Mar

28

The garden of forking paths: Why multiple comparisons can be a
problem, even when there is no “fishing expedition” or “p-hacking” and
the research hypothesis was posited ahead of time
 Andrew Gelman† and Eric Loken‡ 14 Nov 2013

Abstract
Researcher degrees of freedom can lead to a multiple comparisons
problem, even in settings where researchers perform only a single
analysis on their data. The problem is there can be a large number of
potential comparisons when the details of data analysis are highly
contingent on data, without the researcher having to perform any
conscious procedure of fishing or examining multiple p-values. We
discuss in the context of several examples of published papers where
data-analysis decisions were theoretically-motivated based on previous
literature, but where the details of data selection and analysis were
not pre-specified and, as a result, were contingent on data.

http://www.stat.columbia.edu/~gelman/research/unpublished/forking.pdf

Mar

2

Outperforming the S&P 500 with 50 Consensus Stock Holdings of 40 Large
Hedge Funds
• This investment strategy holds a maximum of 50 consensus stock picks
from 40 hedge funds with more than $3,500 million Assets Under
Management.
• Changes in the holdings occur only every three months when the end
of the quarter 13F filings becomes public information; the latest date
was February 15, 2021.
• From 02/24/08 – 02/19/21 this strategy would have produced an
annualized return (CAGR) of 18.7%, significantly more than the 10.7%
CAGR of the S&P 500 ETF (SPY).
• Here we report the most recent holdings, and also list the stocks
removed and added as of the week ending 2/19/2021.

Feb

21

what is a Recent

February 21, 2021 | Leave a Comment

Big AI writes:

from 2005 (may have been posted already):

Does Trend Following Work on Stocks?

Cole Wilcox, Managing Partner Director of Research & Trading Blackstar 

Funds, LLC

Eric Crittenden, Blackstar Funds, LLC

https://www.cis.upenn.edu/~mkearns/finread/trend.pdf

Over the years many commodity trading advisors, proprietary traders,

and global macro hedge funds have successfully applied various trend

following methods to profitably trade in global futures markets. Very

little research, however, has been published regarding trend following

strategies applied to stocks. Is it reasonable to assume that trend

following works on futures but not stocks? We decided to put a long

only trend following strategy to the test by running it against a

comprehensive database of U.S. stocks that have been adjusted for

corporate actions. Delisted companies were included to account for

survivorship bias. Realistic transaction cost estimates (slippage &

commission) were applied. Liquidity filters were used to limit

hypothetical trading to only stocks that would have been liquid enough

to trade, at the time of the trade. Coverage included 24,000+

securities spanning 22 years. The empirical results strongly suggest

that trend following on stocks does offer a positive mathematical

expectancy, an essential building block of an effective investing or

trading system.

Jared Albert  writes:

This is obviously the hardest(or most expensive) part of a study like this:

<<<Data Integrity Data Coverage The database used included 24,000+ individual securities from the NYSE, AMEX & NASDAQ exchanges. Coverage spanned from January-1983 to December-2004. 

Survivorship bias The database used for this project included historical data for all stocks that were delisted at some point between 1983 and 2004. Slightly more than half of the database is comprised of delisted stocks. 

Corporate actions All stock prices were proportionately back adjusted for corporate actions, including cash dividends, splits, mergers, spin-offs, stock dividends, reverse splits, etc. Realistic investable universe A minimum stock price filter was used to avoid penny stocks7 . 

A minimum daily liquidity filter was used to avoid stocks that would not have been liquid enough to generate realistic historical results from. Both filters were evaluated for every stock and for every day of history in the database, mimicking how results would have appeared in real time.>>>

The data vendor they used has these prices listed:

PowerST will run on any Windows computer.

Cost:

The cost of PowerST is:

Initial Purchase: $25,000

Monthly Maintenance: $1,000

Calculation Engine Source Code: $100,000

Does anyone know of an economical source for at least merger and delisted data is accounted for:)?

This site has delisted symbols so long as they are not reused ex:http://www.eoddata.com/StockQuote/NYSE/LEH.htm 

Jan

18

Big AI  writes: 

Does Hollywood ruin books?

https://www.youtube.com/watch?v=FUD8h9JpEVQ

Scott Brooks  writes: 

That was a very interesting post, Big! 

Jan

18

learn

January 18, 2021 | Leave a Comment

Because humans have 5 fingers, and are trained in decimal base ten counting, they tend to think in 10/5 boxes, like a football field, like a 100 point trading range, with rounds being the edges of a box.  

Jan

18

Bayes

January 18, 2021 | Leave a Comment

This guy, "3 Blue 1 Brown", does really nice vids:

Bayes Theorem
https://www.youtube.com/watch?v=HZGCoVF3YvM

And non-stat:

Visualizing the Riemann zeta function and analytic continuation
https://www.youtube.com/watch?v=sD0NjbwqlYw

Jan

18

Motivated me to look up the UK Monopoly board:

https://i.pinimg.com/originals/ae/cf/f5/aecff5f058348b20be3a41d3bc306800.jpg

Dec

28

Stefan Jovanovich  writes: 

Because it was foul stuff to work with compared to pine tar and Davy was promoting the uses of coal over which Britain had the same near monopoly that North Carolina had over turpentine and pine tar.  Britain became coal mad as they discovered that British midlands anthracite had superior qualities for ship's boilers over everyone else's stuff.  (When Admiral Dewey's squadron won the Battle of Manila Bay, they were fueled by British colliers from Hong Kong.). 

Big AI  writes: 

Epilogue to the story:

The financial catastrophe which had overtaken the Earl in no way  diminished his enthusiasm for scientific investigation. While he and his creditors were in prolonged negotiation for the disposal of Culross, he produced his largest and most important publication, A Treatise Showing the Intimate Connection that Subsists between Agriculture and Chemistry. But once again, he was in advance of his time. What was dismissed as eccentricity in the Earl of Dundonald was to be hailed as the genius of discovery in Sir Humphrey Davy. Indeed,  the most bitter irony of all was still far in the future, when the  Earl was an old and dying man, struggling to support his ailing mistress and her child in Parisian squalor, to which he had been  driven by the most remorseless of his creditors. From the miseries of  this exile, where drink had become his last consolation, the old man  heard that the Lordships of the Admiralty had conceived an interesting  new idea. In 1822, they had asked a committee of the Royal Society,  under the chairmanship of Sir Humphrey Davy, to investigate the  possibility that coal tar might be an effective and cheap preservative  for ships' bottoms. The committee reported favorably and the  Lordships congratulated themselves on their acumen. Not only was their> suggestion vindicated but the cantankerous Scottish earl who had taken  out a patent in the 1780s had neither heart nor money to renew it in  1806. The Admiralty, by biding its time, got the process for nothing.

Dec

23

Discussion of Covid

December 23, 2020 | Leave a Comment

Jay Bhattacharya on the Pandemic
https://www.econtalk.org/jay-bhattacharya-on-the-pandemic/

Economist and physician Jay Bhattacharya of Stanford University talks about the pandemic with EconTalk host Russ Roberts. Bhattacharya, along with Sunetra Gupta of the University of Oxford and Martin Kulldorff of Harvard University, authored The Great Barrington Declaration, which advocates a very different approach to fighting the pandemic than current policy and practice. Bhattacharya and his colleagues argue the best way to reduce overall harm is to focus protection efforts on those most at risk, while allowing low-risk populations to return to a more normal way of life. Bhattacharya argues that we have greatly neglected the costs of lockdown and self-quarantine.

Dec

14

Big Al writes: 

In April 1945, Gollancz addressed the issue of German collective guilt in a pamphlet, What Buchenwald Really Means that explained that all Germans were not guilty. He maintained that hundreds of thousands of gentiles had been persecuted by the Nazis and many more had been terrorized into silence. Equally, UK citizens who had done nothing to save the Jews despite living in a democracy, were not free of guilt. This marked a shift of Gollancz's attention towards the people of Germany. In September 1945, he started an organisation Save Europe Now (SEN) to campaign for the support of Germans,[17] and over the next four years he wrote another eight pamphlets and books addressing the issue and visited the country several times.

Gollancz's campaign for the humane treatment of German civilians involved efforts to persuade the British government to end the ban on sending provisions to Germany and ask that it pursue a policy of reconciliation, as well as organising an airlift to provide Germany and other war-torn European countries with provisions and books. He wrote regular critical articles for, and letters to, British newspapers, and after a visit to the British Zone of Occupation in October and November 1946, he published these along with shocking close-up photos of malnourished children he took there in In Darkest Germany [18] in January 1947.

On the expulsion of Germans after World War II he said: "So far as the conscience of humanity should ever again become sensitive, will this expulsion be an undying disgrace for all those who remember it, who caused it or who put up with it. The Germans have been driven out, but not simply with an imperfection of excessive consideration, but with the highest imaginable degree of brutality." In his book, Our Threatened Values (London, 1946), Gollancz described the conditions Sudeten German prisoners faced in a Czech concentration camp: "They live crammed together in shacks without consideration for gender and age … They ranged in age from 4 to 80. Everyone looked emaciated … the most shocking sights were the babies … nearby stood another mother with a shrivelled bundle of skin and bones in her arms … Two old women lay as if dead on two cots. Only upon closer inspection, did one discover that they were still lightly breathing. They were, like those babies, nearly dead from hunger …" When Field Marshal Montgomery wanted to allot each German citizen a guaranteed diet of only 1,000 calories a day and justified this by referring to the fact that the prisoners of the Bergen-Belsen concentration camp had received only 800, Gollancz wrote about starvation in Germany, pointing out that many prisoners never even received 1,000 calories. "There is really only one method of re-educating people," explained Gollancz, "namely the example that one lives oneself."

Stefan Jovanovich  writes: 

The folly of revenge is its unshakeable belief that time's arrow can somehow be reversed, that wrong can be undone by doing it to "them".

Dec

10

Big Al writes: 

Texas has standing.  Article III, Section 2: In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be Party, the supreme Court shall have original Jurisdiction.

They have standing in terms of jurisdiction, but I think it's a question whether they can show the *state of Texas* was harmed.  The Republican party in Texas may not like it, but that's different.  I don't know and you may be right - I'm just saying.

Stefan Jovanovich  writes: 

They could deny the Pennsylvania case as they just have because their jurisdiction is discretionary.  Here it is original.  That is my only point.   In order to reject the "case" as "moot", they have to accept it.  The extraordinary part of this lawfare has been the refusal of every trial court to hear any evidence at all; they have all ducked. What makes it difficult for the Supremos to follow the same tactic is (1) original jurisdiction and (2) it is a pure appellate case.  All the "evidence" is documentary - i.e. the rulings of the governors, Secretaries of States, Board of Election officials - and it is already on the record.  No injunctions or writs of mandamus required. No witnesses or depositions needed.  The risk for the Dems is the one that has always been there: the Supremos disqualify the Electors for those states and leave it up to the House to pick the next President.  That also allows them to duck in much the same way they did in Bush v. Gore. 

Michael Cook  writes: 

And in effect thus overturn the election result.

Does anyone seriously think Roberts will have a piece of that?…

Dec

10

Big Al writes: 

Behavioral Problems of Adhering to a Decision Policy Paul Slovic Oregon Research Institute, Eugene, Oregon  Paper presented at the Institute for Quantitative Research in Finance May 1, 1973, Napa, California

https://scholarsbank.uoregon.edu/xmlui/bitstream/handle/1794/23607/928.pdf?sequence=3&isAllowed=y

Another example of inconsistency comes from a study of expert horse-race handicappers, which we are currently conducting at the Oregon Research Institute. We're not really interested in horse-race predictions, we're studying the stresses caused by information overload, and horse racing provides an appropriate context in which to  do this. We expect that the results will generalize to any domain in which the skilled integration of large masses of quantitative information is performed by means of human judgment. For horse-race

handicapping is an information game, much as investment analysis is an information game, and although there are many differences between these two domains of risk-taking, there are many similarities as well.  Figure 1 shows a typical past-performance chart, which gives detailed  information about each horse’s recent performances. It doesn't take too much imagination to see the similarities between these kinds of charts and the data sources used in some forms of financial analysis. Our judges in this study were eight individuals, carefully selected for heir expertise as handicappers. Each judge was presented with a list of 88 variables culled from the pastperformance charts. He was asked to indicate which five variables out of the 88 he would wish to use when handicapping a race, if all he could have was five variables.

He was then asked to indicate which 10, which 20, and which 40 he would use if 10, 20, or 40 were available to him.  Before examining inconsistency, though, let's look at how accuracy and  confidence varied with amount of information as shown in Figure 4 of  the handout. We see that accuracy was as good with five variables as  it was with 10, 20, or 40. The flat curve is an average over eight subjects and is somewhat misleading. Three of the eight actually showed a decrease in accuracy with more information, two improved, and  three stayed about the same. All of the handicappers became more confident in their judgments as information increased.

In Table 1, we see a comparison of the amount of inconsistency in our handicappers’ judgments at low and high levels of information.

Consistency was measured in three ways—by the number of times the first-place horse was changed when the race was judged the second  time, by the number of changes in any of the five ranks, and by the  sum of the differences in ranks from one time to the next. Each of  these measures told the same story—there was considerable inconsistency in the rankings, and this inconsistency increased as the amount of available information increased.

These results should give some pause to those of us who believe we're better off by getting as many items of information as possible, prior to making a decision.

Ken Sadofsky  writes: 

US voters largely hold as good mechanics, if it ain't broke don't fix it. For Boris if still here opening lines of AC tell a lot about the topical, unintentionally; something for Lindsey and Schumer and maybe to close it, he ain't no boss. And like science, music takes political sides it seems; I disdain - wish someone would just show me the lists what I'm suppose to believe and what to say. I do get reverence to one's fellow carbon forms btw.

most for skimming:

Big Al got me moving on this, I still have much more, but it's locked in my brain vaguely and still can't get to the speaking or typing part.  As usual, others can translate below or even my vague thoughts, still in labor. And few have already.

If this gentleman, Allan Lichtman has already been shot down, scuse.

More important is the set or transit ors (a cleverism to make binarys as a set against impeders) seismic shifts shake the status quo at the top, making the presentation and focus of false ones more understandable for me about the process. Five or fewer keys false, incumbent wins; (6, in this case 7 keys false) incumbent loses.  –so far, unless SCOTUS wants political upheaval, and they're made to hate politics while endorsing their view on lawful governance.

1)fox https://www.youtube.com/watch?v=z0PDVeBRLUA

 begin @1:30

2)"wik:The 13 Keys

"The Keys to the White House is a checklist of thirteen true/false statements that pertain to the circumstances surrounding a US presidential election:

    Midterm gains: After the midterm elections, the incumbent party holds more seats in the U.S. House of Representatives than after the previous midterm elections.

    No primary contest: There is no serious contest for the incumbent party nomination.

    Incumbent seeking re-election: The incumbent party candidate is the sitting president.

    No third party: There is no significant third party or independent campaign.

    Strong short-term economy: The economy is not in recession during the election campaign.

    Strong long-term economy: Real per capita economic growth during the term equals or exceeds mean growth during the previous two terms.

    Major policy change: The incumbent administration effects major changes in national policy.

    No social unrest: There is no sustained social unrest during the term.

    No scandal: The incumbent administration is untainted by major scandal.

    No foreign/military failure: The incumbent administration suffers no major failure in foreign or military affairs.

    Major foreign/military success: The incumbent administration achieves a major success in foreign or military affairs.

    Charismatic incumbent: The incumbent party candidate is charismatic or a national hero.

    Uncharismatic challenger: The challenging party candidate is not charismatic or a national hero.

When five or fewer of the above statements about an upcoming election are false, the incumbent party candidate is predicted to win the election. When six or more are false, the incumbent party candidate is predicted to lose the election.

By "incumbent party", Lichtman means the party to which the incumbent President belongs. In the 2016 election, the Democratic Party was the incumbent party as then-President Barack Obama was a Democrat. Obama was in his second term and thus was ineligble for re-election, so Hillary Clinton ran as the candidate for the Democratic Party, i.e. she was the incumbent party candidate. Donald Trump was the candidate for the Republican Party, i.e. he was the challenging party candidate.

Some of these keys can be judged using objective metrics, such as economic growth, and some of these keys are of rather subjective nature, such as candidate charisma. In the latter case, a forecaster must evaluate the circumstances of all past elections together so that his judgments are at least consistent if not objective, and then observe how his judgments retroactively predict historical election outcomes so that he can refine his subjective standards into something reliably predictive for future elections.[1]"

3)other - one scientific answer may be better suited to another science:

"While predictions of earthquakes eluded his methods and algorithms, they seem to have succeeded in another, completely unrelated field. In 1981 the Russian Keilis-Borok teamed up with an American 26 years his junior. His partner was Allan Lichtman, a political historian at the American University in Washington, D.C. Together they applied the algorithms which would ultimately fail in predicting earthquakes to the US election system. In November 1981 the duo published its results in an article with the very long, unwieldy title "Pattern recognition applied to presidential elections in the United States, 1860-1980: Role of integral social, economic, and political traits" in the Proceedings of the National Academy of Sciences in Washington (Vol. 78, pg. 7230).

And what happened? Using this method, Allan Lichtman has correctly predicted the outcomes of the past eight presidential elections in the United States. And now - in contrast to all other pollsters and talking heads - he was the only one to consistently tell all of us who wanted to listen, that the 45th president of the United States was going to be Donald J. Trump. With his statements Allan Lichtman was the lone voice in the desert and has posthumously vindicated the work of Keilis-Borok, who passed away three years ago in his home in Culver City in the Los Angeles Area."

https://seismo.berkeley.edu/blog/2016/11/13/predicting-presidents-and-not-earthquakes.html

Nov

16

Excellent Book

November 16, 2020 | Leave a Comment

Subject: Re: [SPEC-LIST] excellent book https://www.amazon.com/Bobby-Fischer-Other-Stories-literature/dp/1886040184/ref=sr_1_fkmr0_1?dchild=1&keywords=arnold+denker+the+bobby+fisher+i+knew&qid=1605369810&sr=8- great stories of brilliant and pro active chess playeers from 50 years ago.

Speaking of stories:

https://www.iheart.com/podcast/962-beauties-72513762/episode/introducing-beauties-with-james-duthie-72513768/

Each episode focuses on incredible stories from hockey’s biggest names, greatest characters and unsung heroes. Narrated by James Duthie, legends of the game tell their stories over an immersive audio landscape. 

Oct

9

Big Al writes: 

https://fivethirtyeight.com/features/money-and-elections-a-complicated-love-story/ Money is certainly strongly associated with political success. But, “I think where you have to change your thinking is that money causes winning,” said Richard Lau, professor of political science at Rutgers. “I think it’s more that winning attracts money.”

Stefan Jovanovich  writes: 

Did I miss the memo?  Has there been an edict that particular facts are to be subsumed into coy academic attempts at irony?

There is one professor book that created the standard for electoral analysis and predictions: *The American Voter* by Angus Campbell, Philip Converse, Warren Miller, and Donald Stokes.  They produced a detailed analysis of the 1952 and 1956 Presidential elections using what is still a wonderfully subtle methodology.  Michael S. Lewis-Beck, Helmut Norpoth, William G. Jacoby and Herbert F. Weisberg took that work, applied the extraordinary advances in computing and computation since 1958 and revisited that work.  *The American Voter Revisited* does the 2000 and 2004 elections. 1952 and 1956 elections. Professor Lau thinks he has invented a superior methodology; his proof is hat his model correctly predicted how 3 out of 4 voters in a mock election made the same choice that they would have made "under conditions of perfect information". Meanwhile, Professor Norpoth continues to stick his neck out and make a prediction every 4 years based on his primary turnout model.  (For those who don't know it, he picks Trump.)

You can do better, Big Al.

Duncan Coker  writes: 

Since you brought up the 1952 and 1956 for those who don't remember Adlai Stephenson was the Democratic candidate against Eisenhower.  It marked the start of televised and advertised campaigns.  It also launched the start of a company called Simulmatics.  They were the first to apply data and simulation to campaigns and politics, granted they were using punch card tech.  Parsing data into groups like "white non-college educated, rural voter" or "women suburbanites" they were the first to use. Kennedy hired them in earnest to help him get elected.  They did not predict elections so much as the issues that might turn elections and which side was best.  For Kennedy they recommended expanding civil right issues, not hiding from being Catholic and more debates.  They were not wrong but perhaps Kennedy would have done all thee things anyway.  Today take the same process, but multiply the computing

speed by 1 million x.  All in a very good book called If Then by Jill Lepore.

Sep

1

Betting Average

September 1, 2020 | Leave a Comment

If the prices are"stupid", it may be because they are beginning to discount what they are after you stop cheating in the weighting and sampling.
The issue is just that a bunch of europunters having a go at US
elections may provide little useful information.

Aug

17

Laurel Kenner  writes: 

Gentlemen, your assistance is requested. As my son enters high school, I am earnestly seeding guidance on how to be a good mother during these next four crucial years. As I understand it, he needs validation and a clean house in all senses of the phrase, and not too much direct advice. I don't want him to become an adult with mommy problems, and I don't want him to go so wild that he spoils his later life. Specs, please share your thoughts. What are your most vivid memories of your mother during these years? How did she help or hurt? What makes a mother of a teenage son good or bad? 

kurtsskurtss writes: 

Avoid all lecturing/preaching/cajoling.  Instead, ask questions and try to act like a friend or confidante, way more than a parent.  If he trusts that you will not be judgmental, but instead will be a good listener and help him to recognize potential outcomes for various actions, he will be willing to share more of his life with you.  

Zubin Al Genubi writes: 

Give him well defined specific tasks he must do to get his allowance or a specified reward of his own choice. He can choose the tasks. Could be wash dishes twice a week or clean his room one a week. Could be all A's. Control behavior using incentives. Use of authority is useless as is an appeal to reason. Kids don't think. 

Write down the tasks on a calendar and check off performance as an agreed contract. Put in writing for bigger or long term rewards such as a car for no smoking or drugs till 16.  

Big AI writes: 

One thing i'll offer is this: once the average boy crosses the puberty

threshold, it's like somebody poured gas on him and lit him on fire.

most of his mental bandwidth becomes focused on girls and negotiating

all of that, especially in school where there are all these girls who

have crossed the threshold too.  and at the same time, this new

dynamic that is dominating his life is something he doesn't want to

talk to his mother about.

Paolo pezzutti writes: 

We are parents.  Not friends nor advisors nor confidants…..

Not even task organizers.  Our role in my view is to transmit values. Just that. Transmit values which are the main tools to live their life. They will then choose their objectives. Establish their priorities and tasks. Live their sex life. Values are the core issue.  

larry writes: 

Teach him to cook, wash clothes and iron.  It will make him self sufficient

Jonathan Bower writes:

I'll second this. Additionally, in Scouting many ideals are worthy of pursuit to round out a person's character and skills.

Jan

24

Burgers, by Big Al

January 24, 2011 | Leave a Comment

Best burgers I've ever grilled came about because i was walking through the local grocery store and noticed that they had the Steakhouse Elite ground beef from these people:

http://www.kobe-beef.com/

On sale for $5.69/lb. It's normally ~$10/lb, but I guess they weren't selling much so they marked it down to move it. I bought a package and brought it home and made the best gal-dang burgers I've ever tasted. So I went back and bought the rest and put it in the freezer. Not sure if i'll be willing to pay $10/lb once I run out, but who knows.

Aug

3

fearSex, Drugs, and Body Counts,

July 30, 2010  

Numbers we encounter in the media are often, to say the least, untrustworthy. Some, like casualty figures in Darfur, may be deflated, some, like the street value of drugs, may be inflated, and still others are simply pulled by institutions out of thin air. Brown University professor Peter Andreas, co-editor of Sex, Drugs and Body Counts: The Politics of Numbers in Global Crime and Conflict, says that numbers are even chosen because
of how they’ll sound on the news.

Numbers justify fear. 50,000 abducted children, for example, or 50,000 predators prowling for kids online. That last figure was once touted by the NBC show "Dateline." But where did it come from? As this piece from 2006 points out, 50,000 is something of a Goldilocks number in the media-– not too big and not too small, but, for scaring the public, just right.

KEN LANNING: I was somewhat curious about the fact [CHUCKLES] that it was 50,000. That number had popped in the past, because I had been an FBI agent for over 30 years.

In the early 1980s, this was the number that was most often used to estimate how many children were kidnapped or abducted by strangers every year. But the research that was done in the early 1990s found that somewhere in the neighborhood of 2 to 300 children every year were abducted in this manner.

BROOKE GLADSTONE: It seems bad things don't come in threes – they come in 50,000.

KEN LANNING: The other one that I specifically [LAUGHS] remembered kind of came in the late '80s, where there were a lot of people who were talking about satanic cults that were supposedly running around the country engaging in human sacrifices. And when you'd try to say, well, how much of this is going on, once again, [LAUGHS] the same number popped up, 50,000 a year.

BROOKE GLADSTONE: Sacrificed?

KEN LANNING: Yes. That's what they were alleging. [LAUGHS] This one here was a little bit more obviously problematic to me, because we do have good data on homicide. And at that time, there was somewhere in the neighborhood of 20 to 23,000 murders every year, so this meant that the satanists all by themselves were killing twice as many [LAUGHING] people as all the other murderers combined.

Jun

25

Its good to classify cons into big and small cons, the degree of complicity of the victim, the use of confederates, and ruses versus bait-and-switches. The market would rate at the top in all of these as is readily seen, especially the use of confederates, and baits-and-switches. I am particularly gullible and an easy mark for cons. Recently, with Aubrey I had the pleasure of being victimized by a nice con at a fair. It was the medium sized con of a basketball game with the player having to shoot into a basket about 20 feet away and 10 feet high, with the basket a little smaller than normal. The only way to get it in is apparently to shoot at so high a vertical angle that the ceiling on the game precludes. The prizes include huge 4 by 5 feet whales and dolphins which I thought would be just the thing for Aubrey. Okay I asked the operator how much it would be to win one of the whales. He demurred. It would be so expensive I am ashamed to say. " How about a hundred i said ? " well, I'll have to ask my boss. " The operator said.

He had a conference with several confederates. And then came back to me with a positive shred. "Bring the kid over and we'll make him a happy camper". I pay my money and then I go to bring Aubrey over. The game is still there, but the big prizes have all disappeared. Only a stuffed Finding Nemo is there.  Worth about 1/3 of the prizes I had in mind. "Which one do you want, kid?" Aubrey chooses the Nemo and the man tells him "kid you tried so hard and so well that I am going to give you a prize". As Aubrey walks away holding the Nemo bigger than him many bystanders ask him what he did to get such a prize. " i tried so hard they gave it to me as a reward ". The stages in this con, starting with a rigged game, relying on my desire to get a special deal, bringing in a confederate, then switching the reward are all too familiar. And it is very helpful in thinking about the market to go over these steps I think.

Pitt T. Maner III comments:

I found a nice overview with table of scam types. Elderly are often the main targets.

The success of many attacks on computer systems can be traced back to the security engineers not understanding the psychology of the system users they meant to protect. We examine a variety of scams and “short cons” that were investigated, documented and recreated for the BBC TV programme The Real Hustle and we extract from them some general principles about the recurring behavioral patterns of victims that hustlers have learnt to exploit.

We argue that an understanding of these inherent “human factors” vulnerabilities, and the necessity to take them into account during design rather than naively shifting the blame onto the “gullible users”, is a fundamental paradigm shift for the security engineer which, if adopted, will lead to stronger and more resilient systems security.

From Understanding Scam Victims: Seven Principles for Systems Security , University of Cambridge.
 

Victor Niederhoffer expands on his remarks:

Part of every big con is the final touch where you make the victim frightful to ever demand restitution,or better yet, ready to put in more money to really get the full advantage. It was a nice touch for the operator to praise Aubrey so highly and let him hold the Nemo with such pleasure that for many many times the amount I paid, I would never have demanded a return to the bigger prize.

Rocky Humbert writes:

The cup is half full: If the objective of The Chair's exercise was to bring joy and happiness to his son, then perhaps this was not a "con" — as Captain Nemo was both larger than Aubrey, yet not so large that his father had to drag around an eight-foot-tall stuffed bear for the rest of the day. After all, the eight-foot-tall stuffed bear had unknown risks including the inability to see oncoming traffic when crossing the street perhaps resulting in the demise of both Bear and Chair.

Jeff Watson comments:

Back in my [adventurous] youth, I ran across a husband wife team that were travelers. Their con was simple and was a beautiful work of art in it's simplicity. The lady(dressed to appear rich and very well coiffed) would drive a brand new Caddie Convertible into a gas station, get a fill up, then would start looking around frantically for the 3 ct. diamond ring she "Lost." while going to the bathroom. She'd enlist the help of the pump jockey and would spend a good 15 minutes looking for the ring. She left very distraught with a note with an address and phone number to the jockey that if the ring were found, there would be a $3000 reward, but please don't tell her husband and only call at a certain time. An hour or so later a ragged man would show up walking through the lot. He'd buy a soda then would show the pump jockey the nice ring he just found. After a little wheeling and dealing, the ragged looking man would walk out with the contents of the register, the pump jockey had the ring and thought he was going to make a big profit. The ring was paste, the address and phone number were all fakes, but the money they made was real serious cash, especially for the 70's when they would regularly pull the con twice a day and average $500 total.

Victor Niederhoffer comments:

What is the market application of Jeff's Cadillac story ? The market applications of the Nemo are that the market has many big up days to lure you in, then you try to buy it on the cheap the next day. At first it doesn't hit your limit so you raise it a little. It doesn't go there so you end up paying near the high ofthe day, or like yesterday, it finally goes down a few points to hit your limit. While this is going on, a tip to a TV or news is given that the market looks great or that his former employee really lost money on that deal et al, and that makes you even more enthused.

You put the position on and then your broker calls you when it goes down. You don't have enough margin in your account. But if you sell within next 10 minutes, he's arranged with his manager not to have the computer extricate you at 1040 the way they did on the flash crash day. Finally, you don't have to come up with more money because you just lost all your margin so you don't have to tell the other half about the tragedy, and the manager gave you an extra special deal by not having the robot take you out ruinously because of your special friendship.

Thomas Miller comments:

Regarding Chair's last paragraph:

Forcing a quick decision under threats and intimidation then showing they are really trying to "help" you is an old scam similar to the "jury scam" I didnt know brokers learned this so well.

http://www.fbi.gov/page2/june06/jury_scams060206.htm 

Big Al comments:

On a trip to Europe with a friend, after high school graduation, I started talking to a German merchant marine guy who was traveling with his CentAm wife and kids back to Germany. This was back in the Iceland Air/Air Bahama days, when the cheap flights went through either Rekyavik or Nassau. So we talked for an hour or two during the Nassau layover and then on the plane. When we got to Luxembourg, he hit me with the story about not having money for the bus trip with his family, blah blah blah, and we "loaned" him $20 apiece (I insisted my friend participate - more embarrassment). Then he gave us his address (yeah, right) so we could let him know where we ended up and he could then send us the forty bucks. I still remember the street address: 1 Jahnstrasse. Ha ha.

Watching the bus pull away, I knew we'd been had. He used the technique of familiarity and friendliness, and my obvious yokelhood, to get the money. At first I was really angry and embarrassed, but after a while I almost felt grateful, because the guy taught me an incredibly valuable lesson about myself and about the con and he charged me only $20 for the experience. Cheapest, most effective education I've ever had in my entire life.

And on street cons, I've been targeted enough times to know the pattern: First, the con uses a simple question to make contact with the mark and **get the mark to do something**. It can be just, "May I ask you a question?" Or, sitting in a car with the window rolled down, "Could you come closer? I can't hear you." Then, after the mark has offered compliance, the con hits him with an intense, rapid-fire story - "My husband kicked me out of the house and took my credit cards and I need a room for the night but it's eighty dollars…" - and tries to maintain contact and control and also confuse the mark, until the mark may hand over the money just to break off the engagement.

One way to have fun is start giving it back to them: "Oh that's so terrible. That happened to my sister once, but she was better off without him anyway. The police can help - just let me get your license number so they'll know who to talk to when they get here." It's funny but very consistent how angry they get when you start lying back to them.

Ken Drees recounts:

I just asked my daughter if she remembered the mouse I won for her [at a fair].

"Oh yes, 'mousy', where is he?"

Oh I threw it out years ago when you got tired of him.

"Why did you do that, he was my favorite all time stuffed animal ever, he had a red coat and black whiskers…."

I just turned and slowly closed the door. 

R.P. Herrold responds to Ken's story:

From time to time, we 'clean house' and we find the black trash bags, presently carefully tied closed, up in the attic; from time to time, I am instructed to 'get rid of that clutter' as the now grown kids 'will never use those again'.

The Brio trains, the metal Erector set, the cast lead soldiers and molds, the Duplo blocks, the stuffed animals, Lincoln logs, the McGuffey readers, the arrow and ax heads collected in the fields, have all fallen to head of the queue for disposition over time

Stuffed animals were in the dock this past weekend. At that point, I usually carefully re-tie the sack, set it to one side for a moment, and then find a new hiding place for the bag in question after her attention turns to other matters. But a grandchild's mother and the child were delighted with the animal figures from my preservation efforts, even if my spouse was not pleased to see 'those old things' again

A few weeks ago, the Brio train set moved in with a gransdon infatuated with rolling stock and were 'new' again; The Erector set, the melting pot and molds, all gone (not to return with current day safety rules — choking hazard of the nuts and bolts, heavy metal fumes). I am on the lookout for a replacement McGuffey (that friend of books that taught me to read upstrairs in a quiet room as the adults 'talked' downstairs), so I can 'seed' a room for young visitorsThe flints and shaped stones? I was not atuned to their disposition occurring; a 'sharpie' sweet-talked a sale for a pittance from a elderly family memberwhen 'cleaning up' prior to closing down a house before sale. That lot of childhood treasures also carried out the door the minnie balls I dug from the earth at GettysburgEntropy won a round that time; I know we'll battle again.

Jason Ruspini comments:

Forgot who said that cons work because people want something for nothing. Clear implications for naive technical analysis here. See, it's easy, you can get rich by extending straight lines.. just keep one eye on your laptop while at the driving range.

To the young person who had a query about what to do with his trading system, at least he tested something, but perhaps there is some laziness there. Unhealthy to think of one system as your "ticket" even if it looks good. Better to find a good place to work where you might actually learn something new.

Stefan Jovanovich comments:

In the good old days of the 1970s the favorite panhandle con in downtown SF was to be a crazed Viet-Nam veteran. Since I spent half my life in those days lurking outside office buildings waiting to ruin some suits' day by handing him a summons, I got to hear every pitch going. The only way to escape was to do the "crazed killer wanting to go back" routine. "Hey, man, can you help me out; I was in the Nam." "Yeah, me, too, and Brother, am I glad to meet you because we got to go back there NOW!!!!! and finish the job."

Like Big Al's artful sympathy, it worked every time; but the reaction was more fear than anger. The con artists did not want to spend any time near someone who was so obviously crazy - for real.

Gregory van Kipnis writes:

The con that almost got me the first time I encountered it. It repeated itself 4 times over the intervening years.

I have deduced that the mark has to be a distracted businessman, walking alone midtown near the major hotels, hopefully someone in NY on a business trip.

In NYC, about 15 years ago, walking cross town early one evening, lost in thought, I was nudged by someone coming from the opposite direction. That was followed by "Jeez, you knocked the food out of my hand. Don't you look where you are walking". There on the sidewalk was a spilled plastic container of takeout food from the all too familiar corner Korean greengrocers.

I thought for a moment to review the memory playback of the contact and responded, "But you bumped into me."

He turned angry exclaiming he was on a short break from work and I ruined his dinner and I bumped into him and I should pay for the loss.

I started to reach for my wallet, then hesitated sensing a con, and said "No, you bumped into me."

He got belligerent, put his face close to mine and with intensity and a shaking body said he was angry and he ought to take me out. I stepped aside, hand on wallet again and started walking saying "there is a greengrocer around the corner. Let's go in and I will buy you a meal."

After a barrage of invective he leaned down to scoop up the spilled food. I continued on my way with a shaken feeling followed by euphoria when I realized I foiled a con.

I few years later the same thing happened. It was a different person different neighborhood near the St. Regis. This time two people. As soon as he spoke I said "bull shit, you did the same thing to me last month". He tried again to intimidate, but I just repeated the response. The engagement ended. They scooped up the food.

The third time, same guys same neighborhood near the Penninula, they just pulled the same stunt on a couple. He was reaching for his wallet. I yelled from across the street that it was a scam and he should walk away. Lots of hesitation followed on both sides. To my amazement the mark paid anyway.

The fourth time, same guys, I swerved just in the nick of time and yelled "you are still at it huh?" No response.

Whenever I see a food stain on the sidewalk with a few strands of noodles scattered about, I smile — the tell tail sign of the aftermath of the con. You would be surprised at how many there are.


Rocky Humbert comments:

An important distinction between this con and some of the other cons is that this one preys on the mark's sense of duty/charity versus the cons that prey on the mark's sense of greed.

One ponders whether being victimized in the pursuit of selflessness is any worse than being victimized in the pursuit of selfishness ? For example, was Madoff's theft from charities more heinous than his theft from plain old rich people ?

 

Feb

19

Penny BlackFeb 10 was the first "snow day" in New York in three years where kids don't have to go to school and when I was a boy, we greeted the snow days with alacrity as it meant we could hop on the subway and visit the stamp dealers on Nassau Street and spend a quarter on some rarities. Apparently there are few if any stamp collectors left among kids today because other activities crowded them out. I base this on direct testimony from Stanley Gibbons and the fact that there are no stamps offered for sale in the newspapers anymore as well as published reports from stamp magazines themselves. This is a tragedy since stamps provide so many benefits in geography, art, history, economics, categorization, collecting, and patience, foreign exchange, printing, and topical interests.

In honor of the snow day, I thought I should enumerate some trends I have noted from my reading of the literature. Dimson is seminal. There is a seminal paper on investment returns from stamps available that does for stamps what DMS and Fisher, Lorie and Ibbotsen have done for stocks. They report that the returns from stamps over the last 100 years have been about 2% a year worse than stocks and 3- 4% above bonds. Adjusted for systematic risk and standard deviation the returns are comparable to stocks. There are so many important and intriguing points covered in that paper that I must refer you to the original. However, a few that I noted are that stamps hardly have had a down year during the last 100. The cost of getting in and out is about 25%. The returns from high priced stamps are similar to those of low priced stamps. The boom years for stamps were 2008 and the late 1970s and like stocks these days they have a few 20 year periods where the returns have been flat especially during the early first and last 20 years of the 20th century. The market for collectible stamps is 10 billion a year, higher than the fine art market in total. The number of collectors is about 50 times higher in Germany per capita than in the US: 1 in 20 in Germany versus 1 in 1000. There are an estimated 20 to 50 million collectors in China. It was previously illegal to collect stamps in China under Mao so there is a surging demand especially for the old issues that none in China were allowed to buy. The price of many low priced issues in stamps has appreciated more than the high priced issues becuase people didn't take good care of them. A nice example are the first stamps issued in the US and the Columbia Expedition sets. The price to weight ratio of stamps is among the highest in the world and part of their value is their portability. The upside down fixed income "Sponsor" has bought 100 million worth of stamps and believes that their value is correlated with GNP. Dimson has a nice set of regressions showing the systematic beta of stamps about 0.2 when adjusting for various Fisher type effects in lags in pricing. (The Dimson and Spaenjarie article)

Stanley Gibbons has a nice index of the 100 rarest British stamps, which are the most collectible, as is their silver, and this correlates well with the Dimson estimates, even though there is much spurious lookback effect in it. There is general agreement that the current collectors in stamps are those who were introduced to it before the 70s and now have the income to augment their portfolios. Very few new collectors are coming in from the US and England. In view of the 25% transaction cost of buying and selling stamps, one could not recommend them as an investment. A good investor would never see his stamps because the values regrettably depend almost entirely with a range of 500% for the same stamp based on condition. Thus, only long holding periods like the 40 years that Dimson uses would seem appropriate. But in 40 years the demand from the kids of today would seem to be likely to be small because they don't collect now or even know what a letter is in many cases. If one were going to invest, one would probably confine his activities to German speaking lands and Asia, and England which still is the rule of the sea as far as collectibles goes and is likely to maintain that edge. One should not rule out the changing value of stamps as a hedge against increases in the service rate on gains and lifetime earnings. One would be interested readers' thoughts on this alternative asset.

Sam Marx comments:

Don't buy retail. Place classified ads in Linn's, bidding close to wholesale prices and/or join the NY Stamp Dealers Club and buy close to wholesale there. If you know stamps it is hard to lose money but the amount you can make is small compared to stocks. In my opinion, if you still want to get involved in this type of endeavor, coins are a better choice. Spilled coffee can destroy your stamp investment.

Alan Millhone commments:

A MMy stamp collecting began one Christmas when I was seven and my parents gave me a Coronet stamp album. I still have it and over the years have expanded my collection. Guess at heart I am a collector and the upsurge in values has been a side benefit. As in all collectibles condition is important. One never has to apologize when selling quality items. To date I have never sold anything from my collection. None of my grandsons have any interest in stamp collecting. My daughter collected some as a youth but quit. I look at stamps as little pieces of paper with bits of history printed on each stamp. Stamps are an excellent way for youngsters to learn about countries and where they are on the map. Something many youth cannot do today. As a youth I dealt by mail with HE Harris , Zenith and Garcelon stamp firms. Stamps could be used today in grade school as a teaching tool. Queen Elizabeth maintains the Royal Collection. Spink etc. has helped the Royals add to this most valuable collection since the Penny Black was introduced. I don't collect any modern stamps and the early US are beautiful esp. newspaper and periodicals. My best friend is Greek and we collect the early Hermes. I like to get out my stamps in the Winter months. I like early stampless covers of my area. Penny post cards and post cards depicting Checkers ( a cross collectible). Cut squares is another area I like and Trieste A and B and AMG-FTT. Stamps as you said is a yearly multi billion dollar business. Auction firms like Greg Manning is publicly traded and deals with collectors all over the world.

Rocky Humbert responds:

A slightly different way at looking at this is the fact that domestic postage rates have handily beaten inflation since 1958. Last February, I went "all in" and purchased a trove of USPS Forever Stamps. (My local postal clerk was perplexed, to say the least.) See: http://onehonestman.wordpress.com/2009/02/28/warren-buffett-deer-poop-and-postage ,  Yet if one extrapolates the trend of the last fifty years, this "investment" will handily beat CPI inflation going forward. The Chair's cited paper is interesting. Yet before drawing any conclusions, one should study how stamps have performed compared with other ephemera … such as private letters from Abraham Lincoln, Ronald Reagan, and Hank Paulson. Given the rise of email and the demise of private letters, one might speculate that collecting the written letters may have a historical significance and scarcity value in the future that bests the postage stamps? Details on the forever stamp: http://www.usps.com/communications/newsroom/2007/sr07_011.htm

Russell Sears writes:

While I do not know the first thing about stamps collecting, the Chair's story reminded me of my 3rd grade winter in Titusville, PA. It was close enough to Lake Erie to get hammered by lake effect snow. I would take all the money I owned, (under 15 bucks) and go to the bank and ask for rolls of pennies, nickels or dimes. Shift through them for collectible dates.

The wheat backed pennies, were still fairly common in change. While the silver nickels and dimes quickly grew scarce. The rare one I found were treasured, more than the bought silver. I can still grab a handful of coins shake them and tell you if one is silver.

The ladies at the bank were always gracious and used the machines to re-roll them when I returned a pile of pennies to the bank. Most likely because I was the rare customer on those snowy days, and it was always evident that I walked/ran that mile to the bank on entering.

However, my interest in stamps, now is for the art work. Stamps and their press have some of the best miniature work available.

Plus the interest in special commemorative editions always catch my interest after the press have stopped.
I think the interest in the 50 states quarters and bicentennial quarters may signal that these limited edition and artist designs may be the future of trading stamps, In this large volume nearly reproductive limitless world we live, uniqueness can thrive.

Victor Niederhoffer responds: 

I would add to the erudite Floridian's remark that the vigorish of 25% that Dimson notes, which is in line with or ever too small versus the reported P&L of Gibbons, does not take into account the grading differential where if you bring a stamp in to sell it's very fine but if you buy it, the condition is perfect and flawless, adding another 25% at least to the vigorish.

Alan Millhone comments:

On grading, perhaps a discussion of "slabbed" stamps and coins is warranted on grading services in business today.

Alston Mabry comments:

Does not take into account the grading differential where if you bring a stamp in to sell it's very fine but if you buy it, the condition is perfect and flawless, adding another 25% at least to the vigorish. Certainly reminds one of:

Strong Buy

Buy

Hold

Sell

Strong Sell

and the increase in churn thus promoted.

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