As a person who has an advanced degree in Physical Chemistry, this article about the Italian Cold Fusion saga piqued my interest. Reading the article, the papers, observing their high school attempts at being scientific, and looking at the amateurish lab equipment makes me adopt a "wait and see" attitude, the same attitude I adopted when the guys from Utah announced their debunked "Cold Fusion." I think my "wait and see attitude" will still be in effect in the next hundred millenia or so. One key caveat was when I read that Zero Hedge, Popular Science and other minor players were interested, and the AIP Journal, Journal of Applied Physics, and International Journal of Applied Physics wasn't included, and showed no interest. I like to question why do these pseudo breakthroughs always come from minor league universities and research facilities, and not from MIT, Cambridge, Harvard, Caltech, Rensselaer Polytechnic (The Toot) etc? These attempts and vast pronouncements that crop up every decade or so and defy every conceivable law of science, and frankly, they bore me. Somehow, I suspect that there are gullible investors involved who are chomping at the bit looking for free energy and untold riches. Frankly, I wish they would perfect a perpetual motion machine and do away with all this ballyhoo..

Rocky Humbert replies:

Jeff: One cannot help but smile when one notes that the research was done at the eponymous University of Baloney. (I've forwarded the paper to my brother who has a Princeton PhD in Plasma Physics (say that five times fast)– and who changed careers after both developing a stutter and concluding that we will not see commercially feasible fusion in his lifetime.)I may have already shared this seminal MIT paper– which tests the Effectiveness of Foil Hats … with surprising results. Interestingly, ZeroHedge has not mentioned the paper. See this article.

Michele Pezzutti comments: 

Jeff and Rocky: have you spent more than five minutes in doing research on comments and opinions on their work before brushing this off? Or you have just stopped looking at the words 'cold fusion', the picture or the name of the University? By the way the University of Bologna has very ancient origins, it is considered the first University of the Western world. Conventional date set by a committee of historians dated the origin of the University of Bologna in year 1088. May be it is not cold fusion but an efficient way of producing energy anyhow and deserves attention and funding. And regarding the amateurish lab equipment, many scientists started their work building their own equipments in an amateur way. Is it really true that great discoveries can be done only by huge and rich institutions or it is more the individual genius that matters? Where was Bill Gates when he created MS-DOS? At MIT with a team of 300 scientists or in a garage with a friend? 



 On the subject of deception, I think that "The President's Speech" is striking. It is a story by Oliver Sacks included in his book "The Man Who Mistook His Wife for a Hat". You can read it at the following link .

For those who are interested, stop here, enjoy it, and then proceed. I do not want to spoil your reading.

What do you we need to have, or not to have, not to be deceived by the market? Why do we normals wish to be fooled, and are indeed well and truly fooled by the market? Why don't we listen to its tone and what is trying to tell us? And if we are not able understand its tone, why don't we listen to its expressive speech? I think we need to deprive ourselves of our emotional part and retain only the rational self. Accept the loss and don't hope in vain or take the profit and don't be greedy. Being 'normal' does not help.



Talking about deception, I think that "The President's speech" is striking. It is a story by Oliver Sacks included in his book "The Man Who Mistook His Wife for a Hat". You can read it here .

For those who are interested, stop here, enjoy it and then proceed. I do not want to spoil your reading.

What do you and I need to have, or not to have, not to be deceived by the market? Why do 'we normals wish to be fooled, and are indeed well and truly fooled' by the market? Why don't we listen to its 'tone' and what it is trying to tell us? And if we are not able understand its 'tone', why don't we listen to its 'expressive' speech? I think we need to deprive ourselves of our emotional part and retain only the rational self.

Accept the loss and don't hope in vain, or take the profit and don't be greedy. Being 'normal' does not help.



 I was in Oslo when they started to close the northern Europe air space on Thursday. I decided to take a lift by car from friends to Gothenburg, Sweden at least to get 300 km closer to Milan, Italy. Then I was faced with a dilemma. What is best the best strategy in such an uncertain environment? Wait for flights to go back to normality? Sounds good but how long could it be? Or take a train and travel 24 hours or more? Sounds good as well, but all trains are full now, so the only option is to book a train in some days from now. And what if in the meantime they reopen the airports? Why face a long journey when a plane would be much faster? Or rent a car, provided that they are available, and drive home? That's a long trip, and expensive as well.

It's like being caught in a losing position with limited capital available and having to decide if it is better to close it and accept the loss or hope for the market to go up soon. You cannot wait too long, as you risk losing all your money, but on the other hand it's difficult to sell when you lose.

I have put a stop loss on Tuesday, when I will stop to wait for improvements. Then I will sell and accept the long trip home, provided that it will be feasible. But new (reliable?) forecasts will be provided, and I will change my mind again, as I always do, being unable to fully implement the strategy I decided when I started the trade.

Ken Drees comments:

My father said to me so many times, "he who hesitates is lost". The trading relation lesson is that you first want to doubt the severity of the position going against you. Hoping for the best leads you right into crowd think–things will improve, etc. So here it seems like you at least acted by moving away, but then realized that you are still losing and that losing trades take up capital that can be deployed elsewhere, and losing trades take up time and mental focus and lead to less than perfect mental acuteness. Best to get your arms around the loss and remove it at any cost. 

All these stranded people are like people who have just received pink slips. They just lost their jobs (flights). So should they not take this opportunity to hike the back country, visit that winery, or linger in the cities that they always wished to see, but never had the time to? Some may do so who can afford it, others may not be able to afford to or are not skilled enough to be "re-trained". 

Paolo Pezzutti replies:

I have spent so many days traveling during the past 3 years in so many countries. Most of the times what I have seen is airports, hotels, and conference rooms. Very seldom have I had the opportunity to visit places and understand the culture of the places I have visited. It is like a standardized and artificial reality. For stranded travelers, I think the issue is the lack of choices. You can analyze the options what you want, but practically speaking, in most cases you cannot do anything but wait.

Victor Niederhoffer comments:

Many of us own individual stocks that are stranded, doing nothing while the world spins on its axis. What is appropriate to do in such situations? I would hypothesize that counting would help. Louis L'amour always said that the first moment of a life threatening situation is the best time to act.

Ken Drees replies:

I read once about an older trader, a simple man who simply said that at the end of the day if any one of his trades was "a loser" he would simply "kick it out" of the barn. At first take that seems extreme– or is it? The first time I read that I thought it was too black and white, now it's more of an essential idea for me–the taking of the first loss. Do you like the stock at that price today? Is the stock in a losing position? Would you buy that same stock today–double your position? If the answer is no then its a loser and a candidate for deletion. If every trader on Monday morning got rid of every losing deletion candidate, the force of the positive relief exhaled into the atomsphere would shift the winds over Europe and free the skies for all to get back to work, play, and normalcy. Sell your losers for the tired, the untrainable, the funflighted. 



 Last week I was in Sweden and I went to see my first Ice Hockey match (Frölunda HC vs. Djurgårdens IF, score 2 - 5 ).

Frölunda HC is 7th in the standings and Djurgårdens IF is 2nd in the Swedish Elitserien Regular Season. The game was very fast and it was difficult for me to understand schemes, tactics and strategies. What was obvious, however, was the superiority of the winning team, as they were ahead from the very beginning. They were also much better in managing the game, keeping control of the puck for most of the time. Also the players role was difficult to identify (except the goalkeepers) due to many and fast changes during the game. It was quite exciting at the beginning, as it was the first time I went to a game, but ended up being quite boring as it was obvious who was going to win.

It reminded me how the stock market appeared to me when I was a newbie (not that I am a master now). Daily movements seem very fast and random, like the actions in the game. The role of different shares in the market is also not obvious, e.g., defensive stocks vs. high volatility stocks. Trends and final result instead are quite different. In markets you identify long term trends only looking backwards. In the game the final result was quite easy to predict, given the superiority of the winning team. But only because the game has an end while the market is always ongoing…

Jay Pasch agrees:

Hockey is a consummate sports analogy for trading — fast moving, full of energy, full of fight and emotion, tremendous back and forth. Nearly every winning move, from skate to stick, is chock-full of deception. Try it, you'll see…

So does Tom Marks:

The dynamics of hockey do bear a resemblance to what happens in markets. To the undiscerning eye the players' movements seem ruled by randomness, with everybody in haphazard pursuit of the puck. But there are hidden patterns, as those player movements are largely the function of strategic schemes, both offensive and defensive, that are tactically superimposed on the location of the puck. They use very similar types of schemes in lacrosse.

Likewise in trading, not everybody is desperately chasing the price. Though, just like with the puck, it's advisable to have a good idea of where it is, lest one be ultimately caught out of position like a defenseman in hockey.



Today I went climbing.

It's been a couple of months since I got back to climbing after I broke my ankle hitting my foot on a rock.

It just happened after an ordinary fall, one of the several that can happen on a day out climbing.

I still have not got back to my usual form and thus feel a bit insecure when climbing on routes close to my previous limits.

The route I am working on has a section which reminds me of the accident I had.

Every time I approach that point of the route, the "what if" starts stepping in and I stop focusing on what I should do.

Then I apply far more strength then necessary and try different solutions, thinking that it will help.

Unfortunately, it does not, as I get even more tired and then even more hesitant, entering a self-reinforcing loop which increases my chances of falling.

Self-control and sticking to the right movements would be much more effective.

Same when trading.

When things begin to go wrong, instead of focusing, the "what if" starts stepping in.

Typical end of the story is that I 'fall', together with my shares, losing much more money than necessary.

Self-discipline would be much more effective.

To regain confidence, I just have to keep on trying.

As Cheri Huber said, "Every time we choose safety, we reinforce fear".



Dear Victor,

After reading your nice letter to your son, I have decided to give it a try and let my girls know what I feel. It is an interesting exercise that allows you for a moment to stop running your frenetic daily routines and think of longer term aims and values.

Dear Carla and Livia,

I write this letter when you have just turned seven. It is a great age for kids. You ask so many varied and challenging questions. You come up with surprising ideas and your creativity is beyond imagination. You are full of potential. You can achieve whatever you want in life provided that you have the talent, the right tools and that you will be willing to work hard. There are no free meals. As you grow up, options will progressively decrease and your life will follow a narrower and narrower path defined partly by pure chance and partially by your will and determination. It is true that it is the unexpected that counts the most, but I would like to focus on what is in your power to exploit and realize your potential and talent to the maximum extent. There is a lot you can do about it and I will try to help you in your endeavours as much as I can.

RANDOMNESS (try to make it work for you) My father was a great person. He was a hard worker with sound family values, incredible integrity and sense of responsibility. He transmitted these characteristics to me and my brother. He had also a clear understanding of risk. He walked his life slowly and solidly step by step rather than running and jumping. Eventually he did well, but not as much as he could have done. The way I have based my life is similar, however, I have identified an important lesson (although I have not fully implemented it): live your life so as to develop the preconditions for opportunities to arise.

You can achieve a lot as human beings. You have natural talents and gifts. In addition to them, while you grow up you are surrounded and supported by the environment friends, the place you live, school, hobbies, sports, travels and so forth). Opportunities occur randomly. If the environment is favorable there is a great chance that these opportunities will be favorable. If you do not find yourselves in such an environment: change, be flexible and adaptable. Be demanding. If you do well in this regard, randomness will work on your side.

MY PAST — YOUR FUTURE As a father, I wish I were able to give you the best of myself. I will tell about my childhood dreams and what has become of them now. Many dreams were like waves breaking on rocks, they have vanished into thin air. Even very recently. Some of them are still alive and I struggle with them. I will tell you about my mistakes and what you can learn from them. I will discuss with you what I see right for your future, but I will always let you be free to make your choices. I often go back to my past and run mentally different scenarios, "what if…what if". I am wrong when I try to find responsibilities for choices made and events occurred. Look ahead. Look at the future. Don't waste too much time and energy looking back. You do not know what remorse and regret mean. The later you learn these words the better.

DREAMS You have incredible dreams. The bedtime stories we invent make us laugh and dream of a world where anything is possible. Your favorite story is about the princess with the pink dress, her brave knight and their fights against the wicked queen and her magic spells. Continue to have dreams in your life. Last week C. told me: "Gatto, the princess is sad and I would like to give her a present. It is a magic ring. With that she can transform into anything she wants, get whatever she likes and go wherever she likes". L. added: "I will give her a magic wand to help children". The princess is not real unfortunately although sometimes you ask me where she lives. As Randy Pausch wrote in the Last Lecture, it is not about how to achieve your dreams it is about how to lead your life: searching and experimenting with the mind of a child. Adults often make things more difficult than they are.

OPPORTUNITIES TODAY — VISION TOMORROW Your mindset has to be ready to see and exploit opportunities, and always be willing to explore them. Don't be afraid to make mistakes: be ready to accept failure, as a natural component of your life. If you do this, you will live a happy life. Ayn Rand wrote: "Throughout the centuries there were men who took first steps down new roads armed with nothing but their own vision". When you look at the clouds, their shape looks like crocodiles and bears to you; when you look at the mountains you see monsters and lions; find connections between things and situations that others cannot see. Make sure you have a vision. Follow new roads. Build a map for your life: the vision is your destination and opportunities are the crossroads.

LOVE I am impressed by the love you are able to give me. When I do something wrong to you, you forgive me after a minute; your love is unconditional. When you open your eyes and see me in the morning, the first thing you do is smile. Then you say: "I love you, Dad" and then I am happy all day. I wish to try and answer your questions. C. wrote me a note before going to bed: "Gatto, I will love you forever. When I am dead, I will still love you". You understand more about life than we think. Last night you asked me: "Dad, can we go online and see who invented God?" As you grow up, I expect these questions to be more and more difficult. This requires preparation, commitment, love.

On the investments side, yesterday I challenged you: "If you had some money, what would you do with it?" L. answered:"I would save it and put it in a bank". C replied:"But that is boring, I'd rather spend it!". You are showing pretty different attitudes and I enjoy it.


James Sogi recommends a completely different approach:

I am a firm believer in behaviorist child raising. Much of this touchy-feely stuff is nice, but mumbo. Many well wishing, warm feeling parents have spoiled their kids and resulted in mixed up individuals. Though the parents feel right, their actions are completely and totally wrong. The correct way is to reward good behavior, and to describe to the child what is expected exactly in quantitative terms. Breach of that expectation should not result in withholding of love or the threat of that, but a mere withholding of some minor privilege. The child needs a clear message. Many parents pay attention to the child when he is bad, saying no no no, but inadvertently reinforce that bad behavior at other times. This creates tension and uncertainty in the child as he receives a mixed message. For counters and quantitative scientists, child rearing should be approached similarly. Of course love must be unconditional, but training the child is a separate matter. The result is a happier, more focused and fulfilled child.

Michele Pezzutti says:

I am also a father of two, a 10 and a 7 year old, and I think it is right to try to transmit our values to our kids, if we believe in such values. To integrity and sense of responsibility, I would also like to add respect for others.

In raising my children I am always unsure on how to do it. I think that the most natural way is to use the same model that we have been raised with and that we have absorbed through our family. But is that method the best one? The natural answer would be 'yes' as it is part of us (here I am assuming we all had a happy childhood and I apologise in advance if I am hurting someone's feelings here).

But there could be a better method instead, and we must look for it. We need to be very honest with ourselves, as finding a better method sounds a bit like blaming our own family. But we do not have to be scared, it is not a blame, if we know that our parents were moved by the best intentions, as we are with our kids.

This part of the letter is very nice, as it transmits a very positive message. "As a father, I wish I were able to give you the best of myself … I will tell you about my mistakes and what you can learn from them. I will discuss with you what I see right for your future, but I will always let you be free to make your choices. I often go back to my past and run mentally different scenarios, "what if?,what if?". I am wrong when I try to find responsibilities for choices made and events occurred. Look ahead. Look at the future. Don't waste too much time and energy looking back. You do not know what remorse and regret mean. The later you learn these words the better."

To make my kids look ahead and not fall in the 'regret and what-if' trap, this is how I would like to be with them. I would like to be able to accept their mistakes, especially when they are so young. I would like to be able to praise them for every little achievement. I would like to be able not to scold them for every little thing.

They will grow up confident in themselves. They will bring inside them positive feelings and leave negative thoughts behind. They will remeber words of praise and not of blame. They will not feel the need to look back. And they will look ahead, to exploit the opportunities they will have, random or not.

I hope I will be able to stick to these rules, not to fall in the 'regret and what-if' trap in ten years from now… At least not with my kids. I do it too much with stock investing already and I have enough of it!



Here is a fascinating read on how to beat a 20% vig from Contingencies magazine. To whet your appetite:

"By the time he succumbed to pulmonary embolism in January 2008 at the age of 62 Woods and his pioneering partners in computerized horse betting had transformed the nature of the sport in one major world market and spawned and industry that is still lengthening its stride around the globe. According to his obituary in The Australian, Wood’s fortune was estimated at $670 million at the time of his death."

Michele Pezzutti comments:

Quoted from Contingencies magazine: “The only way to develop a consistent long-term winning system is to either have the unbelievable luck of making the right guesses on enough races or to know something the rest of the public doesn’t.”

One of the thing I liked most about this story is that the information is actually out there for everybody, there aren’t people who have a competitive advantage on information availability. Alan Woods has built a competitive advantage over the public starting from the same knowledge base, which was under everybody’s eyes but unseen by most.

But how sustainable is this? If I liked horse betting, I wouldn’t bet anymore after knowing that a lot of people have a competitive advantage over me. You could argue that this is true also for financial markets (maybe even worse, as information might not be really available to everybody). That’s correct, but a bet is a single shot– either you lose or win. In financial markets, duration of a bet is generally unlimited (provided that your capital allows it or a company does not go bankrupt) and positions can become profitable also after being potentially a loss. Moreover, if a company generates value, every investor will benefit from that.

Craig Mee writes:

I was speaking to a mate about this guy, his reply:

"It’s a sad story actually. I read about this bloke in last year or the year before Business Review Week Australia's Rich 200. He had sent a letter to the BRW asking for inclusion in the Rich 200. The BRW naturally thought it odd someone would want their wealth on display and also thought it odd they had never heard of the guy before. In his letter he professed to be worth about AUD700mio and said he could prove it with a list of assets all around the world. He said he was waiting to be in the top 10 before applying but unfortunately things were taking a turn for the worst as he had been diagnosed with cancer. He died six weeks after he sent the letter.

A guy who chased a dream and succeeded………regardless of the end…….he had a cracker life."



Italy has reached 60 million residents,

were 50 million in 1959,

50 years ago.



 "Il deserto dei Tartari" is a novel from the Italian writer Dino Buzzati. The whole life of Giovanni Drogo is described, since as a 21 year old newly appointed lieutenant he arrives at the Fortress, full of ambitions and with a whole life in front of him. The Fortress dominates the desert from where the Tartars are supposed to arrive, as they did many many years before. But it's a long time they do not show up anymore and the Fortress has now lost all its strategic importance. They are lost and forgotten by the rest of the world. Nevertheless soldiers assigned to the Fortress eagerly wait for the enemy to come, to do their duty as soldiers, to defend the reign and to become heroes. So they train everyday over and over, strictly following procedures and orders. Hoping for the enemies to arrive and defeat them is the only thing they live for. They have dedicated their whole life to this and to defeat the enemy is the only payback. Giovanni Drogo as well is deceived by the Fortress and by the hope of the glory to come, and he will spend there the best years of his youth and then his whole life. Most important, there is the awareness of not being able to come back to his old world, as he no more belongs to it. Waiting for the enemy, months and years pass by, until the final hoax. In the end the enemy arrives but Giovanni Drogo is now too old and sick to fight and he is sent back home and he will die on the way back, realizing that his mission was to confront death with dignity.

There are traders who train themselves and then go and fight where the real war is, continuously training on the field. They do not wait for the enemy (the good trades), they confront him every day. Someone wins and someone loses, as in every war. Others are living in the Fortress. They wait, full of hopes, for the enemy and then the glory (the money) to come. Duly training and verifying that they are prepared for that moment. But the time goes by inexorably. And every time the enemy arrives, they are not in the condition to fight it, deceived by the Fortress.

 Don Chu comments:

 Perspective is a fascinating thing. And the different ways in which we may grind our lenses of perspective (Spinoza may agree) can produce hints of subtle shifts in views, or reveal startling insights of vastly different panorama.

Time (or at least one of its facsimiles, that is, the numbered sequencing of events), is one element which can alter or colour our lenses while looking at the same object. I read J. M. Coetzee’s “Waiting for the Barbarians” before Buzzati’s “The Tartar Steppe”; and thus may never be able to see from the eyes of a young Drogo (with his conflicting hopes and fears of anticipating yet dreading the barbarian hordes just beyond the steppe), without the spectre of Coetzee’s jaded and weary old Magistrate hanging heavily, and with the latter’s resigned knowledge that the darkest enemy lies not yonder, but within.

[Coetzee’s “Waiting for the Barbarians”, in a way picks up where “The Tartar Steppe” ends; with the old Magistrate more or less having come to terms with his own existence (with hints of a younger Drogo-past), after spending his entire career guarding his frontier town against the ‘unimaginable’ barbarians. The enemy finally arrives, but from within (the empire), forcing an excursion from the mundane but familiar routine into the dreaded frontier-lands.

The battle with the barbarians may finally be joined, but is it in the way as had always been imagined — dignified imperialists defending their rightful lands from the menacing barbarian horde? Or as self-righteous barbarians once again disappropriating the lands of a diminishing indigenous people, to feed the appetite of an always-expanding empire…]

As a trader, my first objective is profit and success and indeed, am perhaps no different from earlier profit-seekers adventuring across oceans and continents in the name of “God, gold and glory”. But there may be cause for some self-examination, and a tempering of appetites will not hurt.



Doing Nothing As Learned from My Kenyan and Mathematician Friends.

I have said it many times that the reason the Africans are better than the American runners, is they know how to rest to recover. Americans will sometimes try to simulate Kenyan training methods and conditions in Colorado. But the Americans that have been successful at doing so incorporate one key ingredient: lots of Kenyans. Its not that the Kenyans train harder, or that their high altitude environment is superior to Colorado, or American effort. No, they bring an attitude. Bob Kennedy, the first USA or “European” tern to break 13 minute barrier in the 5k, was one of the first to train with them. He would describe their method as doing nothing but running. They would lie around all day, eat and run. No chores but washing their few clothes in the creek on Saturdays.

It has been said that their culture values being lazy. Their culture allows them to accept “doing nothing” most of the time. But I would disagree. If you know them and have made friends with them, they value socializing a great deal. They will work extremely hard, running 3 times a day and often run through injury and hardship that would make most westerners nauseated on hearing or seeing the gritty details.

The Kenyans I’ve known are great friends. They work very hard at it; at a level most westerners would find exhausting.

I first became good at running in grad school, where I was hanging on academically by the skin of my teeth at Virginia Tech. I was studying my hardest, and running just as hard, putting in 100+ mile weeks for months on end.

Many of my more exclusively athletic focused and more gifted running friends, in college, would put in harder workouts, but couldn’t achieve the volume or consistency that I was able to.

Since I was a math student amongst Phys’ Ed majors, my peers would ask how I could work so hard on my studies. To them math was a major effort.

But on the reverse side, many of my math friends put me to shame in their studies. Almost all in my class had a much better undergrad math curriculum than I did, most had more talent also. But only half the class made it to their second year.

Most, especially those that did not continue to their second year would rarely if ever put forth any physical effort. Many would ask how in the world I could run 100+ miles a week and study. Many of the professors were proud of my track accomplishments, proving by exception a math geek could excel in sports. A few Profs, however, would ridicule my dedication to running and use my borderline grades as evidence that I was not willing to put in the hard work and question my dedication to math and grad school.

There were of course even worse math professors, ones the university did not even trust near students, due to their social difficulties and their unbalanced mental state.

Those professors, however, that I admired once I got to know them did have some physically demanding hobby or pastime. The mental demands of their positions required many restful moments; they let their mind do nothing while their bodies worked hard. These professors not only related well with the students, in my opinion, their published works were much more interesting than the esoteric works, extremely complex but of trivial worth,  of the more imbalanced professors .

As Mr. Sogi suggest the key to winning often is doing nothing. But the best of them have really mastered the art of defining what “nothing” is.

Nigel Davies comments:

Interesting post Russ. Coincidentally I'm currently thinking about these issues myself and am in the midst of a book by the interesting authoress, Chin-Ning Chu entited 'Do Less, Achieve More'. My sense is that our Western 'work ethic' often leads us to need to appear busy, even when activity is likely to be unproductive. And there would seem to be many applications of this same concept in all walks of life.

Michele Pezzutti responds:

"My sense is that our Western 'work ethic' often leads us to need to appear busy, even when activity is likely to be unproductive. "

I agree on your comment. However, some cultures are less prone to it, especially in the north of Europe. In a phase between two project I was managing, activity was quite low as we were completing tails of the old one and waiting for the new one to reach full speed. I did not feel at ease in this situation. But my manager at that time gave me the following advice: "Recover your energy during these periods because soon you'll need a lot of energy again". And he meant it.



 Rock Climbing has evolved into several different styles and variations. Two of such variations are Bouldering and Free Climbing (traditional or sport climbing, depending on whether protections are removed after the ascent or fixed permanently to the rock).

In sport climbing, routes are typically 20-30 meters long while in bouldering, ascents are typically shorter (a few meters). Due to such difference in lengths, different type of efforts are required and then different physical qualities are needed. Pure strength is dominant in bouldering vs stamina in free climbing.

Nevertheless, in both styles it's your mind that makes the difference before and during performance.

When you are engaged in a project close to your performance limits, it can take a lot of time, work and preparation to achieve the result. A lot of motivation is needed in this phase not to let failures discourage you and give up.

When you are performing, mental control is everything. You must be 100% focused on movements, even little details can make the difference between success or failure. A mistake drains effort and mental energy. And it might sound strange, but in my case the most critical part is when you have passed the crux of the route. If you fall before, that's fine, the route is hard. After the crux, you start to feel the pressure to succeed, falling there is a real failure. Then you need to be able to stay in control of yourself.

Due to different lengths between bouldering and climbing, also type of mental engagement during the performance is different. For those who do not climb let me try to make an analogy with athletics: bouldering is a 100m race while free climbing is 1500m (marathon is could be compared to great ascents on big walls …).

In markets you can choose trading (bouldering) or long term investments (free climbing). Different qualities are needed in the two cases, knowledge of statistics, market behavior and dynamics for trading short term, fundamentals of economics for long term investments.

A lot of study and work is needed in the preparation phase in order to decide which trades to make or what asset to invest in, whatever approach you choose. And motivation as well is necessary, as it's easy to get discourage by your failures, even more when you are losing money.

Also in trading and in long term investments, time scale is different but the bottom line is the same: in the performance phase, you need focus, discipline, stick to the rules you decided to entry and exit the market, you need to keep control of details and of yourself, do not let the emotional part take control.



 I wonder if snow, for example the deluge on Feb 1, 2009, in New York has a negative impact on stocks. It had a positive influence on the ability of youngsters in the 1950s to buy stamps, as school was out and Nassau Street was accessible by train. Now you can't even find kids having snowball fights as they are all inside with Nintendo or Twitter or IM.

Paolo Pezzutti comments:

Last evening I left my girls to spend a few hours at some friends' place. I left them playing with a "Chinese" toy pen with very basic videogames such as bowling or skying in it. When I came back they were still playing with that silly toy. They were hypnotized, although sleepy, but they would not give up. What is the power of these applications — even as simple as this? We can track a parallel with a trading screen and its ability to hypnotize wanna-be traders (and not only them) creating a compulsive attraction and dark force to trade even when it is not the best setup.

I was somewhat nervous about my daughters because they were not stimulated to do something different. It seems that if they are not "educated" and addressed to healthier and outdoor activities kids (and adults too) in most cases prefer spending their time following action on a screen. This is what game companies and stock brokers exploit.

Michele Pezzutti adds:

 That's true. This is something I always think about when I reflect on the way kids are growing. I often wonder if the way the kids play today is healthy. I do not want to sound old-fashioned. I do not come from the 18th century. But are fantasy and creativity stimulated the same way by a computer game as they are by Legos, for example? I think that the problem is not in the technology itself but in the use we make of it as in everything else. Too much is poisonous. And I feel relieved when I see that my kids, when they feel like, can still play as only kids can do. From nothing they are still able to create their world and stories. They have plenty of imagination. Then my worries fade away as I can see in them the same kids we used to be. In the end, every new generation must have asked the same question.

Jim Sogi replies:

J SogiWhen my son was younger, we also worried that he also loved computer games and stayed up all night playing. I reasoned, better playing at home than out on the street. He was also an athlete who surfed, snowboarded, skate boarded. But the training he got playing games serves him well now in his new career in the financial markets. Is what we do 24 hours a day glued to a screen any healthier? I say no. It's really the future of work and communication and social structure.

Speaking with my daughter, we compared our contacts with old high school friends and family. She right pointed out that it is easier for her with IM, Twitter, email, sms, and use cell phones to keep in touch. Don't be old fashioned. It's a new world.

Alan Millhone writes:

 On the news tonight it was reported on a program in El Paso, Texas schools that has a regular exercise program in the schools that shows that regular exercise in youth produces better test scores, etc.

When I was a youth the neighborhood kids played outside till dark and our parents had to call us in for supper. In the Winter we built snow forts that we defended with snow balls against attackers. In the Summer if a new basement for a house was being excavated when the workers left we had dirt clod battles!

I began collecting stamps at age seven when that Christmas my parents gave me a Coronet stamp album and some stamps from H. E. Harris and Co. of Boston. In my early years they gave me sets of Lionel Trains (still have both sets in the original boxes ). We had no computers, cells, Ataris, etc. to fritter away our time and no TV for several years. We played board games, rode our Huffy bikes with a baseball card held in the rear spoke with a wooden clothespin. Modern technology is good to a point for youngsters. Much though that was good and wholesome has been forever lost. Just like the Checker players that at one time could be found on a daily basis in Central Park under the wooden canopied shelters. Tom Wiswell would not believe the changes there.

Jeff Watson comments:

I just got through watching the excellent movie Surfing For Life. Written and produced by David Brown and narrated by Beau Bridges, it chronicles the lives of people who are still surfing in the twilight of their lives. The movie took a sampling of notable surfers from the ages of 60-93, gave brief bios, and showed them surfing well as seniors. Surfing for Life is much more than a surfing documentary, it's a celebration of man's optimism and the results of living a life of optimism. It showed one particular surfer who visits senior facilities on a volunteer basis, and most of his charges are younger than him. It then cut away to him surfing a nice 6' wave. The central theme of this movie is that living a life with an optimistic bias will ensure personal happiness. My favorite scene is the closing where they show Doc Ball, 93 years old, riding a skateboard. Not only was he riding a skateboard, it was obvious that he was clearly enjoying it like a little kid. I've been told by many that I'm just like a little kid, and take that as a compliment whether they meant it as such or not. Little kids enjoy playing games, are optimistic by nature, and receptive to new experiences and knowledge. I'm of the view that trading is a game, an extension of the games we played as children. It can't be mere coincidence that a plurality of traders I know usually excel at one form of game or sport. Whether it's checkers, chess, poker, the racket sports, or surfing, these games played for a lifetime keep one's mind sharp, and mentally nimble. Game playing also keeps our competitive edge well honed, which serves us well in the markets. Surfing for Life is such a positive, uplifting movie that it should be seen by all, as it exudes optimism. It would be an interesting study to analyze the optimism/pessimism ratio for all market players. I have a hunch that the successful players would fall into the optimistic category. Optimism breeds self confidence.

Russ Sears says:

 When I hear tales of the freedom of youth my thoughts often turn me back to my 7th grade year, in Pauls Valley OK, where I delivered the Pauls Valley Daily Democrat door to door on a rusted out Schwinn bike I had spray painted baby blue.

I recently went back and visited the town 33 years later. The drugstore where my brother and I spent our share of the subscription price on comic books, baseball cards and soda fountains chocolate shakes had moved from across the street from the newspaper to the new Wallmart. Parts where still the same, with only a fresh coat of paint, others totally gone.

We had a great time "owning" our part of town. However, I think we were one of the last two kids to deliver papers this way. The only reason they gave me the job, since the Sunday papers weight more than me, was cause they were desperate. Few parents would let their kids do something like this even in small town mid late 70s. And thinking back, there were several times where I think "what were my parents thinking"… As I had a machete to my neck from a high druggie, learned where to drop my collection money off before I went to certain areas, and narrowly escaped a pedophile.

Bottom line is it's not all the kids' fault.

Anton Johnson writes in:

In addition to dirt clod fights, we would play king-of-the-hill on construction excavation mounds, resulting in the occasional emergency room visit. During spring-time we played Monkey-in–the–Middle and 500, honing our baseball skills, all the while dodging vehicles and swatting mosquitoes. On moonless sultry summer nights, we played neighborhood wide team hide-in-seek, some of us subtly maneuvering to get close to the object of our affection. Not even brutal winter weather could keep us inside. Often a dozen would-be Bobby Hulls would play ice hockey, taking brutal hits without pads (some of us even wearing figure skates). We shoveled our own rink on the lake, and hauled seemingly endless buckets of water to fill in ice cracks. Almost nothing could deter us, we played whether +40F or -15F degrees, sometimes coming home soaked after falling through the ice or occasionally with a frostbitten appendage. I wonder whether the electronic generation will reflect on their childhood with a similar nostalgia.



 One evening an old Cherokee told his grandson about a battle that goes on inside all people.

He said, "My son, the battle is between two wolves inside us all.

One is Evil. It is anger, envy, jealousy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority, and ego.

The other is Good. It is joy, peace, love, hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, generosity, compassion and faith."

The grandson thought about it for a minute and then asked his grandfather, "Which wolf wins?"

The old Cherokee simply replied, "The one you feed."

Michele Pezzutti responds:

 This reminds me of The Strange Case of Dr Jekyll and Mr Hyde: I would like to share my experience on how this thinking can make me a better trader.

If I should apply this to my (very, very poor and limited) personal trading experience, I can find Evil everywhere:

 -arrogance, when I trade based on pure instinct and with little/no evidence of trends or data supporting a decision.

- false pride and superiority, for being able 'to beat the market', when I make some profit.

- anger, when I lose too much not being able to put a stop loss.

- lies, when I do not want to admit to yourself that I have acted irrationally.

- regret, when I think 'why did I do that?' And I could go on and on…

Much more difficult is to find examples of the Good wolf. That is, long way to go to become a 'Good' trader.

Paolo Pezzutti writes:

I want to propose a slightly different perspective of the two wolves, the "bad" and the "good" one.

Trading wolves move in packs. They are territorial and wait for their preys to graze standing ready to attack when they are distracted. Wolves can also establish some type of coordination during the hunt. They conceal themselves as they approach the prey, targeting the easiest options available, the weakest animals of the herd. Sick or young animals, even pregnant females. They look for preys they have seen already. They do not take much risk, do not even engage in long chases, and rather wait for their prey to die because of the wounds. Sometimes wolves have to yield to their prey and their killing success rate may be low. But they know that their prey will be there in the same place at the same time the next day. It is only a matter of time, sooner or later the wolves will get it. These traders are deadly, but the current downturn might have killed many of them. They have taken too much risk, too much confidence in their strength. These wolves have become preys themselves in this phase of the market. Those who will survive, however, may become even stronger and be able to adapt their techniques to the new environment.

Single trading wolves can also be found, but less frequently. Lone traders can be old specimens expelled from the pack or young animals in search of new territory. Solitary wolves target smaller animals and many deaths are due to other wolves' attacks. Being alone in the wild can be very dangerous. These traders have to find niches, small inefficiencies left over and disregarded by the wolves packs. They have to be adaptive. They have to learn how to survive. I feel one of the lone wolves. Hopefully I will survive and learn how to be a "good" wolf.

Who knows if any of the wolves will survive this market? After all, species can also disappear.


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