I have been intrigued by recent discussions of ETFs by List members, in particular the UNG and UNL ETFs. Not long before this discussion, there was a discussion indicating that UNG got gamed every time that it needed to roll over the futures that provided the underlying asset for the ETF. Finally, there was a mention by Rocky that UNG had lost 78% of its value since inception while the nominal underlying asset had lost 37%.

Is the relatively greater loss in the value of the ETF a product of this gaming? If not, what alternative theories have been posed?

Other ETFs dealing in commodity futures where there are expenses associated with taking delivery would seem to also be subject to similar manipulation. Have the values of these ETFs experienced similar erosion? Isn't any such commodity ETF bound to erode away given enough time?

Finally, it seemed that today most ETFs were down significantly more than their underlying components. Did any news come out that would appear to be distinctly unfriendly to ETFs in general?

Gary Rogan writes:

This ubiquitous article explains enough about the storage costs and their effect on performance. I came across an additional explanation that the predictable patterns of buying and selling on certain days depress/inflate the prices enough in the wrong direction for the holder to matter as well.

Phil McDonnell comments:

I think it is useful to separate the concepts of 'gamed' and 'carry cost due to contango'. Having contango in the related futures market induces a roll cost every time the fund rolls forward into a new month. That would seem to be an unavoidable structural flaw in many of these funds that will eventually lead to their demise. But the gaming aspect is somewhat different. Specifically I mean that gaming is due to the actions of other market participants who front run the roll periods making it more expensive for the fund to perform its roll operations. That activity simply adds to the roll costs that already exist from contango. 

Michael Cohn asks:

Should I be thinking any differently about the deferred option contracts on these products such as VXX (Barclays Volatility Futures ETF or for that matter the UNG discussed here? How do I think about the changing nature of the basket with respect to these term options that are outside of the existing futures basket for the current composition of the ETF and at their own delivery subject to a new basket? I am convincing myself that I need to learn about basket options influenced by the passage of time.  

Rocky Humbert comments:

The VXX currently has some similar roll phenomenons — however, because it is not a physical commodity, it is not bounded by the same physical supply/demand characteristics of things like natgas, crude, wheat, etc. Rather, volatility is a second-order derivative with no physical delivery — and so the roll can swing wildly and remain in a positive carry condition for very extended periods of time. For example, during the 2008/2009 period, VXX experienced the exact opposite condition — and the rolls were very profitable (because short-term volatility was higher than long-term volatillity expectations).

I want to be clear on an important point: If a speculator is bullish on natgas and believes that prices will rise sharply (in a relatively short time frame), then the UNG is a perfectly reasonable vehicle to express this bet. Natgas periodically doubles and triples in a short period of time. However, if you want a long-term exposure to the nat gas market, then this is a horrible vehicle.

Similarly, having a longterm short of the VXX to pick up the rolls is somewhat analagous to selling far out of the money puts on the S&P. You'll make money most of the time. But you will also occasionally wake up and have a dismal mark-to-market and perhaps give back more than you've ever made. Some may argue that this risk can be managed — but that's as much art as science.



Hard to believe that it has been almost 30 years since "The Road Warrior" movie (Mad Max 2), a classic of the dystopian genre and coinciding with DJIA 800 ranges. The show The Colony, starting next Tuesday the 27th, on the Discovery Channel has a bit of that Mad Max/Andromeda Strain post-apocalyptic feel.

I just hope the poor geology professor with no practical skills makes a good showing and can at least find some water–coming from Arizona State.  She probably knows a bit of geohydrology. Did not see Season One, but this looks entertaining:

What would you do in the wake of a global catastrophe? Even if you survived it, could you survive the aftermath?

Season Two of THE COLONY introduces viewers to a new group of volunteers with differing backgrounds, skills and personalities, to bear witness to how these colonists will survive and rebuild in a world without electricity, running water, government or outside communication. Over the course of 10 episodes, the colonists - who include a construction foreman, teacher, carpenter and auto mechanic - must work to utilize and strengthen their exploration, technology and survival skills in ways they've never had to before.

Ralph Vince comments:

This, culturally, is AMAZING to me. A few weeks back I had an extended discussion with a group of very bright guys all in their early 20s — a candid discussion about their perceptions. A few very revealing things:

1. They are all very upbeat, economically, on a personal level. They feel they are smart and educated and will do fine even though they expect things to dissolve, they believe their formal education is their life preserver.

2. They all hate the boomers and consider them the "entitlements" generation — they regard the ones who were mostly their parents, the ones they refer to as "The greatest generation" as deserving of entitlements, but the boomers NOT entitled. Very interesting — I couldn't get to the logic of this other than we, the boomers, "screwed everything up, did nothing as a generation, and have a grotesque (to them) sense of entitlement to us".

3. They all, universally, expect things to decay, eventually, one way or another, into this MadMax anarchist future. When I would press them on this one, with things such as "Well you were saturated with these types of images growing up of the future, can't you foresee a less dark one, a more optimistic one?" They all universally agreed that "There is no other way the future can work out." Fascinating. Absolutely fascinating. With housing now more affordable than it ever was to any of the boomers — with borrowing at interest rate levels never before seen (and long rates banging around 4% !!!) and a protracted, decade-long-already contraction, the thought of a major up move over the next 15-20 years was something they could not possibly conceive of.

Vince Fulco writes:

Would note the release of the movie "Book of Eli" on DVD recently follows this post apocalyptic meme. Also has a fairly strong underlying theme of Pogo's "we've seen the enemy and he is us."

Pitt T. Maner III responds:

When will the post-Boomers give up on the end of "The Road " ideas and swing towards the "On the Road " themes again? Cyclicity. 

James Lackey comments:

One posits (as Mr. Vic did with movies and baseball) stock returns or better said premiums ratios are higher during futuristic movie and tv times.. see 60's twilight zone and late 90's everything was deep space futuristic.. then post crash it was all cop shows and today perhaps its true on the mad max which came in when the rust belt was dying post 70's Opec deals.

One does not say that its different this time. In my day Generation X was deemed stupid, spoiled and lazy.. It was a cultural and economic shift and we didn't know what to do, but the second we figured it out everyone I know ""just did it" hence the Nike slogan "just do it".

It's good to see the young beat up the old on the net, but quite respectful in person. I have a great deal of respect for my Son's buddies and all the BMX kids we train. Their only problem is over specialization and the quote above shows that in their belief their credentials will be their savior.

I do not agree they despise the boomers… I'd rather think we like to think or say that as Gen X ers for a revenge trade.. No Gen X er believed for a minute SSI [Social Security] would work out so for the Gen YZ kids to even think about it at all is a big joke..Ive never heard about it once…matter of fact if any Old BMX racers bring up the 3 sins of talking about Work Marriage or Politics at the track the kids ride off… the older adult pros age 18-24 say it flat out and crack me up "I can't handle this drama, I am gonna go talk to the girls" These kids today are "awesome". 

Ken Drees comments:

TV has recently been and still now is based on these themes "biggest loser" "bachelor" "dancing with the stars" "angry biker building show" "rock star real life" "idol" "top model" "fashion designer contest show" '"hell's kitchen" "next iron chef" "tattoo shop people" "dangerous fishing boat" "man in the wild" etc—a lot of contests, makeup, high energy, tears, people being eliminated, emotive overkill, action with real life injuries. All of this started with "survivor"–which is pretty much over–except they have a Spanish version of it on the Latin channel that I just flipped over yesterday so that trend must be in the last hurrah phase.

 But these themes are lottery like–taking a chance to make it to the top–be the one who can outlast the competition and the make it all the way. So maybe that consciousness seeps into markets–can we survive another day, the odds are against us but I feel the magic. A big cross section of age groups are relating to these shows—I personally got hooked on Hell's Kitchen–something about the angry language that I try to keep under control and watching that blond haired man just let his anger spew at those inept cooks. Then you get into the finalists and start rooting for a favorite —like horse racing.

Survival in a post 401k smashed world, surviving unemployment, etc.

 Kim Zussman comments:

1. They are all very upbeat, economically, on a personal level. They feel they are smart and educated and will do fine even though they expect things to dissolve, they believe their formal education is their life preserver.

2. They all hate the boomers and consider them the "entitlements" generation — they regard the ones who were mostly their parents, the ones they refer to as "The greatest generation" as deserving of entitlements, but the boomers NOT entitles. Very interesting — I couldn;t get to the logic of this other than we, the boomers, "screwed everything up, did nothing as a generation, and have a grotesque (to them) sense of entitlement to us.

Ralph please send our apologies for screwing things up for them. Ask them not to see "Avenue q", because exactly as Mr.s Rogers and Henson told them - and it is statistically remarkable - they really are all gifted, special, and specially equipped to make this a better world.

Sorry too about our house that you've been eyeing; its 20% upside down because of those college loans, and the one for your first car. At least there won't be any estate tax on it. And remember to hang that Ivy diploma proudly in the latrine - you never know when it might come in handy.

If you decide to get more education - forget about cloud quantum computing gene sequences. Go get your CPA, with emphasis on forensic accounting, and take some classes on retrieval of deleted emails, cash-tracing, and banking in the Bahamas. Also get certified to sell the plastics of the future - insurance.

Big shame about that 401 account. We were, as always, worried about you when they went below 700 and we sold everything. The good news is we got back in at 1200, so please work hard so your earnings propel it to the 12,000 you deserve.

About that screw-up: We were taught something like 2008-2009 was more unlikely than an asteroid collision. However now that the problem has been corrected, you have nothing to fear. Please tell your boss to deduct the maximum for your retirement account, auto-deposited in one of the index ETF's on the first of each month. Add to it on the taxable side too. More is better - buy as much as you can while you're young. Find a good ETF that will go up. If it don't go up, don't buy it.

Sorry about our health. We've been doing cardio for decades, so we're not going to MI like Opa or stroke like Oma. And we floss every day, so there won't be any need for chemo. But we did think to get long-term care insurance, and though you're mad hope you will pick nice nurses for us, and bring a case of Ensure now and then.

Alan Brice Corwin writes:

I've also recently had discussions with a large group of twenty-somethings, but I came away with a different impression. This may be a sampling or a context problem. They may have been less candid towards my generation because they were looking for money for their projects

The main difference in my encounter is that most of these people had boomers for parents. While most of our parents were in their early twenties when we (boomers) were born, their parents were often in their thirties and forties when they were born. There were a few with younger parents, but not very many. (We refer to our parents as the greatest generation because they beat the Nazis and the depression, but who are they referring to and why?)

In fact, I noticed a lot of sympathy for their boomer parents. Several of them noted that their parents had worked hard all of their lives and had expected to retire soon, but are now looking at having to work into their seventies or eighties. There was a general feeling that they would not allow this to happen to them. They would take care of their retirement needs while they were still young.

The main resentment that I encountered was that I was able to get my education for free. They don't think social security will be there for them, but they were young enough so that wasn't really a concern. The idea that someone could go to college for ten years and have money in the bank at the end of it was simply mind-boggling to them. People with full scholarships all the way through told me they had forty grand in debt after school.

I also detected less regard for their formal education among the group I talked to The pretty much all had college degrees, but they regarded their life preserver as their skills at seeing what was needed and building something to meet that need. Several told me that their college education was only good for getting a crappy job for a big corporation, and they had no interest in that.

One point of similarity I noticed is the sense of impending decay. One young man told me that he thought we would see a thousand bridges fail in the US in the next ten years, and that no one would step forward to maintain them. He said he saw no inkling of the common sense of purpose that must have existed when the roads were built. He further pointed out that the infrastructure needs were far greater today because there are now so many more people, but China and Dubai seem to be the only places where they are actively working to build a modern infrastructure. He said we have a 1900 model railroad system and a 1950 highway system (I didn't point out that the interstate highways weren't built until the late fifties and early sixties).

There was a sense that they would never have the life their grandparents had. This same young man said that his grandfather went to work for a company right out of college, worked for them for thirty five years without a layoff, and had been retired and playing golf on a generous pension for thirty years. His grandfather had bought his house for less than ten thousand dollars, and three years ago he could have sold the lot the house was on for nearly a million dollars (not any more).

Another thing I noticed was that almost everyone they idolized in business was a boomer. As you might expect with a group that was more iPhone app developers than anything else, Steve Jobs was far and away the person most admired. Eric Schmidt of Google was another favorite, but ranking way behind Jobs.

Marlowe Cassetti writes:

Wouldn't it be great if they were to make a new reality program based upon the Turtle Traders experiment. All the intrigues of students from diverse backgrounds competing. Ah, the high drama. I bet some of us Specs might be so inclined to view a few episodes. Am I right?

Lars van Dort comments:

Actually the BBC had a program called 'Million Dollar Traders' last year:

"Eight ordinary people are given a million dollars, a fortnight of intensive training and two months to run their own hedge fund. Can they make a killing?

The experiment reveals the inner workings of a City trading floor. The money is supplied by hedge fund manager Lex van Dam: he wants to see if ordinary people can beat the professionals, and he expects a return on his investment too. Yet no-one foresees the financial crisis that lies ahead.

The traders were selected in spring 2008, before the US credit crisis gathered pace. The successful candidates were chosen, trained and dispatched to their specially created trading room in the heart of the Square Mile. Among them are an environmentalist, a soldier, a boxing promoter, an entrepreneur, a retired IT consultant, a vet, a student and a shopkeeper.

The eight novice city traders struggle to ride the storm as stock markets around the world go haywire. Some of them take big risks, and others lose their nerve in spectacular fashion."
Episode 1:
Episode 2:
Episode 3:

I quite enjoyed it.




Bremerton, WALately been keeping my ear to the ground and have overhead workers at three businesses discussing among themselves about their hours being cut.

One place was a 7-Eleven and two restaurants.

I don't see things improving. consider me a skeptic.



Al Corwin writes:

I'm in Bremerton, WA, sixteen miles due west of Seattle. Bremerton is a Navy town, and it has always been somewhat immune from the ups and downs of the national economy. It usually does slightly better when the military is in use (like now), and slightly worse when the need for the military seems less acute. This time is different.

The town became flush in the past decade as the one-hour ferry ride to Seattle became a pleasant option to Seattle traffic. All of this was due to the boom in housing. When things started to fall apart, they fell apart more here than closer to the city because of the relative inconvenience. Despite getting an inordinately high number of stimulus projects here, the town is hurting like never before.

Fully a third of the storefronts in town are now empty. Two restaurants closed last week, one of which was a successful business for over thirty years. The only good news I see is that my friends who are contractors are getting enough work to get by now whereas a year ago they were all working on their golf game because business was non-existent.

Another friend runs a temp agency, and his business has turned up sharply over the last three months. That's usually a sign of recovery, but he says the demand shows no signs of being long-lasting, and so far, there has been very little attempt to turn temps into permanent employees.

The only new retail businesses in town are drugstores. Rite-Aid has built a new store and Walgreen has added two. I don't really understand this. It's not like we had a shortage of drugstores before, and this is only a town of forty thousand people. Something has to give.

In fact, I do notice new drugstores everywhere I go. What is up with this?



Eric Schmidt of GoogleThis link takes you to a fairly long but fascinating article called Solitude and Leadership, a lecture given to a plebe class at West Point.

It's about what leadership is, and how to learn to think for yourself. It cautions the students about multitasking, and not taking the time to think about things and how they feel. Know thyself, he pleads, before you can make leadership decisions. Interesting comments about bureaucracies, too.

Found this by following Eric Schmidt, CEO Google, on Twitter. Excellent tweets, recommending various articles. A verified account.

AL Corwin writes:

What a great article! It rings true on every level in a way that is very rare. The piece itself is a great example of the kind of thought it seeks to advance.

My favorite part was about how multi-tasking gets in the way of being good at multi-tasking. I read a couple of years ago that tests show that people who are doing two things at once only perform forty percent as well on the best of the two tasks as they can do when they focus on a single task. This article shows that that problem is just the tip of the iceberg.

In particular, the author makes a compelling case that multi-tasking actually interferes with the thinking process. It's almost impossible to really think about more than one thing at a time, and it is particularly difficult to think in the company of others. Unless you can think your way to knowing what is right, you will never be in a position to stand up for what is right. Thinking is a solitary activity even when you do it with other people. I hadn't thought about it quite that way before.

I find myself wondering if there are several different kinds of multi-taskers. One type is really doing more than one thing at a time, and another is really doing one thing only. There may be other things going on in the second environment, but the person is totally focused on one activity and then another. I am not saying this well, but it seems like some people multi-task in a serial fashion and others are really operating on multiple channels.

To play the devil's advocate for multi-tasking, I would argue that some forms of expertise are in fact multi-tasking. The people that are good at these chores have lots of things that they do on a subconscious level. When anyone starts on these complex tasks, they need to pay attention to everything which is overwhelming. As they become pros, many chores and actions become automatic enough so that the expert may not even realize what they are doing.

So what is multi-tasking? Walking and chewing gum? Shooting a someone while flying a plane? Thinking about sex while trying to drive? Maybe the answer is that focus is good, but simple multi-tasking is okay. I find that my imagination roams the most when I go for a drive, but may not be the best for those along my route.




Google androidI had the opportunity in the last week to mix with a number of young cell phone app developers. It was refreshing to mix with such a positive group after running into negativity almost everywhere else. These people of full of ideas, full of excitement, and full of hope. It helps that they are all young; none were over thirty. They are very entrepreneurial despite the fact that many of them carry huge debt from school.

Why are they so positive? They see the world as just being created, and they see themselves as having the necessary critical skills to help shape that world. They are coming up with new ideas every day because they are exchanging ideas and using their cell phones for everything you can imagine. And they are getting funded!

That may be the most amazing thing. They are getting funded by companies like Sony and Disney. Almost none of their investors are angel investors of the type I have depended for so many of my projects. These are mainly old white guys, and they don't understand what these kids are doing.

I am one of those guys and though I admire their work, I often don't quite get it even after multiple explanations. When I do get it, I can see that they have been thinking about a whole world of possibilities that are not even on my radar. It occurs to me that you can't make tools for a world you don't live in.

David Aronson talks about how being a leading edge expert can be a serious drawback when the leading edge moves on. When you find yourself in that position, you really need to reboot and start over. These young app developers tell me rebooting time is here.

By the way, bad news for Microsoft: none of these kids carried a Windows smart phone. Not one! In fact, those that realized that I had such a device looked at me like I was carrying a pooper scooper bag. The dominant choice was the iPhone, but there was a reasonable sprinkling of Google Android phones.

Alston Mabry writes:

Remember the phase we went through when adults would tell stories about how they couldn't figure out something on the computer, and then their twelve-year showed them how to do it? But usually the twelve-year-old explained the procedure from the POV of someone fluent in "computer", and so the adult had to get multiple repetitions before understanding bloomed.

A while back I was reading a piece by a thirtysomething, about how he was seeing the future being formed around him but had only just noticed what was going on. What he was seeing was this: His friends would take their old smartphones, disable the call features, load them with games and other apps, and then give them to their preschoolers as toys. It struck him that new generations are now growing up from a very young age with a smart device in their hands pretty much at all times. These cohorts will be fluent in "smart device" and will push the use far beyond what us monolingual types can imagine.

Chris Cooper writes:

Just as you would not expect the political leaning of Fortune 500 CEO's to match that of the rank and file, so should you not expect Silicon Valley entrepreneurs to align with the majority of voters in the region. In my experience, Valley entrepreneurs tend to be more libertarian than the average. And as a company gets larger, there is pressure from shareholders and other interested parties to support the establishment. Perhaps the Google founders support Obama in public, but in private I can assure you their views are much more libertarian.



Here is a great article on Behavioral Game Design from a Microsoft game designer. Since trading has essentially become a computer game…

Al Corwin comments: 

Fascinating analysis! Note that you can insert "customer" or "employee" wherever the article uses "player", and the insights are just as true and powerful.




 I'd like to thank whoever it was that first recommended David Aronson's wonderful book Evidence Based Technical Analysis. We are finding it so useful that we are buying a copy for every employee (only three of us so no windfall, David). This book is so solid and well-written that it should be a must-read for everyone doing anything with statistical inference. It has already led to some changes in our research process that should make our results more robust.By the way, reading this site is certainly increasing my bill at Amazon. Henry Clews' book is the first thing that I read after joining the list (wonderful!), and I just received Tufte's "Visual Display of Quantitative Evidence".

Russ Herrold writes:

You're welcome! I received a 'review copy' through David, courtesy from Wiley. The book is thought provoking, educational without being obnoxous or intrusive as it instructs, and well worth the read.

Ken Drees writes:

There was a book thread posted a few weeks or so back that will maybe be archived in a different place on the website for quick review of spec's best book recommendations. I too have picked up some great reads from here.



 My current research passion is the interaction between decision factors and indicators in trading systems. The most interesting interactions are usually between entrance decision factors and exit factors. This is simple enough when we are looking at two-factor interactions, but many times multiple factor interactions also seem to be critical.

I've tried a couple of different ways to show three-factor interactions. My latest attempt is a quasi-animation. The basic response surface graph shows how system profitability is changed by the major interaction between the most significant entrance factor and the most significant exit factor, and the animation shows the whole surface moving as a second exit parameter is modified.

Here is a sample on youtube. It looks much better if you blow it up to full screen size.

This is a work in progress. I think it is very cool right now, but next week I'll be wondering how I ever could have shown something this crude. I like it because I think the relationships are more important to know about than the specific optimal numbers which often represent an over-fitting.

Please let me know if you have a better idea. I am kind of stuck right at the moment looking for a way to show four-factor interactions. I can see that there are four-factor interactions in the numbers, but my brain just hurts when I try to add another dimension. I would love to hear any thoughts on this as well.

In case anyone is interested, the system is a simple mean-reversion system roughly based on Larry Connors' writings. I don't think that is too important because we see significant interactions going on in all of the systems that we have tested.



There is a quiet rumble of economic activity in the Mohawk River Valley.

My mom just sold her house in Dolgeville, NY, for $15K more than she had it listed for. An Indian (subcontinent-type) gentleman wanted her particular house because it was close to his new factory! He wanted it for his employees so they could live close to the factory.

It wasn't quite that easy, of course. He tried a couple of low-ball offers that were just a waste of my mom's time, but when a second party made an offer close to the asking price, he made an offer my mom could not refuse. I was more than amazed. Even people that grew up in Dolgeville aren't that anxious to stay there.

I was a little suspicious. This was looking too good to be true. My sister talked to the real estate agent. His last four sales were to Indians, and he says that Indians are buying in all the little Mohawk Valley towns. They want the factories.

That is actually fairly stunning since the Mohawk Valley, like most of Central New York State, has been going downhill for many decades. The towns are dotted with closed mills and factories, and the countryside is covered with what used to be family dairy farms. There are still a few left, but most of the farms are either not being worked or owned by giant corporations. A working factory is very hard to find.

That is apparently starting to change in a small way. Businessmen from other countries see perfectly good factory buildings, in many cases with free hydroelectric power from turbines that are still there and still work perfectly, and the cost of the buildings is a tiny fraction of their current construction cost. In some cases, they open a factory making exactly what it did thirty years ago when it was abandoned by its American owners. Sometimes the businesses are new. None seem to employ very many people, but it's a long time since those factories employed anyone.

It's too early to say if these new ventures are going to be profitable, but the people buying them have done well enough in the past so that most of these sales are all cash with no lender (at least no visible lender) involved.

If this is happening in the Mohawk Valley, it has to be happening all over the North East since there is a mill everywhere there is a waterfall east of Ohio. The Mohawk Valley is pretty, but even New Yorkers think the weather sucks. The biggest item in the town budget is snow removal! Yet someone from Mumbai is drawn here for the economic opportunity. Is this an economic opportunity Americans are missing, or are these people making a bad bet?

Let's see. Free power, using locally available raw materials, and housing near the factories for the employees. Isn't how these mill towns happened in the first place?

On a related note, this is third story I have heard lately of businesses relocating because of hydroelectric availability. The older story is that Washington and Oregon have become home to huge server farms (mostly driven out of California by Enron) because they don't want to have to deal with middlemen for the electricity they require. There are new cities growing along sections of the Columbia previously known primarily for windsurfing.

There is also a battle in Western New England for some old mills with hydroelectric generators. New technology gets more out of the old generators making them a bargain. At least one company is coming in, fixing the old generators and installing upgrades at their cost, and splitting the profit from the power generated. Just a few years ago, the best idea anyone had for any of these old mills was to turn them into antique malls, but how many antique malls do we really need, anyway?



I've been following these various notes on sports and trading for a couple of weeks now, and I must confess that I don't understand what the underlying theory is. Although I as a lifelong sports fan and a student of the market, I can't even imagine what the connection might be.

For example, why would have it been bad for Federer to lose today? Does it have something to do with his being the favorite? Would a loss by Federer damaged Wimbledon as a capitalist enterprise? Does such a loss indicate less certainty in the world, triggering fears on the part of a world looking for certainty? Is a singles match a more powerful indicator than a doubles match? Why should a first round match at Wimbledon matter more, for example, the golf's U.S. Open?

Are some sports more indicative than others? For example, soccer would seem to have more fans world-wide than tennis; does soccer have more of an effect? If a country wins a world-cup match, does that presage a rise in the winning countries stock market?

Does the market get bullish when NY teams win? Is this something to do with flowing testosterone? Can one be a Red Sox fan and a bull at the same time?


Jeff Watson comments:

Alan, to coin an old pjrade, "Follow the money.": The fix is in in many more sports than you;d realize. In basketball, a point shaving scheme of three points can mean millions of dollars. Boxing,,,,,,I won;t even mention, College sports are particularly vulnerable due to the financial pressures of students and the deep pockets of fixers, Whatever, you have to assume for the worst and hope for the best.



Mr. Pitts fine and erudite post pointing out the importance of the outlet pass to Varusechek who has the best free throw shooting percentage brings to mind Sondheims' song from company . " its the little things you do together that make life a joy " . less hateful and humorous is the real proverb,that little strokes fell great oaks or Wiswell's make quiet moves, or take care of the draws and the wins will take care of themselves.

Marion Dreyfus comments:

Can any of the more psychologically astute listers explain why the win of the Lakers the other night occasioned vast destruction of the city, cars and streets?

Why did the police permit this lawlessness?

Why should we accept this hooliganism?

Stefan Jovanovich responds:

 Marion: your question presumes that there is a "we" in Los Angeles. That is a fallacy; there are only tribes. The tribe that inhabits downtown LA after dark are the homeless, and it was not their property that was vandalized. "Law and order" in LA is entirely up to the local inhabitants. During the Rodney King riots Koreatown was an island of tranquillity even though it was among the neighborhoods closest to South Central because the local tribe immediately displayed their arsenal of (mostly illegal) weaponry. Then, as now, the police were - as they have been for years -well-paid spectators whose concern was their own safety (for all the talk about the danger of the public saftey life, the emergency services in LA now have lower mortality rates than parking lot attendants). As paramilitary SWAT teams have grown in size and budgets, actual control of public events has declined. Some of us cynics think there might be a correlation.

Marion Dreyfus writes:

Thanks for clearing up the mystery.

It is dismaying in the extreme, however.

No-go zones in our country?!Just like the illegals n Arizona, who have entirely taken over parts of the state where no americans can set foot. 


Alan Corwin comments:

I don't think no-go zones are anything new in our country. There were a lot of no-go zones after dark in Boston in the 1950's for example, and I believe that was typical of big East Coast cities. The scariest place I have ever been was when I decided to check out Wilt Chamberlin's High School in Philadelphia during the late 60s. I thought I had wandered into a war zone. That may indicate how sheltered my life has been, but it was scary.

The thing that always amazes me about these riots is that they are almost never in the losing city. Things got pretty ugly in Boston the last time they won a championship, but all was quiet on the Eastern Front when they lost this year.


Gibbons Burke comments:

Witness the 1992 riots in Chicago after the Bulls won the NBA championship:

Bulls' NBA Victory Sparks Chicago Riots By Michael Abramowitz Washington Post Staff Writer Tuesday, June 16, 1992; Page A01

CHICAGO, JUNE 15 – As Michael Jordan and the newly crowned professional basketball champion Bulls partied with 18,000 delirious fans inside Chicago Stadium Sunday evening, an ugly orgy of violence and looting unfolded in neighborhoods scattered around this city, authorities said today.

Police reported more than 1,000 arrests on charges of burglary, theft, mob action, disorderly conduct and damage to property, all in the hours following the Bulls' dramatic come-from-behind victory against the Portland Trail Blazers in Game 6 of the National Basketball Association Finals for their second consecutive championship.

There were scores of injuries, nearly all of them minor. No one was killed. Among those injured were 95 police officers, two of whom received minor gunshot wounds. Three civilians were shot, two by storekeepers and one by the police, according to a police spokesman. The owner of a South Side liquor store and an employee received second-degree burns when looters attacked their establishment.

Although drunken revelry is still the most common mass response to sports championships, violence of the type that occurred here late Sunday and early today is becoming more common. Last year, after the Bulls' first NBA championship, the looting was less widespread, there were 100 arrests and no serious injuries or deaths.




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

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

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

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

Scott Brooks comments:

Two thoughts on this:

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

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

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

Pitt. T. Maner III comments:

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

Meanwhile in Oakland, Ca:

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

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

Al Corwin writes: 

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

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

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

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



 At work I have been helping coach a friend who has turned his future around since he started exercising regularly.

At over 300 pounds he hit his breaking point with stress of work, and the stress of his only child turning into a normal teen had turned his life into a vicious loop of no sleep, despair and poor health. He had a blunt talk with his doctor. He started lifting weights and doing cardio. He has lost over 50 pounds over 2 years and has about 20 to go. Recently he had an injury to his back not related to exercising but had to stop lifting. But now he has taken lessons to learn to swim and is swimming every day and back on track.

He got most of his specific advice from his weight coach, but I was helping him with his cardio work and just keeping him motivated in general. He went from never being on a competitive team to an athlete over these two years. Before his back injury he was doing amazing weight workouts. Now that he sees the benefits from exercising he is hooked on it and has been thanking me for helping him through those hard first days, when the road seems impossibly long. A few things he has repeatedly told me he learned from me are:

1. We are most vulnerable to self sabotage when we are feeling most stressed. Recognizing this is half the battle of overcoming your self defeating excuses of why you can't. But the reverse is also true, stress leads to feelings of hopelessness and excuses of why we can not possibly exercise and do anything which bring more stress. He now spots those sub-conscious sabotages. I think what he likes most about lifting is how you can surprise even yourself when you think you can't and positively encourage yourself.

2. Do it when you can. Always look for that window of opportunity and the opportunity that is there, not the one you ideally wish for. He was really down when he had to stop lifting, but was grateful that he did it while he still could. Now he sees how taking advantage of those small opportunities that you do have leads to bigger and better things. Dropping his weight and staying in shape now has his doctor hopeful that he can return to a modified lifting program again. People think that if they try and fail they will have a lifetime of regrets, but most people end up having bigger regrets thinking back on missed opportunities. If you try and fail, you can always be grateful that you tried when you could.

Scott Brooks lectures: 

Too many people in our great country are unwilling to accept responsibility, and there are way too many people that are willing to let others do most, if not all, of the work. There are certainly far too many people that are unwilling to lead, let alone exercise the qualities of a true honorable, virtuous leader. But far too many people lack any discernible talent beyond being absolute experts at finding the "Perfectly Legitimate Excuse."

Al Corwin agrees:

The larger the bureaucracy, the more you can survive as an excuse maker. Small organizations can't tolerate excuse makers because one excuse equals one failure, and that can bring down the organization. Only large organizations can tolerate excuses, and the excuses often even [destroy] them.

However, I am not alarmed by the pursuit of the legitimate excuse. Excuse makers are my competitors. I just don't want to slide into their camp myself. I've been there and probably will occasionally go there again, The perfectly legitimate excuse is just for oneself. When you try to pass it to others, they will almost always see it for the counterfeit that it is.



 Nobody asked me but the Lakers look very similar to the Knicks to me in their helter skelter approach to getting baskets with the only exception that they have a very good star in Kobe who can fake many ways. There is no rhyme or reason to their play, and when they score a basket it's a fluke three by Kobe or a lucky rebound by Gasol.

Boston on the other hand has a raison d'etre and reminds me of the teams that play the Knicks that always pull away during the fourth quarter.

You can almost see the tug of war between the two teams, like the fight between the bulls and the bears near the end of the day, as the flexions attempt to liquidate the weaks before reversing the next quarter.

Alan Corwin writes:

As a Celtic fan since before the days of Bill Russell, I concur with your analysis and hope it holds up. The Lakers have lots of talent, but it doesn't mesh a lot of the time. The Celts go through frightening stretches where they can't put the ball in the hoop, but they are almost always getting good opportunities.

Red on Roundball is still worth watching. You don't even have to be a basketball fan to appreciate the way his mind attacked the game.

The difference between Nate in Boston and Nate in New York is that Doc Rivers know when to take him out (i.e., most of the time).

Pitt T. Maner adds:

The 5th game should be big–winner would have an advantage.

There is the interesting dynamic of finesse/skill (Kobe) vs. power/inside game (Big Baby Davis).  Actually Davis is quite skillful and almost ballerina-like in those not so easy reverse layups–he shows tremendous heart and desire and considerable improvement over his LSU days (where he was darn good).

Comments this morning were about how can a true 6' 6" guy like Davis go in amongst trees like Odom 6' 10"ish and Gasol (7 footer) and be effective since they know from scouting that you have to overplay Davis to one side.   Answer was  quickness, positioning and "he has a big tuchus"–ha, but its true.  The more space (base) you occupy laterally with mainly muscle the bigger you can play against length.  And he has some of the same cat-like quickness of Barkley.

The Lakers had a chance last night if they make those technical free throw shots and if the referees change the call that went against Kobe when he took an apparent charge.  So it was a bit risky to keep the Celtic 2nd team in there late into the 4th quarter, although they played very well.  Riskier than it looked.  7 or 8 point lead in the NBA is like 3 to 4 for mere mortals.

I suspect that Phil Jackson hasn't shown the Lakers complete hand yet and has some ideas for each game number–situational strategies for game 5, 6 and 7.

With respect to Kobe his fade-a-way shots and 3 pointers look lucky but he is better shooter than one might think–if he goes on a streak watch out.  Hot hand type.

Not quite Bird vs. Magic but its still a very entertaining NBA championship series.  A Game 7 would be great.



programmersI talked with several of my former students who are database programmers over the past few weeks. More and more of them are looking for work. There seemed to be a general consensus that these jobs would reappear as soon as the economy recovers. I hated to be the bearer of bad news, especially since I did my best to make them database programmers when they were my students, but these jobs aren't coming back.

The world has changed. It's not that the need for data collection and processing has diminished; it's that in large part, these jobs have been automated out of existence. Ten years ago, if you needed a million lines of database code to support a large database, several programmers worked more than a year to create that code, and often several programmers were needed permanently to maintain that code. That is simply not the case any more.
In the last ten years, code generation has come of age, and the first places to be impacted are the coding activities that followed simple processes. In 2000, a million lines of code represented ten programmer years and an expensive management structure. Today, one programmer can create that same structure in a few hours. The job now simply requires that one lay out the data structure and push a button. Instantly, you have either a complete application or at least the basic structure that everything else will be built upon. If the customer doesn't like it, I can go back to my computer, work for an hour, and show them a completely different implementation.

There are at least a half-dozen commercial products that do this job, and I have written several variations myself. It's a little tedious (like most programming jobs), but nowhere near as tedious as writing database code by hand. Not only does the customer save a fortune on programming costs, but programming errors with expensive consequences rarely get introduced into the automatically generated code.

I would think that any database programmer who has ever seen a code generator work would immediately strive to develop a different expertise (code generation, for example), but the more typical reaction is to assume that the same people who wanted their skills in the past will want them in the future. They are not actually hungry because they have made a good living for many years, but they are going to be very lucky to get anymore income out of their current skills.

The same thing is happening in all kinds of programming. I watched a demo from Alphacet last week which was quite impressive. We had a simple system consisting of several rules, and the Alphacet representative was able to turn those into an automated system AND do some simple backtesting in less than ten minutes. I could easily come up with rules that I would still have to program by hand, but they were prepared with all of the common structures and market data cleaned and organized. I could get the code generated in my choice of six different languages. The bottom line is that another world of good paying jobs is going to disappear.

What is on the horizon that will replace these jobs? I have no idea, but I spend more and more time thinking about code generation and how to maximize its use. We used to have several programmers on staff, and now we do all that work ourselves. For us, that made the difference between able to survive this downturn (so far, knock on wood) and drowning in our own payroll. For my friends in the programming community, it means that there are hard times ahead.



 Could the internet being changing the way markets trade?

It has been mentioned that the average attention span for adults is 15-20mins, and for the internet now less than a minute!

Could this have implications, as younger "playstation" brought up traders take hold?

I only had to look around at the grad next to me sitting on the desk in London, and watch him at the computer to know these boys were quick!

Could this have wider implications particularly in the normal ebs and flow of a normal trading day?

Alan Corwin writes:

Yes, the Internet is changing the way that traders trade. I think everyone realizes that it has, but if history is any guide, we will find out in the future that we had no idea how dramatic the changes have been or how diverse the fallout will be. Even Jules Verne underestimated change, and he was willing to go way out on a limb.

The one prediction that I feel comfortable making is that everything will happen faster. Certainly, that has been the story of the last twenty years, and the emergence of the Internet has accelerated that trend. I am often dazzled and frustrated by the speed at which markets move and change, but 2010-type trading would be mind-shredding to someone trained to think at the pace that the markets moved in the eighties. I can also remember being told in the eighties that the rate of change then was dramatically different than the rate of change ten and twenty years before.

I do think you have hit on one of the clues to the nature of those changes, i.e., attention span. I don't own the PlayStation kind of games myself because they would take over my life, but I have played several of them enough to realize that they all call for rapid execution of complex tasks, both mental and physical. There have always been activities that fostered these skills (most sports, for example), but the constant comparison against the standard of the machine imposes a different kind of discipline and fosters a different array of skills.

The young are built for change and speed because that is their competitive advantage. If we are competing with them as we are with young traders, we can only win by making the most out of experience. The sad news for those of us past middle age is that they will gain experience quicker and more effectively than we can improve our speed.

I have also noted one encouraging aspect of these games. The young devotees look to themselves for the causes of failure and success. I have never heard one of these kids say: "The machine got lucky" or "the machine cheated". It is accepted that they must look to themselves for the resources necessary to beat the machine. None think that the game is too hard or unfair. That's the way winners think. I like that.

Kim Zussman writes: 

By 1998 the internet was in use by >1% of the world, and has penetrated an increasing proportion of the population. Assuming web-based trading has paralleled this trend, here is an attempt to quantify stock market velocity as a function of internet availability.

DJIA 1928-present was used to calculate a proxy for "weekly velocity" = weekly range:

weekly range = (H-L) / {(H+L)/2}

The attached chart shows historical weekly range from 1928-present. Here is comparison of mean weekly range for the internet period (1998-present), and an equal number of weeks from the earliest part of the series (1928-41), when the internet was just a twinkle in Tipper Gore's mother eye:

t-Test: Two-Sample Assuming Unequal Variances

                   no net    internet
Mean           0.0452    0.0561
Variance       0.0006    0.0014
Observations    648    648
Hypothesized Mean Difference    0.0000
df                   1144.0000
t Stat           -6.2125
P(T<=t) one-tail    0.0000

Any Internet effect is overwhelmed by other market issues.

Craig Mee responds:

Thanks Kim and Alan,

When i wrote this, I was specially watching the dax trade and seeing a counter trend pullback, and thinking every market has a short term cycle. iI wonder if this cycle and any variance is directly related to attention span of its players. With Alan's comment "the sad news for those of us past middle age is that they will gain experience quicker and more effectively than we can improve our speed"….maybe we should then trade in a way that works for our personality and also is physical and mentally practical. 



Bucharest, RomaniaThis is left wide open for every reader of the site to make the call…

It seems now that you are going to need an intelligent electorate to accept the tough calls, pull their heads in, bunker down, and not cry for mum when all of them knew they shouldn't have their hand in the cookie jar and thus are all responsible for the outcome, (granted banks are a joke) but because there was NO SIGN, saying don't be greedy, it's apparently for the masses, everyone else's fault.

So on this basis, we need a intelligent voting population to be the first to put their hands up, and say let's take the heat and get on with the pain.

So on that basis, and of course there are factors to consider including the currently state of said economies, debt levels, housing booms, and credit excesses….what is the best placed country or countries?

Well, maybe luckily for me I found this through surfing the web. Although it was written in 01, (maybe nothing's changed), someone agrees, albeit on the surface. I'm open to other suggestions….

Finally, Lynn and Vanhanen peer into the future. They predict future growth is most likely in countries with high national IQ scores but currently bad economic systems. The countries of the former Communist Bloc—Russia, Poland, Bulgaria, and Romania, and the People's Republic of China, and Vietnam—are good bets.

Jeff Sasmor answers:

The good old US of A.

I'm not being sarcastic. Not to offend those not living here, but personally, I wouldn't leave even if Palin is the next prez. Wait– I was talking about Michael Palin…

Vancouver, Canada
China may be headed for their 1929 moment. A populace not used to investing in any sort of asset is seeing an exponential tulip phenom that the gov't can't control (yet). It's gone open-loop. And they're too connected to the US to decouple as many like to think. We're too big a market compared to anywhere local for the near-term. And their population wants decent wages– guess how long it will take foreign capital to pull up stakes and move where labor is cheaper– probably Africa as soon as (if/when) nations there wise up and become politically stable. I used to think S. America, but it's not as biz friendly as it used to be where foreign capital is concerned.

Europeans think that the way to solve their problems is to ban shorting– déjà vu– they're hosed.

The world's economy is in for a tough time just about everywhere. I'll pick right here as the place to ride it out. All the political stuff is just noise– psychohistorians take note.

Alan Corwin writes:

I like Canada. They have more resources per capita than any other place on the planet, a relatively sound financial system, and a sense of humor that I can understand. The only time they lose resources is that their citizens move someplace warm when they get enough cash.


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