December 3, 2020 | Leave a Comment

Laurence Glazier writes: 

In Sci Fi the Peter Hamilton trilogies and Adrian Tchaikovsky's tales.

But my main find in 2020 is the app Notion - - and among other uses for it I have been applying Tiago Forte's Second Brain method for storing favourite snippets for future access. If anything I find more wisdom in fiction than non-fiction. in a sense that makes it truer.

James Goldcamp  writes: 

Hi Laurence - Can you expand on how you use this app and Second Brain method.  I've actually been contemplating some kind of note app particularly for the purpose of putting excerpts and ideas from things I read or thoughts I have more at my fingertips. I've willfully resisted such technology to this point but think something along these lines might be useful

Leo Jao writes: 

Just checked a bit on Notion, can't yet recommend about its advantages, but have noticed major drawbacks of a note taking software.  In the past years, I have tried and used quite a few of them.  Of course in this age, a key feature is being able to sync notes across devices.  The big names include Evernote, OneNote, Keep, in addition to other lesser known one's.  One issue is at some point in time, one gets concerned about privacy and security of the contents, as with these sync'able platforms, contents are all stored in their servers.  For this or other reasons, one wants to switch to other platforms at some point.  There then is a key issue: one can't easily take the contents away!  Notion has these two issues.  I see that it can export a single note, but misses a feature of exporting all notes.

For the past year, I settled on an open source software called Joplin.  For syncing, it provides various ways without having to use a public server.  Notes can be easily exported.


Michael Chuprin writes: 

Victor's contribution to this thread:
In no specific order:
1.The Psychology of Speculation: The Human Element in Stock Market Transactions
2.Fourteen Methods of Operating in the Stock Market
3.The Mad Dog 100: The Greatest Sports Arguments of All Time
4.Wealth, War and Wisdom
5.The West of the Imagination
7.Regression Analysis and Linear Models: Concepts, Applications, and Implementation
8.Man on Earth: A Celebration of Mankind: Portraits of Human Culture in a Multitude of Environments
9.Voices of the French Revolution
10.The Decline and Fall of the British Empire, 1781-1997
11.Lone Star Rising: The Texas Rangers Trilogy



The walking cure: "Walking Might Be the Best Exercise There is"

After trying it all… jogging is the best exercise there is.

Larry Williams writes: 

BFR or blood flow restriction has good data on it for improving strength w/out heavy weights, etc…

James Goldcamp writes: 

In bang for buck I would look at the high intensity interval work of Martin Gibala. The name "one minute workout" evokes charlatagnism, but the book is a good reference on short protocol workouts with real data. For me if you had only one tool (and your body) at your disposal I'd use an airdyne fan bike (you can generate a lot of intensity in all limbs that is easy on joints) and pushups.



This looks like the Frontline documentary that Ralph recommended: "Betting on the Market (1997)".

James Goldcamp writes: 

Plus you get a pre Lenin Cramer. This was before he was ubiquitous on CNBC. As Ralph says it's a beautiful time capsule. I was even working for fido when they ran advertisement in the documentary and Vinik got the boot.



 "Baseball is Going Back to the Dead-Ball Era"

This trend brings one back to the useful idiot Paul Volker, the great scholar and lover of baseball Larry Ritter, and Kora Reddy's excellent study, and our own work proving that doc Greenspan was no doc.

Stefan Jovanovich writes: 

Jared Diamond knows as much about baseball as he does about "steel". The spirit of Larry Ritter–Bless Him–has to be laughing.

James Goldcamp writes: 

I still recall fondly reading a worn copy of The Glory of Their Times as a young boy in the car on the way to my cousins in eastern Ohio. The old timer stories were mesmerizing. A copy of a more recent edition of that book still sits buried somewhere on an end table in my living room. It was probably the first non-fiction book I ever read.

I recently finished reading The MVP Machine which centers on the tech wave of player development which has swept over baseball (down to the "Hit Traxx" at my son's 11 year old team's training facility and the now banned for patent infringement Zepp sensor at the end of my son's bat). This wave has finally fully swept up on my shore as the hero of the aforementioned book Trevor Bauer is the centerpiece of my hometown team's starting rotation and the founder of Driveline baseball has been hired to run pitching.

One hopes the wave of technology adopted by baseball ends better than the hordes of hedge fund-ists and investors who found system trading or smart beta just before the long extended bull run in stocks.

anonymous writes: 

Our daughter is an ambidextrous natural athlete who was accurately described, by the mother of a teammate on the 4×50 12 Under Relays as a "mound of muscle". By age 12, she was able to practice driving our "field car" by sitting in the passenger seat and steering with her left hand. We made her play basketball, run track and swim competitively because otherwise there was no living with her; to this day, if she does not have a 45-minute workout every morning, her excess of physical energy and the impatience that it brings with it is downright scary. For a few months earlier this year, we thought we had seen nature come to our rescue. Her now 9-month old son has the same internal combustion engine. His nickname, Whumpa, was acquired before birth; and, while other infants seem able to be awake without needing to do calisthenics, Whumpa has only two speeds: Full Throttle and Full Stop. For a while it looked like Walter was actually wearing his mother down. But that was only a phase. The two of them now happily go off to exercise together.

I mention this to give you all the background to my only disappointment as a father. It was the day, when she was 6, that, after playing catch with me with a tennis ball, using first the left and then the right hand, she announced, "this is no fun; let's go running." Like John Kruk I am not and never have been an athlete, I love baseball and I have always hated running.

Congratulations to JG on having a baseball player and an athlete and embracing the technology that is making modern baseball such a marvel. 

James Goldcamp writes: 

Anonymous, the last part (the Kruk quote with which I'm familiar and use sometimes) resonates with me. I'm one of the coaches on my son's team. At various tryouts for our teams I'm notorious for wanting to get past the timed running from home to 1st, 1st to third, etc. that is typically part of an evaluation and "just see them hit live pitching". I was pleasantly surprised while watching a Ted Williams biography hear recounted a story where some players or coaches were discussing the intricacies of a pickle or some such situation, apparently Williams was claimed to have said, when asked to ponder this, something like "#@#! it , let's go hit". Bill Beane was also purported to have said (as recounted in Moneyball) that we usually no player is too fat for us to draft, though we made an exception for Prince Fielder, and we were wrong.



 I wonder how wealth will end up being sheltered if/when our betters on the Dem side implement their wealth taxes.

In particular:

1. Would wealth taxes be imposed upon funds in currently tax sheltered retirement plans–IRAs, 401Ks?

2. What about cash values inside life insurance policies?

3. What about an income-paying annuity that has no official cash value?

Conceivably life insurers and sellers of annuities could be big beneficiaries of the Warren trade.

Whenever elimination of the death tax is proposed, the life insurers reliably roll out arguments against rocking the boat.

James Goldcamp writes:

I recently had similar thoughts.

It's seems if the wealth tax reached low enough those historically rather poor vehicles, income paying annuities, would have a proper place in financial planning. It could be that moves to protect the "net present value" of a future fixed pension (which they would never attack due to union support) would be analogous to protecting such annuity vehicles. Re 401K I think the cynical calculus will be how many voters will be ensnared in the scheme. It's relatively rare for an employee to have say over 10M in a 401K due to contribution limitations (and limitations on the rate of compounding) so they don't risk alienating many voters with a high limit. Drop that down to 1 or 2 M and I suspect you would risk a rebellion among many middle/upper class constituents. Interestingly uncle Joe's stepped up cost basis on estates proposal probably casts a wider net than the Native American candidates "2 penny tax" since it's not uncommon for middle class people to inherit long held stocks from parents.



The fundamental flaw in systems based on past fundamental data which are published in a book and now used as a stalking horse for investments from outsiders is that each time he comes out with a new book he has found better methods based on a moving window of retrospective data.

I'd also suggest that value-momentum is a widely known and disseminated alleged anomaly, and like many things that worked better before everyone knew about it, I suspect the strategy's prospects are not as good as the back tested history. Moreover, given the rate of compounding, if it works, then the many billions pursuing this already will have grown to a substantial part of (more than?) the total market capitalization of equity markets (to say nothing about any capitalization effect that would be nullified by large amounts of capital pursuing the same strategy in anything but large caps).



 I cannot find a single compelling reason to own Japanese stocks (but for one.) The demographics are horrible. Their debt problems may be worse than Greece. They get hit by catastrophic earthquakes, tsunamis and radiation. Even Toyota is a mess. So (other than the fact that their stocks are reasonably priced, and in some cases, extremely cheap), am I systematically nibbling at Japanese stocks with a *10+ year* horizon? The answer is: any country that doesn't like the cult of apple cannot be all that bad. check out this article on the subject.

James Goldcamp adds:

As a casual observer another interesting anecdote confirming the degree to which Japan is out of favor is the bleed out of assets in Fidelity's Japan and Japan Small Companies fund. Not surprisingly in a yield hungry world their junk bond (C&I) and floating rate loan funds (variations of low quality debt) are near an all time high.



 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."



 I apologize in advance for [an article that starts with] a quote from Sage, but…

Five Magic Formula Stocks For The Next Year:

Ontario-based Research in Motion ($23 billion market cap) is the creator of the BlackBerry smartphone and its operating system. It's been producing tremendous growth in recent years, but has been losing some market share to Google's Android smartphones and the iPhone recently, which has spooked many investors. My Greenblatt-based model thinks that's made it a bargain. With an earnings yield of 22.2% and a return on capital of 66.6%, it's the 11th-highest-ranked stock in the market, according to this model.

James Goldcamp writes: 

Interestingly when I run the screener on their own site (the strategy's author not Forbes) I don't get RIMM, but a host of other tech stalwarts like CSCO, MSFT, AMAT, HPQ, and DELL are returned in the screen of the 50 highest rated by the magic formula.



 When holding the ball for the last shot (several examples in last night's playoff games), isn't it clear there is a tendency to wait too long?

I realize, especially when score is tied, you don't want other team to get the ball with sufficient time for it to set up a decent play and shot.

But taking that into account, the team holding the ball ("offense") should also factor in:

1) extra time needed to set up play and take final shot if offense players cannot get to planned positions, something goes awry, etc;

2) extra time needed if defending team interrupts or delays offense's final shot;

3) if offense misses but needs extra time for tip-in or for offensive rebound and second shot;

4) the possibility of the ball being lost or stolen while dribbling or passing around waiting for last shot;

5) the possibility that the offense is on its last legs, that the defense is the better or fresher team and will win in overtime, so there is a higher premium on the offense giving itself the highest chance to break the tie and win in regulation, rather than go to overtime.

More often than not, and especially last night, the team holding the ball winds up with a low-percentage shot (or even no shot). Taking all the above factors into account, shouldn't the coach and go-to guy of the offense start their final player a few seconds earlier?

James Goldcamp writes: 

The answer is, yes, especially with respect to #3 below. Also, another ploy is that when you know a team will hold for last shot at about 15 seconds left if I were on defense I would trap the ball handler and generally pressure knowing the player is afraid to shoot before 5 seconds or so and feel their coach's wrath; it's like a free option for the defense knowing you have a fixed strategy opponent.

The other thing that drives me nuts is with TV announcers where a team is down 2 points with the last possession saying "they don't need a three here", especially on the road. It's well known refs fail to call fouls at the end of a game ("put away the whistle"), so your player is likely to get fouled on a contested drive at the end resulting in a low percentage shot. Better to get a clear three off and win or lose it at that moment (again especially on the road where overtime will work against you); and if you shoot early enough three pointers are notoriously harder to rebound for the defense.

Just like in football, basketball experts and coaches are generally too conservative with strategy I think generally for the fear of looking stupid or reckless.

Pitt T. Maner III writes:

 Usually 7 seconds seems to be the amount of time chosen to start the last play. Given that you have about a 1 in 3 chance of winning with the final play in a tie ball game, and you want to eliminate all possibility of the opposing team getting another look if you miss your final shot, there is a bias to starting the final play late.

Could be considered an example of risk aversion. Better to not win and go into certain OT than to have a potential (if only slight chance of) loss when leaving 2 to 3 seconds on the clock.

Even the best players in the clutch are below 50%. The conservative NBA coaching decision is often to go with your best shooter on an isolation one-on-one and to start the move to the basket at 5 to 7 seconds. It avoids a lot of post-game fan negativity which has to be a consideration. You would think (game theory wise) that a mixed last shot strategy of alternating players and plays would produce a higher win percentage but what coach wants to try that in the playoffs! Better to go with 5 seconds and your known Jordan, Horry, Kobe, LeBron being double covered than go with an alternate strategy.

Here is a list of the best "clutch" players.

Even NBA players "choke" (on occasion), so that if the final play starts too early there is probably a greater risk of potential turnover or poor clock management if several passes are made. There is a "dear in the headlight" phenomena when there is too much time to think about taking a shot–too many options and players not used to handling the ball in pressure can cause a freeze up. The defensive team may also make a decision to foul your worst free throw shooter. (although choking effects seem diminished in last 15 seconds according to following research)

It would be interesting to know what the risk of losing an NBA game is with only 1, 2, 3 ,4 , 5 seconds, etc. left on the clock.

Around 7 seconds appears to be the threshold time to running an effective play when taking the ball in from end to end.

This is a great article on the NBA choke effect:

We analyze the effects of pressure on performance using National Basketball Association (NBA) free throw data from the 2002-03 through 2009-10 seasons. We find strong evidence that players choke under pressure—they shoot 5-10% worse than normal in the final seconds of very close games. Choking is more likely for players who are worse overall free throw shooters, and on the second shot of a pair after the first shot is missed. In general, performance declines as pressure increases (as game time remaining decreases, and as the score margin decreases, whether the shooter's team is winning or losing). However, we find no evidence of choking when games are tied in the final 15 seconds. We also fail to find evidence of performance under pressure being affected by home status, attendance, and whether or not the game is in the playoffs.



Glencore (aka the metal men) IPO top ticks a number of markets within days. Not even Blackstone et. al had that kind of timing skill in the last cycle.

James Goldcamp writes:

And don't forget the tendency for central banks to move to an accumulative posture relative to the metals. Alas, the "convergence" of these types of indicators is too infrequent I would suspect to be of counting value.

Anton Johnson writes:

And let's not forget the guaranteed to happen yin yang of Zell's of near perfect timing vs. Blackstone, and his subsequent dinosaur endeavor.



 1. "There is no such thing as easy money"

2. Events that you think are affected by cardinal announcements like the employment numbers at 8:30 am on Friday are often known to many participants before the announcement

[An example supplied on April 18 by Mr. Rogan: "The Reason For Geithner's Weekend Media Whirlwind Tour: White House Learned About S&P Downgrade On Friday" (zerohedge )]

3. It's bad to try to make money the same way several days in a row

4. Markets that have little liquidity are almost impossible to profit from.

5. When the stock market is way down, policy makers take notice and do what they can to remedy the situation.

6. The market puts infinitely more emphasis on ephemeral announcements that it should.

7. It is good to go against the trend followers after they have become committed.

8. The one constant, is that the less you pay in commissions, and bid asked spread, the more money you'll end up with at end of day. Too often, a trader makes a fortune on the prices showing when he makes a trade, and ends up losing everything in the rake and grind above.

9. It is good to take out the canes and hobble down to wall street at the close of days when there is a panic.

10. A meme about the relation between today's events and those of x years ago is totally random but it is best not to stand in the way of it until it is realized by the majorit of susceptibles

11. All higher forms of math and statistics are useless in uncovering regularities.

Mark Schuetz comments: 

A point about # 2: This one might be fun to try to rigorously measure and test, looking at price movements in the time leading up to and including certain announcements (knowing this type of thing has been shown by list members before, but usually it's more descriptive instead of measured). Is it possible to show which types of announcements are more often known by participants beforehand as opposed to other types? Also, if certain participants are informed ahead of time, how far ahead of time do they know and in which way will they "front-run" the announcement (there can sometimes be many different ways to make a position on one economic statistic) ?

Victor Niederhoffer replies:

Certain participants know it and they react to it, and you can figure out which announcements are go with and go against——-but but but. The pre and the post regularities are always changing vis a vis the flexions and cronies and their nephews.

Ralph Vince writes:

What a great post. Thanks Vic. I certainly must second points 1 and 11, the bookends….and they have me thinking…

1. There is no such thing as easy money

This is so true, in the markets, in everything. Those who happen upon money where it DID come to them easily, it seems, as a witness, have had it very fleetingly. In my own case, although I am supremely confident in the profitabliity of what I am doing, in practically any market, in virtually any "regime," doesn't mean it's easy. It works like clockwork and is incredibly painful and distressing. It would be so much easier to simply sell buckets of blood."

11. All higher forms of math and statistics are useless in uncovering regularities.

Certainly in a post-'08 world, quants are out of favor, and for good reason. Most anyone I know who DOES make money in the markets, does so with very simple, robust techniques. Having considered going to quant school, and studied a good deal of it, I finally came to the conclusion that they are simply working with "models." Models of how the world behaves. unlike hard sciences like Physics and such where you can perform a test, come back a year from now, perform it again and get the same results, you don't have this in financial modeling. And I think this is where the quants have fallen short. Models are NOT reality, and they never got down to the bedrock, the reality of what his game is about. Of course it had to fail, and in a large way, at some point. A good rule of thumb is that if I need a computer, if it isn't simple enough to do in my head on the fly in the foxhole after I have been awake for over 100 hours, I can't use it. 

Jim Lackey writes: 

About point # 10: It takes no time at all for the information to spread. Yet how many times have we acted, lost a bit, recovered, then seemingly too much market time expires, and we close out a position. We say "awe everyone knows that it's priced in." The meme is then repeated for the 57th time and on a low pressure day, month, or year and then, kaboom!

Of course, I can think of the few times where we missed a huge score, being short YHOO in 2000 or selling some short in 2008. Yet there are hundreds of low magnitude fantastic long only ideas that we forget about. I look back 6 months later and say wow look at that beautiful rise, what happened? It went up very small, day after day, and only buy and hold would have worked.

Alston Mabry adds:

 12. One should not make one's analysis more precise than one's actual trading could ever possibly be.

If the rational mind has not determined the parameters of a trade, then upon execution, the lizard brain will decide.

14. Never go on vacation with open trading positions.

Or, zooming in:
<click> home

<click><click> to lunch

<click><click><click> to the bathroom 

Paolo Pezzutti writes:

One could test how the stock market reacts to good (very good, wonderful) or bad (very bad, terrible)(a sort of matrix) news when the news is released and after some time. It might help build a strength indicator. Amazing how the earthquake in Japan and the unrest in Middle East, admittedly extremely bad news, were absorbed by the strong trending markets without any problem (so far). In other times, stock markets might have crashed confronting with the same news.

Alston Mabry comments:

Amazing how the earthquake in Japan and the unrest in Middle East, admittedly extremely bad news, were absorbed by the strong trending markets without any problem (so far). In other times, stock markets might have crashed confronting with the same news.

Chris Tucker adds: 

Stick to your guns, but realize when you are wrong. Easier said than done. Good ideas can lead to conviction, but only experience can strengthen ones resolve. Forget the last trade, look to the next. Try, try, try to learn from your mistakes, but also from your wins.

Anton Johnson writes:

15. When correlations among many typically disparate markets become high, one should reassess leverage and seek novel opportunity.

Jeff Rollert writes:

17. Sell side liquidity is an inverse function of cell signal strength and micros0ft patch frequency, especially at lunch time.

Rocky Humbert writes:

The First Law of Rocky – In every "macro market" (indices, bonds, commodities), all prices WILL be seen at least twice. The only unknowns are: (1) how long it takes and (2) how far prices go, before the price is re-visited. This Law is true 99.999999999% of the time.

The Second Law of Rocky – Rocky always keeps his calculator precision set to two decimal places. Any trade that requires more precision than the hundreth decimal place, is a trade that Rocky leaves for smarter participants

Jeff Sasmor writes:

About Jeff R's # 16:

16a. Never go to the doctor when you have a profitable position as it will reach its maximum profit and reverse exactly at the time that you enter the doctor's office.

Happened to me yesterday…

Ralph Vince comments:

With regards to the First Law of Rocky…."Unless it is a new high, that price has already been seen before."

Victor Niederhoffer adds:

Beware of using hard stops as it's bad enough that the floor can always know your physical hard stops.

Jay Pasch comments:

No wonder over-leveraged daytraders always lose as they are required to deposit a hard stop with their leverage, along with their hard earned money…

Ralph Vince adds: 

Despite numerous posts on this thread, it has not been opened up beyond Vic's original 11…

T.K Marks writes:

Aristotle felt the same way about drama, posited that it could be comprehensively reduced to 6 elements. And any additional analysis would by definition be but variations on those original half-dozen themes:

"…tragedy consists of six component parts, which are listed here in order from most important to least important: plot, character, thought, diction, melody, and spectacle…"

Jim Sogi writes:

Always be aware of and consider current market conditions and how they might affect or even negate your prior analysis.

Even the the weather forecast says sunny, if the clouds look dark and the wind is blowing, stay home or dress warm.

James Goldcamp writes:

One good anecdotal rule I've found that works for investing is that the market that causes you the most psychological pain, revulsion, and visceral response from prior bad investments, or overall perception, is probably currently the best opportunity since others may also have a similar overly pessimistic view (or over assign risk premium). This seems to be especially true for post calamity emerging markets, high yield bonds, and fallen growth stocks (tech). If for no other reason, this is why I think stocks like Citi and the West Virginian's company are good buys now (and perhaps government motors and Russian stocks).

Ralph Vince comments: 

 Thinking on this a great deal the past 24 hours, I think I would add one more, which is to me the most important of them all perhaps, or at least tied with #1 and #11. And that is that most people have no business being here. They don't know why they are here, and, if pressed, can only give a sloppy, struggling answer. "I'm here to make money." "I'm here to improve my risk-adjust return," or some other nonsense.

They are here for action– whether they know it or not, whether they acknowledge it or not. The market is a magnet for gamblers, a magnet for those who compulsively seek out the very action she puts out. People are here because they want to feel they have one-up on the masses, the system, or that they are not as inadequate as they suspect. The very proof of that is their utter inability to instantly articulate their criteria in specific terms. Absent that– they're in a bad place.

They're looking for girls in the wrong dark alley.

It makes no difference how well-capitalized the individual is. The world is full of guys with $10,000 accounts who will lose it all and then some, and full of guys with very fat checkbooks who will lose all of it equally as quickly, in similar fashion.

They still think it is about what you buy, when you buy it and when you get out, facets that have nothing to do with what is going on here (which is specifically why mathematics, simple or higher-order, fails in this endeavor; people are applying to aspects they mistakenly think this thing is about.)

If you examine institutions, they may be equally as clueless as to what this thing is about, but they have one big up on the individuals– they have a specific, well-defined criteria in most cases about what they are in this for, what they are willing to do to achieve something very specific.

Most individuals– of all gradations of wealth– can't, and that's the red flag that they here for all the wrong reasons.

Jeff Rollert adds: 

Amen. If it doesn't hurt a little, you're wrong.



I find the concept of mimicry quite interesting, and I wonder if false signaling via insider purchases of stock are a good example of mimicry. Prospective investors then become aware purchases may be more signaling in nature (rather than economic) and thus turn their attention to the materiality of the purchase. In the commodities space I would speculate that there is a similar desire for manager to appear to be "short term" to their prospective investors (those who have positioned themselves as such have seen large inflows) to offer style diversification, with possible ramifications for investors in vehicles based on short term traders.



Picture book ad for HPBack in about 1994, my wife and I started investing in individual stocks. We did not have much to invest but if we had a couple hundred from say a race won or a tax refund we would research what to buy. We would go to the local library and look up the latest issue of Value Line, to come up with our top ten prospects. Then we would look at their recent statements compared to its competitors to screen out the candidates. HWP was one of our initial purchases,(before the COMPAQ merger ticker switch to HPQ).

While we made several mistakes on other stocks, HWP initially was a great buy., as were most any tech stock back then. Still HWP bet the QQQ.and IBM for first few years. While we had a good initial screening plan, we made several beginners mistake. We had no exit strategy, except to rely on our broker. Further, once we had about 10 stocks we simply started adding to the over performers buying highs.

Then in July of 1999 thing quickly changed with the announcement of Platt's retirement and Carly Fiorina as the replacing CEO. The market voted their disappointment with their feet. Quickly the over performance turn to underperformance compared to QQQ. Meanwhile IBM had started addressing it problems and was out performing by about 96. And of course in hindsight I would have been much better to sale and switch to IBM in 1996.

But HWP was my second best stock, so I kept buying. Then of course the QQQ dropped in 2000 and 2001. But in 2001, to add injury to insult Fiorina got into a proxy fight with the founders son, a board member over the Compaq merger. I kept voting against the merger, but kept getting packets asking me to change my vote. Once they got enough votes by the big mutual funds they finally merged. This of course did not improve things. Finally, I got the message and sold in 2001.

Carly was out by 2005, by shareholder accounts a failure, compared to the QQQ their peers and by price the stock had lost half its value.

Hurd brought HPQ back to over performing. But with his ouster, the stock still has made up for Carly underperformance, but has given up the long term over performanc (to QQQ) of his and Carlly combined tenure.

The moral of the story, is perhaps Platt, Carly, and Hurd or any other CEO is not worth, the billions that is lost by the market. But the Board is telling the market something. Are these isolated events? These stumbles would seem to be predictive of future mistakes or perhaps predictive of simply poor oversight and contempt for the shareholders?

Further, while mergers, may not subtract value, such as Intel, in and of themselves, but do they signal poor future decisions and similar contempt for the shareholders?

Has there been a study to see if these CEO drops are actually predictive of the incumbent CEO tenure? And has there been a study to see if these bad merger announcements, ones that the sums of the parts are clearly negative, signal future underperformance.

Victor Niederhoffer says:

Russ's post about his "layman's" experiences with HPQ should be on television. It's a perfect and useful story for our times. Everything the fast runner does is pitch perfect in my opinion.

Rocky Humbert replies:

There is abundant academic research which shows that most mergers don't create value, particularly in technology. However, the results are skewed by a handful of large deals — and don't give consideration to whether a company is buying a technology which can be exploited — or whether it's some sort of obtuse synergistic strategy proposed by investment bankers and ratified by megalomaniac CEO's. It doesn't take a genius to realize that if a buyer pays a 30% to 50% premium to the market for an acquisition, it's a difficult hurdle to overcome [unless the target was too cheap before the bid.] Importantly, these studies can't answer the question "what if"– since there are an infinite number of alternate scenarios which might have been even worse than overpaying for another company– especially depending on the timeframe. There's also a Wall Street meme at work here. Back in the days of Cendant, every deal "created" value– even though it was just smoke-and-mirrors.

You ask whether an academic has studied "whether the market's initial reaction is predictive of the long term success of a merger," and I'm sure there are papers on this– and I'm also sure that the papers are useless for investors since the forest gets confused with the trees. Case in point: The market "loved" the AOL/Time-Warner deal. Enough said.

There are a lot of papers about CEO departures. Here's one. It's EXTREMELY rare for a CEO to depart after good stock performance (except for retirement, health, etc.) I generally don't pay attention to CEO's unless I consider them to be lazy, unethical, inconsistent or undeserving of their job.

Lastly, I should disclose that since 1997, I did not invest (as distinct from speculate) in technology stocks. Putting the business/innovation/franchise aspects aside, it's only in the past year that certain technology stocks have finally reached valuations which can generate double-digit returns for investors with a static p/e assumption and 3-5 year time horizon…

James Goldcamp comments:

I took Rocky's post to imply something I also believe to be true. Much of a CEO's (perceived) performance is the result of random factors and timing and in many ways are like the ephemeral economic reports, to which chair often refers, that get revised (just like Neutron Jack, Chainsaw Al, and the ousted CEO's predecessor get revised down years later after being previously uniformly lauded). Also, CEO stories probably cause to much focus on the narrative, rather than the underlying business fundamentals, causing mis-pricing of securities when there is excessive negative or positive headlines regarding the executive (to which Rocky has alluded with a prior post about the departure of HP's CEO and questions of how many B's the CEO is really worth).

I didn't take from Rocky's post that CEO's are overpaid, though I will go as far to say that in my opinion directors of public companies have not (in general) been sufficiently diligent with compensation and insuring an appropriate alignment of interests between shareholder and management, especially with respect to cases where said executives do not have "skin in the game".

Disclosure: I was a buyer of shares in HPQ and INTC this week. (among other things)



 I watched for the third time this weekend one of my favorite documentaries (and admittedly a bit of an infomercial), Truth in 24, which tracks the run up to the 2008 24 hours of Le Mans from the perspective of the Audi racing team. Created by NFL Films in cooperation with Audi this has some of the best production quality I have ever seen in a sports documentary. I also had a chance to witness one of the Audi R10 turbo diesel cars in the same year at an ALMS (American Le Mans Series) race shortly after the events depicted in the film.

This film should strike many a chord with traders. It contains elements of planning and exhaustive preparation, slim margins of error, a highly technical and competitive landscape, gamesmanship, weather, hoodo-ism and the role of luck as characterized by Alan McNish, stamina and survival, improvisation, and hubris (one could write a prologue where the heroes suffer a reversal of fortune the following year). As in speculating the lead engineers must deal with a multitude of variables any of which can determine the final outcome and offers a case study in decision making under uncertainty.

For those who are interested, the documentary can be downloaded via iTunes for free.

Dr. Goldcamp is a managing partner of Rina Systems, a quantitative financial software vendor.



I'm sounding alarm. Amidst signs that:
1. Trading and Investment capital is continuing to contract.
2. Political and regulatory interferences are becoming more chaotic
3. Economic downturn's impact is widening
…it is harder than ever before to pin down intermediate-term opportunities. Those who've been trading in-and-out and even reversing every few days (albeit, with year-opener bias in mind), have done well. But in the course of February, year-opener directions should fade. Sector by sector:
1. SP: Commercials have been on the right side of every twist-and-turn. Raising Net Longs late Q4, shorting early Jan, buying again mid-Jan and selling again last week. Test of Nov lows is certain - and only then the panic will reach the pitch tone. However, it's important to not lose sight of the absolute diminishing values: what will look like the ultimate break-down - in fact, will have little room to forge ahead, relative to enormous Bear coups of 2008. When smaller players finally go overly Short on new lows, en mass - they'll find little reward.
2. Treasuries: 30y futures have retraced exactly half of their straight-line Q4 sprint 111->142, thus relieving unconscionable Xmas overbought. O.I. pattern is bullish at current juncture, dropping on down-days and rising on up-days.
3. Currencies: C.O.T. display intriguing divergence vis-a-vis equity-Bear posture. Yen commitments are Bearish, while SF Bullish. I'm getting ready for substantial reversals in both dropping European currencies and rising Yen. My scenario is that such reversals will be playing out against the background of equities' panic, and will catch Specs flat-footed.
4. GC commitments got predictably stone-walled in course of super-rally. Commercials offered scale-up across the precious metals complex. While long-term outlook for Gold is unavoidably Bullish (given few viable investment alternatives), I'd much rather be a buyer on any sharp profit-taking spells, than on any "strong trend". Copper O.I. pattern remains Bullish - but it will be up-hill battle against the back-drop of equity panic.
5. Energy contracts remain in disarray, with little of new indicators in the past week. Of note CL 6-week consolidation pattern that follows vertical 147->33 move, record HO O.I. levels, RB price out-performance (not supported by O.I. pattern) and NG price under-performance, nearing very important $4.05 low of 2006. My conclusion is that the complex will struggle with equities - and that important buying opportunity will form in the process.

George Parkanyi comments:

I admit that I apply COT like a simpleton, but time and time again I've noticed that aligning with the commercials in physical commodities (in the financial indices or currencies I don't even know who a commercial is, or if they're particularly bright enough to make a difference) generally gets you going in the right direction. THAT I learned to pay attention to from Larry's excellent books on the subject. (Unfortunately, Larry, I didn't follow your money management advice and eventually skewered my commodities account).

A guy called Barry Lees runs a site called cotfutures and basically all he does is reorganize COT data into a useful format -particularly a rolling 18 month 0-100 ranking representing the range between the maximum commercial net-short position (0) and the maximum net-long position (100). I've found the 0-10's to be pretty good markers for a downward reversal and the 90-100's for an upward reversal. Speculators would be at the opposite side of the spectrum. There are other factors of course, but these are pretty good ballpark indicators.

Right now, Copper and Rough Rice are at 100-0 extremes, corn 98-4, oats 93-1, cotton 93-20, lumber 92-14. The latter makes sense - it reflects the housing market and consumer staples (leprosy). Gold and oil are mid-range and inconclusive by this interpretation. The closest thing to a short are hogs at 24-63, which is not really considered to be an extreme. (Commercials seem to have not much of a market to sell into and must be cutting back production or holding back inventory because prices suck. Anyway, that's the way I might interpret it.) Would I rush out and by copper and rice right away? Not necessarily. But to buy copper stocks right now to invest for a couple of years might not turn out too badly.

Larry Williams adds:

Not that I know it all, but a little more than most I kid myself, so I will comment what Lees is doing is 10 years behind the times and fails to take into consideration price levels–a critical point.

COT is actually entering bullish area for hogs—2 weeks ago entered bullish are for lumber but not a great buy point due to price levels. Commercials buy all the way down as they take delivery and use the stuff—they are not spec buyers—and that must be factored in….same in copper sure there's been commercial buying, but low price levels induced it.

James Goldcamp writes:

Conceptually I've always had a hard time taking COT serious in markets where the futures markets are not a significant portion of the overall business such as SP(stocks). Isn't the SP overshadowed by the cash market for stocks (where many of the big players such as mutual funds don't use futures at all or minimally)? The same would seem to be true for the currencies. Perhaps you might argue (with respect to markets where the futures are not significant portion of the overall $ traded) the structure of who is positioned in what manner is indicative of sentiment ; however, I cant believe it's driving anything.

Larry Williams replies:

currencies have a very strong commercial influence; international corps protecting sales in various currencies.



Many elements of the fraud charges against M would seem to have applicability to markets. The macher thing, where he was seen as a "macher," a big-hearted big shot. His denying to some people the favor of taking their funds. His friend the tall partner who would mention at clubs that "Bernie earned me 12% this year and he's not open to the public but I can probably get you in." Cialdini apparently calls this a triple threat fraud where someone else mentions how great M is, and then you don't investigate because it would be an affront to the accomplice (who you don't know is getting a fee), and you use all your energy to see if you can get in rather than to investigate the performance. Amazing is that we've all been subject to reports of returns in the security field that seem way out of line with those actually achieved.

Sam Marx comments:

In addition, because M owned and ran a large brokerage firm, the "mark" would feel that his investment was getting some illegal inside advantage that resulted in high returns, such as front running. Most, if not all, confidence games rely on the greed of the mark. You never hear about successful Ponzi Schemes that have been successfully unwound.

James Sogi writes:

That's a good point. Its the reverse of the survivor bias. Let's call it the loser syndrome, where the losses are hidden, as the successful con, the mark doesn't know he's been taken. Further if he does, he doesn't want to blow the whistle because of either romance, his own complicity or blameworthiness. On a more common scale, the denial syndrome often glosses over and forgets failures, losses, defects, losing trades, that extra drink

James Goldcamp writes:

The surprising part of this to me is much less the regulatory overnight or lack thereof, but the third party fiduciary roles. Where was the administrator and the auditors of the funds? How could this have happened? Will it turn out that he invented counterfeit bank and Prime Broker statements and if so did he personally have the technical means to do so? (Unless he was his own PB, but it's hard to believe any reasonably sophisticated investor like Tre~0nt would buy into such a set-up). I have to ask, how did the trial balance, balance?

Victor Niederhoffer requests:

Let us never forget the human tragedies here. I cry when I read the letters of people who had their life savings or wealth or retirement or plans ruined by this. My goodness, what a terrible crime and way to live one's life.

Ronald Weber writes:

Tragic indeed, but I can’t help to quote the good old Livermore, almost one century ago, on the average investor:

“He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think.”

“There is profit in studying the human factors-the ease with which human beings beleive what it pleases them to believe; and how they allow themselves-indeed, urge themselves- to be influenced by their cupidity or by the dollar-cost of the average man’s carelessness. Fear and hope remain the same.”

“Investments were not wanted. The demand was for easy money; for the sure gambling profit.”



Would anyone have observations re CSI's Unfair Advantage data service? Cleanliness of observations, etc. I am finding the IB <–> IbPy interface to be too trouble prone at this time for my needs.

James Goldcamp replies:

I've used it for end of day data and its breadth of coverage (nearly all world futures markets) and flexibility in building continuous data series is very good (rolls X days before expiry, or volume/OI shifts, etc). In the times I've compared the daily change (since I usually "back adjust" comparing price levels is not meaningful) for major contracts it's been accurate, though that's far from a comprehensive study on accuracy. Option data for futures though is a little spotty for OTM strikes (or at least was in the past).


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