra income by growing certain shade-loving crops in unused forests, while larger-scale farmers can use trees to mitigate the environmental costs of agriculture, from soil erosion to water pollution.

This makes an awful lot of sense. They could learn a lot talking with pot farmers in the forests around Corbin, KY and Redding, CA.

Scott Brooks comments:

Two thoughts on this:

1. A friend of mine is the head forester for the state of Missouri. She is a driving force behind this kind of initiative and really knows what she is doing. She is very much a market oriented, capitalist person.

2. "Ditch Weed" used to be pretty big here in MO, but the buzz and profitability of meth has put it on the back burner (no pun intended). Back in the 80's and early 90's, we'd be out hunting and would come across "ditch weed" on a semi-regular basis.

Most ungulates, browsers and other wildlife love to eat weeds as their main food source, but I didn't notice them eating "weed". Although I'm sure a few did eat the "weed", because if we left our cheetos outside over night, we'd be overrun by deer quoting Jeff Spicoli. (Ok, that last sentence may not be completely true).

Pitt. T. Maner III comments:

Perhaps as revenues begin to lag federally-licensed growing will take hold. I suppose medical marijuana is helpful in some cases but not sure if the long-term health effects and future generation genetic effects are fully known–is it really that safe a drug?

Meanwhile in Oakland, Ca:

"Looking at the economic analysis, we will generate a considerable amount of additional revenues, and that will certainly help us weather the hard economic times that all urban areas are having to deal with," Reid said. How much money is at stake isn't clear because the tax rate and the number of facilities the law would allow haven't been decided. A report prepared for AgraMed Inc., one of the companies planning to seek a grower's license, said its proposed 100,000-square-foot-project near the Oakland Coliseum would produce more than $2 million in city taxes each year…

We are emulating the wine industry, but instead of 'from grape to bottle,' it's 'from plant to pipe,'" Mann said. "Or seed to sack," offered Peterson

Al Corwin writes: 

 Tree farming of all types has been a solid business for some time. One of my college projects forty years ago was a comparative analysis of various tree farming operations. It wasn't a get-rich-quick scheme by any stretch of the imagination, but it was hard to find anyone who had gone broke in the business. At the time, Christmas tree farming was the most profitable on a per year per acre basis.

As someone raised on a dairy farm, the contrast between the incessant demands of milking and the barely intermittent demands of tree farming couldn't have been more dramatic. Fire and minor problems with bugs were the only significant hazards.

Here in the Pacific Northwest, there have actually been some great advances in tree farming in the last few years. I am most fascinated by the cottonwood farms. The trees are actually planted in a river. The trees grow so fast that you can see the difference day by day, and the fact that they are already in the water reduces the hassle and cost of harvesting. In addition, the tree farmers claim that the farms are good for fish and for the health of the river. Cottonwood is primarily used for paper.

One of the interesting discoveries that has changed tree farms is that irregular spacing is critical for fir trees. If the trees are planted in regular rows, they are at risk from a certain parasite that does not attack irregularly spaced trees. If you notice any acreage replanted in the last twenty years, the trees have been replanted almost haphazardly on a few years, giving the new plantings much of the look of a mountain clearing gone back to the wild.



Tinsley vs. ChinookI was having a discussion with a colleague on the topic of Chess vs. Checkers. Somewhere I had the impression that Checkers had been "solved" –that it is ultimately an elaborate version of tic-tac-toe, i.e. there is a well-defined correct move to make in every situation. Chess though is different, as I understood it–there is no known correct way of playing in every situation, either because it can't be known in principle or because the computers just haven't found it yet. Can someone set me straight on this topic? (Background: I haven't played chess or checkers in over 30 years, but I am quite good at tic-tac-toe.

Nigel Davies weighs in: 

As I understand it there is no 'solution' as such to either game and that with checkers in particular it is quite easy to make it considerably harder by playing on a larger board and with more pieces (one can also play 'big chess', though this looks somewhat artificial to my eye). With regard to board games being 'computer proof' it's also worth checking out Shogi and (especially) Go where computers are still rather mediocre compared to the best humans.

From the point of view of educating children all of these games are wonderful in that they can teach the young to falsify their own ideas. In order to play 'well' one must find out what's wrong with a move before playing it on the board.

One major consideration in the choice of game might be the number of opponents to be found. In the West at least I believe this is where chess shows to advantage.

Hope this helps. 

Pitt T. Maner III writes:

TinsleyDr. Schaeffer wrote an appreciation of one of the best checker players ever, Marion Tinsley, who actually liked the challenge of facing a computer (nicknamed Chinook).

After Chinook's first game against Tinsley in 1990, we started analyzing the game. Tinsley began recounting the history of the line we played, recalling games he played in the 1940's! The move sequences flowed easily from him without hesitation, sometimes annotated with the name of the opponent, date or place where the game was played! 1947 was as vivid in his memory as if it were only yesterday. The second facet to his play was his incredible sixth sense. A glance at a position was sufficient to tell Tinsley everything he needed to know. For example, in 1990 Chinook was playing Tinsley the 10th game of a 14 game match (won by Tinsley 1-0 with 13 draws). I reached out to play Chinook's 10th move. I no sooner released the piece when Tinsley looked up in surprise and said "You're going to regret that". Being inexperienced in the ways of the great Tinsley, I sat there silently thinking "What do you know? My program is searching 20 moves deep and says it has an advantage". Several moves later, Chinook's assessment dropped to equality. A few moves later, it said Tinsley was better. Later Chinook said it was in trouble. Finally, things became so bad we resigned. In his notes to the game, Tinsley revealed that he had seen to the end of the game and knew he was going to win on move 11, one move after our mistake. Chinook needed to look ahead 60 moves to know that its 10th move was a loser. In my experience with tournament chess and checker players, the sixth sense is experience. It is well-known how intensely Tinsley studied the game, analyzing anything from a Grandmaster game to a game between novices. His uncanny ability to know good from bad and safe from dangerous, is the direct result of all his hard work. Strong chess players have the same ability, but perhaps it is not quite as evident as it was with Tinsley .

Nigel Davies writes:

Seems like we get a whisker away from quite deep philosophical questions. My personal belief is that the goal of 'replacing humanity' in the cause of 'efficiency' is a deeply flawed one. It always feels to me like the attempt to show that computers can 'play' these games much better makes our attempts at self-improvement appear futile, an idea which many people will buy into. Is it too fanciful to suggest that they represent a 'greater goal' of being looked after by machines whilst humans have mindless 'fun'? Nigel Davies

David Hillman writes:

This is not unlike giving up the warm, tactile sensation of the paper page in a book for the slick plastic of a Kindle, or the daily newspaper's beautiful scent of cheap pulp and ink replaced by the netbook's display. The aromas of silicone and polymers do not mix as kindly with the scent of espresso wafting on the morning air. My own livelihood is derived from computer-based industrial productivity and efficiency systems, but my life is kept on a yellow legal pad with a #2 pencil. Balance, always balance. To paraphrase Queen, "we need it all and we need it now." The Deep Blue's, Chinook's, etc. may be wondrous, but there is simply no mineral nor petrochemical-based substitute for the hug of a happy child, for the lap of a caring spouse upon which to lay one's head at the end of a bad day, or for the twinkle in a grand-master's eye across the chessboard when he mates you in 6 moves.

Nigel Davies responds:

I don't think it's the same thing David. An analogy with having a kindle versus a book would be to play chess against a human via your PC. Having computers do the playing and trying to demonstrate their 'superiority' is more like having them write the books, and purportedly do it more efficiently than humans; fewer words for the same meaning perhaps, 'War and Peace' reduced to 10 pages.

Chris Tucker agrees:

I agree with you completely Alan, my point is just that programmers are not out to replace us completely (yet, anyway), but they are out to codify decision making. Games are a good place to do this because the rules and possible moves are very limited, even though the number of possible outcomes can be astronomical. The arena is structured and they can test and validate their ideas within this framework. The idea of game playing is much deeper, philosophically, (as Nigel suggests) than most care to admit. I will leave that bit for you two to explore. Machines that can replace the humanity of squaring off with an opponent do not exist, there are simply too many levels of interaction there. 

Nigel Davies replies:

Chris, there is no decision making in the programs or any attempt to replicate human thinking, they simply use brute force to analyze all the possibilities (with chess slapping in a primitive evaluation function) and the mathematical limitations of the games enable them to get away with it and 'win'. Perhaps when they started out the intention was to create 'artificial intelligence', but I don't see that this claim can be maintained given the route they have taken. Looks like an ego driven attempt to 'beat mankind' of the type which enables a car to go quicker than someone on two legs. 

Dave Bacon addresses the original question:

I believe Checkers on a standard sized board has indeed been solved. The reference is Science, Sept. 2007, Vol. 317. no. 5844, pp. 1518 - 1522.

“Checkers Is Solved” Jonathan Schaeffer, Neil Burch, Yngvi Björnsson, Akihiro Kishimoto, Martin Müller, Robert Lake, Paul Lu, Steve Sutphen

The game of checkers has roughly 500 billion billion possible positions (5 x 10^20). The task of solving the game, determining the final result in a game with no mistakes made by either player, is daunting. Since 1989, almost continuously, dozens of computers have been working on solving checkers, applying state-of-the-art artificial intelligence techniques to the proving process. This paper announces that checkers is now solved: Perfect play by both sides leads to a draw. This is the most challenging popular game to be solved to date, roughly one million times as complex as Connect Four. Artificial intelligence technology has been used to generate strong heuristic-based game-playing programs, such as Deep Blue for chess. Solving a game takes this to the next level by replacing the heuristics with perfection.



 As a first-time homebuyer a few years back, I am now working on becoming a first time homeseller. I was told by our realtrix that she recently had a closing that was held up by a house that failed to appraise at the selling price. Since she specializes in old houses (and ours is pushing 95) she told us that it was unlikely but possible that a sale of our house could be held up for the same reason, depending on how much we were able to get for it.

I nodded my head at the time, but thinking on it later in the day, I was more and more baffled the more I considered it. In the financial markets, if you value infrequently traded securities, then you know that the absolute holy grail of a security's valuation is an arms length trade, in size, viewable on the "tape" (stock exchange, TRACE, MSRB, etc.). Even if you have no trade, an appropriately sized offering on the security sets a ceiling on the price, while a live, executable bid sets a floor price beneath which there's no justification to value the piece. The terminology varies from sector to sector, but fair valuing, marking to model, etc., should be avoided whenever possible.

I guess people for a while have been saying the appraisal system for houses was a contributor to the housing crisis, but most claim it was improperly performed appraisals which led to the problem. To me, the whole structure of the system is wrong. Right now, it works like this: customer pulls a price less than selling price out of the air, and probably after some negotiations, a price is settled upon by the buyer and seller. At this point, it is probably a written, binding offer, contingent upon inspection and appraisal at or above selling price . THEN, an appraiser is brought in to determine "market value." But the market price has already been set! If the appraiser can't take the live, accepted bid on the very property in question as the house's value, then what can he possibly go on?

The answer, incredibly, is that the appraiser is marking to market. He is marking to a model, based on comps, accouterments, neighborhood, lot size, rebuild cost, etc., but it is undeniably a model. If the system made any sense, it wouldn't go offer -> negotiate -> agree -> appraise -> close. The appraisal would be conducted prior to the offer and negotiation as a bidding tool to the buyer… or even as justification by the seller for the offering price. As it is, the appraisal serves two purposes. One, it gives the buyer a false sense of security that he paid the right price, and it gives the bank a false sense of security that sufficient equity will be coupled with the down payment to motivate the mortgagor to perform, and/or that a sale under duress could make the bank sufficiently whole to take the loan risk. I know that theoretically appraisers don't try to "hit the number" but it seems like the knobs on the appraisal are probably turned a little bit at least to get in the right ballpark. I know that it's supposedly a science and they are professionals, etc., but still…

The structural problem, of course, is that the buyer and the lender are trusting an appraiser's mark-to-model to protect their long-term interests. It allows lenders to be more impersonal and buyers the sense they are delegating responsibility. To me, it's yet another example of unintended consequences of regulation: a process that was intended well but ultimately creates an environment where a buyer's biggest purchase in a lifetime and the financier facilitating the trade are entrusting huge sums of money to the model and signature of an interested (but probably not interested enough) third party. A signature counts more today than it ever, in a time when it probably means less than ever.

But I sure hope my house appraises right when I accept an offer!

Jim Sogi comments:

The appraisers' methods have been well tested in the courts, and recently not so well in the markets. There are 3 ways to value property:

1. Comparable Sales

2. Income

3. Replacement Cost.

Marginal price in liquid markets are set by comparable sales of that security. But we know that they can be wrong also. Comparing the appraisal methods to see if there is undue variance give some back up to each method. If one or more are way off, perhaps something is not right. Chair's Fed Model looks at the income for stocks. Replacement cost is rarely used and does not account for things like location or in the stock market, goodwill. Over reliance on comparable sales, which are set at the margin, resulted in the boom and crash of real estate and derivatives of the mortgages.There is quite a bit of play in the range of price that an appraiser can defend, and it plays out regularly in court with the IRS in estate tax cases so the method has been well tested.
They key is getting a good appraiser.

Sam Humbert explains:

The prospective buyer of your home isn’t the young couple with the cute kids and Labrador retriever you’ve been “negotiating” with. It’s their bank. The bank takes all the risk, aside from the small haircut the down payment represents. And appraisals are how banks roll. If you don’t like it, sell to an all-cash buyer instead, so there’s no bank in the picture.

Jonathan Bower writes:

Appraisers are part of the vig in a real estate transaction. As recent first time homesellers (about a year ago) who "scratched" the house, we discovered the long line of people with their hands out to help facilitate my transaction…

City (Sales and Stamp Tax)

County (Sales and Stamp Tax)


2 Brokers (on the market less than 2 weeks…)






Municipal Service Fee

Document Preparation Fee

Closing Fee

Wire Fee

Overnight Fee et al

This is when I realized why the gov't is so interested in stimulating the housing market…

Ken Drees writes:

In general, during the housing boom there was no restraint on the appraisal part of the transaction. The appraisal price was matched to or above the agreed upon sale price in order for the loan to go through. The appraisal person often asked the real estate agent what number they needed. Once again, this is not true in all cases–but obviously lax rules and lax ethics swirled around this function during the boom. Now there is a lot of heat and scrutiny on the appraisal part of the process. These people can and will be held liable and responsible for any questionable values. So naturally they are over reacting and sharpening their pencils to the point of overkill on the low end of ranges. It really is a buyers market–and only now the appraisal needs to be at or below the selling price for the loan to go through.

No wonder that money supply is high at the base level and crashing in terms of reaching the people. Where is the lending?

Rocky Humbert comments:

If a lender isn't involved, there's no need for an appraiser, and there's no bank closing fees. If one has engineering expertise, an inspector is optional. A knowledgeable buyer can also conduct his own title search from public records and (bravely) skip the Title insurance, and can also (in most states) represent themselves "Pro Se," and not retain an attorney. You can also buy and sell without a broker. All of these people are providing risk-reduction or other services for the parties.

The real "vig" in a real estate transaction is not only the stamp tax and bid/ask spread, but also new drapes for all of the windows, and the discovery that there's no way to fit your 9-foot Steinway Concert Grand Piano through the front door.

Real estate markets have one unique peculiarity: In what other market is the seller's identity and cost-basis a matter of public legal record, but the buyer can remain anonymous prior to the closing?

Phil McDonnell adds:

In a market with fungible items the fair market value is the gold standard. The reason is that the previous transaction is a good measure of value given that all items traded are identical. But in Real Estate every property is unique. Even in cookie cutter developments the locations are unique.

Real Estate also differs in financing because the margins are only about 10% or so. Your broker can and will sell you out if your stock falls in value below maintenance margin even momentarily. The bank cannot do that to a homeowner. In effect a mortgage is a loan and a put option. This is because the homeowner can put the house back to the bank if it falls underwater via a foreclosure or short sale.

In California during the boom an immigrant gardener was able to buy something like 10 houses from his friend for inflated prices because of lax mortgage appraisal standards. In scams like that the friend walks away with fast cash from the overpayment. Appraisals are really designed to weed out the risk of less than arms length transactions for the banks.

Stefan Jovanovich writes:

Around here (Contra Costa, Alameda Counties) in California the appraisers were usually in on the deal and their justification for the absurd valuations was the "fair market value" of the lots on which the houses were built. The primary fallacy was– and is– the idea that the dirt itself could be adequate security for the loan. That has been a recurring delusion throughout American history– that land alone could support debt. In the bad old days when money was itself the gold standard, bankers refused to lend against land; they limited their risk to the earnings power of the improvements - i.e. the buildings or the prepared soil. Rents and reliable crop yields were seen as the only reasonable estimate for comparable value; and, since those were expressed in dollars, properties were not considered unique. That was, of course, one of the limits of the gold standard that the newer, more flexible currency was going to solve. And it did in one sense; imagine what dirt prices would be without FHLBs, FNM, FRE and the AAA of 1938.

Rock Humbert replies:

Maslow's hierarchy of needsOuch. Maslow's Hammer just came down on my head, as Stefan once again suggests that society's ills would be cured by the gold standard.There is an important difference between saying "appraisers were usually in on the deal" (which suggests fraudulent intent), and saying the justification was "fair market value.""Fair Market Value" (FMV) is a defined term: the "price" where a willing buyer and a willing seller complete a transaction. This concept is applicable to all assets (including land, copper, gold, horses, equities, etc.), and the price can be stated in any agreed medium of exchange (dollars, gold, salt, seashells). Although it wasn't called FMV, the FMV concept dates back to at least King Solomon and the Talmud.

If a third party (e.g. a bank) provides capital for an asset purchase/investment (debt, equity or barter), and the third party is falsely induced to provide capital, this is fraud. And the existence of fraud also pre-dates modern history. Hardly an argument for the gold standard.

If the third party provides capital based on assumptions (including FMV) regarding the asset purchase that turn out to be wrong, this can be called a bad business decision. And bad business decisions are not a recent development either. Again, hardly an argument for the gold standard.

However, if the bank makes an investment because it plans to flip the loan to Fannie & Freddie– that's a completely different story. And much of the recent mess can be attributed to this phenomenon.(Yet I don't understand why a gold standard and the existence of a gold-rich Fannie & Freddie are necessarily mutually exclusive.

Perhaps Stefan will explain…. 

Stefan Jovanovich explains:

No Fannie or Freddie could possibly be or want to be "gold-rich"; if you can exchange your paper with the central bank why would you want to endure the vicious discounts that 19th century merchants imposed because they insisted on valuing their inventory by what it would sell for in cash, not what it could be appraised for or securitized into? No one here has disagreed that the state has a monopoly of legal tender. What the medium of exchange folks have said is that the government monopoly (and the potential for abuse inherent in any legal monopoly) does not matter because you can always trade your horses, copper, land for money whenever you want and the government's self-regulation will prevent abuse. Or, as Rocky put it, the tax man will take property instead of cash in payment of taxes. Alas that part is simply not true: the tax liability remains even after the taxpayer's property is seized; it is only discharged when and if the property is sold. (One of the interesting interactions of the present tyranny is how the drug laws have revived debtors prison.) Perfect liquidity, like FMV, is a notion that works better on paper than it ever does on the barrel head where - even now - legal tender (Fed reserve balances and notes) remains in limited supply. Because legal tender is in limited supply, there is the unavoidable temptation for the holders of the government to make more money available whenever Congress and the President want a war - whether against poverty or Iraq. That was what the Founders properly feared. They wanted the unavoidable monopolies of our central government - the powers to make Money and War - to be constrained by the requirement that both be approved by an actual vote of the Congress. Since they knew that no unpopular war could be waged without a debasement of the currency, they imposed the further restraint of insisting in our Constitution that the Money be Coined to a Standard Weight and Measure. Credit would regulate itself, even in a world of mark to model and foreign military/aid adventures, as long as the government monopoly could not create legal tender as needed. Money exchangeable on demand into specie was the ballast for republic itself; it might seem useless to waste all that precious cargo space carrying heavy weights that were only hoarded– until you found yourself caught in a storm– and then the ballast would be the only thing that would give the ship of state's righting arms the weight with which to do their work.

David Hillman writes:

Speaking of real estate, more particularly of having the ranch foreclosed upon, TCM [Turner Classic Movies] will air this evening at 10 EDT/9 CDT, a chair and list favorite, the original 1970 version of the classic 'demise of the old west' tale, "Monte Walsh" starring Lee Marvin. Thought some might like a heads up. Enjoy. 

Stefan Jovanovich adds:

And now for a brief jab at Maslow: anyone who would compare being the lonely Jew in a New York school full of gentiles in 1920 to being "the first Negro enrolled in an all-white children" had a sense of self-importance that would have made even our country's original hammer head (aka George Washington) blush. Talk about a hierarchy of needs!



 We're a few weeks into baseball season, so it must be time to start talking football.

Yesterday, the Jets announced they'd released a retired Brett Favre. Before he was traded from the Packers to the Jets a year ago, Favre had made it abundantly clear he wanted to play for the Packers' NFC North Division rival, the hated Minnesota Vikings.

The very last thing the Packers wanted was for Favre to come 'home' and compete against them at the hallowed Lambeau where he had made his unparalleled career. Thus, the trade included the condition that should the Jets trade Favre to an NFC North team, the Jets would have to give up 3, count 'em….THREE….first round draft picks. That is indeed an incentive not to trade.

…..BUT…..Favre plays one year, then retires [for good] a second time. However, now that the Jets have released Favre, they are no longer obligated under the terms of the trade contract. No matter what Favre does now, the Jets are in the clear. Some would argue that the Jets released him because they picked up one of the top two quarterbacks in last weekend's draft and/or they were just cleaning up their books in the wake of Favre's retirement. The former is true, however, I offer the following….

The release was at Favre's request. Favre insists he's retired, as does his agent and 'sources close to Favre', but….he's insisted that before, only one year ago. If he is retired and intends to stay that way, why bother asking for his release? Preparedness? Hmmmmm.

Moving on, next to Tampa, Buffalo, Cleveland and a couple of west coast teams that shall remain nameless to protect innocent specs in the Bay Area, the Minnesota Vikings have arguably the worst QB corps in the NFL in Tavares Jackson and Sage Rosenfels. Jackson can run, but has no arm and his decision-making is suspect. Rosenfels can pass, but was merely adequate as a placeholder in Houston. Put together in one body, they would make a somewhat fair arena league QB.

Could the Vikes use a quarterback? Say "uh huh". Did they covet Favre last year as much as he wanted to play in The Cities? Oh, yeah. Is there anything Favre would like more than taking a big healthy dump on Ted Thompson, the Packers' GM who from the day he arrived in Green Bay made it clear it was his team and he wasn't putting up with the prima donna stuff? "No", that's exactly what Favre wants. He wants to come back to Lambeau to the cheers of an adoring crowd just to show Thompson he was wrong in not letting Favre come back after he had retired and the Packers had moved on. His chance to do that is to sign with the Vikes.

So, I'm putting my money on an announcement in the not too distant future that Mr. Greatest QB of All Time has signed with the Vikings and will play this coming season. There, prediction on the table. If I'm wrong, I'll say so, but I doubt that's going to be necessary.

He'll play for the Vikes, alright. But, unfortunately, what this aging yahoo from the delta doesn't get just yet is that when the Packers moved on with Aaron Rodgers, their outstanding, patient, out-performing, unassuming, level-headed, charming, team-player of a young quarterback, so did the fans. They're wearing #12 now, not #4. Only the hilljacks around here still do that. Make no mistake about it, when, not if, Favre sets foot in Lambeau wearing a Viking uniform, among the boo's there will be a fair amount of respectful cheers. And then, the entire stadium will cheer wildly and enjoy nothing more than watching their one-time hero being crushed beneath a sea of green and gold.

It seems, like verbal contracts, hero worship is worth the paper it's written on.



 Given the current mortgage rates and the fall of the housing market, I want to purchase my first home. Since I am stationed at Fort Hood in Texas, I have been doing heavy research in the Killeen / Harker Heights area. I thought I would ask for some advice. I spoke with Tim Melvin about this earlier, and he mentioned that I should never pay more than 10 times the annual rental rate of comparable houses. Does anyone else have any other good valuation metrics like this or have any knowledge / advice that would help me out as a first time homebuyer?

Legacy Daily replies:

I have found 10x to be used in two cases:

1. High house prices relative to rent — get one to cool off and think more clearly about an investment and do additional homework 2. Low house prices relative to rent - get one to jump in without thinking clearly on a "bargain" investment without doing any additional homework 

Some initial questions worth clarifying:

1. Is this a home or a leveraged investment? a. home — ignore rules like this and find the best place to live, raise a family, pursue happiness… b. leveraged investment — do enough homework to be confident enough about the decision to ignore all general rules.

Assuming investment:

2. What is the holding horizon? What future plans could interfere with that holding horizon? 3. What is the appreciation potential for the country, state, county, city, town, neighborhood, subdivision, this property…? I have not yet been able to come up with sufficient justification to buy for income alone when it comes to residential real estate. 4. What segment of rental market would the property (subdivision, neighborhood, town, etc.) attract? Is that the segment one wants to serve? Real estate agent needed to rent? 5. How predictable is the income stream? How would economic booms/busts affect it?
6. What are the worst case scenarios? What could go wrong?
7. Financial analysis — P&L, tax impact, financing options, downpayment flexibility (very illiquid), initial estimated repairs, etc. 8. Legal analysis — zoning issues, easements, property title issues, locality department issues, neighbor issues, etc. etc.

Couple additional points:

1. Decent real estate attorney representing one's interests can save from numerous headaches (especially true in foreclosure/short sale cases). 2. Avoiding a buyer's broker saves one money, gives additional negotiating room, makes the seller's broker more willing to work extra hard for the deal. 3. Inspections are money well spent, even if one does not end up buying the property. 4. The market is generally very efficient (yes even during this recession). Why has the property one's considering not sold yet? etc.

I hope you find this useful.

Jim Rogers writes:

The rule of thumb I've heard used is 1% of sales price should be equal to or less than comparable monthly rent (that's a little more aggressive than Tim Melvin's measure, especially when you factor in the mortgage tax shield). I'd say, use either and stick to your guns.

Sam Marx replies:

Don't trust what the real estate broker says about a house's value or price. Do your own research.

Try to find prices of recent sales of similar houses in same neighborhood.

Check with the local banks to see what houses they now own and what are their asking prices.

If you can go to foreclosure sales, do it, not to buy a house but to get an idea of what the market in houses is and remember those prices when negotiating with a broker.

I don't recommend buying at a foreclosure unless you're experienced at it.

Don't be shy about making offers 25-30% below asking price when dealing with a broker.

Watch for estate sales, the heirs are motivated sellers.

I don't know your area, maybe it's reached a bottom, but in FL, housing prices are still too high. The stock of St. Joe Land (JOE), FL's largest landowner, was 69 a few years ago — now it's 15.

Phil McDonnell advises:

 Buying a first home can be a frightening prospect. It should start with a realistic look at your needs. How many bedrooms and baths do you need now and in the future? If your life involves one or more women strongly consider the extra bath. If you have the skills a fixer upper my be of interest.

I frequently advise my Realtor wife on the statistical aspects of our local real estate market. Pricing in this market is especially tricky. It is a declining market but that also means buyers have much more negotiating leverage. To measure your local market ask a local Realtor for the latest stats on number of homes on the market and number of sales in the last few months in your area of interest. For a normal market this is about a four month supply of homes at the current monthly sales rate. In this market it is running about 10 months of inventory per home sold. Hence the declining prices as sellers compete. One should consider staying out of the market until the inventory show signs of declining. However do not be fooled by a one month decline in local inventory. Buyers in the Seattle area are negotiating prices an average of 4% below asking. Get the similar number in your area.

As a buyer in this market it is best to view the prices as a price distribution. Suppose we have ten houses in your area. But only 1 will sell in the area in the next month. Clearly it is most likely to be the one that offers the best value on a relative basis. The other nine are over priced for these market conditions. By staying on the market for another month they will probably lose something like 1% in value per month.

There is an old saying in real estate. One should buy the least expensive house in the neighborhood. Generally this is true. After numerous regressions on homes it can be said that among comparables the most important single factor is square foot of the house. For the best resale find out which area has the best schools. Even if you do not have kids the people who ultimately buy your home may have them and it will help resale in the long run.

Check out all the government mortgage deals and tax subsidies. They are offering a tax credit of up to $8,000 for first time buyers. 30 year fixed rates are below 5%. The military may offer even better deals. Remember the $8,000 credit is only paid the following year via a refund so you do not have it to use as a down payment. It is more beneficial the smaller the house you buy. I saw a recent home sold for something like $80,000 in Killeen. The $8k represents 10% on that home, but only 5% on a $160k home.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008

Henry Gifford adds:

Home prices, in general, are still falling in the US, therefore waiting will probably bring lower prices.

As property prices fluctuate, one sign of high prices is easy loans. Times when prices are better tend to be times when loans are hard to get, with of course reasons for this relationship. But, as an affiliate of the military, there are sometimes special deals available to you that are not available to other people, which means you can be one of the few buyers out there at a good time to buy. Some of these loan deals only exist on paper now, as the price limits and interest rates make them impractical, therefore nobody talks about them, but because they are government programs which get updated slowly, and usually out of sync with the market, they can be really good deals at times. Therefore there may come a time when you can get both a good price and a good loan.

Buying near a military base involves risk of base closure (I owned a whole bunch of houses near a base that closed) or downsizing, and since you're in Texas where there is lots of land, upsizing the base won't put much pressure on prices - people will simply build more houses. Perhaps you can ask around inside the gates to get a feel for this.

Buying and selling property involves large costs for brokers, taxes, title insurance, etc., which penalize short term ownership, meanwhile you can get transferred to another base at a moment's notice, which puts you in the position of being in a hurry to sell. If, instead, you buy a commercial property, you can own it as long as you live, with far less management headache, which makes owning it while living elsewhere more realistic than renting a house to someone.

Phil McDonnell responds:

I think the truth in this statement is based on a defect in the way people perceive value. Suppose the average home in a neighborhood sells for $500k but yours is worth $400k. Then if the average goes up to $600k the innumerate masses will think that all homes have gone up $100k not the 20% they really should have. When they do this the $400k home appreciates by 25% not 20%. In other words people add when they should multiply by a percent increase factor.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008

David Hillman writes:

Another part of that defect is focusing on the value of the improvements v. the value of the land.

Some years back, a close friend bought a lousy house on a great piece of property in the best neighborhood. Even though it was a prestigious address in a 'branded' area, he got a deal on the property because the house was so undesirable. The plan all along was to demo the house and built a new one to suit, which is exactly what he did. He had realized the land was worth perhaps 90% of the true total value of the property before the new construction.

Many county auditors, etc. have searchable tax records online with the assessed values of land/ improvements parsed out. One might use that to figure a reasonable estimate of market value of land v. improvements. Don't forget the old saws apply….'land, they're not making any more of it'….and….'location, location, location.'

Bill Egan writes:

In the last 10 years, I have bought three homes and sold two. Did not plan to, but that's the way it worked out due to job changes. Sold both houses in < 1 week for a profit despite forced timing. We were not in subprimeville, either, and the last sale was 2001 before the real estate madness.

My wife and I kept resale value in mind because you never know what can happen to you. We made sure we bought homes that were average to excellent on the following criteria:

  1. School quality
  2. Exterior appearance and interior layout — good and normal
  3. Quiet, safe neighborhood that looks good
  4. Reasonable size (3/2 or larger)
  5. Likely demand due to commuting routes/distance to jobs

For example, I was working at a biotech in NJ from 1999-2001. We bought a 3/2.5 in a newer development, nice neighborhood in Burlington County, right next to an average-quality elementary school. However, the area was less horridly expensive than the homes closer to Princeton, where I commuted to. There was strong demand from people priced out of the homes closer to NYC/Princeton.

Rich Bubb replies:

1.  look at the neighbors. C-L-O-S-E-L-Y… look at the state of their domiciles (even getting "invited-in" for a look see if at all possible), and the state of the upkeeping… especially the immediate next door folk. You might end up living next door to your own personal nightmare. Believe me, it is Not Enjoyable. Even after almost 20 years. Thankfully everyone else on the entire block is somewhat more sane and respectful of their neighbors than my nextdoor nightmare. Or to put it another way: you might get the best deal that no one else could stand…

2. if you really know somebody in the real estate biz (my sister is an agent), have them look around for you. she got her daughter's family a fabulous deal in a great neighborhood. Or to put it another way: sometimes real professionals Do Know what they're doing.

3. look long at the deal, bid low for the deal (Game Theory might help a little here, here is a cool intro), then be prepared to walk away… even if not doing the deal means you'll have to go back and start the whole search-etc process all over again, and don't put pressure on yourself or let anyone pressure you into buying. My wife was not prepared to walk away from her last car purchase. She still got a good vehicle, but she could've strengthened her bargaining position by uttering the words, "Let me think about it." And then purposefully heading for the door. We went outside and argued between ourselves about leaving. She *wanted the vehicle*. It cost her almost $5k more than I wanted her to pay.

4. Consider the cost of long term ownership. I mean, Really figure it out… what's the cost of x, and y, and z, and can you afford it if those costs all hit at once.

5. Tangentially to #1 above, if there'll be kids living next door… would you:

(a) invite them in?, or

(b) chase them away?, or

(c) start scouting for really out-of-the-way burial sites?, or

(d) let them borrow your most deadly power tools?

Just mentioning this as my siblings and I were the 'b-c-d' and almost always the Never-more-than-once 'a'. And the neighborhood's less-than-model parents would often let their barbarians-in-training train at our place… Or to put it another way: your neighbors' kids might have fiends, er friends, worse than they already are…

Hmmm, karma might really exist…

Russ Herrold adds:

A anonymous blogger, 'Benjamin.Publicus' on Thomas Paine's blog  had this this observation:

… The author lives in a community that is (or was) at the epicenter of the mortgage crisis. The developer aggressively marketed the homes to young, first time home buyers, many of whom renters. No money down, own instead of rent, mortgage payments the same as the rent, etc, etc. The development was started in 2001, so the first wave of 5 year ARM's hit in 2006.

…and it goes on from there.

I have spoken to that author (and a couple others) about contributing to DailySpec, but he has been busy.

Dr. Herrold is Principal of Owl River Company, a high-end Unix consultancy

Rich Bubb adds:

As mentioned previously, my sister is a real estate agent. following are her comments on home shopping & buying.

Get a Real Estate Agent to represent YOU as a BUYER. Sign a contract as such. Tell them what YOU want.

There are surely things important to you that you would like to have in one of the biggest investment decisions you will make.

TAKE NOTES of likes/dis-likes of each home you view. re: Basement, Garage, Four Bedroom, Square Footage, LOCATION. I stress location because it can make or break the satifaction of your purchase.

Drive through the neighborhoods you are considering at different times of the day to see what the atmosphere is.Pay attention to the neighbors up keeping of their property. Schools?, established neighborhood?, new additions? child / adult ratio?
Comparison shop, don't just jump at the first home you look at just because you can afford it. Ask your agent to provide you with a CMA (a market analisis of a surrounding area - 5 mile radius ).

Get pre-approval from your lender, look at homes a bit higher than your range and offer LESS - the worst that can happen is, they will say NO or counter-offer and you may wind up with a nicer quality home.

BE Strong in making the decisions of your offers. Be prepared to give and take.

Then BE PATIENT thru the purchase process which seems like it takes forever because we are a see it, buy it, want it now, kind of people. It is a process that is in place to protect you. re: CLEAR TITLE

Again, don't just settle for a home, get as close to what you want as possible.



On TV Rick Steves says there are two kind of travelers, "those who travel heavy and those who don't." He always says to lay out all you plan to take on your bed and cut that by half! Note American Airlines now charges $15 for your first piece of luggage. Oil hit $133 today. At what oil price will the airlines ground their planes? My best friend owns three mall restaurants and one of his workers today commented to us that mall foot traffic is noticeably down.

David Hillman recounts:

I just rented a vehicle for a one-way, one day drive of 300 miles in region. Yes, there are variations market-to-market and pick-up/drop-off locations do matter, but the #1 club "discounted" rate for the full size vehicle I rented was $99/day. For either a compact or economy, $157/day. It seems they've picked up on something. Hmmmmmm…. 



Copy/paste from (30/01/2008):

"I spent 35 years tending to the the Emergency Rooms as an orthopaedic surgeon. I can assure you that if you draw a graph of visits per day it produces a perfect sine curve. The apogee coincides with the full moon and the perigee with the new moon. The variation is about 25%. Large ERs plan their staffing levels on the phases of the moon. This has been going on for decades. The visits are not only mental (lunacy) but also physical. It is clear that the phase of the moon effects mankind. Why not its trading? …"

In a past life in the health care industry, we noted a few studies establishing correlations between moon phase and ER visits. Often times, these studies purported to zero in on specific conditions or causes of injury, like assault or mental disorder, which might be supposed to support the popular notion of 'crazy behavior' at the full moon. However, I recall most of the evidence of same being anecdotal and no statistically significant correlation between the variables over broad samples or studies. That is not to say that this phenomenon could not have been or has not been experienced by a particular hospital ER or at a local or regional level from time to time.

Another such popular supposed relationship is between incidence of crime, particularly a variety of assaults, during the full moon phase. Similar studies with similar results have been conducted and the anecdotal evidence is also there, but overall, the relationship seems to be no stronger than does it in health care.

One could take this a step further in the quest of causality by hypothesizing that the full moon caused a spike in mental disorder, which caused a spike in assaults, which in turn caused a spike in ER visits, perhaps at least in part a reasonable argument, certainly a romantic one, but I for one have no interest in taking that leap. We here have been cautioned to beware spurious correlation in counting. Let's do so with the full moon and the ER.

That said, the facts seem to indicate that on a broad level, ER visits are pretty flat, rarely spiking at all any more. Certainly there are observable peaks, but weekdays are as busy or busier than weekends, the peaks often being Monday and Friday.

Again, this is not to say an individual hospital or groups of hospitals may not see a spike in the pattern from time to time, or that any given study may not find such evidence. For instance, we might try studying Flint, Michigan hospital ER's the night of GM's payday that happens to fall on a full moon. Guaranteed spike in visits for broken noses and knuckles, beer bottle concussions and alcohol poisoning. Sorry, though, no man-in-the-moon causality.

But, back to the point. I would suggest that, if they ever existed, any pattern exhibiting a spike in ER visits for ICD9 codes in the 800-900's correlating with the moon phase, or with any other variable, would have been subsumed in the past few decades by the propensity of many of us to use the ER as primary care provider. This is not to mention the number of visits by bored or lonely people with no companionship and nowhere to go, and there are plenty of those visits to go around, particularly in large urban centers. Ask any ER doc. Instead of hours of boredom separated by moments of terror, it's quite the opposite.

There are over 200MM visits made to hospitals in this country each year, over 100MM of them to the ER. About 300,000 ER visits per day, every day. As an aside, only 15% or so of all hospital visits result in a hospitalization, the remaining 35% or so are for outpatient services. Going out on a limb, albeit a pretty thick one, I'm more or less certain that backing up and viewing a daily plot of these 300K ER visits from across the room, the curve would look pretty flat.

In other words, the universe of ER visits has expanded pretty dramatically. Samples within it may exhibit variations, spikes even, but they're simply going to be less evident when the universe is being viewed as a whole. As I last saw it, the moon seems to impact the earthly hospital universe equally, not just samples of it. Frankly, I don't know of any studies of the ER universe, then or now, so I'll take the evidence of moon phase/ER visit correlation from samples like I take studies of coffee. One week it's good for you, the next it's not, but I'm still drinkin' it.

Would you like cream with those stitches, sir?



Leaving last weekend's Richmond, KY, Checker Tournament, on I-75 I saw an overhead sign and could not believe what it said:


I found it to the point and a real attention-getter! I think South Carolina, and my own state of Ohio, are the only two states without a motorcycle helmet law in place.

David Hillman explains:

Helmet LawIt's far more complicated than that. Only four states have no helmet restrictions; South Carolina and Ohio are not among them. Colorado, Illinois, Iowa and New Hampshire are. Ohio and 18 other states exempt adult riders [age 18+]. South Carolina and six other states exempt riders age 21+, and 20 states have full helmet laws [everybody wears]. The full helmet law states are predominantly West coast, Southeast and Northeast. if you're cagey, you can actually ride from Phoenix to Dover, DE without ever donning a hard hat. You see, we hilljacks and clodhoppers out here in the Midwest and Plains [except Michigan, Missouri, Nebraska] don't care much about head injuries. It's true there's not much uglier than a deer strike on a bike, but, hey, give us freedom and/or give us death.



Nigel Davies wrote: "Investors will have the opportunity to participate as supporting cast on one or more filming days, as well as being invited to the various social events surrounding the production, which may include a grand ball and a gala screening in the West End of London with the stars of the film and other film and television celebrities."

What's interesting about Zatoichi himself is the apparent humility coupled with phenomenal technique and inner confidence. My question is this: Does humility actually take tremendous inner confidence? And if this is the case, why is it called humility?

Changing your name to "Ichi Davies" would likely maximize your investment by guaranteeing a long run for 'Bridge of Lies.' Humility born of tremendous inner confidence? It's a Zen thing.

So, how much did you invest, Ichi-san?



 The Deal:

M's to pay Ichiro through 2032
July 18, 2007NEW YORK (AP) — The Seattle Mariners will be paying Ichiro Suzuki for at least a quarter century.

With interest, to boot, and the perks ain't bad either. Fitting for one of the few who may actually be worth it. 

The Meal:

When asked Wednesday how appreciative he was that the Mariners went far beyond a basic contract for him, the 33-year-old Suzuki said through his interpreter: "I spoke about the contract on the day I signed. I would not like to talk about that any more."

Refusing to be sucked into answering stupid and potentially embarrassing questions so some idiot can have his way with you. Beautifully done. 

The Unreal:

A baseball official with knowledge of Suzuki's new contract — and his current one that ends this fall and is paying him $11 million this season — said the perks were also in Suzuki's previous deals and were not a major negotiating issue this time around. The official requested anonymity to honour the Mariners' policy of not discussing contracts.

Since when does 'requesting anonymity' in betraying a confidence constitute 'honouring' that confidence? Huh! Great value system. Honour, my arse. 



The federal tax on each cigar could rise from 5 cents to $10
Published July 17, 2007

It's no mathematical error: The federal government has proposed raising taxes on premium cigars, the kind Newman's family has been rolling for decades in Ybor City, by as much as 20,000 percent.

As part of an increase in tobacco taxes designed to pay for children's health insurance, the nickel-per-cigar tax that has ruled the industry could rise to as much as $10 per cigar.

Now they are trying to take my cigars away! The maximum tax of $10 would destroy most of the manufacturers who rely on relatively high volume sales of $5-$10 cigars. Some good friends of mine will be instantly out of business.

The high-end Fuentes (Opus-X, Forbidden-X, God of Fire, and the Ashton VSG and ESG Lines), Padrons, Davidoffs, and, of course, the $500 Ghurka stick dipped in billion year old cognac, will not be as adversely effected.

A consequence of the higher tax will be even greater demand for the finest Havanas, which would mean everything you buy in Mexico and Canada will be either fake or seconds (lower quality cigars). London, Spain, Switzerland and Dubai are the best in that arena. 

Ryan Carlson muses:

Can cigar smokers tell different brands apart?

Recreational smokers (a few cigars/month) probably couldn't distinguish between most brands but they can definitely tell the difference between a good or bad cigar. There is a large difference in the strength of brands so perhaps that'd be a better reference point.

I have a few favorites and could probably pick them out of a large selection but try not to go beyond a few brands, so I'd be clueless on the rest. 

David Hillman explains:

 I don't know of anyone who can tell brands apart blind, even experts. Cigars are rated in blind tests; the properties are evaluated, just like wine, but that's merely subjective. They're also like wine in that they're made of tobacco of different vintages, from different origins, often blended, and though manufacturers attempt to maintain some consistency, there can be substantial variation, even from cigar to cigar within a box. The proliferation of seed worldwide, such as Honduran tobacco grown from Cuban seed, and variations in aging make the task more difficult as well.

For instance, one of my favorites, Perdomo's La Tradicion Cabinet Series, is constructed of Cuban-seed fillers grown in the Dominican Republic, Honduras, and Nicaragua, with an Ecuadorian binder and wrappers from Connecticut. Their milder line, Tobaccos San Jose, uses a blend of fillers from the Dominican Republic, Honduras, Nicaragua, and Brazil, binders from the Dominican Republic and Connecticut wrappers. The bolder Dos Rios line is primarily Nicaraguan filler with some Dominican Republic tobacco as well, the binder is Nicaraguan, the wrappers Ecuadorian. There are sub-series within the Cabinet Series, as well as the limited Champagne sub-sub-editions, so there's great variation within brands, too.

Moreover, cigars can/will acquire aromas and tastes of those they're next to in the humidor, so it's important to separate them from one another. Also, as with wine, good cigars improve over time, becoming smoother, more flavorful and complex with age if stored properly. I believe it might possible to tell a frequently smoked cigar with a reasonable consistency apart from others in the blind. I'm nowhere near good enough and don't smoke enough to with regularity, but I might have a better chance than the average Swisher Sweets smoker of batting, let's say, 2%. On the other hand, expert Grade seven rollers and master blenders are certainly capable of carefully examining a cigar and determining the type of tobacco used and its origin — is it a Cuban Cohiba or a Nicaraguan El Fako?

A novice wanting a good, reasonably priced smoke might sample a Monte Cristo #3, the Perdomo La Tradicion Cabinet Series R Champagne Robusto, or the La Flor Dominicana #100 (Tubo), all about $8.00 per. There are many others, these are simply a few that suit me.

All this talk of puros has gotten me fired up, but one last thing in this regard before I head out to the deck to chomp on one of the said Tubo #100s: It would be wise to refrain from entering into a high-stakes blind cigar tasting with a certain former world leader (whom I revere for his ingenuity in tobbaconistic matters). He may very well have found a sure-fire way to gain an advantage in distinguishing his 'brand' from all others in a blind taste test.

Aaron Krizik responds:

A lot of parallels can be drawn to oenology. I am highly confident I can tell the difference between branded cigars from Nicaragua vs. the Dominican Republic and certainly Cuba, but I doubt I could tell the difference between 10 randomly selected Cubans. It's easy to tell the difference between a Merlot and a Cabernet Sauvignon, but 10 randomly selected Merlots would be a challenge for most wine drinkers.

A Nicaraguan cigar like a Padron is just completely different from an Ashton with Dominican filler and a gorgeous "shade" wrapper from Connecticut. I could easily tell the difference between the two — or any other cigar I regularly smoke. Tobacco from Esteli, Nicaragua is simply very different from Vuelta Abajo tobacco from Cuba.

Larry Williams remarks:

With appologies to Guy Clark

Too much smoking gives you cancer
Too much cocaine's not the answer

Too much invested just on margin
Too many lawyers come in chargin'

 Mike Desaulniers extends:

I got back from two weeks in the motherland on Sunday. Caught some excellent weather in Vancouver, and not one local offered me any BC smoking material. My record for unsolicited offers walking through Washington Square Park in New York (granted, on the diagonal) was five.

There were huge displays of patriotism on Canada Day, more than I ever remember on previous visits. Everyone in the West End (downtown residential) had flags out windows. I saw more than one group walking on Robson St. shopping district, singing Oh Canada. It was quite striking. The Canadian dollar's rally must be going to their heads, eh?



 I have heard that the cause of Cyril Burt's death was gallantry to women. He insisted on walking a lady back to the subway in the rain, and died of flu a few days later.

We often see this trait in old men; an unholy courtliness to women, especially attractive ones, that borders on fixation and would be inappropriate for anyone under 70.

Certainly the Greenspan transcript on 9/11, with him showing off that he does not like the cutoff in a certain chart and that he has been fooling with his short wave radio, even as the tragedy unfolds, is a sign of sickness.

What is the general tendency of men to be overly chivalrous and boastful? This is something that is a certain mark of decay in people like the Sage, the weekly financial columnists, and the fake doctor.

I wonder if this tendency is more prevalent among chronic pessimists, and is it a symptom of something much worse?

Vincent Andres adds: 

It makes me think strongly about so many mothers who infantalize their children consciously or unconsciously? This point is not clear to me. Some women may have a real pathological and uncontrollable drive to remain mothers. Their goal seems very clear. Remain a mother. Remain a needed mother. Remain young.

Such mothers what to show the neighborhood "see how well I educate my child," and doing in fact exactly the opposite. They actually poorly socialize their kids to keep them dependant on their mom, the "only one able to understand them". The number of very precise and efficient tricks and tactics used to accomplish this is amazing.

Of course the concerned child also remain young. At 30 always at mom's home (or in jail), depending on mom's money, etc. Could any child escape this kind of situation? How? It's so cool to stay a child. This seems much more common today than 20 years ago.

Janice Dorn replies:

It is my experience that this situation differs from person to person with aging. Men of an older age tend to view themselves and women in a framework which exaggerates that which they held when younger. In essence, personality tendencies of youth are magnified in adulthood.

A depressive tends to become more depressive, a person with obsession or compulsion tends to become more obsessive and compulsive. There are certainly instances where dementia and other sorts of degenerative brain injury can lead people to behave erratically (go naked in public, go after young boys, other inappropriate behavior).

For the most part, however, "normal" aging appears to reflect exacerbation of qualities present when they were younger. You will always find those who are a sucker for a pretty face and youthful body (think of any number of women and men who use this and exploit it as a lifestyle).

By the same token, misogynists become more so. I believe that these are normal so-called defense mechanisms which individuals use in an attempt to not lose themselves.

In other words, the magnification of the personality traits with aging represents the strong need to hold on to those aspects of self which the person senses they are losing.

George Vaillant from Harvard has done some very nice lifestyle through the ages work, including study of the ego. I believe his earlier work was a bit more serious than that recently where he appears to be directing more to the masses, happiness and spirituality.

David Hillman mentions:

"Becoming a caricature of oneself," as I'm fond of calling it, was evident in corresponding for some time with a famous author who had written his magnum opus and done other good work in the '60's.

For the next 40 years, he continued to hammer away at the same off-beat theme to anyone who would listen. Increasingly fewer would. His reaction was to pump up the volume. The longer he kept it up, the more tiresome he and his theme became.

Rather than appearing to be the life-sized, thoughtful guy with interesting theoretical ideas he once was, he looked to be a ranting, bloated, washed up, parade-balloon-sized radical who hadn't had an original idea in years and couldn't let go.

At the time of our last correspondence, he was actually still quite a vital and active near-nonagenarian, and a really nice guy, but who would have known? It makes a pretty strong argument for introspection and re-inventing oneself from time to time.

Also, in this respect to 'an unholy courtliness to women,' I highly recommend Memories of My Melancholy Whores by Gabriel Garcia Marquez.

….García Márquez's slim, reflective contribution to the romance of the brothel, his first book-length fiction in a decade, is narrated by perhaps the greatest connoisseur ever of girls for hire. After a lifetime spent in the arms of prostitutes (514 when he loses count at age 50), the unnamed journalist protagonist decides that his gift to himself on his 90th birthday will be a night with an adolescent virgin. But age, followed by the unexpected blossoming of love, disrupts his plans, and he finds himself wooing the allotted 14-year-old in silence for a year, sitting beside her as she sleeps and contemplating a life idly spent….. —

Laurel Kenner quotes:

SENEX AMANS (from Latin "ancient lover"; also spelled senex amanz in Old French):

A stock character in medieval fabliaux, courtly romances, and in classical drama, the senex amans is an old, ugly, jealous man who is married to a younger, attractive but unhappy woman. He is often a poor lover (or even impotent) with bad breath, wrinkled skin, and grey hair.

He is frequently cuckolded by a younger, handsome, virile man who secretly seduces his wife. We find examples of the senex amans in Chaucer's "Miller's Tale" and "The Merchant's Tale," and in various other fabliaux. Likewise, the motif also appears in the medieval French lais such as Marie de France's "Guigemar" and similar works such as Tristan and Iseult.

The motif of the senex amans often becomes useful for fast characterization, since it often can quickly cast a predatory light on an elderly male antagonist. An example of such use would be the old king of Ghana pursuing the young Imoinda in Aphra Behn's Oronooko, or any of the aging aristocrats sadistically pursuing young innocent girls in Gothic novels. [Read More]



 ….her name is Lili Von Shtupp…..


Here I stand, the goddess of desire
Set men on fire
I have this power.

Morning, noon, and night, it's dwink and dancing
Some quick womancing
And then a shower.

Stage door Johnnies constantly suwwound me
They always hound me, with one wequest.

Who can satisfy their lustful habits?
I'm not a wabbit.
I need some we… [Takes a breath] … est.

The Mistwess sings her sister's song today. Oh, it's twue, it's twue!



 It's all about balance and eating healthy red meat. If you want to eat great red meat, here's how to get pure, organic, lean meat and some exercise in the process. This works for turkey too, and you get just as much exercise!

I get up in the morning, get dressed carefull, go out into the woods with my bow and arrows (walking is good exercise), climb a tree and sit in the freezing temperatures (toughens me up and burns some serious calories), keep my mind and senses alert for "the" deer to come by, wait for the perfect moment, draw, aim and release.

Zip! Razor sharp death zipping along at 300 feet per second through the chest cavity of a deer. Watch carefully where he runs, listen for him to fall, wait 30 minutes, pick up the blood trail, find him, drag him out of the woods (if you want some exercise, try dragging 250 of dead weight up and down a half mile of hills).

Field dress the buck after weighing it and taking measurements (the 'possums, 'coons, coyotes, buzzards, and crows will thank you!).

Hang him up the barn, skin him (20 minutes), cut off his flanks (20 minutes), debone the meat (20 minutes), wrap it up tight and freeze it!

Grind some into burgers and BBQ some that day. Nothing better than fresh back straps (tenderloins) BBQed that day. Get some fresh corn, some green beans, some potatoes and slow cook it all…

Do some situps and pushups while flipping the meat. Grab a low-hanging tree branch to do some pullups on your way in to check on the vittles on the stove, and on your way back out, do 25 deep knee bends.

Put dinner on table while it's piping hot (too hot to eat).

Dash to the shower and take a three-minute refreshing shower, get dressed and get back to the table within five minutes, just in time for the food to be the perfect temperature.

Eat to your heart's content!

Then go outside, stare up at the stars, and take it all in! Life is so beautiful! And it's ours for the taking!

Charles Pennington extends:

 If and when I need to lose weight, I go on the more extreme version of Atkins diet until the mission is accomplished. Then I return to a steady-state diet in which I avoid bread, rice, potatoes, and most sugar, though I do cheat regularly with things like ice cream and chocolate. Avoiding the bread, rice, and potatoes usually pushes me to substitute real vegetables. Don't be afraid of Atkins's almost no-limits approach to meat. Meat is very filling. I, at least, have no craving to overeat meat, although I could easily overeat french fries, sodas, and biscuits.

It is a pet peeve of mine that there is such an anti-meat and anti-fat-in-food bias out there that is not supported by real science. The Atkins/anti-Atkins divide corresponds roughly with the political right/left divide. The left doesn't like Atkins because it involves eating meat, and they're loath to admit its merits. The major studies that have been emerging (such as a massive study of the diet and health of tens of thousands of nurses) have been showing pretty uniformly that the fear of fat is unfounded, that low-fat diets don't work, and that the extreme Atkins-type diets are effective for losing large amounts of weight.

Hany Saad adds:

I have to agree with Prof. Pennington on this. I have yet to find any scientific proof that red meat is harmful for the human body. Colon cancer patients are automatically advised to stop meat consumption, as are patients with kidney and liver diseases. I looked everywhere for scientific proof but failed to find any. 

Marion Dreyfus writes:

In Mongolia you eat lean meat from the vast tracts. On the mountains in Peru, same thing — lean, absent any hormones or commercial shelf-life preservatives. These people live longer, on average, than city folk, even with reddest of the red meats.

The difference is consuming them fresh, without additives, and eating them from the slopes or the veldt, without hormones or padding from artificial feed. I ate wild game when I worked for a hunting magazine, and that game too had little to contest.

The stomach does work harder to digest the meat, true, but if it is of high quality, it is not the cancer-agent suspect the society implicates so easily. I agree, too, that the research with suitable controls is utterly (utterly?) absent, thus far.

Bruno Ombreux adds:

There are also the Okinawan diet and the Cretan diet. Lots of fruits, vegetables and fish. Little meat. And the French Paradox. Lots of wine, goose fat…

Scott Brooks explains:

Exercise and moderation in diet: that is the key, my dear Professors! That is how I've managed my chiseled physique. You don't get this body by accident!

David Hillman writes:

 Ingesting high amounts of certain carbohydrates causes insulin spikes, often resulting in fat synthesis and deposition. So, bread, rice, pasta, potatoes, sugar and greasy three-pound breakfast biscuits from Hardee's not eaten in moderation are common culprits in weight gain. Red meat, or meat of any sort, and fats, have not been shown to cause the creation of excess insulin and glucose and fat. These scientifically proven concepts are the basis of the Atkins diet.

The best advice is to eat what you want, when you want, in moderate proportions, 4-5 meals per day, exercise regularly, screen preventively for common ailments, drink clean water often, good coffee more often, and great bourbon occasionally, smoke a Cuban cigar a couple times a year, get a hobby, steer clear of the press, wear sunscreen and loose underwear, have frequent sex, and always wear your seatbelt. If you want more complete information about insulin spikes, ask a registered dietician or a professional 'natural' body builder. My experience is they know more about this than the average medical doctor.

Dr. Atkins was generally correct, but that's not to say there aren't myriad ways to eat well, stay healthy, keep excess weight off and enjoy life, or that other plans can't also be a kick start. Many enjoy success with Weight Watchers' point counting system. Or, for $300, NutriSystem will sell you enough food for a month's worth of five-a-day MREs (well, not exactly — they sell you the entrees and in the fine print you're told you have to add your own fresh fruits and vegetables, dairy, etc). The truth is, eating to excess can cause weight gain, not eating enough can contribute to weight gain and not everything works for everyone. You have to determine what works for you and develop smart lifestyle and eating habits.

But the misinformation often foisted upon the public as healthful dietary advice by gurus, government and even reputable sources ranges from misleading to deplorable. Years back I stopped sending checks to the American Heart Association after seeing its logo and 'Heart Healthy' endorsement on a box of breakfast cereal known to have 50% sugar content. "No Fat" proudly displayed. Oh, really? The AHA endorses a product that causes insulin spikes, which in turn promotes excess fat production and deposition?

Excess fat builds up around organs (including the heart, and if you're fat outside, you're really fat inside), hampering proper function. Excess weight that wears at joints promoting osteoarthritis and inflammation. Good thinking. Instead, I now support the American Cattleman's Association through regular contributions made at the butcher shop of the local Piggly Wiggly. Ever seen an obese cowboy? Neither had Dr. Atkins. At least not since Andy Devine.



One of the great things about the list beyond the incredible benefit of the mutual education and the camaraderie we share, is the opportunity to be involved in events and activities we might not otherwise have been. Often times, participation can spawn spontaneous learning, self-improvement, or perhaps even a conversion experience. This was the case for me over the past few days. It goes like this …

There is a certain waterlogged spec who likes to see himself as a womanizing rake, a bounder of sorts. He is in fact a thoughtful and quite lovable wanker who writes prolifically and very well when he wants to, treating us to observations on the seasons and tomes that remind us of the spirit of the holidays. There are lengthy missives on the joys of major league baseball and the NCAA's, lurid accounts of barely-there bikini contests at the dock bars, and rambling but oh-so-entertaining trip reports, all interspersed with kind words of gratitude for the chair and others here he calls 'friend.'

Though I have been relatively incommunicado for the past couple of years for reasons I will not articulate here, during my absence, this spec encouraged me to engage in a certain 'competition' which I theretofore believed was principally intended for dumb-jock-wannabe's who never grew up, as well as others who had no life and were determined to fill the void with something … no, with anything! This, my dear fellow specs, is the world of fantasy sports … or so I thought. Though my spec friend likes to consider me addicted, he, in fact, badgered me incessantly and mercilessly to the point I agreed to 'compete' in last year's football extravaganza just to shut him up. This was really the last thing I wanted to do. You see, the problem for me is not addiction, but when on the field of battle, mine is a competitive spirit that operates in constant overdrive, forcing my involvement beyond compulsion. I knew that fantasportatition, as I call it, would result in long hours of study and management and encroachment upon other parts of my life. I would have to think and guess and be stabbed in the gut by the each new entry to the disabled list. Still, I agreed, and last season competed reasonably well, enough to prevail and sit atop the football league in my first ever season. Not bad, methinks, but nothing else would have done.

So, now let's rewind to spring '06. The smell of pigskin is still in the air and 'what's this?' My spec friend is back at my in-box badgering, that's what. "It's time for the 'national past time,'" he whines. "Oh, bite me," says I. Yet, fresh from my victory lap, the smell of dirty jock straps in the locker room and the ghost of The Mick upon me, I am easily persuaded and succumb, this time with baseball. There I was, back at it some 24 weeks ago, girding my loins for battle with 11 other hearty and worthy spec competitors. Developing a strategy, setting priorities, pouring over statistics sorted every which way, and asking my wife to pay the bills for the next five months and to shove a pizza under my office door every so often.

[read the rest of the story]


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